Professional Documents
Culture Documents
AC/NOV 2005/TAX320
COURSE
TAXATION 1
COURSE CODE
TAX320
EXAMINATION
NOVEMBER 2005
TIME
3 HOURS
INSTRUCTIONS TO CANDIDATES
1.
2.
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)
ii)
iii)
iv)
v)
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AC/NOV 2005ATAX320
QUESTION 1
(A)
Encik Poon first came to Malaysia on 1 April 2000. He left Malaysia permanently in
2005. Details of his stay in Malaysia are as follows:
*
**
Year
In Malaysia
No of days
2000
1 April to 31 May
15 November to 22 December
61 days
38 days
2001
27 March to 1 July
24 September to 24 December
97 days
92 days
2002
6 June to 16 October*
26 October to 28 December**
133 days
63 days
2003
3 January to 18 January
16 days
2004
2 April to 11 July
101 days
2005
3 March to 7 May
66 days
Required:
Determine the resident status of Encik Poon for the years of assessment 2000 to
2005 inclusive. Provide explanation for each answer.
(12 marks)
(B)
Encik Razi is the sole-proprietor of a business selling traditional herbs. The annual
gross takings of his business are in the range of RM100.000 to RM120,000 since he
started his business in the year 2003.
Required:
(i)
State briefly Encik Razi's obligation with regard to tax compliance under the
self-assessment system.
(3 marks)
(ii)
(iii)
State four key differences between the self-assessment system and the
traditional/official tax system?
(4 marks)
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(C)
AC/NOV 2005/TAX320
Encik Ken is a fresh graduate from the Faculty of Information Technology of a local
private university. He wonders if he should operate a sole proprietorship (an IT
consultancy business). He seeks your advice on certain tax matters.
Required:
Explain to Encik Ken with regard to:
(i)
(ii)
(iii)
QUESTION 2
Mr. Wong, aged 52, is the factory manager of Smart Electronics Sdn Bhd, which
manufactures electronic components for export to its holding company based in the United
States of America.
He has been working with Smart Electronics Sdn Bhd for the past 101/2 years. Due to the
economic recession in the United States of America, Smart Electronics Sdn Bhd has been
asked to cut production by half and has offered Voluntarily Separation Scheme (VSS) to
some of its employees including Mr. Wong.
Mr. Wong opted for the VSS and officially ceased to work for the company on 31 October
2005 and was paid a sum amounting to 101/2 months of his last drawn salary. Other details of
his remuneration for the year 2005 are as follows:
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AC/NOV 2005/TAX320
Additional notes:
a.
Smart Electronics Sdn Bhd also provided Mr. Wong with a driver (salary RM800 per
month), a servant (salary RM1,000 per month) and a gardener (salary RM700 per
month).
b.
The company also paid for his life insurance premium amounting to RM5,000 and
also contributed RM3,000 towards the tuition fees of Mr. Wong's second child who is
studying in Australia.
c.
In February 2005, the second child was hospitalized in London and had to undergo
surgery to remove her appendix. The surgery and hospitalization costs amounted to
RM15,000 were paid by the company.
d.
Mr. Wong and his family went to New Zealand for their holiday and Smart Electronic
Sdn Bhd paid RM6,500 for their air fare.
e.
Mr. Wong was provided by the company with a fully furnished bungalow. The rental
of the unfurnished bungalow is RM2.500 per month. The value of furniture is RM500
per month.
f.
g.
Required:
Compute the adjusted income from employment of Mr. Wong for the year of assessment
2005.
(18 marks)
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AC/NOV 2005/TAX320
QUESTION 3
(A)
Encik Amir is the sole owner of Amir Enterprise which sells hardware in Jitra. The
following is the forecasted Trading Profit and Loss account for the year ended 31
December 2005.
