QUESTION 1: 

Anthony and Betty agreed to buy the fixed assets and goodwill of a business for a lump sum consideration of RM400,000 payable in full on the transfer of the business in 2018. Not having enough money, they borrowed RM200,000 from Cee Pte.Ltd, located at Thailand, which is repayable in full after two years. In the meantime, Anthony and Betty are to pay interest every three months starting from 1 March 2019 at the rate of 10% per annum (RM5,000 per quarter). Anthony and Betty will carry on the business at its existing location in Malaysia sharing profit equally, Anthony is a Malaysian resident but betty is not.

Required:

Briefly explain whether the interest that Anthony pay to Cee Pte Ltd is deemed to be derived from Malaysia and should he withhold any tax on making payment.

 (5 marks)

Briefly explain whether the interest that Betty pay to Cee Pte Ltd is deemed to be derived from Malaysia and should she withhold any tax on making payment.

(5 marks)

(Total: 10 marks)

QUESTION 3: 

BG Ltd, a company resident in the United Kingdom and MCT Ltd, a company resident in Germany have been awarded contracts by RJ Sdn.Bhd, in connection with the construction of a bridge in Malaysia. RJ Sdn.Bhd carries on the business of construction in Malaysia.

BG Ltd engineers will design the bridge wholly in United Kingdom. It will not be necessary for BG Ltd to send its engineers to Malaysia, BG does not have any branch in Malaysia.

MCT would be responsible for the supply of equipment valued at RM5 million and the provision of project management and supervisory services valued at RM7 million. Employees of MCT will be seconded to Malaysia for the duration of the project, which will be completed in two years.

Required:

Advise BG Ltd and MCT Ltd on their liability to Malaysian income tax arising from the contract with RJ Sdn.Bhd.

(15 marks)

What are the requirements of the Income Tax Act 1967 on RJ Sdn Bhd in respect of the payments due to BG Ltd and MCT Ltd and the implications if the companies do not comply with the requirements?

(10 marks)