Stage 1 (Individual) Deloitte Tax Challenge 2019

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Stage 1 (Individual) Deloitte Tax Challenge 2019 - Quiz


Questions and Answers
  • 1. 

    Which of the following term is defined in the Income Tax Act, 1967?

    • A.

      Plant

    • B.

      Machinery

    • C.

      Building

    • D.

      All of the above

    Correct Answer
    A. Plant
    Explanation
    The term "Plant" is defined in the Income Tax Act, 1967.

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  • 2. 

    Which income is said to be derived from Malaysia?

    • A.

      Royalty income received by a Malaysian tax resident that relates to the usage of intellectual property outside Malaysia

    • B.

      Interest paid by a Malaysian tax resident to a non-resident

    • C.

      Services rendered by a Malaysian tax resident via an overseas branch

    • D.

      Employment income paid by a Malaysian tax resident that relates to employment exercised outside Malaysia

    Correct Answer
    B. Interest paid by a Malaysian tax resident to a non-resident
    Explanation
    The income that is said to be derived from Malaysia in this scenario is the interest paid by a Malaysian tax resident to a non-resident. This means that a Malaysian individual or entity is making interest payments to someone who is not a resident of Malaysia. This income is considered to be derived from Malaysia because it is being generated within the country and is subject to Malaysian tax laws.

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  • 3. 

    In considering a deduction for tax rebate (other than zakat or fitrah) which of the following is correct

    • A.

      An individual resident taxpayer who has claimed personal relief is not eligible for a tax rebate

    • B.

      An individual resident taxpayer with a total income of RM40,000 is eligible for a tax rebate

    • C.

      If the wife has claimed a tax rebate, the husband cannot claim a tax rebate

    • D.

      None of the above

    Correct Answer
    B. An individual resident taxpayer with a total income of RM40,000 is eligible for a tax rebate
    Explanation
    An individual resident taxpayer with a total income of RM40,000 is eligible for a tax rebate. This means that if an individual resident taxpayer has a total income of RM40,000, they can claim a tax rebate. The other options mentioned in the question, such as an individual resident taxpayer who has claimed personal relief not being eligible for a tax rebate or the husband not being able to claim a tax rebate if the wife has claimed one, are not correct.

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  • 4. 

    In arriving at the adjusted income of a business for a company, the following would not qualify for tax deduction:- I. Incorporation expenses of a company with authorised capital not exceeding RM2.5 million at the point of incorporation II. Donations to approved institutions in a relevant year for a year of assessment III. Expenditure on providing infrastructure in relation to its business which is available for public use IV. Revenue expenditure incurred by employers on the provision and maintenance of childcare centre for the benefit of the employees

    • A.

      I and II

    • B.

      II and III

    • C.

      I and III

    • D.

      II, III and IV

    Correct Answer
    B. II and III
    Explanation
    The correct answer is II and III because they both would qualify for tax deduction.

    II. Donations to approved institutions in a relevant year for a year of assessment are typically tax-deductible expenses.

    III. Expenditure on providing infrastructure in relation to its business which is available for public use can also be considered as a tax-deductible expense as it contributes to the community and public welfare.

    Therefore, II and III would not qualify for tax deduction is an incorrect statement.

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  • 5. 

    In preparing the income tax computation for XYZ Sdn Bhd, the following qualify for tax deduction:- I. Expenses relating to maintenance of shareholders’ register II. Immigration and professional fees in relation to employment pass for employees III. Gift with company's logo for customer's annual dinner IV. Expenditure on renovation to set up a new branch V. Legal fees incurred for recovery of trade debts

    • A.

      I, II and IV

    • B.

      III and V

    • C.

      II, III and V

    • D.

      I, II and III

    Correct Answer
    C. II, III and V
    Explanation
    The expenses relating to maintenance of shareholders' register (I) do not qualify for tax deduction as they are not directly related to the business operations or generating income. However, immigration and professional fees in relation to employment pass for employees (II), gift with company's logo for customer's annual dinner (III), and legal fees incurred for recovery of trade debts (V) are all expenses that are necessary for the business operations and can be considered as legitimate deductions for tax purposes. Therefore, the correct answer is II, III and V.

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  • 6. 

    Which of the following traveling expenses would qualify for tax deduction?

    • A.

      Air fares to Pulau Langkawi for the directors and their family members

    • B.

      Air fares to Phuket for the employees and their immediate family for the annual company trip

    • C.

      Air fares to Singapore for the directors to attend a charity concert together with their business associates

    • D.

      None of the above

    Correct Answer
    D. None of the above
    Explanation
    The given question asks which traveling expenses would qualify for tax deduction. However, none of the options provided would qualify for tax deduction. The expenses for air fares to Pulau Langkawi for the directors and their family members, air fares to Phuket for the employees and their immediate family for the annual company trip, and air fares to Singapore for the directors to attend a charity concert together with their business associates do not meet the criteria for tax deductible expenses. Therefore, the correct answer is "None of the above."

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  • 7. 

    All expenses incurred on food and drinks qualify for 100% tax deduction except for:-

    • A.

      Food and drinks provided during the launch of the 1st housing project

    • B.

