Acca F6

Taxation (Malaysia) Monday 1 December 2008 Time allowed Reading and provision Writing 15 minutes 3 hours ALL FIVE questions argon compulsory and MUST be attempted. Tax pass judgment and allowances be on pages 23. Do NOT open this paper until instructed by the supervisor. During knowledge and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the interrogation hall. The Association of Chartered Certified Accountants Paper F6 (MYS) investment trustamentals Level Skills faculty 8DMYSTT Paper F6MYS SUPPLEMENTARY INSTRUCTIONS . 2. 3. Calculations and workings should be make to the adjacent RM. All apportionments should be made to the ne atomic number 18st whole month. All workings should be shown. TAX RATES AND ALLOWANCES The following revenue enhancement rates, allowances and values are to be used in answering the questions. Income impose income rate s resident physician individual Chargeable income Band Cumulative RM RM 2,500 2,500 2,500 5,000 15,000 20,000 15,000 35,000 15,000 50,000 20,000 70,000 30,000 100,000 150,000 250,000 Excess Tax collectible Rate Cumulative % RM 10 0 11 25 13 475 17 1,525 13 3,475 19 7,275 24 14,475 27 54,975 28 house physician compevery Paid up ordinary share capitalFirst RM500,000 20% 26% RM2,500,000 or less More than RM2,500,000 Non-resident Company Individual Excess oer RM500,000 26% 26% 26% 28% Personal deductions self Self accessal if disabled Spouse Spouse additional if disabled sister basic rate Child higher rate Disabled baby bird Life insurance premiums and canonical scheme contributions Medical expenses for parents Medical expenses for effective disease of self, spouse or child, including up to RM500 for health check examination base supporting equipment for self, spouse, child or parent if disabled Educational and medical insurance for self, spouse or childStudy curriculum fees for skills or qualifications leverage of a personal computer Purchase of books, magazines etc for personal use Purchase of sports equipment prepare for a child into the National Education Savings Scheme 2 utmost maximum RM 8,000 6,000 3,000 3,500 1,000 4,000 5,000 6,000 5,000 maximum maximum maximum maximum maximum maximum maximum maximum 5,000 5,000 3,000 5,000 3,000 1,000 ccc 3,000 8DMYSTT Paper F6MYS Rebates Individual with chargeable income not exceeding RM35,000 Basic rate Rate for an individual authorize to a deduction for a spouse or a creator wife RM 350 700Value of benefits in kind Car and fuel scale terms of car (when new) RM Up to 50,000 50,001 to 75,000 75,001 to 100,000 100,001 to 150,000 150,001 to 200,000 200,001 to 250,000 250,001 to 350,000 350,001 to 500,000 500,001 and above Prescribed annual value of secluded usage of car RM 1,200 2,400 3,600 5,000 7,000 9,000 15,000 21,250 25,000 Fuel per annum RM 600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000 The value of the car benefit cope with to half the prescribed annual value (above) is taken if the car provided is more than five (5) familys old, but the value of fuel provided remains unchanged.Household furnishings, apparatus and appliances RM per month Semi-furnished with furniture in the lounge, dining room, or bedroom 70 Semi-furnished with furniture as above plus air-conditioners, and/or curtains and carpets 140 full furnished premises 280 Domestic help 400 Gardener 300 Driver 600 Telephone (fixed or mobile) RM per annum 300 300 Hardware Bills expectant allowances Industrial buildings Plant and machinery general Motor vehicles, heavy machinery accountrs, schooling engine room equipment and computer software Office equipment, furniture and fittings Initial Rate % 10 20 20 20 20 Annual Rate % 14 20 40 10 bargains valuate and service revenue rates Rate % 10 5 Sales appraise answer tax 3 P. T. O. 8DMYSPA Paper F6MYS 8DMYSAA Paper F6MYS ALL FIVE questions are compulsory and MUST be attempted 1 mob and chirp are husband and wife. throng is disabled. The income and expenses of James and Carol for the class clear up 31 December 2008 are expected to be as follows RM James engagement Salary 35,000 Carol Partnership business statutory income Employment Salary Travelling allowance 4,350 16,600 3,000 James incurred expenses as follows Donation to an sanction institution Contributions to Employees Provident storehouseMedical examination for self Medical expenses for his father Fees for his irregular course in Islamic financing at a university in Kuala Lumpur, recognised by the Goernment Carol incurred expenses as follows Contributions to Employees Provident Fund Medical expense on cancer treatment for herself Medical expenses for her bring forth Basic supporting equipment for her disabled father Travelling expenses incurred in the course of her work 2,600 3,850 400 1,300 1,100 2,156 2,700 900 3,600 4,000 indispensable (a) Compute the couples t ax payable for the year of judicial decision 2008 under joint assessment (i) ssuming that James made the election and (ii) assuming that Carol made the election. (12 marks) (12 marks) Notes (1) You should use both columns, one each for (i) and (ii) above. (2) You should indicate, by using the word nil, any expense stop