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CONFIDENTIAL 1 AC/FEB 2023/TAX467

UNIVERSITI TEKNOLOGI MARA


FINAL EXAMINATION

COURSE : TAXATION 1
COURSE CODE : TAX467
EXAMINATION : FEBRUARY 2023
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i) the Question Paper


ii) a four - page Appendix 1
iii) an Anwer Booklet – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO


This examination paper consists of 9 printed pages
© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 2 AC/FEB 2023/TAX467

QUESTION 1

A. i. Composite assessment is normally issued after the preliminary review with


taxpayer that results in an agreement of tax. Identify any TWO (2) circumstances
that Director General of Inland Revenue Board can issue a composite assessment
to the taxpayer.
(2 marks)

ii. List FOUR (4) circumstances that cover the issue of ‘error’ or ‘mistake’ made by
taxpayer.
(4 marks)

B. Sammy, an Indian citizen, arrived in Malaysia in 2016 and works as a Dermatologist for
TCH Hospital in Johor Bharu. His periods of stay in Malaysia were as follows:

Year Period of stay Notes


2016 1 July – 15 December
2017 1 May – 31 May 1
18 June – 30 July
2018 3 February – 31 May 2
15 September – 31 December
2019 1 January – 25 May
2020 5 April – 5 July
2021 - 3
2022 1 January – 15 April 4

Notes:

1. From 1 June till 17 June 2017, he went to New Zealand for a holiday with his
family.

2. From 1 June till 14 September 2018, he was in India to take care of his father who
was undergoing a chemotherapy treatment due to cancer.

3. He was not in Malaysia.

4. He resigned as Dermatologist for TCH Hospital in Johor Bharu and left Malaysia
permanently on 15 April 2022.

Required:

Determine the resident status of Sammy for the year of assessments 2016 until 2022.
Support your answers with relevant reasons.
(12 marks)
(Total: 18 marks)

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL 3 AC/FEB 2023/TAX467

QUESTION 2

Puan Jasmin worked as a Marketing Manager with Seroja Sdn Bhd since 1 July 2018. Since
the country was in the pandemic phase due to covid-19 outbreak, the company has suffered
heavy losses. Therefore, Puan Jasmin was terminated from her employment on 31 August
2022 and she received compensation for loss of employment amounting RM80,000 and
RM30,000 as payment for gratuity.

Below is the information on remuneration and benefits received by her in 2022:

a. Monthly salary of RM6,689 after deducting EPF contribution of 11%, Zakat RM300 and
monthly tax deduction of RM576.

b. Monthly entertainment allowance of RM1,000 and she spent one fourth (1/4) of the
allowances to entertain her client.

c. Monthly childcare allowance of RM250 and monthly medical allowance of RM500.

d. On 15 July 2019, the company offered 10,000 units of share at RM1.70 per unit, with
the market price of RM2.40 per unit. She exercised the offer on 1 May 2022 when the
market value of the share was RM2.50 per unit.

e. She received a fully furnished bungalow until 31 August 2022. The defined value of the
house was RM3,200 monthly including the cost of furniture RM750. Puan Jasmin was
required to pay a nominal rental of RM1,200 per month. She received a domestic servant
and gardener which the monthly salary paid by the employer were RM700 and RM600,
respectively.

f. A brand-new car, Honda CR-V costing RM171,000 together with a driver were provided
to Puan Jasmin starting from January 2020. The driver received a monthly salary
amounting to RM1,100 per month.

g. The company provided her with credit card facilities with a total bill of RM8,700, where
she spent 20% on private purchases and the balance related to her duties. The annual
membership fee was RM200.

h. When the travelling restrictions has been abolished, in January 2022 she went for her
first vacation to London amounting to RM8,500. The company paid for her second
vacation expenses to Cameron Highland at a cost of RM3,400 in May 2022.

i. She withdrew RM60,000 from the unapproved fund, of which 40% of total withdrawal
was from her contribution.

