#Sample

AC/JAN 2024/TAX667/490

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE ADVANCED TAXATION / ADVANCED MALAYSIAN

TAXATION
COURSE CODE TAX667/490
EXAMINATION JANUARY 2024
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) the Question Paper

ii) a two - page Appendix 1
iii) an Answer Booklet - provided by the Faculty

5. Answer ALL questions in English.

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

This examination paper consists of 9 printed pages
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QUESTION 1

A resident trust was created by Suriman via trust deed. The appointed trustee manages the
assets for the benefit of Suriman's four children, namely Ezam, Hasni, Nazim and Umaira. The
following are the reported income and expenses for the year ended 31 December 2023:

RM
Gross business income from Malaysia 250,000
Expenses (including capital expenditure of RM24.000) 56,000
Dividend income from Kempas Berhad (single-tier) 10,300
Adjusted rental income from a local shophouse 15,700
Interest income from Jakarta (not remitted into Malaysia) 8,000

Additional information:

1. A RM5.000 cash donation was made to an approved institution while another RM2,000
donation in-kind was made to another approved institution. These donations were
excluded from the RM56,000 expenses.

2. The capital allowances for the year of assessment 2023 was RM23.000 while business
losses brought forward from the previous year amounted to RM12,700.

3. Out of the four beneficiaries, only Nazim is a non-resident in Malaysia for the year of
assessment 2023.

4. An annual amount of RM9,000 is to be accumulated for Umaira until she reaches the
age of 21. One-third of the trust income is to be allocated to Ezam at the trustee's
discretion. The balance is to be distributed between Hasni and Nazim at a ratio of 2:3,
respectively.

5. An annuity of RM6.000 per year is payable to Marlini (Suriman's wife) but she received
only half the amount entitled in 2023.

6. An annual amount of RM4.000 is paid to the trustee as remuneration fee.

7. In 2023, Nazim received rental income of RM4,600 from a property in Malaysia.

8. The amount received by Ezam, Hasni and Nazim from the trust body were RM95.000,
RM55,000 and RM80.000, respectively.

Required:

a. For the year of assessment 2023, assuming Section 61(2) is to be applied, calculate the
following:
i. The income tax payable by the trust body.
(8 marks)
ii. The income tax payable by Nazim
(2 marks)
Note: Round up the computation to the nearest ringgit.

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b. Explain briefly the tax implication on the net tax payable of Ezam and Hasni, if Sec 61 (2)
is not to be applied.
(2 marks)
(Total: 12 marks)

QUESTION 2

Muffin Investment Holdings Sdn Bhd (MIHSB) is a Malaysian incorporated resident investment
holding company with a paid-up capital of RM5 million. It closes its accounts to 31 December
every year. Its income is derived mainly from investments, which consist of fixed deposits in
local financial institutions, shares in companies and a retail shop lot in a shopping mall in Kota
Kinabalu. There is no support or maintenance services provided for this retail shop lot.

The company has produced the following information for the financial year ended 31 December
2023.

Muffin Investment Holdings Sdn Bhd

Year ended 31 December 2023
Gross Income RM RM
Fixed deposit interest 150,000
Management services fees 42,000
Rental - Retail Shop in Kota Kinabalu 96,000
Dividends
• Gamurda Land Holdings (M) Bhd 57,000
• Parkwood Pvt. Ltd. (Note 1) 45,000 106,000
Gains from realization of investment 100,000
494,000
Less: Expenses
Depreciation 10,000
Directors' remuneration 100,000
Staff salaries and allowances 90,000
Management expenses 25,000
Accounting and Audit fees 8,500
Secretarial fees 12,500
Interest charges 40,000
Printing and stationary 1,200
Office rental 30,000
Repairs and maintenance (Note 2) 24,000
Quit rent and assessment (Note 3) 2,800 344,000
Net Profit 150,000

Additional information:

1. The dividend received from Parkwood Corporation (Australia) is remitted to Malaysia and
has suffered foreign tax at the rate of 25%.

2. A quarter of the cost of repairs and maintenance are related to the retail shop in Kota
Kinabalu while the remaining are related to cost of repairs and maintenance of MIHSB's
office.

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3. Quit rent and assessment amounting to RM1,200 is for the retail shop in Kota Kinabalu.

