CONFIDENTIAL 1 AC/JUL 2023/TAX267

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : TAXATION 1
COURSE CODE : TAX267
EXAMINATION : JULY 2023
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:
i) the Question Paper
ii) a four-page Appendix 1
iii) An Answer Booklet – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 8 printed pages
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QUESTION 1

A. a. Explain briefly TWO (2) situations where a composite assessment shall be

raised.
(2 marks)

b. Identify TWO (2) types of tax returns together with its submission date that an
individual resident in Malaysia needs to submit to Malaysian Inland Revenue
Board.
(4 marks)

B. Puan Juliana is a Malaysian citizen and works as a senior executive at the Bank
Negara Malaysia. She was a resident in prior years until 2017. Her periods of stay in
Malaysia are as follows:

Periods of stay Notes

19 January 2018 – 4 April 2018
5 April 2018 – 10 May 2018 1
11 October 2018 – 31 December 2018
1 January 2019 – 3 February 2019 2
4 February 2019 – 3 July 2019
16 September 2019 – 14 November 2019
1 January 2020 – 31 December 2020 3
1 March 2021 – 22 July 2021
22 August 2021 – 31 August 2021 4
1 September 2021 – 30 September 2021
1 January 2022 – 31 December 2022 5

Notes:

1. She first left Malaysia to attend a meeting related to her work in Japan.

2. She accompanied her mother, who had a kidney operation in China.

3. In 2020, she was not in Malaysia because she took a one-year unpaid leave to
follow her husband to further study in the United Kingdom.

4. She went to Singapore for a family trip.

5. She got a full sponsorship from the Central Bank of Malaysia to attend a
professional course in New Zealand.

Required:

Determine the tax residence status of Puan Juliana for the relevant year of the
assessment until the year of assessment 2022. State the relevant sections and
reasons for your answers.
(12 marks)
(Total: 18 marks)

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QUESTION 2

Mr Chong started working with CCB Sdn Bhd as an accountant on 1 January 2012. Due to his
excellent skills and experience, he was promoted to Finance Director on 1 October 2016 and
held 3% of the company share. Mr Chong's health deteriorated throughout the year, and he
later learned that the doctor had diagnosed him with stage four (4) lung cancer. The company
offered him to resign from his position, and he accepted the offer on 1 October 2022. The
company paid him compensation amount to RM500,000.

The following were the remunerations and benefits he received for the year of assessment
2022:

1. Gross monthly director fees of RM15,000.

2. Entertainment allowance of RM1,000 per month. He incurred RM12,000 to entertain

the company’s clients during the year.

3. Travelling allowance of RM1,500 per month for official purposes. During the year, he
spent RM15,000 to perform his duties.

4. The company paid his professional membership to ACCA amounted to RM1,000.

5. The company awarded his son a RM200,000 scholarship to study medicine in India.

6. The company enrolled him in life insurance for RM500 per month. His wife was the
policy's beneficiary. The company paid the premium until June 2022.

7. Mr Chong was awarded a gold bar worth RM20,000 and a watch worth RM5,000 for
an excellent service award before resigning from his position.

8. The company provided him with a terrace house without furniture until June 2022. The
annual rental for the house was RM20,000.

9. The company provided him accommodation at Hotel SSB in July 2022. The daily rate
for the hotel was RM450.

10. The company provided him with childcare benefits of RM3,000 for his youngest son,
aged four (4) years old.

11. Throughout the year, he was admitted to KPJ hospital three times. The total amount
owed was RM60,000. He paid the bills and later received full reimbursement from the
company. His son was also hospitalised for a week due to bacterial fever, and the
company paid RM6,000 hospital bill.

12. He withdrew RM240,000 from his unapproved fund in April 2022. The company
contributed 50% of the fund.

13. The company paid his telephone bill of RM6,500 and his broadband bill of RM2,550,
respectively. The telephone bill was registered under his name, while the broadband
was registered under the company’s name.

