This question paper consists of 5 questions on 9 printed pages. KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN FACULTY OF ACCOUNTANCY, FINANCE AND BUSINESS ACADEMIC YEAR 2014/15 MARCH/APRIL EXAMINATION ABFT2013 BASIC TAXATION FRIDAY, 3 APRIL 2015 TIME: 9.00 AM – 11.
00 AM (2 HOURS) DIPLOMA IN BUSINESS STUDIES (ACCOUNTING, BANKING & FINANCE AND FINANCE & INVESTMENT) Instructions to Candidates: Number of questions on paper: 5 This paper is divided into 2 sections. Four (4) questions only to be answered as follows: SECTION A: Answer ONE (1) question only. SECTION B: Answer ALL THREE (3) questions. All workings that support the answer should be shown. Marks will be awarded for clarity in presentation and logical arguments. Tax rates and personal allowances are printed herewith. The following rates and allowances are to be used for all questions in this paper:This question paper consists of 5 questions on 9 printed pages. Rates of Income Tax (a) i.
Resident company (paid-up capital not exceeding RM2.5 million) Chargeable Income: First RM500,000 20% Remainder 25% ii. Resident company (paid-up capital exceeding RM2.5 million) 25% (b) Non-resident company 25% (c) Non-resident individual 26% (d) Resident individual Chargeable income RM Rates (%) Cumulative Tax RM (0 – 5,000) First RM 5,000 0 0 (5,001 – 20,000) Next RM 15,000 2 300 (20,001 – 35,000) First RM 20,000 Next RM 15,000 6 300 900 (35,001 – 50,000) First RM 35,000 Next RM 15,000 11 1,200 1,650 (50,001 – 70,000) First RM 50,000 Next RM 20,000 19 2,850 3,800 (70,001 – 100,000) First RM 70,000 Next RM 30,000 24 6,650 7,200 (Above 100,000) First RM 100,000 Next each RM 26 13,850 …….
. Motorcars and related benefits – value assessable extracted from Public Ruling No. 3/2013 issued by the Inland Revenue Board. Cost of car (when new) Annual value of BIK Fuel per annum 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 When the car provided is more than five years old the taxable car benefit is halved but the value of fuel provided remains unchanged. The value of driver provided is fixed at RM600 per month. Household furnishings, appliances, etc: RMThis question paper consists of 5 questions on 9 printed pages.
(i) Semi-furnished with furniture in the lounge, dining room, or bedroom 840 per annum (RM70 per month) (ii) Semi-furnished with furniture as in (i) above plus, one or more of air conditioner, curtains and carpets 1,680 per annum (RM140 per month) (iii) Fully-furnished with benefits as in (i) and (ii) above plus, one or more of kitchen equipment, crockery, utensils and appliances 3,360 per annum (RM280 per month) Other benefits RM Gardener 3,600 per annum Domestic servant 4,800 per annum Personal Reliefs RM Self 9,000 Self – disabled 6,000 (additional) Spouse 3,000 Spouse – disabled 3,500 (additional) Children Normal child below 18 years old 1,000 each Normal / disabled child 18 years old and above, and in higher education: Overseas universities or similar establishments 6,000 each Local universities, colleges or similar establishments 6,000 each Disabled child 5,000 each Medical expenses incurred for parent(s) 5,000 (maximum) Medical expenses on serious disease 5,000 (maximum) Medical examination 500 (maximum) Basic supporting equipment 5,000 (maximum) Books and magazines 1,000 (maximum) Fees for acquiring skills and qualification 5,000 (maximum) Life insurance premium and contributions to approved fund or scheme 6,000 (maximum) Education and medical insurance premiums 3,000 (maximum) Purchase of a new personal computer 3,000 (maximum) Skim Simpanan Pendidikan Nasional Purchase of sports equipment 6,000 (maximum) 300 (maximum) Personal income tax rebates RM Individual rebate: chargeable income does not exceed RM35,000 – self 400 – spouse 400 Zakat and fitrah Amount paid by taxpayer Capital Allowances Initial allowance Annual Allowance Industrial buildings 10% 3%This question paper consists of 5 questions on 9 printed pages. Plant & machinery – general 20% 14% Motor vehicles, heavy machinery 20% 20% Office equipment, furniture & fittings 20% 10% Computers, information technology equipment & computer software 20% 40% SECTION A (25 marks) Answer only ONE (1) question. Question 1 Mr. John, an Australian citizen, came to Malaysia on 1 June 2009 to work as an architect with a multinational company. His period of stay in Malaysia is as follows: Year Period of stay Note No. of days 2009 01.06.
