Principle of taxation

Tutorial 1

Q3)Discuss the basis of determining the residence status of a company in Malaysia.

-A company is a resident in Malaysia for the basis year for a year of assessment if at any time during that
basis year the management and control of its business or affairs are exercised in Malaysia by its
directors or other controlling authority [Section 8(1)]

The management and control of a company are determined by the location of the directors’ meeting
where the major decisions are made to direct and control the company. It is the directors’ actions and
not the shareholders’ actions that usually indicate the residence status of the company.

Q4.)Comment on the following statements in Malaysia

1. "All foreigners are non-tax residents."

The statement "All foreigners are non-tax residents" is not accurate. In Malaysia, tax residency is
determined based on the number of days a person spends in the country in a tax year. Foreigners who
meet the criteria for tax residency can be a tax resident in Malaysia as per Section 7 (1)(a) to (d).

2. "Non-resident individuals enjoyed less tax benefits as compared to tax resident individuals."

This statement is generally true. In Malaysia, tax residents enjoy more tax benefits compared to
non-residents. Tax residents are eligible for various deductions, exemptions, and lower tax rates, while
non-residents are subject to higher tax rates and fewer benefits.

Q6）
 Question 7
Mr. Roger, an American national, first arrived in Malaysia on 15 September 2018. The records of
his stay in Malaysia are as follows:

Year Period of stay Place No. of days

2018 15/09/2018 – 31/12/2018 In Malaysia 108

2019 01/01/2019 – 09/10/2019 Not in Malaysia 282

10/10/2019 – 31/12/2019 In Malaysia 83

2020 01/01/2020 – 31/01/2020 In Malaysia 31

01/02/2020 – 05/02/2020 Singapore (social visit) 5

06/02/2020 – 15/04/2020 In Malaysia 69

16/04/2020 – 27/04/2020 Beijing (social visit) 12

28/04/2020 – 30/09/2020 In Malaysia 156

01/10/2020 – 31/12/2020 Not in Malaysia 92

2021 01/01/2021 – 28/02/2021 Not in Malaysia 59

01/03/2021 – 31/10/2021 In Malaysia 245

01/11/2021 – 31/12/2021 Not in Malaysia 61

2022 01/01/2022 – 30/04/2022 In Malaysia 121

01/05/2022 – 31/12/2022 Not in Malaysia 245

Required:

Determine Mr. Roger’s residence status for the years of assessment 2018 to 2022, stating the
conditions and relevant provisions of the Income Tax Act 1967 to support your answer.

YA Duration of stay No. of Resident Status Remarks

days

2018 15/09/2018-31/12/2018 108 Non-resident None of the S7(1) to (d) can be applied
2019 10/10/2019-31/12/2019 83 Non-resident None of the S7(1) to (d) can be applied

2020 01/01/2020-31/01/2020 31

01/02/2020-05/02/2020 5
(singapore- social visit)

06/02/2020-15/04/2020 69

16/04/2020-27/04/2020 12
(beijing- social visit)

28/04/2020-30-09/2020 156

Total: 256 Resident S7(1)(a) applies, Mr Roger is in

Malaysia for at least 182 days in basis
year of 2020.

2021 01/03/2021-31/10/2021 245 Resident S7(1)(a) applies, Mr Roger is in

Malaysia for at least days in basis year
of 2021.

2022 01/01/2022-30/04/2022 121 Resident S7(1)(c) applies, Mr Roger is in

Malaysia for at least 90 days in basis
year 2022 and he was a resident
(2020,2021) or had benar in Malaysia for
at least 90 days (2018) in any 3 out of 4
immediately preceding

Year Period of stay Place No. of days

2018 1 October to 31 December In Malaysia 92
2019 1 January to 31 October Not in Malaysia 305
1 November to 31 December In Malaysia 61
2020 1 January to 31 March In Malaysia 91
1 April to 10 April UK (social visit) 10
11 April to 31 August In Malaysia 143
1 September to 31 December Not in Malaysia 122
2021 1 January to 31 March Not in Malaysia 90
1 April to 31 July In Malaysia 122
1 August to 31 December Not in Malaysia 153
2022 1 January to 31 December Not in Malaysia 365
Question 8
Ben came to Malaysia for the first time on 1 October 2018 to exercise an employment in
Malaysia. His record of stay in Malaysia is as follows:

Required:
(a) Determine Ben’s tax residence status for the years of assessment 2018 to 2022. Explain
your answer based on Section 7 of the Income Tax Act, 1967.

(b) Assume that Ben would be a tax resident for the year of assessment 2023. Explain the
effect on his residence status for the year of assessment 2022.

(c) Discuss the tax implications on Ben if he is:

(i) resident in Malaysia for a year of assessment;
(ii) non-resident in Malaysia for a year of assessment.
Tutorial 2

Q3) Mr Low is employed by a Malaysian company under a three-year contract. His

duties include visits, not exceeding 30 days, in any one year to supervise the company’s
operations in neighboring countries. He received part of his salary (RM7,000) outside
Malaysia and was for services rendered in neighbouring countries. In addition, an
annual bonus of RM35,000 was paid directly into his bank account in London and
RM14,000 leave pay was paid to him in England when he was on leave for 2 months.

