Foundations in Taxation (Malaysia)

Pilot Paper

Time allowed:Writing: 2 hours

This paper is divided into two sections:Section A – ALL TEN questions are compulsory and MUST be attemptedSection B – ALL NINE questions are compulsory and MUST be attemptedTax rates and allowances are on pages 2–4

Do NOT open this paper until instructed by the supervisor.

This question paper must not be removed from the examination hall.

FOUNDATIONS IN ACCOUNTANCY

Pape

r FTX

(MYS

)

The Association of Chartered Certified Accountants

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SUPPLEMENTARY INSTRUCTIONS

1 Calculations and workings should be made to the nearest RM.2 All apportionments should be made to the nearest whole month.3 All workings should be shown.

TAX RATES AND ALLOWANCES

The following tax rates, allowances and values to be used in answering the questions.

Income tax rates

Resident individuals Chargeable income Rate Cumulative tax RM % RMFirst 2,500 (0 – 2,500) 0 0Next 2,500 (2,501 – 5,000) 1 25Next 15,000 (5,001 – 20,000) 3 475Next 15,000 (20,001 – 35,000) 7 1,525Next 15,000 (35,001 – 50,000) 12 3,325Next 20,000 (50,001 – 70,000) 19 7,125Next 30,000 (70,001 – 100,000) 24 14,325Exceeding 100,000 26

Resident companyPaid up ordinary share capital First Excess over RM500,000 RM500,000RM2,500,000 or less 20% 25%More than RM2,500,000 25% 25% Non-residents Company 25%Individual 26%

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Personal reliefs and allowances

RMSelf 9,000Disabled self, additional 6,000Medical expenses expended for parents (maximum) 5,000Medical expenses expended on self, spouse or child with serious disease, including up to RM500 for medical examination (maximum) 5,000Basic supporting equipment for disabled self, spouse, child or parent (maximum) 5,000Purchase of sports equipment (maximum) 300Fees expended for skills or qualifications (maximum) 5,000Expenses on books for personal use (maximum) 1,000Spouse relief 3,000Disabled spouse, additional 3,500Child (each) 1,000Child – higher rate (each) 4,000Disabled child (each) 5,000Disabled child – additional (each) 4,000Life insurance premiums and contributions to approved funds (maximum) 6,000Deferred annuity premiums (maximum) 1,000Medical and/or education insurance premiums for self, spouse or child (maximum) 3,000Purchase of a personal computer (maximum) 3,000Broadband subscription (maximum) 500Deposit for a child into the National Education Savings Scheme (maximum) 3,000

Rebates

Chargeable income not exceeding RM35,000 RMIndividual 400Rate for an individual entitled to a deduction in respect of a spouse or former wife 800

Value of benefits in kindCar scale

Cost of car Prescribed annual value (when new) of private usage of car RM RM Up to 50,000 1,200 50,001 to 75,000 2,400 75,001 to 100,000 3,600 100,001 to 150,000 5,000 150,001 to 200,000 7,000 200,001 to 250,000 9,000 250,001 to 350,000 15,000 350,001 to 500,000 21,250 500,001 and above 25,000

The value of the car benefit equal to half the prescribed annual value (above) is taken if the car provided is more than five (5) years old.

Where a driver is provided by the employer, the value of benefit per month is fixed at RM600.

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Other benefits RM per monthHousehold furnishings, apparatus and appliances Semi-furnished with furniture in the lounge, dining room, or bedroom 70Semi-furnished with furniture as above plus air-conditioners and/or curtains and carpets 140Fully furnished premises 280Domestic help 400Gardener 300

Capital allowances

Initial allowance Annual allowance (IA) (AA) Rate % Rate %Industrial buildings 10 3Plant and machinery – general 20 14Motor vehicles and heavy machinery 20 20Office equipment, furniture and fittings 20 10

Real property gains tax

Disposal by companies and other than companies

Date of disposal Rate %Disposal within two years after date of acquisition 30Disposal in the third year after date of acquisition 20Disposal in the fourth year after date of acquisition 15Disposal in the fifth year after date of acquisition or thereafter 5Note: An exemption is granted which reduces the effective rate to 5% where the disposal takes place within five years of the date of acquisition and to nil thereafter.