09 – 31.08.09 92 13.12.09 – 31.12.
09 19 2010 01.01.10 – 11.06.10 1 162 19.
06.10 – 20.07.
10 32 2011 12.11.11 – 29.12.11 2 48 2012 06.01.
12 – 21.07.12 197 2013 – 0 (not in Malaysia) 2014 01.03.14 – 30.04.14 61 28.
07.14 – 01.09.14 36 Notes: 1. From 12 June to 18 June 2010, he was in New Zealand to visit his younger brother who was undergoing medical treatment.
2. From 30 December 2011 to 5 January 2012, he was in Indonesia to attend an international workshop in relation to work matters. Required: (a) Determine and explain Mr. John’s tax residence status for each year of assessment from 2009 to 2014 based on Section 7(1) of the Income Tax Act, 1967.
(15 marks)This question paper consists of 5 questions on 9 printed pages. (b) Explain any TWO (2) permitted temporary absences that will be deemed as physical presence in Malaysia under Section 7(1)(b) of the Income Tax Act, 1967. (4 marks) (c) Explain how the residence status of a company that carries on a business in Malaysia is determined under the Income Tax Act, 1967.
(3 marks) (d) List any THREE (3) responsibilities of an individual taxpayer according to Income Tax Act, 1967. (3 marks) Total: 25 marks Question 2 (a) State the classes of income charged under Section 4(a) to 4(d) of Income Tax Act, 1967. (4 marks) (b) Mr. Zamarul owns a restaurant and a laundry shop.
The following information relates to his business for the year ended 31 December 2014: Restaurant (RM) Laundry shop (RM) Adjusted income 75,000 (10,000) Capital allowance 20,000 3,000 Unabsorbed capital allowance brought forward – 2,000 Balancing charge 25,000 2,500 Unabsorbed losses brought forward (25,600) – Other income Rental income from a property in Singapore received in Malaysia: RM15,000. Single tier dividend: RM33,000. Required: Compute the chargeable income for Mr. Zamarul for the year of assessment 2014 pursuant to the Income Tax Act, 1967. (15 marks) (c) Explain any THREE (3) general principles to apply in order to determine tax deductibility of expenses. (6 marks) Total: 25 marksThis question paper consists of 5 questions on 9 printed pages.
SECTION B (75 marks) Answer ALL THREE (3) questions. Question 3 Mr. Yusuf started working as a marketing executive officer for Teen Sdn.
Bhd. on 1 January 2014. His remuneration for the year ended 31 December 2014 is as follows: RM Salary 42,000 Travelling allowance 12,000 Entertainment allowance 14,400 Bonus (paid on 31 December 2014) 14,000 The company also provided him with the following for the whole year, unless stated otherwise: ? A fully furnished condominium was provided to him. Rental paid by employer was RM2,500 per month inclusive of RM700 for the full furnishing.
? Leave passage to Sydney for him and his immediate family costing RM8,000 and to Pulau Pangkor costing RM2,000. ? I Phone6 costing RM2,500 and monthly telephone bills costing RM200 per month. ? Motor vehicle costing RM132,000 which was purchased in 2009 by the employer.
No fuel was provided for him. ? Medical expenses paid by company for his family amounting to RM1,200. Additional information in respect of Mr. Yusuf for 2014:This question paper consists of 5 questions on 9 printed pages. ? He and his wife, Zulaika, a housewife, have three children.
The first child who is married is of age 24 and is studying at Oxford University. The second child is of age 20, is studying at Tunku Abdul Rahman University College while the third child is of age 15, is studying at a secondary school. ? He paid RM7,000 education fees for pursuing a post graduate marketing course in a public university in Malaysia. ? While meeting the company’s clients, he incurred RM17,000 and RM11,000 on entertainment and travelling expenses respectively. ? A cash donation of RM2,100 was made to Rumah Anak Yatim, an approved institution.
