CONFIDENTIAL

2
MIAQE SEPTEMBER 2016
The following tax rates are to be used in answering the questions.
Income tax rates
24%
(a)
Companies
(b)
Small companies
Chargeable income: On first RM500,000
Subsequent Balance
(c)
19%
24%
Resident individuals
Income tax rate for resident individuals
(Chargeable income)
Rate
Cumulative tax
RM
RM
%
RM
First
5,000
(0 -5,000)
0
0
Next
15,000
(5,001 – 20,000)
1
150
Next
15,000
(20,001 – 35,000)
5
900
Next
15,000
(35,001 – 50,000)
10
2,400
Next
20,000
(50,001 – 70,000)
16
5,600
Next
30,000
(70,001 – 100,000)
21
11,900
Next
150,000 (100,001 – 250,000)
24
47,900
Next
150,000 (250,001 – 400,000) 24.5
84,650
Exceeding
400,000
25
(d)

Non-resident individuals
25%
Benefits-in-kind (BIK) scale rates as per Inland Revenue Board (IRB) guidelines
Cost of car when new
RM
Up to 50,000
50,001
75,001
100,001
150,001
200,001
250,001
350,001
500,001 and above
75,000
100,000
150,000
200,000
250,000
350,000
500,000
Annual
prescribed
benefit of
motorcar
RM
1,200
2,400
3,600
5,000
7,000
9,000
15,000
21,250
25,000
Annual
prescribed
benefit of
petrol
RM
600
900
1,200
1,500
1,800
2,100
2,400
2,700
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.
CONFIDENTIAL

3
MIAQE SEPTEMBER 2016
Prescribed value of household furnishings, apparatus and appliances
Category
1
2
3
Type of Benefit
Annual
Prescribed
value of BIK
provided
RM
Semi-furnished with furniture in the lounge, dining room
or bedroom.
Semi-furnished with furniture as in Category 1 and one
or two of the following:

air-conditioners

curtains and alike

carpets
Fully furnished with benefits as in Category 1 and 2 plus
one or more of kitchen equipment, crockery, utensils
and appliances.
Other benefits
840
1,680
3,360
RM per month
Household servant
Gardener
Driver

Rates of Capital Allowances
Initial allowance
Annual allowance

400
300
600
Motor Vehicles/ Plant &
Heavy Machinery Machinery
Computers Others
Industrial
Building
20%
20%
20%
80%
10%
3%
20%
14%
20%
10%
Real property gains tax
With effect from 01.01.2014 the tax rates that apply depending on the holding
period from the date of acquisition of the asset at follows:

Period of Disposal
Company
Within 3 years
In the 4th year
In year 5
In its 6th year onwards
(%)
30
20
15
5
Individual
(Citizens and
Permanent Resident)
(%)
30
20
15
0
Individual
(Non-Citizens)
(%)
30
30
30
5
Goods and services tax (GST)
Standard rate
6%
Registration limit
RM500,000
CONFIDENTIAL
4
MIAQE SEPTEMBER 2016
QUESTION 1
Merci Engineering Sdn. Bhd. (‘the company’) is a locally incorporated resident company, and
more than 80% of its shareholders are Malaysian citizens. The business consists of
manufacturing parts for selected brands of household electrical goods like washing
machines and vacuum cleaners. The company closes the accounts to 30 June each year.
The results for the financial year ended 30 June 2016 is appended below:
Merci Engineering Sdn. Bhd.
Statement of Profit or Loss for the year ended 30 June 2016
Note
Sales
Less: Cost of sales
Gross profit
Add: Other income
Dividend
Interest
Insurance recovery
Less: Expenses
Salaries and wages
Loan interest
Entertainment
Depreciation
Repair and maintenance
Bad and doubtful debts
Motor vehicle expenses
Lease payments
Advertisement and publicity
Professional fees
Insurance
Foreign exchange loss
Donation
1
2
3
32
30
33
4
5
6
1200
86
250
80
227
577
80
218
595
122
80
32
35
7
8
9
10
11
12
13
14
15
Profit before taxation
RM’000
RM’000
359,160
195,570
163,590
95
163,685
3,582
160,103
CONFIDENTIAL
5
MIAQE SEPTEMBER 2016
Notes to the accounts:
1.
