ACCA Certified Accounting Technician Examination Paper T9 (MYS) Preparing Taxation Computations (Malaysia)

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2 ACCA Certified Accounting Technician Examination Paper T9 (MYS) Preparing Taxation Computations (Malaysia) December 2009 Answers and Marking Scheme Notes: () 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 A For an individual, the basis year for a year of assessment shall constitute the basis period for that year of assessment. Therefore, the basis year i.e. the calendar year January 2009 to December 2009 constitutes the basis period for the year of assessment 2009 for Madam Premala in respect of her employment income. 2 B The statement is false: an employment can also arise if there is an appointment or offi ce, whether public or not, and whether or not the master servant relationship subsists, for which remuneration is payable. B Business income is recognised on the accrual basis. Therefore, RM 8 million should be recognised as the gross income from his business as income accrues when the invoice is issued. 4 D An asset is disposed of if it is discarded and no longer used in business. As the initial allowance and annual allowance had been claimed in the year of assessment 2008, there would be residual expenditure. There being no disposal value when the projector was discarded, a balancing allowance is due and should be claimed. 5 D The company was founded on February 2009 i.e. after the introduction of the one-tier system of corporate taxation. The dividend it distributed to Jamal on 7 December 2009 is therefore a one-tier dividend and is duly exempted in the hands of the recipient. 6 D John is eligible for the tax rebate of RM400 because his chargeable income does not exceed RM5,000. As he is also eligible for spouse relief, John is entitled to a further RM400 in respect of his wife. Thus John is entitled to a total rebate of RM800 ( ) for the year of assessment C Mr Aei, Miss Bee and Mr Cee have agreed to combine their rights, powers, property, labour or skill for the purpose of carrying on a business and sharing the profi ts therefrom. They have therefore formed a partnership of which they are the partners. 8 C Pursuant to section 07C(), the tax estimate for the year of assessment 2009 shall not be less than 85% of the revised estimate of tax payable for the immediately preceding year of assessment (i.e. the year of assessment 2008). Therefore the minimum amount to be estimated as tax payable for the year of assessment 2009 is RM8,500 (i.e. 85% of the revised estimate of RM0,000 for the year of assessment 2008). 9 B Only the technical fee is subject to withholding tax as the fee was paid to a non-resident and the fee was derived from Malaysia (services rendered in Malaysia). Payment of remuneration to an employee is not subject to withholding tax even if the employee is a non-resident: schedular tax deductions from the monthly remuneration are made instead. 0 D Sales tax that falls due during the taxable period shall be paid to the customs authorities within 28 days from the end of the taxable period. 5

3 Section B Marks Mr and Mrs Ordinary (a) Mr Ordinary Tax computation for the year of assessment 2009 RM RM Employment income Salary 87,500 / 2 Car benefi t (RM5,000 x / 2 ) 2,500 Leave passage (up to three domestic trips exempted) nil Interest Interest income from fi xed deposits with a Malaysian bank (exempted) nil Dividend Dividend single-tier (exempted) nil Foreign dividend (exempted) nil Aggregate income 90,000 / 2 Less: Approved donation in cash not exceeding 7% of aggregate income (,000) Total income 89,000 / 2 Personal reliefs Personal relief 8,000 / 2 Deposit into the National Education Savings Scheme (restricted to maximum),000 Child relief for two children (,000 x 2) 2,000 Employee Provident Fund (EPF) contributions (restricted to maximum) 6,000 Education insurance premium (restricted to maximum),000 Chargeable income (22,000) 67,000 / 2 Tax on fi rst RM50,000,25 Tax on next RM7,000 at 9%,20 Tax charged/payable 6,555 / 2 4 6

4 Marks (b) Mrs Ordinary Tax computation for the year of assessment 2009 RM RM RM Employment Salary 52,000 / 2 Rental income Rental income received 2,000 / 2 Less: Allowable deductions Quit rent and assessment rates 600 Mortgage interest 8,400 Extension to kitchen (capital expenditure) nil (9,000) Statutory income from rent,000 Aggregate income 55,000 / 2 Less: Donation of computer (not in cash) nil Total income 55,000 / 2 Personal reliefs Personal relief 8,000 / 2 Deposit into National Education Savings Scheme 2,800 / 2 Medical insurance,870 / 2 Books and magazines 60 / 2 Personal computer (once in three years) (restricted to maximum),000 + Employee Provident Fund (EPF) contributions 5,720 / 2 Chargeable income (22,000),000 / 2 Tax on fi rst RM20, Tax on next RM,000 at 7% 90 Tax charged,85 / 2 Less: Rebate (chargeable income not exceeding RM5,000) (400) Tax payable 985 Total 27 7

