KOLEJ TUNKU ABDUL RAHMAN

SCHOOL OF BUSINESS STUDIES

ABFT2013 BASIC TAXATION
Tutorial 1: Income and Scope of Charge
Answer to Question 1
Direct taxes
Income Tax
Real Property Gains Tax
Petroleum Income Tax
Labuan Offshore Business Activity Tax
Stamp Duty

Indirect Taxes
Sales Tax
Service Tax
Import Duty
Export Duty
Excise Duty

Answer to Question 2
a) Class of income:
-

Gains of profits from a business.

Gains of profits from employment.

Dividends, Interest or Discount

Rents, Royalties or Premiums

Pensions, Annuities or Other periodical payments not falling under any one of the
foregoing paragraphs.

Gains or profits not falling under any of the foregoing paragraph.

b) i.

Gains from disposal of landed property (real property) (except for a disposal by
property developer)

ii. Gains from disposal of shares (except for bank and insurance companies)
iii. Gains from disposal of patents, rights, licenses.
iv. Gains from disposal of business assets (capital assets) like plant and machinery.
c) The gain of RM300,000 is not subject to income tax if it is the fixed assets of the
business.
The gain is taxable if the land is the trading stock, as in the case of a property
development company.
d) The sum of RM1,000,000 inherited by Mr. Ang is not taxable as it does not fall within the
meaning of income under sub-sections 4(a) to 4(f) of Income Tax Act 1967.
e) The donation of RM200,000 received by Alice is not taxable as it is not income falling
under any of sub-sections 4(a) to 4(f) of Income Tax Act 1967.

Answer to Question 3
a)

A resident individual is charged to tax on income accruing in or derived from

Malaysia. Income received in Malaysia from outside Malaysia will be exempted from
tax by the virtue of Paragraph 28 of Schedule 6, Income Tax Act (ITA) 1967. The rate
of tax is at scale rates ranging from 0% to 26%.

b)

A non-resident individual or non-resident company is charged to tax on income

accruing in or deriving from Malaysia. Income received in Malaysia from outside
Malaysia will be exempted from tax by the virtue of Paragraph 28 of Schedule 6 of the
ITA 1967.
For year of assessment 2012, the tax rate is at a flat rate of 26% for a non-resident
individual and as for non-resident company is at a flat rate of 25%.

c)

A resident company is charged to tax on income accruing in or deriving from

Malaysia. Income received in Malaysia from outside Malaysia for a resident company
(except resident company in specialized industries) will be exempted from tax by the
virtue of Paragraph 28 of Schedule 6 of the ITA 1967.
For year of assessment 2012, the tax rate is either at the flat rate of 25% (co.s paid
up capital is above RM2.5 million) or 20% and 25% (co.s paid up capital is
RM2.5 million or below).
A resident company carrying on business of insurance, banking, shipping and airtransport; i.e. the specialised industries, will be subject to Malaysian income tax on a
world scope basis. The rate of tax is flat at 25%.

Answer to Question 4
a) Derived and Remittance basis
Before Year of Assessment (Y/A) 2004, resident person (such as individual, trust, cooperative) is chargeable to tax on :a. Income accruing in or deriving from Malaysia, and,
b. Income received in Malaysia from outside Malaysia. (foreign income)
With effective from (w.e.f.) Y/A 2004, the above resident persons will be exempted from
tax on foreign income received in Malaysia by the virtue of Para. 28 of Sch.6 of the ITA
1967.
b) Territorial basis
Resident or non-resident individuals and companies (excluding resident company which
carries on a specialized business such as banking, insurance, sea and transport) will be
chargeable to tax on income that is accrued in or derived from Malaysia.
c) World Scope basis
Resident person chargeable to tax which carried on a specialized business such as
banking, insurance, sea and air-transport, the income will be taxed on wherever derived.
As such, income derived from Malaysia will be taxed PLUS income derived from
overseas will be taxed in Malaysia irrespective of whether it is received or not in
Malaysia.

Answer to Question 5
Five chargeable persons under the Income Tax Act 1967 are:
1)
2)
3)
4)
5)

Individual
Company
Trust
Unit trust
Club

6)
7)
8)
9)
10)

Society
Co-operative
Co-operative society
Trade association
Executor or Administrator of estate