ACCA

TX MYS

DEC 2019
SAMPLE QUESTIONS

Exam Summary

Time allowed: This sample exam is not timed.

This exam is divided into two sections:
Section A
• 15 objective test (OT) questions, each worth 2 marks.
• 30 marks in total.
Section B
• Six constructed response questions that may contain a scenario which relates to
one or more requirement(s).
• Each constructed response question is worth 10 or 15 marks in total.
• 70 marks in total.

All questions are compulsory.

Section A

This section of the exam contains 15 objective test (OT) questions.

Each question is worth 2 marks and is compulsory.
This exam section is worth 30 marks in total.

Important:
(1) Calculations and workings need only be made to the nearest whole unit of currency,
unless instructed otherwise.
(2) All apportionments should be made to the nearest month.
1. Which of the following statements, in relation to the self-assessment system for companies,
is/are FALSE?

A small or medium enterprise (SME) company is never required to submit an estimate of tax
(1)
payable, but must pay any income tax due upon submission of its tax return
Tax is due and payable on the due date unless the company lodges an appeal against the
(2)
assessment
A company is allowed to revise its estimate of tax payable in the sixth and/or ninth month, as
(3)
long as the initial estimate was not RM0

A. 1 only

B. 2 and 3 only

C. 1 and 3 only

D. 1, 2 and 3

2. Tar Sdn Bhd (TSB) is a Malaysian tax resident company.

The company made a royalty payment of RM90,000 to Aussie Pte Ltd on 11 November 2018 and
remitted the withholding tax portion of RM10,000 to the Inland Revenue Board (IRB) on 20 May
2019.

The late payment penalty, if any, was remitted to the IRB before TSB’s tax return was furnished
to the IRB.

What is the amount of penalty payable to the Inland Revenue Board (IRB) by Tar Sdn Bhd
on the late payment of withholding tax?

A. RM10,000

B. RM1,000

C. RM9,000

D. RM0
3. Palm Sdn Bhd (PSB) incurred qualifying agriculture expenditure of RM100,000 on the
construction of a farm storage building in June 2012.

PSB used the farm storage building until 31 March 2019, then sold it for RM40,000 to Getah Sdn
Bhd (GSB).

GSB used the building in its agriculture business.

Both companies close accounts to 31 December each year.

What are the agriculture allowances that can be claimed by Palm Sdn Bhd and Getah Sdn
Bhd for the year of assessment 2019?

Option Palm Sdn Bhd Getah Sdn Bhd

1 RM2,500 RM7,500
2 RM0 RM4,000
3 RM0 RM7,500
4 RM2,500 RM4,000

A. Option 1

B. Option 2

C. Option 3

D. Option 4
4. On 3 March 2019, Chan, a Malaysian citizen, acquired a property from Pak Hassan, an
Indonesian citizen, for cash consideration of RM300,000.

Who is responsible for making the deduction of tax, and what is the amount that must be
retained and remitted to the Inland Revenue Board (IRB) in relation to real property gains
tax?

Party responsible for the deduction of Amount to be retained and remitted to

Option
tax IRB
1 Chan RM9,000
2 Pak Hassan RM21,000
3 Chan RM21,000
4 Pak Hassan RM9,000

A. Option 1

B. Option 2

C. Option 3

D. Option 4

5. Which of the following statements, in relation to registration for sales tax, is/are TRUE?

A manufacturer who carries out sub-contractor work with a sales value of taxable goods
(1)
exceeding RM500,000 per year is not required to be registered for sales tax
Every person engaged in the manufacturing of taxable goods that is required to be registered
(2) for sales tax, must apply to be a registered manufacturer no later than the last day of the month
following the month they become liable to be registered
A manufacturer is liable to be registered for sales tax if, at the end of any month, the total
(3) sales value of his taxable goods in that month and the eleven months immediately preceding
that month exceeds RM500,000

A. 1 only

B. 3 only

C. 2 and 3

D. 1 and 2
6. Ramesh has been employed as an engineer since 15 January 2003.

During the year of assessment 2019, he received the following from his employer:

RM
(i) Gross salary 220,000
(ii) Service excellence award 4,000
(iii) Long service award 5,000

What is Ramesh’s statutory income from employment for the year of assessment 2019?

