Paper F6 (MYS)

Fundamentals Level – Skills Module

Taxation
(Malaysia)
Tuesday 2 December 2014

Time allowed
Reading and planning: 15 minutes
Writing: 3 hours

ALL FIVE questions are compulsory and MUST be attempted.

Tax rates and allowances are on pages 2–4.

Do NOT open this paper until instructed by the supervisor.

During 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.

The Association of Chartered Certified Accountants

SUPPLEMENTARY INSTRUCTIONS
1. Calculations and workings should be made to the nearest RM.
2. All apportionments should be made to the nearest whole month.
3. All workings should be shown.

TAX RATES AND ALLOWANCES

The following tax rates, allowances and values are to be used in answering the questions.

Income tax rates

Resident individuals
Chargeable income Rate Cumulative tax
RM RM % RM
First 5,000 (0 – 5,000) 0 0
Next 15,000 (5,001 – 20,000) 2 300
Next 15,000 (20,001 – 35,000) 6 1,200
Next 15,000 (35,001 – 50,000) 11 2,850
Next 20,000 (50,001 – 70,000) 19 6,650
Next 30,000 (70,001 – 100,000) 24 13,850
Exceeding 100,000 26

Resident company
Paid-up ordinary share capital First Excess over
RM500,000 RM500,000
RM2,500,000 or less 20% 25%
More than RM2,500,000 25% 25%

Non-residents
Company 25%
Individual 26%

Personal reliefs and allowances

RM
Self 9,000
Disabled 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 RM500 for medical examination (maximum) 5,000
Basic 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
Disabled spouse – additional 3,500
Child (each) 1,000
Child – higher rate (each) 6,000
Disabled child (each) 5,000
Disabled child – additional (each) 6,000
Life insurance premiums and contributions to approved funds (maximum) 6,000
Private retirement scheme, deferred annuity premiums (maximum) 3,000
Medical and/or education insurance premiums for self, spouse or child (maximum) 3,000
Purchase of a personal computer (maximum) 3,000
Deposit for a child into the National Education Savings Scheme (maximum) 6,000

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 Rebates
Chargeable income not exceeding RM35,000 RM
Individual 400
Individual entitled to a deduction in respect of a spouse or former wife 800

Value of benefits in kind

Car scale
Cost of car Prescribed annual value of
(when new) private usage of car
RM RM
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.
Where a driver is provided by the employer, the value of benefit is fixed at RM600 per month.

Other benefits
RM per month
Household furnishings, apparatus and appliances
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
Domestic help 400
Gardener 300

Capital allowances
Initial Annual
allowance allowance
(IA) (AA)
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
Agriculture allowance
Buildings for the welfare of or as living accommodation for farm employees nil 20%
Any other buildings nil 10%
All other qualifying agricultural expenditure nil 50%

3 [P.T.O.
 Real property gains tax
Individuals Individuals All
(citizens and (non-citizens) other
permanent persons
residents)
Rate Rate Rate
% % %
Date of disposal
Disposal within three years after date of acquisition 30 30 30
Disposal in the fourth year after date of acquisition 20 30 20
Disposal in the fifth year after date of acquisition 15 30 15
Disposal in the sixth year after date of acquisition or thereafter 0 5 5

Sales and service tax

Rate %
Sales tax 10
Service tax 6

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ALL FIVE questions are compulsory and MUST be attempted

1 Space Tech Bhd (STB), a company with an issued share capital of RM10 million, makes up its accounts annually to
30 September. STB is in the business of manufacturing telecommunications equipment for both the local Malaysian
market and for export.
The statement of profit or loss of STB for the financial year ended 30 September 2014 is as follows:
Note RM’000s RM’000s
Sales 24,000
Less: Cost of sales 1 (18,000)
–––––––
Gross profit 6,000
Add: Other income
Gain on disposal of investment property 2 500
Interest income 3 30
––––––
530
–––––––
6,530
Less: Expenses
Acquisition of industrial designs 4 400
Commission 5 150
Subscriptions, contributions and donations 6 33
Foreign exchange gain 7 (115)
Interest expense 8 60
Legal and professional fees 9 101
Office maintenance expenses 10 180
Marketing expenses 11 604
Motor vehicle expenses 12 195
Provision for doubtful debts 13 (150)
Salaries and allowances 14 2,947
Sundry expenses 15 3
––––––
(4,408)
–––––––
Profit before tax 2,122
–––––––
Notes:
(1) The cost of sales includes obsolete inventories written off of RM36,000 and depreciation of plant, property and
equipment of RM2,350,000.
(2) STB acquired a property in Singapore for an amount equivalent to RM2,000,000 and disposed of it for an
amount equivalent to RM2,500,000. The net proceeds were received on 15 March 2014.
(3) The interest income arose on a loan amount of RM450,000 advanced to a subsidiary. The loan was financed
from funds raised from bank borrowings.
(4) STB acquired the proprietary rights to a patented industrial design, which was registered under the relevant laws,
to improve its manufacturing technology processes from Telco Sdn Bhd and incurred the following expenses:
RM
Purchase consideration for the proprietary rights 320,000
Consultancy and legal fees 30,000
Royalty expense 50,000
––––––––
Total 400,000
––––––––
It was confirmed that not less than 80% of STB’s shares were Malaysian owned throughout the year.