that does not qualify for personal relief. (3) Marks testament be awarded for the use of accurate technical terms to describe the figures comprising the stages in the computation of chargeable income. (b) (i) Based on your tax computations in bankrupt (a), state which spouse should make the election for joint assessment and why. (1 mark) ii) Analyse, value and summarise the tax saving resulting from making the election you have stipulate in (i) above over the alternative election. (5 marks) (30 marks) 4 This is a livid page Question 2 begins on page 6 5 P. T. O. 8DMYSAB Paper F6MYS 2 Beauty Sdn Bhd, a resident company with a paid up ordinary share capital of RM 2 million, is engaged in the manufacture of cosmetic products. The companys scratch and loss fib for the year ended 31 October 2008 is as follows Note RM000s 1 2 3 4 4 5 6 2,300 388 461 700 7 (2) 164 618 (177) 66 2,675 Sales monetary value of gross revenue Gross pull inLess hire Contributions to approved schemes sport Royalty Penalty for late payment of refuse tax on royalty Gain on disposal of a train Repairs and caution Depreciation Bad debt recovery postulate rentals advertisement 7 8 RM000s 27,800 (11,200) 16,600 (7,200) 9,400 Profit before taxation Notes (1) requital includes RM 114,000 400,000 Salaries of disabled employees Entertainment allowance to senior management (2) Contributions to approved schemes comprise RM 276,000 112,000 388,000 Employees Provident Fund Beauty Sdn Bhd schemeThe company contributes 12% to the Employees Provident Fund for all employees and an additional 8% to the Beauty Sdn Bhd scheme in honour of the remuneration of RM1,000,000 an d the entertainment allowance of RM400,000 paid to senior management executives. (3) Entertainment includes the cost of launching new products criterioning to RM38,000. (4) A royalty amounting to RM630,000 net of the 10% withholding tax was paid to a non-resident on 15 kinsfolk 2008, in respect of the new products. The amount of the withholding tax and the link penalty remain unpaid. (5) Gain on disposal of a vanA van was inclined of in August 2008 for RM36,000. The van had been acquired in December 2005 for RM65,000. (6) Repairs and maintenance includes costs of renovation to the companys office building amounting to RM58,000. The condition for this expenditure was to provide a safe workplace for disabled workers. (7) The bountiful debt recovery is in respect of a trade debt taken over from another company carrying on the same business, three historic period ago. (8) Lease rentals are in respect of a motor vehicle cost in excess of RM150,000. The lease rentals commenced on 1 December 2007 at RM6,000 per month for a period of 30 months. 8DMYSAB Paper F6MYS (9) Other information (i) A sum of RM60,000 was incurred on alterations to the companys factory building, in order to install general machinery costing RM340,000. (ii) A sum of RM810,000 was incurred on cutting the land in order to prepare a commit to install heavy machinery costing RM190,000. (iii) For the year of assessment 2008, capital allowances for make and machinery will amount to RM849,000 and industrial building allowances to RM295,000, excluding any allowances or adjustments imputable to the capital expenditure referred to in (i) and (ii) above. essential (a) Compute the tax payable by Beauty Sdn Bhd for the year of assessment 2008. Note your computation should start with the profit before taxation figure and follow the descriptions used in the notes to the profit and loss account, indicating nil in the appropriate column for any item that does not require adjustment. (18 marks) (b) Expl ain your treatment of the items stated below (i) (ii) (iii) (iv) (v) approved schemes (note 2) disposal of a van (note 5) renovations to the office building (note 6) lease rentals (note 8) and he expenditure incurred in respect of the heavy machinery and its installation (note 9 (ii)). (7 marks) (25 marks) 7 P. T. O. 8DMYSAC Paper F6MYS 3 Freshgreen Sdn Bhd is in the business of cultivating vegetables. The adjusted income of the company for the year ended 30 June 2008, before taking into account the following, amounted to RM563,000. The information tending(p) below relates to the business activities of the company during the financial years 2007 and 2008 Date July 2006 July 2006 July 2006 kinsfolk 2006 Expenditure Cost of land bend of roads and bridges call down house for business (note 1) sprightliness quarters for workers Cost of lorry (note 2) Cost of general machinery RM 350,000 34,000 38,000 72,000 64,000 87,000 Notes (1) The farm is situated in a remote area, so the bu ildings on the farm have no value other than for the working of the farm. (2) The lorry was bought under a hire purchase agreement. The company made an initial payment of RM18,000 in July 2006. The balance was paid over a period of 23 months at RM2,200 per month, inclusive of interest of RM200 per month. The instalment payments commenced on 1 August 2006.In July 2007 the company carried out planting of crops and incurred RM19,000 on modify land and RM161,000 on fertiliser and seedlings. In January 2008 the company