Required:

a. Calculate the total income of Muffin Investment Holdings Sdn Bhd (MIHSB) for the year
of assessment 2023, assuming that MIHSB is an investment holding company not listed
on Bursa Malaysia. Show all relevant workings.
(15 marks)

b. Assuming that Muffin Investment Holdings Sdn Bhd (MIHSB) is considering getting listed
on Bursa Malaysia. Advise MIHSB on the tax treatment of its income under a listed
investment holding company.
(5 marks)
(Total: 20 marks)

QUESTION 3

If a taxpayer is suspected of evading tax by the revenue authority, an in-depth

investigation is carried out to recover any tax undercharged. This process is referred to
as tax investigation.

Required:

Explain briefly TWO (2) objectives of tax investigation as stated in the Tax Investigation
Framework.
(3 marks)

B. The Inland Revenue Board of Malaysia (IRBM) suspected that Encik Ali had under-
declared his income for the year of assessment 2023. Encik Ali operates an advertising
firm for the past ten years. The following information was obtained by the IRBM during
the process of their investigation.

1. The Statement of Financial Position extracted from Encik Ali's advertising business
is provided below:

2022 2023
RM RM
Capital 100,000 100,000
Balance of retained earnings 300,000 450,000
Proprietor's fund 400,000 550,000

Represented by:
Non-current assets 120,000 148,000

Current assets 400,000 430,000

Less: Current liabilities (120,000) (28,000)
400,000 550,000

2. Encik Ali owns two cars. Car A was purchased in 2018 for RM56,000 while car B
was purchased in 2021 for RM200,000. He sold car A at the end of 2023 for
RM32,000.
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In November 2023, Encik Ali purchased a new car C for his wife for RM54.500.

3. Encik Ali invested RM20,000 in a fixed deposit (MBB Bank) on 1 July 2023 and
received interest income of RM1,100 in 2023.

4. Encik Ali received full repayment of a loan from his nephew in 2023. The RM 10,000
loan was given out in 2021.

5. Encik Ali owns several properties as at the end of 2022:

Cost Market Price

Property
RM RM
Terrace house (old residence) 240,000 500,000
Land A 100,000 500,000
Land B 200,000 600,000

Encik Ali sold the terrace house for RM464.000 in January 2023 and purchased a
new house on 15 December 2023 at the price of RM1,900,000. He paid
RM800,000 and the balance was financed by a bank loan to be repaid over fifteen
years. The monthly repayment is scheduled to commence in January 2024.

6. Encik Ali acquired shares costing RM60,000 in March 2018. He took a bank loan
of RM 10,000 to purchase the shares. In May 2023, he purchased additional
shares costing RM20.000. He then sold all his shares for RM90.000 in November
2023. The expenses on the disposal of the shares were RM1.500. The sale
proceeds were used to fully repay the bank loan and the balance was placed in a
fixed deposit with CEB Bank for 12 months.

7. It was found that Encik Ali took a personal loan of RM36,000 from a financial
institution on 1 March 2022. He started to repay this loan in May 2022. The
repayment of the principal and interest were as follows:

Years of assessment 2022 2023

RM RM
Total principal payment 8,000 12,000
Total payment of interest expense 2,400 3,600

8. Encik Ali received RM6,000 cash as a birthday gift from his wife in 2023.

9. The following particulars were extracted from the current account of Encik Ali:

RM
As at 31.12.2022 (Debit balance) 52,440
As at 31.12.2023 (Debit balance) 36,600
Total overdraft interest charged for 2023 5,300

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10. The following particulars were extracted from the cheque butts kept by Encik Ali:

RM
05.01.2023 December 2022 credit card bills 4,570
03.04.2023 Air tickets 8,990
04.04.2023 Travelers' cheque 24,000
10.05.2023 Income Tax 7,790
05.08.2023 Daughter's overseas education 34,000
03.10.2023 Gift to oldest son to start his business 100,000
25.11.2023 New car C 54,500

11. The income declared by Encik Ali for the year of assessment 2023 was RM1.3
million.

Required:

Using the capital statement method, ascertain the amount of income not reported by
Encik Ali (if any) for the year of assessment 2023.

(20 marks)
(Total: 23 marks)
QUESTION 4

Prime REIT is a real estate investment trust in Malaysia and has been listed on Bursa Malaysia
since 2018. Prime REIT's real properties are located all over Malaysia and the real properties
are mainly rented by retail and manufacturing industries. The following are the income and
expenses for the year ended 31 July 2023 for Prime REIT.