Dividend
The company received a single tier dividend of RM18,000 paid by a local listed
company in January 2016 and another dividend of RM14,000 from an investment in
an electronic company in Japan. This dividend was remitted to Malaysia in May
2016.
2.
Interest
The company charges interest on late payment by debtors and received RM30,000
on overdue accounts during the year.
3.
Insurance recovery
The company received RM33,000 from an insurance company for goods damaged
owing to a recent flood at its premises.
4.
Salaries and wages – managing director
Payment to the managing director charged under ‘Salaries and Wages’ is as follows:
RM’000
Particulars
(a) Salary
(b) EPF contribution
(c) One free overseas trip
Total
5.
264
58
23
345
Interest
The company paid interest on a loan taken from a local bank. RM26,000 was
interest on a loan for investment purposes and the balance of RM60,000 is for
working capital.
6.
Entertainment
Entertainment consists of the following expenses:
Particulars
(a) Company annual dinner
(b) Payment to the company’s marketing staff to disburse
their entertainment expenses
(c) Promotion expenses incurred on the company’s new
products
Total
7.
RM’000
26
120
104
250
Repair and maintenance
The company extended the sales office for RM168,000. The balance of RM59,000
refers to the maintenance of the production plant and machinery.
CONFIDENTIAL
8.
6
MIAQE SEPTEMBER 2016
Bad and doubtful debts
The company’s bad and doubtful account is as summarized below:
RM’000
Particulars
(a)
(b)
(c)
(d)
(e)
Trade debtors written off
General provision for bad debts (trading account)
Specific provision for bad debts (loan account)
Bad debts written off being advance to customer
Bad debts written off being advance to supplier
Total
9.
114
260
143
21
39
577
Motor vehicle expenses
Compounds and fines for traffic violations by the company’s marketing staff
amounted to RM14,000 while RM66,000 refers to repairs, spares, insurance, and
road tax for the company commercial vehicles.
10.
Lease payments
The company leased a passenger car during the year and paid RM100,000; and
leased a machine for RM118,000.
A new passenger car of the type leased would cost RM300,000.
11.
Advertisement and publicity
During the year the company acquired a patent on a product that cost RM300,000.
The company spent RM104,000 to promote this product through newspapers
advertising. Other advertising during the year included TV commercials costing
RM426,000 while another RM65,000 was incurred on gift to customers who made
purchases exceeding a set threshold.
12.
Professional fees
During the year, the company had incurred and paid the following professional
charges:
Particulars of expenditure
(a) Termination of a supply contract which was proving to be
unprofitable
(b) Guarantee fee on a bank loan for the company’s director
(c) Preparing a lease agreement for the motor vehicle and the
machine that was leased during the year.
(d) Preparing a new supply contract with a local brand for the
manufacture of parts
(e) Secretarial fees to a professional firm
(f) Tax filing fees, including GST returns
(g) Goods and services tax (GST) appeal to the Royal Malaysian
Customs Department following a GST audit
RM’000
12
18
13
7
8
16
13
CONFIDENTIAL
7
MIAQE SEPTEMBER 2016
(h) Transfer price advice in respect of a projected deal with a
company in which the company director’s wife is the Chief
Executive Officer
35
Total
13.
122
Insurance
During the year the company imported some cargo and insured the risk with a local
insurance company for RM20,000. Some cargoes were exported during the year and
this was insured with a foreign company for RM26,000. The company’s fixed assets
were insured against fire and flood with a local insurance company for RM34,000.
14.
Foreign exchange loss
The company incurred a loss of RM9,000 on the import of trading stock and another
RM10,000 on machinery spare parts. Both these losses were realized.
A loss of RM13,000 arose on the import of a sealing machine on account of
exchange rate difference but as at the year end, it was not realized.
15.
Donation
The company made a cash donation of RM35,000 to the Selangor State Government
during the year.
16.