      Food and drinks provided in a meeting with suppliers

    • C.

      Food and drinks provided during a directors' first meeting in the year

    • D.

      Meals provided to employee during a holiday to Genting Highlands

    Correct Answer
    B. Food and drinks provided in a meeting with suppliers
    Explanation
    Expenses incurred on food and drinks provided in a meeting with suppliers do not qualify for 100% tax deduction. This is because the purpose of the meeting is to discuss business matters with the suppliers, and the provision of food and drinks in this context is considered as a business expense. However, expenses on food and drinks provided during the launch of the 1st housing project, during a directors' first meeting in the year, and meals provided to employees during a holiday to Genting Highlands are eligible for 100% tax deduction.

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  • 8. 

    Which of the following interest expense does not qualify for tax deduction?

    • A.

      Interest expense arising from bank loan for purchase of commercial properties for long term investment purposes

    • B.

      Interest expense arising from bank overdraft for working capital purposes

    • C.

      Interest expense arising from bank loan for purchase of plant and machinery

    • D.

      Interest expense arising from bank loan to purchase shares where single tier dividend was received

    Correct Answer
    D. Interest expense arising from bank loan to purchase shares where single tier dividend was received
    Explanation
    Interest expense arising from bank loan to purchase shares where single tier dividend was received does not qualify for tax deduction because it is related to an investment in shares, which is considered a capital expense rather than a business expense. The purpose of the loan was to generate dividend income, which is a form of return on investment, and not to support business operations or generate income for the business. Therefore, it does not meet the criteria for tax deductibility.

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  • 9. 

    The adjusted loss surrendered by a surrendering company to a claimant company shall be allowed as a deduction against:-

    • A.

      The total income of the claimant company

    • B.

      The aggregate statutory income of the claimant company from business source only

    • C.

      The defined aggregate income of the claimant company

    • D.

      70% of the adjusted income of the claimant company

    Correct Answer
    C. The defined aggregate income of the claimant company
    Explanation
    The correct answer is "The defined aggregate income of the claimant company." This means that the adjusted loss surrendered by a surrendering company can be deducted from the defined aggregate income of the claimant company.

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  • 10. 

    In order to be eligible for group relief for a year of assessment (YA), both surrendering and claimant companies must:-

    • A.

      Be related companies throughout the basis period for that YA

    • B.

      Make an official application to surrender or claim an amount of adjusted loss for that YA

    • C.

      Have paid-up share capital in respect of ordinary shares of more than RM2.5 million at the beginning of the basis period for that YA

    • D.

      Fulfill all the above conditions

    Correct Answer
    C. Have paid-up share capital in respect of ordinary shares of more than RM2.5 million at the beginning of the basis period for that YA
    Explanation
    The correct answer is that both surrendering and claimant companies must have paid-up share capital in respect of ordinary shares of more than RM2.5 million at the beginning of the basis period for that YA. This means that in order to be eligible for group relief, both companies must have a significant amount of capital invested in ordinary shares. This requirement ensures that only companies with a certain level of financial stability and resources are able to benefit from group relief.

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  • 11. 

    Failure of an employer to give notice to the Director General of Inland Revenue in respect of the following event would likely result in a fine of RM200 to RM20,000:-

    • A.

      Commencement of employment of an individual who is not likely to be chargeable to tax

    • B.

      Cessation of employment of an employee whose subsequent employer is a rival competitor

    • C.

      Temporary absence of an employee from Malaysia for a period of 3 months

    • D.

      None of the above

    Correct Answer
    D. None of the above
  • 12. 

    Which of the following is an offence under the Income Tax Act, 1967?

    • A.

      Failure of an individual to keep records of his overseas travelling

    • B.

      Failure of an individual to give notice of chargeability upon commencement of employment

    • C.

      Failure of an employer to comply with a direction to deduct tax

    • D.

      All of the above

    Correct Answer
    C. Failure of an employer to comply with a direction to deduct tax
    Explanation
    The correct answer is "Failure of an employer to comply with a direction to deduct tax." This is an offence under the Income Tax Act, 1967 because employers have a legal obligation to deduct and remit taxes from their employees' salaries. Failure to comply with this direction can result in penalties and legal consequences.

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  • 13. 

    After submitting her 2017 return form before the due date 30 June 2018, Ms Tan submitted an amended tax return for the year of assessment 2017 on 10 August 2018 which resulted in an additional tax payable of RM500. What would be the amount payable inclusive of penalties, if any?

    • A.

      RM500.00

    • B.

      RM550.00

    • C.

      RM575.00

    • D.

      RM577.50

    Correct Answer
    B. RM550.00
    Explanation
    Ms Tan submitted an amended tax return after the due date, which means she is liable to pay penalties. The penalties for late submission of an amended tax return in Malaysia are as follows: 5% of the additional tax payable if the amended return is submitted within 60 days from the due date, and 10% if it is submitted after 60 days. Since Ms Tan submitted the amended return on 10 August 2018, which is more than 60 days after the due date, the penalty would be 10% of the additional tax payable. Therefore, the total amount payable, inclusive of penalties, would be RM500 + 10% of RM500, which equals RM550.00.