Required: State, with reference to the relevant provisions under the Income Tax Act,
1967, whether the salary of RM7,000, bonus of RM35,000 and leave pay of RM14,000
received outside Malaysia would be subject to Malaysian tax.

Section 13(1)(a)
Income which are taxable:
- Salary and wages, leave pay, bonus, commission directors fee

Section 13(2)
(a) during which the employment is exercised in Malaysia (working in Malaysia)
(b) of leave attributable to the exercise of the employment in Malaysia (taking paid
leave while working in Malaysia)
(c) during which the employee performs outside Malaysia duties incidental
to the exercise of the employment in Malaysia (working in overseas but related to work
in Malaysia)

Question 4
Dennis, a civil engineer, works with Daylight Sdn. Bhd. since 2012 and was sent by his
employer to a subsidiary company in China from 1 January 2021 to 31 December 2022.

His overseas duties include planning, evaluation and implementation of construction

projects in China. On completion of his overseas duties, Dennis continued to work with
Daylight on his return to Malaysia.

The subsidiary company in China would be responsible for the decision-making and
would issue all the instructions for Dennis’s work in China. All plans and evaluation
reports will be sent to the company in China.

The company in China would bear the remuneration of Dennis during this period in
China.
Required:
Determine whether the employment in China for YA2021 and YA2022 is incidental to the
employment in Malaysia.

Duties performed overseas by Dennis is not incidental to his employment in Malaysia:

-Dennis had exercised his employment in Malaysia prior to being sent to China
- However his duty performed overseas are not connected to his duties in Malaysia and
are not part of his job responsibilities.
- The overseas duties are for an independent purpose and not for the purpose of the
employer in Malaysia, which is not responsible for the decision-making of the work done
overseas.
- The employer in Malaysia did not bear all the risks and did not receive the benefits
from the work that was carried out by the employee overseas.

Question 5

Tanaka received the following from his employer during the basis year 2022.

RM

Salary 30,000

Travelling allowance (Note 2) 9,000

Servant (employed by employer) 6,000

Water and electricity (subscribed by employer) 1,300

Medical treatment 3,000

Cost of air ticket to Korea 4,000

Cost of tickets within Malaysia:

(i) Free passages with his family 1,000

(ii) Business travel to client’s place 500

Free mobile phone provided by employer 800

Mobile phone bill (subscribed by employer) 1,200

Employer’s own goods provided free of charge 1,100

Note:
1. A Proton Waja costing RM65,000 is provided by his employer.

2. His employer has identified the following in respect of travelling allowance

given:

(i) Travelling from Tanaka’s home to place of work – RM2,500

(ii) Travelling in exercising his employment – RM6,500

Required:

Compute the gross income from employment for Tanaka for the year of assessment 2022.

Q5. answer
Q6) Mr. Tan is under employment as a manager with AB Sdn. Bhd. His income
for the year ended

31.12.2022 are as follows:

Salary (whole year)

RM180,000

Bonus (two months)

RM30,000
A car was provided to Mr. Tan for the whole year. It was bought by the company 3
years ago at a cost of RM140,000. A driver was provided for the period from
1.4.2022 to 31.12.2022. An unfurnished house was provided for the whole year.
The rent paid by the employer is RM2,500 per month.

Two local leave passages for Mr. Tan and his wife were provided by his employer
in the year 2022. The total cost incurred by the employer was RM8,000.

Required:

Compute the gross income from employment for Mr. Tan for the year of
assessment 2022.
Tutorial 3

Question 2
Question 3
Weitse started her employment with DIW Sdn. Bhd. on 1 August 2016 with a salary of RM4,000
per month. Weitse always has differences in opinion with the owner; as such she tendered her
resignation on 31 May 2022.

On 1 July 2022, Weitse joined Investment Consultant Sdn. Bhd. which specialises in providing
consultant and financial planning advices. Weitse works as an administrator with a monthly
salary of RM3,500. Weitse was provided with accommodation in Summit Hotel for a month
where the hotel bill was paid by the company, which is RM120 per day.
With effect from 1 August 2022, she was provided with a fully furnished living accommodation.
The company has paid the rental of RM1,950 a month which includes RM350 as the rental of
furniture.

Other income received from the employment was as follows:

(i) Entertainment allowance of RM200 monthly from 1 July 2022.

(ii) A servant and a gardener who were paid a total of RM1,000 per month by the employer
from 1 October 2022 was provided.

(iii) A company car and a driver were provided by employer with effect from 1 September
2022. The car was more than 5 years old which cost RM80,000 when new. Her employer
purchased the car at RM45,000 from a second-hand car dealer.

(iv) Her employer also paid for her petrol bill from September 2022 amounting to RM7,000.

(v) Weitse needs to pay a subscription of RM900 per annum to her professional body to
retain her professional qualification as an administrator.

(vi) During the year 2022, Weitse received a free investment consultation advice from her
employer. The company’s normal charge for this service is RM500.

