Professional Documents
Culture Documents
CONFIDENTIAL
QUALIFYING EXAMINATION
Date
: 20 September 2012
Time
: 2.15 pm 5.30 pm
: 15 minutes
Writing
: 3 hours
Paper: Taxation
Taxation
INSTRUCTIONS TO CANDIDATES:
This question paper contains 6 questions on 17 printed pages.
____________________________________________________
Answer ALL questions.
____________________________________________________
Answer Questions 1,2 and 3 in separate booklet(s) from
Questions 4, 5 and 6.
____________________________________________________
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(a)
Companies
(b)
Small companies
Chargeable income:
(c)
First RM500,000
Excess RM500,000
(d)
20%
25%
Resident individuals
Chargeable Income
RM
0 2,500
2,501 5,000
5,001 20,000
20,001 35,000
35,001 50,000
50,001 70,000
70,001 100,000
Above
100,000
Non-resident individuals
Rate
0%
1%
3%
7%
12%
19%
24%
26%
Cumulative Tax
RM
0
25
475
1,525
3,325
7,125
14,325
26%
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.
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Types of BIK
840
1,680
3,360
Other benefits
RM per month
Domestic help
Gardener
Driver
Initial allowance
Annual allowance
400
300
600
Motor Vehicles/
Heavy
Machinery
Plant &
Machinery
Computers
Others
Industrial
Building
20%
20%
20%
14%
20%
80%
20%
10%
10%
3%
Rate %
10
6
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QUESTION 1
(a)
5
6
7
8
9
10
11
12
13
14
15
16
789
654
610
609
349
1,229
140
771
62
34
95
30
190
RM000
311,486
(170,840)
140,646
199
140,845
(5,562)
135,283
Notes:
1.
Dividend
The dividend was received on 5 January 2011 from an investment in a local
company. Tax at 25% has been deducted from the dividend.
2.
Interest
RM33,000 credited to the account consists of late payment charges received from
customers. The company places funds with a bank in Korea as security for supply
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of goods. Interest of RM7,000 was paid on this deposit, and was remitted to
Malaysia in May 2011.
3.
4.
5.
Rental
i)
The company received rental income from an old office building bought in
1995. The gross rental received for the year ended 30 June 2011 was
RM175,000 and a refundable security deposit of RM30,000.
ii)
In December 2010, the company extended the parking lot to enable more
cars to be parked. The extension, including additional covered lots, cost
RM70,000. Building insurance of RM5,000 covers both fire and flood risks.
The quit rent and assessment on the property was RM9,000 and RM7,000
respectively. A legal fee of RM4,000 was incurred to evict two tenants who
defaulted on rental payments, and for signing four new tenancy
agreements during the current financial year.
ii)
Salary and wages include RM200,000 paid to a director who died recently
(see note 4).
ii)
Employees provident fund contribution of RM33,000 was paid for the said
director.
iii)
iv)
Three (3) free overseas trips that cost RM27,000 during the year. One of
the trips was to Korea to undergo a medical diagnosis.
v)
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6.
7.
8.
Interest includes:
i)
ii)
A sum of RM43,000 on the companys annual dinner for staff and their
family.
ii)
As part of its spend and claim policy, the company disbursed RM154,000
to the marketing team charged with market expansion.
iii)
iv)
9.
A sum of RM152,000 was written off as bad debts as the debtors had died,
or have been declared bankrupt or under liquidation.
ii)
iii)
The company had a special arrangement with one of its senior manager under which advances are made to him during the course of the year. This
special arrangement was provided for (in writing) in the contract of
employment with the said manager.
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ii)
iii)
The company has a lease arrangement with a local leasing firm for two
vehicles as follows:
Vehicle type
Original cost
of new vehicle
Payments up to
year ended
30 June 2010
Payments for
the
year ended
30 June 2011
RM000
520
931
RM000
24
35
59
RM000
24
35
59
Trailer
Car
Total
11.
12.
ii)
iii)
ii)
iii)
RM4,000 was incurred on legal fees (including stamp duty) on the motor
vehicle leasing arrangement with the lessor.
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13.
Compensation
The company terminated the employment contract of one its former employees
who worked as a cleaning specialist with the company. The company paid a
compensation of RM34,000 under an arrangement preventing him from working in
a similar trade for the next five years.
14.
15.
ii)
iii)
ii) An ang pow (cash gift) of RM10,000 to be given to the orphans in the
orphanage during the Chinese New Year. Each orphan would receive RM10.
iii) A sponsorship to five orphans from the orphanage to pursue a degree at the
University Sains Malaysia, a local university in Penang, at a total cost of
RM60,000 for the year ended 30 June 2011.
Other information:
For the year of assessment 2011, the company has claimed capital allowance of
RM629,000 on its assets used in the business.
Required:
Based on the information given, compute the chargeable income of FB Cleaners
Sdn Bhd for the year of assessment 2011.
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Note: Your computation should start with the profit before taxation figure and
follow the description used in the Income Statement and where applicable the
description used in the notes to the accounts. In making your tax adjustments to
the entries, you should indicate Nil where no adjustments are made or are not
required. You do not need to explain the adjustments that you are making.
