KOLEJ UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ACCOUNTANCY, FINANCE AND BUSINESS

ACADEMIC YEAR 2021/2022

OCTOBER EXAMINATION

BBFT2013 TAXATION

FRIDAY, 8 OCTOBER 2021 TIME: 9.00 AM – 1.00 PM

(4 HOURS)

BACHELOR OF ACCOUNTING (HONOURS)

BACHELOR OF BUSINESS (HONOURS) ACCOUNTING AND FINANCE

Instructions to Candidates:

This paper consists of five questions and you are required to answer ALL FIVE (5) questions.

All workings that support the answer must be shown.

Marks will be awarded for clarity in presentation and logical arguments.

Tax rates and personal allowances are printed herewith.

You are required to type your answers using Microsoft Excel and upload your answer into the Google
Classroom.

This is a final online assessment. You MUST answer the assessment questions on your own without
any assistance from other persons or resources.

● You must submit your answer scripts within the following time frame allowed for this online
assessment:

o The deadline for the submission of your answer scripts is half an hour from the end time of
this online assessment.

● Penalty as below WILL BE IMPOSED on students who submit their answers late as follows:

o The final marks of this online assessment will be reduced by 10 marks for answer scripts that
are submitted within 30 minutes after the deadline for the submission of answer scripts for this
online assessment.

o The final marks of this online assessment will be downgraded to zero (0) mark for any answer
scripts that are submitted after one hour from the end time of this online assessment.

● Extenuation Mitigating Circumstance (EMC) encountered, if any, must be submitted to the

Faculty/Branch/Centre within 48 hours after the date of this online assessment. All EMC
applications must be supported by valid reasons and evidence. The UC EMC Guidelines apply.

This question paper consists of 5 questions on 11 printed pages.

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● The following announcements will be made by the lecturer/tutor over the Google Meet link
provided before the end time of this online assessment:

○ 15 minutes before end time: You will be informed that you have only 15 minutes left to
complete your answers;

○ 5 minutes before end time: You will be informed that you have only 5 minutes left to complete
your answers;

○ At end time: You will be informed that it is the end time and you are supposed to stop
writing/typing your answers and start preparing for the submission to ensure that your answer
booklet is received online by the lecturer/tutor before the end of the 30-minute submission
period, failing which, a penalty will be imposed as mentioned above.

STUDENT’S DECLARATION OF ORIGINALITY

By submitting this online assessment, I declare that this submitted work is free from all forms of
plagiarism and for all intents and purposes is my own properly derived work. I understand that I have
to bear the consequences if I fail to do so.

Final Online Assessment Submission

Course Code:
Course Title:
Signature:
Name of Student:
Student ID:
Date:

This question paper consists of 5 questions on 11 printed pages.

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Note: You are to assume that the year ending 31 December 2021 has elapsed

The following rates and allowances are to be used for all the questions in this paper unless
specified otherwise in the relevant question(s):

Rates of income tax

(a) (i) Resident company (paid-up capital not exceeding RM2.5 million and gross business income
not more than RM50 million)
Chargeable Income: First RM600,000 17%
Remainder 24%
(ii) Resident company (paid-up capital exceeding RM2.5 million or gross business income
more than RM50 million) 24%
(b) Non-resident company 24%
(c) Non-resident individual 30%
(d) Resident individual

Chargeable Income Calculations (RM) Rate % Tax (RM)

0 - 5,000 On the First 5,000 0 0
On the First 5,000 0
5,001 - 20,000 Next 15,000 1 150
On the First 20,000 150
20,001 - 35,000 Next 15,000 3 450
On the First 35,000 600
35,001 - 50,000 Next 15,000 8 1,200
On the First 50,000 1,800
50,001 - 70,000 Next 20,000 13 2,600
On the First 70,000 4,400
70,001 - 100,000 Next 30,000 21 6,300
On the First 100,000 10,700
100,001 - 250,000 Next 150,000 24 36,000
On the First 250,000 46,700
250,001 - 400,000 Next 150,000 24.5 36,750
On the First 400,000 83,450
400,001 - 600,000 Next 200,000 25 50,000
On the First 600,000 133,450
600,001 - 1,000,000 Next 400,000 26 104,000
On the First 1,000,000 237,450
1,000,001 - 2,000,000 Next 1,000,000 28 280,000
On the First 2,000,000 517,450
Exceeding 2,000,000 Next ringgit 30 ….........