Sales and service tax

Rate %Sales tax 10Service tax 6

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Section A – ALL TEN questions are compulsory and must be attempted

Please use the space provided on the inside cover of the Candidate Answer Booklet to indicate your chosen answer to each multiple choice question.

1 Trisha, an expatriate from Egypt, was employed by a company in Malaysia. She commenced employment on 1 January 2011 and worked in the company for four months and ceased employment on 30 April 2011. She returned to Egypt on the same date. During her stay she was physically present in Malaysia and she never returned to Malaysia in 2011. Her salary was RM2,500 per month. She was not married.

How much is Trisha’s income tax liability for the year of assessment 2011?

A Nil B RM2,600 C RM260 D RM175 (3 marks)

2 Rosliza legally adopted a child during the year of 2011. The child was two years old and the child’s expenses were maintained by her during the year of assessment 2011.

What is the amount of child relief Rosliza can claim for her adopted child for the year of assessment 2011?

A RM4,000 B RM1,000 (1 mark)

3 Hari and Mei Lee run a florist shop as a partnership. The agreed profit sharing ratio was 25:75. On 1 July 2011, the partners agreed to change the profit sharing ratio and the profits were to be shared equally. The provisional divisible income for the year of assessment 2011 was RM20,000.

What is the share of divisible income that would be allocated to each partner for the year of assessment 2011?

A Hari: RM5,000; Mei Lee: RM5,000 B Hari: RM10,000; Mei Lee: RM10,000 C Hari: RM7,500; Mei Lee: RM12,500 D Hari: RM12,500; Mei Lee: RM7,500 (3 marks)

4 Germaine is a musical composer, and during the year ended 31 December 2011 she earned royalties amounting to RM22,000 from her musical composition. It was confirmed that this income was not part of her emoluments in the exercise of her official duties.

What is the amount of royalty income assessable to tax for Germaine for the year of assessment 2011?

A RM2,000 B RM22,000 C RM10,000 D RM12,000 (2 marks)

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5 Flora Sdn Bhd received an additional assessment in respect of the year of assessment 2009 arising from a tax audit on 1 March 2011. The company’s tax manager does not agree with the additional assessment issued and wants to lodge an objection against the assessment.

By what date must Flora Sdn Bhd lodge an objection against the additional assessment for the year of assessment 2009?

A 30 March 2011 B 28 April 2011 (1 mark)

6 Amazon Sdn Bhd commenced leased rental for a passenger vehicle that was to be used by the company’s managing director.

The following details relate to the year of assessment 2011 based on the financial year ended 31 December 2011:

RM BMW – on the road price 165,000 Total lease rentals paid during the year 110,000

What is the amount of lease rentals paid during the year that are available for tax deduction for Amazon Sdn Bhd for the year of assessment 2011?

A RM60,000 B RM165,000 C RM50,000 D RM100,000 (2 marks)

7 Triton Sdn Bhd has an accounting year end of 31 December, and on 1 January 2011 acquired a van for RM90,000 which was registered as a commercial vehicle licensed to transport goods. The company acquired the van on hire purchase and paid a deposit of RM10,000. The capital portion paid during the year in addition to the deposit was RM80,000 and the interest portion paid was RM1,000.

What is the qualifying expenditure that can be claimed for capital allowances purposes in respect of the van for the year of assessment 2011?

A RM50,000 B RM80,000 C RM91,000 D RM90,000 (3 marks)

8 Which one of the following statements is TRUE?

A When a reduced assessment is issued to a taxpayer, it generally means that the taxpayer is required to pay additional taxes.

B Unutilised capital allowances carried forward are available for set-off against any business source income and not only for the same business source.

C Unabsorbed business losses carried forward are available for set-off against the same business source only and not against any other business source income.

D Interest income derived by a non-resident person is subject to withholding tax at the rate of 15% of the gross income.