A. RM227,000

B. RM229,000

C. RM225,000

D. RM223,000

7. SSK Sdn Bhd (SSK), a Malaysian tax resident company, closes its accounts to 30 June each
year and carries on the business of servicing equipment.

SSK acquired a heavy machine for RM50,000 on 7 January 2016. The machine was destroyed in
a fire on 2 July 2018, when the market value of the machine was RM18,000.

SSK received insurance compensation of RM15,000 on 29 May 2019.

What is the balancing charge arising on the disposal of the heavy machine by SSK Sdn Bhd
in the year of assessment 2019?

A. RM18,000

B. RM8,000

C. RM5,000

D. RM15,000
8. Sedap Sdn Bhd operates food and drinks outlets in the following premises:

(1) A restaurant
(2) A canteen in an educational institution
(3) A café in a hotel
(4) A food court

Which of the supplies are taken into account when determining whether Sedap Sdn Bhd is
required to be registered for service tax purposes?

A. 1, 2 and 3

B. 1, 3 and 4

C. 2, 3 and 4

D. 1, 2 and 4

9. Which of the following statements, in relation to losses and capital allowances, is FALSE?
A. A current year adjusted loss from a business source is available for set off against employment
income

B. Brought forward adjusted business losses can be claimed against aggregate statutory business
source income

C. Capital allowances for the current year from a business source can be carried forward to the
following year and claimed against the same business source

D. Relief for a donation made to an approved institution can be claimed before any current year
adjusted business loss
10. Milan, an Italian citizen, arrived for the first time into Malaysia on 1 October 2018 and was
employed as an innovation technologist.

On 3 February 2019, Milan went on holiday abroad and returned after 12 days.

On 8 March 2019, Milan visited his mother in Italy as she was not well. He returned after 18 days.

On 1 April 2019, he went on a work-related trip abroad and returned after 70 days.

On 30 September 2019, due to personal issues, Milan decided to resign from his work and left
Malaysia permanently. He has not returned to Malaysia since.

What is Milan’s tax residence status for the years of assessment (YA) 2018 and 2019?

Option YA 2018 YA 2019

1 Non-resident Resident
2 Non-resident Non-resident
3 Resident Non-resident
4 Resident Resident

A. Option 1

B. Option 2

C. Option 3

D. Option 4
11. A-One Sdn Bhd provides the following information in relation to the year of assessment (YA)
2019:

(i) The tax estimate furnished to the Inland Revenue Board (IRB) was RM110,000
(ii) The revised tax estimate was RM200,000
(iii) The actual tax payable was RM500,000

What is the penalty A-One Sdn Bhd must pay in relation to the underestimate of tax for YA
2019?

A. RM15,000

B. RM35,700

C. RM24,000

D. RM35,000

12. Dam Sdn Bhd, a Malaysian tax resident manufacturer of air-conditioners, is a major exporter
and a global leader in technological advancements.

Which of the following expenses incurred by Dam Sdn Bhd is NOT entitled to a double
deduction for the year of assessment 2019?

A. Manpower related research expenses incurred in acquiring new knowledge

B. Cosmetic modifications and stylistic changes for the purposes of research and development

C. Cost of maintaining a sales office overseas

D. Expenses on registration of a patent overseas

13. Noraini, a Malaysian tax resident individual, is a professional music composer.

During the year ended 2019, Noraini received a royalty of RM32,000 from a Malaysian company
for her musical compositions. The money was banked into her bank account in Hong Kong.

What is the amount of Noraini’s assessable royalty income, if any, for the year of assessment
2019?

A. RM0

B. RM20,000

C. RM12,000

D. RM22,000

14. Zizan acquired a property four years ago, and in 2019 entered into an agreement to dispose of
the property to AB Sdn Bhd (ABSB).

