CONFIDENTIAL 1 AC/JUN 2019/TAX317

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION
ANSWER SCHEME

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

© Hak Cipta Universiti Teknologi

Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 2 AC/JUN 2019/TAX317

SOLUTION 1A

a. Since the adjusted business income should consist income from business activities
unde
derr s 4(a
(a),
), al
alll non
non-b
-buusi
sinness inc
income
ome sh
shoould be exc
xclluded
ded in ar
arri
rivving
ing at th
thee adj
djuust
steed
business income.
Next, the non-business income should be added-back / included in arriving at the 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:
Compe
Com pennsa
satition
on re
rece
ceiive
vedd fr
from
om a su
supppl
plie
ierr due to fa
faul
ulty
ty
installation of a machine which caused minor
disruption to the factory operation NIL
Divi
Divide
dennd inc
ncoome fro
from Mega gahh Sdn Bhd – a Malays
laysia
iann
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:
Deprec
Depr ecia
iatition
on of plan
plantt and
and mach
machin
iner
eryy in the
the prod
produc
uctition
on
line 105,000
P rovisiowarranty
Actual n for wtyarpaid
warran ranty 88,8NIL
00
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 for foreign
insurance company NIL
Expe
Ex pendndititur
ures
es on trip
trip to Ista
Istanb
nbul
ul to deal
dealer
erss who
who me
mett th
thee
sales target NIL
Billboard and social media advertisement NIL
Cost of entertaining potential buyers (100% NAE) 14,000
Ente
En tert
rtai
ainm
nmen entt allo
allowa
wancncee gi
give
venn to sa
sale
less an
andd mark
market
etin
ingg
staff (50% NAE) 15,000

© Hak Cipta Universiti Teknologi

Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 3 AC/JUN 2019/TAX317

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
Empl
Em ploy
oyee
ee Prov
Provid
iden
entt Fu
Fund
nd (res
(restr
tric
icte
tedd to 19
19%
% x 1,
1,54
540k
0k
= 292.6k v 223k) NIL
Annual dinner
dinner for emplo
employees
yees 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
pr
prod
oduc
ucts
ts in Sepa
Sepang
ng.. Th
Thee wi
with
thho
hold
ldin
ingg ta
taxx requ
requir
irem
emen
entt
has been complied by SpeedAuto Sdn Bhd 130,000
Training cost approved by Malaysian Development
Authority (MIDA) for upgrading
upgrading the technical skills of
tChaesehmpdloonyaeteiosn to a project of national interest 250,000
approrove
vedd by th thee Min
inis
iste
terr of Fina
Finannce (c
(cla
laiimed
med unde
derr 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: IInndustrial building allowances (75,000 + 45,000) (120,000)

STATUTORY BUSINESS INCOME 1,254,150

Add: Dividend
Dividend income – Ma
Malaysia
laysia NIL
Add: Dividend
Dividend income - fore
foreign
ign NIL
Add: Interest income
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
© Hak Cipta Universiti Teknologi
Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 4 AC/JUN 2019/TAX317

TOTAL INCOME TAX PAYABLE 261,287.50

SOLUTION 1B

a. Sub
Submissi
issioon dea
eaddlin
line fo
forr 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
The mmiini
nim
mum of ta
tax eesstitim
mate
ate for
for YA 2019
= should not be less than 85% of last year’s estimate/revised estima
estimate
te 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
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

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

RE 2,349,000
© Hak Cipta Universiti Teknologi
Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 5 AC/JUN 2019/TAX317

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

RE 2,268,000

2. Machinery

Apply 75% rule:

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.

Y
YA
A 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

Y
YA
A 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
Whe the dis
ispo
possal of qual
alif
ifyying
ing agri
agricu
culltu
turre exp
xpeendi
ditu
turre to
toook pla
place wi
with
thiin 5 years
ars
√from the incurring of such expenditure, all the agriculture allowance previously
claimed
claimed wou
would
ld be withdr
withdrawn
awn as agri
agricultu
culture
re charg
charge.
e.