Other information:
For the year of assessment 2016, the company is claiming capital allowance of
RM48,000,000 on its assets used in the business.
Required:
Based on the information given, compute the chargeable income of Merci Engineering Sdn
Bhd for the year of assessment 2016.
Note:
Your computation should start with the profit before taxation figure and follow the description
used in the statement of profit or loss account, 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.
(Total :15 marks)
QUESTION 2
A.
RV Medical Center Sdn. Bhd. (‘the company’) is a local resident company
incorporated in 2010 to carry on the business of providing medical services. It closes
its accounts to 30 June each year.
In the year 2012, the company acquired a piece of land and constructed its own
hospital building, completed in December 2014. The relevant expenditure incurred is
as follows:
CONFIDENTIAL
8
MIAQE SEPTEMBER 2016
Particulars of expenditure
Cost of land
Legal fee for transfer 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 for the hospital building design
Legal services for obtaining various building approval
Subcontract charges for installation of wiring and plumbing
Landscaping charges
Total
RM
184,328
18,433
106,079
37,327
624,394
4,728,580
16,129
64,515
29,954
34,101
29,973
5,873,813
The company also obtained a 30-year lease on an adjoining building in April 2015
and renovated it at a cost of RM760,448 for business purposes. The renovation was
completed in May 2015 and was brought to use in early June 2015. Four-fifth (4/5) of
the leased renovated building was used as a medical facility while one-fifth (1/5) was
used purely for administrative purposes.
Required:
With reference to the Income Tax Act 1967 (as amended), compute the industrial
building allowances due to RV Medical Centre Sdn Bhd for the years of assessment
2015 and 2016 indicating the residual expenditure to be carried forward to the year of
assessment 2017.
(10 marks)
B.
Mr. Bala signed an agreement for the purchase of a piece of land on 14 July 2013 for
RM413,000. He fully settled the payment on 30 September 2013 and the vendor then
transferred the land to him on 21 November 2013. Mr. Bala incurred the following
expenses in acquiring the land: stamp duty of RM5,785 and legal fees of RM3,446.
He then spent RM57,755 on enhancing (levelling and draining etc.) the land after
the purchase.
In March 2014, he received a compensation of RM36,600 for flood damages to the
land; and again another compensation of RM18,300 was received in April 2014, also
for flood damages.
In October 2014, Mr. Bala negotiated the sale of the land and received a deposit of
RM10,000 but this was forfeited when the buyer absconded on the deal.
Mr. Bala also spent RM8,540 being legal fees to defend his title to the land when a
claim arose from his ex-wife.
CONFIDENTIAL
9
MIAQE SEPTEMBER 2016
Subsequently, a buyer agreed to purchase the land for RM530,000, and signed an
agreement with Mr. Bala on 15-10-2015. The payment was settled on 15-11-2015,
and the title was transferred (to the buyer) on 15-12-2015.
In disposing the land, Mr. Bala had incurred the following expenditure: valuation fee
RM8,183; advertisement for buyer RM1,444 and brokerage fee RM11,550.
Up to the time of sale, Mr. Bala had incurred an interest charge of RM77,006 on the
mortgage loan he took to buy the land, and had also incurred legal fees of RM4,000
to a lawyer to advise and handle the disposal.
Required
In relation to the Real Property Gains Tax 1976, compute the chargeable gain arising
from the disposal of the property after exemption under Schedule 4 of the said Act.
Note: Ignore matters arising under the Goods and Services Tax Act 2014 (as
amended) in relation to the disposal.
(10 marks)
(Total : 20 marks)
QUESTION 3
A.
MD Shipping Lines Plc is a non-resident shipping company (‘the company’) and
carries on the business of transporting cargo by sea. For the year ended 30 June
2016, it earned RM1,054,350 gross income from cargos loaded on in Malaysia.
Malaysia has a double tax agreement with the country where the company is resident
and is entitled to a double tax relief of 50% on the income tax charged i.e. to be
allowed by the country which first taxes the income derived therefrom.
