CONFIDENTIAL AC/MAY 2022/TAX317

UNIVERSITI TEKNOLOGI MARA

TEST

COURSE : TAXATION 2
COURSE CODE : TAX317
EXAMINATION : MAY 2022
TIME : 1 HOUR 30 MINUTES

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of three (3) questions.

2. Answer ALL questions in English.

3. Answer ALL questions in your ANSWER SHEET. Start each answer on a new page and
number each page.

4. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) a four-page Appendix 1

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 6 printed pages

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CONFIDENTIAL 2 AC/MAY 2022/TAX317

QUESTION 1

A. Deli Frozen Sdn Bhd commenced business on 1 November 2016 and closed its first set
of accounts on 31 August 2017 and to that date for subsequent years. On 1 July 2019,
the company decided to change its accounting year end to 31 January and the accounts
were prepared on 31 January 2020 and thereafter. The adjusted income/(losses) for the
respective accounting period is as follows:

Accounting Period Adjusted income/(loss)

RM
1 November 2016 – 31 August 2017 80,000
1 September 2017 – 31 August 2018 (23,000)
1 September 2018 – 31 January 2020 102,000
1 February 2020 – 31 January 2021 195,000

Required:

a. Illustrate the basis period and the adjusted income/(loss) of Deli Frozen Sdn Bhd
for all the relevant years of assessment.
(5 marks)

b. Describe TWO (2) situations where the new accounting period will be accepted as
the new basis period for a year of assessment when there is a change in the
accounting period.
(2 marks)

B. Bestmark Sdn Bhd has been a resident company in Malaysia since 2016. The company
prepares its accounts annualy to 30 September. For the year of assessment 2021, the
company estimate its income tax payable at RM330,000 and no revision of tax estimates
has been made thereafter. In April 2022, the actual tax payable for year of assessment
2021 as furnished in the tax return form C is RM550,000.

Required:

a. For the year of assessment 2021, clarify to Bestmark Sdn Bhd:

i. the due date to pay for the first monthly tax installment
ii. the time frame to revise the estimation of income tax payable
(4 marks)

b. Illustrate the outstanding balance due by Bestmark Sdn Bhd to Inland Revenue
Board Malaysia at the time of the submission of the tax return form.
(4 marks)
(Total: 15 marks)

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QUESTION 2

Nature Sdn Bhd was incorporated on 1 December 2015 with a paid up capital of RM1.8 million.
The company is resident in Malaysia and making strides by running a business based on halal
health products. For the year ended 31 December 2021, the company’s Statement of Profit or
Loss showed the following:

Note RM RM
Sales 4,400,000
Less: Cost of sales 1 (2,025,000)
Gross profit 2,375,000
Add: Other income 2 340,000
2,715,000
Less: Expenses
Staff remuneration 3 700,000
Sales and marketing 4 40,000
Research and development 5 280,000
Repair and maintenance 6 43,000
Contributions and donations 7 100,000 (1,163,000)
Net profit before taxation 1,552,000

Notes:

1. Cost of sales includes:

RM
Depreciation for plant and machinery 180,000
Royalty paid to Vikings, a Korean resident company without deduction
of witholding tax 36,000
Provision for slow-moving inventories 4,000

2. Other income comprises:

RM
Dividend from an investment in a local listed company 44,000
Insurance recovery received for inventory destroyed in factory fire 60,000
Interest income on late settlement from trade receivables 36,000
Rental of warehouse in Kulim, Kedah 200,000

3. Staff remuneration includes:

RM
Salaries and bonuses of normal employees 450,000
Salaries and bonuses of disabled employees 46,000
Entertainment allowances for the marketing staffs 34,000
Employees Provident Fund (EPF) contribution 170,000

4. Sales and marketing include:

RM
Cost of obtaining Halal certification for the company’s new product 22,000
Entertainment given to potential or existing customers during the
launching of company’s new product 14,000
Free gifts to customers for purchase above RM200 4,000

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5. Research and development include:

