Week 10

Question 1

GMT Sdn. Bhd., a Malaysian tax resident company, is engaged in the manufacture and sale of plastic
products. The paid up share capital of the company as at 1 January 2021 was RM2.6 million.

The company’s statement of profit or loss for the year ended 31 December 2021 is as follows:

Notes RM'000 RM'000

Turnover 1 4,800
Less: Cost of goods sold 2 2,100
2,700
Add: Other income 3 80
2,780
Less: Expenses
Depreciation 90
Bonus 70
Bad and doubtful debts 4 52
Compensation 5 20
Donations 6 75
Travelling and entertainment 7 60
Legal expenses 8 81
Repair and maintenance 9 145
Salaries and wages 10 745
Export credit insurance premium 11 25
Library facilities 12 120
Statutory audit fee 16
1,499
Profit before taxation 1,281

Notes:

1. Turnover

Turnover includes an unrealized gain from foreign exchange in respect of the sale of inventories
amounting to RM30,000.

2. Cost of goods sold

This includes the following:

RM’000
A provision for stock obsolescence 170
A provision for warranty 12

3. Other income

This comprises the following:

RM’000
Interest income in respect of late payment by trade receivables 50
Dividend income (single tier) 30
 Question 1 (Continued)

4. Bad and doubtful debts (trade)

RM’000
Bad debts written-off during the year 18
Net increase in general provision 30
Net increase in specific provision 19
Bad debts recovered during the year* (15)
52
* It was not tax deductible when the amount was written off previously.

5. Compensation

Compensation paid to one of its distributors to terminate the contract.

6. Donations
The following donations were made:
RM’000
Cash donation to a political party 15
Donation in kind to an approved organization 60
75
7. Travelling and entertainment
Included entertainment allowances paid to marketing personnel of RM38,000.

8. Legal expenses

The expenses are related to the following:

RM’000
Obtaining a bank loan 40
Trading goods lost in transit 20
Renewal of a trading license 21
81

9. Repair and maintenance

RM’000
Renewal of wiring 45
Replacement of damaged tiles of the same quality 20
Extension of the factory building 80
145

10. Salaries and wages

RM’000
Salaries and allowances 700
Leave passage for a senior marketing manager to Sabah 15
Remuneration of disabled employee 30
745
Question 1 (Continued)

11. Export credit insurance premiums

The export credit insurance is provided by a company approved by the Ministry of Finance.

12. Library facilities

The amount was incurred in respect of providing library facilities which are accessible to the public.

13. Other information

Capital allowance for the year of assessment 2021 amounting to RM250,000.

Required:

(a) Compute the tax payable by GMT Sdn. Bhd. for the year of assessment 2021. You are to indicate
‘nil’ in your computation for every item that does not require any tax adjustment. (17 marks)

(b) Explain the tax treatment for each of the items in Notes 3, 5, 11 and 12. (8 marks)
[Total: 25 marks]

Question 2

SSB Sdn. Bhd. purchased the following assets during its financial year ended 30 June 2021:

RM’000
A heavy machine, costing: 120
Cost of alteration of building to install the machine 60
Total cost incurred 180

A heavy machine, costing: 110

Cost of levelling land to prepare a site to install the machine 10
Total cost incurred 120

Note: The annual allowance rate for heavy machine is 20%.

Required:

(a) “Only a tax resident company is entitled to claim capital allowances”.

Comment on this statement. (4 marks)

(b) Compute the capital allowances and tax written down value for both machines for the year of
assessment 2014.

(c) Explain the tax treatments for the following situations:

(i) Asset owned for less than 2 years; (3 marks)

(ii) Non-commercial vehicles; (3 marks)
(iii) Hire purchase instalment payments. (2 marks)