CONFIDENTIAL AC/JUL2022H"AX317

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE TAXATION 2
COURSE CODE TAX317
EXAMINATION JULY 2022
TIME 3 HOURS

INSTRUCTIONS TO CANDIDATES

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

2. Answer ALL questions in the 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 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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CONFIDENTIAL APPENDIX 1 (2) AC/JUL 2022H"AX317

g) Resident individuals

Chargeable Income Rate Cumulative Tax

RM RM
0 - 2,500 0% 0
2,501 - 5,000 0% 0
5,001 - 10,000 1% 50
10,001 - 20,000 1% 150
20,001 - 35,000 3% 600
35,001 - 50,000 8% 1,800
50,001 - 70,000 14% 4,600
70,001 - 100,000 21% 10,900
100,001 - 150,000 24% 22,900
150,001 - 250,000 24% 46,900
250,001 - 400,000 24.5% 83,650
400,001 - 600,000 25% 133,650
600,001 - 1,000,000 26% 237,650
1,000,001 - 2,000,000 28% 517,650
Above 2,000,000 30%

h) Non-resident individuals 30%

• Benefits-in-kind (BIK) scale rates as per Inland Revenue Board (IRB) guidelines

Cost of car Prescribed annual Prescribed annual

(when new) value of private usage value of private
RM of car petrol
RM RM
Up to 50,000 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

The value of the car benefit equivalent to half of the above rates is taken if the car
provided is more than five years old.

Where a driver is provided, the value benefit is fixed at RM600 per month.

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CONFIDENTIAL APPENDIX 1 (3) AC/JUL2022H"AX317

Household furnishing, apparatus and appliances

Types of BIK Annual value of BIK

RM
Semi-furnished with furniture in lounge,
dining room or bedroom 840

Plus one or more of the following:

Air-conditioners, curtains, carpets 1,680

Plus one or more of the following:

Kitchen equipment, crockery, utensils, appliances
i.e fully furnished 3,360

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

Rate of Real Property Gains Tax Rates

For the period of 1 January 2020 and onward

Category of disposal RPGT rate

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

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CONFIDENTIAL APPENDIX 1 (4) AC/JUL 2022/TAX317

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 January 2019 - 30 June 2019
For every RM100 or fractional part thereof:
On the first RM100,000 1%
RM100,001 to RM500,000 2%
On the excess over RM500,000 3%

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%

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CONFIDENTIAL 2 AC/JUL2022flTAX317

QUESTION 1

Happy Lappy Sdn Bhd is a Malaysian resident company with a financial year ending on 31
March each year. The paid-up capital of the company is RM4 million and the estimated tax
payable for the year of assessment 2020 is RM3.6 million. The company seeks your advice
on matters relating to tax.

Required:

a. Explain to Happy Lappy Sdn Bhd the due date for the first instalment payment and
submission of the tax return to the Inland Revenue Board of Malaysia (IRBM) for the
year of assessment 2021.
(4 marks)

b. Estimate the amount of tax payable of Happy Lappy Sdn Bhd for the year of assessment
2021.
(2 marks)
(Total: 6 marks)

QUESTION 2

Alam Makmur Sdn Bhd (ALSB) manufactures and sells a shoe product known as Product
GXZ in Klang Valley. As at 1 January 2021, it had a paid-up capital of RM3 million and closes
the account on 31 December each year. The company's statement of profit or loss for the
financial year ended 31 December 2021 is as follows:

Alam Makmur Sdn Bhd

Statement of Profit or Loss for the year ended 31 December 2021
Note RM RM

Sales 1 5,576,000
Less: Cost of sales 2 (1,576,000)
Gross Profit 4,000,000

Less: Operating expenses

Remuneration 3 340,600
Selling and distribution 4 42,000
Professional fees 5 17,000
Repair and maintenance 6 91,000
Bad and doubtful debts 7 53,100
Depreciation 48,200
Contributions 8 60,000
Transport and travelling 9 47,120
Entertainment expenses 10 10,000
Training 11 3,600 (712,620)
Net Profit 3,287,380

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CONFIDENTIAL 3 AC/JUL 2022/TAX317

Notes:

1. Sales include compensation received from an insurance company for damaged office
equipment amounted to RM10,000.

2. Cost of sales includes:

RM
Written-off stock obsolescence 10,000
Provision for stock obsolescence 30,000

3. Remuneration comprises:
RM
Salary inclusive salary of a disabled executive (eyesight problem) at
RM2,000 per month 270,000
EPF contribution 60,000
Travelling allowance for company's sales executives 10,600

Selling and distribution include:

RM
Participation in a Virtual International Trade Fair in Taiwan which
was approved by the Ministry of International Trade and Industry 20,000
(MITI)
Local advertisement 8,000
Freight charges 14,000

5. Professional fees include:

RM
Accounting and secretarial fees 8,000
Consultation fees paid to Meriah Packaging for designing and
packaging the product for the company 2,000
Fees for owner's personal loan 7,000