RM
Cost of routine quality control 35,000
Consultancy fees paid to a local research organisation for advice
pertaining to the research being undertaken 150,000
Payment to SIRIM for the use of testing equipment 70,000
Training expenses for employees to upgrade the quality of the products
(approved by Malaysian Industrial Development Authority) 25,000

6. Repair and maintenance comprise:

RM
Initial repairs on purchase of a used machine 6,000
Renovation of office building for the installation of safety features to
create a safe environment for disabled employees 25,000
Expenditure incurred for the provision and maintenance of the child care
centre registered with the Department of Social Welfare 12,000

7. Contributions and donations include:

RM
Business zakat 50,000
Cash contribution to Kedah State Library. The company elected for
s 44(8) 10,000
Cash wakaf to Lembaga Zakat Negeri Kedah 40,000

Additional information:

Capital allowance claimed for the current year amounted to RM140,000. The company’s
balancing allowance for the year is RM14,000.

Required:

a. Calculate the income tax payable of Nature Sdn Bhd for the year of assessment 2021.
Every item in the notes to the account must be shown in your computation. Write ‘NIL’
where no adjustment is necessary.
(20 marks)

b. Explain the reason for the tax treatment of the following items of Note 6 in part (a):

i. Initial repairs on purchase of a used machine

ii. Renovation of office building for the installation of safety features to create a safe
environment for disabled employees
(2 marks)
(Total: 22 marks)

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QUESTION 3

A. Fusion Sdn Bhd, a resident company in Pulau Pinang has been in operation since 2017.
The company manufactures two products, Product Bee (a promoted product) and
Product Dee (a non-promoted product). The financial information pertaining to the
promoted and non-promoted products are as follows:

2022 2023
RM’000 RM’000
Product Bee
Adjusted income/(loss) 400,000 800,000
Capital allowance 160,000 180,000
Unabsorbed capital allowance from YA 2021 60,000
Unabsorbed busines loss from YA 2021 (100,000)
Qualifying capital expenditure incurred:
Plant and machinery 90,000 120,000
Factory building 130,000

Product Dee
Statutory income/(loss) (62,000) 88,000
Unabsorbed busines loss from YA 2021 (28,000)

Cash donation to Penang State Government 10,000 15,000

To maximise tax savings, the company plan to apply for Pioneer status or Investment
Tax Allowance incentives currently available under the Promotion of Investment Act
1986.

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 and 2023 under the
following tax incentives:

i. Pioneer Status
ii. Investment Tax Allowance
(18 marks)

b. Based on the computation in (a), evaluate the incentive that Fusion Sdn Bhd
should apply.
(2 marks)

B. Cengkih Sdn Bhd is a Malaysian resident company specializing in manufacturing food

products since 2015. To reduce the operating cost and increase the quality of the
products, the company installs three new sophisticated machines to its existing
production line at a cost of RM2 million. The modenization project commenced in
January 2021 which is eligible for reinvestment allowance.

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Required:

Explain the factors that determine the eligibility of Cengkih Sdn Bhd in claiming for
reinvestment allowance.
(3 marks)
(Total: 23 marks)

END OF QUESTION PAPER

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CONFIDENTIAL APPENDIX 1 (1) AC/MAY2022/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 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 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 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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CONFIDENTIAL APPENDIX 1 (2) AC/MAY2022/TAX317

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 13% 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 value of
RM usage of car private 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/MAY2022/TAX317

• 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 2019 and onward

Category of disposal RPGT rate

Individual Individual Company
(citizen or (non-citizen or
permanent non-permanent
resident) resident)
Within 3 years after date of 30% 30% 30%
acquisition
In the 4th year after date of 20% 30% 20%
acquisition
In the 5th year after date of 15% 30% 15%
acquisition
In the 6th year after date of 5% 10% 10%
acquisition or thereafter

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CONFIDENTIAL APPENDIX 1 (4) AC/MAY2022/TAX317

• Sales Tax and Service Tax

For the period from 1 September 2018 and onward

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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