Tax

Tax Rebate for New Incorporated Company Malaysia with new T&C

Tax Rebate for New Incorporated Company Malaysia with new T&C
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Tax Rebate for New Incorporated Company Malaysia with new T&C

Income Tax (Conditions for the Grant of Rebate under Subsection 6D(4) Order 2021 @ 31/12/21

This order has effect from the year of assessment 2021.

Conditions for the grant of rebate

  1. Own by the company with paid-up share capital not more than RM2.5 million.

  2. Different premises from its related company.

  3. Shall not use the plant, equipment & facility of the related company.

  4. Employee (except CEO & director) is different from related company.

  5. Business is different from related company.

  6. Business is different from sole proprietorship.

  7. Not M&A with paid up share capital more than RM2.5m or revenue RM50m.

Other pertaining key information

Related company refer as more than 50% of paid up share capital.

A rebate may be granted for YA 2021 and 2022 on company commence business operation after 1/7/2020 with basis period ended 31/12/2020.

Source :

PU Order 504_2021 Income Tax (Conditions for the grant of rebate under subsection 6D(4) order 2021 on 31.12.2021.

https://lom.agc.gov.my/.../outputp/1719408/PUA504_2021.pdf

Update on our past blog on tax rebate

a. 有限公司或有限合伙企业的回扣 (RM20,000 x 3 years) – Post on 19.11.2020

https://www.ktp.com.my/blog/ns9lfg2j36acs7w-bphe6-pbtm3-k6mng-gzk5f-taxrebateenglish-bg3t3

b. 𝐓𝐚𝐱 𝐑𝐞𝐛𝐚𝐭𝐞 (𝐑𝐌𝟐𝟎,𝟎𝟎𝟎 𝐱 𝟑 𝐲𝐞𝐚𝐫𝐬) 𝐨𝐧 𝐟𝐨𝐫 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐨𝐫 𝐥𝐢𝐦𝐢𝐭𝐞𝐝 𝐥𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐩𝐚𝐫𝐭𝐧𝐞𝐫𝐬𝐡𝐢𝐩. – Post on 19.11.2020

https://www.ktp.com.my/blog/ns9lfg2j36acs7w-bphe6-pbtm3-k6mng-gzk5f-taxrebateenglish

c. The advantages of buying property via Sdn Bhd? Posting on 16 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd/16april2021

d. The disadvantages of buying property via Sdn Bhd (Copy) Part 2 Posting on 19 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd-part2/19april2021

e. Investment holding company enjoy tax rebate RM20,000 x 3 years ? Part 3 Posting on 20 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd-part3/20april2021-hgpza

f. Can unlisted investment holding company (IHC) enjoy tax rebate RM20,000 x 3 years? Part 4 Posting on 21 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd-part4/21april2021

g. 预算案 2022 Posting on 19 November 2021

https://www.ktp.com.my/blog/tax-budget-2022-sme-edition-chinese/19nov21?rq=20%2C000

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Is interest rate tax-deductible?

Is interest rate tax-deductible?
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Is interest rate tax-deductible?

Interest expense

The Malaysian Income Tax Act 1967 (“Act”) specifically singles out interest expenses incurred under some circumstances to be deductible. Typically, interest expense arising from borrowing used for general working capital or purchase of fixed assets would qualify for this prescribed deduction.

A key summary of relevant sections under the Income Tax Act on interest expenses in Malaysia

Section 33 (1) the Income Tax Act 1967

Subject to this Act, the adjusted income of a person from a source for the basis period for a year of assessment shall be an amount ascertained by deducting from the gross income of that person from that source for that period all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of gross income from that source.

Section 33 (4) the Income Tax Act 1967

For the purposes of paragraph (1)(a) and subsection (2), where any sum payable for a basis period for a year of assessment is not due to be paid in that period, the sum shall when it is due to be paid be deducted in arriving at the adjusted income of a person for that period.

Section 109 the Income Tax Act 1967

Where any person (in this section referred to as the payer) is liable to pay interest or royalty derived from Malaysia to any other person not known to him to be resident in Malaysia, other than interest or royalty attributable to a business carried on by such other person in Malaysia, he shall upon paying or crediting the interest (other than interest on an approved loan or interest of the kind referred to in paragraph 33, 33A, 33B, 35 or 35A of Part I, Schedule 6) or royalty deduct therefrom tax at the rate applicable to such interest or royalty, and (whether or not that tax is so deducted) shall within one month after paying or crediting the interest or royalty render an account and pay the amount of that tax to the Director General...

Section 140C the Income Tax Act 1967

(1) This section shall apply without prejudice to section 140 or 140A and subject to any rules made under this Act.

(2) In ascertaining the adjusted income of a person from each of his sources consisting of a business for the basis period for a year of assessment, no deduction from the gross income from that source for that period shall be allowed in respect of any interest expense in connection with or on any financial assistance in a controlled transaction granted directly or indirectly to that person which is in excess of the maximum amount of interest as determined under any rules made under this Act.

Section 140A the Income Tax Act 1967

(1) This section shall apply notwithstanding section 140 and subject to any rules prescribed under this Act.

