BBFT3024 ADVANCED TAXATION

Suggested answer to Question 1(e) APPENDIX I

Prime Sdn. Bhd. (Pioneer Status - Production date on 1.1.2023)

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 1,000 0
Amount credited to exempt income account 0 0 0 890 9,940
Exempt balance b/f 0 0 0 0 890
Exempt balance c/f 0 0 0 890 10,830

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 1,000 1,000 1,000 -
Current year business loss 1,000 - - - -
1,000 1,000 1,000 1,000 -
Less: Utilisation - - - 1,000 -
Balance c/f 1,000 1,000 1,000 - -

Pre-Pioneer business loss

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 4,500
Less: Capital Allowance (CA) 0 1,000 500
Statutory income 0 1,000 4,000
Less: Abated statutory income (70%) 0 700 2,800
Deemed total income (30% of SI) 0 300 1,200

Non-Pioneer business (NPB)

Adjusted income 180 0 0
Less: CA 100 0 0
Statutory income 80 0 0

Non-Business income / Other income

Fixed deposit interest (Malaysia) 30 30 30
Single tier dividend (Para. 12B of Sch. 6) Exempt Exempt Exempt
Dividends from overseas (after 20% tax) Exempt Exempt Exempt
Interest income from overseas 20 20 20
Aggregate income (AI) 130 50 50
Less: Current year biz loss (rest. to) 0 0 0
Total income 130 50 50
Deemed total income (30% of SI) 0 300 1,200
Chargeable income 130 350 1,250

Tax exempt account (Pioneer status)

Exempt pioneer income (70% of statutory income) 0 700 2,800
Less: Current year non-pioneer business loss 0 500 1,000
Pioneer business loss b/f 0 100 0
Amount credited to exempt income account 0 100 1,800
Exempt balance b/f 0 0 100
Exempt balance c/f 0 100 1,900

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 2025

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 0 100 0
Current year business loss 100 0 0
100 100 0
Less: Utilisation 0 100 0
Balance c/f 100 - 0

Non-Pioneer business loss

Balance b/f - - -
Current year business loss - 500 1,000
- 500 1,000
Less: Utilisation (set-off against abated SI from Pioneer) - 500 1,000
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 7,000 9,000 0 16,000 20,000
Less: IBA & CA 4,000 3,900 0 7,200 3,300
Statutory income (SI) 3,000 5,100 0 8,800 16,700
Less: ITA (limited to 70% of SI) 2,100 2,700 0 1,200 1,800
Statutory income (30% of non-exempt SI) 900 2,400 0 7,600 14,900
Less: Unabsorbed business loss b/f - s43(2) 0 0 0 880 0
900 2,400 0 6,720 14,900
2. Fixed deposit interest (Malaysia) 120 120 120 120 120
3. Rent (Singapore) [Regrossed: RM80K x 100/85] 94 94 0 0 0
4. Dividends from overseas (after 15% tax) Exempt Exempt Exempt Exempt -
Aggregate income (AI) 1,114 2,614 120 6,840 15,020
Less: Current year business loss 120
Cash donation to approved institution 60 60 12 60 60
(restricted to 10% of AI or within the 10% of AI )
Total income / Chargeable income 1,054 2,554 0 6,780 14,960

Tax exempt account

Balance b/f - 2,100 4,800 4,800 6,000
Amount to be credited to exempt income account 2,100 2,700 0 1,200 1,800
Balance c/f 2,100 4,800 4,800 6,000 7,800

Qualifying capital expenditure (QCE) for

investment tax allowance (ITA):
Plant & Machinery 2,000 1,000 1,000 1,000 3,000
Factory (RM6 million - RM1 million for land) 5,000 0 0 0 0
Land 0 0 0 0 0
Total QCE 7,000 1,000 1,000 1,000 3,000

ITA at 60% 4,200 600 600 600 1,800

Investment Tax Allowance (ITA)

ITA b/f 0 2,100 0 600 0
Current year ITA 4,200 600 600 600 1,800
ITA available 4,200 2,700 600 1,200 1,800
Less: ITA utilised 2,100 2,700 0 1,200 1,800
ITA c/f 2,100 0 600 0 0

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

Business loss
Balance b/f 0 0 0 880 0
Current year business loss 0 0 1,000 0 0
0 0 1,000 880 0
Less: Amount utilised 0 0 120 880 0
Balance c/f 0 0 880 0 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 RM7.8 million (RM2.1m +RM2.7m + RM1.2m + RM1.8m)

When the ITA is fully utilised, the amount of abated statutory income would be RM7.8 million.