For the year of assessment, the company produced a certificate from the revenue
authorities of its country ( which acceptable by the Director General of the Inland
Revenue of Malaysia) that certified the following information:
Acceptable Ratio Certificate
MD Shipping Lines Plc
Period: 1 July 2015 to 30 June 2016
Gross world shipping income
Adjusted world shipping income
World capital allowance
Gross shipping income derived from Malaysia
RM equivalent
4,217,400
2,811,600
800,000
1,054,350
CONFIDENTIAL
10
MIAQE SEPTEMBER 2016
For the year of assessment 2016, the company had made a donation of RM4,500 to
a charitable institution that is approved for the purposes of the Income Tax Act 1967
(as amended).
Required:
Compute the tax payable of MD Shipping Lines Plc for the year of assessment 2016
under the:
i)
Five Percent (5%) Method
ii) Acceptable Ratio Certificate Method.
(5 marks)
B.
Cyber Bus Company Sdn. Bhd. (‘the company’) operates a bus service in the town of
Cyberjaya, carrying fare paying passengers in the town area. One day, one of the
company’s bus driver lost control of the bus and crashed into a restaurant damaging
several furniture and fittings. The driver too was hurt in the accident and was warded
for several weeks at a hospital. The company, based on an internal investigation,
found that the driver to be responsible for the accident. However, this was denied by
the driver. Accordingly when the driver filed a claim with the company for
compensation for bodily injury sustained, the company refused to pay any
compensation. The driver then instituted a legal action and filed a case in court. The
company engaged a lawyer to dispute the employee’s claim in court and incurred
legal fees of RM40,000 in the process.
The court gave a decision against the company and ordered it to pay the employee a
sum of RM100,000 as compensation.
The company claimed the payment of RM100,000 and the legal fees of RM40,000
incurred in resisting the claim, in the statement of profit or loss account for the
financial year ended 30 June 2016.
Required:
With reference to the Income Tax Act 1967 (as amended), discuss whether the claim
by the company would be deductible in arriving at the adjusted income from its
business.
Note: Candidates are encouraged to quote the relevant provisions of the law and
case laws where appropriate.
(5 marks)
C.
Padi Malaysia Sdn. Bhd. (‘the company’) is engaged in the production of packed
polished rice for consumption in the domestic market. As part of its business
operations and to ensure a steady flow of farm rice, the company entered into
several agreements with local padi cultivators under which the company advances
seed, fertilizer and cash to them.
CONFIDENTIAL
11
MIAQE SEPTEMBER 2016
In return the padi cultivators agreed to sell their padi upon harvest to the company
exclusively at the prevailing market price and to have the cost of the advance by way
of seed, fertilizer and cash adjusted towards the price due. The company opens an
account and enters into an agreement with each padi cultivator on an annual basis at
the beginning of the planting season.
In the early part of 2016, there was a severe drought owing to the El Nino effect, and
resulted in a disastrous crop failure. The company then decided to write off the cost
of the advance made to the padi cultivators on humanitarian grounds.
In the accounts for the financial year ended 30 June 2016, the company claimed a
sum of RM 1.6 million as a deduction on this account.
Required:
With reference to the Income Tax Act 1967 (as amended) discuss whether Padi
Malaysia Sdn. Bhd. would succeed in its claim of the amount of RM1.6 million written
off.
Note: You are encouraged to quote relevant case laws in support of your discussion.
(5 marks)
(Total : 15 marks)
QUESTION 4
A.
Miss Tina, a Malaysian, worked in Australia for ten years prior to her return to
Malaysia in January 2015 to work with an international company in Iskandar
Malaysia, Johor. Since commencement of her employment in January 2015, she has
not filed any Malaysian tax return as her employer has been deducting taxes from
her salary on a monthly basis. She is very concerned with her tax filing obligations
after reading in the local newspapers about tax audits and investigations by the tax
authorities.
Required:
Advise Miss Tina of her responsibilities as a Malaysian taxpayer in relation to the
following tax matters:
a)
Filing of Malaysian personal tax returns.
(1 mark)
b)
The penalties for failing to furnish the tax return for the year of assessment
2015.
(2 marks)
c)
She intends to remit some of her income from Australia to Malaysia and she
seeks your advice regarding the Malaysian personal tax implications on nonMalaysian income received in Malaysia.