© Hak Cipta Universiti Teknologi

Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 6 AC/JUN 2019/TAX317

b. Mega P
Pllantation S
Sddn B
Bhhd ((F
FYE 3300/11)

Y
YA
A 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)
(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
Co st of land
nd,, purc
rchhase of tr
truuck
ck,, and cos
ostt of mainte
intennance do not qualifi
lifieed to cl
claaim fo
forr
agriculture allowance

SOLUTION 3A

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

i. Transfer within 5 years from acquisition:

Dono
Do norr is no
nott subj
ubjec
ecte
tedd to RPGT
RPGT be
beca
cauuse th
thee tr
traansa
sact
ctiion is exe
xem
mpt
pteed und
under
NO GAIN NO LOSS situation where the disposal price is deemed equal to

acquisition price
ii. Transfer after 5 years from acquisition:
acquisition:
Donor
Don or is
is not ssubj
ubject
ected
ed to RPGT
RPGT be
becau
causese th
thee rate
rate of RPG
RPGT
T is aatt 0%.

b. Calc
Calcul
ulat
atio
ionn of
of RPG
RPGT
T for
for Mr Au
Auyi
yinn ((Ma
Mala
lays
ysia
iann cit
citiz
izen
en))

Disposal Price (1 Sept 2018) RM

Consideration received (MV) 1,000,000

Less: Incidental costs

Legal fees (25,000)

© Hak Cipta Universiti Teknologi

Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 7 AC/JUN 2019/TAX317

DISPOSAL PRICE FOR MY AUYIN 975,000

Acquisition Price (14 Aug 2014)

Consideration paid by Mr Soon (donor

Malaysian citizen) 450,000

Add: Incidental
Incidental costs incurre
incurredd 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
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
Publicc ent
Publi entert
ertain
ainer
er Subject ● Under public entertainer under s 109A
of RM350,000
© Hak Cipta Universiti Teknologi
Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 8 AC/JUN 2019/TAX317

● Inco
Incom
me is de
deeemed deri
rive
vedd fr
froom Malays
laysia
ia when
when th
thee
employment of public entertainer is exercised in
Malaysia

Publicc ent
Publi entert
ertain
ainer
er Subject ● Under public entertainer under s 109A
of RM700,000 ● Inco
Incom
me is de
deeemed deririve
vedd fr
froom Malays
laysia
ia when
when th
thee
employment of public entertainer is exercised in
Malaysia and the employee performs outside
Malaysia duties incidental to the exercise of
employment in Malaysia

In
Inte
tere
rest
st on lo
loan
an 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 RM73050,000 15% x 37050,000 10552,0500

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
© Hak Cipta Universiti Teknologi
Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 9 AC/JUN 2019/TAX317

Less: capital allowance [1:1] (7,000) (7,000)

Statutory Business Income (Partnership) 43,750 111,300 107,500
Add: Dividend
Dividend income Nil √ - -
Add: Director’s fee - 45,000 -
Aggregate Income 43,750 156,300 107,500
Less Approved donation:
(-)
(-) Pa
Part
rtne
ners
rshi
hip;
p; RM
RM12
12,0
,000
00 [1:1
[1:1]] (r
(res
estr
tric
icte
tedd to 7% - (6,000) (6,000)
AI)
(-)
(-) Indi
Indivi
vidu
dual
al,, Am
Aman
an of RM
RM1,
1,00
0000 to publ
public
ic libr
librar
aryy - (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
turnover of taxable supplies is based on RM5 million limit.
limit.
Monthly
Mont hly basis
basis - The annu
annual
al turno
turnover
ver is equa
equall or
or more than RM5 million
million
Quarterl
Quar terlyy basis – The an
annual
nual turnov
turnover
er is less th
than
an RM5 million
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)
(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
© Hak Cipta Universiti Teknologi
Teknologi MARA CONFIDENTIAL
CONFIDENTIAL 10 AC/JUN 2019/TAX317

SOLUTION 5B

a.
Y
YA
A Basis Period Adjusted income/(loss)
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
it res
resul tsbasis
ults in theperiod
in the ddet
eter where
ermi
mina the
natition
on ofcommencement
the
the firs
firstt ye
year date
ar ooff as
asse falls
sess
ssme
mentnt

END OF SUGGESTED SOLUTION

© Hak Cipta Universiti Teknologi

Teknologi MARA CONFIDENTIAL