Answers

Applied Skills, TX – MYS September 2019 Answers

Taxation – Malaysia (TX – MYS) and Marking Scheme

Section A

1 1, 2 and 3
Orders and Regulations prescribed by the Minister, case decisions made by the Malaysian courts on tax matters
and guidance notes issued by the Inland Revenue Board (IRB) and the Royal Malaysian Customs are all sources of
revenue law in Malaysia.

2 Jason is required to file his tax return by 30 April 2019 and All-Digital Sdn Bhd is required to file its tax return by
31 October 2018.
Tutorial note: Jason does not have any business source income and so has to file his tax return by 30 April 2019.
The company, ADSB, is required to file within seven months of close of its year end, which is 31 March and hence,
it has to file its returns by 31 October 2018.

3 RM38,750 ((RM250,000 x 10%) + RM275,000 x 5%)

Tutorial note: The penalty rate of 10% will apply which will increase the amount due to RM275,000 (RM250,000
+ RM25,000) and since it remains unpaid, an additional penalty of 5% on the amount due will arise, which is
RM13,750 (RM275,000 x 5%). Thus the total penalty will be RM38,750 (RM25,000 + RM13,750).

4 Non-monetary consideration received for a supply can be subject to GST.

Tutorial note: Generally, both monetary and non-monetary consideration is a supply for GST purposes.

5 YA 2018 – Resident  YA 2019 – Non-resident

YA 2018
Alda’s physical presence in Malaysia during 2018 was 101 days (short period) which is below 182 days and she
is therefore not resident under s.107(1)(a) of the Income Tax Act, 1967 (as amended) (The Act). However, the
short period is linked to a period of 182 or more consecutive days in 2019 as the period of 70 days is regarded
as a temporary absence and Alda is deemed to be present during this period. Alda is therefore resident under
s.7(1)(b) of the Act in YA 2018.
YA 2019
Alda’s physical presence in Malaysia during 2019 was 175 days, which is below 182 days and, therefore, she is
not resident for tax purposes.

6 3 and 4 only
Only whether the remuneration is in respect of duties performed in Malaysia and the length of time the employee
works in Malaysia is relevant in determining whether employment income received by an employee is subject to
income tax in Malaysia.

7 RM 20,000 (RM13,000 + RM7,000)

Tutorial note: Both the bonus and leave pay are taxable in 2018 as both amounts are received during the year
ended 31 December 2018.

3
 Marks
8 RM RM
Aggregate income 855,100
Donations to a Federal Government fund 50,000
Donations to approved charitable organisation:
max 7% of aggregate income (RM855,100 x 7%) 59,857
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Total donations (109,857 )
––––––––
Total income 745,243
––––––––
Tutorial note: Some donations can be allowed for the full amount of cash donations paid such as payments to
the Federal Government. However, there are some payments such as cash payments to approved charitable
institutions which are restricted to a percentage of the aggregate income. Payments made by individuals are
restricted to 7% of aggregate income.

9 RM41,800 [(RM40,000 [20% x RM200,000] + RM1,200 [RM300/day for 4 days] + RM600 [RM150/day for
4 days])

10 RM
YA 2016
Qualifying expenditure 100,000
Initial allowance (RM100,000 x 20%) (20,000 )
Annual allowance (RM100,000 x 20%) (20,000 )
YA 2017
Annual allowance (RM100,000 x 20%) (20,000 )
––––––––
Residual expenditure 40,000
YA 2018
Less: Sale proceeds (higher of MV of RM45,000 or insurance compensation of RM35,000) 45,000
––––––––
Balancing charge 5,000
––––––––

11 RM60,000 (RM80,000 – RM20,000)

Tutorial note: A current year business loss is available for set-off against any source of income, business or
non-business, such as rental income. Brought forward business losses are only available for set-off against
business sources. Thus the brought forward business loss cannot be set-off against the rental income. Capital
allowances are only allowed for set-off against the same business source and so in this case the unutilised balance
is carried forward.

