YPC International College

BSc (Hons) Accounting and Finance

Business Memorandum Report on Tax Advisory

Individual Coursework

Taxation
6004AFYPC
Neetu Harkishindas Binwani
Prepared by:
Student Name YPC ID LJMU ID
MOHAMAD ZAINI BIN MOHD ZAIN BAF2009012 935879
Table of Contents
1 Option 1 - Employment..............................................................................................................1
2 The total income.........................................................................................................................2
3 The chargeable income.............................................................................................................3
4 Option 2 – Self Employed.........................................................................................................4
5 Business Memorandum............................................................................................................5
References........................................................................................................................................11
Appendices.......................................................................................................................................12
 6004AFYPC Taxation

1 Option 1 - Employment
Required:

Q1. Calculate the amount of Real Property Gain Tax that would be payable in YA
2023. Provide explanations for the tax treatment of each item of income and
expenditure.

Computation RM RM Explanation
Disposal price (DP) 2023    
600,00
Consideration 0 Para 5 Schedule 2, RPGT Act 1976
Less:    
7,00
Valuation fee 0    Para 5 Schedule 2, RPGT Act 1976
10,00
Brokerage fees 0    Para 5 Schedule 2, RPGT Act 1976
50 (17,50
Advertisement costs 0 0)  Para 5 Schedule 2, RPGT Act 1976
582,50
Net Disposal Price (NDP) 0  
     
Acquisition price (AP) 2021    
400,00
Consideration 0    Para 5 Schedule 2, RPGT Act 1976
Add: Incidental cost    
3,00
Stamp duty 0    Para 5 Schedule 2, RPGT Act 1976
5,00
Legal fee 0    Para 5 Schedule 2, RPGT Act 1976
408,00
  0    
(30,00
Less: Compensation for damages 0)    Para 5 Schedule 2, RPGT Act 1976
378,00
Net Acquisition Price (NAP) 0  
     
Real Property Gain (NDP-NAP) 204,500  
       
Less: (10% * RM 204,500 OR (20,45
RM10,000)   0) Whichever is higher
184,05
Net Chargeable Gain   0  
Holding period of property is less than
RPGT rate   30% 3 years
RPGT Liability 55,215  

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2 The total income

Q2. Calculate the total income (employment and other income) of Mr. John
Abdullah for YA 2023. Provide explanations for the tax treatment of each item in
the computation.
Computation of Total Income RM RM Explanation
Section 13(1)(a)
Employment Income:
Salary (RM 40,000 × 9) 360,000
Bonus (RM 40,000 × 9/12) 30,000
Gross Employment Income 390,000

Section 13(1)(b) Benefit in kind

Annual benefit of car (RM 7,000 × 9/12) 5,250
Annual benefit of petrol (RM 1,800 × 9/12) 1,350
Fully Furnished (RM 280 × 9) 2,520
Driver (RM 600 × 9) 5,400
Domestic servant (RM 400 × 9) 3,600
Gardener (RM 300 × 9) 2,700
Golf Club Membership (RM 300 × 9) 2,700
Oversea leave passage (RM 10,000 – RM 3,000) 7,000 30,250
Adjusted Employment Income (AEI) 420,520

Section 4(c)
Other Income:
Lower of 30%
(RM 390,000 × 30% × 9/12 = RM87,750)
Or defined value
[(RM 4,500 – RM 500) × 9 = RM 36,000] 36,000
Dividend Exempt
Interest Exempt
Rental Income (RM 3,000 × 12) 36,000
Expenses:
Fire Insurance 2,000
Quit Rent 500
Assessment 800
Loan Interest 12,000
Repairs 2,000 (17,300)
Gross Other Income (GOI) 54,700

Section 44(8)
Aggregate Income (AEI + GOI) 475,220
Less: Approved donations (20,000)
Total Income 455,220

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3 The chargeable income

Q3. Calculate the chargeable income and tax payable by Mr. John Abdullah for YA
2023.
Computation of Total Income RM RM Explanation
Total Income 455,220

Less reliefs:
Personal 9,000
Wife 4,000
1st Child 2,000
2nd Child 2,000
Medical expenses (fertility treatment) 8,000
EPF contribution 4,000 (29,000)

Chargeable Income 426,220

Tax on first RM 400,000 83,450

Next @ 25% 6,555
Tax Liability 90,005
Self-Rebate -
Tax Payable 90,005

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4 Option 2 – Self Employed

Required:

Calculate the total income tax payable by Mr. John Abdullah for YA 2023. Include
all calculations as appropriate. Provide explanations for the tax treatment of each
item in the computation.

