Paper F6 (MYS)

Fundamentals Level – Skills Module

Taxation
(Malaysia)
Monday 6 December 2010

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours

ALL FIVE questions are compulsory and MUST be attempted.

Tax rates and allowances are on pages 2–4.

Do NOT open this paper until instructed by the supervisor.

During reading and planning time only the question paper may
be annotated. You must NOT write in your answer booklet until
instructed by the supervisor.
This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

SUPPLEMENTARY INSTRUCTIONS
1. Calculations and workings should be made to the nearest RM.
2. All apportionments should be made to the nearest whole month.
3. All workings should be shown.

TAX RATES AND ALLOWANCES

The following tax rates, allowances and values are to be used in answering the questions.

Income tax rates

Resident individuals
Chargeable income Rate Cumulative tax
RM % RM
First 2,500 (0 – 2,500) 0 0
Next 2,500 (2,501 – 5,000) 1 25
Next 15,000 (5,001 – 20,000) 3 475
Next 15,000 (20,001 – 35,000) 7 1,525
Next 15,000 (35,001 – 50,000) 12 3,325
Next 20,000 (50,001 – 70,000) 19 7,125
Next 30,000 (70,001 – 100,000) 24 14,325
Exceeding 100,000 26

Resident company
Paid up ordinary share capital First Excess over
RM500,000 RM500,000
RM2,500,000 or less 20% 25%
More than RM2,500,000 25% 25%

Non-residents
Company 25%
Individual 26%

Personal deductions
RM
Self 9,000
Disabled self, additional 6,000
Medical expenses expended for parents (maximum) 5,000
Medical expenses expended on self, spouse or child with serious disease,
including up to RM500 for medical examination (maximum) 5,000
Basic supporting equipment for disabled self, spouse, child or parent (maximum) 5,000
Purchase of sports equipment (maximum) 300
Fees expended for skills or qualifications (maximum) 5,000
Expenses on books for personal use (maximum) 1,000
Spouse relief 3,000
Disabled spouse, additional 3,500
Child (each) 1,000
Child – higher rate (each) 4,000
Disabled child (each) 5,000
Disabled child, additional (each) 4,000
Life insurance premiums, contributions to approved provident funds (maximum) 6,000
Deferred annuity premiums (maximum) 1,000
Medical and/or educational insurance premiums for self, spouse or child (maximum) 3,000
Purchase of a personal computer (maximum) 3,000
Broadband subscription (maximum) 500
Deposit for a child into the National Education Savings Scheme (maximum) 3,000

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 Rebates
Chargeable income not exceeding RM35,000 RM
Individual 400
Rate for an individual entitled to a deduction for a spouse or a former wife 800

Value of benefits in kind

Car scale
Cost of car Prescribed annual value of
(when new) private usage of car
RM RM
Up to 50,000 1,200
50,001 to 75,000 2,400
75,001 to 100,000 3,600
100,001 to 150,000 5,000
150,001 to 200,000 7,000
200,001 to 250,000 9,000
250,001 to 350,000 15,000
350,001 to 500,000 21,250
500,001 and above 25,000
The value of the car benefit equal to half the prescribed annual value (above) is taken if the car provided is more than
five (5) years old.
Where a driver is provided by the employer, the value of benefit per month is fixed at RM600.

Other benefits
RM per month
Household furnishings, apparatus and appliances:
Semi-furnished with furniture in the lounge, dining room or bedroom 70
Semi-furnished with furniture as above plus air-conditioned and/or curtains and carpets 140
Fully furnished premises 280
Domestic help 400
Gardener 300

Capital allowances
Initial Annual
allowance allowance
(IA) (AA)
Rate % Rate %
Industrial buildings 10 3
Plant and machinery – general 20 14
Motor vehicles and heavy machinery 20 20
Office equipment, furniture and fittings 20 10

3 [P.T.O.
 Real property gains tax
Disposal by companies and other than companies
Rate %
Date of disposal
Disposal within two years after date of acquisition 30
Disposal in the third year after date of acquisition 20
Disposal in the fourth year after date of acquisition 15
Disposal in the fifth year after date of acquisition or thereafter 5
Note: an exemption is granted which reduces the effective rate to 5% in every case where disposal takes place within
five years of the date of acquisition and to nil thereafter.

