CONFIDENTIAL 1 AC/JUN 2019/TAX317

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION
ANSWER SCHEME

COURSE : TAXATION 2
COURSE CODE : TAX317
EXAMINATION : JUNE 2019

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SOLUTION 1A

a. Since the adjusted business income should consist income from business activities
under s 4(a), all non-business income should be excluded in arriving at the adjusted
business income.
Next, the non-business income should be added-back / included in arriving at the
aggregate income.

b.
SpeedAuto Sdn Bhd
Computation of income tax payable for the YA 2021
RM RM
Add Less
Net profit before taxation 1,452,700
Less: Non-business income:
Compensation received from a supplier due to faulty
installation of a machine which caused minor
disruption to the factory operation NIL
Dividend income from Megah Sdn Bhd – a Malaysian
resident company 32,000
Dividend income from Linoll Ltd – remitted from Japan 25,000
Interest income received from fixed deposit in local
banks 56,000
Add: Non allowable expenses:
Depreciation of plant and machinery in the production
line 105,000
Provision for warranty 88,800
Actual warranty paid NIL
Increased in the provision of obsolete inventory 7,000
Excise duty for importation of raw materials NIL
Compensation paid to the clients due to the wrong
product delivery NIL
Insurance premium on export cargo paid to a foreign
insurance company NIL
Expenditures on trip to Istanbul to dealers who met the
sales target NIL
Billboard and social media advertisement NIL
Cost of entertaining potential buyers (100% NAE) 14,000
Entertainment allowance given to sales and marketing
staff (50% NAE) 15,000

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Increase in specific provision for bad debts NIL

Increase in general provision for bad debts 7,000
Lease rental of commercial vehicle NIL
Salaries (including 10% of the salary of disabled
employees) 154,000
Employee Provident Fund (restricted to 19% x 1,540k
= 292.6k v 223k) NIL
Annual dinner for employees NIL

Upgrading the company’s Enterprise Resource

Planning system (ERP) 126,250
Legal fees on disposal of the company’s land 29,000
Consultancy fees paid to a Korean company in
relation to a new business activity in cosmetic
products in Sepang. The withholding tax requirement
has been complied by SpeedAuto Sdn Bhd 130,000
Training cost approved by Malaysian Development
Authority (MIDA) for upgrading the technical skills of
the employees 250,000
Cash donation to a project of national interest
approved by the Minister of Finance (claimed under s 65,000
44(11C))
Foreign exchange loss (realised) due to currency
exchange for importation of raw materials NIL
2,039,750 517,000
(517,000)

ADJUSTED BUSINESS INCOME 1,522,750

Less: Capital allowances (92,600 + 56,000) (148,600)
Less: Industrial building allowances (75,000 + 45,000) (120,000)

STATUTORY BUSINESS INCOME 1,254,150

Add: Dividend income – Malaysia NIL
Add: Dividend income - foreign NIL
Add: Interest income 56,000

AGGREGATE INCOME 1,310,150

Less: Approved donation for project of national
interest (restricted to 10% AI = 191,395 v (65,000)
65,000)

CHARGEABLE INCOME 1,245,150

Computation of income tax payable for non-SME co.:

The first RM500,000 @ 20% 100,000
Excess (645,150 x 25%) 161,287.50
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TOTAL INCOME TAX PAYABLE 261,287.50

SOLUTION 1B

a. Submission deadline for YA 2018 of:

i. CP204: Not later than 30 days before the beginning of its basis period ,
latest by 1/10/2017.
ii. Form C: Within 7 months after the end of its basis period , latest by 31 May
2019.

b. The minimum of tax estimate for YA 2019

= should not be less than 85% of last year’s estimate/revised estimate tax payable
(85% x RM500,000)
= RM425,000

SOLUTION 2A

a. The meaning of within the same curtilage is a building attached or adjacent to or

within the same enclosure as the other building.

b. Sedonia SB (FYE 30/4)

