Tutorial 3: Other Income 

Question 1 
Under what circumstances the following income can be deemed derived from Malaysia?
(a) Interest; 
S15(a) if responsibility for payment of the interest or royalty lies with the Government, a
State Government or a local authority
S15(b)(i) if responsibility for payment of the interest or royalty in the basis year for a year of
assessment lies with a person who is resident for that basis year; and
S15(b)(ii) in the case of interest it is payable in respect of money borrowed by that person and
employed in or laid out on asset used in or held for the production of any gross income of
that person derived from Malaysia or the debt in respect of whih the interest is paid is secured
by any property or asset situated in Malaysia; or
S15(c) if the interest or royalty is charged as an outgoing or expense against any income
accruing in or derived from Malaysia.

(b) Dividend; and 

Dividend can be deemed derived from Malaysia if it is distributed by a company resident in
the basis year for a year of assessment. - S14(1)

(c) Rent from real property. 

Rent from real property can be deemed derived from Malaysia if the real property is located in
Malaysia.

Question 2 
Jean owned a shophouse in Petaling Jaya. Details for the shophouse for the year ended  31
December 2021 are as follows: 
Rent received:  RM 
January – December 2021  42,000
January – March 2022 
(being rental received in advance in December 2021) 10,000
Deposits for utilities (refundable)  5,000

Expenditure: 
Deposit refunded to ex-tenants  3,000
Rates and assessment  4,200
Quit rent  1,190
Loan interest (Jan-Dec 2021)  8,200
Penalty for late payment of assessments  100
Repainting  5,000
Renovation to kitchen and bathroom  12,000
Replacement of damaged roof tiles  8,000
Required 
Compute the adjusted rental income of Jean for YA 2021.
Jean
Income tax computation for the YA 2021
Section 4(d) Rental Income RM RM
Rent
-January – December 2021  42,000
-January – March 2022  10,000
-Deposit in utilities Nil
52,000
Less: Outgoing Expenses
-Deposit refunded to ex-tenants  Nil
-Rates and assessment  4,200
-Quit rent  1,190
-Loan interest (Jan-Dec 2021)  8,200
-Penalty for late payment of assessments  Nil
-Repainting  5,000
-Renovation to kitchen and bathroom  Nil
-Replacement of damaged roof tiles  8,000
26,590
Adjusted rental income 25,410

Question 3 
Under what circumstances rental income from real properties in Malaysia can be treated as 
business income under section 4(a) of Income Tax Act, 1967? 
Rental income from real properties in Malaysia can be treated as business income under section
4(a) of ITA 1967 if maintenance services or support services are comprehensively and
actively provided in relation to the real property which include:

(a) doing generally all things necessary (eg. Cleaning services or repairs) for the
maintenance and management of the real property such as the structural element of the
building, stairways, fire escapes, entrances and exists, lobbies, corridors, lifts/escalators,
compounds, drains, water tanks, sewer, pipes, wires, cabies or other fixtures and fittings; and

(b) doing generally all thing necessary for the maintenance and management of the
exterior parts of the real property such as playing fields, recreational areas, driveways, car
parks, open spaces, landscape areas, walls and fences, exterior lighting or other external
fixtures and fittings; or
If a person only provides security services or other facilities that person is not providing
maintenance services or support services comprehensively
Services actively provided means the person who owns or lets out the real property
(a) provides himself. or
(b) hires another person or another firm to provide the maintenance services or support
services

Question 4 
Sam owns a semi-detached house which was let for the first time on 1 July 2021. Details of  the
property are as follows: 
Semi-detached house RM
Gross rental from 1 July 2021 to 31 December 2021 4,000 per month
Quit rent from 1 January 2021 to 31 December 2021 200
Assessment from 1 January 2021 to 31 December 2021 600
In year 2021, he received royalties of RM13,000 from the sales of CDs recorded by him as a 
musician and single-tier dividend from GBS Bhd of RM15,000 on 30 June 2021. 
Required: 
Compute the total income of Sam for YA 2021. 
Jean
Income tax computation for the YA 2021
Section 4(c) Dividends RM RM
GBS Bhd Exempted
-
Section 4(d) Rental Income
Rent (RM4,000*6) 24,000
24,000
Less: Outgoing Expenses
-Quit rent (RM200*6/12) 100
-Assessment (RM600*6/12) 300
400
23,600
Royalties (RM13,000-10,000) 3,000
Total Income 26,600

Question 5 
Mr. Richard, a resident of Malaysia, owns a residential property in Johor and an apartment in 
Kuala Lumpur. Both properties were let out on 1 April 2021. He has approached you 
regarding the tax treatment of the following items: 
(i) Rental received in advance; 
(ii) Rental deposits received; 
(iii) Legal fees on rental agreement with the first tenant; 
(iv) Housing loan interest for the period 1.1.2021 to 31.3.2021; and 
(v) Rental loss. 
(i) Rental received in advance is taxable in the year of received as stipulated under S27(3)
(ii) Rental deposits received is not taxable, as it is capital in nature.
(iii) Legal fees on rental agreement with the first tenant is not deductible as it is initial expense.

