Financial Planning Association of Malaysia Web Sample 2008

Module 3 Sample Questions

Q1. The following considerations may be relevant when deciding whether a company is trading in or with Malaysia: I. II. III. IV. A. B. C. D. Q2. The place where the contracts of sales are made. The place where the operations from which the profits arose are carried out. The place where payments are made. The place where the title to the goods passes from the seller to the buyer.

I, II II, III I, II, IV All of the above. Leonard Lane first arrived in Malaysia in 2007 and was employed as a project manager in a Malaysian company. He left Malaysia on 29 June 2007. The following represent his pattern of stay in the country. 01.01.2007 to 04.01.2007 05.01.2007 to 31.01.2007 01.02.2007 to 29.05.2007 30.05.2007 to 29.06.2007 Days 4 27 118 31 Holiday Employment Holiday Employment

Choose the correct statement regarding the taxability of his income in Malaysia. A. B. C. D. He is subject to tax on his employment income in Malaysia except for the days he was on holiday. He is subject to tax on his total employment income. He is not subject to tax as he is a non-resident and exercised employment for less than 60 days. He is not subject to tax as he is a tax resident and his employment was for less than 60 days.

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Q3. A. B. C. D. Q4.

The chargeable income of the following taxpayers is represented by their total income except: Companies. Trade associations. Resident individuals. Clubs. Which date is the most important in determining the beginning of the basis period for a year of assessment to ascertain the chargeable income of a company? Financial date. Commencement date. Invoice date. Accounting date. The following statements in respect of corporate and central bank bonds are correct except for: Interest earned by individuals on bonds issued by public companies listed on Bursa Malaysia is tax exempt. Interest derived by individuals from bonds other than convertible loan stock paid or credited by any company listed in Malaysia Exchange of Securities Dealing and Automated Quotation Berhad is not tax exempt. Interest in respect of securities or bonds guaranteed by the government and debentures, other than convertible loan stock, approved by the Securities Commision is tax exempt. Interest income derived from Merdeka bonds issued by Bank Negara Malaysia and received by pensioners of 55 years and above who do not have permanent jobs and uniformed personnel on mandatory retirement is tax exempt. Non-business income refers to the following except: Employment income. Partnership income. Dividend income. Rental income.

A. B. C. D. Q5. A. B.

C. D.

Q6. A. B. C. D.

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Q7.

Best Sdn. Bhd. is a company involved in the trading of shoes. The following information is provided for YA 2006 and 2007: YA 2006 RM (10,000) 5,000 YA 2007 RM 50,000 12,000 2,000 1,000

Adjusted Income/(Loss) Capital allowance Balancing charge Approved donations

Calculate the chargeable income for YA 2007. A. B. C. D. RM37,000 RM39,000 RM29,000 RM24,000

Answer: YA 2007 Adjusted income Add: Balancing charge 50,000 2,000 52,000

Less: Capital allowance (RM5,000 + 12,000) 17,000 Statutory income 35,000 Less: Unabsorbed loss b/f 10,000 Aggregate Income 25,000 Less: Approved donations (restricted to 7% of Agg. Income) 1,000 Chargeable Income 24,000 Q8. Janine Sdn. Bhd. manufactures furniture and trades in watches. The following information is related to YA 2006: Manufacturing business Trading business Adjusted Income RM20,000 RM17,000 Capital Allowances RM22,000 RM15,000

Compute the statutory income for both the businesses separately. A. B. Manufacturing business RM20,000 RM0 Trading business RM17,000 RM2,000

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C. D.

RM2,000 RM0

RM2,000 RM0

Answer: Manufacturing Adjusted income Less:CA Statutory income Businesslossc/f Trading Adjusted income Less:CA Statutory income Q9. A. B. C. D. 20,000 22,000 NIL 2,000

17,000 15,000 2,000

The following statements regarding donations are correct except: Approved donations in cash to approved institutions, Government, State Governments and local authorities are allowed against aggregate income. Donations are revenue expenses and are allowable for tax deduction against the gross income of a business. An amount equal to the value as determined by the Department of Museums and Antiquities or the National Archives is allowed against aggregate income. An amount of cash (restricted to RM20,000) for the provision of library facilities to public or school libraries, university or colleges is allowed against aggregate income.

