tax320 (2)

CONFIDENTIAL AC/OCT 2006/TAX320

UNIVERSITI TEKNOLOGI MARAFINAL EXAMINATION

COURSE

COURSE CODE

EXAMINATION

TIME

TAXATION 1

TAX320

OCTOBER 2006

3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of five (5) questions.

Answer ALL questions in the Answer Booklet. Start each answer on a new page.2.

3.

4.

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

Please check to make sure that this examination pack consists of:

i) the Question Paperii) an Answer Booklet - provided by the Facultyiii) a one-page Appendix 1iv) a two-page Appendix 2v) a one-page Appendix 3

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SOThis examination paper consists of 10 printed pages

Hak Cipta Universiti Teknologi MARA CONFIDENTIAL


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:

15 September 2000

20 August 2001

17 December 2001

1 April 2002

15 January 2003

10 March 2003

1 January 2004

29 May 2004

1 1 January 2005

1 January 2006

- 20 December 2000

1 December 20013 January 2002

- 1 8 December 2002

- 1 March 2003

- 30 November 2003

- 27 February 2004

- 7 July 2004

- 20 January 2005

- 30 August 2006

Note

1

2

3

4 and 5

6

Note:

1.

2.

3.

4.

5.

6.

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

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

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

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

On 2 March 2003 Dr Hasheem lead a group of Malaysian medical officers toIraq for medical voluntary services and returned to Malaysia on 10 March2003.

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


CONFIDENTIAL 3 AC/OCT 2006/TAX320

Required:

Determine the resident status of Dr Hasheem for all the relevant years ofassessment, giving reasons for each answer.

(12 marks)

B. Suzana is a computer science graduate, who has just set up her own computerservice center in June 2005. Suzana approached you for advice in respect of thefollowing:

(i) Her responsibilities as an employer(4 marks)

(ii) The Scheduler Tax Deduction System.(2 marks)

(iii) Responsibilities of a person carrying on a business.(2 marks)

(Total: 20 marks)

QUESTION 2

Puan Allysa, (aged 40 years old) has been with Macadamis Industries as an accountantsince 1 July 1999. Her service was terminated on 31 July 2005. She received RM45.000 ascompensation for loss of employment and a gratuity of RM25.000. She withdrew RM50.000from 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 2005were as follows:

a. Monthly salary of RM4.500 (gross)b. Monthly entertainment allowance of RM500c. A six-year old Volvo which cost RM175,000 when new.d. A semi-furnished apartment with air condition, carpet and curtain. Macadamis

Industries rented the apartment at RM1.500 per month, excluding the rental offurniture of RM200.

On 1 August 2005, Puan Allysa commenced employment with Cadbury Sdn Bhd as aFinance Manager for which she was given the following remuneration and benefits for theyear 2005:

a. Salary RM4.005 per month (after deducting employee's EPF contribution of 11%)b. Bonus of RM6,000c. A fully furnished bungalow. Cadbury Sdn Bhd paid a monthly rental of RM5.500

inclusive of furniture value at RM2,500.d. 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,e. Entertainment allowance of RM300 per month,f. A servant with a salary of RM500 per month, paid by the employer.

Hak Clpta Universlti Teknologi MARA CONFIDENTIAL


g. Leave passages to Tioman Island and New Zealand (with her husband and adaughter). Costs of air tickets paid by Cadbury Sdn Bhd were RM3.500 andRM11,750 respectively.

Other information:

1. Puan Allysa incurred entertainment expenses of RM2.000 from August 2005 untilDecember 2005.

2. Puan Allysa paid an annual membership fee to Malaysian Institute of Accountants ofRM250.

Required:

Compute the statutory income from employment for Puan Allysa for the year of assessment2005.

(20 marks)

QUESTION 3

Encik Kamal is the owner of a construction supplies business, Nilam Sdn. Bhd. The financialyear 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 1February 2006 for RM3,200.

2. A second-hand motor vehicle was bought in February 2003 for RM118,000. Thevehicle was not licensed for commercial transportation and the Inland RevenueBoard, Malaysia has determined that only one-third of its usage was for businesspurpose. 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 adeposit of RM36.000 was paid. The cash price was RM120,000. The hire purchaseloan consist of 48 installments of RM2.030 per month. The first installmentcommenced on 16 September 2005.

Required:-

Compute the capital allowances, balancing charges or allowances (if any) that can beclaimed by Encik Kamal for all the relevant years of assessment up to year of assessment2006.

