BBFT3024 ADVANCED TAXATION

Suggested answer to Question 1(e)

APPENDIX I
Prime Sdn. Bhd. (Pioneer Status - Production date on 1.1.2023)
The rate of abatement of statutory income is 70%.

Year of Assessment 2022 2023 2024 2025 2026 2027

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Pre-pioneer business
Adjusted income 0
Less: IBA & CA 0
Statutory income 0

Pioneer business (PB)

Adjusted income 0 4,000 6,000 10,000 18,000
Less: IBA & CA 0 4,000 6,000 7,300 3,800
Statutory income (SI) 0 0 0 2,700 14,200
Less: Abated statutory income (70% of SI) 0 0 0 1,890 9,940
Deemed total income (30% of SI) 0 0 0 810 4,260

FD interest - 170 170 170 - -

Rent 120 - - - - -
Aggregate income (AI) 120 170 170 170 0 0
Less: Current year biz loss 120 - - - - -
Cash donation to State Govt. 100 100 100 100 100 100
Total income 0 70 70 70 0 0
Deemed total income (30% of SI) - 0 0 0 810 4,260
Chargeable income 0 70 70 70 810 4,260

Total chargeable income in the period for YA 2023 to YA 2027 (YA's under pioneer period): 5,280

Tax exempt account

Exempt pioneer income @ 70% of statutory income 0 0 0 1,890 9,940
Less: Pioneer business loss b/f 0 0 0 500 0
Amount credited to exempt income account 0 0 0 1,390 9,940
Exempt balance b/f 0 0 0 0 1,390
Exempt balance c/f 1,390 11,330

Pre-Pioneer & Pioneer business

Industrial building allowance (IBA) & Capital allowance (CA)
Balance b/f - 3,500 7,100 6,700 4,000 -
IBA & CA claimed in current year 3,500 3,600 3,600 3,300 3,300 3,800
Amount available 3,500 7,100 10,700 10,000 7,300 3,800
Less: Utilisation - - 4,000 6,000 7,300 3,800
Balance c/f 3,500 7,100 6,700 4,000 - -
BBFT3024 ADVANCED TAXATION

Suggested answer to Question 1(e) (cont'd)

Year of Assessment 2022 2023 2024 2025 2026 2027

RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Pioneer business loss
Balance b/f 0 500 500 500 -
Current year business loss 500 - - - -
500 500 500 500 -
Less: Utilisation - - - 500 -
Balance c/f 500 500 500 - -

Pre-Pioneer business
Balance b/f 0 180 180 180 180 180
Current year business loss 300 - - - - -
300 180 180 180 180 180
Less: Utilisation 120 - - - - -
Balance c/f / Unabsorbed biz loss c/f 180 180 180 180 180 180

Answer to Question 1(f) APPENDIX II

2023 2024 2025 2026 2027
RM'000 RM'000 RM'000 RM'000 RM'000

Qualifying capital expenditure (QCE) - Investment Tax Allowance

Land 0 - - - -
Factory / Extension of Factory 5,400 4,900 - - 2,600
Plant & machinery 5,000 - - - -
Total QCE 10,400 4,900 - - 2,600

ITA at 60% 6,240 2,940 - - 1,560

Total ITA: RM10,740,000 (6,240,000 + 2,940,000 + 1,560,000)

BBFT3024 ADVANCED TAXATION

Suggested answer to Question 2

Best Sdn. Bhd. - Tax Computation of Chargeable Income

Year of Assessment 2023 2024 2025
RM'000 RM'000 RM'000
Pioneer business (PB)
Adjusted income 0 2,000 2,500
Less: Capital Allowance (CA) 0 1,000 500
Statutory income 0 1,000 2,000
Less: Abated statutory income (70%) 0 700 1,400
Deemed total income (30% of SI) 0 300 600

Non-Pioneer business (NPB)

Adjusted income 180 0 0
Less: CA 100 0 0
Statutory income 80 0 0
Less: Unabsorbed business loss b/f from YA 2025
FD interest 30 30 30
Single tier dividend (Para. 12B of Sch. 6) - Exempt Exempt Exempt Exempt
Dividend (Singapore) Exempt Exempt Exempt
Rent from Australia remitted to Malaysia 20 20 0
Aggregate income (AI) 130 50 30
Less: Current year biz loss (rest. to) - [Step 2] - 0 0
Total income 130 50 30
Deemed total income (30% of SI) 0 300 600
Chargeable income 130 350 630

Tax exempt account (Pioneer status)

Exempt pioneer income (70% of statutory income) 0 700 1,400
Less: Current year non-pioneer business loss [Step 1] 0 200 300
Pioneer business loss b/f 0 500 500
Amount credited to exempt income account 0 0 600
Exempt balance b/f 0 0 0
Exempt balance c/f 0 0 600

