objectives CLO3 : To compute the tax payable for Malaysians individual taxpayer

Question

Eddy runs a restaurant known as Taste Me located in Cyberjaya, Selangor. The 2020s business income and expenses of the business are given as below:

Apart from bought the new restaurants equipment, Eddy also brought in into their business his own van which had been acquired in year 2018 at the cost of RM85,000. The market value of the van in year 2020 is recorded at RM68,000. The van is to be used for delivery purpose due to MCO which inhibit the fully operation of the restaurant.

Due to global pandemic of Covid-19, Eddys income from the business was severely affected. Thus, he was actively in various platform for the purpose of income generation. As at 2020, Eddy earns the following incomes:

i. Rental income of RM40,000 from his apartment at Bangsar, Kuala Lumpur. He also incurred RM500 for the quit rent and assessment; RM2,500 for the maintenance; and RM5,000 for the new kitchen cabinet.

ii. Dividend of 10% from his investment in unit trust of Public Mutual. His total net investment is RM60,000.

iii. Teaching culinary course on part-time basis at two private colleges in Kuala Lumpur and being paid for a total of RM20,000.

iv. RM41,000 as interest income from his investment in unit trust with Philips Mutual (approved).

Eddy is married to Sofia, a full-time housewife. The are having a pair of twins aged 10 years old and a baby of 7- month young. . Eddy also taking care of his father, aged 65 years old and suffered with heart problem. Due to that, Eddy spent an amount of RM400 per month for his father medication. Sofia is also a registered dealer with one of the online business leader in Malaysia. Sofias earned an amount of RM45,000 in the year 2020 from the online business. During the year 2020, Eddy and Sofia incurred the following expenses:

i. Purchase of tablets amounting to RM1,400 for the use of his kids online classes.

ii. RM2,200 for the purchase of breastfeeding equipments.

iii. Reading materials of RM3,100 for his family.

iv. RM6,000 each for the twins, deposited to National Education Saving Scheme (SSPN).

v. Life insurance premium for him and her wife amounted to RM2,500.

vi. Medical insurance for Eddy and Sofia at RM1,500 each, and another RM1,500 for his children.

vii. Personal donation of RM1,000 to Tabung Prihatin (approved).

viii. Zakat payment amounted to RM3,000.

Eddy is not sure of the responsibility of individual taxpayer for the assessment and payment of their tax liabilities and submission of tax returns under the self- assessment system.

Required:

i. Prepare the Statement of Profit or Loss for the year ended 31 December 2020 for the business. Show all workings ii. Determine the statutory business income for the year of assessment 2020.

iii. Compute the income tax payable for Eddy and Sofia under combined (joint) assessment.

iv. Advise Eddy on his responsibility as a taxpayer.

Remarks Turnover Cost of sales Salaries and wages RM 1,990,000 796,000 294,000 The expense includes monthly salary paid to Eddy of RM8,000 each per month. The business also hiring a disabled cashier and being paid for RM1,500 per month Bonus 49,000 Two months bonus for all staff inclusive Eddy at RM16,000 EPF 62,780 EPF was paid for all staff including Eddy at 11% Staff training costs 18,000 Approved and qualify for double deduction Travelling allowance 10,000 50% for business purposes and another 50% is for Eddy's use. Entertainment allowance 5,000 Fully payable for business purposes Water and electricity charges 20,000 All are incurred for business purposes 150,000 Purchase of restaurant's equipment Assets qualified as Qualifying Plant Expenditure (QPE) for tax purposes. Depreciation is to be allocate at 10% for the year 2020. Rental of restaurant Miscellaneous expense 56,000 20,000 80% is for business use 20% is donation made to Covid-19 Fund (approved) Marketing expense 15,000