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					Confidential                                                       AAD 3084 / July – November 2005



Question 1

Encik Azam, a Brunei citizen, had been working as the senior marketing manager of Newport
(M) Sdn Bhd. His periods of stay in Malaysia were as follows:
Project Taiping                -      1 March 1998 until 2 August 1998
                                      1 December 1998 until 15 April 1999
Project Johor                  -      1 May 2000 till 16 November 2000
Project Penang                 -      1 September 2001 to 30 April 2002 except for Umrah
                                      leave from 21 December 2001 to 2 January 2002


Encik Azam returned to Malaysia again on 1 June 2003 as consultant with another company,
Qwella Holding Bhd for a short assignment lasting until 30 July 2002. On 1 November 2004,
again Encik Azam returned to Malaysia until 1 April 2005.


He then went to Copenhagen for social visit for 10 days. On 24 July 2005, he left Malaysia for
good to his home country.


Required:
     a. Determine the resident status of Encik Azam for the relevant years of assessment up to
          2005. Please quote the relevant sections of the Income Tax Act 1967 to support your
          answer. (8 marks)


     b. Section 7 (1) (b) permits temporary absents to be count as part of period forming in
          Malaysia. What are the three situations permitted under the term of “Temporary Absents”
          (3 marks)


     c. Pining Sdn Bhd makes up its accounts to September 30 annually. The following are
          assets owned by the firm.
          Motor vehicles
               1. On 1 May 1998, the company purchased a motorcar (M1) for the purpose of its
                  business. The cash price was RM58,000. The company traded its old car for




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                  RM28,000. After owning the car for some time, the car (M1) was sold for
                  RM30,000 in November 2003.
               2. On 1 September 2004, the company purchased a second hand car (BMW) costing
                  RM140,000 for its General Manager. This car was later sold on 30 September
                  2005 for RM100,000.
     Machine
               1. Facsimile machine was acquired on 1 October 2004 at a cost of RM3,500. on 15
                  September 2005 it was completely damaged by lighting and was scrapped.
               2. A new machine costing RM120,000 was bought on 31.10.2004 to be used in the
                  company factory. The cost of cutting and tunnelling the land to install the
                  machine was RM18,300 while the installation cost was RM47,000.


          Required:
          Calculate the capital allowance/charges for the company for the relevant years of
          assessment up to year assessment 2005. Given the rate of annual allowance for motor
          vehicles and machine are 16% and 10% respectively. (14 marks)
                                                                                      Total: 25marks
     Question 2


     Encik Azraai, a resident taxpayer in Malaysia had been working as the senior marketing
     manager of Nestle (M) Bhd since 1 June 2000. On 31 October 2005, he resigned voluntarily
     from the company when the company underwent a reorganization scheme. He was born in
     June 1966. He was paid a gratuity of RM30,000 and a compensation for loss of employment
     amounting RM28,000.


     Other payments and benefits received by Encik Azraai from Nestle (M) Bhd in 2005 was as
     follows:


   i. Salary RM4,000 (after deducting insurance of RM172 and EPF of 11%).
  ii. Bonus equivalent to two months salary.




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 iii. Medical allowance of RM200 per month. During the year, the company also paid RM1,000
        of Encik Azraai’s hospital bill.
 iv. Entertainment allowance RM1,000 per month.
  v. Cost of leave passages paid by the employer
          To Langkawi                                  RM1,200
          To Sabah                                     RM3,200
          To Australia                                 RM2,100
 vi. A car was provided by the employer. The car was purchases in 1996 at a cost of
        RM95,000. Encik Azraai used the car until 31 October 2005. The company also paid a
        driver of RM550 per month.
vii. Accommodation
          a) A house (fully furnished) was provided from July 2000 till 31 August 2005. The
               monthly rent of RM2,400 (including furniture RM400) were paid by the company.
          b) From 1 September 2005 to 31 October 2005, Encik Azraai stayed in Hotel Mandarin
               Oriental. The hotel room rate was RM330 per day.


  Additional information
  a) On 15 June 2005, Nestle Bhd offered Encik Azraai the option to purchase 10,000 shares of
        RM1.00 per share although the current market price was RM1.50 per share. Encik Azraai
        accepted the option and purchased the 5,000 shares on 1 July 2005 when the market price
        was RM1.80 per share.
  b) Of the entertainment allowance received, Encik Azraai actually spent RM8,000 in 2004 to
        entertain clients.