5 2 JualBeli Sdn Bhd Marks (a) (i) Fixed assets brought forward and not disposed of in the year of assessment 2009 Asset Qualifying Annual allowance plant expenditure RM Rate RM Furniture and fi ttings 2,000 0%,200 / 2 Air conditioning system 50,000 4% 7,000 / 2 + / 2 (ii) Fixed assets acquired in the year of assessment 2009 Asset Qualifying Initial allowance Annual allowance plant expenditure RM Rate RM Rate RM Packaging equipment 240,000 20% 48,000 4%,600 / 2 Delivery van 0,000 20% 22,000 20% 22,000 / 2 + / 2 5 (iii) Fixed assets disposed of in the year of assessment 2009 Motor car Residual expenditure 8,000 / 2 Disposal value (0,000) / 2 Balancing allowance 8,000 / 2 Computers Residual expenditure nil / 2 Disposal value (2,500) / 2 Balancing charge (2,500) / 2 (b) (i) Due date for submission of tax return The annual tax return must be submitted by the end of the seventh month after the close of the accounts. 2 Hence the due date for submission of the tax return for the year of assessment 2009 is seven months after the close of accounts on 0 September 2009 i.e. 0 April 200. (ii) Due date for the payment of any balance of tax The balance of tax payable must be paid by the end of the seventh month after the close of the accounts. 2 Hence the due date for payment of any balance of tax due for the year of assessment 2009 is seven months after the close of accounts on 0 September 2009 i.e. 0 April 200. (iii) Submission of tax estimate The tax estimate for a year of assessment must be furnished at least one month before the commencement of the basis period. 2 Therefore, the tax estimate for the year of assessment 200 must be furnished at least one month before October 2009 i.e. by the August Total 20 8

6 Biz-Savvy Sdn Bhd Marks (a) Computation of total income for the year of assessment 2009 RM Car park business Adjusted income 20,000 / 2 Less: Capital allowance brought forward 5,00 current year 6,700 (2,000) Statutory income 08,000 Retail business Adjusted income 2,000 / 2 Add: Balancing charge 0,000 Less: Capital allowance nil / 2 Statutory income 22,000 Restaurant business Adjusted income (Adjusted loss: RM02,000) nil 0,000 Less: Unabsorbed business loss brought forward (26,800) Statutory income from all businesses 0,200 Add: Interest income 2,800 Aggregate income 6,000 / 2 Less: Current year business loss (02,000) Less: Approved donation in cash (restricted to 0% of aggregate income) (,600) + Total income 2,400 2 (b) Service tax (i) Car park business Operators of parking space for motor vehicles are listed as taxable persons. There is a minimum threshold of RM50,000 of annual sales turnover stipulated for service tax to apply. The car park business registered a turnover of RM50,000 for the 2-month period of December 2008 to November 2009 (6 x 0, x 5,000). The car park business is therefore subject to service tax from December 2009 onwards. 4 (ii) Restaurant business A restaurant operator is a taxable person. However, with effect from July 2008, the minimum threshold stipulated for annual sales turnover is RM million. Therefore, the restaurant business of Biz-Savvy Sdn Bhd is not subject to the service tax provisions at anytime in Total 9 9

7 Marks 4 (a) (i) Statutory time limit for making assessments The Income Tax Act [in s.9] provides that the Director General of Inland Revenue may raise an assessment or additional assessment for a year of assessment within six years of the expiration of that year of assessment. / 2 In Ali s case, the original assessment for the year of assessment 2002 must be made within six years after the end of the calendar year 2002 (i.e. December 2002). In other words, the assessment must be made by December / 2 As the assessment for the year of assessment 2002 was made on December 2009, it is time-barred. The Director General is therefore not entitled to make such an assessment unless Ali has committed any fraud, wilful default or negligence. 5 (ii) Valid appeal against the assessments A valid appeal is one made in writing in the prescribed form [Form Q] within 0 days after the service of the notice of assessment. + + Ali must therefore lodge his written appeal in the prescribed form against the two assessments dated December 2009 by December (b) Tax residence of Ah Beng YA 2006 Resident Linked to a consecutive period of 82 or more days in 2005 s.7()(b) / 2 YA 2007 Non-resident Less than 90 days, does not fulfi l s.7 ()(c) / 2 YA 2008 Non-resident Less than 90 days, does not fulfi l s.7()(c) / 2 YA 2009 Resident Linked to a consecutive period of 82 days or more in 200 s.7()(b) / 2 + / 2 5 Total 4 20