(2) Subject to subsection (3), where a person in the basis period for a year of assessment enters into a transaction with an associated person for that year for the acquisition or supply of property or services, then, for all purposes of this Act, that person shall determine and apply the arm’s length price for such acquisition or supply.

Section 33(2) the Income Tax Act 1967

Where a person, being a person to whom paragraph (1)(a) applies in relation to gross income from a business of his for the basis period for a year of assessment and in relation to borrowed money, has made (otherwise than for the purpose of producing that gross income)any loan of money or any investment in movable or immovable property, and the loan or any part thereof is outstanding at any time in that period or the investment or any part thereof is held by him at any time in that period and it appears to the Director General that the loan or any part thereof or the investment or any part thereof has been financed wholly or partly or directly or indirectly out of the borrowed

money—

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Is rental income a business income?

Is rental income a business income?
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Is rental income a business income?

Tax Case - BCSB v. DIRECTOR GENERAL OF INCOME TAX

Income is received from the letting of the properties. Taxpayer declared and taxed under section 4(a) ITA 1967 as a business income from YA 2001 to 2011.

Tax audit finding

Income received from letting the properties from YA 2011 is to be taxed under section 4(d) of the ITA as rental income pursuant to Public Ruling No. 4/2011.

Tax audit action

1. Withdrew Capital Allowance for the properties

2. Capital Allowance for the properties

3. Added back the same in the tax computation for YA 2011.

4. Raised the Notices of Additional Assessment for YA 2010 and 2011.

The Company’s opinion

1. The rental income is the business income under section 4(a) of the ITA since its commencement in 2001.

2. The Public Ruling No 4/2011 has no force of law.

IRB argument

1. The Company had failed to provide comprehensive & active maintenance to the properties.

2. The Company only provided maintenance upon request by the tenants.

3. Public Ruling 4/2011 offers guidelines for the tax treatment of the rental income.

4. The Company is disallowed to claim the administration expenses and capital allowance for this non-business income.

5. The interest expenditure for the term loan and bank overdraft claimed by the Company are also not permitted.

6. Section 4 does not determine whether an income falls under subsection (a),(b),(c), (d),(e) or (f).

7. Therefore, the DGIR is authorized under s.138A of the ITA to issue a public ruling.

Decision

The Special Commissioners of Income Tax'' (SCIT) agreed with the IRB submission and totally dismissed the Company appeal.

The assessment and penalty imposed by the IRB for YA 2010 and 2011 are confirmed and maintained.

Source:

https://phl.hasil.gov.my/pdf/pdfam/BCSB_v_KPHDN.pdf

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(u-turn update) foreign-source income budget 2022

(u-turn update) foreign-source income budget 2022
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(u-turn update) foreign-source income budget 2022

Background information from Budget 2022

Under the Budget 2022 proposal, the exemption of foreign-sourced income received by any person (other than a resident company carrying on the business of banking, insurance or sea or air transport) which is provided under Paragraph 28, Schedule 6 of the Income Tax Act 1967 is proposed to be removed for Malaysian residents.

The proposed removal is to take effect from 1 January 2022. The amendment to the law is to be made through the Finance Bill 2021 which has been passed by both houses of Parliament.

Last minutes u-turn

The Ministry of Finance has announced today that subject to conditions, which will be set out in guidelines to be issued by the Inland Revenue Board, the following foreign-sourced income received from 1 January 2022 to 31 December 2026 (5 years) will continue to be exempted from Malaysian income tax:

• Dividend income received by resident companies and limited liability partnerships.

• All classes of income received by resident individuals, except for resident individuals who carry on business through a partnership.

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2% withholding tax on commission

2% withholding tax on commission
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2% withholding tax on commission

Overview

Recent Budget 2022 proposed the Company needs to pay 2% withholding tax on commission paid to the individual agent, dealer, and distributor to IRB.

Effective date

With effective from 1/1/2022 under Section 107D

Key takeaway

You will understand:

(a) Payer who needs to withhold 2% of commission and remit to IRB

(b) Payee who is subject to withholding tax

(c) Penalty for not remitting the 2% withholding tax

Summary of learning

Payer:

• Company pays monetary commission to the individual agent, dealer and distributor

• Company remits the withholding tax to IRB within 30 days from payment date

Payee:

• Individual resident

• Received more than RM100k of commission whether in monetary or otherwise (such as accrual) from the same company in the calendar year 2021

• Exclude the commission of employees reported in Form E

• Income tax payable can be deducted by withholding tax

Penalty:

• 10% penalty if the payer fails to remit 2% to IRB within 30 days

• Commission is not allowed for tax deduction

Scenario

Company A paid RM120,000 commission to individual agent B in the calendar year 2021.

So, agent B is subject to withholding tax.

From 1/1/2022, Company A needs to withhold 2% of the commission paid to agent B and remit it to IRB within 30 days.

Agent B individual tax return:

Tax payable x

(-) Tax instalments xx

(-) Withholding tax xxx_

Balance tax payable/ refund xxxx

Sources

https://bit.ly/3HkBGSr

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CP 21 CP22 CP22A CP22B LHDN

CP 21 CP22 CP22A CP22B LHDN
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CP 21 CP22 CP22A CP22B LHDN

IRB concession to enforce?