Zizan and ABSB verbally agreed to enter into a contract on 10 April 2019. Both parties signed the
contract on 24 April 2019.

Zizan received the full consideration on 6 June 2019 and the legal title to the property was
transferred on 10 July 2019.

What is Zizan’s date of property disposal for the purposes of real property gains tax?

A. 24 April 2019

B. 10 July 2019

C. 6 June 2019

D. 10 April 2019
15. The finance director (FD) of a company which trades in electrical equipment, has written off
in its financial statements, a related party irrecoverable debt for sale of electrical equipment.

Which of the following actions could result in this expense being disallowed for tax purposes?

(1) The FD failed to take any prudent action to recover the debt
(2) The FD did not take any action to recover or take back the equipment from the customer
The FD did not write off the debt based on prudent commercial consideration and the write
(3)
off was not in the best interests of the company

A. 1 and 2 only

B. 2 and 3 only

C. 1 and 3 only

D. 1, 2 and 3
Section B

This section of the exam contains six constructed response questions.

Each question may contain a scenario which relates to one or more requirement(s) which may be
split over multiple question screens.
Each question is worth 10 or 15 marks and is compulsory.
This exam section is worth 70 marks in total.

Important:
(1) Calculations and workings need only be made to the nearest whole unit of currency,
unless instructed otherwise.
(2) All apportionments should be made to the nearest month.
(3) In your live exam you must:
• Enter your answer for each question in the response area provided for that
question. Any answers entered into a response area provided for a different question
will not be marked.
• Show all notes/workings that you want the marker to see within the response area
provided for the question. Remember, any notes/workings made on the Scratch Pad or
on your workings paper will not be marked.
1. The following scenario relates to requirements (a)(i), (ii) and (iii) only.

Amalan Sdn Bhd (ASB) has been manufacturing furniture for many years and is registered for
sales tax purposes. ASB charges a 10% mark-up on the costs and overheads of its products. ASB
closes its accounts annually on 31 December.

Details relating to a sale made to a customer, Kulim Sdn Bhd (KSB), are as follows:

RM'000
Total direct manufacturing costs 60
Indirect marketing and distribution costs/overheads 40

Date goods delivered 28 December 2018

Date invoice issued 19 January 2019
Date full payment received 13 March 2019

The following scenario relates to requirements (b)(i) and (ii) only.

Morek Services Sdn Bhd (MSB), an architect firm, is a service tax registrant. MSB closes its
accounts annually on 31 December.

Details relating to the invoicing of a customer, SOHO Sdn Bhd, are as follows:

RM'000
Fees for design services 10
Disbursements for statutory costs:
Planning fees from local authorities incurred on behalf of SOHO Sdn Bhd 2

Date MSB issued the invoice to SOHO Sdn Bhd 22 January 2019
Date SOHO Sdn Bhd settled the invoice 5 March 2019

(a)(i) Determine the selling price and compute the sales tax due on Amalan Sdn Bhd’s sale
to Kulim Sdn Bhd.
(3 marks)

(ii) State in which taxable period the sale to Kulim Sdn Bhd should be recorded.
(1 mark)

(iii) Explain by when Amalan Sdn Bhd should pay the sales tax for the taxable period to the
Royal Malaysian Customs Department.
(2 marks)
(b)(i) Determine the amount of service tax, and total amount to be charged on the invoice
issued to SOHO Sdn Bhd.
(2 marks)

(ii) Explain the taxable period in which Morek Sdn Bhd should account to the Royal
Malaysian Customs Department for the service tax on the invoice issued to SOHO Sdn Bhd.
(2 marks)

(10 marks)
2. The following scenario relates to requirements (a)(i) and (ii) only.

Osaka-san, a Japanese citizen and non-Malaysian resident, is interested in investing in a residential

property in Malaysia which is estimated to be worth RM10 million.