(2 marks)

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9 Tunis Sdn Bhd was incorporated on 1 January 2011 to provide management and consultancy services.

What is the minimum threshold for the management and consultancy services for the purposes of applying for a service tax licence under the service tax legislation?

A Nil threshold B RM150,000 C RM300,000 D RM3,000,000 (2 marks)

10 Snow Sdn Bhd recently moved into its new business premises and will be changing its address.

Under the Income Tax Act, 1967, by what date must Snow Sdn Bhd notify the Director General Inland Revenue of the change of address?

A Within one month B Within three months (1 mark)

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Section B – ALL NINE questions are compulsory and MUST be attempted

1 Sanjay ran a luxury car business and due to cashflow problems, decided to close down his business on 31 March 2011. The current year adjusted loss for the year of assessment 2011 was computed to be RM10,000.

He commenced employment on 1 April 2011 as a director in a hotel in Malaysia.

Details relating to Sanjay’s income, benefits and expenditure for the year to 31 December 2011 are as follows:

RM Income Salary 130,000 Bonus 20,000

Benefits provided by employer Car benefit – New MPV costing 120,000 Car provided from 1 April 2011 Leave passage – local trip to Penang 3,100 Domestic help provided by employer from 1 April 2011 – salary 4,500

Expenditure Contributions to the Employees’ Provident Fund 12,100 Life insurance premiums – self 3,100

Sanjay received total interest of RM3,000 for the year of assessment 2011 which was made up of interest on fixed deposit of RM350 from a Malaysian bank and interest of RM2,650 from a loan to his sister for the year of assessment 2011.

Required: Compute Sanjay’s chargeable income and income tax payable for the year of assessment 2011. Notes:

(1) You should indicate by the use of the word ‘nil’ any item referred to in the question for which no adjusting entry needs to be made in the tax computation.

(2) Marks will be awarded for the use of accurate technical terms to describe the figures comprising the stages in the computation of chargeable income.

(15 marks)

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2 Divine Sdn Bhd is in the business of operating a houseboat in a resort and closes its accounts to 31 December annually.

Relevant information of the company’s profit and loss account for the year ended 31 December 2011 is shown below:- RM RM Sales 1,600,000 Less: Cost of sales (800,000) Gross profit 800,000 Add: Other income Dividend income remitted from China 10,000 810,000 Less: Expenses Foreign exchange loss – trade related and realised 50,000 Leave passage for directors – overseas trip 6,000 Professional fees for company secretary 5,000 Depreciation 13,000 Entertainment of suppliers 12,000 Other deductible expenses 144,000 (230,000) Profit before tax 580,000

Additional notes relevant to the tax computation are as follows:i) During the year ended 31 December 2011, the company acquired office furniture comprising table and chairs

costing RM100,000. It was confirmed that each asset costs more than RM1,000 and the claim for small value assets does not apply. The residual expenditure for the brought forward assets was nil.

ii) Unabsorbed losses brought forward from the previous year of assessment was RM10,000. iii) The company’s issued paid-up share capital is RM2,000,000.

Required:

Compute the chargeable income and the income tax payable of Divine Sdn Bhd for the year of assessment 2011.

Notes:(1) You should indicate by the use of the word ‘nil’ any item referred to in the question for which no adjusting entry

needs to be made in the tax computation. (2) Marks will be awarded for the use of accurate technical terms to describe the figures comprising the stages in

the computation of chargeable income. (15 marks)

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3 Su San acquired an office building on 12 January 2009 for investment purposes for RM820,000. She incurred renovation expense of RM20,400 as part of the building’s enhancement cost and also paid stamp duty of RM18,600. The total quit rent and assessment per year is RM800.

In 2010, she received an insurance compensation of RM10,000 arising from damage to the building.

She disposed of the office building and signed a sales and purchase agreement on 12 September 2011 based on a valuation of RM900,000. The valuation fee was RM2,000 and the agency commission fee for the disposal was RM1,000.

Required:

Compute the chargeable gain subject to real property gains tax arising to Su San from the disposal of the office building. Clearly show the disposal price and the acquisition price taking into account all necessary adjustments.