Required:

Calculate the statutory employment income of Puan Jasmin for the year of assessment 2022.
(Total: 15 marks)

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL 4 AC/FEB 2023/TAX467

QUESTION 3

A. Describe THREE (3) conditions for ex-convict remuneration which is allowable for
double deduction.
(3 marks)

B. Vicky, a sole proprietor operates Perniagaan Mega Plastik, a food container box shop
in Seremban. The following is the Statement of Profit or Loss for the year ended 31
December 2022:

Perniagaan Mega Plastik


Statement of Profit or Loss for the year ended 31 December 2022
Notes RM RM
Revenue 689,600
Less: Cost of sales 1 (210,000)
Gross profit 479,600
Add: Other income 2 88,800
568,400
Less: Operating expenses
Administrative expenses 3 222,700
Selling and distribution expenses 4 63,800
Finance cost 5 30,000
Fees and donations 6 35,200
Other expenses 7 36,200
(387,900)
Net profit before tax 180,500

Notes:
1. Included in the cost of sales were:
RM
Stock obsolescence written-off 8,500
Compensation to Silicon Trading (competitor) to restrict competition 15,000

Goods taken by Ratha Dewi (Vicky’s wife) for her own use at cost of
RM4,500. The market value of the goods was RM7,800. The
transaction has recorded in the cost of sale.

2. Other income comprises of:


RM
Interest received on overdue accounts receivable 28,600
Dividend received from Kuala Lumpur Kepong Berhad 24,200
Income from rental of residential properties 36,000

3. Included in administrative expenses were:


RM
Depreciation 17,200
Annual salary to shop workers (disabled) 48,000
Annual salary to shop workers (normal) 54,000
Annual salary (Vicky) 60,000

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL 5 AC/FEB 2023/TAX467

Employees Provident Fund (EPF) – workers 19,500


– Vicky 12,000
Non-trade debt written off (given to Vicky’s mother) 2,000
General provision for doubtful debts 10,000

4. Selling and distribution expenses comprise of:


RM
Lease payment made on a new Nissan Navara (a non-commercial
vehicle). The cost was RM150,000 and the monthly lease payment
was RM1,700, commencing 1 March 2022 17,000
Travelling allowances to employees 14,400
Redemption vouchers given for purchase made by customers 7,000
Leave passage to Pulau Langkawi (yearly trip for workers) 15,400
Reimbursement of entertainment expenses incurred by employee in
entertaining business client 10,000

5. Included under finance cost was interest on a loan taken for an investment in CIMB Bank
amounting RM15,000.

6. Fees and donations comprise of:


RM
Accounting fees 8,500
Contribution to Indian Cultural Festival (s 34(6)(i)) 11,200
Cash donation to Persatuan Kanak-kanak Cerebral Palsy (approved) 10,500
Cash donation to a political party 5,000

7. Other expenses comprise of:


RM
Utilities expenses (included 20% for personal use) 8,000
Installation of CCTV in the business premise 8,900
Legal fees to acquire the investment loan in CIMB Bank 2,000
Legal charges paid for collection of trade debts 6,300
Replacing old fencing with an improved new fencing around
business premise 8,000
Penalty for late submission of Vicky’s income tax 3,000

8. Other information:
RM
Current year capital allowance 22,600
Unabsorbed business loss brought forward from prior year of
assessment 21,500

Required:

Calculate the statutory business income of Perniagaan Mega Plastik for the year assessment
2022. Indicate ‘Nil’ for any item that does not require any adjustment.
(17 marks)
(Total: 20 marks)

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL 6 AC/FEB 2023/TAX467

QUESTION 4

A. Briefly explain the expansion of tax relief for “medical expenses for serious diseases” on
mental health examination.
(3 marks)

B. Saleh and Nuha, are Malaysian citizen and tax residents. They have been married for
23 years. They are blessed with two children ages between 20 and 11 years old. The
eldest, Matin is currently pursuing his study in Diploma of Geomatic Science, UiTM
Perlis. The youngest child, Miranda, who is suffering from Autism Spectrum Disorders
(ASDs) and serious neurological disease.

Due to economic problem, Saleh who is working as a Human Resource Manager since
1 July 2005 was retrenched on 31 July 2022. He received a compensation for loss of
employment amounted to RM200,000. Meanwhile, Nuha has been running two
businesses, Boutique and Cafe for over 10 years.

The details of their income and expenses for 2022 are as below:

Saleh

1. Details of employment income:

RM
Annual salary (gross) 59,500
Travelling allowance (monthly) 1,000

2. Dividend income received from an investment in Amanah Saham Malaysia was


RM10,000.

3. Rental income (condominium):

RM
Monthly rental* 4,000
Advance rental (January 2023) 4,000
Repair of tiles (incurred on 15 July 2022) 2,500
Porch enhancement (incurred on 25 August 2022) 15,000
Quit rent and assessment (yearly) 2,200
* The condominium was rented out effective from 1 April 2022.

Nuha

1. Business income for the year ended 31 December 2022:

Boutique Cafe
RM RM
Adjusted income/(loss) (2,000) 15,500
Balancing charge 800 8,200
Capital allowance 1,200 5,000
Unabsorbed capital allowance b/f - 3,000
© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 7 AC/FEB 2023/TAX467

Note: Nuha also received an annual salary (gross) for these businesses amounted
to RM108,000.