He is considering whether he should acquire the property by setting up a company, or acquire the
property in his own name as an individual.

The following scenario relates to requirement (b) only.

Wau Sdn Bhd (Wau) acquired an office building for RM3,000,000 from Mr Soon on 12 June 2009.
Wau incurred stamp duty of RM84,000 and legal fees of RM40,000. The company also paid
RM2,000 in professional fees to submit its real property gains tax (RPGT) return on the acquisition
of the property.

On 23 June 2009, Wau incurred enhancement costs of RM100,000 for renovating the building,
and on 3 September 2009 received compensation of RM48,000 as a result of damage caused to the
building during the construction of a neighbouring building.

The company paid RM41,000 in interest on a bank loan taken out to purchase the property.

Wau disposed of the property to Miss Renu for RM4,000,000 and signed a sales and purchase
agreement on 19 July 2019. Wau incurred a RM40,000 commission charge for the introduction of
Miss Renu, the acquirer.
(a)(i) In relation to real property gains tax (RPGT), briefly explain:

- The RPGT rates payable by Osaka-san on the eventual disposal of the property if he
acquires it as a company, or as an individual.
- Any exemptions available if Osaka-san acquires the property in his own name.
(3 marks)

(ii) Advise Osaka-san of the due date for filing a RPGT return if he disposes of the property
in the future.
(1 mark)

(b) Compute the RPGT payable to the Inland Revenue Board (IRB) on the disposal of the
property by Wau Sdn Bhd, clearly indicating whether the company is eligible for any
exemption.

Note: You should indicate by the use of ‘0’ any item referred to in the question for which no entry
needs to be made in the tax computation.
(6 marks)

(10 marks)
3. The following scenario relates to requirements (a)(i) and (ii) only.

Sabah Sdn Bhd (SSB) incurred RM878,000 purchasing a specialist machine that was used in its
manufacturing business.

During the year of assessment 2019, SSB engaged the services of Jeguh Sdn Bhd (JSB) and paid
service fees to JSB to operate the machine in SSB’s manufacturing business.

During a tax audit of SSB, the Inland Revenue Board (IRB) disallowed SSB’s claim for capital
allowances on the specialist machine, on the grounds that it did not meet the requirements and the
machine was operated by JSB, not SSB.

The following scenario relates to requirement (b) only.

Miri Sdn Bhd, a manufacturing business, constructed a new factory and other related buildings
during the current year of assessment. The company conducts its own research and development
(R&D) activities and claims double deduction in respect of qualifying R&D expenditure. The
company closes its accounts annually to 31 March.

Details from the non-current asset records of the costs incurred on the new assets which were
completed and used during the year ended 31 March 2019 are as follows:

RM’000
(i) Cost of land 300
(ii) Legal fees and stamp duties on land 9
(iii) Building approval from local authorities 20
(iv) Architect fees 100
(v) Construction works 1,000

Additional details were provided in respect of the costs incurred on the buildings constructed:

(i) Canteen and recreational area for employees 15%

(ii) Office and administration area 20%
(iii) R&D building 15%

(a) Explain, for the year of assessment 2019, whether:

(i) Sabah Sdn Bhd has met the requirements to claim capital allowances on the specialist
machine, and
(2 marks)
(ii) the Inland Revenue Board (IRB) has valid grounds in disallowing Sabah Sdn Bhd’s claim
for capital allowances on the specialist machine.
(1 mark)

(b) Determine the qualifying building expenditure, and compute the industrial buildings
allowance available in respect of the costs of the relevant assets incurred by Miri Sdn Bhd
for the year of assessment 2019.

Notes:
1. You should state all amounts to the nearest thousand RM.
2. You should indicate by the use of ‘0’ any item referred to in the question for which no entry
needs to be made in the tax computation.
(7 marks)

(10 marks)
4. The following scenario relates to requirements (a)(i), (ii), (iii) and (iv) only.