Note:

(1) You are not required to compute the real property gains tax. (2) You should indicate by the use of the word ‘nil’ any item referred to in the question for which no adjusting entry

needs to be made in the computation. (10 marks)

4 Greenhill Sdn Bhd is a manufacturing company and closes its accounts annually on 31 December. The company acquired a factory building for RM1,500,000 during the year of assessment 2010.

In 2011, the company extended the factory building and incurred the following capital expenditure:

RM Levelling of land 10,000 Design fee for factory 18,000 Construction cost for factory extension 102,000 130,000

Required:

Determine the qualifying building expenditure and calculate the industrial building allowance for the years of assessment 2010 and 2011 for

(a) The original factory building acquired in 2010; and (4 marks) (b) The extension made to the factory building in 2011. (6 marks)

(10 marks)

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5 Skysoft Sdn Bhd manufactures computer covers for computers. The company is licensed for sales tax purposes and its products are subject to sales tax at 10%.

The selling price of each product is RM10 and cost of each product is RM8.

Relevant details relating to sales are as follows:

RM January 2011 Gross sales value for the month 1,000,000 Payments received 110,000

February 2011 Gross sales value for the month 1,000,000 Payments received 55,000

March 2011 Gross sales value for the month 900,000 Payments received 120,000

April 2011 Gross sales value for the month 700,000 Payments received 90,000

Required:

Calculate the amount of sales tax payable by Skysoft Sdn Bhd, and state the due date to remit the sales tax for each of the taxable period/periods shown above.

(6 marks)

6 Lara, a Malaysian, was seconded to his employer’s Thailand office on 1 January 2008. The nature of his job required to him to perform duties both in Malaysia and in Thailand.

Lara’s secondment ended and he returned to Malaysia on 30 September 2010.

Based on the travel schedule prepared based on his passport, the following information was obtained:

Year No of days in Malaysia Resident status / 2006 95 days Non-resident 2007 365 days Resident 2008 190 days Resident 2009 185 days Resident 2010 90 days To be determined 2011 0 days To be determined 2012 365 days Expected to be resident

Required:

Determine, with reasons, Lara’s tax resident status for the years of assessment 2010 and 2011. (6 marks)

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7 Ira owned a hilltop house in Kuala Lumpur which she rents out to a tenant who is an expatriate. This was the only property she owned.

Details of her rental income and expenditure for the year ended 31 December 2011 are shown below.

RM RM Gross income from rental 24,000

Less: Expenditure Quit rent and assessment 1,600 Interest on housing loan (see note 1 below) 3,200 Replacement of old air-conditioner 500 New fridge for expatriate tenant (see note 2 below) 1,500 Agent’s commission for collection of rent 1,200 (8,000) Net income 16,000

Note 1: The above interest includes cheque book charges of RM200. Note 2: Ira brought the fridge for the first time for her house in Kuala Lumpur.

Required

Calculate the statutory income arising from the rental income for the year of assessment 2011.

Note: You should indicate by the use of the word ‘nil’ any item referred to in the question for which no adjusting entry

needs to be made in the computation. (6 marks)

8 Below is information with regards to Star Sdn Bhd’s tax matters.

New employee One new employee commenced employment on 1 March 2011. The new employee is likely to be chargeable to tax.

Instalment scheme and tax payable for the year of assessment 2011

RM Initial tax estimate notified to the Inland Revenue Board 100,000 Final tax liability per tax computation to the Inland Revenue Board 300,000

Required

(a) State the due date for Star Sdn Bhd to notify the Inland Revenue Board (IRB) of an employee who has commenced employment and is likely to be chargeable to income tax. (1 mark)

(b) State the due date for Star Sdn Bhd to remit the employees’ schedular tax deduction (STD) deducted from the employees’ March 2011 salary. (1 mark)

(c) Compute the penalty for the excessive difference between the estimated tax and final tax payable for the year of assessment 2011 by Star Sdn Bhd. (4 marks)

(6 marks)

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9 (a) Martha is a retired Government servant and her income for the year of assessment 2011 is shown below.