carried out replanting of crops and incurred the following expenses RM 22,000 115,000 7,000 Clearing land Fertiliser and seedlings Labour In March 2008 Freshgreen Sdn Bhd disposed of the following assets on which agriculture allowance had been claimed in the previous years Assets Store Living quarters for employees Date of construction 1 January 2005 6 August 2005 Cost RM 25,000 60,000The store and the living quarters were disposed of for RM10,000 and RM35,000 respectivel y. Required (a) Compute the agriculture allowance and capital allowance under enrolment 3, Income Tax Act, that can be claimed by Freshgreen Sdn Bhd for the year of assessment 2008. (10 marks) (b) Compute the statutory income of Freshgreen Sdn Bhd for the year of assessment 2008. (7 marks) (c) Compute the agriculture charge on the basis that Freshgreen Sdn Bhd made an election to spread the charge, under para 27, chronicle 3, Income Tax Act, clearly indicating the years of assessment affected. 3 marks) Note the rates of agriculture allowance are as follows Rate 50% 50% 50% 20% 10% Clearing and preparing land Planting of crops Construction of roads and bridges on a farm Construction of living quarters for workers Construction of buildings (20 marks) 8 8DMYSAD Paper F6MYS 4 (a) (i) For the year of assessment 2008 Cik Lee has income from three sources employment, business and the rental of property. Required State, with explanations, the provisions of the law of nature applicable to Cik Lee in respect of the payment of tax for the year of assessment 2008. (3 marks) ii) Encik Koon is expected to have the following income for the year of assessment 2008 RM 180,000 130,000 310,000 10,000 300,000 57,500 Statutory income from employment Statutory income from a partnership business Aggregate income approved donations Total income Tax payable For the year of assessment 2008, in addition to the tax deducted from his remuneration under the Schedular Tax Deduction (STD) system, Encik Koon paid tax instalments amounting to RM12,000, as per his application to the manager General of Inland Revenue, to vary the amount of his payment.Required Compute the penalty, if any, resulting from the application by Encik Koon to vary the instalment amounts. (6 marks) (b) Encik smith is engaged as a service director of a company and his hire is RM180,000 per annum. Encik Smith is provided with unfurnished living accommodation for which the company pays rent amounting to RM60,000 pe r annum. Encik Smith is not provided with a company car but he has been granted the option of (i) a number one wood provided by the company or (ii) the reimbursement of the drivers salary amounting to RM15,600 per annum. RequiredState, with explanations and supporting calculations, which of the above options Encik Smith should contract from a tax perspective. (6 marks) (15 marks) 9 P. T. O. 8DMYSAA Paper F6MYS 5 (a) Chongdart Sdn Bhd is a commissioned manufacturer in the business of making computer tables. The companys records for the period from 1 July to 31 August 2008 show the following Sale of 1,200 tables at RM40 each excluding sales tax, of which 900 were sold to customers in Malaysia and 300 were exported to China. Purchase of the following raw materials and component parts Castors for table legs including sales taxLocks for drawers, merchandise from Thailand Rollers for pull-out shelf and drawers, purchased from Heng Sdn Bhd, a licensed manufacturer Paint for painted f inish undertaken by a subcontractor RM 3,000 2,300 6,400 5,100 None of the above items are exempt from sales tax. Chongdart Sdn Bhd obtained the approval of the Director General of Customs and scrape for the import of the locks from Thailand and the purchase of the rollers from Heng Sdn Bhd. The subcontractor was exempt from licensing in view of the fact that its annual sales derangement does not exceed RM20,000. The appropriate rate of refund under the realisation system is 8%.Required State the particulars which Chongdart Sdn Bhd must disclose in the sales tax return, Form CJP No. 1, for the taxable period 1 July to 31 August 2008, together with the due date of payment of the tax to the Director General of Customs and Excise. (5 marks) (b) AB Sdn Bhd, a firm of licensed surveyors, issued an bank bill to Buildup Sdn Bhd, on 4 March 2007, for surveying work amounting to RM15,000, disbursements amounting to RM950 and the service tax payable. In April 2007 Buildup Sdn Bhd paid a su m of RM10,400 for the full amount of the disbursements and 60% of the fees, including the service tax thereon.The balance outstanding was written off as a bad debt by AB Sdn Bhd in November 2008, when Buildup Sdn Bhd went into compulsory liquidation. Required (i) State the amount of the service tax payable by AB Sdn Bhd in respect of the above invoice, together with the due date(s) for payment of the tax to the Director General of Customs and Excise. (3 marks) (ii) Compute the amount of the service tax that AB Sdn Bhd can recover from the Director General of Customs and Excise in due course, in respect of the bad debt written off. (2 marks) (10 marks) curio of Question Paper 10