AC/JUL2024/TAX317

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE TAXATION 2
COURSE CODE TAX317
EXAMINATION JULY 2024
TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of six (6) questions.

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

3. Do not bring any materials 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 two-page Appendix 1
iii) an Answer Booklet - provided by the Faculty

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
© Hak Cipta Universiti Teknologi MARA
 2 AC/JUL2024/TAX317

QUESTION 1

Multi Mart Sdn Bhd (MMSB) is a resident company in Malaysia, incorporated on 1 May 2021
and commenced its business immediately. The company ends its first accounting period on
30 April 2022 and on 30 April every year. At the beginning of the year of assessment 2023,
the company has a paid-up capital amounting to RM4 million. The following information is
related to the year of assessment 2023:

RM
Actual chargeable income 1,550,000
Estimated tax payable 220,000
Revised estimated tax payable 308,000

Required:

a. For the year of assessment 2023, discuss the following submission requirements to
MMSB:

i. The estimated tax payable.

ii. The revision of estimated tax payable.
(4 marks)

b. For the year of assessment 2023, indicate the amount due to the Inland Revenue Board
by MMSB.
(2 marks)
(Total: 6 marks)

QUESTION 2

Luxurious Sdn Bhd is a manufacturing company located in Kota Bharu, Kelantan. It specialises
in the production and distribution of furniture for both domestic and global markets. This
Malaysian resident business was incorporated on 1 July 2013 and has a paid-up capital of
RM4 million. The statement of profit or loss of Luxurious Sdn Bhd for the year ended 30 June
2023 is as follows:

Luxurious Sdn Bhd

Statement of Profit or Loss for the year ended 30 June 2023

Notes RM RM
Sales 7,486,100
Less: Cost of sales 1 (1,780,000)
Gross Profit 5,706,100
Add: Other income 2 376,100
6,082,200
Less: Expenses
Sponsorship and donation 3 139,500
Salaries and wages 4 2,450,400
Financial expenses 5 240,000
General and administration 6 247,800

© Hak Cipta Universiti Teknologi MARA

 3 AC/JUL2024/TAX317

Depreciation 195,000
Entertainment expenses 282,200
Specific provision for doubtful debts 250,000
Business zakat 96,800 (3,901,700)
Net profit before taxation 2,180,500

Notes:

Cost of sales include:

RM
Provision of warranty 20,000
Actual warranty claimed by customers 18,000

Other income consists of the following:

RM
Dividend from foreign investment 56,400
Dividend from Media Prima (M) Bhd 32,000
Interest on fixed deposit from Maybank Bhd 72,700
Compensation from a supplier for late delivery of woods 215,000

Sponsorship and donation comprise of:

RM
Cash donation to a school library in Penang [s 34(6)(g)] 93,000
Book donation to a public library in Perak [s 34(6)(g)] 11,500
Cash donation to the flood victims in Kelantan. The donation was made
through an approved institution. 5,000
Scholarships were awarded to three (3) eligible full-time students at a
local higher education institution for a bachelor's degree programme in
engineering (The parents' monthly income for each student is
RM5,000). 30,000

Salaries and wages:

RM
Salaries and bonuses paid to employees 1,988,000
Overtime payments 46,900
Entrance fees to Vienna Golf Club for Marketing manager 15,100
Employees Provident Fund (EPF) 380,000
Staff training conducted in Kuala Lumpur 20,400

Financial expenses consist of:

RM
Interest on loan taken for investment purposes
Unrealized foreign exchange loss on repayment of loan taken with 136,000
China Commercial Bank
Realized foreign exchange gain arising from conversion of balances 155,000
owing by overseas trade receivables at year-end
(51,000)

© Hak Cipta Universiti Teknologi MARA

 4 AC/JUL2024/TAX317

6. General and administration include:

RM
Advertisement of the company's brand name registered in United
Kingdom 16,200
Lease rental of a used lorry licensed as a commercial vehicle is
RM2,000 per month (starting on 1 March 2022). The cost of the lorry
was RM130,000. 24,000
Bad debts on loans provided to ex-employees 8,800
Tax penalties 33,000
Cash embezzlement by a cashier of the company 20,000

