Tax

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
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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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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

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A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients

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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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KISB vs Ketua Pengarah Dalam Hasil Negeri

KISB vs Ketua Pengarah Dalam Hasil Negeri
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KISB vs Ketua Pengarah Dalam Hasil Negeri

Lesson from Tax Case : KISB vs Ketua Pengarah Dalam Hasil Negeri

1. Expenses incurred by the director (Company Vs Personal).

2. Wrong business code on 2nd business source.

Background information

The Company is operating a clinic.

The income generated from:

1. Consultancy fees and selling medicine for cure the patient.

2. Sales of supplement medicine to patients.

The Company discloses income separately for clinic income and supplement medicine in the tax computation.

Tax Issue 1 - Deductibility of “private” expenses

The Company incurred the following expenses:

- Training expenses,

- Repair,

- Service and maintenance; and

- General expenses.

Are these expenses allowable for tax deduction??

Tax Issue 2 : Wrong business code in tax computation

The Company discloses income separately for clinic income and supplement medicine

Does the presentation of tax computation use 2 business source of income is correct?

The Company’s opinion on Issue 1:

All the expenditures were basic expenses and a necessity in providing beneficial training to its patients as well as the buyers of the vitamin supplements allegedly sold by the Company.

1. All the expenditures were basic expenses and a necessity in providing beneficial training to its patients as well as the buyers of the vitamin supplements allegedly sold by the Company.

2. Presentation of tax computation is allowable as the principal activities include general traders and dealers.

The Company’s opinion on Issue 2:

Presentation of tax computation is allowable as the principal activities include general traders and dealers.

IRB argument on Issue 1:

The expenditures in question were not eligible for deduction under Section 33(1) of the ITA for the following reasons:

a) Expenses were not incurred by the Company but by one of its directors;

b) It was of personal expenses in nature; and

c) Expenses not supported by the relevant documentation.

IRB argument on Issue 2:

The income of “Business 2nd source - supplement medicine” was wrongly declared and reported by the Company as the income was from the multi-level-marketing (MLM) business of one of the Company’s directors

Therefore, it should be declared and reported separately from the Company’s income.

The decision by The Court

The Company expenses were not allowed for deduction due to the following reason:

1) Failed in proving that the expenses incurred are eligible for deduction under Section 33(1) of the ITA;

2) The Company had failed to call any witnesses to support its claim;

3) Failed to show that the expenditure is not capital in nature; and

4) The expenses incurred were found not related to the business of the Company.

Source:

https://phl.hasil.gov.my/pdf/pdfam/KISB_v_KPHDN_31012020.pdf

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Stamp duty exemption 2021

Stamp duty exemption 2021
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Stamp duty exemption 2021

How to save stamp duty with our Government exemption order during this pandemic?

Two exemption orders:

1. Stamp duty (Exemption) (No. 10) Order 2021 [P.U.(A) 364/2021].

Stamp duty exemption on the instrument of loan or financing agreement executed between a Small and Medium Enterprise (SME) and a financial institution

Stamp Duty (Exemption) (No. 10) Order 2021 [P.U.(A) 364/2021] was gazetted on 10 September 2021 and was deemed to have come into operation and effective on 1 January 2021.

The Order provides that the exemption shall apply to relevant instruments executed under a letter of offer issued by the Financial Institution to a SME between 01 January 2021 to 31 December 2021.

Loan or financing facility approved under Bank Negara Malaysia (BNM)’s Fund for SMEs:

(i) All Economic Sectors Facility

(ii) Small Medium Enterprises Automation and Digitalization Facility;

(iii) Agrofood Facility

*An Application must be submitted for the exemption

2. Stamp duty (Exemption) (No.11) Order 2021 – [P.U.(A) 367/2021]

Stamp duty exemption on qualifying loan restructuring and rescheduling agreements.

Stamp duty (Exemption) (No.11) Order 2021 – [P.U.(A) 367/2021] was gazetted on 15 September 2021 and was deemed to have come into operation and effective on 1 July 2021.

This new order is to extend the exemption period under Stamp Duty (Exemption)(No.2) Order 2020 [P.U.(A) 165/2020].

The Amendment Order provides that:

This exemption applies to the loan restructuring and rescheduling agreements executed on or after 01 July 20201 to 31 December 2021. (previously until 30 June 2021)

The exemption is subject to the following conditions: -

1. An application must be submitted for the exemption;

2. The existing loan and financing agreement has duly stamped under item 22 or 27 of the First Schedule to the Act;

3. Do not contain any additional value to the original amount of loan or financing agreement relating to the restructuring or rescheduling of a loan of financing;

4. Any interest or profit accrued from the restructured or rescheduled payments is not considered as an element of additional value.

