3. TAXMY224 FE QnA with Examiner Report

MICPA Examination Overview

  • Title: MICPA Examination Term 2, 2024: Questions, Suggested Answers & Examiners’ Report

  • Focus: Advanced Stage Examination in Taxation MY (TAXMY)

  • Published by: Malaysian Institute of Certified Public Accountants (MICPA)

Publication Notes

  • This booklet contains questions and unofficial suggested answers.

  • Suggested answers prepared by MICPA should not be regarded as the only solutions.

  • Some answers may exceed the expected depth due to their usefulness for study purposes.

  • Copyright Notice: No part of this publication may be reproduced without prior permission from MICPA.

Question 1: Milky Sdn Bhd (MSB)

Overview

  • Business Type: Manufacturing and distribution of dairy and milk products

  • Financial Year End: 31 December

  • Ordinary Paid-Up Capital: RM3,500,000

Statement of Comprehensive Income (FY2023)

  • Revenue: RM2,400,000

  • Cost of Sales: RM1,030,000

  • Gross Profit: RM1,370,000

  • Other Income: RM261,000

  • Total Expenses: (Selling & Distribution, Administrative, Finance Costs)

  • Profit Before Taxation: RM571,000

Income Breakdowns

  • Cost of Sales Breakdown:

    • Raw Materials: RM700,000

    • Freight Charges: RM200,000

    • Unrealised Loss on Foreign Exchange: RM6,000

  • Other Income Components:

    • Interest Income from Fixed Deposit: RM50,000

    • Interest Income from Subsidiary Loan: RM150,000

    • Gain on Disposal of Equipment: RM55,000

    • Realised Gain on Foreign Exchange: RM6,000

  • Expenses Details:

    • Selling & Distribution: RM168,000

    • Administrative: RM786,000

    • Finance Costs: RM106,000

Question 2: Shareholders of XYZ Sdn Bhd

Shareholder Details

  • Mr. A: 5,000 shares at RM5,000 (Incorporated 1 July 2018)

  • Mr. B: 5,000 shares at RM5,000 (Increased capital on 1 March 2021)

Acquired Properties

  • Condonminium Acquisition: RM850,000 (15 January 2019)

  • Shophouse Acquisition: RM1,700,000 (30 November 2020)

Balance Sheet (As at 30 November 2020)

  • Assets Total: RM3,522,000

    • Condominium Market Value: RM1,400,000

    • Shophouse: RM1,700,000

Disposal and RPGT Considerations

  • Disposal at RM4,000,000 per shareholder on 31 December 2023

Question 3: Sedap Sdn Bhd (SSB)

Business Overview

  • Type: Manufacturing frozen foods

  • Diversification: Into food ingredients with RM23 million capex expected

Tax Incentives

  • Potential Incentives: Pioneer status or Investment Tax Allowance (ITA)

  • Features of Pioneer Status:

    • 70% exemption on statutory income for 5 years

    • Eligible for carry forward of pioneer losses up to 7 years

  • Features of ITA:

    • 60% allowance on qualifying capital expenditure

    • Unutilized ITA can be carried forward indefinitely

Eligibility Analysis

  • SSB not eligible for both incentives simultaneously; must choose the more beneficial option.

Examiners’ Report Highlights

General Observations

  • Candidates displayed varied understanding of tax computations and principles.

Common Errors

  1. Adjusted Income Errors: Misclassification of deductible and non-deductible items.

  2. Capital Allowances Claims: Inadequate understanding of capital allowance calculations.

  3. Interest Income Taxation: Omissions leading to incorrect computations.

Areas for Improvement

  • Candidates encouraged to practice calculations and understand legislative framework.

  • Emphasis on careful reading of questions to avoid common mistakes.