5 [P.T.O.
(5) The commission was paid to a Singaporean resident, Mr Yeu, for introducing a buyer for the property (as in (2)
above). Mr Yeu is retired and undertook this work on a part-time basis. STB paid him RM135,000, net of
withholding tax of 10% on 20 March 2014 and remitted the withholding tax of RM15,000 to the Inland
Revenue Board (IRB) on 21 March 2014.
(6) Subscriptions, contributions and donations comprise:
RM
Annual trade subscription to the Federation of Manufacturers 10,000
Scholarship expenses for a Malaysian student to study a degree at a university in
Bangladesh (full-time student and parents’ monthly income RM4,800 per month) 11,000
Scholarship expenses for a Malaysian student to study a degree at a local university
registered with the relevant Ministry (full-time student and parents’ monthly income
RM4,500 per month) 6,000
Cash sponsorship of a customers’ annual dinner 5,000
Cash contribution for a community project in Vietnam 1,000
–––––––
33,000
–––––––
(7) The foreign exchange gain comprises:
RM
Foreign exchange loss realised on the disposal of investments 35,000
Foreign exchange gain from export sales (unrealised) (150,000)
––––––––
(115,000)
––––––––
(8) The interest expense arose from bank borrowings on term loans. Part of the loan was used to advance a loan to
a subsidiary (as in (3) above). The amount of loan outstanding throughout the year was RM900,000.
(9) Legal and professional fees comprise:
RM
Statutory audit fees 65,000
Legal fees for raising the bank loan (as in (8) above) 4,000
Legal fees for renewal of a tenancy agreement 2,000
Secretarial fees 30,000
––––––––
101,000
––––––––
(10) Office maintenance expenses include the costs of purchasing two air-conditioners for RM800 each and a
refrigerator for RM400 for the pantry.
(11) Marketing expenses comprise:
RM
Expenses for maintaining a sales office for the promotion of exports to the
Vietnam market 500,000
Travelling expenses for a 20-day trip to Vietnam by the chief marketing officer
to negotiate and conclude contracts with Vietnamese customers:
– accommodation 80,000
– sustenance 20,000
– airfare (economy) 1,000
Travelling expenses for a 2-day trip to Vietnam for the company’s appointed dealer
to meet customers and to conclude contracts (accommodation and sustenance) 3,000
––––––––
604,000
––––––––

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(12) Motor vehicle expenses include the following lease rentals:
Cost Year of assessment
2013 2014
RM RM RM
Chief marketing officer’s car (non-commercial) 305,000 110,000 110,000
Van (commercial) 165,000 60,000 60,000
(13) Provision for doubtful debts (general and trade) comprises:
RM
Balance brought forward 550,000
Less: Amount written back (150,000)
––––––––
Balance carried forward 400,000
––––––––
(14) Salaries and allowances include allowances of RM40,000 paid to the sales and marketing team to defray
expenses incurred to entertain customers and RM4,000 of overseas leave passage for the chief marketing officer.
(15) Sundry expenses comprise:
RM
Insurance premium for a key-man endowment policy on the life of the marketing
manager 2,000
Annual general meeting expenses 1,000
––––––
3,000
––––––
(16) The capital allowances for the assets acquired by STB prior to the start of the period have been computed at
RM1,300,000 for the year of assessment 2014. The capital allowances for the assets acquired during the
current year are still to be calculated.
(17) STB has entered into a partnership agreement with Telco Sdn Bhd to provide technology solution services and
the terms of this agreement provide that the profits will be shared equally. The divisible loss of the partnership
for the year of assessment 2014 has been computed at RM40,000.

