Tutorial 4: Personal Tax Computation

Note: To discuss Q1 to Q5 during the tutorial class.

Question 1

Encik Hassan, a Malaysian tax resident, has been employed by INTEC Sdn. Bhd. since 1
January 2019. Details of his income for the year ended 31 December 2022 are as follows:
RM RM
Employment with INTEC Sdn. Bhd.
- Salary (01.01.2022 to 31.12.2022) S13(1)(a) 72,000
- Leave pay S13 (1) (a) 12,000
- Parking allowance S13 (1) (a) Exempted 4,800
- A holiday trip to Japan S13 (1)(b) 4,800
- Receipt on the unapproved pension fund previously contributed
by Encik Hassan and his employer:
 Contribution by Encik Hassan S13 (1)(d) Nil 15,000
 Contribution by INTEC Sdn. Bhd.S13 (1) (d) 43,000 58,000

A six-year old company car that originally cost RM180,000 was provided to Encik Hassan.
Petrol for official duties amounted to RM5,800 (cannot take from the PIK table, need to be
adjusted, need to compare with the actual and the adjusted) (Adjusted = Amount minus
exemption RM 6,000).

Other sources of income: RM

Royalties from a translation of work (as requested by Ministry of Education) 15,000
Royalties from artistic work 12,000
Interest on fixed deposits with Public Bank 3,412

During the year, Encik Hassan incurred the following expenses:

RM
(a) Medical expenses for his parents (receipt available only for RM6,000) 9,000
(b) Book and magazines 1,200
(c) Premium on medical insurance 2,800
(d) Cash donation to an approved institution 24,000
(e) Zakat (obligatory) with receipts 3,000
(f) Purchase of a Toshiba computer notebook 4,500

Required

Compute the chargeable income of Encik Hassan for the year of assessment 2022.

Donation = Aggregate income of all sources x 10%

1
 Question 2 (ACCA 2006) [modified as per YA 2022’s tax law]

Mrs Chan is employed as an executive of a company at a monthly salary of RM13,000.

The company provided Mrs Chan with a two-year-old car and a driver. The car had been
purchased for RM130,000 (the cost of the car was RM170,000 when new). The driver was
employed at a monthly salary of RM1,100. The fuel provided for the company car amounted
to RM7,000 for official duties.

In March 2022 Mrs Chan joined a golf club under individual membership with an entrance fee
amounting to RM24,980 and monthly subscriptions amounting to RM800 commencing from
March 2022. Both these payments were paid for by the company. S 13 (1) (a)

The company reimbursed Mrs Chan for the salary of a domestic servant employed by Mrs
Chan amounting to RM7,020. S13 (1) (a)

The company provided the leave passages for 2022 as follows:

Two overseas leave passages costing RM1,800 and RM2,700 respectively. Tax RM 1,800

Four local leave passages to: Tax on Penang (1,700 – 550 because not immediate member)
RM
Kota Kinabalu* 4,800
Langkawi 3,300
Penang 1,700
Kuching 2,900

* including an air ticket costing RM550 for Mrs Chan’s sister (need to be tax).

Mrs Chan’s only other income for the year 2022 was a single-tier dividend amounting to
RM1,300 received on 10 August 2022. S4 (c) Exemption

Mrs Chan made the following claims in her tax return for the year of assessment 2022:

Employees Provident Fund contributions amounting to RM17,160. Maximum RM 4,000

Purchase of books amounting to RM850. Lifestyle relief Maximum RM 2,500

The cost of medical equipment amounting to RM23,000 was donated to a healthcare centre
approved by the Ministry of Health. Maximum RM 20,000

Required

Compute the tax payable by Mrs Chan for the Year of Assessment 2022.

2
Question 3 (May 2022: PoTax)

Simon is a Malaysian tax resident for the year of assessment 2022. He has been employed as a finance
manager with Edaran Sdn. Bhd. (ESB) since 2010. The details of his remuneration from ESB for the
year of assessment 2022 are as follows:

 Salary and allowances:

Basic salary : RM15,000 per month

Entertainment allowance : RM2,000 per month
Travelling allowance : RM3,000 per month

 Simon’s contribution to the EPF is at 11% while ESB’s contribution towards his EPF is at 15%.

 A six-year old company car that originally cost RM180,000 was provided to him from 1 April
2022.

