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AC/OCT 2006/TAX320

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE

TAXATION 1

COURSE CODE

TAX320

EXAMINATION

OCTOBER 2006

TIME

3 HOURS

INSTRUCTIONS TO CANDIDATES
1.

This question paper consists of five (5) questions.

2.

Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3.

Do not bring any material into the examination room unless permission is given by the
invigilator.

4.

Please check to make sure that this examination pack consists of:
i)
ii)
iii)
iv)
v)

the Question Paper

an Answer Booklet - provided by the Faculty
a one-page Appendix 1
a two-page Appendix 2
a one-page Appendix 3

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 10 printed pages
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AC/OCT 2006/TAX320

QUESTION 1

A.

Dr. Hasheem from Syria works as a medical consultant at Syifa' Medical Hospital,
Ipoh. Details of his stay in Malaysia are as follows:

Note
15 September 2000

- 20 December 2000

20 August 2001

1 December 2001

17 December 2001

3 January 2002

1 April 2002

- 1 8 December 2002

15 January 2003

10 March 2003

- 30 November 2003

1 January 2004

1 March 2003

4 and 5

- 27 February 2004

29 May 2004

1 1 January 2005

- 20 January 2005

1 January 2006

7 July 2004

- 30 August 2006

Note:
1.

Dr. Hasheem went to China on 2 December 2001 until 16 December 2001 for
medical course sponsored by his employer.

2.

He went back to Syria on 4 January 2002 to take care of his son who was
suffering from a renal failure until 31 March 2002.

3.

In the afternoon of 19 December 2002 he left for Indonesia for a social visit.

4.

Dr. Hasheem went to United Kingdom for a seminar at the Royal Medical
Hospital from 1 January until 14 January 2003.

5.

On 2 March 2003 Dr Hasheem lead a group of Malaysian medical officers to

Iraq for medical voluntary services and returned to Malaysia on 10 March
2003.

6.

On 28 December 2004 until 10 January 2005 he was in Brunei for a social

visit.

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AC/OCT 2006/TAX320

Required:
Determine the resident status of Dr Hasheem for all the relevant years of
assessment, giving reasons for each answer.
(12 marks)
B.

Suzana is a computer science graduate, who has just set up her own computer
service center in June 2005. Suzana approached you for advice in respect of the
following:
(i)

Her responsibilities as an employer

(ii)

The Scheduler Tax Deduction System.

(iii)

Responsibilities of a person carrying on a business.

(4 marks)
(2 marks)
(2 marks)
(Total: 20 marks)
QUESTION 2

Puan Allysa, (aged 40 years old) has been with Macadamis Industries as an accountant
since 1 July 1999. Her service was terminated on 31 July 2005. She received RM45.000 as
compensation for loss of employment and a gratuity of RM25.000. She withdrew RM50.000
from an unapproved fund (70% of the fund was contributed by Macadamis Industries).
The details of her remuneration and benefits from Macadamis Industries in the year 2005
were as follows:
a.
b.
c.
d.

Monthly salary of RM4.500 (gross)

Monthly entertainment allowance of RM500
A six-year old Volvo which cost RM175,000 when new.
A semi-furnished apartment with air condition, carpet and curtain. Macadamis
Industries rented the apartment at RM1.500 per month, excluding the rental of
furniture of RM200.

On 1 August 2005, Puan Allysa commenced employment with Cadbury Sdn Bhd as a
Finance Manager for which she was given the following remuneration and benefits for the
year 2005:
a.
b.
c.

d.
e.
f.

Salary RM4.005 per month (after deducting employee's EPF contribution of 11%)
Bonus of RM6,000
A fully furnished bungalow. Cadbury Sdn Bhd paid a monthly rental of RM5.500
inclusive of furniture value at RM2,500.
A brand new Mercedes Benz (costing RM278,000) and a driver were also provided.
The company paid RM650 per month for the driver and RM4,000 for fuel,
Entertainment allowance of RM300 per month,
A servant with a salary of RM500 per month, paid by the employer.

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g.

