UNIVERSITI TEKNOLOGI MARA

TAX517
TOPIC 2 : CORPORATE TAX

1. Explain how the company is chargeable to tax under the Income Tax Act 1967 in relation to the
income mentioned in the following scenario.
a. A company resident in Malaysia carried on a consultancy business in Malaysia and
reported revenue of RM2 million. This included consultancy fees of RM100,000 earned
by the company in Africa and remitted back to Malaysia

b. Simon Inc., was incorporated in the USA on 2.1.2000 and shortly after its incorporation,
it registered as a foreign company in Malaysia on 2.3.2000. Simon Inc. (Malaysia) then
commenced the business of provision of management and consultancy services in
Malaysia. Its revenue was largely from fees charged for management, consultancy and
other services provided to a related company, Simon (Malaysia) Sdn Bhd.
The Board of Directors of Simon Inc. (Malaysia) comprised of an American citizen who
held the post of the president and 4 Malaysians who held the posts of a general manager,
director (2 persons) and an accountant. However, the management and control of Simon
Inc. (Malaysia) has been carried on in the USA since incorporation by the board of
directors in the USA. The financial accounting period of Simon Inc. (Malaysia) is the
calendar year. The company claimed to be a resident in Malaysia in the year of
assessment 2008 as the board of directors meeting was held in Kuala Lumpur on
30.11.2008. An audit finding indicated that a board of directors meeting was not held on
the said date but a promotional and marketing session was held instead.

c. Ching Mart Stores Inc. is a Chinese retail store dealing with luxury products in China. It
has set up a business in Kuala Lumpur that deals with trading activities but the
management and control is exercised by the parent company in China.

2. Mr Teh, an employee of a textile company and Mr Bean, a banker made some profits on the
purchase and sale of seven units of cotton spinning plant. This was the only occasion that Mr Teh
and Mr Bean undertook a transaction of such nature. The units of cotton spinning plant were sold
to different purchasers. Expenses such as commission, advertising, repairs, insurance, travelling
and entertainment were incurred to facilitate the sale.

3. Encik Raju retired from employment at the age of 55 in 2000 and received gratuity of
RM160,000. He also withdrew a sum of RM190,000 from the EPF. He used the gratuity and the
EPF withdrawal to partly finance the acquisition of a piece of agricultural land costing RM45,000.
The balance of the acquisition price was financed by bank borrowings.

Part of the agricultural land was developed into mangosteen plantation and the balance of the land
was rented out to his cousins who are farmers living in the village
In 2006, Encik Raju and his wife Puan Dewi migrated to Perth, Australia to be with their children.
Before he left Malaysia, he sold the agricultural land for a gain of RM200,000. The sale was made
through a real estate agent. Neither he nor his wife previously disposed of any real property.

State with reasons whether the gain of RM 200 is assessable to income tax.