2. In August 2022, she received a royalty from book published titled ‘Tycoon and
Future’ amounted to RM45,000.

Other payments made by Saleh and Nuha during the year:


Saleh Nuha
RM RM
Cash donation to Pusat Jagaan Warga Tua (approved) - 5,000
Medical expenses incurred for parents - 10,400
Supporting equipment for Miranda - 8,000
Vaccination cost for influenza for Matin and Miranda 1,500 -
Full medical check-up for Nuha 1,200 -
Life insurance premium for Saleh and Nuha 4,000
Entrance fees paid for several tourist attractions in 500 -
Melaka
Purchase of books and online magazines 3,000 2,000
Purchase of personal computer for Matin - 3,500
Purchase of smart phone for Nuha 5,000 -
Internet subscriptions 3,000 2,400
Gymnasium entrance fee 1,000 -
Medical insurance premiums for Matin and Miranda 1,500 -
Education insurance premium for Matin - 1,400
Kindergarten fees paid for Saleh’s nephew, Iskandar 1,800 -
Net savings into Skim Simpanan Pendidikan Nasional
(SSPN) for Matin - 5,000
Electronic vehicle charging hardware and services 3,200 -
Zakat 3,000 2,500

Required:

Determine the income tax payable by Saleh and Nuha for the year of assessment 2022,
assuming Nuha does not elect for joint assessment.
(22 marks)
(Total: 25 marks)

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL 8 AC/FEB 2023/TAX467

QUESTION 5

A. Discuss briefly THREE (3) conditions for non-entitlement of agriculture expenditure.


(3 marks)

B. Vortex Five Sdn Bhd incurred the following expenditures to construct a factory in Buloh
Kasap, Segamat:

RM
Cost of land 245,000
Legal fee and stamp duty (20% was related to land) 22,000
Consultant fee and building plan 10,000
Architect charges 9,000
Building plan approval 5,000
Cost of demolishing squatter houses 70,000
Construction cost 900,400
Electrical wiring and fittings 34,200
Drainage and irrigation 30,000

The construction works were completed in April 2019. Vortex Five Sdn Bhd only started
to use the building for its production beginning August 2019. The space utilisation of the
industrial building was as follows:

Administration office 8%
Showroom & gallery 7%
Production department 74%
Storage of raw materials 11%

Vortex Five Sdn Bhd closes its accounts on 31 July every year.

On 1 November 2019, the business acquired two units of machines (Alpa-123) costing
RM85,000 each. The machines were used in the production until 31 October 2020. The
machines were breaking down for seven months. During that period the repair work was
carried down. The machine has been used immediately after the repair until today.

Moreover, a heavy machinery (Beta-456) costing RM63,500 was acquired by cash on 1


March 2021. The machine was used in the production until 31 October 2021. However,
due to its inconsistency, the machine was disposed at RM40,000 without a concern from
the Director General of Inland Revenue Board of Malaysia.

A new lorry was acquired on 15 June 2021 costing RM180,000 under a hire purchase
term. The business paid RM50,000 as deposit in June 2021. Beginning 1 July 2021,
Vortex Five Sdn Bhd paid an equal monthly instalment of RM3,500 for 40 months.

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL 9 AC/FEB 2023/TAX467

Required:

Compute the capital allowance, industrial building allowance, balancing


charges/allowances (if any) for each asset of Vortex Five Sdn Bhd for the relevant years
of assessment up to the year of assessment 2022.
(19 marks)
(Total: 22 marks)

END OF QUESTION PAPER

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL APPENDIX 1 (1) AC/FEB 2023/TAX467

 The following tax rates and allowances are to be used in answering the
questions:
Income Tax Rates
(a) Companies 24%

(b) Small companies 17% & 24%

(c) Non-resident individuals 30%

(d) Resident individuals Scaled rate*

(e) Trust Body – Resident or Non-resident 24%

(f) Executor – Domiciled in Malaysia Scaled rate*

(g) Executor – Not domiciled in Malaysia 24%

*Chargeable Income Rate% Cumulative Tax


RM RM

On 5,000 0 0
Next 15,000 1 150
On 20,000 150
Next 15,000 3 450
On 35,000 600
Next 15,000 8 1,200
On 50,000 1,800
Next 20,000 13 2,600
On 70,000 4,400
Next 30,000 21 6,300
On 100,000 10,700
Next 150,000 24 36,000
On 250,000 46,700
Next 150,000 24.5 36,750
On 400,000 83,450
Next 200,000 25 50,000
On 600,000 133,450
Next 400,000 26 104,000
On 1,000,000 237,450
Next 1,000,000 28 280,000
On 2,000,000 517,450
Exceeding 2,000,000 30

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL APPENDIX 1 (2) AC/FEB 2023/TAX467

 Benefits-in kind (BIK) scale rates as per Inland Revenue Board (IRB) guidelines.

