Question 1 (Total: 25 marks) Power-Tech Sdn Bhd (Power-Tech), a…

Question Answered step-by-step Question 1 (Total: 25 marks) Power-Tech Sdn Bhd (Power-Tech), a… Question 1 (Total: 25 marks) Power-Tech Sdn Bhd (Power-Tech), a company which manufactures IT communication devices with paid-up capital of RM120 million. Power-Tech has decided to produce a series of new 5G enabled devices (code name PT0308-5G) beginning 2023. According to the Ministry of International Trade and Industry, all products in the PT0308-5G series are promoted products under the Promotion of Investments Act 1986. The management team of Power-Tech applied for Pioneer Status on 12 January 2022, The Malaysian Industrial Development Authority (MIDA) then approved the application on 4 May 2022 and issued a Pioneer Status Certificate to Power-Tech with the ‘production day’ dated on 1 January 2023. Power-Tech closes its accounts on 31 December every year. The management accountant of Power-Tech furnished the following budget information to a tax consultant in order to work out the estimated income tax liabilities of the company for the next five years of assessment: PT0308-5G Series of Products:Year of assessmentSales Revenue (RM’000)Production, Selling & Operating Expenses (RM’000)Investment Costs on New Plant & Machinery (RM’000)20237,0009,00020,000202415,00012,00015,000202517,00011,000 202632,00015,0001,000 202726,00014,000  Existing Products:  Year of assessmentSales Revenue (RM’000)Production, Selling & Operating Expenses (RM’000)Capital Allowances for Existing Plant & Machinery (RM’000)202356,00036,0003,000202450,00032,0003,000202528,00031,0002,000202649,00033,7002,000202730,00031,2001,500 Other Transactions: Year of assessmentRental Income (RM’000)Cash Donation (RM’000)20234808002024480Nil2025530202026530100202758070Additional information:Power-Tech will enjoy income tax exemption on 85% of its statutory income coming from the sale of PT0308-5G range of products.The new machines to produce PT0308-5G products are normal plant and machinery according to the guidelines issued by Inland Revenue Board (IRB).All budgeted production, selling and operating expenses (for both PT0308-5G and existing products) are allowed for tax deduction pursuant to the Income Tax Act 1967.The existing products manufactured by Power-Tech are not qualified for any tax incentive under the Promotion of Investments Act 1986 and other tax legislation.Power-Tech allocated RM300,000 to participate in an international trade fair to be held in Dubai in 2026. The trade fair is approved by the Ministry of International Trade & Industry (MITI) as it will help to expand the market of the company’s existing products into the Middle East. The amount is included in 2026 budgeted production, selling and operating expenses for existing products.Rental income is coming from a factory lot located in Selangor held by Power-Tech for investment purposes. This property was acquired in 2018 at RM7 million using the company’s excess cash. The budget amount is stated at rental receivable net of all tax-deductible expenses and RM20,000 of depreciation expense every year.All recipients of the cash donated by Power-Tech are approved charity institutions pursuant to s.44(6) of the Income Tax Act 1967. Required            1.  Using the information provided by the management accountant and assume the company tax rate is 24% for the years  of assessment of 2023 to 2027, prepare the income tax liabilities forecast of Power-Tech for these 5 years of assessment. Show all workings clearly and indicate ‘nil’ or ‘0’ for items in your tax forecast with zero value.(18 marks)            2. Critically comment on Power-Tech’s decision to apply for Pioneer Status and advise accordingly. Support your comments with your work done in Part (i) above. (7 marks)    Law Social Science Tax law ACC 3014 Share QuestionEmailCopy link Comments (0)