Vest Co Sdn Bhd (VCSB), a Malaysian resident manufacturing and trading company, has made
investments in two wholly owned subsidiaries which were financed by term loan and bank
overdraft borrowings.

The company closes its accounts annually on 31 December.

The relevant details of its investments, borrowing amounts and interest expenses for the year ended
31 December 2019 are as follows:

Details of investments Cost of shares Remarks

Investments in shares
Harimau Sdn Bhd
Canada Investments Inc
Total
RM’000
Harimau Sdn Bhd has RM10 million in its
distributable and cash reserves currently
100 available for distribution as dividends
VCSB provided a 10% allowance for the
200 diminution in value of investments
300

Investments in fixed
deposits Deposits placed
RM’000
Fixed deposit placed in a local
financial institution 50
Borrowing amounts RM’000
Term loan 1,000
Bank overdraft 200
1,200
Interest expenses RM’000
Term loan 100
Bank overdraft 20
120

(a)(i) Explain why the interest restriction should be applicable on the interest expense
incurred by Vest Co Sdn Bhd.
(1 mark)

(ii) Explain whether the computation of the interest restriction should be based on year-end
or monthly balances.
(1 mark)
(iii) Compute the interest restriction that is applicable on the interest expenses incurred by
Vest Co Sdn Bhd.
(1 mark)

(iv) Determine the amount of interest expenses to be allocated to the investment in shares
and fixed deposits.
(3 marks)

The board of directors of Vest Co Sdn Bhd are concerned that a large portion of the interest
expenses incurred on the bank borrowings are not being efficiently utilised.

(b) Advise whether the interest incurred is being efficiently utilised for tax deduction
purposes, and what action the board of directors of Vest Co Sdn Bhd could consider to
minimise the non-deductibility of interest expenses.
(4 marks)

(10 marks)
5. The following scenario relates to three requirements.

No Lah Sdn Bhd (NL), a Malaysian tax resident company, has an issued share capital of RM5
million and is a wholly owned subsidiary of Sun Japan Ltd. NL has been manufacturing and selling
solar panels for many years and it sells its products to the local and export markets under the
registered brand ‘Sun Power’.

NL closes its accounts annually on 31 March, and details of its statement of profit or loss for the
financial year ended 31 March 2019 are as follows:
Note RM'000 RM'000
Revenue 40,324
Less: Cost of sales 1 (28,890)
11,434
Add: Rental income 2 114
Less: Unrealised foreign exchange loss 3 (23) 91
11,525
Less: Expenditure
Advertising and promotion expenses 4 935
Consultancy fees 5 112
Listing expenses 6 55
Salaries and staff welfare expenses 7 8,200 (9,302)
Profit before tax 2,223

Notes:
(1) Cost of sales includes:
RM'000
Amortisation and depreciation 12,497
Import duties and taxes 356
Export credit insurance premiums 44
Training expenses for new thermal process (approved by the relevant authorities) 29

(2) Rental income

The rental income, net of deductible expenses, relates to a research and development (R&D)
building. The building was rented to Matahari Sdn Bhd, a related company in Malaysia, which
carries out the group’s global R&D activities.

NL incurred RM1 million on construction of the R&D building which was completed and used in
the business from the year of assessment 2017 onwards.

(3) Unrealised foreign exchange loss

The unrealised foreign exchange loss arose on a trade payable to an overseas supplier. A foreign
exchange gain of RM67,000 which arose from a trade receivable in the previous year of assessment
was also realised during the current year. This gain has not been included in the statement of profit
or loss.

(4) Advertising and promotion expenses comprise:

RM’000
Advertising NL’s brand in local media and websites 225
Donation / sponsorship expenses for a sports club fund approved by the relevant
minister:
In-kind (footballs / jerseys – no logo) 205
In cash 505
935

(5) Consultancy fees paid to local companies comprise:

RM’000
Professional fees for payroll management 100
Professional fees for tax audit defence 12
112

(6) The company incurred expenses relating to the proposed listing on the local Bursa (stock
exchange).