Required:
Compute Weitse’s adjusted income from employment for the year of assessment 2022.
Tutorial 4: Other Income

Question 1
Under what circumstances the following income can be deemed derived from Malaysia?
(a) Interest;

Section 15(a): If responsibility for payment of the interest or royalty lies with the
Government, a State Government or a local authority.

Section 15(b) : Two reason

i) If responsibility for payment of the interest or royalty in the basis year

for a year of assessment lies with a person who is resident for that
basis year.

ii) In the case of interest is payable in respect of money borrowed by that

person and employed in or laid out on assets used in or held for the
production of any gross income of that person derived from Malaysia
or the debt in respect of which the interest is paid is secured by any
property or asset situated in Malaysia.

Section 15©: If the interest or royalty is charged as an outgoing or expense against

any income accruing in or derives from Malaysia.

(b) Dividend; and

Section 14(1): A dividend can be deemed derived from Malaysia if it is distributed by

a company resident in the basis year for a year of assessment.

(c) Rent from real property.

Rent from a real property can be deemed derived from Malaysia if the real property
is located in Malaysia.

Question 2

Under what circumstances rental income from real properties in Malaysia can be treated as
business income under Section 4(a) of the Income Tax Act, 1967?
It is possible to have rental income from real properties to be treated as business income under
Section 4(a) if the owner is active in providing maintenance services and support services
comprehensively and actively. (all services including changing light and washing toilet)

Question 3

Jean owned a shophouse in Petaling Jaya. The details of the shophouse for the year ended 31
December 2022 are as follows:

RM

Rent received:

January – December 2022 42,000

January – March 2023 (being rental received in advance in December 10,000

2022)
5,000
Deposits for utilities (refundable)

Expenditure:
 Deposit refunded to ex-tenants 3,000

Rates and assessment 4,200

Quit rent 1,190

Loan interest (January – December 2022) 8,200

Penalty for late payment of assessments 100

Repainting 5,000

Renovation of kitchen and bathroom 12,000

Replacement of damaged roof tiles 8,000

Replacement of two air conditioners 3,600

Required:

Compute the adjusted rental income of Jean for YA 2022.

Question 4

Mr. Richard, a resident of Malaysia, owns a residential property in Johor and an apartment in
Kuala Lumpur. Both properties were let out on 1 April 2022. He has approached you regarding
the tax treatment of the following items:

(i) Rental received in advance;

Rental received in advance is taxable in the year of received as stipulated under

Section 27(3).

(ii) Rental deposits received;

Rental deposit is counted as capital expenditure, is non-allowable expenses for tax

computation.

(iii) Legal fees on the rental agreement with the first tenant;
 Legal fees on the rental agreement with the first tenant is initial expenditure, is
non-deductible expenses for tax computation for adjusted income from rental. Except
first tenant, following tenant legal fees on the rental agreement are non-allowable
expenses (Can be deductible expenses)

(iv) Housing loan interest for the period 1.1.2022 to 31.3.2022; and

Mr Richard let out the house on 1 April 2022, the house loan interest for the period 1
Jan 2022 to 31 Mar 2022 is not deductible expenses (Preliminary Expense). It only
can be treated as deductible expenses when the house loan is for the first tenant, and
the house loan interest is occurred after the house is rented out.

(v) Rental loss.

Rental loss happens if the deductible expenses exceed the rental income received.
This is a permanent loss, it cannot be brought forward to the next year and treated as
deductible expenses for the next year.
Question 5

Sam owns a semi-detached house which was let for the first time on 1 July 2022. Details of the
property are as follows:

RM

Gross rental from 1 July 2022 to 31 December 2022 4,000 per month

Quit rent from 1 January 2022 to 31 December 2022 200

Assessment from 1 January 2022 to 31 December 2022 600

In the year 2022, he received royalties of RM13,000 from the sales of CDs recorded by him as a
musician and a single-tier dividend from GBS Bhd of RM15,000 on 30 June 2022.

Required:

Compute the total income of Sam for YA 2022.

 Sam

Computation of Total Income for YA 2022

RM RM

Section 4(c) Dividend Income

Single-tier dividend from GBS Berhad Exempted

Section 4(d) Rental Income

Rental income (RM4,000 x 6 months) 24,000

Less: Deductible Expenses

Assessment (300)

Quit rent (100)

23,600

Section 4(d) Royalties

Sales of CDs’ musician (exempted RM10,000 for CD recorded) 3,000

Total income 26,600

Tutorial 5: Individual Tax Computation
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.

The company reimbursed Mrs Chan for the salary of a domestic servant employed by Mrs Chan
amounting to RM7,020.
The company provided the leave passages for 2022 as follows:

• Two overseas leave passages costing RM1,800 and RM2,700 respectively.

• Four local leave passages to:

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.

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

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

• Employees Provident Fund contributions amounting to RM17,160.

• Purchase of books amounting to RM850.

• The cost of medical equipment amounting to RM23,000 was donated to a healthcare

centre approved by the Ministry of Health.

Required:
Compute the tax payable by Mrs Chan for the year of assessment 2022.
Question 4
T5Q5 Answer