(15 marks)
(b)
With reference to the information given in the notes to the Income Statement,
explain the tax treatment you would make (or not make) to the following items,
supporting your answer with the relevant provision of the Income Tax Act 1967 (as
amended), rulings and case laws where appropriate:
1.
2.
3.
4.
QUESTION 2
(a)
The MBS Casting Sdn Bhd is a locally incorporated company (the company)
engaged in the manufacture of cast iron products. It closes its accounts to 30
June each year. During the year 2011, it embarked on the construction of its own
industrial building in Seremban, and incurred the following expenditure:
Particulars of expenditure
Cost of land
Legal fee for transfer of land
Clearing of land
Cutting and leveling land
Excavation and preparation of site for construction
Piling and foundation works
Construction of building
Construction of perimeter wall
Architect fee - building design
Legal services for obtaining various building approval
Subcontract charges for installation of wiring and plumbing
Landscaping charges
Total
RM
216,424
21,642
81,159
48,696
43,826
78,454
194,782
18,937
75,749
35,169
40,038
43,285
898,161
The building was completed in early May 2010 and was brought into use on 1 September
2010.
Required:
(i)
Determine the qualifying building expenditure for MBS Casting Sdn Bhd for the
year of assessment 2011.
(6 marks)
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(ii)
Compute the industrial building allowance due to the company for the year of
assessment 2011 and the residual expenditure to be carried forward to the year of
assessment 2012.
(2 marks)
(b)
Mr Ganesh is looking for a piece of land to build a house. He met En. Abdul Halim
who agreed to sell his plot to him for RM289,835. They signed the sales and
purchase agreement on 26 June 2009. Mr Ganesh paid the full price on 25 July
2010 and transferred the land to his name on 15 November 2010. Mr Ganesh
incurred additional expenses on the acquisition which included stamp duty of
RM2,898 and interest of RM51,432 on the loan taken to acquire the land. The
land was flooded owing to nearby development works and Mr Ganesh had to
spend RM41,405 to drain the land. He obtained RM25,340 from the developer on
1 February 2011 as compensation for damages as well as RM9,275 from the
insurance company on 15 February 2011.
The owner of the adjoining plot had disputed the boundary to the land. Mr Ganesh
had to engage a lawyer to defend the title to the land and paid legal fee amounting
RM3,395. He later found the land not suitable to build a bungalow and put it up for
sale. A prospective buyer paid a deposit of RM8,000 and applied for a loan but
was not successful and he forfeited the deposit.
Required:
Determine the acquisition price of the land for Mr Ganesh.
(7 marks)
(Total: 15 marks)
QUESTION 3
(a)
State the conditions under which a co-operative society would be exempted from
income tax under the Income Tax Act 1967 (as amended).
(2 marks)
(b)
The Alor Gajah Co-operative Society (the society) was registered on 1 January
2009. As at 1 January 2011, the society has a members fund of RM800,000. The
society caters for the farmers in Alor Gajah district who are mainly tapioca
farmers. The detail of the societys income and other information for the year
ended 30 June 2011 was as follows:
No.
1.
2.
3.
4
Particulars
Audited net profit
Statutory business income
Statutory dividend income
Contribution to statutory reserve funds
RM
80,000
35,000
20,000
6,000
The dividend income was from a public listed company and has suffered tax at
25%.
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11
Required:
Determine the income liability of the Alor Gajah Co-operative Society for the year
of assessment 2011.
(5 marks)
(c)
The MKG Farmers Co-operative Society (the society) was officially registered in
the year 2000 to cater for the needs of the farmers in the Mukim of Kampung
Gajah, Negeri Sembilan. The farmers rear mainly goats and cattle for the local
market. The society closes its accounts to 30 June each year. For the year ended
30 June 2011, the society has produced the following account:
MKG Farmers Co-operative Society
Accounts for the year ended 30 June 2011
RM
Sales
Less: Cost of goods sold
Gross profit
Less: Expenses
Secretarial fees
Accounting fees
Depreciation
Donation
Zakat perniagaan
Veterinary services
Transport
Repairs and maintenance
Office rent
Utilities charges
Audited net profit
Less:
Interest on members savings
Dividends paid to members
Contribution to co-operative trust fund
Sum transferred to statutory reserve
fund
Balance of profits
11,199
14,375
1,800
26,730
8,910
132,195
17,218
50,106
5,346
45,999
RM
579,150
(121,176)
457,974
(313,878)
144,096
2,430
8,100
9,720
22,680
(42,930)
101,166
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12
The members fund as at 1 July 2010 was RM973,800, as per the account below:
Members fund at 1 July 2010
Paid up share capital
Subscribed capital
Share premium account
Statutory reserve fund
Balance of profit and loss appropriation account b/f
Members fund at 1 July 2010
RM
810,000
36,000
2,700
49,500
75,600
973,800
Required:
Compute the chargeable income of the MKG Farmers Co-operative Society for
the year of assessment 2011.
