ACB21303 TAXATION II
TUTORIAL – WITHOLDING TAX
QUESTION 1
Mac Sdn Bhd is due to pay an amount of RM51,000 (net of tax) to Mr Alfro, a resident of
Germany, being interest charged on the loan given to the company. The interest was credited
to Mr Alfro’s account on 6 July 2022. However, the withholding was only remitted to the Inland
Revenue Board on 23 August 2022. Comment on the penalty imposed on the late payment, if
any.
QUESTION 2
Tiles Sdn Bhd is in the business of manufacturing tiles for export to countries in Southeast
Asia. Owing to the high demand in the market, the company needs to use a certain patent and
design from a Swedish company.
An agreement was entered into between the two companies. As agreed, the Swedish
company charged a total payment of RM2,400,000 as royalty for agreeing to handing over the
patent and design of the tiles to Tiles Sdn Bhd. The payment would be payable on 24
November 2022. Would the payment to the Swedish company be subject to withholding tax,
and when would the tax be due to the Inland Revenue Board (IRB)? What will be the amount
of penalty imposed if the tax is remitted to the IRB only on 3 January 2023?
QUESTION 3
HPL Ltd is a non-resident contractor engaged in the construction of residential properties
located in Tanjung, Terengganu. For the accounting year ended 31 October 2022, the
company showed a chargeable income of RM4,500,000 and the amount related to service
portion was RM6,000,000.
a) Compute the net income tax payable by HPL Ltd for year of assessment 2022.
b) Compute the penalty imposed on the service portion if the withholding tax failed to be
remitted to the Inland Revenue Board within the stipulated time allowed.
QUESTION 4
Denai Sdn Bhd, a company resident in Malaysia, manufactures tools and dies for export. In
2022, the company entered into an agreement with Phew Wit (Taiwan) Ltd for technical
assistance and supply cum installation of plant and machinery.
The following expenses have been incurred:
i) technical advice/ management RM70,000
ii) Supply of plant and machinery RM230,000
iii) Services in connection with installation of the plant RM45,000
Required:
a) State with reason whether each of the above amounts is subject to withholding tax.
Where applicable, state the rate of withholding tax.
b) Explain the consequences of not complying with the withholding tax provisions.
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QUESTION 5
Vroom Ltd will be undertaking a few contracts from Tanjung Berhad (a resident company).
The contracts involve the following payments to suppliers and sub-contractors in Malaysia and
Korea:
i. Payment of interest to Korea Commerce Bank on loan taken to purchase fixed assets
to be used in the business in Malaysia. The amount of interest is RM900,000 (being 10%
interest as RM900,000 loan).
ii. Rental payment to its business counterpart in Korea for the use of special equipment.
The amount of rental is RM2,300,000.
iii. Payment to sub-contractors for the contract works which are to be performed entirely in
Malaysia. The amount of progress payment related to service is RM3,500,000.
Comment whether each of the above payments will be subject to withholding tax, and the
consequences if Vroom Ltd does not comply with the withholding tax provisions.
QUESTION 6
Restu Sdn Bhd, a company resident in Malaysia manufactures canned food and spare parts
for export. During 2022, the company entered into agreements with a few companies as
follows:
Date Company Purpose Details
1/1/2022 Addy GMBH, 1. Supply of materials Cost: RM2 million
Germany
resident 2. Training of local employees Payment: RM400,000
company regarding operation and
maintenance
3. Supply of plant and machinery Cost : RM3,600,000
4. Installation of plant and
machinery Payment: RM200,000
1/5/2022 JIT Co.Ltd a 1. Loan of RM20 million Interest: 9% per year
Japan
resident 2. Transfer of technical know- Royalty: RM80,000
company how and assistance
Additional information:
The payments related to the above agreements were made on 31 December 2022.
Required:
a) Justify the deductibility of withholding tax from each payment.
b) Compute the withholding tax for each payment
c) If Restu Sdn Bhd fails to remit the withholding tax within one (1) month after the payment
is made to the non-resident, compute the total sum that shall be due to the government.
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QUESTION 7
Brilliant Ltd is an incorporated company, resident in the United States and was awarded a
contract by the Malaysian Government to develop a Smart System Network. The following
amounts were paid to the company in 2022:
i. RM3.5 million for rental of equipment
ii. RM500,000 for shipment of the plant and equipment to Malaysia
iii. RM1.5 million for work performed locally by the employees of the company
iv. RM50,000 as interest charged by the company for late payment of part of the purchase
price for the plant and equipment
Required:
Explain, with reasons, whether each of the above payments were subjected to withholding tax
and state the rate of the tax, where applicable.
QUESTION 8
M-Food Sdn Bhd paid a royalty for operating a franchised cafe, to a non-resident company
amounting to RM360,000 net of withholding tax, on 1 June 2021. M-Food Sdn Bhd remitted
70% of the withholding tax to the IRB on 28 June 2021. The balance of the withholding tax
was paid on 5 August 2022. M-Food Sdn Bhd has a financial year end of 31 December, and
the applicable rate of withholding tax is 10%.
Required:
a) Compute the withholding tax payable and the penalty, if any, payable by M-Food Sdn
Bhd.
b) State the amount of the payments in respect of the royalty which is deductible in
arriving at the adjusted income of M-Food Sdn Bhd, assuming that the full amount of
the withholding tax and the penalty, if any, was subsequently paid.
QUESTION 9
The accountant of Allied First Bank Berhad has approached you to seek clarification on
withholding tax that may be applicable in the following circumstances:
i. Deposits placed in Allied First Bank Berhad by Hong Kong Residents.
ii. Taiwanese residents who have purchased debentures with fixed interest payments
issued by a subsidiary of Allied First Bank Berhad.
iii. Malaysian residents who have deposits in Allied first Bank Berhad.
iv. Malaysian residents who have taken up debentures with fixed interest payments
issued by a subsidiary of Allied First Bank Berhad.
v. Malaysian resident individuals who have invested in bonds issued by Malaysian
companies.
Required:
State, with reasons, whether withholding tax would be applicable in each of the situations
outlined above.
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QUESTION 10
A company resident in Hong Kong grants a loan of RM5 million at an interest rate of 2.5% to
its subsidiary company, a tax resident in Malaysia. The loan is to finance the purchase of plant
used for the business of the subsidiary company.
Required:
Explain the Malaysian withholding tax implications for the recipient subsidiary company in
respect of the loan interest.
QUESTION 11
Top Hunting Sdn Bhd (THSB) is a Malaysian resident company operating in Pulau Pinang.
THSB is engaged with a new project of developing Museum and Gallery which costs RM3.3
million. The followings are the payments made by THSB:
i. 7 January 2022
Payments made to Dragon Ltd, an Australian resident company for:
Contract service RM1,750,000
Cost of machinery RM 800,000
ii. 8 February 2022
Payment made to Kinawa Ltd, a Japanese resident company for technical advice given
in Malaysia for the installation of machinery amounting to RM65,000
iii. 12 April 2022
Payment of RM114,700 made to Bestari Bhd, a Malaysian resident company for
engineering services
iv. 23 May 2022
Interest on loan paid to Kyito Bank, a Korean resident bank amounting to RM120,000
v. 15 June 2022
Design fees of RM415,000 paid to Thiru Manufacturing Sdn.Bhd, a China resident
company. The design was done in China.
Required:
a) For each of the payments above:
i. Discuss whether the withholding tax provisions are applicable.
ii. Determine the amount of withholding tax (if applicable) and the due date to remit
the tax to the Inland Revenue Board.
b) State the consequences if THSB fail to remit the withholding tax amount to Inland
Revenue Board.