Calling HR/Account Do it before 31 December 2021 on your newly recruited & resigned employees in your company as IRBM ….

The IRBM, under the Covid 19 pandemic, has agreed to give employers to use and submit paper forms for Forms CP21, CP22, CP22 and CP22B until 31 December 2021.

The IRBM will only enforce the method submission of Forms CP21 CP22, CP22 and CP22B (version of the form prescribed under section 152 ACP1967) from 1 January 2022.

Effective from 1 January 2022 Forms CP21, CP22, CP22 and CP22B shall be submitted according to the prescribed method.

Penalty

Delay or failure to submit Form CP21, CP22, CP22 & CP22B is an offense and if convicted, is liable to a fine of not less than RM200 or not more than RM20,000 or imprisonment not exceeding six (6) months or both under subsection 120 (1) of ITA 1967.

Effective from 1 January 2021, Form CP21, CP22, CP22A and CP22B must be submitted using the form prescribed by the IRBM.

Type of CP Form

CP 21 (Notification of employee leaving Malaysia)

Not less than 30 days before the date the employee is expected to leave Malaysia

i. Online via e-SPC ii. Handover iii. Through post

CP 22 (Notification of new employees)

Within 30 days after employment commence

i. Hand in hand ii. Through post

CP 22A (Notification of Cessation of employment for private sector)

Not less than 30 days before cessation

i. Online via e-SPC ii. Handover iii. Through post

CP 22B (Notification of Cessation of employment for public sector)

Not less than 30 days before cessation

i. Online via e-SPC ii. Handover iii. Through post

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2022 Major Tax Changes on LLP

2022 Major Tax Changes on LLP
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2022 Major Tax Changes on LLP

Does an LLP need to be audited in Malaysia?

In the past, a Limited Liability Partnership is not required to prepare an audited financial statement.

Effective from Year of Assessment 2022, under Section 77A(4) of the Income Tax Act 1967, A LLP is required to furnish tax returns based on the accounts are true and fair.

Tax estimation for LLP

10% penalty on tax payable will be imposed on LLP when there is no estimation furnished under Section 107C (10A) of the Income Tax Act 1967.

Such penalty shall be due and payable upon furnishing the tax return of that LLP.

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FAQ on Special Income Remittance Programme (PKPP)

FAQ on Special Income Remittance Programme (PKPP)
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FAQ on Special Income Remittance Programme (PKPP)

IIRBM has issued the frequently asked questions (FAQ) on the PKPP on 17 December 2021 following the media release on - Special Program (PKPP) on remittance of foreign income dated 16/11/21.

IRBM encourages taxpayers to participate in this special program that is offered to update their tax position.

Key summary of the FAQ on PKPP :

  • The implementation period of PKPP is from 1 January 2022 to 30 June 2022 (PKPP period).

  • Individuals, companies, LLP & etc which are Malaysia tax residents are eligible for PKPP.

  • Foreign income from business, employment, dividend, rental, interest, royalty or others are covered under PKPP.

  • Foreign income is “received” when the income is remitted, brought in, transferred into Malaysia physically or via banking methods.

  • A tax rate of 3% (gross) on income brought into Malaysia during the said period.

  • There is no audit review, investigation or penalty on income brought into Malaysia during the PKPP period.

  • All income brought into Malaysia will be accepted in good faith by IRBM.

  • Income must be brought into / remitted into Malaysia within the PKPP period.

  • Taxpayers must make a declaration to join the PKPP not later than 30 days after the expiry of the PKPP period.

  • Tax payments shall be made in accordance with the normal payment arrangements prescribed for the year of assessment 2022 or 2023 whichever is applicable.

  • PKPP does not involve income derived from Malaysia which is subject to tax for the year of assessment 2021 and subsequent years of assessment and is remitted into or brought back to Malaysia during the PKPP period.

  • Taxpayers can claim foreign tax credit (either foreign income tax or withholding tax). The claim must be supported with documentary proof.

  • Taxpayers can make an online declaration with Borang PKPP which can be accessed through MyTax from 1 January 2022 onwards.

  • Taxpayers are required to report the foreign income remitted in the tax return form for YA 2022 - 2023.

KTP takeaways

IRBM will review and examine the information on income of the Malaysian tax residents kept overseas that has been received through the tax information exchange agreements with other countries after 30/6/22.

Based on the review, if IRBM found that Malaysian source income kept overseas has not been reported, additional assessment can be raised together with penalties.

IRBM will issue frequently asked questions (FAQs) as well as guidelines relating to the PKPP to the public in due course.