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 RM22,520,000 [Refer to Appendix B]

The exempt income under ITA is lower by RM14,720,000 [RM7,800,000 (ITA) - RM22,520,000 (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 3,000 5,100 0 8,800 16,700

Exempt income account (Pioneer)

Exempt pioneer income @ 70% of statutory income 2,100 3,570 0 6,160 11,690
Less: Pioneer business loss b/f 0 0 0 1,000 0
Amount credited to exempt income account 2,100 3,570 0 5,160 11,690
Exempt balance b/f 0 2,100 5,670 5,670 10,830
Exempt balance c/f 2,100 5,670 5,670 10,830 22,520
BBFT3024 ADVANCED TAXATION

Suggested answer to Q4(e) Appendix

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 1,000 2,000 3,000
Less: Capital allowance (CA) 0 0 1,000 1,800 1,200
Statutory income (SI) 0 0 0 200 1,800

2. Business (Manufacturing - ITA)

Adjusted income 0 3,000 6,000 10,000 14,000
Less: IBA & Capital allowance 0 3,000 3,000 2,000 2,100
Statutory income (SI) 0 0 3,000 8,000 11,900
Less: 60% of ITA restricted to 70% of SI 0 0 2,100 4,680 2,280
Statutory income (Not exempt, inclusive of 30% of SI) 0 0 900 3,320 9,620

Aggreate of Statutory income from Biz (B1 + B2) 0 0 900 3,520 11,420
Less: Unabsorbed business loss b/f 0 0 900 380 0
0 0 0 3,140 11,420
FD interest (Malaysia) 50 50 50 50 50
Adjusted incomf from rental (Malaysia) 60 60 30 60 50
Dividends (Indonesia) 100 100 100 100 0
Aggregate income (Biz & Non-Biz) 210 210 180 3,350 11,520
Less: Current year business loss under s44(2) 210 210 0 0 0
Food donation (approved inst.) 0 0 0 0 0
Cash donation (non-approved inst.) - - - 0 0
Cash donation Selangor S. Govt. 0 200 200 300 300
Total income/Chargeable income 0 0 0 3,050 11,220

Tax payable @ 24% 0 0 0 732 2,692.8

Exempt income account

Balance b/f - - - 2,100 6,780
Current year - - 2,100 4,680 2,280
Balance c/f - - 2,100 6,780 9,060
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 (RM9m - RM2m land cost) 7,000 - - - -

Factory land 0 - - - -
Extension of factory - - - 2,800
Plant & machinery 3,000 0 500 800 1,000
Office equipment & Furniture & fittings 0 - - 0 -
Total QCE 10,000 0 500 800 3,800

ITA at 60% of QCE 6,000 0 300 480 2,280

Investment Tax Allowance (ITA)

Balance b/f - 6,000 6,000 4,200 0
ITA claim for the year 6,000 - 300 480 2,280
6,000 6,000 6,300 4,680 2,280
Less: Utilized amount 0 - 2,100 4,680 2,280
Balance c/f 6,000 6,000 4,200 0 0

CA (B1: No ITA)
Balance b/f - 500 1,000 800 0
CA claim for the year 500 500 800 1,000 1,200
500 1,000 1,800 1,800 1,200
Less: Utilized amount 0 0 1,000 1,800 1,200
Balance c/f 500 1,000 800 0 0

IBA & CA (B2: ITA)

Balance b/f - 2,000 1,000 0 0
IBA & CA claim for the year 2,000 2,000 2,000 2,000 2,100
2,000 4,000 3,000 2,000 2,100
Less: Utilized amount 0 3,000 3,000 2,000 2,100
Balance c/f 2,000 1,000 0 0 0

Business loss (B1 & B2)

Balance b/f - 890 1,280 380 0

Current year business loss (800K +300) 1,100 600 0 0 0

Less: Utilized amount 210 210 900 380 0
390
Balance c/f 890 1,280 380 0 0