Cost of car when new Annual value of BIK Annual prescribed


benefit of petrol
RM RM RM
Up to 50,000 1,200 600
50,001 - 75,000 2,400 900
75,001 - 100,000 3,600 1,200
100,001 - 150,000 5,000 1,500
150,001 - 200,000 7,000 1,800
200,001 - 250,000 9,000 2,100
250,001 - 350,000 15,000 2,400
350,001 - 500,000 21,250 2,700
500,001 - and above 25,000 3,000

The value of the car benefit equivalent to half of the above rates is taken if the
car provided is more than five years old.

Where a driver is provided, the value of benefit is fixed at RM600 per month.

Household furnishing, apparatus and


appliances

Types of BIK Annual value of BIK


RM
Semi-furnished with furniture in lounge,
dining room or bedroom 840
Plus one or more of the following:
Air-conditioners, curtains, carpets 1,680
Plus one or more of the following:
Kitchen equipment, crockery, utensils, appliances
i.e fully furnished 3,360
Domestic help 4,800
Gardener 3,600
Guard 4,800

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL APPENDIX 1 (3) AC/FEB 2023/TAX467

Personal
reliefs
RM
Self 9,000
Disabled self, additional 6,000
Medical expenses expended on parents (maximum) 8,000
Medical expenses expended on self, spouse or child with serious (maximum) 8,000
disease, including:
 medical examination up to RM1,000
 vaccination up to RM1,000
 fertility treatment
Basic supporting equipment for disabled self, spouse, child or (maximum) 6,000
parent
Study course fees for skills or qualifications (up to RM2,000 for (maximum) 7,000
upskilling or self enhancement course
Lifestyle allowance (taxpayer, spouse and children) (maximum) 2,500
Lifestyle,additional (purchase of personal (maximum) 2,500
computer/smartphone/table)
Healthy lifestyle (sports equipment, entrance fee to sport activity, (maximum) 500
etc)
Spouse relief 4,000
Disabled spouse, additional 5,000
Child - basic rate (each) 2,000
Child - higher rate (each) 8,000
Disabled child (each) 6,000
Disabled child, additional-studying full time in higher education (each) 8,000
Childcare (below six years old) (maximum) 3,000
Breastfeeding equipment (maximum) 1,000
Life insurance premiums (private sector) (maximum) 3,000
Contributions to approved funds (EPF) (maximum) 4,000
Life insurance (public service) (maximum) 7,000
Private retirement scheme contributions, deferred annuity (maximum) 3,000
Premiums
Medical and/or education insurance premiums for self, spouse or (maximum) 3,000
child
Deposit for a child into the National Education Savings Scheme (maximum) 8,000
(SSPN)
Contribution to Social Security Organisation (SOCSO) (maximum) 350
Domestic travelling expenses (local tour package, (maximum) 1,000
accommodation& entrance fee)

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


CONFIDENTIAL APPENDIX 1 (4) AC/FEB 2023/TAX467

Rebates
Chargeable income not exceeding RM35,000 RM
Individual – basic rate 400
Additional rebate when wife/husband relief is 400
claimed
Departure levy for umrah travel/religious travel for Flight Class Destination/rate
other religions ASEAN Others
RM RM
Economy 8 20
Business/First 50 150
Zakat/fitrah Amount incurred

Rate of Capital Allowances


Initial allowance Annual 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
Computers 20 20

Agriculture allowance
Buildings for the welfare of or as living
accommodation for farm employees Nil 20
Other buildings used in the business Nil 10
All other qualifying agricultural expenditure Nil 50

Real Property Gains Tax Rate


Companies Individuals Individuals
(Citizen/PR) (Non- citizen/Non-PR)
Disposal within three years after 30 30 30
the date of acquisition
Disposal in the fourth year after 20 20 30
the date of acquisition
Disposal in the fifth year after 15 15 30
the date of acquisition
Disposal in the sixth year after 10 0 10
the date of acquisition and
thereafter

Sales and service


tax
Sales tax rate 5% / 10%
Service tax rate 6%

© Hak Cipta Universiti Teknologi MARA CONFIDENTIAL

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