Trading Profit and Loss account for the year ended 31 December 2005
Notes
Sales
Less: Cost of goods sold
RM
RM
2,250,000
(1,750,000)
500,000
GROSS PROFIT
Add:
Dividend
Gain on disposal of fixed asset
Rental loss
6,000
1,950
(1.000)
506,950
Less: Expenses
Salary
Bonus
Employee Provident Fund
Entertainment
Fines and penalties
Donations
Office rental
Office expenses
Postage and courier
Printing and stationery
Quit rent and assessment
Registration fee
Staff benefit
Sundry expenses
Accounting fees
Maintenance
Telephone
Water and electricity
Bank charges
Legal expense
Depreciation
Net profit before tax
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
78,000
20,000
22,540
45,000
3,200
15,000
24,000
18,000
3,500
18,000
650
380
8,000
6,000
3,520
14,500
6,000
7,150
1,080
7,800
35.000
(337,320)
1
69,630
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AC/NOV 2005ATAX320
Salary comprise of
Encik Amir
Normal Employees
Disabled Employee
2.
6,800
10,800
4,940
5.
10,000
8,800
1,200
4.
30,000
36,000
12,000
3.
RM
25,000
6,000
14,000
900
2,300
6.
During the year, Encik Amir donated clothing valued at RM5.000 to a Disaster
Fund and the balance is a cash donation to Kedah Public library, to be
claimed under section 34(6)(g).
7.
Encik Amir rented a 3-storey shop lot. His family occupies the third floor while
the second floor is rented out to an insurance agency. The business is carried
out on the first floor.
8.
9.
The quit rent and assessment expenditure was for the whole building.
10.
The registration fee was in respect of the annual membership fee paid to the
Kedah Traders' Association.
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AC/NOV 2005/TAX320
11.
12.
RM
5,000
6,000
3,500
13.
Inland Revenue Board agreed that a quarter (1/4) of the telephone expenses
was for private purpose.
14.
Inland Revenue Board agreed that one half (1/2) of the water and electricity
was for private purpose.
15.
Legal expense was in respect of the purchase of Encik Amir's new house.
16.
17.
During the year, Amir gave away goods costing RM10,000 to his relatives.
This was not recorded anywhere in the books. The mark-up for goods sold to
customers is 20% on cost of sales.
Required:
Compute the statutory business income of Amir Enterprise for the year of assessment 2005.
(17 marks)
(B)
Badges of trade are used to determine whether a person is engaged in trading. State
and explain any three (3) badges of trade.
(3 marks)
(Total: 20 marks)
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AC/NOV 2005/TAX320
QUESTION 4
Tech Creative Sdn Bhd which prepares its accounts to 31 October annually, carries on a
manufacturing business. Its head office is based in Seberang Perai, Pulau Pinang and it
also has a branch in Singapore. Details of its expenditures on plant and machinery are as
follows:
(a)
(b)
On 1 August 2002, a Honda CRV (not for commercial use) was bought on hire
purchase. The cash price of the car was RM110,000 and a deposit of RM25,000
was paid on 1 August 2002. Installment payment is RM2.100 per month for 48
months commencing from 1 September 2002. It was agreed with the IRB that 1/3 of
the car was used for private purposes. On 1 January 2005, the motor vehicle was
sold for RM85.000. The rate of annual allowance is 20%.
Required:
Calculate the capital allowances, balancing allowances and charges (if any) for Tech
Creative Sdn Bhd for all the relevant years of assessment up to year of assessment 2005.
(12 marks)
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AC/NOV 2005/TAX320
QUESTION 5
b)
Dividend income:
From Malaysia
From Singapore (not remitted)
Gross
RM25.000
S$15,000
d)
e)
f)
g)
Rental income of RM1.800 per month. He paid RM1.200 each month (inclusive of
interest RM450) to service the loan taken to purchase the property. He also paid
RM1.350 per annum for assessment and quit rent. Repairs and extension of the
kitchen were RM4.500 and RM10,000 respectively.
Encik Jeffrey's wife, Puan Juriah sells cakes from the house to supplement her husband's
income. She earned RM8.000 for the year 2005.
Encik Jeffrey furnished the following additional particulars for the preparation of the tax
return for the year of assessment 2005:
a.
