Hitachi Sdn Bhd (Hitachi) owns 100 acres of plantation land. On 1 June 2010, Hitachi granted a 40-year lease over 12 acres of land to Toshiba Sdn Bhd (Toshiba), for a premium of RM240,000 and an annual rent of RM12,000. Toshiba completed the construction of a factory on the leased land on 15 December 2010 at a cost of RM1,000,000. It immediately used the factory and all of the land in its manufacturing business. On 1 June 2018, Toshiba transferred the lease over five acres and the factory building sitting on the said land to Zoya Sdn Bhd (Zoya), for a premium of RM1,800,000 (RM1,200,000 for the factory building and RM600,000 for the land) and an annual rent of RM8,000. This sub-lease to Zoya is for the residual duration of the main lease to Toshiba. Toshiba retained the balance of seven acres of the land for its own use in an orchard business commencing 1 June 2018. The three companies are all unrelated and make up their accounts to 31 December annually. Required: (a)Compute the real property gains tax (RPGT) liability of Toshiba Sdn Bhd on the disposal of the lease on 1 June 2018 over the five acres of land and factory building. (b)Explain the RPGT compliance requirements for Zoya Sdn Bhd as the acquirer of a chargeable asset. (c)Explain the income tax treatment of the rental expense and rental income of Toshiba Sdn Bhd (1) before the granting of the sub-lease; and (2) after the granting of the sublease to Zoya Sdn Bhd. (d)Discuss the tax treatment of premium value and annual rent received by Hitachi Sdn Bhd.
Hitachi Sdn Bhd (Hitachi) owns 100 acres of plantation land. On 1 June 2010, Hitachi
granted a 40-year lease over 12 acres of land to Toshiba Sdn Bhd (Toshiba), for a
premium of RM240,000 and an annual rent of RM12,000.
Toshiba completed the construction of a factory on the leased land on 15 December
2010 at a cost of RM1,000,000. It immediately used the factory and all of the land in
its manufacturing business.
On 1 June 2018, Toshiba transferred the lease over five acres and the factory building
sitting on the said land to Zoya Sdn Bhd (Zoya), for a premium of RM1,800,000
(RM1,200,000 for the factory building and RM600,000 for the land) and an annual
rent of RM8,000. This sub-lease to Zoya is for the residual duration of the main lease
to Toshiba.
Toshiba retained the balance of seven acres of the land for its own use in an orchard
business commencing 1 June 2018.
The three companies are all unrelated and make up their accounts to 31 December
annually.
Required:
(a)Compute the real property gains tax (RPGT) liability of Toshiba Sdn Bhd on the
disposal of the lease on 1 June 2018 over the five acres of land and factory building.
(b)Explain the RPGT compliance requirements for Zoya Sdn Bhd as the acquirer of a
chargeable asset.
(c)Explain the income tax treatment of the rental expense and rental income of Toshiba
Sdn Bhd (1) before the granting of the sub-lease; and (2) after the granting of the sublease to Zoya Sdn Bhd.
(d)Discuss the tax treatment of premium value and annual rent received by Hitachi Sdn
Bhd.
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