Fujiplus , a company from Japan, has entered into a partnership agreement with Tambah Sdn Bhd...

Fujiplus , a company from Japan, has entered into a partnership agreement with Tambah Sdn Bhd to undertake a contract for the construction of a bridge in Malaysia.

The partnership agreement provides for the following profit sharing ratio :

Fuji plus 60%

Tambah 40%

The gross contract value is RM120 million and the project is expected to commence on 1 January 2018 and be completed by 30 November 2018.

The gross contract value of RM120 million is divided into following components :

Services RM50 million

Material and equipment RM70 million

Fujiplus intend to register a branch in Malaysia. Several Japanese expatriate workers will be employed by the partnership. The partnership will also be paying a technical assistance fee of 2% of the gross contract value to a Fujiplus associated company in Japan for work to be done in Malaysia.

The partnership expects a profit of RM15 million from this project. For income tax purposes, this is also equivalent to adjusted income.

Required : i. Advise the partnership on the tax implications of the above arrangement (including withholding tax provisions).

ii. Compute the income tax payable by Fujilus for YA 2018.

Expert Solution

ekkarill92 answered 2 years ago

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