AC/OCT 2006/TAX320

Leave passages to Tioman Island and New Zealand (with her husband and a
daughter). Costs of air tickets paid by Cadbury Sdn Bhd were RM3.500 and
RM11,750 respectively.

Other information:
1.

Puan Allysa incurred entertainment expenses of RM2.000 from August 2005 until
December 2005.

2.

Puan Allysa paid an annual membership fee to Malaysian Institute of Accountants of

RM250.

Required:
Compute the statutory income from employment for Puan Allysa for the year of assessment
2005.
(20 marks)

QUESTION 3

Encik Kamal is the owner of a construction supplies business, Nilam Sdn. Bhd. The financial
year ends on 31 December. The following are the assets used in the business:
1.

A facsimile machine was purchased on 25 May 2004 for RM5,800. It was sold on 1
February 2006 for RM3,200.

2.

A second-hand motor vehicle was bought in February 2003 for RM118,000. The
vehicle was not licensed for commercial transportation and the Inland Revenue
Board, Malaysia has determined that only one-third of its usage was for business
purpose. On 24 October 2006 the motor vehicle was sold for RM80,000.

3.

A lorry was acquired on 25 August 2005 under a hire-purchase terms for which a
deposit of RM36.000 was paid. The cash price was RM120,000. The hire purchase
loan consist of 48 installments of RM2.030 per month. The first installment
commenced on 16 September 2005.

Required:Compute the capital allowances, balancing charges or allowances (if any) that can be
claimed by Encik Kamal for all the relevant years of assessment up to year of assessment
2006.

(Total: 15 marks)

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AC/OCT 2006/TAX320

QUESTION 4

Rozaime owns Rainbow Shoppe which is located in Taman Sri Pelangi, Johor. The
business deals in general trading commenced operation on 1 July 2004. On 31 September
2006, he came to you for some advice regarding his business tax liability. He submitted to
you the Forecasted Trading, Profit and Loss account for the year ended 31 December 2006.
Rainbow Shoppe
Forecasted Trading, Profit and Loss account
for the year ended 31 December 2006

Sales
Less: Cost of goods sold
Gross profit
Add: Other income
Commission received
Dividends received (net)
Interest received
Less: Operating expenses
Salary
Bonus
EPF
Water and electricity
Telephone bills
Transportation expenses
Legal fees
Bad debts
Entertainment expenses
Insurance
Taxation
Depreciation
Sundry expenses
Net Loss

Note
1

RM

2
3
4

5,000
2,980
1.570

5
5
5
6
7
8
9
10
11
12
13
14
15

40,000
8,000
5,280
750
1,982
2,825
5,500
4,000
7,100
4,280
2,570
7,310
505

RM
110,000
42.560
67,440

9.550
76,990

90,102
(13.112)

Notes to the account:

1.

During the year, Rozaime has withdrawn goods that have not been recorded in the
books. The selling price and the cost of the goods withdrawn were RM4.250 and
RM3,150 respectively.

2.

Commission received from trading.

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3.

AC/OCT 2006/TAX320

Dividends received were from investment in the following portfolio:

RM
2,100
880

ASB
Areca Bhd.

Date Received
2 January 2006
30 April 2006

4.

Interest charged on debtors for late payments of accounts receivables.

5.

Salary, bonus and EPF contributions:

Rozaime
Employees

Salary (RM)
24,000
16.000

Bonus (RM)
4,800
3.200

EPF (RM)
3,168
2.112

40.000

8.000

5.280

Included in the salary, bonus and EPF paid to employees are salary of RM6.000,
bonus RM1,000 and EPF RM770 paid to Muthu, a disabled employee.

6.

One-third (1/3) of the water and electricity was for private use.

7.

Telephone bills:
RM

Rainbow Shoppe
Charges related to his wife's business
8.

1,367
615

Transportation expenses:
RM

Carriage outwards
Rozaime's holiday to Terengganu
9.

2,225
600

Legal fees:
RM

Business contract agreement

Tax appeal for Rainbow Shoppe
Housing loan agreement for Rozaime
10.

3,500
1,200
800

Bad debts:
RM

Rozaime's friend
Ex-staff
Bankrupt debtors
Specific provision for doubtful debts

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600
600
800
2,000

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11.