Source

IRB FAQ on PKPP (in Bahasa)

https://phl.hasil.gov.my/pdf/pdfam/FAQ_PKPP_1.pdf

IRBM media release on PKPP

https://phl.hasil.gov.my/pdf/pdfam/KM_LHDNM_16112021_PROGRAM_KHAS_PEREMITAN_PENDAPATAN_YANG_DISIMPAN_DI_LUAR_NEGARA.pdf

Update on the tax on remittance of foreign source income into Malaysia

1. IRBM Media Release on PKPP 7/12/2021

https://www.ktp.com.my/blog/irbm-special-remittance-program-pkpp/08dec21

2. Finance Bill on foreign source income remitted into Malaysia 10/11/2021

https://www.ktp.com.my/blog/foreign-source-income-malaysia-taxable/10nov21

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𝐒𝐒𝐓 𝐫𝐞𝐟𝐮𝐧𝐝 𝐨𝐧 𝐛𝐚𝐝 𝐝𝐞𝐛𝐭𝐬

𝐒𝐒𝐓 𝐫𝐞𝐟𝐮𝐧𝐝 𝐨𝐧 𝐛𝐚𝐝 𝐝𝐞𝐛𝐭𝐬
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𝐒𝐒𝐓 𝐫𝐞𝐟𝐮𝐧𝐝 𝐨𝐧 𝐛𝐚𝐝 𝐝𝐞𝐛𝐭𝐬
Sales & service tax have different accounting treatments. We must clearly know the accounting basis to avoid incorrect submission.
Let’s say the customer couldn’t make the payment to us, but we have submitted and paid SST on the relevant sales. Can we apply for the SST refund? Don’t worry, let us talk about the claim of SST refund for bad debts.
𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐛𝐚𝐬𝐢𝐬 𝐨𝐧 𝐒𝐒𝐓 𝐨𝐧 𝐛𝐚𝐝 𝐝𝐞𝐛𝐭𝐬
Sales Tax - Accrual basis
Sales Tax is accounted for when the goods are sold, disposed of, or used.
Example:
Company A is a mechanical parts manufacturing company. The company issues invoices to customers on 15/09/2021. Therefore, the sales tax will be calculated based on the date of the invoice and submitted in the coming tax period.
Service Tax - Payment basis
Service Tax accounted : When receiving payment from a customer;
If the customer has not paid within 12 months, the taxpayer will have to pay the service tax to the customs on the first day after 12 months from the invoice date.
Example:
Company B is a service provided company. The company issues invoices to customers on 15/09/2021, but customers make payments on 17/12/2021. Therefore, the service tax will be calculated based on the date of payment and submitted in the coming tax period.
Company B is a service provided company. The company issues invoices to customers on 15/09/2021, but the customers have not paid for it for more than one year. Therefore, the service tax will be calculated on the first day after 12 months from the invoice date (15/09/2022) and submitted in the coming tax period.
𝐂𝐥𝐚𝐢𝐦 𝐟𝐨𝐫 𝐚 𝐫𝐞𝐟𝐮𝐧𝐝 𝐢𝐧 𝐛𝐚𝐝 𝐝𝐞𝐛𝐭𝐬
When the company is unable to recover the arrears from the customer, the company can request a tax refund for the paid sales and service tax from the customs. However, the company must fulfil the following conditions to claim this tax refund:
𝐒𝐚𝐥𝐞𝐬 𝐓𝐚𝐱
The company has written off all or part of the unrecoverable sales tax in the accounts as bad debts.
The company has taken reasonable actions to recover the sales tax from customers.
The company must apply for this sales tax refund within six years from the date the sales tax is paid.
𝐒𝐞𝐫𝐯𝐢𝐜𝐞 𝐓𝐚𝐱
The company has written off all or part of this unrecoverable service tax as bad debts in the accounts.
The company has taken reasonable actions to recover the service tax from customers.
The company has not recovered any payments related to service tax from the customers.
This unrecoverable service tax has been paid to the customs.
The company must apply for this service tax refund within six years from the date the service tax is paid.
𝐓𝐡𝐞 𝐜𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝐦𝐞𝐭𝐡𝐨𝐝 𝐟𝐨𝐫 𝐜𝐥𝐚𝐢𝐦𝐢𝐧𝐠 𝐭𝐡𝐞 𝐫𝐞𝐟𝐮𝐧𝐝 𝐢𝐧 𝐛𝐚𝐝 𝐝𝐞𝐛𝐭𝐬
i）If the company has received a part of the payment for the sales of taxable goods,
the claim can be made for the difference between the sales tax paid and the amount
calculated as below formula：
A / B X C (A divided by B and multiplied by C)
A = Payment received from the customer
B = Total amount of the invoice including tax
C = Tax amount of the invoice
Example： Company A is a registered company. The company has issued an invoice with RM 110,000.00, but company A only receives payment of RM 60,000.00 including tax from customers. Later, the customer declared bankruptcy, and he was unable to repay the debt. Company A has paid a 10% tax to the customs. Therefore, Company A is eligible to claim the bad debt sales tax refund from the customs based on the following calculations：
𝐓𝐡𝐞 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝐌𝐞𝐭𝐡𝐨𝐝：
RM 60,000.00 / RM 110,000.00 x RM 10,000.00 = RM 5,454.55
Hence, the bad debts that Company A can claim from the custom are RM4,545.45 (RM10,000.00 – RM5,454.55)
ii）The required form for applying for the bad debt repayment is Form JKDM No.2. This form must be submitted to Cawangan Perakaunan Hasil according to zone /state /station.
𝐃𝐨𝐜𝐮𝐦𝐞𝐧𝐭𝐬 𝐑𝐞𝐪𝐮𝐢𝐫𝐞𝐝 𝐟𝐨𝐫 𝐑𝐞𝐟𝐮𝐧𝐝
Copy of invoice or payment received.
SST-02 form and SST listing
Documents or records which prove that the sales tax paid by the customer has not been received.
Documents or records which prove that reasonable actions have been taken to claim taxable payments from customers.
Documents or records which prove that the unrecoverable sales of taxable goods have been written off as bad debts on the accounts.
Remarks: If you request the SST refund from the customs, but subsequently receive payment from the customer, you shall report the SST and pay it to the customs!
𝐒𝐨𝐮𝐫𝐜𝐞𝐬
For more details, please visit the official website：
Accounting for SST
Sales and Service Tax 2018 (Sales Tax 2018 - Pg. 24 to 27, Service Tax 2018 - Pg. 32 to 34)
Form JKDM No.2
𝐕𝐢𝐬𝐢𝐭 𝐮𝐬
Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
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LHDN Can Now Access Taxpayers' Bank Accounts Without Informing Or Seeking Permission