Sales and service tax

Rate %
Sales tax 10
Service tax 5

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ALL FIVE questions are compulsory and MUST be attempted

1 (a) Irsyad Antoine, a sole proprietor, operates a French language centre and makes up his accounts to 31 December
each year. His trading profit and loss account for the year ended 31 December 2010 is expected to be as follows:
NOTE RM RM
Sales 700,000
Less: Cost of sales 1 (300,000)
–––––––––
Gross profit 400,000
Less: Expenses
Salary 2 80,000
Motor vehicle petrol and maintenance 3 20,000 (100,000)
––––––––– –––––––––
Net profit before tax 300,000
–––––––––
–––––––––
Notes:
1 Cost of sales includes RM30,000 as the cost of manuals and Blu-ray discs that Irsyad withdrew from the
business to give to his daughter so that she could teach herself French. These items are normally sold to the
students of the language centre at a mark-up of 20%.
2 When the communications assistant at his language centre left in March, Irsyad employed his son, Reginald,
aged 19, who is studying full time pursuing a degree in linguistics, on a part-time basis at a salary of RM320
per month from 1 April 2010. The communications assistant who had been engaged on an arms length
basis was paid a salary of RM2,400 per annum.
3 Irsyad has two cars a Mercedes Benz and a Mini Cooper, both of which are more than five years old. The
Mercedes Benz is used 100% in the business. The Mini Cooper is not used in the business. The running
expenses of both cars have been charged in the accounts as follows:
RM
Mercedes Benz 15,000
Mini Cooper 5,000
–––––––
20,000
–––––––
–––––––
4 Regina, Reginald’s twin sister, is a full time student with the University of National History. She worked as
a tourist guide on weekends and is expected to earn RM4,000 excluding tips in 2010.
5 Irsyad’s wife Darlee died at childbirth in January 2010 after giving birth to a daughter, Evana, who was born
with a defective heart and lived for only 15 days. Darlee had no total income in 2010.

Required:
(i) Compute Irsyad Antoine’s tax payable for the year of assessment 2010; (6 marks)
(ii) Briefly explain the tax treatment of each of the items referred to in notes 1 to 5. (7 marks)

5 [P.T.O.
(b) Dulcie is the sole proprietor of Dulcie’s Realty, the business of which consists of the letting of properties. All of
Dulcie’s Realty’s properties are rented out and the Inland Revenue has always treated all of its rental income as
business income.
Details of Dulcie’s Realty’s rentals and expenses incurred for the year 2010 are as below:
Semi detached house in Lakeview
RM
Annual rental 100,000
Water and power deposit 2,000
––––––––
102,000
––––––––
Expenses:
Assessment tax and quit rent 2,500
Security, gardening and waste disposal services 17,000
Interest on loan obtained for acquisition of Lakeview property 5,000
Fine for late payment of assessment tax 100
––––––––
24,600
––––––––
Three shop lots at Coollana Mall
The shop lots are let out fully equipped with unique designer furnishings and CCTV. The rental is RM10,000 per
lot per month. Two of the lots were rented out for six months and the third lot for the entire 12 months of 2010.
Dulcie provided the cleaning services and supplied filtered water. No services were provided by a management
company.
The total expenses incurred on the three shop lots are as follows:
RM
Daily cleaning services 4,200
Fire insurance 2,000
Supply of filtered hot/cold water 1,800
–––––––
8,000
–––––––
Town house in the scenic Putra wetlands resort
After regular advertising in the Xpat magazine, this house was rented out for nine months at RM5,000 per month
in 2010.
The expenses spent on the house are as follows:
RM
Advertising in the Xpat 2,000
Monthly fumigation and termite treatment 15,000
In-house butler service 34,000
–––––––
51,000
–––––––
Additional information:
1. Dulcie has high tech sensor survelliance equipment at her home to monitor the security of all of the
properties owned by Dulcie’s Realty. The capital allowance on this equipment for the year 2010 is
RM10,000.

