Remuneration package Make use of the following keywords in answering the question: Tax planning Income Tax-efficiency...

 

Transcribed Image Text:

Remuneration package Make use of the following keywords in answering the question: Tax planning Income Tax-efficiency Resident/Non-resident Employees Provident Fund Share option Exercise the option Tax saving Sole-proprietor/Sole-trader Business income Non-business income Investment income Share price/Option price / Market price Benefits in kind Perquisites/Allowance Gratuity/Compensation Question 1 Mr. Phang who is a citizen and tax resident in Malaysia, carries on a business of selling spare parts for motor vehicles under a sole proprietorship in Kuala Lumpur. The annual sales is about RM3 million, and the net profit is around RM400,000 per year. Sales are expected to grow by 10% annually for the next three years. Mr. Phang incorporated a company with a paid-up capital of RM1 million in Malaysia, MV Sdn. Bhd. which took over the above business on 1.1.2020. He commenced employment on 1.1.2020 as the managing director of his company (resident in Malaysia) His employment income and benefit are as follows: 1. 2. His gross remuneration is RM120,000 per annum receivable in cash. Contribution by the employer to the Employees Provident Fund at the rate of 16% on gross remuneration. Mr. Phang married his wife. Angie, in the year 2017. Angie is a housewife with no sources of income. Sometimes she helps Mr. Phang with the company's administrative work in his office. Mr. Phang contributes to Employees Provident Fund at 11% of his remuneration. Required: Write a letter to Mr. Phang as the managing director of MV Sdn. Bhd. on the following: (a) (b) Discuss the tax treatment(s) and the tax-efficiency in respect of all the above remuneration and benefits from employment on Mr. Phang and MV Sdn. Bhd. You have to consider the taxability of the benefits on Mr. Phang taking into account his marginal tax rate (based on his tax computation) and the deductibility of the expenses on MV Sdn. Bhd. Recommend and explain tax-efficient measures that may be undertaken to achieve tax- savings in carrying on the above business under MV Sdn. Bhd. Note: Marks will be awarded for appropriateness of the format of the letter and effectiveness of communication. Remuneration package Make use of the following keywords in answering the question: Tax planning Income Tax-efficiency Resident/Non-resident Employees Provident Fund Share option Exercise the option Tax saving Sole-proprietor/Sole-trader Business income Non-business income Investment income Share price/Option price / Market price Benefits in kind Perquisites/Allowance Gratuity/Compensation Question 1 Mr. Phang who is a citizen and tax resident in Malaysia, carries on a business of selling spare parts for motor vehicles under a sole proprietorship in Kuala Lumpur. The annual sales is about RM3 million, and the net profit is around RM400,000 per year. Sales are expected to grow by 10% annually for the next three years. Mr. Phang incorporated a company with a paid-up capital of RM1 million in Malaysia, MV Sdn. Bhd. which took over the above business on 1.1.2020. He commenced employment on 1.1.2020 as the managing director of his company (resident in Malaysia) His employment income and benefit are as follows: 1. 2. His gross remuneration is RM120,000 per annum receivable in cash. Contribution by the employer to the Employees Provident Fund at the rate of 16% on gross remuneration. Mr. Phang married his wife. Angie, in the year 2017. Angie is a housewife with no sources of income. Sometimes she helps Mr. Phang with the company's administrative work in his office. Mr. Phang contributes to Employees Provident Fund at 11% of his remuneration. Required: Write a letter to Mr. Phang as the managing director of MV Sdn. Bhd. on the following: (a) (b) Discuss the tax treatment(s) and the tax-efficiency in respect of all the above remuneration and benefits from employment on Mr. Phang and MV Sdn. Bhd. You have to consider the taxability of the benefits on Mr. Phang taking into account his marginal tax rate (based on his tax computation) and the deductibility of the expenses on MV Sdn. Bhd. Recommend and explain tax-efficient measures that may be undertaken to achieve tax- savings in carrying on the above business under MV Sdn. Bhd. Note: Marks will be awarded for appropriateness of the format of the letter and effectiveness of communication.

Answer rating: 100% (QA)

Calculate the total contribution to the Employees Provident Fund EPF by both Mr Phang and MV Sdn BhdMr Phang contributes 11 of RM120000 which is RM13200 MV Sdn Bhd ... View the full answer