1. Factory building

Expenditures RM
Cost of land NIL
Architect’s fees 200,000
Legal and professional fees (RM60,000 – RM10,000) 50,000
Construction cost 1,900,000
Fitting installation 350,000
Cost for obtaining approval from local authority for
construction of the building 5,000
Installation of solar panel for electricity power source 195,000
QBE 2,700,000

YA RM
2017 QBE 2,700,000
(-) IA (10%) (270,000)
(-) AA (3%) (81,000)
RE 2,349,000

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2018 (-) AA (3%) (81,000)

RE 2,268,000

2. Machinery

Apply 75% rule:

Cost of machinery RM
100,000
Cost to prepare a site (COPS) for machinery 450,000
Aggregate cost 550,000

COPS = 450,000 / 550,000 x 100% = 81.8%

Since COPS is > 75% of aggregate cost , the aggregate cost qualified as
QBE.

YA RM
2017 QBE 550,000
(-) IA (10%) (55,000)
(-) AA (3%) (16,500)
RE 478,500

2018 AA (3%) (16,500)

RE 462,000

3. Hostel for factory worker

YA RM
2018 QBE 350,000
(-) IA (40%) (140,000)
(-) AA (3%) (10,500)
RE 199,500

SOLUTION 2B

a. A circumstance that would give rise to an agriculture charge effective from 1 January
2014:

Where the disposal of qualifying agriculture expenditure took place within 5 years
√from the incurring of such expenditure, all the agriculture allowance previously
claimed would be withdrawn as agriculture charge.

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b. Mega Plantation Sdn Bhd (FYE 30/11)

YA QAE / Land Road Planting Staff

Rate clearing Quarters
RM300,000 RM200,000 RM500,000 RM200,000
50% 50% 50% 20%
2014 AA 150,000 - - -
2015 AA 150,000 100,000 250,000 -

2016 AA - 100,000 250,000 40,000

2017 AA - - - 40,000
2018 AA - - 40,000 x
11/12
= 36,667
AC (300,000) (200,000) (500,000) (116,667)
AC with (150,000) for (100,000) (250,000) for (38,889) for
election each YA for each YA each YA each YA
2014-2015 2015-2016 2015-2016 2016-2018

Cost of land, purchase of truck, and cost of maintenance do not qualified to claim for
agriculture allowance

SOLUTION 3A

a. Real property gains tax implication to Malaysian citizen donor on the transfer of real
property as a gift to close family members:

i. Transfer within 5 years from acquisition:

Donor is not subjected to RPGT because the transaction is exempted under
NO GAIN NO LOSS situation where the disposal price is deemed equal to
acquisition price

ii. Transfer after 5 years from acquisition:

Donor is not subjected to RPGT because the rate of RPGT is at 0%.

b. Calculation of RPGT for Mr Auyin (Malaysian citizen)

Disposal Price (1 Sept 2018) RM

Consideration received (MV) 1,000,000

Less: Incidental costs

Legal fees (25,000)

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DISPOSAL PRICE FOR MY AUYIN 975,000

Acquisition Price (14 Aug 2014)

Consideration paid by Mr Soon (donor

Malaysian citizen) 450,000

Add: Incidental costs incurred by Mr Soon

Valuation fees 12,000

Less: Capital receipts by Mr Soon

Compensation received (5,000)
Deemed AP by Mr Soon 457,000

Add: Permitted expenses by Mr Soon

Defending the title of the bungalow 30,000

Acquisition Price paid by donor 487,000

Less: Capital receipts by Mr Auyin

Deposit forfeited (60,000)

ACQUISITION PRICE FOR MR AUYIN 427,000

CHARGEABLE GAIN 548,000

Less: Schedule 4 exemption

10% of CG = RM54,800 or RM10,000 WIH (54,800)