RM RM
Income
Gross rental income 1,000,000
Gross interest income - local banks 175,000
Gross dividend income - pioneer status company 82,000
Gains from disposal of motor vehicle 29,000 1,286,000

Less: Expenses
Manager's remuneration 60,000
Interest expense on loan to acquire shares 17,100
Interest expense on loan to acquire new real properties 52,000
Maintenance of properties 132,000
Depreciation 40,000
Dinner with potential tenants 1,000
Cash donation to a public university 20,000
Professional fees 30,000
Provision for specific doubtful debts 20,000
Properties' insurance 27,000
Audit fees 15,000 414,100
Net profit before taxation 871,900
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Additional information:

1. Information on disposal of a motor vehicle during the year of assessment 2023:

• The disposal value is RM60.000

• Residual expenditure is RM40,000
• The accumulated capital allowance is RM160,000.

2. The current year's capital allowances and industrial building allowances (related to rental
income) amounted to RM60.000 and RM15,000, respectively.

3. Prime REIT distributed 85% of its total income to unit holders on 15 September 2023.
There was no subsequent distribution of total income to the unit holders after the initial
distribution.

Required:

a. Determine the income tax liability of Prime REIT for the year of assessment 2023. Start
your answer with net profit before taxation and indicate 'Nil' where no adjustment is
needed.
(12 marks)

b. Contrast the tax treatment of the total income derived from REIT by comparing those
listed on Bursa Malaysia with those unlisted on Bursa Malaysia. Consider the
perspectives of both the REIT and non-resident company unit holders.
(5 marks)

c. Explain to the management of Prime REIT ways to minimize its tax effect via application
of industrial building allowance for its real properties.
(3 marks)
(Total: 20 marks)

QUESTION 5

A. The entire Kejora group of companies was incorporated in Malaysia on 1 October 2020
with the financial year end on 30 September. The paid-up share capital for each company
is RM3 million except for Kejora Holdings which has a paid-up share capital of RM5
million. They are all tax resident in Malaysia with the following holding structure since
incorporation.

Kejora Holding

100%
r
75% ' 50% , r

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?n%

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Details for the year ended 30 September 2023 are as follows:

Kejora Kejora Kejora Kejora

Holding Solar Manufacturing Logistics
(RM) (RM) (RM) (RM)
Adjusted income / (loss) 4,000,000 (2,000,000) 400,000
Capital allowances 2,400,000 200,000
Rental income 1,100,000 400,000
Approved donation 130,000 100,000

Additional information:

1. Kejora Solar was granted investment tax allowance by the Malaysian Investment
Development Authority (MIDA) on 1 January 2021 for 5 years.

2. It is the group's policy to prioritize Kejora Holding with regards to the utilization of
group loss reliefs.

Required:

a. Determine the amount of current year business loss that can be surrendered by
Kejora Manufacturing for the year of assessment 2023.
(1 mark)

b. Calculate the chargeable income for the year of assessment 2023 for each of the
companies in the group (excluding Kejora Manufacturing).
(7 marks)

B. Rinal Sdn Bhd was incorporated on 1 April 2021 and is involved in the manufacturing of
textiles. On 1 May 2021, the company acquired an automatic textile machine, costing
RM200,000 to be used in the business operation. Incidental cost on installation
amounted to RM20,000. The materials for the production were received by the company
on 15 November 2021. The company commenced the production on 10 January 2022
and close its accounts on 31 December, every year.

Before embarking on the textiles industry, the company sent three (3) employees to
China on 8 December 2021 for training course to ensure their business venture matches
with the demand and local industry needs. The company spent RM50.000 for 2 weeks
training course in China. The company also participated in the Asian Traditional Textiles
Fair 2022 that was approved by Ministry of International Trade. The event was held on
15 August 2022 at Marriot Hotel Putrajaya. The cost of the event is amounted to
RM5.000.