Required:
Compute the Statutory Income from Employment of Encik Azraai for the year assessment 2005.



                                                                                      Total: 25 marks




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Question 3
Encik Eryan, a successful engineer, owns a trading company in Kuala Lumpur. The following
Forecast Income Statement is for Eryan Engineering & Trading for the year ended 31 December
2005.
                          ERYAN ENGINEERING & TRADING
                FORECAST TRADING, PROFIT AND LOSS ACCOUNT
                     FOR THE YEAR ENDED 31 DECEMBER 2005
                                         RM                                                  RM
Cost of goods sold                    479,812 Sales                                       989,074
Gross profit c/d                      509,262
                                      989,074                                             989,074
Less: expenses                                Gross profit b/d                            509,262
Remuneration, bonus and EPF (1)       129,055 Gains on disposal of fixed assets             2,000
Entertainment (2)                      31,270 Dividends                                    12,500
Fine and penalty (3)                      750
Donations (4)                          23,874
Office rental (5)                      18,000
Office expenses (6)                     2,000
Postage and courier                     2,791
Printing and stationery                 5,814
Quit rent and assessment                  194
Registration fees (7)                   1,435
Staff benefits                          5,818
Sundry expenses                           492
Maintenance of office equipment (8)     3,870
Telephone (9)                          14,405
Water and electricity (9)               7,158
Finance expenses                        1,377
Repairs and maintenance (10)            2,010
Upkeep of motor vehicles               11,763
Bad debts (11)                          5,500
Depreciation expenses                  30,178
Net profit for the year               226,008
                                      523,762                                            523,762




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Notes to Account:
     1. Salary, Bonus and EPF consist of the following:
                                  Gross salary              Bonus            EPF (employer’s)
                                          RM                  RM                RM
        Encik Eryan                    44,000                    -                     3,960
        Employees                      40,000               22,620                    18,475
                                       84,000               22,620                    22,435

     2. Entertainment were as follows:
                    Family gathering                             RM 5,450
                    Entertainment potential clients              RM 9,950
                    Annual dinner for staff and clients          RM12,000
                    Purchase a set of home theatre for office    RM 3,870
     3. Fine and penalty:
                    Parking ticket for company’s car                             RM500
                    Late payment penalty for income tax                          RM250
     4. Encik Eryan donated RM10,000 cash to Majlis Kanser Nasional and the balance being
          contribution to an approved research institute.
     5. Encik Eryan rented a four-storey shop lot where the top floor is occupied by Encik
          Eryan’s family.
     6. Office expenses represent cost incurred in fixing wooden shelves for Eryan Engineering
          office.
     7. Fees are in respect of admission as a member of Wilayah Perseketuan Trader
          Association.
     8. This is being cost of installing and renovating partition for the office.
     9. It was agreed with IRB that ¾ of telephone bills and ¼ of water and electricity expenses
          are for private purposes.
     10. Repairs and maintenance is related to repairs of the business photocopy machines.
     11. Bad debts
                    Trade debtors                 RM3,500
                    Loan from employee            RM2,000
     12. Capital Allowances
                    Initial allowance             RM19,495
                    Annual allowance              RM11,601


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Required:
Determine the statutory income from business for Encik Eryan for the year of assessment 2005
(start your computation from net income for the year).                        Total: 25 marks


Question 4
Encik Nazmi, 57 years old, is a retired teacher from government school. His wife, Puan Seri, 53
years old, is an English lecturer with HELP Institute. They are both residents in Malaysia for the
basis year 2005. the following is the information for the year 2005.
Encik Nazmi
Dividend income :     Telekom Malaysia Bhd, RM7,056 (net)
                      PT Unza (located in Brunei), RM16,000 (one –quarter was remitted to
                      Malaysia).
Encik Nzmi received a loan to purchase the shares from Telekom Malaysia Bhd. He pays a
monthly instalment of RM350 on the loan (inclusive of RM150 for interest).


Interest income :     RM7,200 received from savings in Southern Bank Bhd. (capital invested
                      was RM120,000 at 6% interest p.a.)
Rental Income
                                                         House           Flat     Shop house
                                                           RM            RM             RM
      Monthly rental                                      1,200          800           3,500
      Expenses incurred:
          Quit rent per annum                               400          150           700
          Repairs and maintenance                           500          200           800
          Renovation                                           -       2,000         6,000
          Fire insurance per annum                          250          120           420
Note: The flat was bought in April 2005 and was only       rented out in July 2005. Encik Nazmi
monthly loan payment for the flat is RM450 including interest of RM120.