7. Entertainment expenses include:

RM
Hari Raya celebration for staff 26,200
Condolence message in newspaper in respect to customers 5,600
Entertainment of clients during launching of new living room furniture 31,900
Cost of participating in an international trade fair in Putrajaya approved
by the Ministry of International Trade & Industry (MITI) 170,000
Promotional gifts to customers (with business logo) upon the purchase
of company's products 48,500

Additional information:

For the year of assessment 2023, the company has capital allowances of RM92,600. The
company has an unabsorbed business loss of RM75,440 and capital allowance of RM26,300,
all from the year of assessment 2022.

Required:

a. Calculate the income tax payable by Luxurious Sdn Bhd for the year of assessment
2023. Indicate 'Nil' for any item that does not require any adjustment.
(22 marks)

b. Explain the reason(s) for your treatments as in part (a) in arriving at the adjusted
business income for the following items:

i. Cash donation to a school library in Penang [s 34(6)(g)].

ii. Book donation to a public library in Perak [s 34(6)(g)].
(2 marks)
(Total: 24 marks)

© Hak Cipta Universiti Teknologi MARA

 5 AC/JUL2024/TAX317

QUESTION 3

Smartwood Sdn Bhd is a resident company manufacturing wood-based products, located in

Pengkalan Chepa, Kelantan. The company commenced business on 1 January 2022 and
closes its account every 30 November. The company produces non-promoted products
(plywood).

During the board of directors meeting in June 2023, the board has approved the proposal for
the following capital expenditures for the production of plywood:

1. Purchase of a Computer Numerical Control (CNC) machine in June 2024 costing

RM620,000 for production of a wide range of plywood sizes. The machine will increase
the production capacity.
2. Purchase of an air filtration system in January 2025 costing RM180,000 to minimize the
release of harmful substances into the environment.

In the company's monthly meeting in January 2024, the newly appointed account executive of
the company suggested to the management that the company should also produce
engineered wood products due to the high prospect and demand of the product in the market.
Moreover, the engineered wood product is listed as one of the promoted product and therefore
the company is eligible to apply for either Pioneer Status or Investment Tax Allowance for its
production. The production of the promoted product is proposed to start from 1 January 2025.
The following is the extract of projected information for both the promoted and non-promoted
products of the company for the years of assessment 2025 and 2026.

2025 2026
RM'OOO RM'OOO
Promoted products:
Adjusted income /(loss) (250) 1,750
Capital allowance 9 11

Non-promoted products:
Adjusted income /(loss) 1,050 (2,040)
Capital allowance 49 84
Balancing charge 31 41
Adjusted loss brought forward from the year of assessment (186) -
2022

Cash donations to State Government 82 59

Capital Expenditure related to promoted products

Land 725 -
Factory building 515 70
Plant and machinery 975 50
Office equipment 10 -

© Hak Cipta Universiti Teknologi MARA

 6 AC/JUL2024/TAX317

Required:

a. Calculate the chargeable income and the amount credited to the exempt income
account for the year of assessment 2025 to 2026 under the following tax incentives:

i. Pioneer Status
ii. Investment Tax Incentive
(18 marks)

b. Analyse the most efficient tax incentive for Smartwood Sdn Bhd.
(2 marks)

c. Discuss with reason(s) the eligibility of Smartwood Sdn Bhd for Reinvestment Allowance
for each of the approved capital expenditures for the production of plywood.
(4 marks)
(Total: 24 marks)

QUESTION 4

Triple-H Sdn Bhd (TSB) a resident company in Malaysia, manufactures camera lenses for
mobile phones. The company has factories in Malaysia, Indonesia and India. The company
closes its account every 31 December. During the financial year 2023, the company made the
following payments:

Date Details of Payment Amount

(RM)
16 April 2023 Payment to an Indonesian company for the use of patent at 120,000
all TSB's factories.
1 May 2023 Payment to a Singaporean consulting company for technical 200,000
advice relating to one of its products produced at the main
factory in Malaysia. The consultants were in Malaysia for 7
days.
10 June 2023 Payment to Are-We Ltd, a Singaporean construction 1,000,000
company to construct the company's new factory in Gua
Musang, Kelantan (70% of the amount was for building
materials and the balance was for the service).

