CONFIDENTIAL 1 MAY 2021/TAX667/TEST 1

COMMON TEST 1

COURSE : ADVANCED TAXATION

COURSE CODE : TAX 667
EXAMINATION : 1 MAY 2021
TIME : 10.00 AM - 12.00 PM (2 HOURS)

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of three (3) questions.

2. Answer ALL questions (handwritten). Start each answer on a new page.

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

i. The Question Paper

ii. Appendix

This examination paper consists of 6 printed pages

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QUESTION 1

Sulaiman, a resident taxpayer, died domiciled in Malaysia on 30 September 2020. Upon his
death, his estate was administered by Salihin, his brother who was resident in Malaysia for the
basis year 2020.

The following are information gathered by the executor for the year of assessment 2020:
RM
Business income (Laundry business)
Adjusted loss (15,000)
Balancing charge 27,000
Capital allowance 15,000

Business income (Restaurant business)

Adjusted income 100,000
Unabsorbed loss brought forward 20,000
Capital allowance 10,000

Rental income
Net rental income after deduction of interest on mortgage (RM2,000) and
installation of air conditioner (RM1,300) 30,000

Interest income
Fixed deposit at RHB Bank maturing on 10 November 2020 3,000

Dividend income
Glosev Berhad (a pioneer company) paid on 5 April 2020 18,500

Other expenses
Donation made to Rumah Kebajikan Masyarakat (approved) on May 2020 5,000
Executor’s remuneration 10,000
Annuity payable to wife, Suhaila 10,000

Sulaiman also received income from sources outside Malaysia as follows:

1. Interest of RM25,000 on a fixed deposit was received from a bank in Thailand. The
amount was fully received in Malaysia in May 2020.

2. In October 2020, an Australian company paid dividend of RM35,000 of which only

RM10,000 was received in Malaysia in December 2020.

Other information available:

Sulaiman was a disabled person (registered with Welfare Services Department) due to an
accident several years ago. He lived with his wife, Suhaila until he died. Suhaila has no other
sources of income except for annuity received from the executor.

Before his death, Sulaiman spent RM7,000 to purchase a wheelchair in January 2020 and
RM550 for his wife medical examination.

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Required:

a) For the year of assessment 2020, compute the followings:

i. The chargeable income of the deceased; and
ii. The income tax payable of the executor.
(13 marks)

b) Explain the taxability (if any) of the annuity received by Suhaila of RM10,000
(2 marks)
(Total: 15 marks)

QUESTION 2
Encik Amir, a tax resident carries on trading business in Malaysia and Indonesia. He passed
away on 1 March 2019, leaving behind a wife and his four children. Upon his death, a trust,
resident in Malaysia was created for the benefit of his beneficiaries Irfan, Harraz, Alisya, Hadif
and his wife Puan Azra. Encik Amir’s brother, Azlan was appointed as a trustee. The income
and expenditure pertaining to the trust and the beneficiaries for the basis year 2020 are
provided below:
RM
Rental Income
Adjusted rental income from a house in Ipoh is after deducting quit and 30,000
rent assessment of RM 500.

Interest Income
Interest income from fixed deposit in Bank Islam Malaysia 12,500
Interest income from fixed deposit in Bank Mandiri, Indonesia (remitted to 8,000
Malaysia on 1 November 2020)

Dividend
Dividend (Malaysia - single tier) credited on 1 June 2020 4,500

Business Income (Malaysia)

Gross Income 450,000
Revenue expenses (Note 1) 25,000
Capital expenses 45,000
Capital allowance 9,500

Business Income (Indonesia)

Statutory Business income (only three quarter of the business income was 48,000
remitted to Malaysia on 1 October 2020)
Donation to Perak State Government 10,000

Note 1
Included in the revenue expenditure is a trustee fee paid to Azlan for managing the business
in Malaysia amounted to RM14,000 and the balance of RM 8,000 for managing the trust.

Additional information:
i. Puan Azra will be paid an annuity of RM42,000 annually. However, for the year of
assessment 2020, she only received RM 38,000.

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ii. An amount of RM 2,500 per month was accumulated for Hadif, who is still in secondary
school and paid to him when he reaches 21 years old.

iii. The beneficiaries are tax residents except Harraz who is married and working in Adelaide,
Australia.

iv. 40% of the trust body’s income was distributed to Alisya, the sole beneficiary of the non-
discretionary, while the balance is to be paid to Irfan and Harraz, a sum as the trustee think
fit out of the discretionary portion.

v. The actual sums received by Irfan, Harraz and Alisya from the trust body in 2020 are RM
95,000, RM 115,000 and RM 105,000 respectively.

Required:

For the year of assessment 2020:

a) Calculate the income tax payable by the trust body if Section 61(2) is applied
Note: Round up your computation to the nearest ringgit
(13 marks)
b) Explain briefly the tax implication of Section 61(2) to Harraz.
(2 marks)
(Total: 15 marks)

QUESTION 3

A. Please indicate TRUE or FALSE for the following statements:

i. Qualified healthcare travellers mean foreign entities outside Malaysia as well as an

individual who is Malaysian citizen and do not hold Malaysian work permit.

ii. Qualifying company achieving increased in export sales on manufacturing product

would be exempted up to 70% of Statutory Income.

iii. The amount credited to an exempt income account can be used by the company to
pay exempt dividend under single tier basis.

iv. Company A is an agricultural company that produce crude coconut oil. Company A is
eligible for export incentives if the company fulfill certain criteria.

v. REST Specialist Hospital is eligible for tax incentive if the company provide private
healthcare facility to healthcare travellers but subject to certain conditions.
(5 marks)

B. Great Specialist Hospital is a qualified healthcare service provider approved by MIDA. As

a tax advisor, you need to advice the management team related to investment tax
allowance on qualifying capital expenditures that eligible for the company.
(5 marks)
(Total: 10 marks)

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APPENDIX (YA 2020)

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%

Scaled Rate (YA 2020)

*Chargeable Income Rate Cumulative Tax

RM RM
On the first 5,000 0 0
On the next 5,000 1 50
On the first 10,000 50
On the next 10,000 1 100
On the first 20,000 150
On the next 15,000 3 450
On the first 35,000 600
On the next 15,000 8 1,200
On the first 50,000 1,800
On the next 20,000 14 2,800
On the first 70,000 4,600
On the next 30,000 21 6,300
On the first 100,000 10,900
On the next 150,000 24 36,000
On the first 250,000 46,900
On the next 150,000 24.5 36,750
On the first 400,000 83,650
On the next 200,000 25 50,000
On the first 600,000 133,650
On the next 400,000 26 104,000
On the first 1,000,000 237,650
Exceeding 1,000,000 28 280,000
On the first 2,000,000 517,650
Exceeding 2,000,000 30

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Personal reliefs
RM
Self 9,000
Disabled self, additional 6,000
Medical expenses expended on self, spouse or child with serious (maximum) 6,000
disease,
including up to RM500 for medical examination Parental care (each) 1,500
Basic supporting equipment for disabled self, spouse, child or parent (maximum) 6,000
Spouse relief 4,000
Disabled spouse, additional 3,500
Child - basic rate (each) 2,000
Child - higher education (each) 8,000
Disabled child (each) 6,000
Disabled child, additional for higher education (each) 8,000
Childcare (below six years old) (maximum) 1,000

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