6. Repairs and maintenance include:

RM
Upgrading the factory's floors 20,000
Resurfacing of car park 40,000
Renovation of business premise air-conditioning systems for
customers' convenience (the company claims capital allowance) 31,000

7. Bad and doubtful debts include:

RM
Bad debts written off during the year 21,400
Net increase in general provision 31,200
Net increase in specific provision 19,500
Bad debts recovered during the year (debts were written off last (19,000)
year)

All the debts are trade debts except for a sum of RM8,000 written off
which is in respect of a loan made to an ex-accountant

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CONFIDENTIAL 4 AC/JUL2022/TAX317

8. Contributions include:
RM
Cash donation to Tabung Covid-19 under section 44(6) 20,000
Gift of artefact to Kedah State Government 10,000
Cash contribution to an approved research and development 10,000
company
Business zakat 20,000

9. Transport and travelling comprise:

RM
Marine insurance premium paid to Moriko Marine Insurance (M)
Bhd for import of goods 10,600
Leave passage to Japan for the finance manager and family 10,000
Lease rental for company lorry 26,520

10. Entertainment expense includes:

RM
Annual dinner for employees 3,000
Hari Gawai dinner for employees with the presence of some clients 5,000
Refreshment for clients during 'Bonanza Sales Day' 2,000

11. A sum of RM3.600 incurred in sending the employees to attend courses conducted by
the Malaysian Productivity Centre (MPC). A certificate from the institution for the
attendance is available.

Additional Information:

Business adjusted losses brought forward from the previous year of assessment amounting
to RM10,000 and total capital allowance for the year of assessment 2021 amounting to
RM20,000 and balancing charge amounting to RM15,000.

Required:

a. Calculate the income tax payable by Alam Makmur Sdn Bhd for the year of assessment
2021. Indicate 'Nil' for any item that does not require any adjustment.
(22 marks)

b. Explain any TWO (2) circumstances in determining business income is deemed derived
from Malaysia.
(2 marks)
(Total: 24 marks)

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CONFIDENTIAL 5 AC/JUL2022/TAX317

QUESTION 3

Aroma Sdn Bhd (ASB), a resident company located in Samarahan, Sarawak, manufactures
two (2) products, namely Arbe X and Berz Y. Arbe X is a promoted product under the
Promotion Investment Act 1986 which is eligible for consideration of pioneer status or
investment tax allowance. ASB is uncertain whether to apply for pioneer status or an
investment tax allowance incentive.

The summarized adjusted income/(losses), capital allowances and capital expenditures of

Arbe X and Berz Y for the years ended 31 December are as follow:

ArbeX 2022 2023

RM RM
Adjusted income/loss 700,000 (80,000)
Capital allowances for the year 200,000 20,000

Capital Expenditures:
Plant and machinery 100,000 100,000
Office equipment 40,000
Motor vehicle for directors 120,000
Buildings 600,000
Land 1,000,000

BerzY 2022 2023

RM RM
Adjusted income/loss (140,000) 150,000
Capital allowances for the year 20,000 70,000
Rental income 60,000 20,000
Donation to state government 20,000 20,000

Required:

a. Calculate the company's chargeable income and the amount to be credited to the
exempt income account for the year of assessment 2022 to 2023 under the following
tax incentives:

i. Pioneer status
ii. Investment tax allowance
(18 marks)

b. Analyse the more efficient tax incentives for Aroma Sdn Bhd.
(2 marks)

c. Explain FOUR (4) criteria to be eligible for the reinvestment allowance if Aroma Sdn Bhd
wishes to apply for reinvestment allowance under Schedule 7A of the Income Tax Act
1967.
(4 marks)
(Total: 24 marks)

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CONFIDENTIAL 6 AC/JUL 2022/TAX317

QUESTION 4

Lanang Sdn Bhd, a Malaysian resident company, purchased a machine from Seol Pte Ltd, a
company from South Korea. Seol Pte Ltd also provides technical assistance and training to
Lanang Sdn Bhd to operate the machine. Seol Pte Ltd sent its employees to Malaysia to install
the machine and to provide technical assistance on the operation of the machine.

To expand its business, Lanang Sdn Bhd made a mortgage loan from Bank BCB, in
Singapore. The amount of loan is RM30 million and payable within 20 years.

On 30 June 2021, Lanang Sdn Bhd made the following payments to its contractors and
suppliers:
1. RM750,000 for the purchase of high-tech machinery from Seol Pte Ltd.
2. RM50,000 for the fees charges on the technical assistance provided by Seol Pte Ltd.
3. RM650,000 for interest on a mortgage loan from Bank BCB for the construction of Lanang
Sdn Bhd branch in Penang.
4. RM25,000 for the installation fee of machine paid to Seol Pte Ltd.

