ertified ccounting Technician Examination dvanced Level Preparing Taxation omputations (Malaysia) Tuesday 15 June 2010 Time allowed Reading and planning: 15 minutes Writing: 3 hours This paper is divided into two sections: Section LL TEN questions are compulsory and MUST be attempted Section LL FOUR questions are compulsory and MUST be attempted Tax rates and allowances are on pages 2 3. o NOT open this paper until instructed by the supervisor. uring reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the examination hall. Paper T9 (MYS) The ssociation of hartered ertified ccountants
SUPPLEMENTRY INSTRUTIONS 1. alculations and workings should be made to the nearest. 2. ll apportionments should be made to the nearest whole month. 3. ll workings should be shown. TX RTES N LLOWNES The following tax rates, allowances and values are to be used in answering the questions. Income tax rates Resident individuals hargeable income Rate umulative tax % First 2,500 (0 2,500) 0 0 Next 2,500 (2,501 5,000) 1 25 Next 15,000 (5,001 20,000) 3 475 Next 15,000 (20,001 35,000) 7 1,525 Next 15,000 (35,001 50,000) 12 3,325 Next 20,000 (50,001 70,000) 19 7,125 Next 30,000 (70,001 100,000) 24 14,325 Exceeding 100,000 27 Resident company Paid up ordinary share capital First Excess over 500,000 500,000 2,500,000 or less 20% 25% More than 2,500,000 25% 25% Non-resident ompany 25% Individual 27% Personal reliefs and allowances Self 8,000 isabled self, additional 6,000 Medical expenses expended for parents (maximum) 5,000 Medical expenses expended on self, spouse or child with serious disease, including up to 500 for medical examination (maximum) 5,000 asic supporting equipment for disabled self, spouse, child or parent (maximum) 5,000 Purchase of sports equipment (maximum) 300 Fees expended for skills or qualifications (maximum) 5,000 Expenses on books for personal use (maximum) 1,000 Spouse relief 3,000 isabled spouse, additional 3,500 hild (each) 1,000 hild higher rate (each) 4,000 isabled child (each) 5,000 Life insurance premiums and contributions to approved provident funds (maximum) 6,000 Medical or education insurance premiums for self, spouse or child (maximum) 3,000 Purchase of a personal computer (maximum) 3,000 eposit for a child into the National Education Savings Scheme (maximum) 3,000 2
Rebates hargeable income not exceeding 35,000 Individual 400 Individual who has been given a deduction in respect of a spouse or former wife 800 ar scale Value of benefits in kind ost of car Prescribed annual value of (when new) private usage of car 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, but the value of fuel provided remains unchanged. Where a driver is provided by the employer, the value of the benefit per month is fixed at 600. Other benefits Household furnishings, apparatus and appliances per month Semi-furnished with furniture in the lounge, dining room, or bedroom 70 Semi-furnished with furniture as above plus air-conditioners and/or curtains and carpets 140 Fully furnished premises 280 omestic help 400 Gardener 300 apital allowances Initial allowance (I) nnual allowance () Rate % Rate % Industrial buildings 10 3 Plant and machinery general 20 14 Motor vehicles and heavy machinery 20 20 Office equipment, furniture and fittings 20 10 Sales tax and service tax Rate % Sales tax 10 Service tax 5 3 [P.T.O.