RM Interest income from loan extended to friend’s company 300 Pension from the Government (no other pension) 12,000 Franked dividend from local listed company (net) (taxable) 750 Dividend from shares invested in overseas company 2,000

Required

State whether the above income is taxable or tax exempt. (2 marks)

(b) Below is an extract from page 2 of a tax return for an individual without business (FORM BE)

Part C: Statutory Income and Total Income

Amount (RM)

C1 Employment C1

C2 Dividends C2

C3 Interest and discounts C3

C4 Rents, royalties and premiums C4

C5 Pensions, annuities and other periodical payments C5

Required

In your answer booklet, state the amounts that would be entered in boxes C2, C3, and C5 only. Indicate “0” if there is no amount to be inserted in the box.

Note: you should show all workings. (4 marks)

(6 marks)

End of Question Paper

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Answers

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Pilot Paper FTX (MYS) Answers and marking schemeFoundations in Taxation (Malaysia)

Notes:(1) All references to legislation or public rulings shown in square brackets are for information only and do not form part of the answer

expected from candidates.

(2) Marks indicated with a ‘*’ are awarded for the allocation of the appropriate description to the figure calculated, not for the figure itself.

Section A Marks

1 B Trisha was physically present in Malaysia only for 120 days during the year of assessment 2011. She was a non-resident [under Section 7 of the Income Tax Act, 1967] and will not be entitled to any personal relief and also not entitled to the scale rates to calculate her income tax liability. She will be taxed as a non-resident at a flat rate of 26% on the gross income. Therefore, her income tax is RM2,600 [(RM2,500 x 4 = RM10,000) x 26%]. 3

2 B Rosliza is entitled to claim child relief of RM1,000 for the year of assessment of 2011 even if the child is adopted. She is entitled to claim child relief for the adopted child as long as the adoption was carried out legally. 1

3 C Hari’s share is RM7,500 and Mei Lee’s share is RM12,500 for the year of assessment 2011.

Hari Mei Lee Share of divisible income from RM RM 1 June 2011 to 30 June 2011 (6 months) 6/12 x 20,000 = RM10,000 Profit sharing ratio 25:75 2,500 7,500 1 July 2011 to 31 December 2011 (6 months) 6/12 x 20,000 = RM10,000 Profit sharing ratio 50:50 5,000 5,000 Total for each partner for year of assessment 2011 7,500 12,500 3

4 A An exemption of RM20,000 is available to be set-off against royalty income from musical composition [under paragraph 32D of Schedule 6 of ITA, 1967]. Therefore, the amount assessable to income tax for the royalty income for the year of assessment is RM2,000 (RM22,000 – RM20,000) 2

5 A A taxpayer who wishes to lodge an appeal against any assessment has to do so within 30 days of the date of issue of the assessment with the Director General Inland Revenue. Therefore, the company has to lodge an appeal against the additional assessment for the year of assessment 2009 on or before 30 March 2011. 1

6 C The maximum amount available for a tax deduction is RM50,000. This is because [under Section 39(1)(k) of the ITA, 1967], where the on-the-road cost of the vehicle exceeds RM150,000 then the maximum lease rentals allowable as a deduction is restricted to RM50,000. In the case where the on-the-road cost of the vehicle is below RM150,000 then the claim can be restricted to RM100,000 or the actual cost of the vehicle if it is lower than RM100,000. 2

7 D Triton Sdn Bhd can claim capital allowances for the amount of deposits and capital portion of the instalments paid during the year of assessment 2011. There is no restriction on the cost as the van is a licensed commercial vehicle. The qualifying expenditure for the van, that is available for the claim of capital allowances, is RM90,000. 3

8 D Generally, when a reduced assessment is issued to a taxpayer, it means that the taxpayer is assessed on income that is lower compared to the original or additional assessment raised earlier and under normal circumstances, the taxpayer will be due for a refund of the excess tax paid. There will be no additional taxes to be paid under normal circumstances when a reduced assessment is issued. Unutilised capital allowances carried forward is available for set-off only against the same business source and not against any other business source. Unabsorbed losses carried forward is available for set-off against any business source and is not restricted to the same business source. Therefore, statements A, B and C are false. Interest income derived by a non-resident person is subject to a withholding tax of 15%. Therefore, statement D is true. 2