(7) Salaries include maintenance expenses of RM18,000 for a child care centre for the company’s
employees.

Additional information:
(1) The capital allowances computed for year of assessment 2019 for the business are
RM14,266,000.

(2) On reviewing the draft tax computation, the financial controller of NL noticed that the company
did not claim industrial buildings allowance (IBA) on the R&D building that was rented to its
related company. He is of the opinion that NL can claim the IBA.
(a) Commencing with the profit before tax, compute the chargeable income of No Lah Sdn
Bhd for the year of assessment 2019.

Note: Your computation should indicate by the use of ‘0’ any item referred to in the question for
which no adjusting entry needs to be made in the tax computation.

(12 marks)
(b)(i) State the circumstances which allow a company to claim industrial buildings allowance
(IBA) for a research and development (R&D) building.
(1 mark)

(ii) Explain, whether No Lah Sdn Bhd and/or Matahari Sdn Bhd is entitled to claim IBAs
for the R&D building for year of assessment 2019.
(2 marks)

(15 marks)
6. The following scenario relates to four requirements.

Ms Yasmeen, a Malaysian citizen and tax resident, worked in Singapore until the end of 2018 and
from 1 January 2019 she started to work in Malaysia. She is a single mother with a daughter,
Mariam, who is a 20-year-old student studying for a degree in a local university. Ms Mariam was
previously married but is now divorced.

Ms Yasmeen worked in Singapore as a government employee and lived in the neighbouring state
of Johor, Malaysia.

She commuted daily to Singapore and lived in Malaysia during the relevant years for
approximately 11 months in a year. She has a bank account in Singapore and regularly banks her
income into her Malaysian bank account. She did not derive any income in Malaysia.

She seeks some clarification on the tax implications relating to her employment income in
Singapore, and living in Malaysia.

Details of Ms Yasmeen’s income and expenses for the year of assessment 2019 are as follows:

(1) Ms Yasmeen was engaged as a director of MY Sdn Bhd from 1 January 2019 to 31 March
2019, and received a monthly director’s fee of RM12,000.

(2) Ms Yasmeen was employed as a treasury manager by TT Sdn Bhd, a retailer of consumable
supplies, from 1 April 2019 onwards.

She received a monthly salary of RM10,000 and the following benefits:

- a monthly parking allowance of RM1,000 from 1 April 2019.
- the use of a car from 1 June 2019. TT Sdn Bhd acquired the car in 2013 for RM110,000. No fuel
was provided.
- unfurnished living accommodation from 1 July 2019 onwards at a monthly rate of RM3,000.
- reimbursement of RM1,000 for dental treatment.
- free consumables products of TT Sdn Bhd worth RM300.

Ms Yasmeen’s bonus of RM5,000 for the year 2019 will be paid in January 2020.

Her contribution to the employees’ provident fund (EPF) for the year 2019 was RM9,000.

(3) In addition, Ms Yasmeen:

- received interest of RM20,000 from a loan she provided to her brother’s company in Malaysia.
- paid Mariam’s university fees of RM23,000.
- paid RM8,000 medical expenses for her 71-year-old mother. Yasmeen’s mother has no income
of her own and was hospitalised in June 2019.
- paid RM2,500 for a complete medical check-up.

(a) Advise Ms Yasmeen on the following three issues:

(i) Whether her employment income from Singapore is liable to tax in Malaysia;
(1 mark)

(ii) Whether she becomes a Malaysian tax resident by residing in Malaysia each year;
(1 mark)

(iii) Whether being a Malaysian tax resident deriving employment income from Singapore
will automatically result in all income received by Yasmeen being subject to income tax in
Malaysia, even if she does not receive any income derived from Malaysia.
(1 mark)

(b) Compute the chargeable income for Ms Yasmeen for the year of assessment 2019.

Note: You should indicate by the use of ‘0’ any item referred to in the question for which no entry
needs to be made, or for which no personal reliefs are given, in the tax computation.
(12 marks)

(15 marks)