Computation of Total Income RM RM Explanation

Net Profit before tax 142,000
Add:
Entertainment expenses (Notes 1) 4,000
House insurance (Notes 3) 500
Life insurance for son (Notes 3) 500
Cost of income tax appeal (Notes 4) 500
Quit rent and assessment (Notes 5) 1,500
Water and electricity (Notes 6) 800
Depreciation 2,000
Housing loan interest 5,000
Provision for doubtful debts 1,000 (15,800)
Adjusted Business Income 157,800
Less: Capital allowance (4,000)
Statutory Income 153,800

Dividend income Exempt

Interest income Exempt
Add: Rental Income 36,000
Less expenses:
Fire insurance (2,000)
Quit rent (500)
Assessment (800)
Loan interest (12,000)
Repairs (2,000) 18,700
Aggregate Income 172,500
Less: Approved donations (20,000)
Total Income 152,500
Less reliefs:
Self-relief 9,000
Wife 4,000
Child relief:
1st Child (age: 8) 2,000
2nd Child (age: 6) 2,000
Medical expenses (fertility treatment) 8,000 (25,000)
Chargeable Income 127,500

Tax on first RM 100,000 10,700

Next @ 24% 6,600
Tax Liability 17,300
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5 Business Memorandum

BUSINESS MEMORANDUM ON COMPUTATION OF PERSONAL INCOME TAX

To : Mr. John Abdullah
From : Zaini Zain
Date : 30th March 2023
Subject: Commentary on tax implications of employment income versus business income

Dear Mr. John,

Thank you for considering Shahrom & Associates for your tax advisory needs. I am
writing this memorandum to provide you with tax advisory services regarding your employment
and self-employment options. We have computed your tax liability for both options based on the
information you have provided us. Below are the results of the computations:

Employment Self-Employed
Aggregate Income RM 475,220 RM 172,500
Total Income RM 455,220 RM 152,500
Total Reliefs RM 29,000 RM 25,000
Chargeable Income RM 426,220 RM 127,500
Tax rates 25% 24%
Tax Liability RM 90,005 RM 17,300
Tax Payable RM 90,005 RM 17,300

Commentary

Based on the computations, it is clear that the self-employment option offers a lower tax liability
compared to the employment option. This is because self-employed individuals are entitled to
more deductions and reliefs, such as business expenses and EPF contributions.

However, it is important to note that choosing the self-employment option also comes with its
own set of challenges, such as the need to manage business operations, financial risks, and the
absence of job security and employee benefits.

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Therefore, it is crucial to weigh the pros and cons of each option carefully before making a final
decision. Seeking professional tax advisory services can also help you better understand your
tax liabilities and make informed decisions that are aligned with your financial goals and
objectives.

Although employment will incur high tax liability however it can be reduced by maximizing tax
relief available. Both alternatives in our estimate can claim another total additional relief of up to
RM 26,500. Based on our analysis, we estimate by maximizing the tax relief that we can help
you reduce your total tax liability by approximately RM 6,360 (RM 17,300 – RM 10,940) for self-
employed (refer scenario 2 at appendices) and RM 6,624 (RM 90,005 – RM 83,381) for
employed (refer scenario 1 at appendices). This represents a significant savings for your tax
return and will help you optimize your tax strategy going forward.

However, all these reliefs must be claim by provided sound evidence and based on your
necessary needs. For instance, education relief can be claim if you are pursuing further study in
relevant course, or undertaken for the purpose of up-skilling or self-enhancement. Next, make
used of these relief; lifestyle and IT Gadget by purchased purchasing personal computer and
smartphone or subscribed to broadband subscription. To claim the IT gadget relief, you will
need to keep your purchase receipts or subscription receipts as proof of the expenses incurred.
For insurance premiums to be claim its involves determining the amount of premiums paid,
determining the maximum amount of tax relief that can be claimed, and including the tax relief in
your income tax return form.

Sports equipment relief is intended to encourage individuals to maintain an active lifestyle and
engage in sports activities. Sports equipment is only applicable for personal use, and not for
commercial purposes. Claiming income tax relief for sports equipment involves determining the
amount of sports equipment purchased, determining the maximum amount of tax relief that can
be claimed, and including the tax relief in your income tax return form.

Besides maximizing the reliefs here are tax implication that you might face for each option:

Employment Option:

Higher tax liability: As an employee, your income is subject to a higher tax rate compared to
self-employment income. The highest tax rate for employment income is 30%, while the highest
tax rate for self-employment income is 24%.

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Limited tax deductions: While some employment-related expenses such as commuting and
uniforms may be deductible, employees have fewer opportunities to claim tax deductions
compared to self-employed individuals.