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Required:

Calculate the statutory employment income for Mr Chong for the year of assessment 2022.
Round off your answers to the nearest RM.
(Total: 15 marks)

QUESTION 3

A. Encik Abu, a prominent name in TV hosting in Malaysia, has been offered by Star, a
giant TV station, a contract where he will receive an amount of RM1,000,000 with the
condition that he is prohibited from appearing/collaborating with any other TV station
except for Star. Encik Abu is also offered to host a reality TV show for four (4) seasons
and will be paid RM300,000 each season.

Required:

Explain briefly in terms of the taxability on the payment of RM1,000,000 and

RM300,000 if Encik Abu decides to accept the offer from Star TV.
(3 marks)

B. Molek Enterprise, a sole proprietorship owned by Alia, is an online business selling

women’s and children’s attire. Most of its suppliers are from China and Vietnam. The
following is the Statement of Profit or Loss for the year ended 31 December 2022.

Notes RM RM
Sales 750,000
Less: Cost of sales 1 (245,500)
Gross profit 504,500
Add: Other income
Compensation from an overseas supplier due 7,000
to late delivery of the purchases
Interest from a fixed deposit from Bank Islam 2,000
Berhad
Gain on disposal of the delivery van 3,000
516,500
Less: Operating expenses
Depreciation 4,500
Repairs and maintenance 2 10,500
Remuneration and EPF 3 199,000
Entertainment and travelling 4 9,000
Fees and donations 5 6,900
Bad debts 6 4,000 (233,900)
Net profit 282,600

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Notes:

1. Cost of sales consist of:

RM
Purchases of trading stock 170,000
Penalty paid to Les Copaq for selling imitation products and breach
of copyright 50,000
Import and custom duty on the importation of the goods 20,000
Forwarding agent fees for the importation of goods 5,500

2. Repairs and maintenance comprise:

RM
Fuel and toll charges (delivery van) 2,500
Installation of built in cabinets in the business premise 8,000

3. Remuneration and EPF consist of the following:

Salary EPF
RM RM
Alia 72,000 8,000
Kesuma (Alia’s sister) 40,000 7,800
Jannah (OKU card holder) 32,000 3,200
Muliani 32,000 4,000

4. Entertainment and travelling consist of:

RM
Free gift for customers for purchases exceeding RM200 900
Hari Raya hampers for all employees 900
Hari Raya hampers to local suppliers 1,200
Team building and annual family day for all employees in Pulau
Redang 6,000

5. Fees and donations consist of:

RM
Donation to several approved instituitions 2,500
Donation to public library (s 34(6)(g)) 1,400
Business zakat paid to Pusat Zakat Negeri 3,000

6. Bad debt was related to a loan given to a deceased close family member.

7. Molek Enterprise has the following amount for the year of assessment 2022:

RM
Balancing charge 3,200
Capital allowance – current year 4,400

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Required:

Compute the statutory business income of Molek Enterprise for the year of assessment 2022.
Indicate “NIL” for any item that does not require any adjustment. Round off your answers to
the nearest RM.
(17 marks)
(Total: 20 marks)

QUESTION 4

A. The Malaysian government has granted relief on any expense incurred on an electric
vehicle charging facility. The purposes are to promote a green environment and to
reduce air pollution. Identify the conditions to be eligible to claim such relief.
(3 marks)

B. Hashim and Diana, both are residents in the year of assessment 2022, had been
married since 2000. However, Hashim married his employee, Widuri, who was a non-
resident in the same year of assessment. Below are their income and spending for the
year 2022:

Hashim

1. He owned a sole proprietorship business in Kampar, Perak. During the year

2022, its adjusted business income was RM149,800. He claimed RM8,000 for
capital allowance on plant and machinery used in the business. Upon the
disposal of several plants and machinery, there were balancing allowances and
balancing charges of RM930 and RM12,700, respectively. The business also
had an unabsorbed business loss from year of assessment 2021 amounted to
RM11,362.

2. Hashim had a shop lot in Ipoh, Perak, which had been rented out four (4) years
ago. The gross rental was RM5,000 per month. He incurred regular maintenance
of RM200 per month, replacement of the roof with a better quality of RM5,800
and quit rent of RM1,000.