LHDN Can Now Access Taxpayers' Bank Accounts Without Informing Or Seeking Permission
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LHDN Can Now Access Taxpayers' Bank Accounts Without Informing Or Seeking Permission

Dewan Rakyat has passed the Finance Bill 2021 on 15 December 2021 and one of the amendments, Section 106A of the Income Tax Act 1967.

Section 106A ITA 1967

New S106A ITA 1967 fall under Part VII Collection and Recovery of Tax

LHDN will also no longer have to inform taxpayers when requesting their bank account details from banks for review or investigation.

The banks are not allowed to disclose to anyone that such a request has been made.

The taxpayer was, in the past, required to sign a consent form before banks were allowed to furnish relevant information to LHDN.

What happens if you fail to pay taxes?

LHDN can execute the judgment against you. One of the normal methods used by LHDN is garnishee order.

What is Garnishee Proceeding?

A garnishee proceeding is a process of enforcing a money judgment by the seizure or attachment of debts due to the judgment debtor that forms part of his property available in execution.

In short, a civil proceeding is instituted against a taxpayer. A judgment has been obtained against that taxpayer for LHDN to obtain taxpayer’s bank account information from the financial institutions.

Final words

If you don’t owe any tax due, are you worry?

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Can you be a director if declared bankrupt?

Can you be a director if declared bankrupt?
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Can you be a director if declared bankrupt?

Latest SSM action on qualification of a director

SSM published a media statement on 09 December 2021 to caution all the companies directors on the importance of a person qualification to act as the company director.

The media statement specified about a former company director with bankrupt status was convicted of 2 offences under Section 125(1) of CA, 1965 to act as a company director without obtaining permission from the court.

Background story

Mr Hung Lye Huat, former company director of Global Agriculture Sdn Bhd with bankrupt status was found to have signed Form 48A (Statutory Declaration before appointment as director) dated 24.01.2017 and Form 32A (share transfer form) dated 26.01.2017 whereas he was an undischarged bankrupt and had never obtained court permission to act as a director during that period.

Contravention of Company Act

According to Section 125(1) of CA, 1965, every person who is an undischarged bankrupt act as director of, or directly or indirectly takes part in or is concerned in the management of, any corporation except with the leave of the Court shall be guilty of an offence against this Act. Failure to comply shall impose a penalty of imprisonment for five (5) years or RM100,000 or both.

At the end, the court has imposed a fine of RM8,000.00 or 3 months imprisonment if fails to pay; after the accused pleads guilty through plea bargaining.

Let look at the Section 198(1)(a) of CA, 2016 (with effect from 31.01.2017) on the requirement on the disqualified from being a director. Under this new act, it provides that an undischarged bankruptcy cannot hold office as a director or take part in the management of the company. It is regardless whether his/ her bankruptcy is within or outside Malaysia.

Any Exemption?

Can a person with bankruptcy status be appointed or hold office as a director? The answer is yes; however approval is required either from the Official Receiver (OR) or the Court as according to Section 198(3) of CA, 2016.

If option by way from the Court approval, the person shall serve a notice to the OR and the Registrar of Companies on his/ her intention to apply for such leave. The registrar shall be made as a party to the proceeding; whereas the OR will be heard in court.

Severe Fine and Penalty

Any penalty for contravenes this section? Refer to Section 198(7) of CA, 2016, a heavier penalty to be imposed as compared to Section 125 (1) of CA, 1965 where offender shall be liable to imprisonment for a term not exceeding five (5) years or to a fine not exceeding RM1 million or both.

SSM take seriously the qualification of a person to act as the director. This is proven from the additional requirement and also increase 10 times the amount of fine under Section 198 of CA, 2016 as compared to Section 125 (1) of CA, 1965.

Hence, any appointment to act as director of a company should not take for granted by merely making a declaration under Section 201 of the Companies Act 2016. It should be supplementary along with comprehensive background research of the person such as bankruptcy search with Jabatan Insolvency Malaysia to avoid any heavy penalty imposed on the contradiction of the act.