Pioneer business
Industrial building allowance (IBA) & Capital allowance (CA)
Balance b/f 0 500 0
IBA & CA claimed in current year 500 500 500
Amount available 500 1,000 500
Less: Utilisation 0 1,000 500
Balance c/f 500 0 0
BBFT3024 ADVANCED TAXATION

Suggested answer to Question 2 (cont'd)

2023 2024 2024

Non-Pioneer Business RM'000 RM'000 RM'000
Capital allowance
Balance b/f 0 0 100
Claimed in current year 100 100 100
Amount available 100 100 200
Less: Utilisation 100 0 0
Balance c/f 0 100 200

Pioneer business loss

Balance b/f 0 1,000 500
Current year business loss 1,000 0 0
1,000 1,000 500
Less: Utilisation 0 500 500
Balance c/f 1,000 500 0

Non-Pioneer business loss

Balance b/f - - -
Current year business loss - 200 300
- 200 300
Less: Utilisation (set-off against abated SI from Pioneer) - 200 300
Balance c/f - 0 0

Pre-Pioneer business loss

Balance b/f & c/f to Post-pioneer period 800 800 800
BBFT3024 ADVANCED TAXATION
APPENDIX A
Suggested answer to Q3(a)

Smart Sdn. Bhd.: Tax Computation of Chargeable Income

Year of Assessment 2023 2024 2025 2026 2027

RM'000 RM'000 RM'000 RM'000 RM'000
1. Business (manufacturing)
Adjusted income 10,000 9,000 0 6,000 8,000
Less: IBA & CA 4,500 3,900 0 6,000 4,500
Statutory income (SI) 5,500 5,100 0 0 3,500
Less: ITA (limited to 70% of SI) 3,850 350 0 0 2,450
Statutory income (30% of non-exempt SI) 1,650 4,750 0 0 1,050
Less: Unabsorbed business loss b/f - s43(2) 0 0 0 0 880
1,650 4,750 0 0 170
2. FD interest 120 120 120 120 120
3. Rent (Singapore) 80 80 0 0 0
Aggregate income (AI) 1,850 4,950 120 120 290
Less: Current year business loss 120
Cash donation to approved institution 60 60 12 12 29
(restricted to 10% of AI)
Total income / Chargeable income 1,790 4,890 0 108 261

Tax exempt account

Balance b/f - 3,850 4,200 4,200 4,200
Amount to be credited to exempt income a/c 3,850 350 - - 2,450
Balance c/f 3,850 4,200 4,200 4,200 6,650

Qualifying capital expenditure (QCE) for

investment tax allowance (ITA):
Plant & Machinery 2,000 0 0 5,000 2,000
Factory (RM6 million - RM1 million for land) 5,000 0 0 0 0
Land 0 0 0 0 0
Total QCE 7,000 0 0 5,000 2,000

ITA at 60% 4,200 0 0 3,000 1,200

Investment Tax Allowance (ITA)

ITA b/f 0 350 0 0 3,000
Current year ITA 4,200 0 0 3,000 1,200
ITA available 4,200 350 0 3,000 4,200
Less: ITA utilised 3,850 350 0 0 2,450
ITA c/f 350 0 0 3,000 1,750

Note: The rate of investment tax allowance is 60% and is deductible against 70% of statutory income.
BBFT3024 ADVANCED TAXATION

Suggested answer to Q3(a) (Cont'd)

2023 2024 2025 2026 2027
RM'000 RM'000 RM'000 RM'000 RM'000

Industrial building allowance (IBA) & Capital allowance (CA)

Balance b/f 0 0 0 3,700 1,200
Current year IBA & CA 4,500 3,900 3,700 3,500 3,300
4,500 3,900 3,700 7,200 4,500
Less: IBA & CA utilised 4,500 3,900 0 6,000 4,500
Balance c/f 0 0 3,700 1,200 0

Business loss
Balance b/f 0 0 0 880 880
Current year business loss 0 0 1,000 0 0
0 0 1,000 880 880
Less: Amount utilised 0 0 120 0 880
Balance c/f 0 0 880 880 0

Suggested answer to Q3(b)

For the investment tax allowance (ITA) opted, the amount of ITA at 60% of the qualifying capital expenditure
incurred on the factory, plant and machinery would be RM8,400,000 (RM4.2m +RM3m + RM1.2m)

When the ITA is fully utilised, the amount of abated statutory income would be RM8,400,000.

If pioneer status (PS) is opted, the abated stautory income at 70% [after deducting pioneer loss brought forward]
which can be credited to the exempt account would be RM8,870,000 [Refer to Appendix B]

The exempt income under ITA is lower by RM470,000 [RM8,400,000 (ITA) - RM8,870,000 (PS)].