Q10. Which of the following statements is CORRECT in respect of the general guidelines provided by the IRB on the keeping of sufficient records. A. Books and other records in manual or electronic form should be sufficient to explain the transactions and to enable a true and fair profit and loss account or income and expenditure account and a balance sheet to be prepared. If computers are used to record transactions, the original source documents need not be retained. Records and books of accounts should be kept at the registered office for 6 years from the end of the calendar year in which the accounts are closed. Records and books of accounts should be written in any known language.

B. C. D.

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Q11. An offence is committed under the Income Tax Act 1967 under the following circumstances except: A. B. C. D. Failure to declare a correct Return. Late submission of a Return Form. Failure by companies to submit estimate of tax payable. Failure to notify change of address within 2 months.

Q12. Choose the correct statements regarding a newly incorporated company in 2005. I. II. III. IV. A. B. C. D. It is required to register an income tax file at the nearest branch of the IRB. It is required to ensure that an employers file is registered. It is required to submit an estimate of tax payable within 3 months from the date of commencement of operations. It is required to file its tax return within 30 days of receipt of a Tax Return.

I, II II, III I, II, III All of the above.

Q13. A company may apply to revise its estimate of tax payable twice, in the _________ and __________ month of the basis period for a year of assessment by using Form CP 204A. A. B. C. D. Third and fourth. Sixth and ninth. Second and fourth. Fifth and seventh.

Q14. Choose the most accurate duty and responsibility of an employer regarding income tax. A. B. C. D. Submit Tax Return to the IRB. Submit Return of Remuneration by An Employer (Form E) to the IRB. Inform the Inland Revenue Board of any employee about to or intending to leave Malaysia within 3 months before the expected date of departure. Make tax deductions bimonthly from employees remuneration.

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Q15. The IRB has issued a guideline on entertainment expenses to explain the treatment of the expense as a deduction. For this purpose, Entertainment includes the following: I. II. III. IV. A. B. C. D. Provision of food and drink. Provision of recreation. Provision of accommodation or travel in connection with the purpose of facilitating entertainment. Provision of hospitality.

I, II I, III I, II, III All of the above.

Q16. Salient Sdn. Bhd. is in the business of trading in plastic wares. The company has bank borrowings of RM50 million as at 31.12.2006. The interest incurred on the borrowings was RM5 million. The company has investment in a subsidiary of RM10 million. Calculate the amount of interest restricted based on the above facts. A. B. C. D. RM1 million RM2 million RM4 million RM5 million

Answer: RM10/50 million X 5 million = RM 1 million Q17. The definition of a permanent establishment in all double taxation agreements entered into between Malaysia and various countries would require the existence of a ____________. A. B. C. D. Country. Contract. Fixed place of business. Licence.

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Q18. The following interest expenses are tax deductible except: A. B. C. D. Interest on debentures issued by a company. Interest on loans to purchase shares which generate income. Interest paid on the breach of a commercial agreement. Interest on loans raised specifically to pay dividends.

Q19. A company which has a financial year end of 31 December 2006 is required to submit its estimate of tax payable to the IRB by: A. B. C. D. 1 December 2005 1 December 2006 31 March 2006 10 February 2006

Q20. The following income is exempted from income tax with the exception of: A. B. C. D. Income of an individual derived from exercising employment on board a sea-going ship registered under the Merchant Shipping Ordinance 1952. Income of a director who performs his duties in Malaysia for less than 60 days. Gratuity or pension paid to a person resident in Malaysia if he has attained the age of 55. Sums received by way of death gratuities or as consolidated compensation for death or injuries.

