Tebashini a/p Annahdurai (201703020024)

QUESTION 1
Explain tax principle.
i. Equity and fairness

Taxation should produce the right amount of tax at the right time, while avoiding
both double taxation and unintentional non-taxation. In addition, the potential for
evasion and avoidance should be minimised.

ii. Efficiency and neutrality

Taxation should seek to be neutral and equitable between forms of business

activities. A neutral tax will contribute to efficiency by ensuring that optimal
allocation of the means of production is achieved. Efficiency is compliance costs
to business and administration costs for governments should be minimised as far
as possible.

iii. Simplicity

Tax rules should be clear and simple to understand so that taxpayers know where
they stand. A simple tax system makes it easier for individuals and businesses to
understand their obligations and entitlements.

QUESTION 2
Objective of taxation
i. Redistribution of income
Regulate the distribution of income and wealth between different types and
classes of citizens. When rich are taxed, this money is collected by the
government and spend on services such as education, medical, and housing.

ii. Control of consumption

There are some taxes where primary objective is to control and regulate
consumption. For example, restrictions on the consumption of alcoholic liquors
are effected by means of restrictive excise duties. For instance, the policy of high
cigarette excise enforced by some state governments in India seeks to attain
certain social and economic objectives at the cost of revenue yield.
 iii. Fairness and equity
Taxation equity is the principle that taxes should be fair. However, there are
several criteria for determining what is fair. The benefits principle states that
people should pay taxes based on the benefits that they receive from government
services. For instance, excise taxes on gasoline are used to build roads and
bridges. However, taxes on income and investments are based on the ability to
pay.

QUESTION 3
Definition of taxation
 Taxation refers to the act of a taxing authority actually levying tax. Taxation as a term
applies to all types of taxes from income to gift to a estate taxes. It is usually refer to
as an act any revenue collected is usually called Taxation.

QUESTION 4
RESIDENT STATUS
YA Period of Days Resident Section Reason
stay
2011 01.11.2011 30 NO No section Micheal Ong
to applied is NOT a
30.11.2011
resident in
01.12.2011 31 Malaysia
to for the year
31.12.2011
=61 of
assessment
2011
because he
was not
present in
Malaysia for
more than
182 days in
year 2011
QUESTION 5
Explain S 7 (1) (a), (b) , (c) , (d)
 under Section 7(1)(a) of Income Tax Act (ITA) 1967, if a person stays in Malaysia
for a total of 182 days or more in one year, he is qualified as a tax resident in
Malaysia and thus, enabling him to enjoy the tax benefits stated above. That year is
known as a Resident Year.
 under Section 7(1)(b) of ITA 1967, if a person stays in Malaysia for less than 182
days in one year and the period is linked to both immediately preceding or
immediately following a Resident Year, he is still classified as a Resident in the year
despite not fulfilling a minimum of 182 days in Malaysia.
 under Section 7(1)(c) of ITA 1967, if a person who stays in Malaysia for 90 days or
more and has been either a resident or be in Malaysia for 90 days or more in 3 out of 4
immediate preceding years, he qualifies as a tax resident in Malaysia for that year.
 under Section 7(1)(d) of ITA 1967, if a person is not present in Malaysia at all for the
entire year, he is a tax resident in the ‘missing’ year if he is a tax resident in three
immediate preceding years to the ‘missing’ year and a tax resident in the immediate
following year to his ‘missing’ year.

QUESTION 6
Discuss FOUR (4) distinction between resident and non- resident individual in
Malaysia.

Resident Non-resident
Tax : 0% - 26% 26% flat rate
Personal Relief : Self, Wife, Child Personal Relief : None
Rebate : If chargeable income ≤RM 35,000 Rebate : None
Income exempted from Tax : Income exempted from Tax :
 Royalties from literary & artistic  None
work
 Approved cultural performance
 Music composition

QUESTION 7
EMPLOYMENT INCOME

SEPARATE ASSESSMENT
Married person and the person’s spouse are treated as separate individuals. Each is required
to complete a tax return, declare income, claim expenses (and deductions) , and pay tax.
JOINT ASSESSMENT
Joint assessment is the option that benefits most couples. Under joint assessment you are
chargeable to tax on your combined total income.This is the option that is applied when you
notify us that you are married or in a civil partnership. This does not prevent you from
choosing the other options of separate assessment or separate treatment.
For example, Mr Mustafa has two wives, Bena and Sena. He can elect for his total income for
any year of assessment to be aggregated with that of either of his wives but not both and only
if neither Bena nor Sena have made an election for that year to aggregate their income with
his. For joint assessment, the election must be made in writing before 1 April in the following
year of assessment (or any subsequent date as permitted by the director general).