Note: Ignore the provision of the Double Taxation Agreement

Required:

a. Assess with reason(s) whether each of the above payments made by TSB is subjected
to withholding tax.
(6 marks)

b. Calculate the amount of withholding tax and penalty (if any) for each of the payments
above if TSB remits the amount of withholding tax after the due date.
(4 marks)

© Hak Cipta Universiti Teknologi MARA

 7 AC/JUL2024/TAX317

c. Indicate the withholding tax implication if the Double Taxation Agreement between
Malaysia and Singapore specifies the withholding tax rate under section 109A (public
entertainer) is 10% and section 109B (special classes of income) is 8%.
(2 marks)
(Total: 12 marks)

QUESTION 5

On 10 January 2017, Uwais acquired a piece of land next to Calm Resort in Tok Bali, Kelantan
for RM510,000. He incurred the following expenses for the purchase of land which are legal
fees of RM45,000, stamp duty of RM29,000, brokerage fees of RM10,000, and valuation fees
of RM18,000. In April 2017, Calm Resort started piling works for the construction of a six-
storey building which caused damage to Uwais's land. As a result, the contractor paid
RM44,900 as compensation to Uwais.

On 2 May 2017, Encik Amin offered to purchase the land for RM750,000. Uwais agreed and
received a deposit of RM55,000. On 1 August 2017, Encik Amin had to cancel the purchase
of the land and the deposit was forfeited by Uwais.

On 15 February 2021, Uwais transferred the land to his daughter, Huda, as a birthday gift.
The market value of the land at that date was RM820,000.

On 1 January 2022, Huda and her sister, Nurul, commenced Superb Sdn Bhd (SSB), a non-
real property company. The paid-up share capital of SSB was 800,000 shares at RM1.50 each
and are shared equally by each of them.

On 1 April 2022, Huda transferred the land that was given by her father to SSB for a total
consideration of RM945,000 consisting of 500,000 units of shares at RM1.50 each and the
balance in cash. On this date, the market value of the land and other tangible assets were
RM1,250,000 and RM410,000, respectively.

On 1 December 2023, Huda decided to sell the 500,000 shares she acquired from the transfer
of land to SSB and 400,000 shares she owned since the date of incorporation for
RM1,350,000.

Note: All individuals are Malaysian citizens and do not claim for private residence exemption.

Required:

a. Compare the real property gains tax implication to the donor for gift of real property from
husband to wife between donor who is a Malaysian citizen and a Malaysian resident.
(4 marks)

b. Calculate the following:

i. The acquisition price of the land for Huda.

ii. The real property gains tax implication (if any) on the transfer of land from Huda
to Superb Sdn Bhd.
(10 marks)

© Hak Cipta Universiti Teknologi MARA

 8 AC/JUL2024/TAX317

c. Calculate the real property gains tax (if any) for Huda on the following:

i. The disposal of 500,000 shares.

ii. The disposal of 400,000 shares (indicate the status of Superb Sdn Bhd).
(10 marks)
(Total: 24 marks)

QUESTION 6

Sunrise Manufacturing Sdn Bhd is a registered manufacturer of taxable goods under Sales
Tax Act 2018. The company imported taxable goods from an independent supplier at a
purchase price of RM355.000. The imported goods are subject to import duty of 20%. The
following costs were incurred in connection with the imported taxable goods in 2023:

Transactions Total
(RM)
Freight expenses 20,800
Insurance expenses 14,500

In addition, Sunrise Manufacturing Sdn Bhd sold taxable manufactured goods to Indah Kumia
Sdn Bhd at RM500,000. Below is the information concerning the sales.