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2. Dulcie also has a small organic jam business and the results of this business for 2010 are as follows:
RM
Current year balancing charge 10,000
Current year capital allowances 4,000
Capital allowances brought forward 2,000
Loss brought forward (5,000)
Current year adjusted loss (8,000)
3. Dulcie donated a portable kidney dialysis machine, costing RM30,000 to a children’s health care centre in
2010.
4. Dulcie is also a writer and received royalties from a series of books of RM25,000 in 2010.
5. Dulcie has three children: Lavinia aged two, Astrid aged ten and Ferdinand aged 14 and has elected to claim
child relief. She has also taken out insurance policies and paid premiums in 2010 as follows:
RM
Life insurance policy on Lavinia 6,000
Medical insurance for Astrid 2,000
Education policy for Ferdinand 7,000
–––––––
15,000
–––––––
6. Dulcie’s husband runs a DVD movie business which incurred a loss of RM20,000 in 2010. He had no other
source of income.

Required:
Compute Dulcie’s chargeable income for the year of assessment 2010. (17 marks)

(30 marks)

7 [P.T.O.
2 Lite Ace Sdn Bhd, which was incorporated in 2005, is a company trading in high end sports goods. It has an
authorised share capital of RM1,500,000 of which RM500,000 is issued and fully paid up. It makes up its accounts
to 30 November each year and its trading profit and loss account for the year ended 30 November 2010 is as follows:
Note RM RM
Sales 2,000,000
Less: Cost of sales (700,000)
––––––––––
Gross profit 1,300,000
ADD: Other income 1 43,000
––––––––––
1,343,000
Less: General and administrative expenses
Contract payment 2 1,000
Audit fees 1,200
Bank charges 2,100
Bank interest 9,800
Depreciation 4,000
Staff salaries 3 90,000
Directors remuneration 24,000
EPF contributions 12,000
Quit rent and assessment 1,500
Insurance 4 7,000
Preliminary expenses 5 2,000
Entertainment 6 18,500
Bad debts 7 6,600
Donations 8 2,400
Compensation 9 10,000
Defalcation 10 5,000
Repairs and maintenance 11 15,000 (212,100)
––––––– ––––––––––
Net profit for the year 1,130,900
––––––––––
––––––––––
Notes:
1 Other income comprises the following:
RM
Discount from creditors 10,000
Dividend received under the single tiered system 20,000
Commissions 5,000
Compensation received for late delivery of supplies 8,000
–––––––
43,000
–––––––
2 The contract payment was made to a non-resident on 10 November 2010 but the witholding tax was not
remitted until January 2011.
3 Salaries include the remuneration of a disabled employee amounting to RM9,000.
4 The insurance expense relates to the premium paid on a key man life assurance policy taken out in respect of
the sales director.
5 The preliminary expenses relate to the cost of the company’s Memorandum and Articles of Association, which
was being written off.

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6 Entertainment comprises:
RM
Reimbursement to a director for entertaining his family 2,500
Office family day 6,000
Public sporting event used for a brand launch 10,000
–––––––
18,500
–––––––
–––––––
7 Bad debts comprise:
RM
A loan to a business associate who has now become bankrupt due to the Dubai crisis 10,400
An amount recovered from a debtor of a business taken over last year by
Lite Ace Sdn Bhd including its debtors (3,800)
–––––––
6,600
–––––––
–––––––
8 Donations comprise:
RM
Donation of books to National Library 2,000
Donations to fund elections 400
–––––––
2,400
–––––––
–––––––
9 The compensation was paid to an employee for a restrictive covenant not to take-up a similar employment.
10 The defalcation relates to money withdrawn illegally from the company by a director.
11 Repairs and maintenance comprise:
RM
Replacement of a damaged door of the same type and size 7,000
Extension of the roof of the shop 8,000
–––––––
15,000
–––––––
–––––––
12 Capital allowances for the year of assessment 2010 are RM12,000.