(iv) Housing loan interest for the period 1.1.2021 to 31.3.2021 is not deductible as it is not
incurred in the production of gross rental income of that period
(v) When rental income is assessed as S4(d) source, rental loss cannot be used be deducted
against other income in arriving at the total income in the same year or cannot carried forward
to subsequent years. It is a permanent loss.
Question 6 
Joseph is a director of Creative Sdn. Bhd., a controlled company. He received the  following
remuneration from the company for the year ended 31 December 2021: 
(i) Annual salary of RM108,000. 
(ii) Bonus of RM10,000. 
(iii) Entertainment allowance of RM48,000 per annum. 
(iv) Travelling allowance for official duties of RM36,000 per annum.
(v) Director’s fees of RM20,000 (received in December 2021) 
(vi) Meal allowance and parking allowance of RM1,000 and RM500 respectively per month. 
(vii) A company car costing RM120,000 (without petrol benefit) provided by the  company for
the whole year. The company bought the car 3 years ago.
(viii) A golf club corporate membership with a monthly subscription of RM600 paid by the
company for the whole year ended 2021. 
(ix) A domestic servant and gardener were provided by the company for the whole year ended
2021 with a monthly salary of RM1,200 and RM1,000 respectively.
(x) An unfurnished house was provided by the company for the whole year ended  2021. The
company paid a monthly rental of RM4,000. 

Additional information: 
∙ He incurred RM30,000 for travelling to visit customers. 
∙ Entertainment expenses incurred by him to entertain the company’s clients  amounting to
RM50,000. 
∙ He received rental income of RM20,000 from a bungalow located in Ipoh, Perak.
∙ He donated a painting worth RM10,000 to the National Art Gallery. 
Required: 
Compute the total income of Joseph for the year of assessment 2021.
Joseph
Income tax computation for the YA 2021
Section 4(b)-Employment Income RM RM
Section 13(1)(a)
Salary 108,000
Bonus 10,000
Entertainment allowance 48,000
Travellling allowance 36,000
Director's fees 20,000
Meal allowance (RM1,000*12) 12,000
Parking allowance (RM500*12) 6,000
240,000
Section 13(1)(b)
Car 5,000
Subscription fee (RM600*12) 7,200
Domestic servant 4,800
Gardener 3,600
 20,600
Section 13(1)(c)
Unfurnished house
-Defined value (RM4,000*12 months) 48,000
-30% x S13(1)(a) 72,000
whichever is lower 48,000
Gross income from employment 308,600

Less: Allowance expenses

Travelling expense 30,000
Entertainment expense 48,000
78,000
Statutory employment income 230,600
Section 4(d)-Rental Income
Rent 20,000
Aggregate income 250,600
Less:
-Approved Donation (10,000)
Total income 240,600

Question 7 
James, an Australian national, is a tax resident in Malaysia for the year of assessment 2021.  He
has been employed as a marketing manager by Cooper Sdn. Bhd. since 2019. His 
remuneration details for the year 2021 are as follows: 
─ Salary of RM12,000 per month. 
─ Entertainment allowance of RM2,500 per month. 
─ Travelling allowance of RM2,000 per month. 
─ James is provided with a used car which was purchased by the company in 2015 for 
RM130,000. The cost of the car when new was RM180,000. 
─ An overseas leave passage to Bali was paid for him, his wife and his mother. The  company
paid RM1,400 per person for their holiday trip in Bali. 
─ A fully furnished house was provided to him where the company paid a monthly rental  of
RM3,800 including rental for furnishings of RM300 commencing from 1 August  2021. 
─ Reimbursement of salary in respect of a domestic maid hired by James at a monthly salary of
RM1,500 commencing from 1 October 2021. 
While performing his duty in the year 2021, he spent RM33,000 in entertaining clients and 
incurred RM20,000 for travelling expenses.  
Other relevant information on income and expenditure incurred during the year 2021 are as 
follows: 
1. Interest income of RM2,000 from a fixed deposit with Maybank Berhad.  
2. Royalty income of RM18,000 from the sale of CDs recorded by him as a part time 
musician. 
3. Net rental income of RM25,000 from a property located in Australia. James remitted 
RM10,000 to Malaysia. 
3. Net rental income of RM25,000 from a property located in Australia. James remitted 
RM10,000 to Malaysia. 
4. Professional subscription fee of RM1,500 to the Chartered Institute of Marketing.
Required: 
(a) Calculate the aggregate income of James for the year of assessment 2021. 
(b) James has approached you regarding his salary if it is paid in Australia is subject to 
Malaysian income tax.
Joseph
Income tax computation for the YA 2021
Section 4(b)-Employment Income RM RM
Section 13(1)(a)
Salary (RM12,000*12) 144,000
Entertainment allowance (RM2,500*12) 30,000
Travelling allowance (RM2,000*12)-6,000 18,000
Domestic maid (RM1,500*3) 4,500
196,500
Section 13(1)(b)
Car (RM7,000/2) 3,500
Overseas local passage (Mother) 1,400
Fully furnished house (RM280*5) 1,400
6,300
Section 13(1)(c)
Fully - furnished house
-Defined value (RM3,800-300)*12 42,000
-30% x S13(1)(a) 58,950
whichever is lower (RM42,000*5/12) 17,500
Gross income from employment 220,300