Required:

a. Explain with reasons whether each transaction incurred by Lanang Sdn Bhd is subjected
to withholding tax.
(6 marks)

b. Calculate the amount to be paid by Lanang Sdn Bhd to Seol Pte Ltd.
(4 marks)

c. Explain the consequences to Lanang Sdn Bhd if the company remitted the withholding
tax to the Inland Revenue Board Malaysia (IRBM) on 3 August 2021.
(2 marks)
(Total: 12 marks)

QUESTION 5

Marwa, a Malaysian citizen, intended to sell his double-storey terrace house in Sepang,
Selangor to Safa for RM600.000. Safa paid a 5% deposit on 12 April 2021 but decided to
withdraw the deal one week later. The deposit was forfeited.

The house was a gift from Marwa's mother, Puan Lily who is a Malaysian citizen. The transfer
took place on 14 August 2016 and the market value at the time of transfer was RM480,000.
Puan Lily had purchased the house from a private developer on 2 January 2011 at the price
of RM320.000. Puan Lily incurred a minor renovation cost of RM100,000 and legal fees of
RM8.500. Puan Lily also received an insurance compensation of RM5,000 due to flood.

On 1 December 2021, Marwa sold the house to Ali via a Sales and Purchase Agreement for
RM650,000. He incurred brokerage fees of RM650, valuation fees of RM2,500 and an
advertisement to seek a buyer of RM850.

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CONFIDENTIAL 7 AC/JUL2022/TAX317

Marwa, together with his siblings, Zulaikha and Zahirah who are Malaysian citizens,
incorporated AZA Sdn Bhd (ASB) on 11 May 2018. Each of them held 200,000 units of shares
of RM1.00 each in ASB. ASB was not a real property company at the date of incorporation.
However, ASB became a real property company on 5 January 2021. The defined value of real
property for ASB on that date was RM2,500,000.

Marwa inherited a piece of land from his grandmother on 11 January 2020 and transferred the
land to ASB on 5 October 2021 for a total consideration of RM1,050,000, consisting of 230,000
shares valued at RM4.00 each and the balance in cash. The market value of the land was
RM680,000 at the date of transfer. The land was purchased by her grandmother in March
2012 for RM380,000. On 1 December 2021, Marwa sold all the shares he acquired on 5
October 2021 in ASB for RM1,200,000.

Required:

a. Explain any FOUR (4) situations which give rise to real property gains tax exemption for
individuals.
(4 marks)

b. Calculate the real property gains tax (if any) on the:

i. transfer of the double-storey terrace house from Puan Lily to Marwa; and
ii. disposal of the double-storey terrace house from Marwa to Ali.
(10 marks)

c. Determine the implication of real property gains tax (if any) on the:

i. disposal of land by Marwa to ASB on 5 October 2021; and

ii. disposal of 230,000 shares by Marwa on 1 December 2021.
(10 marks)
(Total: 24 marks)

QUESTION 6

Dew Sdn Bhd is a Malaysian tax resident company. The company converts organic materials
to become organic-based products such as soaps, shampoos, aromatherapy and candles in
Tangkak, Johor. The company commenced its business on 1 April 2019 and closes its
accounts on every 31 December. The company sells its products to customers within
Malaysia. The company achieved its threshold limit for sales tax purposes in July 2021.

On 3 December 2021, the company made the following sales to Sparkle Sdn Bhd in Klang,
Selangor:

Transactions RM
(exclusive sales tax)
Organic soaps 250,000
Organic shampoos 300,000
Organic aromatherapy 110,000
Organic candles 390,000
Organic materials 10,000
Transportation charges 300

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CONFIDENTIAL 8 AC/JUL2022/TAX317

Required :

a. Show to Dew Sdn Bhd:

i. Whether the activities of the company fall within the scope of sales tax.
ii. When the company is required to become sales tax registrant and issue sales tax
invoice to its customer.
(4 marks)

b. Illustrate the sales tax invoice issued to Sparkle Sdn Bhd according to the Sales Tax Act
2018 (Assume sales tax rate is at 10%).
(6 marks)
(Total: 10 marks)

END OF QUESTION PAPER

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CONFIDENTIAL APPENDIX 1(1) AC/JUL 2022/TAX317

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

Income tax
rates
a) Resident company with paid-up capital of RM2.5 million and below
(at the beginning of the YA) AND having gross income from source
or sources consisting of a business of not more than RM50 million
for the basis period for a YA:

On the first RM600,000 chargeable income 17%

On the subsequent chargeable income 24%

b) Resident company with paid-up capital above RM2.5 million (at the
beginning of the YA) OR having gross income from source or
sources consisting of a business of more than RM50 million for the
basis period for a YA 24%

c) Non-resident company/branch 24%

d) Resident limited liability partnership with a capital contribution of

RM2.5 million and below (at the beginning of the YA) AND having
gross income from source or sources consisting of a business of
more than RM50 million for the basis period for a YA AND the
resident limited liability partnership is not controlled by or does not
control another company with a capital contribution (whether in
cash or in-kind) and paid-up share capital of more than RM2.5
million:

On the first RM600,000 chargeable income 17%

On the subsequent chargeable income 24%

e) Resident limited liability partnership with capital contribution above

RM2.5 million (at the beginning of the YA) OR having gross income
from source or sources consisting of a business of more than RM50
million for the basis period for a YA 24%

f) Non-resident limited liability partnership 24%

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