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  • 14. 

    An audit was conducted on the business premises of Mr Tan. He was asked to give the name and address of the person who prepared his income statement and statement of affairs. However, Mr Tan did not give a reply as he wanted to protect his friend. Mr Tan can be charged in court and if found guilty he is liable to a fine of:-

    • A.

      RM200 - RM20,000

    • B.

      RM1,000 – RM20,000

    • C.

      RM1,000 - RM10,000

    • D.

      None of the above

    Correct Answer
    C. RM1,000 - RM10,000
    Explanation
    Mr Tan can be charged in court and if found guilty, he is liable to a fine of RM1,000 - RM10,000. This is because Mr Tan failed to comply with the audit request by not providing the name and address of the person who prepared his income statement and statement of affairs. By refusing to cooperate and protect his friend, Mr Tan has violated the law and can be penalized with a fine within the given range.

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  • 15. 

    Which of the following payment(s) made to a non-resident person by a Labuan company are not subject to withholding tax?

    • A.

      Royalties

    • B.

      Management and technical fees for services rendered in Malaysia

    • C.

      Interest on loan provided by its holding company which is located overseas

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    All of the above payments made to a non-resident person by a Labuan company are not subject to withholding tax. This means that royalties, management and technical fees for services rendered in Malaysia, and interest on a loan provided by its overseas holding company are exempt from withholding tax.

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  • 16. 

     Which of the following statements is true?

    • A.

      A Labuan company (LC) is given an irrevocable election on whether to be charged to tax in accordance with the Income Tax Act, 1967

    • B.

      A LC carrying on Labuan non-trading activities is not taxable and is not required to file any statutory declaration

    • C.

      Labuan trading activity includes shipping, banking, insurance, trading, management or any other similar activity

    • D.

      All of the above

    Correct Answer
    A. A Labuan company (LC) is given an irrevocable election on whether to be charged to tax in accordance with the Income Tax Act, 1967
    Explanation
    A Labuan company (LC) has the option to choose whether or not to be taxed according to the Income Tax Act, 1967. This means that LC has the power to decide whether it wants to be subject to taxation or not. This gives LC flexibility in managing its tax obligations and allows it to make a strategic decision based on its specific circumstances.

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  • 17. 

    TSY Sdn Bhd is a company set up in Malaysia to manufacture a promoted product. The company began its operations 3 months ago and it is expected that capital expenditure of RM50 million would be incurred on factories, plant and machinery in the next 5 years to build and expand its operations. Projected profit for the initial years would be low due to high capital investments and cost penetration strategy to gain market share. In order to maximise tax-exempt income, which of the following incentive should the company apply for?

    • A.

      Pioneer status

    • B.

      Investment tax allowance

    • C.

      Reinvestment allowance

    • D.

      Infrastructure allowance

    Correct Answer
    B. Investment tax allowance
    Explanation
    The company should apply for the Investment Tax Allowance. This incentive allows the company to deduct a certain percentage of its qualifying capital expenditure from its taxable income. Since TSY Sdn Bhd is expected to incur a significant amount of capital expenditure in the next 5 years, this incentive will help reduce their taxable income and maximize their tax-exempt income. This will be beneficial for the company as it is projected to have low profits in the initial years due to high capital investments.

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  • 18. 

     Which of the following expense is eligible for double deduction claim?

    • A.

      Remuneration of employees for the period they were hospitalised

    • B.

      Payment for services of a contract research and development company

    • C.

      Leave passage provided to disabled employees

    • D.

      None of the above

    Correct Answer
    B. Payment for services of a contract research and development company
    Explanation
    Payment for services of a contract research and development company is eligible for double deduction claim. This means that the company can claim a deduction for this expense twice, reducing their taxable income. This is because expenses related to research and development are often seen as investments in innovation and are therefore encouraged by the government. By allowing double deduction, the government aims to incentivize companies to invest in research and development activities, which can lead to technological advancements and economic growth.

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  • 19. 

    There are some conditions for a person to qualify for initial allowance in respect of an industrial building except I. he incurred capital expenditure on the construction of a building II. he incurred capital expenditure on the purchase of a building III. he was the owner of the building at the end of the basis period IV. the building was about to be used as an industrial building

    • A.

      I, II and III

    • B.

      I, III and IV

    • C.

      II and III

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    The correct answer is "All of the above". This means that all the conditions mentioned in options I, II, III, and IV are required for a person to qualify for the initial allowance in respect of an industrial building. In other words, if any of these conditions are not met, the person would not be eligible for the initial allowance.

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  • 20. 

    Any unabsorbed capital allowance may be carried forward to be set off against (Note: there is no substantial change in shareholding)

    • A.

      Income of the following years from non-business source

    • B.

      Income of the following years from the same business source

    • C.

      Income of the following years from all business sources

    • D.

