Coronano Herbs Sdn Bhd (CHSB) is a resident company that manufactures health and beauty products. The company just started its business on 1.3.2019 with a paid-up capital of RM2 millions. The accounts are closed on 30 September every year. CHSB presented its Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 September 2020 as follows: Coronano Herbs Sdn Bhd Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 September 2020 Note RM Sales Less: Cost of sales 1 Gross profit Dividend income 2 Other income 3 RM 2,800,000 (1,270,000) 1,530,000 127,000 83,300 1,740,300 4 5 Less: Expenses Salaries and wages Legal and professional fees Dep ion of property, plant and machinery Entertainment expenses Repair and maintenance Provision for bad debts (general) Research and development expenditure Selling and distribution expenses Other expenses 6 7 313,000 44,200 120,000 70,000 39,900 28,000 65,000 64,000 28,800 8 9 10 (772,900) 967,400 Profit before tax Notes to the accounts: 1. Cost of sales include: Withdrawal of company's products as a hamper gift to an agent who was admitted to a hospital. The withdrawal was recorded at cost of RM800 and the selling price is RM1,600.00 2. Dividend income received from: Investment in a local public listed company Investment in a Brunei company, which was remitted to Malaysia RM 50,000 77,000 3. Other incomes comprise of: Gross rental income from a shop lot in Mergong Gain on disposal of a company's car RM 48,000 35,300 1 BKAT3023 ADVANCED TAXATION 4. RM 60,000 12,000 4,500 18.000 Salaries and wages include: Payment to company's managing director as follows: Gross salary EPF contribution One free local leave passage to Labuan Payment to a disabled employee as follows: Gross salary Bonus Wages to a staff aged 64 years old Legal and professional fees include: Audit fees Secretarial fees Income tax filing Income tax planning Renewal of tenancy agreement for the rented shop lot in Mergong 1,500 14,400 5. RM 8,700 9,000 7.000 11.000 4,000 6. RM 50,000 16,000 Entertainment expenses include: A dinner at to entertain suppliers (Some of the company's employees were also present) Provision of food and drinks during launching of a new product Repair and maintenance include: Renovation of the business premise (expenses incurred in June 2020) Installation of new five units of air-conditioners that is more energy efficient for business premise 7. RM 25,000 1.500/unit 8. 9 Research and development (R&D) expenditure is related to in-house R&D which comprise of researchers' salaries, travelling allowance and rental of R&D equipment. An application for R&D project approval has been submitted to the Inland Revenue Board of Malaysia but the result is still pending. Selling and distribution expenses include: RM Social media advertisement cost to advertise a congratulatory message to Kedah Darulaman football team on winning Piala TM. This is also to promote the company's name and its health and beauty products range. 18.000 The company's logo and products were displayed in the advertisement A treasure hunt contest expenditure. The contest was held to celebrate the company's first birthday on 1 March 2020 and was opened to the public. Costs involved: T-shirts with the company's logo Cash prize to the winners of the contest 3,000 5,000 Free gifts to customers for purchases above RM500 Cost of developing company's website to enable e-commerce 5,000 28,000 10. RM 4,100 Other expenses include: Sponsoring food and beverages for a golf tournament that was opened to members of UUM Golf Club only Donation of Personal Protective Equipment (PPE) for hospitals (receipts with hospitals' stamps are attached) Traffic offences by the company's staff 100,000 1,500 Additional information: i. ii iii. iv. Balancing charge Capital allowances for the year (excluding the new air-conditioners) Business loss brought forward Payment of business zakat in December 2019 RM 80,000 40,000 60,000 50,000 REQUIRED: Assuming that you are the appointed tax agent for Coronano Herbs Sdn Bhd, compute the tax liability for the company for the year of assessment 2020 by showing all relevant tax adjustments. Beside changes in Budget 2020, you need to also consider the economic stimulus package 2020 in calculating the tax liability. (Note: Your answer must list every item stated in the profit or loss statement and notes. Indicate with 'NIL' where no adjustment is necessary). (20 Marks) Coronano Herbs Sdn Bhd (CHSB) is