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Marks9 A Nil threshold. There is no minimum threshold amount for any person who is in the business of providing management and consultancy services. This means even if there is a billing for RM1, there is a requirement to apply for a service tax licence before providing such services. This is provided for under Group G – other service providers of the second schedule of the Service Tax Regulations [under Service Tax Act, 1975]. 2

10 B Snow Sdn Bhd will be required to notify the Director General Inland Revenue by notice in writing within three months of change of address. 1 20

Section B

1 Sanjay Tax computation for the year of assessment 2011

RM RM Employment income Salary and bonus 150,000 0.5 Car benefit as per table – annual value 5,000 1 Car used from 1 April to 31 December 2011= 9 months 5,000 x 9/12 3,750 2 Leave passage – (local trip) Nil 1 Domestic help (400 x 9) 3,600 2 Adjusted/statutory income from employment 157,350 *0.5 Interest income (3,000 – 350) 2,650 1.5 Aggregate income 160,000 *0.5 Less: Current year adjusted loss from business (10,000) 1.5 Total income 150,000 *0.5 Less: Personal reliefs Personal relief 9,000 1 Employee’s Provident Fund (EPF) contributions (restricted to maximum) 6,000 1.5 (15,000) Chargeable income 135,000 *0.5 Tax liability: Tax on first RM100,000 14,325 Tax on next RM35,000 x 26% 9,100 1 Tax charged /payable 23,425 15

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Marks2 Divine Sdn Bhd Tax computation for year of assessment 2011 RM RM Profit before tax 580,000 0.5 Add/(Less) Dividend income from China (foreign source income is exempt) (10,000) 1.5 Foreign exchange loss – trade and realised Nil 1 Leave passage 6,000 1 Professional fees for company secretary 5,000 1 Depreciation 13,000 1 Entertainment expenses (50% x 12,000) 6,000 2 Adjusted income 600,000 *0.5 Less: Capital allowances Current year assets Cost/Qualifying Expenditure 100,000 0.5 – Initial allowance 20% x 100,000 20,000 1 – Annual allowance 10% x 100,000 10,000 1 (30,000) Statutory income 570,000 *0.5 Less: Unabsorbed losses brought forward (10,000) 1.5 Aggregate income/chargeable income 560,000 *0.5 Tax liability Tax on first RM500,000 at 20% 100,000 Tax on excess of RM60,000 at 25% 15,000 1.5 Tax charged/payable 115,000

Tutorialnote:ForaSME(smallandmediumenterprise)companywithissuedsharecapitalofRM2,500,000orless, thescaledtaxratesareavailable. 15

3 Su San – Computation of chargeable income

RM RM Disposal consideration 900,000 0.5 Less: Permitted expenditure Enhancement costs – renovation expense (20,400) 1.5 Incidental costs: Valuation fees (2,000) 1 Agent’s commission (1,000) 1 Disposal price 876,600

Less: Acquisition consideration 820,000 0.5 Less: Insurance compensation for damage to office building (10,000) 1.5 Add: Incidental expenses relating to acquisition: Quit rent and assessment (not eligible for deduction) Nil 1 Stamp duty 18,600 1 Acquisition price (828,600) Chargeable gain 48,000 Less: Schedule 4 exemption for individual Higher of the following: (i) 10% of Chargeable gain 10% x RM48,000 4,800 (ii) RM10,000 10,000 (10,000) 2 Chargeable gain 38,000

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Marks4 Greenhill Sdn Bhd – Industrial building allowance

(a) Industrial building allowance (IBA)

Assets acquired in 2010 RM RM Qualifying building expenditure 1,500,000 0.5 Less: IBA for YA 2010 Initial allowance 10% 150,000 1 Annual allowance 3% 45,000 (195,000) 1 Residual expenditure 1,305,000 Less: IBA for YA 2011 Annual allowance 3% x 1,500,000 (45,000) 1.5 Residual expenditure 1,260,000 4

