Assignment DTM2323- ANIS ANNISYA BINTI ABDUL RANI 0201122010

KOLEJ UNIVERSITI ISLAM PERLIS (KUIPs)

DTM 2323
MALAYSIAN TAXATION 2

ASSIGNMENT

TOPIC:
COMPANY TAXATION

PREPARED BY:
ANIS ANNISYA BINTI ABDUL RANI

0201122010

PREPARED FOR:
DR. FARAH MASTURA BINTI NOOR AZMAN

TABLE OF CONTENT PAGES NUMBER
3
NO. TOPICS 4
1. Concept of Company Taxation
2. Income Tax Liability for Golden Shine Bhd.

2

Concept of Company Taxation

A company is defined as a body corporate that establish together with a separate legal identity
under the laws, by the Income Tax Act 1967. Company taxation means a tax that levied on the
income of any company derived from Malaysia or received in Malaysia from outside Malaysia
according to the provisions of the law. A company’s residence status is confirmed when the
management and control of its business is carried out in Malaysia. The residential status of a
company does not refer to the location of its business operations. There are several different
taxation systems practiced by several countries resulting from the distribution of dividends to
its shareholders. The taxation system practiced is the classical system, the dual tier system, the
fiscal transparency system, and finally is the imputation system.

A profit generated from the company’s business operations are taxed at certain levels at the
company level, under the classical system. While the company’s profit are divided into
distributed and non-distributed profits by under the dual tier system. Both of these systems
which are classical system and dual tier system will create double taxation problems.
Meanwhile under the fiscal transparency system, the company profits will be distributed to
shareholders not only through dividend.

On January 1, 2008, Malaysia had adopted the imputation system. This system requires the
imposition of taxes on profits at the corporate level and again at the shareholder level. The
principle of the imputation system is to overcome the double taxation of income. Companies
resident that in Malaysia are required to deduct tax at source at the prevailing corporate tax rate
on dividend paid to their shareholders. The same income can be taxed twice if the credit is not
credited to the shareholder.

Effective 1 January 2008, a single tier system was introduced where tax paid on dividend by
companies will not be calculated to shareholders. And also the tax paid by the company is the
final tax based on single tier system. There are several reasons for the imputation system to
move to a single tier system such as to remove the constraint that the company may have profits
that can be distributed but unable to clear the dividend due to the insufficient credit. The benefit
of the single tier system is that it can reduces the tax leakage because the dividend are exempt
from the tax.

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Income Tax Liability for Golden Shine Bhd.

Golden Shine Bhd. is a wholly owned Malaysian company which is in the business of
producing fine bullions gold and jewelries. The company closes its accounts on 31 December
each year. The paid-up capital on the first day of the basis period for year of assessment 2021
is RM2.5 million. The statement on comprehensive income of Bersatu Bhd for the year ended
31 December 2021 is as follows:

Golden Shine Bhd.
Statement of Comprehensive Income for the year ended 31 December 2021

Notes RM RM

Sales 15,150,000

Less: Cost of sales 1 (11,120,000)

Gross Profit 4,030,000

Add: Other incomes 2 32,250

4,062,250

Less: Operating expenses

Loss on disposal of asset 50,000

Foreign exchange loss 3 2,000

Professional and legal fees 46,000

Bad and doubtful debts 4 40,000

Repairs and maintenance 5 99,000

Salaries and wages 6 1,200,000

Entertainment expenses 7 94,000

Advertising and promotions 74,000

Lease payments 100,000

Miscellaneous expenses 8 141,000 1,846,000

Net Profit 2,216,250

Notes to the account:

1. Cost of sales includes:
i. Depreciation of factory building, plant, machinery and vehicles amounted to
RM73,000.
ii. Insurance premiums paid to Malaysian Insurance Bhd. for insuring bullions
gold bar exported amounted to RM14,000.

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2. Other income comprises;

i. Dividend incomes: RM21,250

The dividend warrants relating to the above dividend income are as follows:

Gross (RM) Net (RM)

Tan Beng Holdings Bhd. 15,000 11,250

Goh Builders Bhd 10,000 10,000

ii. Interest income: RM7,000
Interest income was from a fixed deposit account of Maybank Bhd.

iii. Foreign exchange Gain: RM4,000
It was arising from conversion of balances owning by overseas trade debtors
at year-end

3. Foreign exchange loss: RM2,000
Foreign exchange loss of RM2,000 (unrealized) arose from buying a
machinery from supplier located in Japan.