Required:

a. Advise the management of the company on how to determine the commencement

date of Rinal Sdn Bhd.
(2 marks)

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b. Advise Rinal Sdn Bhd on the tax treatment for the following expenses:

i. The cost of an automatic textile machine and the time when the capital
allowance can be claimed,
ii. The cost of training in China, including its deductibility and justification,
iii. The cost incurred for participating in the Asian Traditional Textiles Fair 2022,
including its deductibility and justification.
(7 marks)

c. Determine the capital allowances available to Rinal Sdn Bhd up to the year of
assessment 2023.
(3 marks)

C. Adamie Food Sdn Bhd, a trusted supplier of halal instant noodles, makes up its accounts
to 30 September, annually. The company is considering the purchase of a motor vehicle
for its business use through hire purchase in 2023. There are two options in relation to
the purchase of the motor vehicle. The first option is to buy a new motor vehicle for
RM130,000, while the second option is to acquire a used vehicle costing RM80,000.
Both vehicles are not licensed as commercial vehicles. The management of Adamie
Food Sdn Bhd seeks your opinion with regard to the best tax savings option.

Required:

Advise Adamie Food Sdn Bhd about the best option for the acquisition of motor vehicle
in order to minimize its income tax liability.
(5 marks)
(Total: 25 marks)

END OF QUESTION PAPER

© Hak Cipta Universiti Teknologi MARA

 APPENDIX 1 (1) AC/JAN 2024/TAX667/490

The following tax rates and allowances are to be used in answering the questions:

Income Tax Rates

(a) Company with paid up capital of not more than
RM2.5 million and Gross Business Income of
not more than RM50 million:
• On the first RM150,000 chargeable income 15%
• RM150,001 to RM600.000 chargeable income 17%
• In excess of RM600.000 chargeable income 24%

(b) Companies - other than category (a) above 24%

(c) Non-resident individuals 30%

(d) Resident individuals Scaled rate*

(e) Trust Body - Resident or Non-resident 24%

(f) Executor- Domiciled in Malaysia Scaled rate*

(9) Executor - Not domiciled in Malaysia 24%

* Scaled Rate (BUDGET 2023)

*Chargeable Income Rate Cumulative Tax

RM RM
On 5,000 0
Next 5,000 1 50
On 10,000 50
Next 10,000 1 100
On 20,000 150
Next 15,000 3 450
On 35,000 600
Next 15,000 6 900
On 50,000 1,500
Next 20,000 11 2,200
On 70,000 3,700
Next 30,000 19 5,700
On 100,000 9,400
Next 300,000 25 75,500
On 400,000 84,400
Next 200,000 26 52,000
On 600,000 136,400
Next 1,400,000 28 392,000
On 2,000,000 528,400
Exceeding 2,000,000 30

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 APPENDIX 1 (2) AC/JAN 2024/TAX667/490

Personal reliefs (BUDGET 2023)

RM
Self 9,000
Disabled self - additional relief for self 6,000
Spouse relief (normal) - no income/joint assessment 4,000
Disabled spouse - additional spouse relief 5,000
Child - unmarried and under 18 years old (each) 2,000
Child - unmarried child of 18 years and above receiving "A- (each) 2,000
Level", certificate, matriculation or preparatory courses.
Child - unmarried child of 18 years and above receiving further (each) 8,000
education at higher learning institution
Disabled child (unmarried) (each) 6,000
Disabled child - more than 18 years old and study at institution (each) 14,000
of higher education
Fees paid to childcare centre and kindergarten (maximum) 3,000
Expenses on medical treatment, special needs or carer (maximum) 8,000
expenses for parents
Medical expenses expended on self, spouse or child with serious (maximum) 10,000
disease, fertility treatment, vaccination up to RM1,000 and
diagnostic treatment for learning disabilities.
Basic supporting equipment for disabled self, spouse, child or (maximum) 6,000
parent
Study course fees for skills, qualifications, upskilling and self- (maximum) 7,000
enhancement
Lifestyle allowance (basic) (maximum) 2,500

Rebates

Chargeable income less than RM35,000 RM

Individual - basic rate 400
Husband and wife are separately assessed 400 each
Husband and wife are jointly assessed 800

Rate of Capital Allowances

Initial allowance Annual allowance

Rate % Rate %
Industrial buildings (general) 10 3
Plant and machinery - general 20 14
Motor vehicles and heavy machinery 20 20
Office equipment, furniture and fixtures 20 10
ICT equipment, computer software
packages and developed customized 20 20
software

© Hak Cipta Universiti Teknologi MARA

TAX667 –
JAN2024
RADIO
Q1 - TRUST
Q2 - IHC
Q2 - IHC
Q3 – TI & CAPITAL
STATEMENT
Q4 – REIT
Q5 – TAX PLANNING