Source:

i. Stamp duty exemption on the instrument of loan or financing agreement

ii. Stamp duty exemption on the instrument of loan or financing agreement executed between a Small and Medium Enterprise (SME) and a financial institution

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Public Ruling (PR) No. 4/2021: Taxation of Income Arising from Settlements

Public Ruling (PR) No. 4/2021: Taxation of Income Arising from Settlements
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Public Ruling (PR) No. 4/2021: Taxation of Income Arising from Settlements

The IRB has published Public Ruling (PR) No. 4/2021: Taxation of Income Arising from Settlements, dated 13 August 2021.

The objective of Public Ruling 4/2021

The PR explains the taxation of income arising from a settlement created by a person for the benefit of another person.

* Clarify who constitutes a “settlor” and what constitute “settlements” for income tax purposes

• Explain the circumstances where income arising from a settlement is deemed to be the income of a settlor and hence assessable on him/her.

• Explain how the amount of income of a settlor from settlements is determined

• Explain the tax treatment in a settlement where there are two or more settlors

Example

Mr Rich transferred a shophouse to his unmarried son as a gift for his 18 years old birthday. The shophouse will generate RM10,000 of rental income every month.

The rental income should be assessable under Mr Rich or his son?

The rental income would be deemed to be Mr Rich’s income, as his son is below 18 years old and unmarried.

When his son attains 21 years old, the rental income would be assessable under his son.

But why?

Because there is a “settlement” for an unmarried relative under 21 years of age.

Definition of settlement in tax ruling

In a settlement, there must be an element of giving or getting something for nothing or less than the open market value.

The shophouse is treated as a birthday gift to his son without any consideration.

Tax treatment on income from the settlement

In subsection 65 of ITA mentions that the settlement for an unmarried relative under 21 years’ old, income would be deemed to be the income of settlor (Mr Rich) where a settlement is created either directly or indirectly for the benefit of a relative.

However, in subsection 65(1) of ITA, the income would be deemed as income of the relative when:

1. in the event of the death of the settlor;

2. a relative under 21 years old who is married;

3. a relative who is 21 years old and above whether married or unmarried.

In this case, his son is unmarried and 18 years old.

Source:

PR4/2021 – Taxation of income arising from settlements: https://phl.hasil.gov.my/pdf/pdfam/PR_04_2021.pdf

Section 65 of Income Tax Act 1967 - https://phl.hasil.gov.my/pdf/pdfam/Act_53.pdf

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Tax estimation LHDN 2022

Tax estimation LHDN 2022
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Tax estimation LHDN 2022
 
Budget 2022 proposes some measures to allow businesses to amend their estimated income tax payable. The proposal is to allow all businesses to revise the estimated income tax payable in the 11th month before 31 October 2022.
 
Key summary 
 
a. The application process for the 11th month revision of tax estimate before 31 October 2022 is similar to those implemented previously where it can be submitted online (including email) and is deemed approved upon submission (i.e.automatically approved). 
 
b. The application form(CP204A)can be submitted via email to
 
pindaancp204bajet2022@hasil.gov.my.
 
c. Companies can make payment based on their 11th month revision of tax estimate figure after submitting the completed application form. The LHDNM will issue a revised instalment payment schedule(CP205)to the company as notification.
 
d. The estimate of tax payable for the year of assessment 2022 shall not be less than 85% of the tax estimate or the revised tax estimate in accordance with S.107C(3) and S.107C(7)of the Income Tax Act 1967 (ie.85%based on the 6t month or the 9t month revision and not the 11th month revision).
 
KTP takeaways on tax estimation 2022
 
It offers businesses some flexibility in managing their tax estimates and cash flow.
 
As many companies in Malaysia adopt a December financial year end, the cut-off on 31 October 2022 would mean that companies closing their financial year on 31 December 2022 will not be able to benefit from this amendment.
 
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THK (Secretarial, Account, Payroll, Advisory)
 
A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsource booking, accounting and payroll services to clients
 
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An internal community for our colleagues on work and leisure.
 
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An external job community on vacancy in Johor Bahru for interns, graduates & experienced candidates.
 
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THK Group of Companies THK Management Advisory Sdn Bhd 200401000220 (638723­X) THK Secretarial PLT 202304003367 (LLP0037327-LGN)

Wisma THK, No. 41, 41-01, 41-02, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru, Johor, Malaysia.
+6012-771 7903 (Secretary Department)
+6012-771 7803 (Account Department)
+607-361 3443

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