(b) Assets acquired in 2011 Qualifying building expenditure for factory extension Levelling of land non-qualifying relates to land 0 1 Design fee for factory 18,000 1 Construction cost of factory 102,000 1 Qualifying building expenditure 120,000 Less: IBA for YA 2011 Initial allowance 10% 12,000 1.5 Annual allowance 3% 3,600 (15,600) 1.5 Residual expenditure 104,400 6 10

5 Skysoft Sdn Bhd – Sales tax

Taxable period Amount of sales tax Payment due date for sales tax RM January 2011 1,000,000 0.5 February 2011 1,000,000 0.5 Total for taxable period 2,000,000 Sales tax – 10% x 2,000,000 200,000 Due on or before 28 March 2011 1+1 March 2011 900,000 0.5 April 2011 700,000 0.5 Total for taxable period 1,600,000 Sales tax – 10% x 1,600,000 160,000 Due on or before 28 May 2011 1+1 6

6 Lara – Resident status

Year of assessment Resident status Basis 2010 Resident He was in Malaysia for 90 days during the year of assessment 2010 1+ 1 and was resident in three out of the immediately four preceding basis 1 years [under Section 7(1)(c) of ITA, 1967], ie he was resident for the years of assessment 2007, 2008 and 2009.

2011 Resident He was resident in the following year of assesment (year of assessment 1+1 2012) and was resident in the immediately three preceding basis years 1 [under Section 7(1)(d) of ITA, 1967], ie he was resident for the years of assessment 2008, 2009 and 2010. 6

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Marks7 Ira – Rental Income RM RM Gross rental income 24,000 0.5 Less: Allowable expenses Quit rent and assessment 1,600 0.5 Interest on housing loan (3,200–200) 3,000 1 Maintenance expenses Replacement of old air-conditioner 500 1.5 – New fridge for expatriate tenant 0 1.5 Agent’s commission for collection of rent 1,200 1 (6,300) Adjusted income/statutory income from rental under s 4(d) of the ITA, 1967 17,700 6

8 Bright Sdn Bhd – Compliance

(a) The due date for Star Sdn Bhd to notify the Inland Revenue Board of an employee who has commenced employment and is likely to be chargeable to income tax , is within a month of commencement of employment. Therefore, the due date would be one month from 1 March 2011, ie on or before 31 March 2011. 1

(b) The due date for Star Sdn Bhd to remit the schedular tax deducted to the Inland Revenue Board is by the 10th of the following month. Therefore, the due date for the schedular tax deducted relating to the March 2011 salary to be remitted to the Inland Revenue Board is on or before 10 April 2011. 1

(c) Penalty for the excessive difference RM Final tax as per tax computation submitted 300,000 Estimated tax 100,000 Difference 200,000 1 Less: 30% of final tax (30% x 300,000) (90,000) 1.5 Excess 110,000

Penalty at 10% thereon 10% x 110,000 11,000 1.5 4 6

9 (a) Martha – Self-assessment tax return entries RM Taxable/Exempt Interest income from loan extended to friend’s company 300 Taxable 0.5 Pension from the Government 12,000 Tax Exempt 0.5 Franked dividend from local listed company (net) 750 Taxable 0.5 Dividend from shares invested in overseas company 2,000 Tax Exempt 0.5 2

(b) Box C2 RM1,000 Net dividends RM750 2 Tax deducted 25% x 1,000 RM250 Gross amount (RM750/0.75) RM1,000 Box C3 RM300 1 Box C5 RM0 1

Tutorialnote:ThegrossdividendamountofRM1,000isdeterminedasfollows:

Grossdividendincome=Netdividendincomex 1=RM750x 1 =RM750x 1 =RM1,000 (1-CT*) (1-0.25) 0.75

*CT–WhereCTisthecurrentyear’staxrateforcorporations(whichiscurrently25%). 4 6