12 The PRE is only available in respect of a private residence in which the disposer has resided
The private residence exemption (PRE) is not only applicable on a private residence in which the disposer has
resided, it could also apply on residences which the disposer had rented to tenant.

13 RM1,040,000 (1,000,000 + 28,000 + 12,000)

Tutorial note: In determining the acquisition price, certain costs are taken into account, together with the
consideration paid and certain recoveries, insurance received and deposit forfeited. In this case, only the stamp
duty and legal fees are taken into account in arriving at the acquisition price. The installation of a drainage and
irrigation system is part of enhancement costs which is adjusted against the disposal consideration in arriving at
the disposal price. Interest costs are not eligible for any deduction from 1 January 2010 onwards.

14 RM6,000 (RM106,000 x 6/106)

15 RM2,990,000 (RM2,000,000 + RM20,000 + RM970,000)

Tutorial note: As the business operations are all in Malaysia, all income from the export of goods and the provision
of services is deemed to be derived from Malaysia even if the taxpayer instructs the sum to be remitted to an
overseas account or remains unpaid. The exemption for foreign income is not applicable.
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2 marks each 30
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Section B Marks

1 (a) I-Tiles Sdn Bhd – Capital allowances

(i) The main criteria of plant and machinery are:
–
It is whatever apparatus or thing used by a person in carrying on his business [function or
apparatus test]. ½
– It does not constitute the inventory in trade. ½
– It is used permanently in the business. ½
– It is not part of the settings from which the business is carried on [settings or premises tests]. ½
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2
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(ii) (1) The tiles would not be eligible for capital allowances as they are part of I-Tiles Sdn Bhd’s inventories
for re-sale. ½+½
(2) The display shelf for the showroom would be regarded as plant as the machine functions as
an apparatus used in the business of I-Tiles Sdn Bhd and it is therefore eligible for capital
allowances. ½+½
(3) The fixed partitions are not eligible for capital allowance as they are regarded as primarily part of
the settings and premises from which the business is carried on. ½+½
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3
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(b) (i) Planters Sdn Bhd – Agriculture allowance

Qualifying Agriculture Agriculture
expenditure rate allowance
RM % RM
Costs necessary to level the land 12,000 50 6,000 ½ + ½
Planting of cocoa seedlings 9,000 50 4,500 ½ + ½
Replacing rubber with palm oil seedlings 3,000 50 1,500 ½ + ½
Construction of workers quarters 240,000 20 48,000 ½ + ½
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Total 60,000
––––––– –––
4
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(ii) The government grant received by Planters Sdn Bhd is not subject to tax. 1
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10
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2 Real property gains tax (RPGT) for YA 2018

(a) Nurul – RPGT

RM RM
Disposal consideration [market value of asset received from JNH] 280,000 ½ + ½
Less: Incidental costs – valuation report (1,000 ) ½
––––––––
Disposal price 279,000
Less: Acquisition price
Acquisition consideration 220,000 ½
Add: Stamp duty 6,000 ½
––––––––
(226,000 )
––––––––
Chargeable gain (CG) 53,000
Less: Schedule 4 exemption
Higher of RM10,000 or 10% of CG (10,000 ) ½ + ½
––––––––
Chargeable gains 43,000
––––––––
RPGT
Holding period:
Date of acquisition: 14 June 2014
Date of disposal: 15 January 2018
Disposal in the 4th year ½
RPGT rate/payable: 20% 8,600 ½+½
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5
 Marks
(b) JNH Sdn Bhd – Real property gains tax (RPGT) for YA 2018
RM RM
Disposal consideration (market value of asset received from Nurul) 300,000 ½ + ½
Less: Permitted expenses – repainting (0 ) ½
Less: Incidental costs – valuation report fees (1,000 ) ½
––––––––
Disposal price 299,000
Less: Acquisition price
Acquisition consideration 90,000 ½
Add: Stamp duty 2,000 ½
Less: Compensation received (3,000 ) 1
–––––––
(89,000 )
––––––––
Chargeable gain 210,000
––––––––
RGPT
Holding period:
Date of acquisition: 20 January 2010
Date of disposal: 15 January 2018
Disposal after 5 years
RGPT rate/payable: 5% 10,500 ½+½
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5
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10
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3 (a) GST
Examples of out of scope supplies:
(i) Supplies made by a person who is not a taxable person;
(ii) Supplies not made in the furtherance business;
(iii) Supplies not made in Malaysia;
(iv) Supplies made by Federal Government, State Government;
(v) Supplies made by a local authority or statutory body.
Marks will be awarded for other acceptable answers.
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One mark per item, maximum 2
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(b) Subang Sdn Bhd – GST