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RMCD Special Voluntary Disclosure & Amnesty Program (VA)

RMCD Special Voluntary Disclosure & Amnesty Program (VA)
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RMCD Special Voluntary Disclosure & Amnesty Program (VA)

Background of VA

Under the proposed indirect tax amnesty program, taxpayers will be encouraged to voluntarily disclose underpaid or unpaid indirect taxes arising from errors or mistakes made in indirect tax filings or submissions, in exchange for reduced penalties.

Taxpayers who have failed to register and comply with indirect tax filing requirements are also expected to be eligible for the VA.

Key summary of VA

Special Voluntary Disclosure and Amnesty Program (VA) will be implemented with effect from 1 January 2022.

The VA program will be introduced in two (2) phases with penalty remission (with full payment during the said period) :

  • 1 January 2022 to 30 June 2022 : 100% penalty remission

  • 1 July 2022 to 30 September 2022 : 50% penalty remission

What is VA?

The VA program will involve two (2) distinct programs :

1. Voluntary disclosure program : Taxpayers can voluntarily disclose any unpaid or under-reported indirect tax/duty not known or discovered by RMCD under this program.

2. Amnesty program – Taxpayers with any outstanding Bill of Demand (“BOD”) or who have been audited by the RMCD Compliance Division and received audit findings on non-compliance areas can enjoy penalty and tax/duty remissions under this program.

The VA program will cover all indirect taxes administered by RMCD, including Sales Tax, Service Tax, GST, Tourism Tax, Departure Levy, Import Duty, Export Duty and Excise Duty.

Good faith

Voluntary disclosure submitted in good faith will be accepted. No audit will be conducted on the activities and periods involved.

Once the VA period is over, RMDC will enhance enforcement with hefty penalties.

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Stock written off tax deductible

Stock written off tax deductible
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Stock written off tax deductible

Issue

Whether the stock written off need to add back in tax computation? in what circumstances have to add back?

Fact

According to PR 2/2020, this ruling explains that if it is an actual write-off of stock in trade, then it is deductible. If it is just a provision for obsolescence of stock in trade, it will need to add back to tax computation.

Tax opinion

If it is an actual write-off of stock in trade that is charged to the profit and loss account is allowable for tax-deductible. If it is a provision for obsolescence of stock in trade, it will need to add back in tax computation.

Source

Public Ruling 2/2020 tax treatment of stock in trade part 1 – valuation of stock

https://phl.hasil.gov.my/pdf/pdfam%20PR_02_2020.pdf

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Upkeep of motor vehicle tax treatment

Upkeep of motor vehicle tax treatment
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Upkeep of motor vehicle tax treatment

Issue

For the purchase of a new non-commercial motor vehicle for a company, specifically, a lorry, is initial insurance and road tax-deductible as expenses or need to add back as capital in nature?

Fact

1. According to PR 6/2015 #5.2, Expenditure in respect of the vehicle which does not qualify for capital allowance claim is as follows:

(i) road tax, insurance and hire purchase interest does not qualify for capital allowance as the expenditures are recurring expenses which allowable as expenditures under subsection 33 (1) of the ITA.

2. Under subsection 33(1) of the ITA, an expense wholly and exclusively incurred in the production of gross income from a source is allowable as a deduction against gross income from that source. As long as the lorry is used for business purposes wholly and exclusively, the expenses incurred are tax deductible.

Tax opinion

Road tax and insurance do not qualify for capital allowance. However, they can be deductible as expenses as this is recurring expenses which is allowable as expenditure under subsection 33(1) of the ITA.

Source

1. Public Ruling No. 6/2015 : Qualifying expenditure and computation of capital allowances

https://phl.hasil.gov.my/pdf/pdfam/PR_6_2015.pdf

2. Income Tax Act 1967 – Section 33(1) Adjusted income generally

https://phl.hasil.gov.my/pdf/pdfam/Act_53_20190101.pdf

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LHDN Personal Tax Relief 2021

LHDN Personal Tax Relief 2021
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Malaysia Personal Tax Relief 2021

As we know time is left until the Year 2022 is around 3 weeks and it is almost over!

That’s mean it is time for us to rummage through our house, looking for the receipts!

You can decide the tax saving for your personal tax granted by Lembaga Hasil Dalam Negeri (LHDN).

So, do not miss out on any claim! Here is a complete tax relief checklist at a glance.

Click Personal Tax Relief Year 2021

Remember

you must keep your receipts properly as evidence to avoid any penalty imposed by LHDN!

Source:

Public ruling 5/2021 Taxation Of A Resident Individual Part I - Gifts Or Contributions And Allowable Deductions

https://phl.hasil.gov.my/pdf/pdfam/PR_05_2021.pdf

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Special Income Remittance Programme (PKPP) to Malaysian Residents

Special Income Remittance Programme (PKPP) to Malaysian Residents
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Special Income Remittance Programme (PKPP) to Malaysian Residents

IRBM media release on - Special Program (PKPP) on remittance of foreign income dated 16/11/21.