CONCLUSION
Under separate assessment, a married couple with employment income will be assessed as
separate individuals. If both you and your spouse have assessable income, each of you
should declare the income and claim expenses and deduction in the tax returns. Separate
notices of assessment will be issued to you and your spouse and the tax charged on each will
not take into account the income of the other spouse. If your spouse does not have income
assessable under salaries tax, you are entitled to claim the married person’s allowance and
need not elect joint assessment.
Under joint assessment, the incomes of the couples will be aggregated and the married
person’s allowance or other allowances that the couple is eligible for will be deducted from
the couple’s joint total income. This could result in some tax savings, and a notice of
assessment will be issued. However, if joint assessment does not result in less tax, each
spouse will receive a separate notice of assessment.
QUESTION 8
Definition of royalty
Definition of royalty includes the use of or the right to use in respect of any software.
"royalty" includes any sums paid as consideration for, or derived from the use of, or the right
to use in respect of, any copyrights, software, artistic or scientific works, patents, designs or
models, plans, secret processes or formulae, trademarks or other like property or rights

Types of royalty
 Copyright − Copyright provides a legal right to the author (of his book/s), the
photographer (on his photographs), or any such kind of intellectual works. Copyright
royalty is payable by the publisher (lessee) of a book to the author (lessor) of that
book or to the photographer, based on the sale made by the publisher.
 Mining Royalty − Lessee of a mine or quarry pays royalty to lessor of the mine or
quarry, which is generally based on the output basis.
 Patent Royalty − Patent royalty is paid by the lessee to lessor on the basis of output or
production of the respective goods.

Exemption
 PARAGRAPH 32 Royalty from publication, use / right to use any artistic work. from
recording discs / tapes. exemption limit: RM10,000.
 PARAGRAPH 32A Royalty from translation of books / literary work at the request of
Minister of Education. exemption limit: RM12,000.
 PARAGRAPH 32B Royalty from publication, use / right to use any literary work /
original painting. exemption limit: RM20,000.
 PARAGRAPH 32C Royalty income in respect of cultural performances approved by
the Minister. exemption limit: full exemption.
 PARAGRAPH 32D Royalty income in respect of any musical composition.
exemption limit: RM20,000.
QUESTION 9
Explain the definition of income of employment (section 2 of ITA 1962)
 Employment is defined in Sec 2, ITA 1967 are employment in which the relationship
of master & servant subsists, any appointment or office, whether public or not &
whether or not that relationship subsists, for which remuneration is payable

Explain law principles under employment income.

 Law principle under employment income are there exists a master and servant
relationship. The master’s right to control the method of doing works and the right of
suspension or dismissal. The employment is normally a full time job undertaken by
the employee himself without substitution of staffs. No financial risks and the
employee enjoy benefits. Employee uses tools provided by the employer to carry out
duties and the employee’s duties would form part of the business activities.
QUESTION 10
RM RM

Remy 100,000

Jane 70,00

TOTAL INCOME 170,000

(-) Relief

Self 9,000

Spouse 4,000

Child over 18 8,000

Child under 18 2,000

EPF 4,000

Life insurance 3,000

Medical expenses 6,000

Education 7,000

TOTAL RELIEF (45,000)

TOTAL CHARGEABLE INCOME 125,000

ON THE FIRST RM 100,000 10,900

SECOND (RM 25,000 X 24%) 6,000

NET PAYABLE AT SCALED RATE 16,900

REBATE -

NET PAYABLE TAX 16,900

 QUESTION 11
Year Period of Number of Resident Section Reason
stay days status

2009 01.11.2009 to 30 NO No section Micheal Ong is NOT a

applied
30.11.2009 resident in Malaysia
for the year of
01.12.2009 to assessment 2009
31.12.2009 31 because he was not
present in Malaysia for
more than 182 days in
year 2009
=61
2010 01.01.2010 to 31 NO No section Micheal Ong is NOT a
31.01.2010 applied resident in Malaysia
for the year of
01.06.2010 to 30 assessment 2010
30.06.2010 because he was not
present in Malaysia for
01.11.2010to 61 more than 182 days in
31.12.2010 year 2010
=122
2011 01.01.2011 to 90 YES 7(1)(a) ITA Micheal Ong is a
31.03.2011 1967 resident in Malaysia
for the year of
15.04.2011 to 108 assessment 2011
31.07.2011 because he was
present in Malaysia
01.10.2011 to 92 for more than 182
31.12.2011 days in year
=290 2011.

QUESTION 12
  Paragraph 32 – translation of books (RM 12 000)
1 income = 55,000
2 income = 30,000
Total income = 85,000
(-) para 32 exemption = 12,000
NET INCOME = 73,000

 Paragraph 32A – translation of books (RM12,000)

1 income = 60,000
2 income = 85,000
3 income = 20,000
Total income = 165,000
(-) para 32B exemption = 20,000
NET INCOME = 145,000

 Total income
1) translation = 73,000
2) publication = 145,000

 Total net income from royalty = 218,000

 Assume cost incurred

 - expenses
 Editing/ typing expenses = (9500)
 Printing = (1000)
Total net income from royalty = 207,500

Cost of computer = 5,300 (why not include – because fixed asset)

Printer = 300 (why not include – because fixed asset)
Editing/ typing expenses = 9,500 (include – expenses)
Printing expenses = 1,000 (include- expenses)