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ACC3024 Tutorial 4 Q (Apr 2023)

SPO is a charitable organization approved for income tax exemption under paragraph 13 of Schedule 6 of the Malaysian Income Tax Act. [1] In 2019, SPO had income from donations, dividends, rental income, interest income, and a souvenir shop totaling RM231,000 and spent RM340,000 on its charitable purposes. [2] The question asks to discuss SPO's tax exemption eligibility and calculate any tax liability.

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135 views3 pages

ACC3024 Tutorial 4 Q (Apr 2023)

SPO is a charitable organization approved for income tax exemption under paragraph 13 of Schedule 6 of the Malaysian Income Tax Act. [1] In 2019, SPO had income from donations, dividends, rental income, interest income, and a souvenir shop totaling RM231,000 and spent RM340,000 on its charitable purposes. [2] The question asks to discuss SPO's tax exemption eligibility and calculate any tax liability.

Uploaded by

Shermaine Wan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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ACC3024 – Advanced Tax

Tutorial 4

Question 1

The Malaysian Society for the Protection and Preservation of Orang Utan ('SPO') is a
charitable organisation established in Malaysia. The rehabilitation center operated by
SPO is located at a very remote area near Sandakan, Sabah.

The Director General has approved SPO as a charitable organisation for the purposes
of income tax exemption under para 13, Sch 6, without the imposition of any
conditions other than those of para 13 and stipulated in the guidelines issued by IRB.

In addition to its normal activities, SPO runs a souvenir shop at Kota Kinabalu, Sabah.
The shop is operated by 2 employees recruited by SPO. For the year to 31/12/2019,
the income and expenditure account of SPO showed the following:
RM
Donations 90,000
Dividends from overseas (net of tax at 25%) 15,000
Rent from property minus deductible expenses 60,000
Interest from non-convertible bonds issued by
a listed company 10,000
Interest from convertible bonds issued by
Pengurusan Danaharta Bhd (tax-exempt) 16,000
Net business profits – souvenir shop 40,000

The accumulated fund of SPO was RM210,000 at the beginning of the year of
assessment. As for the business, all operating expenses amounting to RM75,000 are
tax deducted and assume that no capital allowance is available.

During 2019, RM340,000 of SPO’s total funds (from donation and business income)
were applied for the charitable purposes of SPO and the balance was accumulated for
future use. SPO’s approved status is due for renewal on 10 January 2020.

Required

(a) Based on the facts given above discuss whether, and to what extent, the
exemption under para 13, Sch 6 will be available to SPO for year of assessment
2019.

(b) You are required to calculate the liability to tax if any. Show details of any
necessary calculations.

1
ACC3024 – Advanced Tax

Question 2

The following is a list of receipts and expenditures relating to the operations of a


registered trade association for the year ended 31 December 2019:
Receipts: RM RM
Contributions - general 10,000
Subscriptions 48,000
Entrance Fees 27,000
Donations for building fund 46,700
Anniversary contributions 140,000
271,700
Expenditures:
Administrative expenses 14,400
Salaries 22,000
Building - additions & alterations 54,400
Anniversary dinner, drink, talk show,
etc. 144,700
235,500

Surplus of funds 36,200

Required

Prepare the tax computation for this trade association for year of assessment 2019
taking into consideration of the Income Tax (Exemption) (No.19) Order 2005.

Question 3

The income statement of a registered trade association for the year ended 31
December 2019 is as follows:

Income RM
Members’ subscription 198,000
Seminar fees 66,000
Fixed deposit interest 300,000

Expenditure
Administrative expenses 100,000
Employees remuneration 175,000
Rental of seminar hall 88,000
Transportation 38,500
Stationery 16,500
Surplus of income over expenditure 146.000

2
ACC3024 – Advanced Tax

The association is eligible to claim capital allowances of RM200,000 on all qualifying


assets which are not specific to any source of business income.

Required

Prepare the tax computation for this trade association for the year of assessment of
2019 taking into consideration of the Income Tax (Exemption) (No.19) Order 2005.

Question 4

Stanley, a civil engineer practicing in his own firm located at Puchong. In 2010,
Stanley assigned the rental income from four units of condominiums he owned to his
son, David, through a settlement. These four units of condominiums are currently
rented to Sunway University as student hostel and producing extra rental income of
RM48,000 in total per year. This settlement is revocable any time at the discretion of
Stanley.

David is a 22 years old student studying fulltime for his accounting degree at Sunway
University and depending solely on Stanley to pay for his cost of study and living.

Required

From the perspective of taxation, critically discuss Stanley’s intention of assigning his
rental income to David and whether his arrangement is effective. Support your
discussion with relevant tax legislation.

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