Required:
(a) Compute Lite Ace Sdn Bhd’s chargeable income for the year of assessment 2010.
Note: your computation should include all of the items referred to in notes 1 to 11 indicating by the use of
NIL any item for which no adjustment is needed. (18 marks)

(b) Briefly explain the tax treatment of the following items:

– the contract payment to a non-resident (note 2); (1 mark)
– the key man insurance premium (note 4); (1 mark)
– the preliminary expenses (note 5); (1 mark)
– the cost of the public sporting event (note 6); and (1 mark)
– the defalcation by the director (note 10). (1 mark)

(c) State by when Lite Ace Sdn Bhd had to file its estimate of income tax payable for the year 2010 and when
the first instalment should have been paid. (2 marks)

(25 marks)

9 [P.T.O.
3 Mr Brendan Michael works for the European Union and oversees its ASEAN projects located in Malaysia. He has been
present in Malaysia for the following periods in the years 2003 to 2010 inclusive
Year Period of stay Number of days
2003 1 January to 31 July 212
2004 1 April to 30 September 183
2005 1 January to 31 March 90
2006 1 January to 30 November 334
2007 1 March to 31 October 245
2008 1 April to 30 June 91
2009 Absent all year 0
2010 1 January to 31 July 212

Required:
(a) State, giving reasons, whether or not Mr Michael is resident or non-resident in Malaysia in each of the years
2003 to 2010 inclusive. (15 marks)

(b) State the basis, if any, that Mr Michael will be taxable on his employment income in Malaysia. (2 marks)

(c) State the circumstances in which a person like Mr Michael, who works both in Malaysia and outside
Malaysia, can claim to have dual employment and why such a claim could be beneficial. (3 marks)

(20 marks)

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4 (a) For the purposes of service tax, explain:
– the basis of taxation applicable;
– who is the taxable person; and
– who actually bears the tax. (4 marks)

(b) Ramakamheng Sdn Bhd is a consultancy firm based in Selangor. It provides services taxable under the Service
Tax Act 1975. In the year 2010, the advisory services it provided, invoiced and was paid for were as follows:
Service provided RM
– Investment advice to Panger Pte Ltd in Australia 25,000
– Drawing up legal agreements, providing advice and establishing a company
which is a Malaysian subsidiary company of Agfa Deutsch, Germany 65,000
– Advisory services to the Kelantan branch of Ramakamheng Sdn Bhd 5,000
– Accounting services to PJR Sdn Bhd 2,500

Required:
(i) State, giving reasons, if any of the services rendered by Ramakamheng Sdn Bhd in 2010 will NOT be
subject to service tax; (2 marks)
(ii) Compute the total value of services and the service tax due by Ramakamheng Sdn Bhd for the year
2010. (2 marks)

(c) GFK is a firm of surveyors and engineers who established a business in Malaysia in January 2010. Although
slow initially, business has grown steadily throughout the year resulting in a turnover and profit for the period
from January to November 2010 as follows:
Months Turnover Net profit/(loss)
RM RM
January to April 0 0
May to August 23,000 (58,000)
September to November 500,000 60,000

Required:
(i) State, giving reasons, whether or not GFK is correct in its belief that it is not obliged to be licensed for
service tax; (3 marks)
(ii) Assuming that GFK is required to be licensed:
– explain from when it should be licensed; and
– list the taxable periods applicable to 2010, together with the date of submission of the return and
payable date. (4 marks)

(15 marks)

11 [P.T.O.
5 Nigel purchased a house in Tropicana from the developer on 4 July 2009 for RM245,000. The certificate of fitness
was obtained on 20 August 2009. Nigel financed the purchase of the house with a loan from Kerala Bank.
In December 2010 Nigel sold the house for RM500,000. The costs he incurred on the property were as follows:
RM
Stamp duty on acquisition 3,000
Interest on the loan from Kerala Bank 50,000
Valuation fee for the sale 6,000
Advertisement for the sale 2,000
Real estate agent’s fee on the sale 4,000
–––––––
65,000
–––––––
–––––––

Required:
(a) Compute Nigel’s income subject to real property gains tax (RPGT). (7 marks)

(b) Explain the treatment for RPGT purposes of a loss arising on the sale of a property. (3 marks)

(10 marks)

End of Question Paper

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