TAX RATES AND ALLOWANCES The following tax rates, allowances and values are to be used in answering the questions. Income tax rates Resident Individuals Chargeable income RM First 5,000 (0 - 5,000) Next 15,000 (5,001 - 20,000) Next 15,000 (20,001 - 35,000) Next 15,000 (35,001 - 50,000) Next 20,000 (50,001 - 70,000) Next 30,000 (70,001 - 100,000) Next 150,000 (100,001 - 250,000) Next 150,000 (250,001 - 400,000) Exceeding 400,000 Rate % 0 1 3 8 14 21 24 24.5 25 Cumulative tax RM 0 150 600 1,800 4,600 10,900 46,900 83,650 133,650 Resident company Paid up ordinary share capital First RM500,000 18% 24% Excess over RM500,000 24% 24% RM2,500,000 or less More than RM2,500,000 Non-resident Company Individual 24% 28% Personal reliefs and allowances RM Self 9,000 Disabled self, additional 6,000 Medical expenses expended for parents (maximum) 5,000 Parental care relief: Father 1,500 Mother 1,500 Medical expenses expended on self, spouse or child with serious disease, including up to RM500 for medical examination (maximum) 6,000 Basic supporting equipment for disabled self, spouse, child or parent (maximum) 6,000 Fees expended for skills or qualifications (maximum) 5,000 Lifestyle (maximum) 2,500 - Purchase of books journals, magazines, printed newspaper and other similar publications for self, spouse and child. Purchase of personal computer, smartphone or tablet for self, spouse and child. Purchase of sports equipment and gym membership for self, spouse and child. - Payment of monthly bill for internet subscription Expenses on breastfeeding equipment (maximum) 1,000 Spouse relief 4,000 Disabled spouse, additional 3,500 Child (each) 2,000 Child - higher rate (each) 8,000 Disabled child (each) 6,000 Disabled child - higher rate (each) 14,000 Life insurance premiums and contributions to EPF (maximum) 6,000 Contributions to SOCSO (maximum) 250 Contributions to Private Retirement Scheme or deferred annuity premiums (maximum) 3,000 Medical or education insurance premiums for self, spouse or child (maximum) 3,000 Deposit for a child into the SSPN's scheme (maximum) 6,000 Self-education fee - higher rate 7,000 Child care fees to a child care centre or a kindergarten (maximum) 1,000 Rebates Chargeable income not exceeding RM35,000 Individual Separately assessment Wife / Husband Joint assessment Zakat fitrah RM 400 400 800 Actual Value of benefits in kind Cost Of Car When New (RM) Up to 50,000 50,001 - 75,000 75,001 - 100,000 100,001 - 150,000 150,001 - 200,000 200,001 - 250,000 250,001 - 350,000 350,001 - 500,000 500,001 and above Annual Value Of BIK Fuel Per Annum (RM) (RM) 1,200 600 2,400 900 3,600 1,200 5,000 1,500 7,000 1,800 9,000 2,100 15,000 2,400 21.250 2.700 25,000 3,000 70 Other benefits RM per month Household furnishings, apparatus and appliances Semi-furnished with furniture in the lounge, dining room, or bedroom Semi-furnished with furniture as above plus air-conditioners and/or curtains and carpets 140 Fully furnished premises 280 Domestic help 400 Gardener 300 Driver 600 Capital allowances Initial allowance (IA) Rate % Industrial buildings Plant and machinery - general 20 Motor vehicles and heavy machinery 20 Office equipment, furniture and fittings 20 10 Annual allowance (AA) Rate% 3 14 20 10 Question 1 Aiman & Aishah, tax residents of Malaysia, are married with three children. Aiman is employed as a marketing manager in a listed company, while Aishah is a housewife and sells homemade cakes when there are orders. Details of Aiman's employment income, benefits and expenditure for the year ended 31 December 2020 are as follows: Income and benefits in kind: RM Salary 200,000 Bonus (received for sales performance in year 2019) 30,000 Entertainment allowance 6,000 Renewal of subscription fees to Institute of Marketing Malaysia 500 Reward for best employee of the year 3,500 Lucky draw (LED TV) during annual dinner 3,000 Company car provided to Aiman: cost when new (more than 5 years) 220,000 Driver's salary (hired and paid by his employer) 24,000 Maid's salary (reimbursed) 12,000 Cost of mobile phone (under Aiman's name) provided by his employer 2,500 Total of monthly bills for the mobile phone paid by his employer 1,300 Total leave passages paid by his employer for a trip to Australia 10,000 Medical and dental benefits 5.000 Aiman is provided with fully-furnished bungalow house for him and families to reside. The rental value of the bungalow is RM5,000 (of which RM2,000 is for the furniture). During the month of June 2020, company is launching their new products and Aiman is provided with accommodation in The Legend Hotel, Penang for the event. The employer settled the hotel bill equivalent to RM240 per day for the room he occupied. In year 2020, Aiman received dividends amounting to RM6,000 from his shares portfolio in Canada. He also received rental income (net) of RM150,000 from his family house in Belgium which is directly credited into his account in Canada. He also received interest income from his fixed deposits in CIMB Bank of RM8,450. The following Aiman's expenses and contributions in 2020: 1) RM3,000 for entertaining clients on behalf of of the company. 2) RM25,000 for the first child who is 20 years old, pursuing a full time degree in a local university and married. 3) RM6,000 for the second child who is 17 years old and pursuing a pre-nursing course in preparation for a nursing degree in a local university 4) RM8,000 for the third child who is 10 years old and who has an OKU card. 5) RM7,000 for basic medical equipment and medicines for Aiman's mother who is paralyzed after suffering from stroke. 6) Aiman contributed 11% of his salary to the EPF. He also pays annual life assurance premium for himself RM2,500 and for his wife RM2,000. 7) Aiman incurred RM1,225 to buy books for his children. 8) Aiman made a cash contribution of RM25,000 to a public library in Shah Alam, Selangor. Required: (a) Aiman has heard that separate assessment will result in payment of a lower tax. Hence, Aiman is considering whether to elect joint assessment with his wife or separate assessment. Discuss the concept of separate assessment. (6 marks) (b) Assuming Aiman has elected for a separate assessment, compute the income tax liability of Aiman for the year of assessment 2020. You may round-up any fractions to the nearest ringgit. Note: You should indicate by the use of the word 'nil' any item referred to in the question for which no adjusting entry needs to be made in the tax computation. Correct classification of income sources into the respective category {Section 13(1)(a), (b),(c), (d) and (e)} is essential (19 marks) (Total: 25 marks)