Steady income and benefits: As an employee, you can count on a regular salary and
employee benefits such as health insurance, retirement plans, and paid time off. This can
provide stability and security, especially if you have dependents or are risk-averse.

Self-Employment Option:

Lower tax liability: Self-employed individuals generally have a lower tax liability compared to
employees, as they are allowed to claim a variety of tax deductions such as business expenses,
home office expenses, and equipment depreciation.

More tax deductions: Self-employed individuals have more opportunities to claim tax
deductions compared to employees. This can significantly reduce your taxable income and
overall tax liability.

More flexibility and control: As a self-employed individual, you have more control over your
work schedule, clients, and business decisions. This can provide more freedom and autonomy
in your work life but also requires more responsibility and discipline in managing finances and
securing clients.

Further tax considerations

Following your employment and self-employment options, we would like to provide you with
additional information on tax considerations that may impact your decision.

Firstly, we advise you to consider the tax implications of any potential investments you may
make. Depending on the nature of the investment, you may be subject to different tax rates and
reliefs. Therefore, it is important to review your investment portfolio and seek professional
advice to ensure that you are maximizing your tax benefits.

Secondly, you should also consider the tax implications of any potential business ventures. If
you are planning to start a business, you will need to understand the tax laws and regulations
that apply to your industry. This will help you to manage your tax liabilities and avoid any
penalties or fines.

Thirdly, you should also consider the impact of any changes to tax laws or policies on your
financial situation. Tax laws are subject to change, and any changes may have significant
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implications for your tax liabilities. It is therefore important to stay informed of any changes and
seek professional advice to ensure that you are complying with the latest regulations.

Finally, we advise you to maintain accurate records of your income and expenses to ensure that
you are claiming all the deductions and reliefs to that you are entitled to. This will help to
minimize your tax liabilities and avoid any potential audits or penalties.

Tax planning ideas

We would like to offer you some tax planning ideas that can help you to minimize your tax
liabilities and maximize your savings. Below are ten tax planning ideas that we recommend:

1. Contribute to an Employee Provident Fund (EPF) to reduce your taxable income.

2. Make charitable donations to eligible organizations to claim tax deductions.
3. Consider investing in a Unit Trust or Private Retirement Scheme (PRS) to claim tax relief.
(e.g. Public Mutual Retirement Scheme, CIMB PRS Plus, RHB PRS, etc.)
4. Opt for the Married Couple Relief if you are married to a non-working spouse to reduce your
tax liability.
5. Invest in capital allowances, such as machinery or equipment, to reduce your taxable
income.
6. Claim tax deductions for expenses related to your job or business, such as travel or rental
expenses.
7. Take advantage of tax incentives for businesses, such as investment tax allowances or
reinvestment allowances.
8. Consider investing in real estate investment trusts (REITs) to claim tax benefits (Aziz, 2017).
9. Utilize tax-efficient investment vehicles, such as individual savings accounts (ISAs) or unit
trust investments (Shanthini Dorai, 2021).
10. Manage your income and expenses to minimize your taxable income and maximize your
deductions.

These are just a few tax planning ideas that can help you to optimize your tax savings. We
recommend that you consult with a professional tax advisor to discuss your specific situation
and identify the best tax planning strategies for you.

Non-tax considerations

While taxes are an important factor to consider, they are not the only factor that should guide
your decision-making. Below are six non-tax considerations that we recommend:
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1. Risk Tolerance: Consider your risk tolerance when making investments or other financial
decisions. Your risk tolerance will determine how much risk you are comfortable taking on in
order to achieve your financial goals (Twin, 2022).
2. Liquidity Needs: Consider your liquidity needs when investing or making other financial
decisions. You should have enough liquid assets to cover any unexpected expenses or
emergencies.
3. Investment Objectives: Consider your investment objectives when making investment
decisions. Your objectives may include long-term growth, income generation, or capital
preservation.
4. Time Horizon: Consider your time horizon when making investment decisions. Your time
horizon will determine the appropriate investment strategies and asset allocations for your
portfolio (Chen, 2021).
5. Estate Planning: Consider your estate planning needs when making financial decisions.
You should have a comprehensive estate plan that outlines your wishes for the distribution
of your assets in the event of your death to protecting your loved one (Fuscaldo, 2021).
6. Legal Considerations: Consider any legal considerations when making financial decisions.
This may include compliance with regulations, contractual obligations, or intellectual
property rights (KPMG, n.d.).

These non-tax considerations should be taken into account when making any financial decision.
They can help you to achieve your financial goals while minimizing your risk exposure and
ensuring that your assets are protected. It is recommended that you consult with a professional
advisor to discuss your individual situation and identify the best strategies for your specific
needs.