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Motorcars and related benefits – value assessable extracted from Public Ruling No. 11/2019 issued
by the Inland Revenue Board.
Cost of car (when new) Annual value of BIK Fuel per
annum
RM RM RM
Up to - 50,000 1,200 600
50,001 - 75,000 2,400 900
75,001 - 100,000 3,600 1,200
100,001 - 150,000 5,000 1,500
150,001 - 200,000 7,000 1,800
200,001 - 250,000 9,000 2,100
250,001 - 350,000 15,000 2,400
350,001 - 500,000 21,250 2,700
500,001 and above 25,000 3,000
When the car provided is more than five years old the taxable car benefit is halved but the value of fuel
provided remains unchanged.

Household furnishings, appliances, etc: RM

(i) Semi-furnished with furniture in the lounge, dining room, or bedroom 840 per annum
(RM70 per month)
(ii) Semi-furnished with furniture as in (i) above plus, one or more of air 1,680 per annum
conditioner, curtains and carpets (RM140 per month)
(iii) Fully-furnished with benefits as in (i) and (ii) above plus, one or more 3,360 per annum
of kitchen equipment, crockery, utensils and appliances (RM280 per month)

Other benefits
RM
Driver 7,200 per annum
Gardener 3,600 per annum
Domestic servant 4,800 per annum

Personal Reliefs RM
Self 9,000
Self – disabled 6,000 (additional)
Spouse 4,000
Spouse – disabled 5,000 (additional)
Children
Normal child below 18 years old 2,000 each
Normal / disabled child 18 years old and above, and in higher education:
Overseas universities or similar establishments 8,000 each
Local universities, colleges or similar establishments 8,000 each
Disabled child 6,000 each
Medical expenses, special needs and parental care incurred for parent(s) 8,000 (maximum)
Medical expenses on serious disease, fertility treatment including up to 8,000 (maximum)
RM1,000 for medical examination and RM1,000 for vaccination
Basic supporting equipment 6,000 (maximum)
Study course fees for skills or qualifications including up to RM1,000 for 7,000 (maximum)
recognized upskilling and self-enhancement courses

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Takaful / life insurance premium (taxpayer: private sector) 3,000 (maximum)

Takaful / life insurance premium (taxpayer: public sector) 7,000 (maximum)
Contributions to approved funds or schemes 4,000 (maximum)
Private retirement scheme, deferred annuity premium 3,000 (maximum)
Education and medical insurance premiums 3,000 (maximum)
Childcare (below 6 years old) 3,000 (maximum)
Purchase of breastfeeding equipment 1,000 (maximum)
Deposit into the Skim Simpanan Pendidikan Nasional (SSPN) 8,000 (maximum)
Contribution to Social Security Organisation (SOCSO) 250 (maximum)
Domestic travelling expenses - accommodation & entrance fee 1,000 (maximum)
Lifestyle relief 2,500 (maximum)
Special lifestyle relief - personal computer, smartphone or tablet 2,500 (maximum)
Additional lifestyle relief for sports related items 500 (maximum)

Personal income tax rebates RM

Individual rebate: chargeable income does not exceed RM35,000 - self 400
- spouse 400
Zakat and fitrah Amount paid by taxpayer

Capital Allowances Initial Allowance Annual Allowance

Industrial buildings 10% 3%
Office equipment, furniture and fittings 20% 10%
Computers 20% 20%
Plant and machinery – general 20% 14%
Motor vehicles, heavy machinery 20% 20%

Real Property Gains Tax Rate

Companies Individual Individual

incorporated (Citizen or (Non-citizen or
Date of disposal in Malaysia; Permanent Non-permanent
Trustee of a resident) resident) or an
Trust; executor of the estate
Society of a deceased person
who is not a citizen
and not a permanent
resident; or a
company not
incorporated in
Malaysia
Disposal within 3 years 30% 30% 30%
after the acquisition date
Disposal in the 4th year 20% 20% 30%
after the acquisition date
Disposal in the 5th year 15% 15% 30%
after the acquisition date
Disposal in the 6th year 10% 5% 10%
after the acquisition date

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Answer ALL FIVE (5) questions.