IRBM will issue frequently asked questions (FAQs) as well as guidelines relating to the PKPP to the public in due course.

IRBM encourages taxpayers to participate in this special program that is offered to update their tax position.

Key summary of the PKPP :

  • The implementation period of PKPP is from 1 January 2022 to 30 June 2022 (PKPP period).

  • A tax rate of 3% (gross) on income brought into Malaysia during the said period.

  • There is no audit review, investigation or penalty on income brought into Malaysia during the PKPP period.

  • All income brought into Malaysia will be accepted in good faith by IRBM.

  • Income must be brought into / remitted into Malaysia within the PKPP period.

  • Taxpayers must make a declaration to join the PKPP not later than 30 days after the expiry of the PKPP period.

  • Tax payments shall be made in accordance with the normal payment arrangements prescribed for the year of assessment 2022 or 2023 whichever is applicable.

  • PKPP does not involve income derived from Malaysia which is subject to tax for the year of assessment 2021 and subsequent years of assessment and is remitted into or brought back to Malaysia during the PKPP period.

KTP takeaways

IRBM will review and examine the information on income of the Malaysian tax residents kept overseas that has been received through the tax information exchange agreements with other countries after 30/6/22.

Based on the review, if IRBM found that Malaysian source income kept overseas has not been reported, additional assessment can be raised together with penalties.

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Deferment of CP204 CP500 Payment Budget 2022 Part 2

Deferment of CP204 CP500 Payment Budget 2022 Part 2
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Deferment of CP204 CP500 Payment Budget 2022 Part 2

The Postponement of 6 instalments on Estimated Tax Payable (CP204) and Instalment Payment Scheme (CP500) will be given automatically to qualified taxpayers with the status of micro, small and medium enterprises (MSMEs or PMKS) from Jan 1 to June 30, 2022.

What if taxpayers don’t want the deferment?

Taxpayers want to maintain the current tax instalment scheme.

  • IRB is not required to be notified as qualified taxpayers are allowed to follow the original CP 204 or CP 500.

  • Any tax instalments paid during the deferment period will be treated as payments towards the tax instalments for those respective months and will not be allowed to be carried forward for settlement of tax instalments after the deferment period.

Tax estimation

No changes to existing eligibility to revise tax estimates in the 6th or the 9th month and the special 11th month revision (subject to existing conditions)

Tax penalty ?

The increase in taxes for late payment of instalments will not be imposed for instalments deferred during the deferment period

6 instalment deferment

The Inland Revenue Board (IRB) informed that qualified taxpayers are based on records or the latest Income Tax Statement Form received by the board.

CP 204 deferment

For CP204 payment, business criteria that qualify for the PMKS status are companies, cooperatives, trust bodies and limited liability partnerships with a paid-up capital of less than RM2.5 million for ordinary shares at the start of the basic period of an assessment year.

In addition, the entity’s gross business income of RM50 million or below for an assessment year.

The postponement of CP204 payment to the taxpayer who fulfils the criteria will be sent via registered email with HASiL (the IRB).

CP500 deferment

The IRB informed that the postponement of CP500 payment is allowed automatically to all taxpayers concerned for the 2021 assessment year payment (for the payable date of Jan 1, 2022) and the 2022 assessment year payment (for the payable dates of March 1, 2022 and May 1, 2022).

FAQ on deferment

Frequently asked questions (FAQ) on the postponement could be accessed via the link https://phl.hasil.gov.my/pdf/pdfam/SOALAN_LAZIM_PINDAAN_BAJET_2022_CP204.pdf and the public can contact the HASiL Recovery Call Centre (HRCC) at 03-8751 1000 for further information.

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Deferment of CP204 Payment Budget 2022

Deferment of CP204 Payment Budget 2022
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Deferment of CP204 Payment Budget 2022

The Postponement of Estimated Tax Payable (CP204) and Instalment Payment Scheme (CP500) will be given automatically to qualified taxpayers with the status of micro, small and medium enterprises (MSMEs or PMKS) from Jan 1 to June 30, 2022.

6 instalment deferment

The Inland Revenue Board (IRB) informed that qualified taxpayers are based on records or the latest Income Tax Statement Form received by the board.

CP 204 deferment

For CP204 payment, business criteria that qualify for the PMKS status are companies, cooperatives, trust bodies and limited liability partnerships with a paid-up capital of less than RM2.5 million for ordinary shares at the start of the basic period of an assessment year.

In addition, the entity’s gross business income of RM50 million or below for an assessment year.

The postponement of CP204 payment to the taxpayer who fulfils the criteria will be sent via registered email with HASiL (the IRB).

CP500 deferment

The IRB informed that the postponement of CP500 payment is allowed automatically to all taxpayers concerned for the 2021 assessment year payment (for the payable date of Jan 1, 2022) and the 2022 assessment year payment (for the payable dates of March 1, 2022 and May 1, 2022).

FAQ on deferment

Frequently asked questions (FAQ) on the postponement could be accessed via the link https://phl.hasil.gov.my/pdf/pdfam/SOALAN_LAZIM_PINDAAN_BAJET_2022_CP204.pdf and the public can contact the HASiL Recovery Call Centre (HRCC) at 03-8751 1000 for further information.