Required:
(a) Commencing with the profit before tax, compute the chargeable income of Space Tech Bhd for the year of
assessment 2014.
Note: 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. (28 marks)

(b) State the conditions which must be met before a company can claim a special deduction for the cost of
acquisition of proprietary rights. (2 marks)

(30 marks)

7 [P.T.O.
2 Mathen, a Canadian citizen, is a senior teacher in a local international school. He has one son aged 12. Mathen is
engaged to Anu, a Malaysian divorcee, who has a daughter aged 10. Mathen plans to get married to Anu in Canada
in 2015. Both Mathen and Anu are Malaysian tax residents for the year of assessment 2014.
Mathen’s employment will cease on 28 February 2015 and his employer has agreed that he can take his annual
leave from 1 December 2014. Mathen left Malaysia permanently on 1 December 2014 and will not return to
Malaysia in 2015.
Mathen
Mathen’s monthly salary is RM20,000. He will continue to be paid RM20,000 at the end of each month during his
leave period, i.e. up to February 2015.
Details of the benefits provided by his employer from 1 January to 30 November 2014 are:
– Travelling allowances of RM10,000.
– A discount of RM50,000 in fees for Mathen’s son who is studying in the school. It was confirmed that this benefit
was not transferrable.
– A car costing RM220,000 and a driver with a monthly salary of RM2,000. No fuel was provided.
– Utilities reimbursed of RM11,150.
– Subscription to the Ace Golf Club of RM300 per month.
– An innovation award of RM12,000 for being the most creative teacher, paid to him in July 2014.
Additional information:
– On 30 November 2014 Mathen:
– Refunded RM15,000 to his employer for the RM15,000 private individual membership’s entrance fee the
school had paid to the Ace Golf Club on 1 June 2013. The school’s policy on employee benefits requires
an employee to refund the full amount of the entrance fee if the employee leaves the school’s employment
within a period of two years of its paying the entrance fee.
– Withdrew the sum of RM110,000 from the school’s own provident fund, which is not approved by the
Inland Revenue Board. He also withdrew his portion of the contributions amounting to RM7,800.
– Mathen composes music on a part-time basis and he received a royalty of RM22,000 during the year of
assessment 2014.
– Mathen incurred RM3,300 in respect of school text books for himself and his son and medical expenses of
RM5,600 for his uncle who was certified as having a serious disease.
– Mathen made a contribution of medical equipment worth RM22,000 to an approved healthcare facility.
Anu
Anu is in the TV serial production business and her adjusted loss for the basis year for the year of assessment 2014
was RM12,000.
Anu also received and made the following payments in the year 2014:
– Received alimony payments from her ex-husband of RM22,000.
– Received RM25,000 as proceeds from an endowment insurance policy.
– Paid RM36,000 for her daughter’s school fees.

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Required:
(a) Compute the income tax payable for the year of assessment 2014 by:
(i) Mathen if he does not make an election in respect of his leave pay; and (17 marks)
(ii) Anu. (5 marks)
Note: You should indicate by the use of the word ‘nil’ or ‘exempt’, where appropriate, any item referred to in
the question for which no adjusting entry needs to be made in the tax computation.

(b) Explain the tax implications for Mathen if he did elect for his leave pay to be assessed on a received basis
and compute the income tax payable by him for the year of assessment 2015.
Note: You are NOT required to re-compute the tax payable for the year of assessment 2014. (3 marks)

(25 marks)

9 [P.T.O.
3 Roda Sdn Bhd (RSB) is a resident company in the business of the manufacture and assembly of automobile vehicles
and accessories. Part of RSB’s factory premises includes a service centre workshop which is used for repairs to
vehicles carried out in conjunction with the business of selling the company’s products. During the year ended
30 June 2014, the following capital expenditure was incurred by RSB:
(1) RM20,000 for an extension to the service centre workshop.
(2) RM250,000 for preparing, cutting and levelling of land for the installation of a spraying machine which cost
RM70,000.
(3) RM750 for preparing, cutting and levelling of land for the installation of a hoist machine which cost RM6,000.
(4) The acquisition on hire purchase of a non-commercial car for the production manager. The on-the-road price of
the car was RM148,000 and details of the payments made by RSB are as follows:
RM
Road tax and insurance 3,000
Deposit 20,000
Capital portion of each monthly instalment commencing from 1 January 2014 15,000
On 10 June 2014, RSB wrote off a computer assisted design (CAD) software system which it no longer required. The
system had been purchased for RM30,000 on 3 June 2012, and RSB had claimed accelerated capital allowances
under the Income Tax (Accelerated Capital Allowance) (Plant and Machinery) Rules 2008 under which the initial and
annual allowances claimed were 20% and 80% respectively.