Less: Allowance expenses

Travelling expense (RM20,000-6,000) 14,000
Entertainment expense 30,000
Professional subscription fee 1,500
45,500
Statutory employment income 174,800
Section 4(c)-Interest income
Fixed deposit Exempted

Section 4(d)-Royalty & Rental Income

Royalty (RM18,000-10,000) 8,000
Rent (under Para 28 Sch 6) Exempted
Aggregate income 182,800

(b)
James's employment is exercise in Malaysia. Therefore, his employment income is deemed to
be derived from Malaysia under S13(2)(a). As such, even the salary is paid outside Malaysia, it
is still subject to Malaysian income tax. The place of payment is irrelevant.

Question 8 
Mr. Fong bought a house in Petaling Jaya for RM1,000,000 on 2.1.2021 with a cash payment 
of RM600,000 and a housing loan of RM400,000 from B-bank which was released on 
1.3.2021. 
Mr. Fong spent RM52,000 on renovation that were necessary before renting it out on 
1.4.2021. The first tenant was obtained through the service of an estate agent, and RM4,000 
was paid for his service. The monthly rent was RM4,000. 
The first tenant vacated the house on 31.8.2021 with an advance notice that was stipulated in 
the rental agreement. Mr. Fong secured another tenant who rented his house on 1.11.2021 for 
two years with the same monthly rent of RM4,000. 
Mr. Fong submitted the following statement of income & expenditure for the year ended 
31.12.2021: 
RM RM
Rent received: RM4,000 x 9 36,000
Less: Expenditure 
Estate agent’s fee (for first tenant) 4,000
Stamp duty (purchase of house) 24,000
Loan processing fee 3,000
Legal fees: Sales & Purchase agreement 9,000
House valuation report 3,000
Loan interest (1.3.2021 to 31.12.2021) 18,000
Quit rent 360
Assessment 3,600
Fire insurance 900
Renovation 52,000
Advertising (to secure tenant) - first tenant 500
 - second tenant 600
Newly-installed air-conditioner 3,000 121,960
Net income/(loss): (85,960)
Notes: 
1. The rent received included rent of RM8,000 for the months of January 2022 and  February
2022 paid in advance by the second tenant on 20.12.2021. 
2. Quit rent, assessment and fire insurance were paid for the whole year 2021. 
Required: 
(a) Compute Mr. Fong’s statutory income from rent for the year of assessment 2021 and  state
the reason for those non-deductible expenses. 

(b) Explain the tax treatment of expenses in respect of the vacant period from Sep to Oct  2021.
Mr. Fong
Income tax computation for the YA 2021
Section 4(b)-Employment Income RM RM
Section 4(d) Rental Income
Rental
-First tenant (RM4,000*5) 20,000
-Second tenant (RM4,000*2) 8,000
-Received in advance 8,000
36,000
Less: Outgoing Expenses
Estate agent’s fee (for first tenant) Nil Initial expenses
Stamp duty (purchase of house) Nil Capital expenditure
Loan processing fee Nil Capital expenditure
Legal fees: Sales & Purchase agreement Nil Capital expenditure
House valuation report Nil Capital expenditure
Loan interest (1.3.2021 to 31.12.2021)
-1.3.2021 to 31.3.2021 (RM18,000*1/10) Nil Pre-commencement of rental
-1.4.2021 to 31.12.2021 (RN18,000*9/10) 16,200
Quit rent (RM360*9/12) 270
Assessment (RM3,00*9/12) 2,700
Fire insurance (RM900*9/12) 675
Renovation Nil Capital expenditure
Advertising (to secure tenant) - first tenant Nil Initial expenses
 - second tenant 600
Newly-installed air-conditioner Nil Capital expenditure
20,445
Adjusted income from rental 15,555

(b)
The expenses in respect of the temporary vacant period from September to October 2021 are
tax deductible. Once the rental source exists, the expenses incurred during the non-occupation
period would continue to be deductible
mencement of rental