Question 1

Swiss Co Sdn. Bhd. is a Malaysia incorporated company located in Shah Alam and it is principally
involved in the business of manufacturing furniture since 2018. The company has a paid-up capital
of RM3 million and closes its accounts on 30 June each year. For the year ended 30 June 2021, its
statement of profit or loss is as follows:

Note RM RM
Sales 3,000,000
Less: Cost of sales 1 (1,000,000)
Gross profit 2,000,000
Add: Other incomes 2 100,000
2,100,000
Less: Expenses:
Depreciation 75,000
Salaries, EPF and SOCSO 3 500,000
Repair and maintenance 4 48,000
Hire purchase interest 10,000
Entertainment 5 38,000
Bad and doubtful debts 6 36,000
Utilities 88,000
Telephone and broadband 13,000
Sundry expenses 7 538,000
Insurance 8 60,000
Statutory audit fee 12,000
(1,418,000)
Net profit before tax 682,000

Notes:

1. Cost of sales:

(i) Cost of sales is computed after excluding RM10,000 in respect of cost of furniture
manufactured by the company which were withdrawn from stocks for the use of the
company’s own manufacturing business. The market value of the furniture was
RM15,000.

(ii) Include export credit insurance premium of RM12,000 paid to Malaysia Export
Credit Insurance Berhad.

(iii) Include unrealised foreign exchange gain of RM6,000 on an amount owing to a trade
payable in Vietnam.

2. Other incomes consist of:

(i) Rental income of RM80,000 from a property rented out in Sydney. The rental income
was credited to a bank account in Australia.

(ii) Compensation of RM9,000 received from one of the company’s suppliers for late
delivery of the raw materials.

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Question 1 (Continued)

3. Salaries, EPF and SOCSO include:

RM
(i) Salaries paid to disabled workers 50,000
(ii) Leave passage provided to senior management staff 48,000
(iii) Recruitment expenses to employ new administrative staff 3,000

4. Repair and maintenance

Renewal of wiring 5,500
Maintenance of factory fencing 9,500
Extension of office building 13,000
Replacement of collapsed retaining wall 20,000
48,000
5. Entertainment
Light refreshments to customers at the business premises 2,000
Promotional gifts with company logo given to customers 3,500
Entertainment allowances 26,000
Staff annual dinner 6,500
38,000
6. Bad and doubtful debts
Increase in specific allowance for doubtful debts (trade) 11,000
Increase in specific allowance for doubtful debts (non-trade) 8,000
General allowance for doubtful debts (trade) 14,000
Legal expenses to recover non-trade debt 3,000
36,000

7. Sundry expenses
Donation of a medical equipment to an approved healthcare centre 20,000
Losses due to embezzlement by a director of the company 500,000
Loss on disposal of shares held in a Malaysian public listed company 18,000
538,000

8. Insurance expense includes life insurance premium of RM28,000 on the life of the marketing
manager. The right to the insurance proceeds remains with the company.

9. For the year of assessment 2021, the company has current year capital allowances and
unabsorbed capital allowances of RM55,000 and RM11,000 respectively.

Required:

Starting with net profit before tax, compute the chargeable income of Swiss Co Sdn. Bhd. for the year of
assessment 2021. Indicate ‘nil’ under the appropriate column, where no tax adjustment is required.
Please note that the reasons for the tax adjustments are not required.
[Total: 20 marks]

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Question 2

Azlan commenced employment as a marketing executive with E-Point Sdn. Bhd. in 2019.
Unfortunately, the COVID-19 pandemic has forced the company to close down permanently. Azlan
lost his job on 30 June 2021. His remuneration up to 30 June 2021 was as follows:

(i) Basic salary per month: RM4,000

(ii) Entertainment allowance totaling RM5,000. Azlan spent RM6,000 to entertain customers.