(Total: 15 marks)



QUESTION 4

Rozaime owns Rainbow Shoppe which is located in Taman Sri Pelangi, Johor. Thebusiness deals in general trading commenced operation on 1 July 2004. On 31 September2006, he came to you for some advice regarding his business tax liability. He submitted toyou the Forecasted Trading, Profit and Loss account for the year ended 31 December 2006.

Rainbow ShoppeForecasted Trading, Profit and Loss account

for the year ended 31 December 2006

SalesLess: Cost of goods soldGross profitAdd: Other incomeCommission receivedDividends received (net)Interest received

Less: Operating expensesSalaryBonusEPFWater and electricityTelephone billsTransportation expensesLegal feesBad debtsEntertainment expensesInsuranceTaxationDepreciationSundry expensesNet Loss

Note1

234

5556789101112131415

RM

5,0002,9801.570

40,0008,0005,280

7501,9822,8255,5004,0007,1004,2802,5707,310

505

RM110,00042.56067,440

9.55076,990

90,102(13.112)

Notes to the account:

1. During the year, Rozaime has withdrawn goods that have not been recorded in thebooks. The selling price and the cost of the goods withdrawn were RM4.250 andRM3,150 respectively.

2. Commission received from trading.

Hak Clpta Unlversltl Teknologl MAR A CONFIDENTIAL


3. Dividends received were from investment in the following portfolio:

RM Date ReceivedASB 2,100 2 January 2006Areca Bhd. 880 30 April 2006

4. Interest charged on debtors for late payments of accounts receivables.

5. Salary, bonus and EPF contributions:

Salary (RM) Bonus (RM) EPF (RM)Rozaime 24,000 4,800 3,168Employees 16.000 3.200 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 1,367Charges related to his wife's business 615

8. Transportation expenses:RM

Carriage outwards 2,225Rozaime's holiday to Terengganu 600

9. Legal fees:RM

Business contract agreement 3,500Tax appeal for Rainbow Shoppe 1,200Housing loan agreement for Rozaime 800

10. Bad debts:RM

Rozaime's friend 600Ex-staff 600Bankrupt debtors 800Specific provision for doubtful debts 2,000



11. Entertainment expenses:RM

Holiday passage to Pulau Rawa for the employees 4,850Promotional samples of Rainbow Shoppe products 1,050Free 2006 diary without business logo 1,200

12. Insurance:RM

Fire insurance on business premise 1,300Life insurance for Rozaime 1,800Insurance for goods purchased 1,180

13. Taxation:RM

Rozaime's business tax 2,120Quit rent for business premise 450

14. Depreciation on the following assets used in the business:

Depreciation Capital(RM) allowance (RM)

Motor vans 3,200 3,600Furniture 1,650 1,400Office equipment 2,460 2,620

15. 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 Rozaimefor the year of assessment 2006. (Indicate 'nil' or'-' in the appropriate column for any item/sthat does not require any adjustment).

(Total: 20 marks)

Hak Cipta Unlversiti Teknologi MARA CONFIDENTIAL

CONFIDENTIAL 8 AC/OCT 2006rTAX320

QUESTION 5

Encik Shahir works as an accountant in a private company in Johor Bahru. His wife, PuanTasya 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 followingsources are:

Encik Shahir:

1. Monthly salary of RM4.500 net (after deducting RM250 for income tax andRM520 for EPF). He also received bonus amounting to RM10,540 and monthlyhousing allowance of RM500.

2. Encik Shahir also owned a telecommunication business in Johor Bahru. He hired 3workers to assist him in the business. The following information is regarding incomeand loss from the telecommunication business for the basis year 2005:

RMAdjusted business income 80,000Capital allowance:

previous year Nil- current year 15,000

Balancing charge 4,000Previous year business loss Nil

3. 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 buyingthese shares, he secured a bank loan which he paid RM280 per monthincluding interest of RM50.RM3.000 from Pakhini Company (a company resident in Thailand). The totaldividend was remitted to Malaysia in 2005.

4. Interest of RM5.250 received from savings account in Alliance Bank Bhd (Capitalinvested 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 year2005, he paid RM150 for the membership fees.

Hak Cipta Unlverslti Teknologl MARA CONFIDENTIAL


Puan Tasya:

1. Monthly salary of RM3.280.

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

3. Puan Tasya has a house in Kulai, Johor which is rented out. The house waspurchased 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

Quit rent 650Fire insurance 400Upkeep of garden 240Repair of broken window (see note) 150Renovation 1,000

Note: The tenant paid for the repair of broken window.