      Unabsorbed capital allowance cannot be carried forward

    Correct Answer
    B. Income of the following years from the same business source
    Explanation
    Any unabsorbed capital allowance refers to the amount of capital allowance that has not been fully utilized in a particular tax year. This unutilized amount can be carried forward to be set off against the income of the following years from the same business source. This means that if a business has not fully utilized its capital allowance in a given year, it can offset this unused amount against its future income from the same business source. This allows businesses to effectively utilize their capital allowances over multiple years and reduce their tax liability.

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  • 21. 

    The operating lease payment of a new non-commercial motor vehicle started in January 2018. The cost of the motor vehicle in January 2018 was RM130,000. The total lease payments is RM160,000 over four years. The total lease payments that is deductible shall not exceed

    • A.

      RM160,000

    • B.

      RM130,000

    • C.

      RM100,000

    • D.

      RM50,000

    Correct Answer
    C. RM100,000
    Explanation
    The total lease payments that are deductible shall not exceed RM100,000. This is because the cost of the motor vehicle in January 2018 was RM130,000, but the total lease payments over four years is only RM160,000. Therefore, the maximum amount that can be deducted is RM100,000, which is the total lease payments.

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  • 22. 

    The incorrect tax treatment for purchase of assets under a hire-purchase transaction is

    • A.

      To claim capital allowance on principal payments made during the year

    • B.

      To claim capital allowance on principal and interest payments made during the year

    • C.

      To expense off the interest payments

    • D.

      None of the above

    Correct Answer
    B. To claim capital allowance on principal and interest payments made during the year
    Explanation
    The correct answer is to claim capital allowance on principal and interest payments made during the year. In a hire-purchase transaction, the ownership of the asset is transferred to the purchaser only after the final payment is made. Until then, the purchaser is considered as the hirer. Therefore, the correct tax treatment is to claim capital allowance on the principal payments made during the year, as the hirer is not the legal owner of the asset. Additionally, the interest payments should be expensed off, as they are considered as financing costs rather than capital expenditure.

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  • 23. 

    Which statement is incorrect? I. Balancing allowance is the withdrawal of capital allowance previously claimed II. The balancing charge cannot be greater than the total amount of capital allowance claimed previously III. Upon disposal of an asset in a control transfer situation, we do not compute balancing charge/balancing allowance IV. Balancing charge/allowance is only computed where there is a sale proceed  

    • A.

      I, II and III

    • B.

      II, III and IV

    • C.

      I and IV

    • D.

      All of the above

    Correct Answer
    C. I and IV
  • 24. 

    In the case of an investment holding company (not listed in Bursa Malaysia), permitted expenses include

    • A.

      Directors fees, audit, secretarial and tax fees

    • B.

      Rental of office, rental and maintenance of equipment, salaries and allowance

    • C.

      Audit and accounting fees, directors fees and tax fees

    • D.

      Management fees, telephone and postage charges, salaries and accounting fees

    Correct Answer
    D. Management fees, telephone and postage charges, salaries and accounting fees
    Explanation
    The correct answer is "management fees, telephone and postage charges, salaries and accounting fees". This is because the question asks for the permitted expenses for an investment holding company that is not listed in Bursa Malaysia. Among the given options, these expenses are typically allowed for such a company. Directors fees, audit, secretarial and tax fees are not mentioned as permitted expenses, and rental of office, rental and maintenance of equipment are not usually considered as expenses for an investment holding company.

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  • 25. 

    Bee Sdn Bhd has made a royalty payment to a Japanese company on 20 March 2018 in respect of royalty for the month of February 2018 charged in invoice dated 10 March 2018. When was the withholding tax due to be paid to the IRB on the above royalty payment?

    • A.

      One month from 20 March 2018

    • B.

      One month from 10 March 2018

    • C.

      One month from 28 February 2018

    • D.

      20 March 2018

    Correct Answer
    A. One month from 20 March 2018
    Explanation
    The withholding tax on the royalty payment was due to be paid to the IRB one month from 20 March 2018 because the payment was made on that date.

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  • 26. 

    AB Ltd, a company resident in Australia, has received payment of RM2,500,000 from CD Sdn Bhd for the supply, installation and commissioning of machines at the factory of CD Sdn Bhd for a duration of 3 months. It was agreed that RM2,000,000 is for the supply of machines and the balance of RM500,000 is for installation and commissioning services. What is the amount of withholding tax payable on the above payment of RM2,500,000?

    • A.

      RM250,000

    • B.

      RM65,000

    • C.

      RM50,000

    • D.

      RM0

    Correct Answer
    D. RM0
    Explanation
    The correct answer is RM0 because withholding tax is not applicable in this scenario. Withholding tax is a tax deducted at source on certain types of income, such as dividends, interest, or royalties. In this case, the payment of RM2,500,000 is for the supply, installation, and commissioning of machines, which does not fall under the categories that are subject to withholding tax. Therefore, no withholding tax is payable on this payment.

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  • 27. 

    Mr. Lim was employed as a sales manager in Company ABC in January 2009. He retired from the company on 15 May 2018 on reaching the age of 55. He was paid a lump sum payment of RM200,000 and a gold-plated watch costing RM2,000. What is the taxable amount of the above payment/gift received by Mr. Lim?

    • A.

      RM202,000

    • B.

      RM193,000

    • C.

      RM2,000

    • D.