Q21. The following capital expenditure charged to the profit and loss account would not qualify for tax deduction except: A. B. C. D. Incorporation expenses of companies with authorized capital less than RM2.5 million. Expenditure relating to changes in authorized and paid-up capital. Professional fees in connection with acquisition or disposal of fixed assets. Renovations and improvements.

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Q22. Mr. Lee is entitled to a yearly leave passage benefit amounting to RM5,000 under the terms of his employment contract with Latent Sdn. Bhd. In March 2007, he accompanied his mother to USA for medical treatment and incurred total overseas leave passage cost of RM5,000 ie at RM2,500 per person. His employer reimbursed him for the full cost of RM5,000. How much of the leave passage incurred is exempted from tax? A. B. C. D. RM5,000 RM3,000 RM2,500 None of the above.

Q23. Anklemark Sdn. Bhd. received rental income from 1 unit of shophouse, 2 units of residential houses and 1 unit in a shopping complex. The rental income of Anklemark Sdn. Bhd. is assessed under: A. B. C. D. Section 4(a) of the Income Tax Act 1967. Section 4(b) of the Income Tax Act 1967. Section 4(c) of the Income Tax Act 1967. Section 4(d) of the Income Tax Act 1967.

Q24. The tax consequences of a taxpayer who does not comply with the provisions of withholding tax in respect of payments to non-resident contractors is/are ________________. I. II. III. IV. A. B. C. D. I I, II I, II, III I, II, IV A penalty of 10% would be imposed on the amount of withholding tax. The withholding tax and penalty would be a debt due to Government. The payment to the non-resident would not be allowed for deduction. A deduction will be given for the payment to the non-resident if withholding tax and penalty is paid subsequently. the the tax the

Financial Planning Association of Malaysia Web Sample 2008

Q25. Encik Rahim bought a double storey shophouse in December 2005 and rented it out for RM6,000 per month for the whole year beginning January 2006. The following expenses were incurred by Encik Rahim during the year ended 31 December 2006. RM Interest on term loan for purchase of property 18,000 Quit rent and assessment 14,000 Commission paid to broker to secure his first tenant 1,000 Renovations on the shophouse 8,000 Legal fees incurred on tenancy agreement 3,000 Compute the net rental income for the year 2006 which is subject to tax. A. B. C. D. RM28,000 RM40,000 RM36,000 RM39,000

Answer: (RM6,000 X 12) (RM18,000 + RM14,000) = RM40,000 Q26. Which of the following unfurnished accommodation does not apply to the taxable BIK for living accommodation which is to be limited to 3% of the section 13(1)(1) gross income of an employee? A. B. C. D. A hotel, hostel or similar premises. Premises on a plantation or in a forest. Premises not subject to rates. An apartment.

Q27. Total Income is Aggregate Income less the following items except: A. B. C. D. Approved donations. Prospecting expenditure. Adjusted business loss for the basis period. Qualifying operational business expenditure.

Financial Planning Association of Malaysia Web Sample 2008

Q28. To arrive at adjusted income from a business source, one of the following is deducted from gross income: A. B. C. D. Donations. Capital allowances. Balancing charges. Losses brought forward from an earlier YA.

Q29. Which of the following withholding tax payments is not considered to be a final tax? A. B. C. D. Interest. Section 4A income. Contract payment. Royalty.

Q30. Lam and his wife Eva have income as follows in the year 2006: Lam 1. Salary (EPF: 4,000) Rent 36,000 6,000 1. Salary (EPF: 500) Eva 4,000

They decide on a joint assessment, in Lams name. What is the tax chargeable on Lam? A. B. C. D. RM1,210 RM860 RM510 RM1,175

Answer: Salary Lam 36,000 - Eva 4,000 Rent Total Income Less: Reliefs Self 8,000 Wife 3,000 EPF 4,500 Chargeable Income 40,000 6,000 46,000

15,500 30,500

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Tax Liability Income tax on first 20,000 Next 10,500 @ 7% Less: Rebate Tax chargeable

475.00 735.00 1,210.00 700.00 RM 510.00

End of Sample Questions