Input tax Output tax
RM RM
(1) New car 0 1
(2) Parking fees (RM5,300 x 6/106) 300 1
(3) Linen materials (RM10,600 x 6/106) 600 1
(4) Supply of free gifts (RM5,000 x 6/106) 283 1
(5) Golf club subscription fees 0 1
(6) Imported services 1,200 1,200 1+1
–––––– ––––––
2,100 1,483
–––––– ––––––
Net GST payable/(recoverable) (617 ) 1
–––––– –––
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 Marks
4 (a) Partnership
Arts and crafts
RM RM
– +
[Sec 4(a) Business source income]
Profit before tax 238,000
Add/Less
Entertainment expenses 0 1
Approved donations (in-kind) 23,000 ½
Partners’ salaries (Chen and Sharifah) 120,000 ½
Chen – medical expenses for operation 11,000 ½
Interest income 18,000 ½
–––––––– ––––––––
18,000 392,000
(18,000 )
––––––––
Provisional adjusted income 374,000
Less:
Partners’ salaries (Chen and Sharifah) 120,000 ½
Chen – medical expenses for operation 11,000 ½
––––––––
(131,000 )
––––––––
Divisible income 243,000
––––––––
Partners’ income
Total Chen Sharifah
RM RM RM
Divisible income (RM243,000; 50:50) 243,000 121,500 121,500 ½ + ½
Salaries (RM5,000 per month x 12 months) 120,000 60,000 60,000 ½ + ½
Chen – private expenses 11,000 ½
–––––––– ––––––––
192,500 181,500
Capital allowances 14,000 (7,000 ) (7,000 ) ½ + ½
–––––––– ––––––––
Statutory income – partnership business 185,500 174,500
Add: Investment income [Sec 4(c)]
Interest income 18,000 9,000 9,000 ½ + ½
–––––––– ––––––––
Aggregate income 194,500 183,500
Less: Donations (not eligible) 0 0 ½
–––––––– ––––––––
Total income 194,500 183,500
–––––––– –––––––– –––
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(b) The DGIR has the power to raise a best judgement assessment on a taxpayer when the taxpayer has failed to
make return as required by law. 1
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10
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 Marks
5 (a) CKF Bhd
Chargeable income for the year of assessment 2018
(Basis period: Year ended 31 January 2018)
Note RM’000 RM’000
– +
[Sec 4(a) Business source income]
Profit before taxation 13,956
Depreciation 1 1,419 ½
Allowance for stock obsolescence 1 101 ½
Allowance for royalty 1 82 ½
Allowance for royalty written back 1 1 ½
Amount paid 1 0 1
Dividend income (non-business) – local 2 96 ½
Compensation for restrictive covenant (capital) 2 109 1
Share capital increase expenses 3 4 1
Tax appeal fees 3 11 ½
Secretarial fees (not paid during the year) 3 12 1
Foreign exchange loss 4 0 1
Lease rentals (RM65,000 – RM50,000) 5 15 ½ + ½
Traffic violations expenses 5 1 ½
Sponsoring approved for local arts activity 6 9 ½ + ½
Leave passage for employee 7 4 ½
–––– –––––––
206 15,614
––––
(206 )
–––––––
Adjusted income 15,408
Less: Capital allowance 8 (2,300 ) ½
–––––––
Statutory business income 13,108
[Sec 4(c) – Investment income]
Gross dividend income – local 2 0 ½
–––––––
Aggregate income/total income/chargeable income 13,108
––––––– –––
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Tutorial note: The withholding tax paid will be allowed a deduction once both the withholding tax and late
payment penalty thereon are paid before the tax return is submitted. In this case, no deduction is available
since both were paid after the tax return was submitted.