Section LL TEN questions are compulsory and MUST be attempted Please use the inside cover of the andidate nswer ooklet to indicate your chosen answer to each multiple choice question. Each question within this section is worth 2 marks. 1 The Income Tax ct 1967 is an act to tax income: that is why capital gains are not taxable under the said ct. The above statement is: True False Sometimes false Sometimes true 2 h eng purchased a motor car for use in his restaurant business. He was told that he could not claim an immediate tax deduction in respect of the whole cost of the motor car in arriving at the adjusted income from the restaurant business. Which of the following is the reason for this? The cost of the motor car has nothing to do with the restaurant business. The expenditure is capital in nature as it relates to a fixed asset of the restaurant business. apital allowance will be given. None of the above: the cost of the motor car should be tax deductible in arriving at the adjusted income of the restaurant business. 3 Jasmine was sent by her merican employer to work as a designer in Malaysia for the whole of the year 2009. Her total remuneration package for 2009 amounted to 150,000, of which 70,000 was paid to her in the US while the remaining 80,000 was paid to her in Malaysia. State Jasmine s gross income from employment for Malaysian income tax purposes for the year of assessment 2009. 80,000 Nil 150,000 70,000 4 Zakri runs a workshop in his backyard specialising in making and installing kitchen cabinets to order. Why is Zakri treated as deriving income from a business? He does not receive a fixed income He does not have fixed working hours He works from home He is carrying on a trade 4
5 In 2009, Goode usiness Sdn hd (GS) contributed 50,000 (being 12% of the total remuneration of each of its employees for 2009) to the Employee Provident Fund. State the amount of tax deduction that GS is entitled to in arriving at the adjusted income from its business for the year of assessment 2009. Nil 50,000 25,000 10,000 6 handran purchased fixed assets during the period pril to October 2008 for use in his new sole proprietor business which commenced operations on 1 February 2009. State the FIRST year of assessment for which capital allowance may be claimed by handran in respect of the fixed assets which are used in his business. Year of assessment 2007 Year of assessment 2008 Year of assessment 2009 Year of assessment 2010 7 On 30 September 2009, Fortune Sdn hd paid 100,000 to a non-resident company being a royalty for secret know-how and failed to comply with the withholding tax requirements. What are the additional amounts that Fortune Sdn hd is liable to pay as a result of the non-compliance? 100,000 + 10,000 10,000 + 10,000 Nil 10,000 + 1,000 8 On 10 pril 2010, the irector General of Inland Revenue (GIR) issued an additional assessment to income tax for the year of assessment 2003 to Mr Wealthy. Which of the following statements is applicable? Mr Wealthy should pay the additional tax within 30 days of 10 pril 2010. The additional assessment was time-barred as it was issued more than six years after 31 ecember 2003 (the end of the year of assessment 2003). The GIR is empowered to raise any assessment at any time even if there is no fraud, wilful default or negligence. The GIR has 15 years to raise any assessment for all cases. 9 Miss Long returned to Malaysia on 31 ugust 2009 after her studies abroad and commenced her first employment in Malaysia on 1 October 2009. She expects to be chargeable to tax in Malaysia for the first time in the year of assessment 2010. State the date by which Miss Long should notify the irector General of Inland Revenue of her chargeability to tax. y 30 October 2009 y 1 January 2010 y 30 pril 2010 y 30 pril 2011 5 [P.T.O.
10 epat Koorier Sdn hd (KS) is a courier service company which recorded an income of 150,000 in its first three months of operations. State when KS should apply for a licence for service tax purposes. In the fourth month of operations t the end of the first 12-month period t the end of the calendar year Within 28 days after the commencement of operations (20 marks) 6
Section LL FOUR questions are compulsory and MUST be attempted 1 rothers Tai Kor and Yee Kor jointly manage as directors the printing business operated by a controlled company called Words Sdn hd (WS). Tai Kor holds 20% of the shares of WS and Yee Kor 80% of the shares of WS. etails regarding their income and expenditure for the year ended 31 ecember 2009 are as follows: Tai Kor Yee Kor Income irector s remuneration 120,000 54,000 Single-tier dividend from WS 20,000 8,000 Interest remitted to Malaysia from Singapore 3,750 Expenditure ontributions to the Employees Provident Fund 13,200 5,940 Life insurance premium 1,800 Share of the medical expense for their father s heart surgery 30,000 10,000 ash donation to a charity (approved) 5,300 onation of art supplies to an orphanage (approved) 1,900 nnual full medical check-up 980 Tai Kor and his wife (who does not derive any income) have six children, the eldest of whom is 15 years old. Since 2007, Tai Kor and his family have been living rent-free in a fully-furnished house owned by WS. The economic rent of the house (unfurnished) is 60,000 per annum. WS also provided Tai Kor with a domestic helper and a gardener throughout 2009. Yee Kor is single and a keen sportsman. uring the year 2009, he purchased sports equipment amounting to 2,500. Required: ompute the chargeable income and the income tax payable for the year of assessment 2009 by: (a) Tai Kor; and (17 marks) (b) Yee Kor. (10 marks) 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. (27 marks) 7 [P.T.O.