Hence, Smart Sdn. Bhd. should opt for pioneer status instead of investment tax allowance.

If pioneer status is opted: APPENDIX B

Year of Assessment 2023 2024 2025 2026 2027

RM'000 RM'000 RM'000 RM'000 RM'000
Statutory income as above 5,500 5,100 0 0 3,500

Exempt income account (Pioneer)

Exempt pioneer income @ 70% of statutory income 3,850 3,570 0 0 2,450
Less: Pioneer business loss b/f 0 0 0 0 1,000
Amount credited to exempt income account 3,850 3,570 0 0 1,450
Exempt balance b/f 0 3,850 7,420 7,420 7,420
Exempt balance c/f 3,850 7,420 7,420 7,420 8,870
BBFT3024 ADVANCED TAXATION

Suggested answer to Q4(e) Appendix I

Victory Sdn. Bhd. Tax Computation

Year of assessment 2023 2024 2025 2026 2027
RM'000 RM'000 RM'000 RM'000 RM'000
1. Business (Manufacturing - No ITA)
Adjusted income 0 0 3,000 3,400 4,000
Less: Capital allowance (CA) 0 0 1,800 1,600 1,600
Statutory income (SI) 0 0 1,200 1,800 2,400

2. Business (Manufacturing - ITA)

Adjusted income 0 2,000 6,000 10,000 14,000
Less: IBA & Capital allowance 0 2,000 5,200 2,200 2,000
Statutory income (SI) 0 0 800 7,800 12,000
Less: 60% of ITA restricted to 70% of SI 0 0 560 5,460 8,400
Statutory income (Not exempt: 30% of SI) 0 0 240 2,340 3,600

Aggreate of Statutory income from Biz (B1 + B2) 0 0 1,440 4,140 6,000
Less: Unabsorbed business loss b/f 0 0 1,220 0 0
0 0 220 4,140 6,000
FD interest (Malaysia) 50 50 50 50 50
Adjusted incomf from rent (Malaysia) 60 60 30 60 50
Dividend from Indonesia remitted to Malaysia Exempt Exempt Exempt Exempt 0
Aggregate income (Biz & Non-Biz) 110 110 300 4,250 6,100
Less: Current year business loss under s44(2) 110 110 0 0 0
Food donation (approved inst.) 0 0 0 0 0
Cash donation (non-approved inst.) 0 0 0 0 0
Cash donation Selangor S. Govt. 0 200 200 700 720
Total income/Chargeable income 0 0 100 3,550 5,380

Tax payable @ 24% 0 0 24,000 852,000 1,291,200

Exempt income account

Balance b/f - - - 560 6,020
Current year - - 560 5,460 8,400
Balance c/f - - 560 6,020 14,420
BBFT3024 ADVANCED TAXATION

Suggested answer to Q4(e) (cont'd)

2023 2024 2025 2026 2027
RM'000 RM'000 RM'000 RM'000 RM'000
Qualifying capital expenditure (QCE) for ITA

Factory 9,000 - - - -
Factory land 0 - - - -
Extension of factory (RM8m - RM1m for land) - - - 7,000 -
Plant & machinery 2,000 1,000 1,500 3,000 2,000
Office equipment & Furniture & fittings 0 - - 0 -
Total QCE 11,000 1,000 1,500 10,000 2,000

ITA at 60% of QCE 6,600 600 900 6,000 1,200

Investment Tax Allowance (ITA)

Balance b/f - 6,600 7,200 7,540 8,080
ITA claim for the year 6,600 600 900 6,000 1,200
6,600 7,200 8,100 13,540 9,280
Less: Utilized amount 0 - 560 5,460 8,400
Balance c/f 6,600 7,200 7,540 8,080 880

CA (B1: No ITA)
Balance b/f - 500 1,000 0 0
CA claim for the year 500 500 800 1,600 1,600
500 1,000 1,800 1,600 1,600
Less: Utilized amount 0 - 1,800 1,600 1,600
Balance c/f 500 1,000 0 0 0

IBA & CA (B2: ITA)

Balance b/f - 2,600 3,000 0 0
IBA & CA claim for the year 2,600 2,400 2,200 2,200 2,000
2,600 5,000 5,200 2,200 2,000
Less: Utilized amount 0 2,000 5,200 2,200 2,000
Balance c/f 2,600 3,000 0 0 0

Business loss (B1 & B2)

Balance b/f - 850 1,220 0 0

Current year business loss (B1: 800K + B2: 160) 960 480 0 0 0
Less: Utilized amount 110 110 1,220 0 -
370
Balance c/f 850 1,220 0 0 0