He has four (4) children from his marriage with Puan Juriah:
Arsyad, 8 years old, suffers from bone cancer. He has been paralysed since
birth. Encik Jeffrey spent RM8.000 for his treatment and an additional
RM1,500 to purchase a wheelchair for him.
b.
Encik Jeffrey also has a daughter, Erina, from his previous marriage. Erina, 23 years
old, is studying in Universiti Malaya. He incurred RM6.000 while his ex-wife incurred
RM4.000 on the child's maintenance for the year 2005.
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10
AC/NOV 2005/TAX320
c.
Encik Jeffrey was directed by the court to pay RM500 per month as alimony to his
ex-wife.
d.
Encik Jeffrey incurred RM6.500 medical expenses for his mother who was
hospitalised.
e.
A life policy (capital sum: RM70.000) was taken out on Puan Juriah's life for a
premium of RM2.100 which was +paid by Encik Jeffrey.
f.
g.
Encik Jeffrey paid a premium of RM3.700 on education insurance for the benefit of
his children.
h.
Puan Juriah incurred RM800 to purchase books and other reading materials.
i.
Encik Jeffrey also made Zakat and Fitrah contributions amounting to RM5.500.
However, he only has receipts for RM4.500.
j.
Encik Jeffrey and Puan Juriah donated RM10,700 and RM850 respectively to an
approved institution.
k.
Encik Jeffrey spent RM4,500 to purchase a personal computer for his children.
I.
With respect to the dividend income earned by Mr. Jeffrey, the investments (both in
Malaysia and Singapore) were financed through a term loan. Interest incurred on the
loan in 2005 amounted to RM9.600 of which one-third (1/3) pertained to the cost of
the Malaysian investments and the balance pertained to the cost of the Singaporebased investments.
Required:
(i)
Calculate the income tax payable for Encik Jeffrey and Puan Juriah for the year of
assessment 2005. Puan Juriah elected for combined assessment and both are
resident for tax purposes.
(22 marks)
(ii)
Based on the facts presented in the question, Puan Juriah should not have elected
for joint assessment. Explain why Puan Juriah should not have elected for joint
assessment. (You are not required to calculate the amount of tax saved.)
(3 marks)
(Total: 25 marks)
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APPENDIX 1 (1)
AC/NOV 2005/TAX320
Chargeable Income
(RM)
Rate (%)
Tax Payable
(RM)
On the first
On the next
2,500
2,500
0
1
0
25
On the first
On the next
5,000
5,000
150
On the first
On the next
10,000
10,000
175
300
On the first
On the next
20,000
15,000
475
1,050
On the first
On the next
35,000
15,000
13
1,525
1,950
On the first
On the next
50,000
20,000
19
3,475
3,800
On the first
On the next
70,000
30,000
24
7,275
7,200
On the first
On the next
100,000
50,000
27
14,475
13,500
On the first
On the next
150,000
100,000
27
27,975
27,000
On the first
250,000
Above
250,000
25
54,975
28
Self
Wife/husband
Child - basic
Life insurance and approved schemes
RM
8,000
3,000
1,000
6,000 maximum
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APPENDIX 2(1)
AC/NOV 2005/TAX320
Annual Value
RM
Fuel (per ar
RM
50,000
and below
1,200
600
50,001
75,000
2,400
900
75,001
100,000
3,600
1,200
100,001
150,000
5,000
1,500
150,001
200,000
7,000
1,800
200,001
250,000
9,000
2,100
250,001
350,000
15,000
2,400
350,001
500,000
21,250
2,700
500,001
and above
25,000
3,000
Others
Types of BIK
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APPENDIX 2 (2)
AC/NOV 2005/TAX320
Prescribed
Average life span
Asset
(1)
Motorcar
(2)
5 years
15 years
8 years
10 years
6 years
20 years
10 years
7 years
15 years
Miscellaneous
Mobile telephone
10 years
(3)
(4)
(5)
8 years
VALUE OF BENEFITS
(i)
)
)
(ii)
)
)
)
)
)
(iii)
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APPENDIX 3(1)
AC/NOV 2005/TAX320
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