Required:
(a) State the circumstances in which a service centre workshop will qualify as a factory building for the purposes
of claiming industrial buildings allowances. (2 marks)

(b) In respect of the assets acquired by Roda Sdn Bhd in the year ended 30 June 2014:
– Determine the qualifying plant and building expenditure and compute the capital allowances and
building allowances for the year of assessment 2014.
– Identify those assets or expenses which are non-qualifying and state the reason.
Note: Your answer should indicate the residual expenditure in respect of all relevant assets. (15 marks)

(c) Compute the balancing allowance or charge for the year of assessment 2014 as a result of the write off of
the CAD software system. (3 marks)

(20 marks)

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4 (a) Paragon Sdn Bhd (PSB) is a Malaysian resident company which operates an internationally renowned fast food
chain. PSB has an issued share capital of RM10 million and makes up its accounts annually to 30 September.
PSB has entered into a franchise agreement with Lara Ltd, a non-resident company. Under the terms of this
agreement, PSB is required to pay a royalty annually based on its annual sales. For the year ended 30 September
2014, the gross royalty payable was computed as RM100,000 and this was paid to Lara Ltd on 20 October
2014. Due to a change in personnel, the payment of the withholding tax on this royalty due to be remitted to
the Inland Revenue Board (IRB) was inadvertently overlooked.
PSB submitted its tax return for the year of assessment 2014 on 1 December 2014 and claimed a deduction for
the gross royalty payment in arriving at its adjusted income.
Extracts from the return submitted and the tax computation for the year of assessment 2014 are as follows:
RM
Chargeable income 2,000,000
Income tax payable at 25% 500,000

Required:
(i) State the date by which the withholding tax on the royalty payment should have been remitted to the
Inland Revenue Board (IRB). (1 mark)
(ii) State the consequences for Paragon Sdn Bhd of its non-compliance with the withholding tax
requirements. (3 marks)
(iii) Compute the amount of withholding tax due and the penalty for its late payment, and compute the
income tax underpaid by Paragon Sdn Bhd for the year of assessment 2014; and the penalty for
submitting an incorrect return.
Note: You should assume the penalty rate for incorrect submission is 45%. (3 marks)
(iv) State the circumstances in which a taxpayer may self-amend an already submitted tax return and the
time limit for doing so. (2 marks)

(b) Mr Xuan a Taiwan citizen, was employed as head of global operations for Goal Sdn Bhd from March 2009 to
May 2014. He flew into Malaysia for the first time on 3 March 2009 and took the last flight from Malaysia to
Taiwan on 20 May 2014.
The record of Mr Xuan’s stay in Malaysia is as follows:
Year Period in Malaysia Days
2009 3 March to 31 December 2009 304
2010 1 January to 8 January 2010 8
2011 8 October 2011 to 31 December 2011 84
2012 1 January 2012 to 4 May 2012 }
25 May 2012 to 9 June 2012 } 282 (see note below)
22 June 2012 to 10 November 2012 }
2013 0
2014 10 January 2014 to 20 May 2014 131
In 2012, all of Mr Xuan’s temporary absences from Malaysia were for service-related matters except for:
– from 5 May 2012 to 24 May 2012 (20 days) when he returned to Taiwan due to his mother’s ill- health;
and
– from 10 June 2012 to 21 June 2012 (12 days) when he left Malaysia for a social visit.

Required:
State, giving reasons, the residence status of Mr Xuan for each of the years of assessment 2009 to 2014.
(6 marks)

(15 marks)

11 [P.T.O.
5 (a) State the THREE types of facilities available to a licensed manufacturer to acquire raw materials and
packaging materials for use in the manufacture of taxable goods, free of sales tax. (3 marks)

(b) Pacific Sdn Bhd, a company licensed for sales tax purposes, undertook the following transactions in the period
from 1 January to 28 February 2014:
(1) Imported goods including freight and insurance worth RM100,000 and received an invoice for this amount
dated 10 January 2014. The goods imported were subject to an import duty at the rate of 20%.
(2) As part of the promotion of its products, gave away free-of-charge 1,000 units of its products to potential
importers and customers on 20 February 2014. The cost to manufacture each unit of product is RM15 and
the selling price per unit is RM20.

Required:
(i) Explain the sales tax implication of giving away 1,000 units of finished goods free-of-charge.
(2 marks)
(ii) Compute the sales tax payable by Pacific Sdn Bhd for the period 1 January to 28 February 2014.
(3 marks)
(iii) Compute the penalty for late payment payable by Pacific Sdn Bhd if it did not remit the sales tax (as
calculated in (ii) above) until 25 May 2014. (2 marks)

(10 marks)

End of Question Paper

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