      RM0

    Correct Answer
    B. RM193,000
    Explanation
    The taxable amount of the payment/gift received by Mr. Lim is RM193,000. This is because the lump sum payment of RM200,000 and the cost of the gold-plated watch RM2,000 are considered as retirement benefits, which are taxable. Therefore, the total taxable amount is RM202,000. However, since Mr. Lim retired on reaching the age of 55, he is entitled to a tax exemption of RM9,000. Thus, the taxable amount is reduced to RM193,000.

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  • 28. 

    Mr. Klaus is a resident of Germany. In February 2018 he was selected by a Malaysian company to provide architectural services with regard to a new office building. His fees was RM1 million. Most of the time spent on the job was in Germany. He estimated that the value of his time spent in Malaysia with regard to the project was RM200,000. The withholding tax to be deducted by the Malaysian company is?

    • A.

      RM100,000

    • B.

      RM70,000

    • C.

      RM20,000

    • D.

      RM14,000

    Correct Answer
    D. RM14,000
    Explanation
    The withholding tax to be deducted by the Malaysian company is RM14,000. Withholding tax is a tax deducted at source by the payer of the income. In this case, the Malaysian company is required to deduct withholding tax on the fees paid to Mr. Klaus for his architectural services. The withholding tax rate in Malaysia for non-residents providing technical or professional services is 10%. Therefore, the withholding tax on Mr. Klaus' fees of RM1 million would be RM100,000. However, since Mr. Klaus estimated that the value of his time spent in Malaysia was only RM200,000, the withholding tax would be 10% of RM200,000, which is RM20,000. However, the question asks for the withholding tax to be deducted by the Malaysian company, so the correct answer is RM14,000.

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  • 29. 

    An individual can be a tax resident in Malaysia for the basis year for year of assessment 2017 if:- I. He is in Malaysia for a period of 92 days in the basis year 2017 and stayed in Malaysia in the basis year 2014 (180 days), basis year 2015 (130 days) and basis year 2016 (153 days) II. He is in Malaysia for periods of 182 days in the basis years 2014, 2015 and 2016, 20 days in 2017 and 188 days in 2018 III. He is in Malaysia for 30 days and that period is linked by the basis year 2016 of 181 consecutive days (total of 211 days) IV. He is in Malaysia for 183 days in the basis year 2017

    • A.

      I and IV

    • B.

      I, II and IV

    • C.

      II, III and IV

    • D.

      All of the above

    Correct Answer
    B. I, II and IV
    Explanation
    An individual can be a tax resident in Malaysia for the basis year for year of assessment 2017 if they meet any of the following conditions:
    - They are in Malaysia for a period of 92 days in the basis year 2017 and have stayed in Malaysia for a total of 180 days in 2014, 130 days in 2015, and 153 days in 2016 (Condition I).
    - They are in Malaysia for periods of 182 days in each of the basis years 2014, 2015, and 2016, 20 days in 2017, and 188 days in 2018 (Condition II).
    - They are in Malaysia for 30 days and that period is linked by the basis year 2016 of 181 consecutive days, making a total of 211 days (Condition III).
    - They are in Malaysia for 183 days in the basis year 2017 (Condition IV).

    Therefore, the correct answer is I, II, and IV.

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  • 30. 

    Which of the company below qualifies for Reinvestment Allowance? I. Tecorp Sdn Bhd purchased new machineries in a project to automate its production of chilli sauce II. Z Hotel Sdn Bhd in a project of expansion of its number of rooms and restaurant III. FAA Co-operative Society diversified its fruit farm of mangoes, rambutan and mangosteen to durians and incurred cost of clearing land and planting IV. TDD Sdn Bhd incurred additional cost in purchase of a building for use as an additional store for goods in its trading business  

    • A.

      I and II

    • B.

      I and III

    • C.

      I, II and III

    • D.

      All of the above

    Correct Answer
    B. I and III
    Explanation
    Companies that qualify for Reinvestment Allowance are those that have incurred capital expenditure for the purpose of automation, expansion, or diversification of their business. In this case, Tecorp Sdn Bhd qualifies because they purchased new machineries to automate their production. FAA Co-operative Society also qualifies because they diversified their fruit farm and incurred costs for clearing land and planting. Z Hotel Sdn Bhd and TDD Sdn Bhd do not qualify as their projects do not involve automation, expansion, or diversification. Therefore, the correct answer is I and III.

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  • 31. 

    Bes Berhad is an investment holding company listed in Bursa Malaysia. Which of the following tax treatment is correct for Bes Berhad? I. Rental, dividend and interest income are treated as investment income II. Permitted expenses can be allowed in the income tax computation III. Capital allowance is not allowed as a deduction against the adjusted income from each source of income IV. All income will be business income  

    • A.

      I and III

    • B.

      I, II and III

    • C.

      IV

    • D.

      II and IV

    Correct Answer
    C. IV
  • 32. 

    Which of the following entertainment expenses qualify for 50% tax deduction? I. Redemption of gifts based on a scheme of accumulated points II. Expenditure on leave passage benefit provided by an employer to its employees to Pulau Pangkor as its yearly event III. A dinner provided to an important supplier IV. Entertainment given to internal auditors from holding company

    • A.