Uncertainties in advice

As your tax consultant, we take our responsibility to provide accurate and reliable advice very
seriously. However, we would like to bring to your attention the uncertainties that may arise in
tax advice due to the complexity and changing nature of tax laws and regulations.

There are a number of factors that can contribute to uncertainties in tax advice, including:

1. Tax laws and regulations are subject to change, and it is difficult to predict how future
changes will affect a taxpayer's specific situation.
2. Tax law interpretation and regulations can be complex and subject to interpretation,
resulting in different outcomes for different taxpayers.
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3. Different tax professionals may give conflicting advice on the same issue, causing the
taxpayer to be uncertain.
4. Inconsistent enforcement by tax authorities may interpret and enforce tax laws differently,
causing taxpayers to be uncertain.
5. If a taxpayer does not have sufficient documentation to support their tax position, it may be
unclear whether their position is defensible.

Conclusions and recommendations

We have carefully considered your tax situation and reviewed your income, reliefs, and tax
liabilities for both the employment and self-employed options. We recommend you to:

 Take advantage of tax incentives and exemptions, such as by investing in certain industries
or regions that offer tax benefits.
 Review your tax compliance and reporting procedures to ensure that you are meeting all of
your tax obligations and avoiding penalties and interest charges.
 Consult with other professionals, such as financial advisors and attorneys, to ensure that
your tax planning is integrated with your overall financial and legal strategies.

Thank you for considering Shahrom & Associate for your tax advisory needs. We look forward
to working with you.

Sincerely,

Zaini Zain
[Zaini Zain]

BAF2009012 [LJMU ID: 935879]

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References
Ariffin, Z. Z. & Saad, N., (2021). Malaysian Taxation for Individuals and Businesses. First Edition ed.
Sintok: UUM Press.

Aziz, A., (2017). Association seeks tax-free dividends for REITs, Petaling Jaya: The Edge Financial Daily.

Chen, J., (2021). Investopedia. [Online]

Available at: https://www.investopedia.com/terms/t/timehorizon.asp
[Accessed 30 March 2023].

Dolah, A., (2012). Zakat dan Cukai di Malaysia. Shah Alam: UiTM Press.

Fuscaldo, D., (2021). Investopedia. [Online]

Available at: https://www.investopedia.com/articles/wealth-management/122915/4-reasons-estate-
planning-so-important.asp
[Accessed 30 March 2023].

KPMG, n.d. KPMG. [Online]

Available at: https://kpmg.com/xx/en/home/insights/2020/03/tax-and-legal-considerations.html
[Accessed 30 March 2023].

Mat Udin, N. et al., (2021). Malaysian Corporate Taxation (Incorporating 2020 Budget). Sintok: UUM
Press.

New Straits Times, (2021). Relief for payment of daycare and kindergarten fees, Kuala Lumpur: New
Straits Times Press.

Shanthini Dorai, (2021). Crow Malaysia. [Online]

Available at: https://www.crowe.com/my/news/tax-and-investments-in-malaysia
[Accessed 30 March 2023].

Twin, A., (2022). Investopedia. [Online]

Available at: https://www.investopedia.com/terms/r/risktolerance.asp
[Accessed 30 March 2023].

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Appendices
Scenario 1: Computation for Employment by maximizing tax relief.
Computation of Total Income RM RM
Total Income 455,220
Less reliefs:
Personal relief 9,000
Wife 4,000
1st Child (age: 8) 2,000
2nd Child (age: 6) 2,000
Medical expenses (fertility treatment) 8,000
EPF contribution 4,000
Education 7,000
Complete medical examination 1,000
Childcare fees 3,000
Lifestyle 2,500
IT Gadget 2,500
Sports equipment 500
Life insurance premium 3,000
Contribution to approved funds 4,000
Private retirement scheme 3,000 (55,500)
Chargeable Income 399,720

Tax on first RM 250,000 46,700

Next @24.5% 36,681
Tax Liability 83,381
Self-Rebate -
Tax Payable 83,381

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Scenario 2: Computation for Self-Employment by maximizing tax relief.

Computation of Total Income RM RM
Total Income 152,500
Less reliefs:
Personal relief 9,000
Wife 4,000
1st Child (age: 8) 2,000
2nd Child (age: 6) 2,000
Medical expenses (fertility treatment) 8,000
Education 7,000
Complete medical examination 1,000
Childcare fees 3,000
Lifestyle 2,500
IT Gadget 2,500
Sports equipment 500
Life insurance premium 3,000
Contribution to approved funds 4,000
Private retirement scheme 3,000 (51,500)
Chargeable Income 101,000

Tax on first RM 100,000 10,700

Next @24% 240
Tax Liability 10,940
Self-Rebate -
Tax Payable 10,940

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