? Other expenses incurred by him included expenditure on books and journals of RM2,050 and a personal computer costing RM3,200. ? Medical and education insurance premium for his children totalling RM7,320. He also paid for life insurance for himself amounting to RM2,000. Question 3 (Continued) ? Medical expenses incurred for his father in-law was RM3,000. ? Contribution of RM3,500 to Skim Simpanan Pendidikan Nasional for his children. ? Contribution of RM4,620 to Employees Provident Fund. ? Zakat payment of RM850.
Required: (a) Compute the income tax payable for Mr. Yusuf for the year of assessment 2014. (22 marks) (All items stated in the question are to be included in the computation. Where the item requires no adjustment, indicate ‘NIL’ in the computation.) (b) Explain the tax treatment of the leave passage provided to Mr. Yusuf. (3 marks) Total: 25 marks Question 4 X-Concept Sdn. Bhd.
with a paid up ordinary share capital of RM1 million is in the business of manufacturing household appliances since 2003. The company’s statement of profit or loss for the year ended 31 December 2014 is as follows: Notes RM’000 RM’000 Sales 1,780 Less: Cost of sales 1 893 887This question paper consists of 5 questions on 9 printed pages. Add: Other income 2 39 926 Less: Expenses Repairs and maintenance 3 125 Professional fees 4 68 Donations Travelling Bad debts 5 6 7 35 85 35 Marketing expenses 8 20 Entertainment 9 19 Staff remuneration 10 280 Water and electricity Depreciation 40 21 728 Profit before taxation 198 Question 4 (Continued) Notes: RM 1. Cost of sales: Included in the cost of sales: Provision for obsolete inventories 110,000 Royalty payment 90,000 2. Other income comprises: Interest received from fixed deposit 12,000 Single tier dividends 27,000 3. Repairs and maintenance include: Renovation of warehouse 87,200 Maintenance of machinery 37,800 4.
Professional fees comprise: Accounting and audit fee 44,600 Fees paid to tax agent 9,900 Fine for traffic offences 13,500 5. Donations to approved institutions: Donation of cash 29,000 Donation of books 6,000 6. Travelling: Leave passage for managers to Amsterdam 58,600 Annual company trip to Pulau Tioman organised by employer 26,400 7. Bad debts comprise: Trade debt 20,500 General provision for doubtful debt 6,000 Specific provision for doubtful debt 5,500 Loan to an ex-employee 3,000This question paper consists of 5 questions on 9 printed pages. 8. Marketing expenses: These are expenses incurred to promote company’s products in magazines and newspapers. 9.
Entertainment expenses comprise: Beverages for clients during launching of new products 6,000 Annual dinner for company’s staff 13,000 10. Staff remuneration includes: Employee Provident Fund contribution 45,000 Salaries and wages 200,000 11. The balancing charge and capital allowances for the year of assessment 2014 were RM15,000 and RM75,000 respectively. Question 4 (Continued) Required: (a) Starting with net profit before tax, compute the income tax payable for X-Concept Sdn. Bhd. for the year of assessment 2014. Indicate ‘nil’ under the appropriate column, where no tax adjustment is required. (23 marks) (b) Explain the tax treatment for marketing expenses under Note 8.
(2 marks) Total: 25 marks Question 5 (a) Mr. Safuan is a tax resident in Malaysia for the year of assessment 2014. In 2014, he worked as a pilot with the Malaysia Airlines (MAS) and earned a total salary of RM180,000. He also earned a rental income of RM15,500 from letting out a property in Shanghai which was deposited in a bank in that country. He received in Malaysia a foreign dividend income of RM23,300.
Required: Explain with reasons whether each of Mr. Safuan’s income is subject to Malaysian tax. (6 marks) (b) Bigmac Sdn. Bhd. is a construction company based in Shah Alam. It incurred the following capital expenditure during the year ended 31 December 2012: RM A new Mercedes car for a director 322,000 A second hand Honda car for a manager 80,000 Heavy machinery 250,000 During the year ended 31 December 2014, the company: – acquired new office equipment costing RM85,000; – disposed of the heavy machinery (acquired in 2012) for RM160,000.This question paper consists of 5 questions on 9 printed pages.
Required: (i) Explain any THREE (3) conditions to be fulfilled in order to claim capital allowances. (6 marks) (ii) Compute the capital allowance for the years of assessment 2012 to 2014. (13 marks) Total: 25 marks