      I and II

    • B.

      I, II and IV

    • C.

      III

    • D.

      III and IV

    Correct Answer
    C. III
  • 33. 

    Which of the following investment income is not taxable in the hands of Encik Ahmad who is Malaysian-resident:- I. Interest received from Islamic convertible loan stocks issued in non-Ringgit currency by a bank licensed under the Islamic Banking Act, 1983 II. Interest received from Islamic securities (non-convertible) originating from Malaysia that is issued in any currency other than Ringgit and approved by the Labuan Financial Services Authority III. Interest income received from Sukuk (maturity in June 2018) issued in Ringgit by a Syariah-compliant Malaysian company and approved by the Securities Commission. IV. Interest received from Islamic convertible loan stocks issued in Ringgit by a bank licensed under the Islamic Financial Services Act, 2013  

    • A.

      I, II and III

    • B.

      II and III

    • C.

      II, III, IV

    • D.

      All of the above

    Correct Answer
    B. II and III
  • 34. 

    When would a corporation be subject to Malaysian withholding tax (other than Section 107A)? I. When the corporation is a non-resident II. When the income is deemed derived from Malaysia III. When the income is not attributable to a business carried on by the non-resident in Malaysia IV. When there is an office in Malaysia

    • A.

      I and II

    • B.

      I, II and III

    • C.

      I, II and IV

    • D.

      All of the above

    Correct Answer
    B. I, II and III
    Explanation
    A corporation would be subject to Malaysian withholding tax when it is a non-resident, when the income is deemed derived from Malaysia, and when the income is not attributable to a business carried on by the non-resident in Malaysia. Having an office in Malaysia is not mentioned as a condition for being subject to withholding tax. Therefore, the correct answer is I, II, and III.

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  • 35. 

    Sofmicro Inc. incorporated in the United States of America is a company that has been providing technical services to its subsidiaries in Malaysia. Its employees would frequently travel to Malaysia to provide onsite support. Which of the following would apply to Sofmicro, Inc? I. Sofmicro Inc. has established a taxable presence in Malaysia. As such, it would be liable to Malaysian corporate tax II. Sofmicro Inc. would be required to withhold 10% of payments made to its customers III. Sofmicro Inc. employees will be subject to Malaysian tax in respect of their income earned in Malaysia IV. Sofmicro Inc. earnings would be subject to a Malaysian withholding tax of 10%

    • A.

      I, II and III

    • B.

      II, III and IV

    • C.

      I, III and IV

    • D.

      All of the above

    Correct Answer
    C. I, III and IV
    Explanation
    Sofmicro Inc. would be liable to Malaysian corporate tax because it has established a taxable presence in Malaysia. Additionally, Sofmicro Inc. employees would be subject to Malaysian tax on their income earned in Malaysia. Furthermore, Sofmicro Inc. earnings would be subject to a Malaysian withholding tax of 10%. Therefore, the correct answer is I, III, and IV.

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  • 36. 

    Optimal Sdn Bhd is planning to make payment in respect of services rendered by a non-resident. When should Malaysian withholding tax payment be made?

    • A.

      Within 1 month when Optimal Sdn Bhd enters the payment in its accounts

    • B.

      Within 1 month before the commencement of its new financial year

    • C.

      Within 1 month after the close of its financial year end

    • D.

      Within 1 month when Optimal Sdn Bhd electronically transfers the payment to the non-resident

    Correct Answer
    D. Within 1 month when Optimal Sdn Bhd electronically transfers the payment to the non-resident
    Explanation
    The correct answer is "Within 1 month when Optimal Sdn Bhd electronically transfers the payment to the non-resident." This is because Malaysian withholding tax payment should be made within 1 month of transferring the payment to the non-resident. This ensures that the tax is withheld and paid to the relevant authorities in a timely manner.

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  • 37. 

    Which of the following statements is correct pertaining to the general principles of a double taxation agreement (DTA)? I. DTA cannot impose tax if domestic tax law does not provide for a particular tax II. A relief is given in the country of source to relieve the burden of double taxation III. DTA overrides the domestic tax law IV. If income is liable to be taxed in both countries, the DTA determines the taxing rights between the country of residence and the country of source

    • A.

      I, II and III

    • B.

      II, III and IV

    • C.

      I, III and IV

    • D.

      All of the above

    Correct Answer
    C. I, III and IV
    Explanation
    The correct answer is I, III and IV.



    Statement I is correct because a DTA cannot impose a tax if the domestic tax law of a country does not provide for that particular tax.

    Statement III is correct because a DTA can override the domestic tax law of a country.

    Statement IV is correct because if income is liable to be taxed in both countries, the DTA determines the taxing rights between the country of residence and the country of source.

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  • 38. 

    Which of the following activities carried on by a Labuan entity will be taxed under Labuan Business Activity Tax Act, 1990? I. Shipping operations II. Trading of goods III. Labuan insurance business carried on by a branch of a Malaysian insurer IV. Management

    • A.

      I, II and IV

    • B.