(1 marks)
CONFIDENTIAL
B.
a)
12
MIAQE SEPTEMBER 2016
Goods and Services Tax (GST) is a consumption tax based on value-added
concept. Payment of tax is made in stages by intermediaries in the production
and distribution process. GST return must be submitted to the Royal
Malaysian Customs Department (RMCD) office not later than the last day of
the following month after the end of the taxable period.
Required:
Briefly explain the taxable period.
(2 marks)
b)
Pending Sdn. Bhd. (Pending), a wholesaler, sells shawls (taxable goods) to
Tanjak Sdn. Bhd. (Tanjak), who in turn sells the shawls to its customers. The
chain of supply is as follows:
Pending sold the shawls to Tanjak for RM10,000.
Tanjak sold the shawls to its customers for a total of RM13,000.
Note: Both Pending and Tanjak are taxable persons and shawl is standardrated supply.
Required:
i)
Compute the output and input tax for the above transactions.
(2 marks)
ii)
Compute the total GST to be remitted to the Royal Malaysian
Customs Department (RMCD) for the above transactions.
(2 marks)
(Total: 10 marks)
QUESTION 5
A.
Encik Atef is an engineer at a private company in Setia Alam, Selangor. His wife
Puan Naimah (45 years old) is a teacher at Tenby International School Setia Alam
Selangor and both of them are residents in Malaysia. The following are the income of
Encik Atef and Puan Naimah for the year of assessment 2015.
Encik Atef:
1.
Monthly salary of RM 10,530 (net after deduction of STD of RM1,250,
housing loan of RM3,400 and 12% contribution to Employee Provident Fund
(EPF))
2.
Dividend income from Selasih Bhd. (pioneer status company) amounted to
RM6,000.
3.
Royalty income from publication of his new book amounted to RM40,000.
Encik Atef also received an honorarium of RM10,000 for series of
motivational talk given to secondary students of Sekolah Menengah Shah
Alam Selangor.
CONFIDENTIAL
13
MIAQE SEPTEMBER 2016
4.
Interest income received from Bank Rakyat amounted to RM5,600.
5.
Encik Atef owned a stationary shop in Puncak Alam, Selangor. The following
are the information related to his stationary shop business:
Adjusted income
Balancing Charge
Capital allowance – current year
Capital allowance – brought forward from the year
of assessment 2014
Previous year business loss
6.
12,500
Rental income from a townhouse located in Rawang, Selangor are as follows:
Rental income
Expenses incurred:
Quit rent
Repairs of the broken windows
Renovation of the kitchen
7.
RM
160,000
2,500
8,100
2,400
RM
24,000
1,100
1,800
20,500
Encik Atef made the following claims in his tax return for the year of
assessment 2015:
 Insurance premiums on the following policies in 2015:
Life insurance for himself
Medical insurance for himself and his children
Educational insurance for his children
RM
2,400
4,800
3,000
 Purchased of books and magazines amounting to RM1,600 (including
RM600 for newspapers).
 Child relief in respect of his three (3) children :
a.
b.
c.
Afiq, age 22 unmarried and pursuing his master degree course at
University of Science, Malaysia.
Afifah, aged 18 is also unmarried and a full time medical student at
University of Poland, United Kingdom.
Ashriq, aged 16, legally adopted by the couple when he was still a
baby. Currently, he is studying in a special high school for students
with hearing disabilities.
 Donation in kind to an approved institution, amounting to RM10,000.
 Zakat payment to Pusat Pungutan Zakat (PPZ) Selangor of RM14,400.
CONFIDENTIAL
14
MIAQE SEPTEMBER 2016
Puan Naimah:
1.
Annual salary of RM47,000.
2.
Puan Naimah made the following claims in her tax return for the year of
assessment 2015:
Contributions to Employees Provident Fund (EPF),
Life Insurance for herself
Purchased a wheelchair for her disabled mother
Annual medical check-up for her son Ashriq
RM
5,170
1,800
5,500
700
Required:
Compute the income tax payable for Encik Atef and Puan Naimah for the year
of assessment 2015 (Encik Atef elected to claim children reliefs).