Pension Income
Encik Nazmi received a monthly pension of RM1,200 from the government for the basis year
2005.
Puan Seri
Salary per month:     RM4,000 (after deducting RM300 for tax and RM473 for EPF)


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Interest income :            RM2,700 (savings account with Bank Simpanan Nasional, capital sum
                             invested RM60,000, at 5% interest per annum)
Other information:
     a. They have five children
          i.         Azam age 25, married and studying in University of Austalia.
       ii.           Azura age 22, single and studying in Michigan States since September 2001.
      iii.           Azlan age 19, studying in UiTM Shah Alam.
       iv.           Azmir age 16, disable, a full time student at Sekolah Menengah Khas Seksyen 3
          v.         Azi age 10, primary school.


     b. Encik Nazmi spent RM5,800 on his parent’s medical expenses but could only produce a
             receipt of RM2,600 and paid RM500 for his father’s basic supporting equipment.
     c. During the year 2005, they lived in a house owned by Puan seri. Details of the house are
             given below:
                                                                            RM
                        Rateable value                                       40,000
                        Expenses incurred:
                        Quit rent                                                  320
                        Rates                                                      800
                        Fire insurance                                             280

     d. Puan Seri incurred RM150 per month for her mother’s medical expenses.
     e. Insurance premium incurred in the year 2005:
                                                             Encik Nazmi         Puan Seri
                                                             RM                  RM
                 Life insurance on the life of Encil Nazmi   2,400               1,500
                 Life insurance on the life of Puan Seri     1,200               -
                 Medical insurance for Dani                  1,600               -
                 Educational insurance for Adi               -                   800

     f. Puan Seri bought a personal computer at a cost of RM4,900 to be used by her children.
     g.        For the basis year 2005, Encik Nazmi paid RM1,800 as zakat and Puan Seri donated
             RM3,000 to Rumah Kebajikan anak Yatim Johor Bahru (approved).
     h. Puan Seri spent Rm200 to subscribe for women magazines during the year 2004.




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Confidential                                                   AAD 3084 / July – November 2005



Required:
Complete the tax payable for Encik Nazmi and his wife for the year of assessment 2005 if they
elect for separate assessment.
                                                                                  Total: 25 marks




                                     End of Question Paper




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Confidential                                               AAD 3084 / July – November 2005




                                     Appendix A
               THE TAX RATES APPLICABLE WITH EFFECT FROM YA 2002
                Chargeable Income     (RM)         Rate        Tax payable
                        (RM)                       (%)            (RM)
               On the first              2,500      0                         0
               On the next               2,500      1                        25
               On the first              5,000                               25
               On the next               5,000       3                      150
               On the first             10,000                              175
               On the next              10,000       3                      300
               On the first             20,000                              475
               On the next              15,000       7                    1,050
               On the first             35,000                            1,525
               On the next              15,000       13                   1,950
               On the first             50,000                            3,475
               On the next              20,000       19                   3,800
               On the first             70,000                            7,275
               On the next              30,000       24                   7,200
               On the first            100,000                           14,475
               On the next              50,000       27                  13,500
               On the first            150,000                           27,975
               On the next             100,000       27                  27,000
                                       250,000                           54,975
               Above                   250,000       28


                                     Appendix B
          TAXABLE VALUE OF MOTOR VEHICLES PROVIDED BY EMPLOYER
                   Cost of car       Annual value of private         Fuel per
                   (when new)            usage of car                annum
                       RM                     RM                       RM
                 Up to    50,000             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                    2,000
                250,001 – 350,000           15,000                    2,400
                350,001 – 500,000           21,250                    2,700
               500,001 – and above          25,000                    3,000




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                                                   Others
          Types of Benefit in Kinds
                 i. Semi-furnished with furniture in the lounge, dining            RM 70 per month
                    room, or bedrooms                                            (RM840 per annum)
                ii. Semi-furnished with furniture as in (i) above and
                    one or more of the following:                                RM 140 per month
                    Air conditioners                                           (RM1,680 per annum)
                    Curtains
                    Carpets
               iii. Fully-furnished with benefits as in (i) and (ii) above       RM 280 per month
                    plus one or more of kitchen equipment, crockery,           (RM3,360 per annum)
                    utensils and appliances




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