      I, III, and IV

    • C.

      II, III, IV

    • D.

      All of the above

    Correct Answer
    D. All of the above
    Explanation
    All of the activities mentioned in options I, II, III, and IV will be taxed under the Labuan Business Activity Tax Act, 1990. This means that shipping operations, trading of goods, Labuan insurance business carried on by a branch of a Malaysian insurer, and management activities carried on by a Labuan entity will all be subject to taxation under this act.

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  • 39. 

    Which of the following statements in respect of incentives for "Approved Food Production Projects" is true? I. A company enjoying tax incentives under the Promotion of Investments Act, 1986 is not eligible to apply for the deduction for investment in an approved food production project as it is mutually exclusive II. The cost of investment amount which is allowed as a deduction in the basis period is deducted at adjusted income level III. Any consideration for disposal of shares made within 5 years in which the said investment cost was claimed as a deduction by the investing company will be treated as part of adjusted income IV. For expansion projects of existing approved food production projects, the operating company undertaking the approved food production project would be entitled for an additional five years tax exemption incentive  

    • A.

      I, II and III

    • B.

      I, III and IV

    • C.

      II, III and IV

    • D.

      All of the above

    Correct Answer
    C. II, III and IV
  • 40. 

    Which of the following types of R&D expenditure qualify for double deduction? I. Cost of moulds, dies and soft tools which cannot be reused II. Maintenance cost of motorcars used by research employees/consultants III. Consultancy fee paid to particular organizations for use of testing equipment IV. Cost of attending courses and seminars relevant to research project

    • A.

      I, II and III

    • B.

      I, III, and IV

    • C.

      II, III and IV

    • D.

      All of the above

    Correct Answer
    B. I, III, and IV
    Explanation
    The types of R&D expenditure that qualify for double deduction are the cost of moulds, dies, and soft tools that cannot be reused, consultancy fees paid to particular organizations for the use of testing equipment, and the cost of attending courses and seminars relevant to the research project. These expenses are considered necessary and directly related to the research and development activities, making them eligible for double deduction.

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  • 41. 

    Which of the following instruments are chargeable to stamp duty? I. Statutory declaration II. Register of particulars of directors and secretaries III. Service agreement IV. Power of letter of attorney

    • A.

      I, II and III

    • B.

      I and III

    • C.

      I, III and IV

    • D.

      All of the above

    Correct Answer
    C. I, III and IV
    Explanation
    Statutory declaration, service agreement, and power of letter of attorney are chargeable to stamp duty. This means that when these instruments are executed or signed, a fee must be paid to the government for the stamp duty. The register of particulars of directors and secretaries, however, is not chargeable to stamp duty.

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  • 42. 

    Based on your research on the taxability of the unit holders of a unit trust fund, the investment in a unit trust fund will not provide tax savings to an investor company if:

    • A.

      The income of the unit trust fund mainly consist of gains from realisation of investments and single tier dividends from investment in equity securities quoted in Malaysia

    • B.

      The unit trust mainly receives interest derived from convertible loan stock paid or credited by companies listed in Bursa Malaysia

    • C.

      The unit trust fund is a foreign unit trust

    • D.

      The unit trust mainly receives interest derived from Malaysia and paid or credited by any bank or financial institution licensed under the Financial Services Act 2013, the Islamic Financial Services Act, 2013 and the Development Financial Institutions Act, 2002

    Correct Answer
    B. The unit trust mainly receives interest derived from convertible loan stock paid or credited by companies listed in Bursa Malaysia
    Explanation
    Investment in a unit trust fund will not provide tax savings to an investor company if the unit trust mainly receives interest derived from convertible loan stock paid or credited by companies listed in Bursa Malaysia. This is because the income derived from convertible loan stock is considered interest income, which is taxable. Therefore, the investor company will not receive any tax savings from this type of income.

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  • 43. 

    C Manufacturers Sdn Bhd commenced its business in 2001. In year 2003, the company first undertook its expansion project. Based on the current legislation, what is the final year which C Manufacturers Sdn Bhd is entitled for the claim of Reinvestment Allowance?

    • A.

      YA 2017

    • B.

      YA 2018

    • C.

      YA 2019

    • D.

      YA 2020

    Correct Answer
    B. YA 2018
    Explanation
    Based on the information provided, C Manufacturers Sdn Bhd commenced its business in 2001 and undertook its expansion project in 2003. The claim for Reinvestment Allowance is usually available for a certain period of time after the expansion project. Since the question does not specify the duration of the claim period, we can assume it is the standard 5-year period. Therefore, the final year for which C Manufacturers Sdn Bhd is entitled to claim the Reinvestment Allowance would be 2018, as it is five years after the expansion project in 2003.

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  • 44. 

    A local company resident in Malaysia carrying on activities of manufacturing or agriculture is exempted from the payment of income tax in respect of income derived from export sales. Which of the following amount of income to be exempted applies to the above export incentive:- I. 30% of the value of increased exports where a company has achieved a significant increase in exports II. 50% of the value of increased exports where a company has penetrated new markets III. 80% of the value of increased exports where a company has been awarded the Export Excellence Award

    • A.