(iii) Reimbursement of expenses for business trips visiting customers: RM2,000

(iv) A six-year-old company car costing RM120,000 was provided up to 30 June 2021.

(v) Medical and dental benefits of RM2,500 for him and his immediate family.

(vi) A semi-furnished (with air-conditioner) apartment was provided by the employer from 1
January to 30 June 2021. The rental of RM1,000 (including RM200 for rental of furnishings)
was paid by the company.

Immediately after Azlan lost his job, he started up a sole proprietorship involved in the food delivery
business. The statement of profit or loss for the period from 1 July 2021 to 31 December 2021 is as
follows:

RM RM
Gross profit 80,000
Less: Azlan’s salaries 36,000
Depreciation of motor vehicles 1,000
Advertising 2,000
Transportation 10,000 (49,000)
Net profit 31,000

Additional information relating to the business for the year ended 31 December 2021:

(i) Azlan received RM25,000 in respect of royalties from writing a book.

(ii) He received dividends amounting to RM3,000 from Singapore.

(iii) Interest income of RM8,000 was received on his fixed deposits in Public Bank.

(iv) Donation of food amounting to RM8,000 was made to an approved old folks home.

(v) Azlan is married to Minah, a tax resident who has no income and is physically disabled after
suffering a stroke.

(vi) The couple has two unmarried children of their own and one legally adopted child. The elder
son, Kassim, 23 years old, is pursuing a degree course in a local university while his daughter,
Diana, 18 years old, is studying A level in a private college.

(vii) Azlan deposited RM9,000 into an SSPN account for his adopted daughter who is studying in
a local secondary school.

(viii) He contributed RM2,500 to the Employees Provident Fund and incurred life insurance
premium of RM5,000.

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Question 2 (Continued)

(ix) He bought a new personal computer costing RM2,300 for his children to do homework.

Required:

Compute the income tax payable of Azlan for the year of assessment 2021.
[Total: 20 marks]

Question 3

(A)

Green Ocean Ltd. is a company incorporated in China. The company is in the business of canning
various sea food for local and overseas market. In line with its expansion project, the company intends
to incorporate a subsidiary company in Malaysia to provide management, administration and technical
support to its related companies in Malaysia, Singapore and Philippines.

In relation to this, the senior management of Green Ocean Ltd. plans to send its regional manager Mr.
Sim, a China citizen, to work partly in Malaysia and partly in China. Mr. Sim is expected to work in
Malaysia for a period of 4 months in a year. He will be paid a salary of RM100,000 by Green Ocean
Ltd. for his services performed in Malaysia. The salary will be credited into his bank account in China.

Meanwhile, Mike, a Singaporean, will be appointed as a director of the Malaysian subsidiary to

oversee the business activities in Malaysia. He will come to Malaysia to attend board of directors
meetings twice in a year. As a director of the subsidiary, Mike will be paid a director fee of RM60,000
a year which will be credited into his bank account in Singapore. All other board of directors meetings
will be held overseas.

Required:

(a) Explain to the board of directors of Green Ocean Ltd. whether the subsidiary company in
Malaysia will be considered as a Malaysian tax resident company pursuant to the Income Tax
Act, 1967. (4 marks)

(b) Comment on whether the salary of RM100,000 earned by Mr. Sim and the director fee of
RM60,000 earned by Mike will be subject to Malaysian tax. (9 marks)

(B)

(a) Aiman was employed as a cashier in a mini market. The owner of the mini market discovered
that RM80,000 cash were stolen by Aiman during the year 2019. A police report had been
lodged and Aiman was dismissed thereafter. The loss of RM80,000 had been claimed as a tax
deductible expense in the year of assessment 2019. The owner made an insurance claim on the
loss of cash. In year of assessment 2021, the owner managed to recover RM60,000 from the
insurance company. (3 marks)