AC/OCT 2006/TAX320

Entertainment expenses:
RM

Holiday passage to Pulau Rawa for the employees

Promotional samples of Rainbow Shoppe products
Free 2006 diary without business logo
12.

4,850
1,050
1,200

Insurance:
RM

Fire insurance on business premise

Life insurance for Rozaime
Insurance for goods purchased
13.

1,300
1,800
1,180

Taxation:
RM

Rozaime's business tax

Quit rent for business premise

14.

Depreciation on the following assets used in the business:

Motor vans
Furniture
Office equipment

15.

2,120
450

Depreciation
(RM)
3,200
1,650
2,460

Capital
allowance (RM)
3,600
1,400
2,620

Sundry expenses included medical expenses of RM280 for Muthu (an employee)
who is handicapped and RM225 for Rozaime's son.

Required:
Starting with net profit before tax, compute the statutory business income of Encik Rozaime
for the year of assessment 2006. (Indicate 'nil' or'-' in the appropriate column for any item/s
that does not require any adjustment).
(Total: 20 marks)

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AC/OCT 2006rTAX320

QUESTION 5

Encik Shahir works as an accountant in a private company in Johor Bahru. His wife, Puan
Tasya is a teacher at Sekolah Menengah Datuk Paduka, Johor Bahru (Government School).
They are both residents in Malaysia. For the basis year 2005, their income from the following
sources are:
Encik Shahir:
1.

Monthly salary of RM4.500 net (after deducting RM250 for income tax and
RM520 for EPF). He also received bonus amounting to RM10,540 and monthly
housing allowance of RM500.

2.

Encik Shahir also owned a telecommunication business in Johor Bahru. He hired 3

workers to assist him in the business. The following information is regarding income
and loss from the telecommunication business for the basis year 2005:
RM

Adjusted business income

Capital allowance:
previous year
- current year
Balancing charge
Previous year business loss
3.

80,000
Nil
15,000
4,000
Nil

During the year, Encik Shahir invested in shares and received dividend as follows:
RM4.200 (net) from Petra Bhd. (a company resident in Malaysia). In buying
these shares, he secured a bank loan which he paid RM280 per month
including interest of RM50.
RM3.000 from Pakhini Company (a company resident in Thailand). The total
dividend was remitted to Malaysia in 2005.

4.

Interest of RM5.250 received from savings account in Alliance Bank Bhd (Capital
invested was RM105,000 @ 5% interest per annum).

5.

He also earned commission of RM8.000 as a part time property agent.

6.

Encik Shahir is a member of the Malaysian Institute of Taxation. For the basis year
2005, he paid RM150 for the membership fees.

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AC/OCT 2006/TAX320

Puan Tasya:
1.

Monthly salary of RM3.280.

2.

She received RM600 interests from her saving account with BCB Bank (Capital
invested was RM12,000 @ 5% interest per annum).

3.

Puan Tasya has a house in Kulai, Johor which is rented out. The house was
purchased on 26 July 2004. The following information is related to the house:
Monthly rental
(July - December 2005)

RM600 per month

Expenses incurred (per annum)

RM
650
400
240
150
1,000

Quit rent
Fire insurance
Upkeep of garden
Repair of broken window (see note)
Renovation

Note:
4.

The tenant paid for the repair of broken window.

Puan Tasya also conducted a 2-month extra classes at her home for the PMR
students. She earned RM1,400 per month from the extra classes.

Other information:
1.

Encik Shahir and Puan Tasya have four children:

Bita
Nizam

Sham
Aiman

24 years old, married and studying in University of Nanyang,

Singapore
21 years old, studying full time in UiTM Johor. Doing part time job,
and earned RM 3,650 in 2005.
17 years old, attending secondary school in Singapore.
15 years old, attending secondary school in Johor Bahru.

2.

Encik Shahir spent RM4.275 and RM1,650 for his father and mother in-law medical bills
respectively.

3.