      I and II

    • B.

      I and III

    • C.

      II and III

    • D.

      All of the above

    Correct Answer
    A. I and II
    Explanation
    The correct answer is "I and II". This means that a local company resident in Malaysia carrying on activities of manufacturing or agriculture can be exempted from the payment of income tax in respect of income derived from export sales if they have achieved a significant increase in exports (30% of the value of increased exports) or if they have penetrated new markets (50% of the value of increased exports). The exemption does not apply to companies that have been awarded the Export Excellence Award (III).

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  • 45. 

    Dizi Sdn Bhd was newly incorporated on 1 July 2018 with a paid up ordinary share capital of RM3 million. The company will close its accounts on 31 December. When should the company start furnishing its tax estimate to the Inland Revenue Board?

    • A.

      The company is exempted from furnishing tax estimates for the first two years of assessment

    • B.

      The company should furnish tax estimates within 2 months from the date of commencement of operations

    • C.

      The company should furnish tax estimates 30 days before start of the basis period of the year of assessment 2018

    • D.

      None of the above

    Correct Answer
    D. None of the above
  • 46. 

    Income of BC Sdn Bhd includes the items below. Please identify the income which is subject to income tax. I. Insurance compensation on factory partly damaged by fire II. Interest income derived from deposit placed with a local licensed bank III. Waiver of trade payable IV. Realised gain on foreign exchange arising from purchase of machinery from Japan

    • A.

      I and III

    • B.

      II and III

    • C.

      I, II and III

    • D.

      Il, III and IV

    Correct Answer
    C. I, II and III
    Explanation
    The income subject to income tax includes insurance compensation on factory partly damaged by fire, interest income derived from deposit placed with a local licensed bank, and waiver of trade payable. These sources of income are considered taxable as they are considered as revenue or gains for the business. The realized gain on foreign exchange arising from the purchase of machinery from Japan is not subject to income tax as it is a capital gain and not considered part of the business's regular income.

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  • 47. 

    Mr. Smith is seconded to Malaysia to provide technical services to Dan Sdn Bhd for a period 9 months. His salary is paid by Tom Co. Ltd. in the home country and Dan Sdn Bhd pays technical fee to Tom Co. Ltd. for the services rendered by Mr. Smith. Which of the following is not true? I. Technical fee is not subject to withholding tax but Mr. Smith’s salary is subject to withholding tax II. Technical fee is subject to withholding tax but Mr. Smith’s salary is not subject to income tax III. Both technical fee and Mr. Smith’s salary is given tax deduction if withholding tax has been deducted and remitted to the Inland Revenue Board IV. Technical fee and Mr. Smith’s salary are subject to tax in Malaysia

    • A.

      I and II

    • B.

      II and III

    • C.

      I, II and III

    • D.

      All of the above

    Correct Answer
    C. I, II and III
  • 48. 

    Which of the following qualifies as an industrial building? I. A factory II. A workshop used for repair and servicing of goods returned by consumers III. A warehouse within the factory compound used to store raw material used in production IV. A building used in the telecommunication services industry  

    • A.

      I, II and III

    • B.

      I and III

    • C.

      I, III and IV

    • D.

      All of the above

    Correct Answer
    C. I, III and IV
    Explanation
    An industrial building refers to a building that is used for industrial purposes. Option I, a factory, qualifies as an industrial building as it is a place where goods are manufactured or processed. Option III, a warehouse within the factory compound used to store raw material, also qualifies as it is an essential part of the production process. Option IV, a building used in the telecommunication services industry, can also be considered an industrial building as it is used for a commercial activity related to the industry. Therefore, the correct answer is I, III, and IV.

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  • 49. 

    Which of the following entertainment expenses qualify for 100% tax deduction? I. Promotional gift with company logo II. Cost of lunch incurred by a salesman entertaining his customers III. Annual dinner to employees IV. Cash contribution for customer’s annual dinner

    • A.

      I and II

    • B.

      I and III

    • C.

      I, II and III

    • D.

      All of the above

    Correct Answer
    B. I and III
    Explanation
    Promotional gifts with company logos can be considered as a marketing expense and are therefore eligible for a 100% tax deduction. Annual dinners for employees can be considered as a business expense to boost employee morale and are also eligible for a 100% tax deduction. However, the cost of lunch incurred by a salesman entertaining his customers and cash contributions for a customer's annual dinner are not eligible for a 100% tax deduction.

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  • 50. 

    Which of the following are incentives provided under the Promotion of Investments Act, 1986? I. Investment Tax Allowance II. Infrastructure allowance III. Deduction for promotion of exports IV. Export allowance

    • A.

      L and II

    • B.

      I and III

    • C.

      I, II and III

    • D.

      All of the above

    Correct Answer
    B. I and III
    Explanation
    The correct answer is I and III. The Promotion of Investments Act, 1986 provides incentives such as Investment Tax Allowance (I) and Deduction for promotion of exports (III). Infrastructure allowance (II) and Export allowance (IV) are not mentioned as incentives provided under this act.

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Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 20, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Sep 10, 2019
    Quiz Created by
    Mydtc

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