NET CG 493,200

RPGT Rate 15%

(in the 5th year from date of acquisition)
RPGT Payable 73,980

(
SOLUTION 3B

a. Reasons for WHT

Payment Subject to Reasons

WHT
Public entertainer Subject ● Under public entertainer under s 109A
of RM350,000
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● Income is deemed derived from Malaysia when the

employment of public entertainer is exercised in
Malaysia

Public entertainer Subject ● Under public entertainer under s 109A

of RM700,000 ● Income is deemed derived from Malaysia when the
employment of public entertainer is exercised in
Malaysia and the employee performs outside
Malaysia duties incidental to the exercise of
employment in Malaysia

Interest on loan of Not subject ● The loan was used to finance construction of office
RM200,000 outside Malaysia.

b. i.
Payment Computation of WHT WHT
RM
Public entertainer of RM350,000 15% x 350,000 52,500
Public entertainer of RM700,000 15% x 700,000 105,000
Interest on loan of RM200,000 - NIL
WHT to IRB 157,500

ii.
Payment Computation of amount Amount
payable payable to
recipients
RM
Public entertainer of RM350,000 85% x 350,000 297,500
Public entertainer of RM700,000 85% x 700,000 595,000
Interest on loan of RM200,000 100% x 200,000 200,000
Total amount 1,092,500

SOLUTION 4

Musa Aman Suhili

RM RM RM
Divisible Income
Pre = (RM216,000) x 6/12 [M:A:S = 1:1:1] 36,000 36,000 36,000
Post = (RM216,000) x 6/12 [A:S = 1:1:] - 54,000 54,000
Salary 5,000 20,000 15,000
Personal expenses 250 300 500
Interest on capital 2,500 5,000 5,000
Bonus - 3,000 4,000
Adjusted Income (Partnership) 43,750 118,300 114,500
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Less: capital allowance [1:1] (7,000) (7,000)

Statutory Business Income (Partnership) 43,750 111,300 107,500
Add: Dividend income Nil √ - -
Add: Director’s fee - 45,000 -
Aggregate Income 43,750 156,300 107,500
Less Approved donation:
(-) Partnership; RM12,000 [1:1] (restricted to 7% - (6,000) (6,000)
AI)
(-) Individual, Aman of RM1,000 to public library - (1,000) -
(restricted to RM20k)
Total Income 43,750 149,300 101,500

SOLUTION 5A

a. For determining GST registration:

Annual turnover of taxable supplies should exceed RM500,000 based on the
revolving 12 months period.

For determining taxable period:

Annual turnover of taxable supplies is based on RM5 million limit.
Monthly basis - The annual turnover is equal or more than RM5 million
Quarterly basis – The annual turnover is less than RM5 million

b. THREE types of supply under GST Act 2014:

▪ Exempt supply
Supply of goods or services which are not subjected to GST

▪ Standard rated supply

Supply of goods or services which are subjected to 6% GST

▪ Zero supply
Supply of goods or services which are subjected to 0% GST

c.
Output tax (Sales) Input tax (Purchases) Net GST
RM RM RM

January 2018 530k x 6/106 = 30,000 424k x 6/106 = (24,000) 6,000

February 2018 159k x 6/106 = 9,000 106k x 6/106 = (6,000) 3,000
March 2018 212k x 6/106 = 12,000 106k x 6/106 = (6,000) 6,000
Total 51,000 (36,000) 15,000
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SOLUTION 5B

a.
YA Basis Period Adjusted income/(loss)
2014 01/07/13 – 31/03/14 (210,000)
2015 01/04/14 – 31/03/15 (180,000)
2016 01/04/15 – 31/12/16 (100,500) + 240,000 = 139,500
2017 01/01/17 – 30/11/17 11/22 x 372,500 = 186,250
2018 01/12/17 – 31/10/18 11/22 x 372,500 = 186,250

b. The importance of determining commencement date and the year-end date for
business sources are;
● any revenue expenses incurred before the date of commencement is not
deductible in arriving at adjusted income
● capital allowance on qualifying expenditure would be available beginning from
the first basis period where the commencement date falls
● it results in the determination of the first year of assessment

END OF SUGGESTED SOLUTION

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