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PROBLEM BASED LEARNING PROJECT TAX COMPUTATION ON MALAYSIAN FOOD SERVICE(MFS) SDN BHD GROUP B NAMEMATRIK NO. IZWANI BT ABDUL MAJID 225515 HAZWANI BT GHAZALI225584 NUR HIDAYAH BT MUHAMAD ZAMRI225592 MUHAMAD SYAZWI AFIF B HALIM226015 Slide 2 Slide 3 Slide 4 EXPLANATION Interest income According to Section 4(c) Income Tax Act 1967, interest income must deduct from the net profit as it is a non-business income and added back after the computation of income from business. Cost of Sale According to Section 33(1) Income Tax Act 1967, the business expense has to fulfil the conditions in order to secure a deduction from the gross income of a business source. Cost of sales that written off in respect of a consignment of vegetables and fruits damaged in an accident is allowable expense because it incurred in relation to the business nature. Slide 5 Withholding tax on special classes of income According to Section 4A(ii) Income Tax Act 1967, The amount paid to non- resident for consideration of technical advice, assistance or services rendered in Malaysia in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme. Salary to disable employees According to Section 33 Income Tax Act 1967, remuneration for disable employees must be allowable under but employer has to prove to the Director General that the employee is physically or mentally disabled. The salary paid to the disabled persons qualifies for a double deduction. Employee Provident Fund (EPF) According to Section 34(4) Income Tax Act 1967, The payment of the EPF contributions on the salaries of the management staff is restricted to 19% of the remuneration, and the balance is not an allowable expenses. Slide 6 COST OF PREMISES Extensive repairs to a bungalow According to Section 33(1)(c) Income Tax Act 1967, The major repair classified as the renovation and reconstruction. The extensive repair is not allowable expense. Replacement of broken ceiling and windows According to Section 33(1)(c) Income Tax Act 1967, The item replaced must be the same or substantially same type. This replacement is allowable expenses. Rental for owner According to Section 39(1)(a) Income Tax Act 1967, the domestic and private expense are not allowable for deduction. The 40% of rental that is occupied by the owner should not being deducted from the company gross income. Rental for business - Other 60% of rental is for business. The rental that occupied for business is allowable expenses. Slide 7 ENTERTAINMENT EXPENSE Entertainment to suppliers - The categories of entertainment expenses specified did not fall in provisos (i) to (viii) to paragraph 39(1) (l) of the ITA only qualifies for a fifty percent (50%) deduction against gross income. Expenditure related to family event According to Section 39(1)(l)(i) Income Tax Act 1967, expenditure related to family events for companys employees and family members 100% allowable. BAD AND DOUBTFUL DEBT Bad debts written off According to Section 34 Income Tax Act 1967, Public ruling no 1/2002, a bad debt written off in advance is not allowable deduction. A general provision for doubtful debts According to Section 34 Income Tax Act 1967, General provision for doubtful debts is not allowable. A general provision made in respect of doubtful debts is not allowable for tax purposes. Slide 8 CULTERY AND GLASSWARE Purchased of new spoon, fork, knife, dining sets and kitchen appliances for the restaurant use RM 33,000 are included in the capital expenditure. Capital expenditure is money spend by the business to maintain or acquire fixed assets such as land, building and equipment. Therefore, this amount of RM33, 000 is considered as non-allowable expenses Replacement of old and broken items RM 24,000-Section 33 - If the replacement is same quality and did not make any improvement, it is allowable. Slide 9 Motor vehicles expenses - Motor vehicles expenses are allowable because it is use in the business. Based on A Guide To Malaysian Taxation book by Jeyapalan Kasipillai state that for expenditure to qualify deduction it must be connected and related to the business carried on by taxpayer. Training expenses -Public Ruling No.2/2002, the training expenses incurred by MFS Sdn Bhd that sending staffs for a training course organized by an approved institute is allowed for double deduction. The expenditure incurred on Halal certification-Section 34(6)(m), From year of assessment 2005, expenses for halal certification and in obtaining certification for quality systems would be eligible for double deduction. Slide 10 MISCELLANEOUS EXPENSES Provision of tax penalty for withholding tax non- compliance - Section 39(1)(j) Income Tax Act 1967, Provision of tax penalty for withholding tax non-compliance is not allowable deduction. Any payment from which tax is deductible under section 109B will be disallowed if tax has not been deducted and paid to the DGIR within the stipulated time. Donation to approved charities Section 44(6) Income Tax Act 1967, the donation to approved charities is non-allowable as a deduction against the gross income of the company; however it can be deducted against the aggregate income. Insurance expense-Public Ruling No 2/2003, Insurance expenses related to life insurance premium on the managing director of the business who is a key-man to the company is allowable deduction. Slide 11 Depreciation - Section 33(1) Income Tax Act 1967, depreciation is a capital expenditure that is not the expenses wholly and exclusively incurred in the production of gross income from the business source. Therefore, depreciation expense is non-allowable expense. Loss on sale of van - Section 33(1) Income Tax Act 1967, loss on sale of van is not wholly and exclusively for the production of gross income from the business source. Therefore, loss on sale of van is non-allowable expense. Slide 12 Capital allowance -The statutory income is determined by adjusting the adjusted income with current and brought forward capital allowance. Capital allowance is deductible against adjusted income of the business in arriving at statutory income. Thus, the capital allowance of RM 76,000 need to be deducted against adjusted income to compute the statutory income. Balancing allowance - The adjusted income is adjusted with balancing allowance or balancing charge related to the disposal of companys assets. Balancing allowance is deductible against adjusted income of the business in arriving at statutory income. Thus, the balancing allowance of RM 2,400 need to be deducted against adjusted income to compute the statutory income. Slide 13 Profit before taxation - Profit before tax (PBT) is the combination of all the companys profit before tax which consist of operating, non-operating, continuing operations and non- continuing operations. We use PBT RM 474,860 in our tax computation because it gives the investors a good picture of changes in companys profit once the tax expense is taken out as the tax expense is constantly changing.