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

Other information:

1. Encik Shahir and Puan Tasya have four children:

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

Nizam 21 years old, studying full time in UiTM Johor. Doing part time job,and earned RM 3,650 in 2005.

Sham 17 years old, attending secondary school in Singapore.Aiman 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 billsrespectively.

3. Insurance from Syarikat Takaful:

Premium paid On the life / Paid by(per annum) name of

Life Insurance RM600 Sham Puan TasyaLife Insurance RM1.200 Encik Shahir Puan TasyaEducation Insurance RM3.000 Aiman Encik Shahir

Hak Cipta Universitl Teknologl MARA CONFIDENTIAL


4. Encik Shahir paid zakat on his employment income amounting to RM1,350 for the year2005 and zakat fitrah of RM30

5. Puan Tasya purchased a personal computer that cost her RM4.800 and claimed for therebate.

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 RM600receipt 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 ofassessment 2005.

(Total: 25 marks)

END OF QUESTION PAPER

Hak Cipta Unlversit! Teknologi MARA CONFIDENTIAL

CONFIDENTIAL APPENDIX 1 (1) AC/OCT 2006/TAX320

THE TAX RATES APPLICABLE WITH EFFECT FROM YA 2002

Chargeable Income

On the firstOn the next









On the first

Above

(RM)

2,5002,500

5,0005,000

10,00010,000

20,00015,000

35,00015,000

50,00020,000

70,00030,000

100,00050,000

150,000100,000

250,000

250,000

Rate (%)

01

13

19

24

27

27

28

Tax Payable(RM)

025

25150

175300

4751,050

1,5251,950

3,4753,800

7,2757,200

14,47513,500

27,97527,000

54,975

Selected Personal Deductions

SelfWife/husbandChild - basicLife insurance and approved schemes

RM8,0003,0001,000

6,000 maximum

Hak Clpta Unlversiti Teknologl MARA CONFIDENTIAL

CONFIDENTIAL APPENDIX 2(1) AC/OCT 2006/TAX320

TAXABLE VALUE OF MOTOR VEHICLES PROVIDED BY EMPLOYER

New

50,000

50,001

75,001

100,001

150,001

200,001

250,001

350,001

500,001

Vehicles CostingRM

and below

75,000

100,000

150,000

200,000

250,000

350,000

500,000

and above

Annual ValueRM

1,200

2,400

3,600

5,000

7,000

9,000

15,000

21,250

25,000

Fuel (per arRM

600

900

1,200

1,500

1,800

2,100

2,400

2,700

3,000

Others

Types of BIK

Mobile telephone (rental and charges)DriverGardenerDomestic servant

Annual value of BIKRM600

7,2003,6004,800

Hak Cipta Unlverslti Teknologf MARA CONFIDENTIAL


(D

(2)

(3)

(4)

PRESCRIBED AVERAGE LIFE SPAN

Asset

Motor car

(5)

Furniture and fittings:Curtains, carpetsFurniture, sewing machineAir-conditionerRefrigerator

Kitchen equipment (i.e. crockery, rice cooker, electrickettle, toaster, coffee-maker, gas cooker, dryer,food processor, etc)

Entertainment and RecreationPianoOrganColour television, video player, stereo setSwimming pool (detachable), sauna

MiscellaneousMobile telephone

PrescribedAverage life span

8 years

5 years15 years8 years10 years

6 years

20 years10 years7 years15 years

10 years

VALUE OF BENEFITS

(i) Semi-furnished with furniture in the lounge,dinning room, or bedrooms

(ii) Semi-furnished with furniture as in (i) above andone or more of the following:Air-conditionersCurtainsCarpets

(iii) Fully-furnished with benefits as in (i) and(ii) above plus one or more of kitchenequipment, crockery, utensils and appliances

RM70 per month(RM840 per annum)

RM140 per month(RM1,680 per annum)

RM280 per month(RM3.360 per annum)

Hak Clpta Unlversltl Teknologl MARA CONFIDENTIAL


Capital Allowances - Plant and machinery

Assets Annual allowance ratesComputers, information technology equipmentand computer software 40%Motor vehicles, heavy machinery 20%Plant and machinery - general 14%Office equipment, furniture and fittings 10%

Hak Clpta Unlverslti Teknologi MARA CONFIDENTIAL

tax320 (2)

Documents

page appendix

answer booklet

new page

macadamis industries

medical consultant

resident status of dr

acoct 2006tax320required

medical voluntary services