3. He received RM12,000 from a trust fund set up by his late grandparents.

4. Hashim and Diana had a son, Mustafa. He was a full-time student at the
University of Malaya pursuing a degree in engineering. Hashim fully sponsored
Mustafa’s study.

5. During the year 2022, Hashim incurred the following:

a) Zakat for his business of RM4,000 to Majlis Agama Perak.

b) Vaccination against Covid-19 of RM500 for him and Mustafa.
c) Life insurance on his life with a premium of RM200 per month.
d) Internet in his home of RM200 per month.
e) Two (2) units of laptops for Mustafa and Diana, which cost RM3,000 each.
f) Tennis racquet for Diana RM600.
g) Equipment to charge his electric car worth RM3,400.
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h) A room hotel in Pulau Redang for a family vacation, which the hotel was
registered with the Commissioner of Tourism under the Tourism Industry
Act 1992. The cost of accommodation was RM980.

Diana

1. She has been employed as an engineer in Toyoda Bhd since 15 years ago. Her
monthly gross salary was RM6,500 in the year 2022. She contributed 11% to her
EPF. However, Diana ceased her employment on 31 October 2022 to focus on
her study.

2. Diana earned RM4,600 for a consultation fee from David, her friend, in relation
to machinery used in his business.

3. She donated a painting to Perak State Government. The National Archives

valued the painting at RM20,000.

4. Diana earned RM980 interest from her fixed deposit from Maybank.

5. During the year 2022, Diana incurred the following:

a) Study fees of RM1,400 as she pursued a doctorate in the Faculty of

Engineering, Universiti Malaya as a full-time student.
b) Medical expenses of RM800 for her anxiety and depression problems due
to the COVID-19 pandemic. The psychiatrist was registered with the
Malaysian Medical Council under the Mental Health Act 2001.
c) Deposit to SSPN for Mustafa of RM8,000. However, Diana withdrew
RM2,500 for her son’s study fees.
d) Contribution of SOCSO of RM50 per month.
e) Books for her own study worth of RM3,400.

Widuri

1. Widuri remitted RM5,000 from her business in Medan, Indonesia.

2. She worked for Hashim for six (6) months in the year 2022 and received gross
wages of RM10,000. Widuri ceased her employment after she married Hashim
on 25 December 2022.

Required:

Compute the income tax payable of Hashim, Diana and Widuri for the year assessment
2022. Round off your answers to the nearest RM.
(22 marks)
(Total: 25 marks)

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QUESTION 5

A. State any THREE (3) examples of non-qualifying expenditures under Schedule 3 of

Income Tax Act 1967 in relation to agriculture business.
(3 marks)

B. Volume Sdn Bhd is a resident company in Malaysia and involves in producing fertiliser.
Below is the information on the company’s assets for the year financial year ended on
31 December 2022.

Office equipment
Office equipment was acquired on 1 July 2020 at RM10,000. The company disposed
the office equipment on 31 March 2022 for RM3,000.

Fertiliser processing machine

A fertiliser processing machine was bought on 1 August 2020 from Italy. The machine
was located 25 kilometres away from factory area. The following are the expenditures
incurred:

Cost of machinery: RM550,000

Transportation cost: RM15,000
Custom duty: 20% of purchase price
Site preparation during installation: RM50,000

Factory
The company purchased a factory building for RM3,000,000 on 1 November 2020 and
immediately used it for business purposes. 50% of the building is used in operations,
30% as raw material storage and the balance is used as an office. Later, on 1 March
2021, the company renovated the operation area and incurred a cost of RM300,000.
The renovation was completed on 1 June 2021.

Childcare centre
On 15 March 2021, the company purchased a nearby building costing RM400,000 and
used it as a childcare centre for its employees.

Required:

Calculate the capital allowances, industrial building allowance, balancing charge, or

balancing allowance (if any) for each asset of Volume Sdn Bhd for all the relevant years
of assessment up to the year of assessment 2022. Round off your answers to the
nearest RM.
(19 marks)
(Total: 22 marks)

END OF QUESTION PAPER

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