 Two leave passages costing RM10,500 were provided to him and his wife as follows:
- Kota Kinabalu : RM3,500
- Hong Kong : RM7,000

 A fully furnished house was provided to him from 1 July 2022. ESB paid RM4,500 per month
(including RM500 for furnishings) for the rental of the house. Simon paid RM600 per month to
ESB as a token of appreciation for the accommodation provided.

 ESB also reimbursed Simon for the salary of a domestic servant employed by him amounting to
RM6,000.

While performing his duty in the year 2022, Simon spent RM25,000 in entertaining the clients of ESB
and travelling expenses of RM35,000 on his official duties.

Other details of Simon’s incomes and expenditures during the year 2022 are as follows:

1. Interest income of RM8,000 from a fixed deposit with Pubic Bank Berhad.

2. Dividend income of RM20,000 from Iskandar Bhd., a tax resident company in Malaysia.

3. He donated a dialysis machine costing RM25,000 to a kidney centre approved by the Ministry of
Health.

4. Simon is married to Jane, a tax resident and a full-time housewife. The couple has two
unmarried children. The elder daughter, Jessica, 20 years old, is pursuing a degree in University
Malaya while his son, Mike, 15 years old, is studying in a secondary school.

5. He bought a new smartphone costing RM4,500 for himself and books and magazines costing
RM1,800 for his wife and children.

6. He also incurred RM6,000 on medical expenses for his parents.

Required:

Compute the income tax payable of Simon for the year of assessment 2022. All items stated in the
question are to be included in the computation. Where the item is not taxable or deductible, indicate
‘NIL’ in the computation.
3
Question 4 (May 2022: Tax)

Jordan, single and a Malaysian tax resident, is employed as a senior group accountant with
Total Quality Sdn. Bhd since 2020. His remuneration for the year ended 31 December 2022 is
as follows:

(i) Salary per annum of RM108,000. S13(1)(a)

(ii) Bonus for the year 2022 of RM15,000 received in January 2023. S13(1)(a), but no record
because it received in January 2023

(iii) For the first 3 months of 2022, the company reimbursed Jordan the salary of a
domestic servant employed by him at a monthly salary of RM1,500. Effective from 1
April 2022, the company employed the domestic servant and provided the servant free
of charge to Jordan. S13(1)(a) = 1,500 x 3 months; S13(1)(b) = 9/12 months x 4,800
(from table)

(iv) The company provided him with a piano costing RM25,000. The average life of the
piano is twenty years as determined by the Inland Revenue Board Public Ruling.
S13(1)(b) = 25,000 / 20 y

(v) A six-year old company car costing RM90,000 was provided to him together with fuel
for the whole year. S13(1)(b) = 3,600 / 2 = 1,800 car ; Fuel = 1,200

(vi) A company mobile phone costing RM2,000 was provided to him for the whole year.
All phone bills were paid by the company. S13(1)(b) Phone exempted bill exempted

During the year ended 31 December 2022, Jordan paid a yearly ACCA subscription fee of
RM1,000 to maintain his professional qualification. Deductible expenses

Jordan also owned a sole proprietorship business in Petaling Jaya, Selangor. The following is
the information related to his sole proprietorship business:
RM
Adjusted loss (Bring forward after 4(d), but before total income) (it (45,000)
can be deducted in all sources income)
Balancing charge Section 4 (a) 10,000
Current year capital allowance Section 4 (a) Minus out 8,000
Unabsorbed business loss brought forward from the YA 2021 2,000
Section 4 (a) Minus out

Additional information relating to Jordan for the year ended 31 December 2022:

(i) Jordan received a royalty income of RM50,000 from the publication of his new book. S4
(d) Exempted RM 20,000

(ii) Jordan received an interest income of RM8,000 from a local bank. Exempted S4 (c)

(iii) Jordan received a rental income of RM48,000 from a condominium located in Ipoh,
Perak. Expenses incurred on the condominium are as follows:
4
 RM
Quit rent and assessment (deductible) 1,200
Interest on loan (Deductible) 2,500
Installation of kitchen cabinets (Non-deductible) Capital expenses 5,000
Replacement of broken doors (Deductible) 1,500

The following expenses have been incurred by Jordan for the year ended 31 December 2022:

(i) EPF contributions of RM11,880 and SOCSO contributions of RM300. Maximum RM

4,000 EPF

(ii) Insurance premium of RM8,000 on life insurance policy for a capital sum of
RM500,000. Insurance premium maximum RM 3,000

(iii) Medical expenses of RM9,000 on his father. Maximum RM 8,000

(iv) Purchase of a Dell laptop costing RM6,000 for personal use and purchase of approved
sports equipment of RM500. Exempted maximum RM 2,500 for laptop (lifestyle) and
(Additional relief) + sport equipment RM 500 (Additional relief)

Required:

Compute the income tax payable of Jordan for the year of assessment 2022. All items stated
in the question are to be included in the computation. Where the item is not taxable or
deductible, indicate ‘nil’ in the computation.