(b) Salary paid to an accounts clerk of a company for preparing and submitting sales tax returns to
the Royal Malaysian Customs. (2 marks)

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Question 3 (Continued)

(c) Fees paid to a tax agent for advisory services provided on tax planning for a group of
companies. (2 marks)

Required:

With reference to the Income Tax Act, 1967, explain the tax treatment in each of the above
circumstances in arriving at the adjusted income from business.
[Total: 20 marks]

Question 4

Jaya Sdn. Bhd. is a company with a paid up capital of RM2 million. The company closes its accounts
on 30 April every year. For the year ended 30 April 2021, the company has furnished its first estimate
of tax payable of RM20,000 to the Inland Revenue Board. A revised estimate of RM30,000 for the
year of assessment 2021 was subsequently furnished to the Inland Revenue Board within the stipulated
time. The income tax computation submitted through Form e-C on 30 November 2021 showed a tax
payable of RM60,000 for the year ended 30 April 2021.

In June 2021, the senior management of the company has decided to change its accounting year end
to 30 June for its own convenience. The accounts will be prepared as follows:

1 May 2021 to 30 June 2022

1 July 2022 to 30 June 2023

Required:

(a) Briefly explain the tax laws relating to the amount and due dates to submit the initial and revised
estimate of tax payable for Jaya Sdn. Bhd. for the year of assessment 2021. (6 marks)

(b) Compute the penalty for the underestimate of tax payable for the year of assessment 2021.
(5 marks)

(c) Determine the basis period for the years of assessment 2021, 2022 and 2023 due to the change
of accounting period of Jaya Sdn. Bhd. (3 marks)

(d) Explain the differences between the tax returns Form BE and Form B for the year of assessment
2021 in terms of their deadlines, payment of the tax instalments and timing for the payment of
the final tax. (6 marks)
[Total: 20 marks]

This question paper consists of 5 questions on 11 printed pages.

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BBFT2013 TAXATION

Question 5

Cergas Sdn. Bhd. is a registered manufacturer under the Sales Tax Act 2018. The company
manufactures textile in Kelantan since 2017 and closes its accounts on 31 December every year. For the
financial year ending 31 December 2021, the company incurred the following capital expenditures for
its business:

(i) A heavy machine was acquired at a cost of RM180,000 together with RM22,500 incurred to
prepare the site for the installation of the machine.

(ii) Cost of constructing a 3-storey building amounting to RM900,000. The ground floor of the
building has been used as an office while the other 2 floors have been used as a factory.

In August 2019, the company sold taxable goods amounting to RM52,500 to P Trading Enterprise. In
May 2020, only RM22,500 has been received from P Trading Enterprise. P Trading Enterprise was
adjudicated bankrupt and the outstanding amount had been written off as bad debt in the statement of
profit or loss of Cergas Sdn. Bhd for the year ended 31 December 2020.

One of the directors of Cergas Sdn. Bhd. is considering buying a residential property situated in
Malaysia. The director is a non-Malaysian citizen and he is unsure as to whether to buy the property
under the name of an individual or a company.

Required:

(a) Determine and explain the qualifying capital expenditures for Cergas Sdn. Bhd. in respect of
the heavy machine and the 3-storey building in accordance with Schedule 3 of the Income Tax
Act, 1967. (9 marks)

(b) Compute the amount of sales tax refund that Cergas Sdn. Bhd. can claim from the Royal
Malaysian Customs in respect of the bad debt written off in 2020. Assume that the goods sold
have been subjected to 10% sales tax. (5 marks)

(c) Assuming that after Cergas Sdn. Bhd. has claimed for sales tax refund in 2020, P Trading
Enterprise paid an amount of RM9,000 to Cergas Sdn. Bhd. Compute the amount of sales tax
repayable to the Royal Malaysian Customs. (2 marks)

(d) Explain to the director the differences in terms of the real property gains tax rates and any
exemption available in the computation of the real property gains tax between a non-Malaysian
individual and a company. (4 marks)
[Total: 20 marks]

This question paper consists of 5 questions on 11 printed pages.