Particulars Date

Date of goods delivered 18 January 2023

Date of invoice issued 15 February 2023
Date of full payment received 16 March 2023

The sales tax rate is at 10%.

Required:

a. Explain the following to Sunrise Manufacturing Sdn Bhd regarding the sales made to
Indah Kumia Sdn Bhd:

i. The deadline for submission of sales tax to the Royal Malaysian Customs
Department,
ii. The tax implication (if any) if the sales tax was remitted on 30 June 2023 (no
calculation is needed).
(4 marks)

b. Calculate the amount of sales tax payable by Sunrise Manufacturing Sdn Bhd for the
imported taxable goods.
(6 marks)
(Total: 10 marks)

END OF QUESTION PAPER

© Hak Cipta Universiti Teknologi MARA

 APPENDIX 1 (1) AC/JUL2024/TAX317

• The following tax rates are to be used in answering the questions.

Income tax
rates
a) Resident company incorporated in Malaysia with paid up capital of
RM2.5 million and below (at the beginning of the YA), having gross
income from source or sources consisting of a business of not more
than RM50 million for the basis period for a YA, provided that:
- the resident company is not connected to a "related company";
and
- less than 20% of the paid up capital in respect of ordinary shares
of the resident company is directly or indirectly owned by
"foreign shareholder" at the beginning of the basis period

On the first RM150,000 chargeable income 15%

On the subsequent RM450,000 chargeable income 17%
On chargeable income exceeding RM600,000 24%

b) Resident company with paid up capital above RM2.5 million (at the
beginning of the YA) OR is connected to a related company 24%

c) Non-resident company/branch 24%

"Related company" means a company with paid up capital of more

than RM2.5 million (at the beginning of the YA) and is connected to
the resident company in either one of the following situations:
- 50% of the paid up capital in respect of ordinary shares of the
company is directly or indirectly owned by a related company;
- 50% of the paid up capital in respect of ordinary shares of the
related company is directly or indirectly owned by the company;
or
- 50% of the paid up capital in respect of ordinary shares of the
company and the related company is directly or indirectly owned
by another company

"Foreign shareholder" means:

- One or more companies incorporated outside Malaysia; or
- One or more individuals who are not Malaysian citizens

Rate of Capital Allowances

Motor Heavy General Computers Others Building

Vehicles Plant & Plant &
Machinery Machinery
Initial 20% 20% 20% 20% 20% 10%
allowance
Annual 20% 20% 14% 20% 10% 3%
allowance

© Hak Cipta Universiti Teknologi MARA

 APPENDIX 1 (2) AC/JUL 2024H"AX317

• Rate of Real Property Gains Tax Rates

For the period of 1 January 2022 and onward

Category of disposal RPGT rate

Companies Individual Individual (non-
incorporated in (citizen / citizen / non-
Malaysia or a permanent permanent
Trustee of a resident) resident) or a
Trust Company not
incorporated in
Malaysia
Within 3 years after date of 30% 30% 30%
acquisition
In the 4th year after date of 20% 20% 30%
acquisition
In the 5th year after date of 15% 15% 30%
acquisition
In the 6th year after date of 10% 0% 10%
acquisition or thereafter

• Sales Tax and Service Tax

For the period from 1 September 2018 and onwards

Sales tax rate for taxable goods 5%, 10%

Service tax rate for taxable services 6%

Stamp Duty

Rates of duty under the First Schedule

Conveyance, assignment, transfer or absolute bill of sale

Rate
%
Sale of property from 1 July 2019 onwards
For every RM100 or fractional part thereof:
On the first RM100,000 1%
RM100,001 to RM500,000 2%
RM500,001 to RM1,000,000 3%
On the excess over RM1,000,000 4%

© Hak Cipta Universiti Teknologi MARA