a resident company that manufactures health and beauty products. The company just started its business on 1.3.2019 with a paid-up capital of RM2 millions. The accounts are closed on 30 September every year. CHSB presented its Statement of Profit or Loss and Other Comprehensive Income for the financial year ended 30 September 2020 as follows: Coronano Herbs Sdn Bhd Statement of Profit or Loss and Other Comprehensive Income for the year ended 30 September 2020 Note RM Sales Less: Cost of sales 1 Gross profit Dividend income 2 Other income 3 RM 2,800,000 (1,270,000) 1,530,000 127,000 83,300 1,740,300 4 5 Less: Expenses Salaries and wages Legal and professional fees Dep ion of property, plant and machinery Entertainment expenses Repair and maintenance Provision for bad debts (general) Research and development expenditure Selling and distribution expenses Other expenses 6 7 313,000 44,200 120,000 70,000 39,900 28,000 65,000 64,000 28,800 8 9 10 (772,900) 967,400 Profit before tax Notes to the accounts: 1. Cost of sales include: Withdrawal of company's products as a hamper gift to an agent who was admitted to a hospital. The withdrawal was recorded at cost of RM800 and the selling price is RM1,600.00 2. Dividend income received from: Investment in a local public listed company Investment in a Brunei company, which was remitted to Malaysia RM 50,000 77,000 3. Other incomes comprise of: Gross rental income from a shop lot in Mergong Gain on disposal of a company's car RM 48,000 35,300 1 BKAT3023 ADVANCED TAXATION 4. RM 60,000 12,000 4,500 18.000 Salaries and wages include: Payment to company's managing director as follows: Gross salary EPF contribution One free local leave passage to Labuan Payment to a disabled employee as follows: Gross salary Bonus Wages to a staff aged 64 years old Legal and professional fees include: Audit fees Secretarial fees Income tax filing Income tax planning Renewal of tenancy agreement for the rented shop lot in Mergong 1,500 14,400 5. RM 8,700 9,000 7.000 11.000 4,000 6. RM 50,000 16,000 Entertainment expenses include: A dinner at to entertain suppliers (Some of the company's employees were also present) Provision of food and drinks during launching of a new product Repair and maintenance include: Renovation of the business premise (expenses incurred in June 2020) Installation of new five units of air-conditioners that is more energy efficient for business premise 7. RM 25,000 1.500/unit 8. 9 Research and development (R&D) expenditure is related to in-house R&D which comprise of researchers' salaries, travelling allowance and rental of R&D equipment. An application for R&D project approval has been submitted to the Inland Revenue Board of Malaysia but the result is still pending. Selling and distribution expenses include: RM Social media advertisement cost to advertise a congratulatory message to Kedah Darulaman football team on winning Piala TM. This is also to promote the company's name and its health and beauty products range. 18.000 The company's logo and products were displayed in the advertisement A treasure hunt contest expenditure. The contest was held to celebrate the company's first birthday on 1 March 2020 and was opened to the public. Costs involved: T-shirts with the company's logo Cash prize to the winners of the contest 3,000 5,000 Free gifts to customers for purchases above RM500 Cost of developing company's website to enable e-commerce 5,000 28,000 10. RM 4,100 Other expenses include: Sponsoring food and beverages for a golf tournament that was opened to members of UUM Golf Club only Donation of Personal Protective Equipment (PPE) for hospitals (receipts with hospitals' stamps are attached) Traffic offences by the company's staff 100,000 1,500 Additional information: i. ii iii. iv. Balancing charge Capital allowances for the year (excluding the new air-conditioners) Business loss brought forward Payment of business zakat in December 2019 RM 80,000 40,000 60,000 50,000 REQUIRED: Assuming that you are the appointed tax agent for Coronano Herbs Sdn Bhd, compute the tax liability for the company for the year of assessment 2020 by showing all relevant tax adjustments. Beside changes in Budget 2020, you need to also consider the economic stimulus package 2020 in calculating the tax liability. (Note: Your answer must list every item stated in the profit or loss statement and notes. Indicate with 'NIL' where no adjustment is necessary). (20 Marks)