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What is tax recovery action by LHDN?

What is tax recovery action by LHDN?
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What is tax recovery action by LHDN?

Background story from a Facebook post

Last year, I was fined by LHDN for under-declaring the tax and I was fined RM30K with 2 years instalments. Because of the MCO this year, I did not pay the money on time. Originally, it was the 11th issue this month, but I was only going to the seventh issue.…

I suddenly received a letter from ''Kes Mahkamah'' the day before yesterday. I opened it and saw that it said that I would go to court on December 20 and I had to pay more than RM25k in one go. ….…

Can I really continue to pay in instalments? Can't it be the 11th issue if I return him on time now?

LHDN tax recovery action

LHDN can file a recovery action against the taxpayer if no payment is made after 30 days from the services of the Notice of Assessment (NOA).

Judgement in Default

A writ saman (writ of summons) and pernyataan tuntutan (statement of claim) will be served to the taxpayer. If the taxpayer does not enter appearance within 14 days, a judgement in default of appearance (JID) will be entered against the taxpayer. Once a JID is entered, LHDN can proceed to execute the JID against the taxpayer.

Summary of Judgement

If summary judgement is entered, LHDN will proceed to file bankruptcy proceedings against taxpayer to recover the taxes. Once summary judgement is entered, taxpayer must by lumpsum. Thus, negotiate for instalment scheme before summary judgement is entered.

A summary judgement means a judgment can be entered against taxpayer without having to go for a trial. The Court will not entertain any challenges on the correctness of the assessment. The challenges can only be done at the Special Commission of Income Tax.

Instalment scheme S103(7) ITA 1967

Where any tax is payable in accordance with subsection (2), the Director General may allow the tax to be paid by instalments in such amounts and on such dates …. in the event of default in payment of any one instalment on the date specified for payment the balance of the tax then outstanding shall be due and payable on that date and shall without any further notice being served … and that sum shall be recoverable as if it were tax due and payable under this Act.

Consent Judgement

A consent judgment will be recorded before the Court when both parties (taxpayer and LHDN) agree to the instalment plan.

A lapse in any one of payment, the Consent Judgement will be revoked and the tax will become due and payable immediately.

No bankruptcy/winding-up proceeding will be filed against the taxpayer as long as payment is made.

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Special Tax Incentive under Penjana

Special Tax Incentive under Penjana
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Special Tax Incentive for Selected Services Activities under National Economic Recovery Plan (PENJANA)

The scope of Special Tax Incentive under the Economic Recovery Plan (PENJANA) is not only to assist manufacturing companies to relocate their operations to Malaysia. In Budget 2021, it also expanded to selected service activities, including companies adapting Industrial Revolution 4.0 and digitalization technology.

Key takeaways:

You will understand: -

1. Who is eligible for the tax incentive?

2. What are the tax incentives?

3. What are the selected service activities?

4. What are the key conditions to be fulfilled？

5. How to apply?

Summary of learnings:

1. Who is eligible for the tax incentive?

New company

A company that does not have:

a. any existing operation/entity in Malaysia with including the related company, or

b. any existing services operation in Malaysia but has an existing non-services operation, e.g. manufacturing

and is planning to:

a. Relocate its facility for qualifying services activities from any foreign country; or

b. Relocate new services activities; or

c. Establish new operation in Malaysia

Existing company

A foreign or locally owned company with existing services operation (including selected services activities) in Malaysia; and

Proposes to undertake selected services activities for a new business segment, which is separate from the operation of its existing services activities.

2. What are the tax incentives?

New company

  • Income tax rate: 0% to 10%

  • Period: up to 10 years.

Existing company

  • Income tax rate: 10%

  • Period: up to 10 years

3. What are the selected service activities?

The company must undertake any of the following service activities:

i. Provision of technology solutions based on substantial scientific or engineering challenges;

ii. Provision of Infrastructure and technology for cloud computing;

iii. Research and development/design and development activities;

iv. Medical devices testing laboratory and clinical trials; and

v. Any services or manufacturing-related services activities determined by the Minister of Finance

4. What are the key conditions to be fulfilled?

Some of the key conditions are outlined as below:

i. Company incorporated under Companies Act 2016 and resident in Malaysia;

ii. To commence business operation within one year from the date of approval;

iii. Incur the first capital expenditure within one year from the date of approval for the incentive and to be completed within three years from the date of the first capital expenditure was incurred; and

iv. To incur capital investment or business expenditure in the following areas:

a. Adoption of Industrial Revolution 4.0 or digitalisation technology;

b. Employment opportunities for Malaysians including fresh Malaysian graduates;

c. Technology transfer;

d. Utilization of local goods and services;

e. Internship for Malaysian students;

f. Collaboration with local industries/institutions/universities.

5. How to apply?

The completed application should be submitted in three (3) sets of PENJANA (Services) Form to MIDA before 31 December 2022.

Source:

https://www.mida.gov.my/wp-content/uploads/2021/09/Revised-Guideline-Relocation-Incentive_as-at-22.9.2021-for-MIDAs-website_final-v2.pdf

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