Final Examination Semester 3 / Year 2011 COURSE : TAXATION II COURSE CODE : ACCT 3053 TIME : 2 1/2 HOURS DEPARTMENT : ACCOUNTING AND FINANCE LECTURER : NG PEK LENG Student s ID : Batch No. : Notes to candidates: 1) The question paper consists of 5 pages and 4 questions. 2) Answer all questions. 3) Tax rates and allowances are on page 5. 4) Return the question paper with your answer booklet.
Answer all four questions 1. Winner Sdn Bhd is engaged in the manufacture of food products. Its profit and loss account for the year ended December 31, 2009 is as follows: Notes RM 000 RM 000 Sales 4,900 Less: Cost of sales 1 (2,600) Gross profit 2,300 Less: Operating expenses Payroll costs 2 1,500 Directors remuneration 3 300 Freight and insurance 4 150 Donation 5 50 Utilities 6 75 Professional fees and subscriptions 7 85 Training and research 8 60 Entertainment 9 120 Foreign exchange loss 10 40 Provision for doubtful debts (trade) 11 30 (2,410) (110) Add: Other income 12 400 Profit before taxation 290 = Notes: 1. Cost of sales including: RM 000 Depreciation of fixed assets 300 Provision for stock obsolescence 74 Damaged stocks written off 26 2. Payroll cost including: RM 000 Provision for retirement benefits 80 Medical expenses of employee 46 Contribution to an overseas provident fund (unapproved) for an expatriate employee 16 3. Directors remuneration comprises: RM 000 Directors salaries and fees 255 Leave passages 20 Entertainment allowances (utilized to entertain customers and dealers) 25 300 = Page 1 of 5
4. Freight and insurance Included under the above is an amount of RM3,000 paid to Safe Insurance (M) Sdn Bhd, a company incorporated in Malaysia, for insuring goods imported. 5. Donations comprises: RM 000 Cash donations to approved institutions 45 Advertisement in souvenir programmes 5 50 6. Utilities Included in the above are deposits of RM3,000 for water and electricity in connection with the expatriate employee s house 7. Professional fees and subscriptions comprises: RM 000 Audit and tax fees 35 Registration of trade marks 20 Legal fees in obtaining term loan 17 Legal fees on recovery of trade debts 13 85 8. Training and research including: RM 000 Routine product testing and quality control expenses 16 Payments to an approved research and development company for the use of its services 33 9. Entertainment comprises: RM 000 Dinners and lunches provided to suppliers 54 Meals and refreshments provided to employees during promotional campaigns 6 Salesman entertainment allowances (utilized to entertain customers and dealers) 60 120 = 10. Foreign exchange loss comprises: RM 000 Foreign exchange loss on settlement of trade debts 27 Foreign exchange loss on purchase of machinery 13 40 Page 2 of 5
11. Provision for doubtful debts (trade) comprises: RM 000 Specific provision for doubtful debts 8 General provision for doubtful debts 15 Bad debts written off 7 30 12. Other income RM 000 This comprises income derived from Malaysia as follows: Tax exempt dividend 154 Interest income 86 Dividend income (gross) 160 400 = 13. Additional information (a) The balances of the following provision accounts are as shown below: 31/12/2009 31/12/2008 RM 000 RM 000 Provision for stock obsolescence 180 120 Provision for retirement benefits 302 254 Provision for doubtful debts (trade) - Specific 32 25 - General 72 60 (b) Unabsorbed capital allowances brought forward from the year of assessment 2008 are RM100,000. The capital allowance claim for the year of assessment 2009 is RM124,000. Compute the chargeable income of Winner Sdn Bhd for the year of assessment of 2009. To indicate - in the computation, if there is no tax adjustment required. (40 marks) Page 3 of 5
2 (a) Explain who is a taxable person under the Sales Tax Act, 1972. (6 marks) (b) Tat Wah Sdn Bhd, a taxable person licensed under the Sales Tax Act, sold taxable goods to its holding company for RM185,000.00 on 14 th May 2007. The normal selling price of the goods was RM190,000.00 Compute the sales tax payable by Tat Wah Sdn Bhd, indicating the taxable period and when the sales tax must be paid. (Assume a sales tax rate of 10%) (12 marks) 3 Super Sdn Bhd operates retail stores in Malaysia. On 15 April 2007, the company disposed of its building in Penang for RM2,770,000 and incurred legal fees of RM8,000. The land on which the building stands was bought for RM775,000 on 3 March 2001. In addition, the company incurred stamp duty of RM17,250 and valuation fees of RM6,650. In December 2001, the company constructed a building on the land at a cost of RM1,100,000. Compute the real property gains tax payable by Super Sdn Bhd. (20 marks) 4 (a) MMA Sdn Bhd (tax resident) is presently developing a theme park in Kuala Lumpur. During the year ended 31.12.2009, the company made a payment of RM300,000 to Mr Soto, a resident of Japan, being interest on the RM10 million loan at the rate of 3.0% p.a.. The loan is used as working capital of the company. Explain the Malaysian withholding tax implications with regard to the payments. (12 marks) (b) State the consequences of not complying with the withholding tax provisions applicable to payments to non-residents. (10 marks) Page 4 of 5
The following tax rates and allowances are to be used in answering the questions. Rates of real property gains tax: Disposal within the following period after acquisition Individual Company Citizen or Non-citizen or Permanent non-permanent resident resident (%) (%) (%) Within two year 30 30 30 In the third year 20 30 20 In the fourth year 15 30 15 In the fifth year 5 30 5 In the sixth year and thereafter nil 5 5 Capital allowances: Initial allowance Annual allowance (%) rate (%) rate Motor vehicle and heavy machinery 20 20 Plant and machinery 20 14 Office equipment, furniture & fittings 20 10 Industrial Building 10 3 000 Page 5 of 5