2 (a) ijakbena Sdn hd (S), which has an accounting year ending on 31 ecember, carries on manufacturing activities in its own factory complex, which comprises the following: Name Usage Year constructed ost of construction () lock Factory 2006 600,000 lock Factory 2007 300,000 lock Warehouse for the storage of raw materials and finished goods 2008 250,000 In 2009, a new factory named lock was constructed by S on land adjoining the complex and S commenced to use this new factory in its manufacturing business on 1 November 2009. etails of the cost of lock are as follows: ost of adjoining land 560,000 Legal fees and stamp duty for land 18,000 esign and professional fees 87,000 ost of construction ivil and structural 705,000 Mechanical, electrical and plumbing 150,000 Painting, tiling and finishing 98,000 953,000 Total expenditure 1,618,000 The administrative office and showroom take up 20% of the factory space of lock. On 1 ecember 2009, lock was demolished as it was found to be structurally defective. Required: ompute the industrial building allowance that ijakbena Sdn hd is entitled to claim for the year of assessment 2009 and the resulting residual expenditure carried forward to the year of assessment 2010 in respect of: (i) lock ; and (ii) lock. (3 marks) (2 marks) (b) etermine the qualifying building expenditure in respect of lock. (8 marks) (c) Explain why the demolition of lock constitutes a disposal of a qualifying asset. (2 marks) (d) ompute the balancing allowance or balancing charge in respect of the demolition of lock. (3 marks) (18 marks) 8
3 kitek and Frens are partners in kitek & Frens, an architectural practice, sharing profits in the ratio of 60:40. They receive equal partners salaries and interest on their capital contributions. For the year ended 31 ecember 2009, kitek & Frens registered the following results: Professional fees 635,000 Less: Expenditure Payroll and Employees Provident Fund contributions for staff 178,044 Provision for doubtful debt (staff loan) 41,956 Travelling and toll charges 90,760 Stationery, office supplies and maintenance 62,825 Telephone, internet and multi-media charges 25,190 Partners salaries 180,000 Interest on partner s capital 20,000 epreciation 1,225 ank charges and finance costs 39,019 (639,019) Net loss (4,019) kitek has a claim for a capital allowance of 8,360 in respect of his motor car, which he uses in the partnership business. Frens does not have a similar claim of capital allowance. Required: (a) Starting with the net loss figure, compute the provisional adjusted income and divisible income of kitek & Frens for the year of assessment 2009. (7 marks) (b) ompute the statutory income of kitek from the partnership. (5 marks) (c) ompute the statutory income of Frens from the partnership. (3 marks) (d) State, with reasons, whether the service tax provisions are applicable to kitek & Frens in 2009. (3 marks) (18 marks) 9 [P.T.O.
4 Relak Sdn hd (Relak) annually closes its accounts to 30 November. For the year of assessment 2009, it estimated its tax at 100,000, but the final tax liability was 180,000. Relak plans to move to new premises in three months time. In preparation for the move, Relak intends to discard its old business records, retaining only the records relating to the past three years. Required: (a) State, with reasons, the due date for Relak Sdn hd to submit its tax return for the year of assessment 2009. (2 marks) (b) (c) (d) (e) (f) (g) (h) (i) State the due date for the payment of the balance of tax payable by Relak Sdn hd for the year of assessment 2009. (1 mark) ompute the penalty for the excessive difference between the estimated tax and the final tax payable by Relak Sdn hd. (3 marks) State, with reasons, the date by which Relak Sdn hd should furnish its estimate of tax for the year of assessment 2010. (2 marks) State, with reasons, the minimum amount of estimate of tax Relak Sdn hd must furnish for the year of assessment 2010 and calculate the amount of its monthly instalments. (3 marks) State, with reasons, the month/months when Relak Sdn hd may revise its estimate of tax for the year of assessment 2010. (2 marks) State, with reasons, the due date for Relak Sdn hd s managing director to submit his personal tax return for the year of assessment 2009, assuming he only derived income from his employment with Relak in 2009. (1 mark) State, with reasons, whether Relak Sdn hd s plan to retain records for the past three years only will satisfy its responsibilities with regards to the keeping of sufficient records. (2 marks) State Relak Sdn hd s responsibility under the Income Tax ct with regards to its proposed move to new business premises. (1 mark) (17 marks) End of Question Paper 10