Convert Enterprise (sole-proprietorship/partnership) to Sdn Bhd Explained ... Controlled Transfer

Convert Enterprise (sole-proprietorship/partnership) to Sdn Bhd Explained ... Controlled Transfer
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What is control transfer under income tax act for the conversion from sole proprietorship to Sdn Bhd?

As per refer to Public Ruling 1/2018 Public Ruling 1/2018 Disposal of Plant and Machinery Part II - Controlled Sales

Control transfer is transaction of asset between two parties.

  • The acquirer of the asset has control(at least 50%) over the disposer and; vice versa

  • Some other person has control over the disposer and acquirer of the asset

  • The disposal is effected in consequence of a scheme of reconstruction or amalgamation of companies

The disposal is effected by way of a settlement or gift or by devolution of the property in the asset on death

The conversion of sole proprietorship to Sdn Bhd will subject to control transfer.

 As the control right of sole proprietorship and Sdn Bhd come from one person.

Treatment in tax

  • The disposal of asset from sole proprietorship to Sdn Bhd.

  • The assets deemed transfer at residual expenditure instead of the transaction price.

  • Disposer would not subject to balancing charge or allowance.

  • Acquirer's can't claim the initial allowance and claim annual allowance based on disposer's acquisition price but restricted to the residual expenditure.

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