5
Question 5 (ACCA Dec 2015) [modified as per YA 2022’s tax law]

Karam, a Malaysian tax resident, is married to Susan and has a 19-year-old son, David. David
is pursuing a full-time degree at a local Malaysian university and received a full scholarship
from a multi-national company in Malaysia for his university fees. Susan has no income.

Karam is employed by Olive Sdn. Bhd. as the operations manager based in Ipoh, Malaysia.
Details of his employment income for the year 2022 are as follows:

─ A salary of RM48,000.
─ An entertainment allowance of RM3,000. During the year 2022, Karam spent RM2,000
on entertaining the company’s clients.
─ Employees’ provident fund (EPF) contributions by Olive Sdn. Bhd. of RM5,760. Karam
made EPF contributions of RM5,280.

Olive Sdn. Bhd. also provided Karam with the following benefits during the year 2022:

─ Semi-furnished accommodation. Olive Sdn. Bhd. paid a monthly rental of RM2,100 for
an apartment which included RM100 for the furniture in the lounge and dining room.
─ Medical benefits of RM250.

Karam also runs a part-time business selling computer games software. Details of his business
income for the year 2022 are as follows:

Adjusted income RM30,000

Capital allowances RM5,000
Unabsorbed business loss brought forward RM1,000

In addition, in 2022, Karam received RM3,000 as a commission from his neighbour for
assisting him in securing a buyer for the sale of the neighbour’s small office, home office
(SOHO) unit.

Details of Karam’s other expenditure for the year 2022 are as follows:

─ Medical expenses for a weight reduction and wellness programme for his wife of
RM2,000.
─ A donation of goods worth RM10,000 to an approved institution.
─ Deferred annuity premiums paid of RM3,500.
─ Books purchased for his personal use of RM1,200.

Required:

Compute the income tax payable by Karam for the year of assessment 2022. (15 marks)

Note: You should indicate by the use of the word ‘nil’, as appropriate, any item referred to in
the question for which no adjusting entry needs to be made in the tax computation.

6
Question 6

David, a Canadian, first came to Malaysia with his family on 1 December 2021 to take up an
appointment as a senior IT consultant in Telford Sdn. Bhd. He commenced his employment
with the company on 1 January 2022. He stayed in Malaysia for the whole year 2022 except
for the period of 1 October 2022 to 10 October 2022 when he returned to Canada for a social
visit. His remuneration package for the year ended 31 December 2022 was as follows:

1. Basic salary per month: RM8,000

2. Bonus for the year 2021: RM15,000 (paid in January 2022)

3. Entertainment allowance per annum: RM24,000

4. Reimbursement of business trips visiting customers: RM20,000

5. A company car costing RM100,000 was provided for the whole year of 2022.

6. An interest-free loan of RM200,000 from his employer to finance the acquisition of

his second car. The loan was given from the internal funds of the employer. The
interest of the said loan would have been RM15,000 if it had been borrowed from a
commercial bank.

7. Leave passage to Canada: RM10,000

8. A fully furnished bungalow was provided for the whole year. The rental of RM5,000
per month (including RM1,000 for rental of furnishings) was paid by the company.

Additional information relating to the year ended 31 December 2022:

1. David spent RM28,000 to entertain customers.

2. He received dividends amounting to RM10,000 from his portfolio of shares in Canada

which was remitted into Malaysia. He also received rental income of RM80,000 from
a property in Canada which was directly credited into his bank account in Canada.

3. Interest income of RM8,000 was received on his fixed deposits in Maybank.

4. A cash donation of RM10,000 was made to the library of Tunku Abdul Rahman
University College.

5. He has three children. The first child, aged 23, is physically disabled and pursuing a
degree course in Australia. The second child, aged 17, is studying A levels in a local
college. The third child, aged 15, is studying in an international school. His wife has
no income for the year 2022.