Insurance from Syarikat Takaful:

Life Insurance
Life Insurance
Education Insurance

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Premium paid
(per annum)
RM600
RM1.200
RM3.000

On the life /
name of
Sham
Encik Shahir
Aiman

Paid by
Puan Tasya
Puan Tasya
Encik Shahir

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4.

10

AC/OCT 2006/TAX320

Encik Shahir paid zakat on his employment income amounting to RM1,350 for the year
2005 and zakat fitrah of RM30

5.

Puan Tasya purchased a personal computer that cost her RM4.800 and claimed for the
rebate.

6.

Donations made by Encik Shahir in 2005:

1 unit of refrigerator costing RM2.000 to Rumah Anak-Anak Yatim Johor,
which is an approved institution.
RM1,500 cash to Tabung Gempabumi Yogyakarta,Indonesia

7.

Puan Tasya spent RM800 on books and magazines. However, only the RM600
receipt is available.

8.

Puan Tasya has made an election to claim all the children relief.

Required:
Compute the income tax payable for Encik Shahir and Puan Tasya for the year of
assessment 2005.
(Total: 25 marks)

END OF QUESTION PAPER

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APPENDIX 1 (1)

AC/OCT 2006/TAX320

THE TAX RATES APPLICABLE WITH EFFECT FROM YA 2002

Chargeable Income

(RM)

Rate (%)

Tax Payable
(RM)

On the first
On the next

2,500
2,500

On the first
On the next

5,000
5,000

150

On the first
On the next

10,000
10,000

175
300

On the first
On the next

20,000

475
1,050

On the first
On the next

35,000
15,000

13

1,525
1,950

On the first
On the next

50,000
20,000

19

3,475
3,800

On the first
On the next

70,000
30,000

24

7,275
7,200

On the first
On the next

100,000
50,000

27

14,475
13,500

On the first
On the next

150,000
27

27,975
27,000

On the first

250,000

Above

250,000

0
1

25

15,000

100,000

0
25

54,975
28

Selected Personal Deductions

RM

Self
Wife/husband
Child - basic
Life insurance and approved schemes

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8,000
3,000

1,000
6,000 maximum

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APPENDIX 2(1)

AC/OCT 2006/TAX320

TAXABLE VALUE OF MOTOR VEHICLES PROVIDED BY EMPLOYER

New Vehicles Costing

RM

Annual Value
RM

Fuel (per ar
RM

50,000

and below

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

Others
Types of BIK

Mobile telephone (rental and charges)

Driver
Gardener
Domestic servant

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Annual value of BIK

RM
600
7,200
3,600
4,800

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APPENDIX 2 (2)

AC/OCT 2006/TAX320

PRESCRIBED AVERAGE LIFE SPAN

Asset

Prescribed
Average life span

(D

Motor car

8 years

(2)

Furniture and fittings:

Curtains, carpets
Furniture, sewing machine
Air-conditioner
Refrigerator

5 years
15 years
8 years
10 years

Kitchen equipment (i.e. crockery, rice cooker, electric

kettle, toaster, coffee-maker, gas cooker, dryer,
food processor, etc)

6 years

Entertainment and Recreation

Piano
Organ
Colour television, video player, stereo set
Swimming pool (detachable), sauna

20 years
10 years
7 years
15 years

Miscellaneous
Mobile telephone

10 years

(3)

(4)

(5)

VALUE OF BENEFITS

(i)

Semi-furnished with furniture in the lounge,

dinning room, or bedrooms

(ii)

Semi-furnished with furniture as in (i) above and

one or more of the following:
Air-conditioners
Curtains
Carpets

(iii)

Fully-furnished with benefits as in (i) and

(ii) above plus one or more of kitchen
equipment, crockery, utensils and appliances

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RM70 per month

(RM840 per annum)

RM140 per month

(RM1,680 per annum)
RM280 per month
(RM3.360 per annum)

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APPENDIX 3 (1)

AC/OCT 2006/TAX320

Capital Allowances - Plant and machinery

Assets
Computers, information technology equipment
and computer software
Motor vehicles, heavy machinery
Plant and machinery - general
Office equipment, furniture and fittings

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Annual allowance rates

40%
20%
14%
10%

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