(12 marks)
B.
Albert, a resident taxpayer, died domiciled in Malaysia on 31 August 2015.
According to Albert’s will, his brother, John, is appointed as an executor for his
estate. John, resident in Malaysia, furnished the following information for the basis
year 2015 with respect to the estate:
RM
Business 1
Gross business income
Revenue expenses (note 1)
Business loss brought forward from previous year
Capital allowance
200,000
75,000
6,000
24,500
Business 2
Statutory income from foreign country (note 2)
36,000
Other sources of income:
Dividend income (single tier) received on 1 May 2015
Interest income from financial institutions received on 1 December 2015
Rental income (note 3)
18,000
20,000
60,000
Note:
1.
The revenue expenses include payments made to John as follows:
i.
ii.
RM10,000 for administering the deceased’s estate.
RM20,000 for managing the deceased’s businesses.
(John was given the authority to manage the business of the
deceased in which he shall be directly involved in the production of
gross income of the business).
CONFIDENTIAL
15
MIAQE SEPTEMBER 2016
2.
Only RM4,000 was remitted to Malaysia on 1 October 2015.
3.
The rental income was RM5,000 per month. According to the will, the rental
income is transferred to his son, Mathew, effective from November 2015.
Additional information:
i.
Annuity of RM2,000 per month is payable to Jenny, Albert’s widow.
ii.
On 5 May 2015, Albert donated RM6,000 cash to approved institutions. In
December 2015, John donated RM5,000 cash to the same institutions as
stated in the will.
iii.
RM7,000 was spent in June 2015 for medical treatment of Albert due to lung
cancer.
Required:
For the year of assessment 2015, compute the income tax payable of the deceased
and the executor.
(8 marks)
(Total: 20 marks)
QUESTION 6
A.
Kristal Sdn. Bhd. (KSB) was incorporated in 2015 and set up a factory in Rawang,
Selangor to manufacture hoses, pipes and tubing. These products are promoted
products which are eligible for consideration for the pioneer status or investment tax
allowances under the Promotion of Investment Act 1986.
KSB has prepared the following financial projections in respect of its manufacturing
business:
Year ending 31 December
Adjusted income/(loss)
Capital allowances
Capital expenditures incurred:
Land
Factory building
Plant and machinery
2016
RM’000
(1,000)
800
2,000
4,000
3,000
2017
RM’000
1,500
900
2018
RM’000
3,200
1,000
2019
RM’000
5,000
1,800
500
CONFIDENTIAL
16
MIAQE SEPTEMBER 2016
Required:
a)
b)
B.
Assuming Kristal Sdn. Bhd. intends to apply for the pioneer status, for the
year of assessment 2016 until 2019:
i)
Compute the chargeable income.
ii)
Determine the amounts (if any) to be credited to the exempt income
account.
(Provide all relevant workings)
(7 marks)
Assuming Kristal Sdn. Bhd. intends to apply for the investment tax allowance,
for the year of assessment 2016 until 2019:
i)
Compute the chargeable income.
ii)
Determine the amounts (if any) to be credited to the exempt income
account.
(Provide all relevant workings)
(8 marks)
Berry Sdn. Bhd. (BSB) purchased a plant and machinery for RM3,000,000 from
Avocado Pte Ltd (APL), a non-resident company for its factory in Nilai, Negeri
Sembilan on 1 April 2015. The agreement provides for non-resident employees of
APL to carry out the installation of the plant and machinery and giving technical
services to BSB in Nilai, Negeri Sembilan.
The fees charged by APL for the installation and technical services were RM100,000
and RM500,000 respectively. The installation fees of RM100,000 was paid to APL
on 1 May 2015. The technical services fees were paid to APL in two equal
instalments, on 1 May 2015 and 1 June 2015. BSB remitted the withholding tax to
Inland Revenue Board on 15 June 2015.
Required:
Compute the amount of withholding tax payable by BSB to the Inland Revenue Board
including the penalties (if any).
(5 marks)
(Total: 20 marks)
END OF QUESTION PAPER