(b) Generally, the patent registration expenses are not deductible as it is expenditure incurred with a view to
bringing an asset into existence, or an advantage for the enduring benefit of the trade. 1+½
The patent registration made locally is capital expenditure and not tax deductible. ½
However, the overseas patent registration expenses incurred to promote expenses are eligible for a double
deduction. 1
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3
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 Marks
6 Nakha and Sumi

Nakha – income tax payable for the year of assessment 2018

RM RM
[Sec 4(a)] Business
Tax-adjusted income 86,000 ½
Add: Balancing charge 2,000 ½
––––––––
88,000
Less: Capital allowances 5,000 ½
Less: Brought forward capital allowances 1,000 (6,000 ) ½
–––––––– ––––––––
Statutory business income 82,000
[Sec 4(b)] Employment
[Sec 13(1)(a)]
Gross salary (RM10,000 x 12 months) 120,000 ½
Employee’s provident fund (EPF) 0 1
Reimbursement of driver’s salary 30,000 ½
––––––––
Total 150,000
[Sec 13(1)(b)]
Domestic helper (employed by Nakha’s employer) (RM400 x 6 months) 2,400 ½ + ½
Leave passage 0 ½
Food and drinks 0 ½
[Sec 13(1)(c)]
Value of living accommodation
(a) 30% x (RM150,000) = RM45,000 ½
(b) Defined value (RM2,000 x 12m) = RM24,000 ½
Lower of RM24000 x 6m/12m 12,000 ½ + ½
––––––––
Gross employment income 164,400
––––––––
Aggregate income/total income 246,400
Less: Reliefs
Self (9,000 ) ½
Employee’s provident fund (6,000 ) ½
Lifestyle 0 ½
––––––––
(15,000 )
––––––––
Chargeable income 231,400
––––––––
Tax liability:
Tax on first RM10,900 10,900 ½
Tax on RM131,400 at 24% 31,536 ½
––––––––
Income tax payable 42,436
––––––––
Sumi – income tax payable for the year of assessment 2018
RM RM
[Sec 4(c)]
Dividend income 0 ½
Less: Interest expense attributable
(RM300,000/RM1,000,000 x RM100,000) (30,000 ) 1
––––––––
Adjusted/statutory income 0
Interest income from local company 85,000 ½
Less: Interest expenses attributable
(RM700,000/RM1,000,000 x RM100,000) (70,000 ) 1
––––––––
Adjusted/statutory income 15,000
––––––––
Aggregate income/total income 15,000
Less: Reliefs
Self (9,000 ) ½
Lifestyle – tablet (2,500 ) (11,500 ) ½
–––––––– ––––––––
Chargeable income 3,500
––––––––
Income tax payable
First RM5,000 0 ½
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15
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Additional marking guide for section B Marks available Marks awarded

1 (a) (i) CA criteria 2

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(ii) I-Tiles exp P&M 3
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(b) (i) Agricultural allowce 4

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(ii) Government grant 1
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Total 10
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2 (a) RPGT for Nurul 5

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(b) RPGT for JNH 5

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Total 10
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3 (a) GST supplies 2

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(b) GST payable 8

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Total 10
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4 (a) Tot inc for partnrs 9

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(b) Best judgement 1

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Total 10
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5 (a) Expenses added back 7

Amounts deducted 2
Nil adjustments 2
Capital allowances 0·5
Dividend income 0·5
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12
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(b) Double deduction 3

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Total 15
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6 Business income 2
S13(1)(a) – Salary 2
S13(1)(b) – BIK 2
S13(1)(c) – VOLA 2
Reliefs 1·5
Tax payable 1
Sumi stat income 3
Sumi reliefs 1
Sumi tax payable 0·5
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Total 15
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