4. Professional and legal fees comprise of: RM
20,000
Secretarial and tax filing fees (1:3) 4,000
Legal fees for tax appeal 14,000
Legal fees to recover trade debts 8,000
Annual subscription to Federation of Malaysian
Manufacturers 46,000

5. Bad and doubtful debts as follows: RM
10,000
Private loan to an employee 12,000
Specific provision for bad and doubtful 18,000
General provision for bad and doubtful debts 40,000

6. Salaries and wages include: RM
20,000
Salaries paid to two disabled receptionist 27,000
Two-day company retreat cum staff family holiday to Pangkor
Island including directors, staff and families

5

7. Entertainment expenses include: RM
26,000
Entertainment of potential clients 10,000
Entertainment of company’s clients 28,000
Entertainment of staff 20,000
Allowance to staff in marketing department

8. Lease payments

The company leased two vehicles from a local leasing firm and payments

details are as follows:

Vehicle type Original cost of new vehicle Payments for the year

(RM) ended 31 December 2021

(RM)

Lorry 300,000 45,000

Luxury car 250,000 55,000

Total 100,000

9. Miscellaneous expenses include: RM
10,000
Cash donations to approve organizations 4,000
Speeding and parking fines of the company drivers 5,000
Purchase a new photostat machine

Additional information:
i. Capital allowance for the year of assessment 2021 is RM84,000 (not included
not notes no.8).
ii. Unabsorbed business losses brought forward from year of assessment 2020 is
RM26,000. There is no substantial change of shareholders in the immediately
preceding and during the relevant year of assessment.
iii. Company paid RM25,000 for business zakat and this amount is not recorded in
Statement on comprehensive Income.

You are required to:
Compute the income tax liability of Golden Shine Bhd. for the year of assessment 2021.
(Show your working for balancing allowances of disposed fixed asset)

6

Solution:

Golden Shine Bhd.
Income tax liability for the year of assessment 2021

profit before tax 1 RM RM
depreciation 1 21 250 2 216 250
insurance premium paid to insurance company 2 7 000
dividend income 2 4 000 73 000
interest income 2 nil
foreign exchange gain 3 32 250
foreign exchange loss 4 2 000
secretarial and tax filing fees 4 15 000
legal fees for tax appeal 4 4 000
legal fees to recover trade debts 4 14 000
annual subscription to Federation of Malaysian Manufacturers 5 8 000
private loan to an employee 5 10 000
specific provision for bad and doubtful 5
general provision for bad and doubtful debts 6 nil
salaries paid to 2 disabled receptionists 6 18 000
leave passage - local trip for staff family 7 20 000
entertainment of potential clients 7 27 000
entertainment of company's clients 7 26 000
entertainment of staff 7 10 000
allowance to staff in marketing department 8 28 000
lease payments- lorry 8 20 000
lease payments- luxury car 9 45 000
speeding and parking fines of the company drivers 9 55 000
purchase a new photostat machine 10 000
loss on disposal of asset 4 000
advertising and promotions
nil
adjusted income 8 nil
(-)balancing allowance 2 605 250
(-)capital allowance (32 250)
statutory income 2 573 000
(-) unabsorbed business loss (280 000)
(84 000)
(+)other income 2 209 000
dividend (exempted) (26 000)
aggregate income 2 183 000
(-) approved donation
donation cash = RM10 000 nil
Limited to 10% x 2 468 000 = 246 800 2 183 000

(10 000)

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zakat nil
chargeable income 2 173 000
tax on the first RM1 000 000 237 650
tax on the next RM1 173 000 @ 28% 328 440
Tax liability 566 090

Lorry YA 2021 RM
qualifying expenditure 300 000
initial allowance 20% 60 000
annual allowance 20% 60 000
residual expenditure 180 000

Luxury car YA 2021 RM
qualifying expenditure 250 000
initial allowance 20% 50 000
annual allowance 20% 50 000
residual expenditure 150 000

RM

residual expenditure (lorry+car) 330 000

sales proceeds 50 000

balancing allowance 280 000

*balancing allowance = sales proceeds < residual expenditure

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