6. He bought a new smartphone costing RM2,000 for his wife and also spent RM1,000
on a gym membership.

7
Required:

(a) Determine the residence status of David for the year of assessment 2021 in accordance
with the Income Tax Act, 1967. (4 marks)

(b) Compute the income tax payable of David for the year of assessment 2022. (16 marks)
[Total: 20 marks]

Suggested answer:

6(a)

According to section 7(1)(b) of the Income Tax Act, 1967, an individual is a resident in
Malaysia for the basis year for a particular year of assessment if he/she in Malaysia in
that basis year for a period of less than 182 days but that period is linked by or linked to
another period of at least 182 consecutive days (including temporary absence) either
immediately preceding or immediately following that particular year of assessment.

David stayed in Malaysia for 31 days in 2021 and this was linked to following year 2022
for a period of at least 182 consecutive days. Hence, David is a resident under section
7(1)(b) for the year of assessment 2021.

8
6(b)
David's tax computation for YA 2022
Employment income RM RM
S 13(1)(a)
Salary (RM8,000 x 12) 96,000
Bonus 15,000
Entertainment allowance 24,000
Reimbursement of business trips Nil
Interest free loan Nil
135,000
S 13(1)(b)
Car 3,600
Leave passage (RM3,000 exempted) 7,000
Fully furnishings 3,360
13,960
S 13(1)(c )
30% of S 13(1)(a)
30% x 135,000 = 40,500
or defined value
RM(5,000 - 1,000) x 12 48,000
whichever is the lower 40,500
Gross income from employment 189,460
Less: Entertainment expenses (restricted) (24,000)
Adjusted employment income 165,460
s4 (c)
Dividend income (Sch 6 Para 28) Nil
Interest income Nil
s4(d)
Rental income Nil
Aggregate income 165,460
Less: Approved donation (limited to 10% of agg income) (10,000)
Total income 155,460
Less: relief
Self 9,000
Wife 4,000
Child : First RM(6,000 + 8,000) 14,000
Second 2,000
Third 2,000
EPF 4,000
Lifestyle + Special lifestyle relief (phone 2,000 + gym 1,00 3,000 (38,000)
Chargeable income 117,460

Tax payable
First RM 100,000 10,700.00
Next RM 17,460 *24% 4,190.40
Net tax payable 14,890.40

9
Question 7
Mr. Heng, a Malaysian resident, received the following income for the year ended 31
December 2022:

RM
Employment income 50,000
Dividend from Abus Bhd. 3,000
Fixed deposit interest from May Bank 1,000
Adjusted rental income from a property located in Kuala Lumpur 8,000

He also operates a small organic farm business and the results of this business for the year
ended 31 December 2022 are as follows:

RM
Adjusted income from business (Adjusted loss RM9,000) NIL
Current year balancing charge 10,000
Current year capital allowance 4,000
Capital allowance brought forward 2,000
Unabsorbed business loss b/f from the year of assessment 2021 (1,500)

Mr. Heng’s wife is a housewife. They have three children as follows:

1. Ping, 20 years old, studying at the University of Malaya. The annual costs of
educating and maintaining her in 2022 amounted to RM15,000.

2. May, 14 years old, studying at Sekolah Menengah Kwang Yit.

3. Ling, 8 years old, is a disabled person certified by the department of social welfare.

During the year, Mr. Heng had also incurred RM3,000 for medical expenses in respect of his
parents.

Required:

Compute the income tax payable by Mr. Heng for the year of assessment 2022.

10
Suggested answer:

Mr. Heng
Computation of income tax payable for YA 2022

Section 4(a) - Business income RM RM

Adjusted income Nil
Add: Balancing charge 10,000
Less: Capital allowances
Brought forward 2,000
Current year 4,000
(6,000)
Statutory business income 4,000
Less: Unabsorbed business loss b/f (1,500)
2,500
Section 4(b) Employment income 50,000
Section 4(c) Dividend income exempted
Section 4(c) Interest income exempted
Section 4(d) Rental income 8,000
Aggregate income 60,500

Less: Current year business loss (9,000)

Total income 51,500

Less: Reliefs
Self 9,000
Wife 4,000
Child : Ping 8,000
May 2,000
Ling 6,000
EPF 4,000
Parents' medical expenses 3,000
(36,000)
Chargeable income 15,500

Income tax payable

First 0
RM5,000
Balance @ 1% 105
105
Less: Rebate Self 400
Wife 400
(800)
NIL

11