(5 marks)
(Total: 12 marks)
QUESTION 4
(a)
Linda is a Malaysian citizen and was resident prior to the year 2007. On 3 August
2007, she left Malaysia to join a U.S. company which is based in Dubai. The
following information relates to her periods of stay in Malaysia as well as in Dubai:
On 1 December 2008, she arrived in Malaysia to visit her family. She was
in Malaysia until 7 December 2008.
On 15 May 2009, she came back to Malaysia for a three month holiday.
She returned to Dubai on 15 August 2009.
Required:
Determine the residence status of Linda for the year of assessment 2007 until
2011. State the related sections and reasons for your answer.
(5 marks)
(b)
Pesona Sdn Bhd commenced business in June 2007 and closes its accounts on
31 August each year. The first financial statement of the company was prepared
for year ended on 31 August 2008.
In October 2009, the company changed its accounting year end to 31 October
each year thereafter.
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The companys adjusted income/loss for the relevant periods were as follows:
Accounting period
1 Jun 2007 - 31 Aug 2008
1 Sep 2008 - 31 Aug 2009
1 Sep 2009 - 31 Oct 2009
1 Nov 2009 - 31 Oct 2010
1 Nov 2010 - 31 Oct 2011
Adjusted income/(loss)
RM
120,000
150,000
(60,000)
100,000
140,000
Required:
Compute the adjusted income/(loss) for the relevant years of assessment up to
year assessment 2011.
(7 marks)
(c)
QUESTION 5
(a)
2.
3.
4.
A fully furnished house was provided until 31 July 2011. The monthly rental
paid by the company was RM4,000 (inclusive of furnishing valued at
RM1,000 per month).
5.
For the whole month of August 2011, Dayang was provided with an
accommodation at the Le Meridien Hotel at a rate of RM315 per day. The
company paid the hotel expenses including RM2,000 food expenses
incurred during her stay in the hotel.
6.
A company car was provided until 31 August 2011. The cost of the car was
RM210,000. The car was bought on 1 May 2004.
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7.
In April 2011, Dayang went for a one week holiday in Australia. The air fare
and the hotel bills amounted to RM6,588 and RM4,450 respectively were
paid by the company.
8.
9.
10.
Required:
Compute the statutory employment income of Dayang for year of assessment
2011.
(8 marks)
(b)
Peter (married) and Kamal (single) are partners in show business since 2010.
Each of them contributed equal capital of RM250,000 and has agreed on an equal
profit sharing ratio. For the year of assessment 2011, Kamal was not resident in
Malaysia as he is running another business in Singapore in which Peter is also the
partner. Peter is entrusted to run the partnership business in Malaysia. The
accounting year end of the business is 31 December each year.
The terms of their agreement are as follows:
Profit sharing ratios
Annual interest rate on capital contribution
Annual salary
Annual entertainment allowance
Peter
50%
5%
RM120,000
RM23,000
Kamal
50%
5%
RM60,000
-
Additional information:
1.
The provisional adjusted income for the year ended 31 December 2011
was RM438,000.
2.
The capital allowance on the business assets for the year of assessment
2011 was RM37,000.
3.
Peter provides the following information for the basis year 2011:
1.
15
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2.
Peter has a house which was rented out. The monthly rental income
received by him was RM2,000.
3.
4.
2)
Required:
Compute the tax payable by Peter and Kamal for the year of assessment 2011.
(12 marks)
(Total: 20 marks)
QUESTION 6
(a)
Expenditure
Plant and Equipment
Building (Note 1)
Heavy Machinery
RM
80,000
330,000
110,000
Note 1:
It has been agreed that RM150,000 of the cost of the building is related to the
administrative office.
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16
2011
RM000
(35)
25
2012
RM000
190
48
2013
RM000
272
65
Additional information:
1.
2.
3.
Required:
For the years of assessment 2011, 2012 and 2013, compute the chargeable
income and amount to be credited to the exempt income account of Sinar Sdn
Bhd (show all relevant workings).
(9 marks)
(b)
(c)
Warna Sdn Bhd and Allied Sdn Bhd are both 100% wholly owned subsidiaries of
Restu Bhd. On 1 July 2011, Warna Sdn Bhd imported taxable goods from an
independent supplier at a purchase price of RM391,600. Other related expenses
incurred on the goods were as follows:
RM
Insurance
3,000
Freight
7,800
Import duty
74,000
The goods were sold to Allied Sdn Bhd on 5 September 2011 at cost inclusive of
the above charges plus 10% mark up. The price charged is in line with the groups
pricing policy. The mark-up price on sale to customers outside the group is 20%.
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17
Warna Sdn Bhd is a licensed manufacturer for sales tax, whereas Allied Sdn Bhd
is not.
Required:
(i)
Compute the sales tax payable by Warna Sdn Bhd on the goods sold to
Allied Sdn Bhd. State when the sales tax is due for payment. (Assume an
odd taxable period)
(3 marks)
(ii)
Assuming that sales tax payable on good sold to Allied Sdn Bhd was paid
to the Malaysian Customs Department on 3 December 2011. Compute the
amount of penalty that would be imposed on Warna Sdn Bhd for the late
submission of sales tax.
(1 mark)
(Total: 15 marks)
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