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HRDF Levy 2022 for *newly* registered employers

HRDF Levy 2022 for *newly* registered employers
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HRDF Levy 2022 for *newly* registered employers

What is the meaning of HRDF?

The HRDF is an abbreviation of the term Human Resource Development Fund. This is a pool of funds collected from the various companies and manufacturers that come under the HRDF act. The funds are collected as levies from the employers of the manufacturing and service sectors, and the registered companies

Newly Registered Employers under First Schedule of PSMB Act 2001

Exemption of HRDF levy payment extend to 31.12.2021 (6 months) HRDF Exemption.

January 2022

The levy payment on this newly registered employers under the First Schedule of the PSMB Act 2001 start from January 2022. The payment is due on 15th February 2022.

10% penalty on late payment charges will be imposed on any payment before the due date.

Read our past blogs on the HRD Levy

1. Latest update on HRDF 2021dated on 09/03/2021

https://www.ktp.com.my/blog/hrdf/09march2021?rq=hrd

2. Key Summary – MIA seminar with HRDF @ 23/03/2021 dated on 25/03/2021

https://www.ktp.com.my/blog/hrdf-part1-/25march202?rq=hrdf

3. FAQ - MIA seminar with HRDF @ 23/03/2021 Part 2 dated on 26/03/2021

https://www.ktp.com.my/blog/hrdf-faq-part2-/26march202?rq=hrdf

4. FAQ - MIA seminar with HRDF @ 23/03/2021 Part 3 dated on 29/03/2021

https://www.ktp.com.my/blog/hrdf-faq-part3-/29march202?rq=hrdf

5. 今天是最后一天登记 HRDF! dated on 30/03/2021

https://www.ktp.com.my/blog/hrdf-register/30march2021?rq=hrdf

6. 3 minutes video on how to register HRDF dated on 01/04/2021

https://www.ktp.com.my/blog/hrdf-registeration-video/01april2021?rq=hrdf

7. Extension of HRDF registration dated on 06/04/2021

https://www.ktp.com.my/blog/hrdf-registeration-extension/06april2021?rq=hrdf

8. Tax matters under Pemerkasa... dated on 01/06/2021

https://www.ktp.com.my/blog/tax-matters-pemerkasa/01june2021

9. HRDF exemption 2021 dated on 11/06/2021

https://www.ktp.com.my/blog/hrdf-exemption-2021/11june2021?rq=hrdf

10. HRDF exemption 2021 dated on 17/08/2021

https://www.ktp.com.my/blog/hrdf-exemption-2021/17aug21?rq=hrdf

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What is the difference between Investment property & PPE?

What is the difference between Investment property & PPE?
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What is the difference between Investment property & PPE?

Investment Property (IP)

Land or building (or a part of it), or both, held for the following specific purposes:

  • To earn rentals;

  • For capital appreciation; or

  • Both

Accounting for IP

IP shall be measured at fair value at each reporting date.

The IP shall use the cost model if the fair value cannot be measured reliably without undue cost or effort

Undue costs or effort means the costs and benefits from obtaining or determining the information necessary to comply with a requirement

Property, plant and equipment (PPE)

  • For use in production or supply of goods or services

  • For administrative purposes

  • It is expected to be used during more than one period.

Accounting for PPE

1.Cost model

Cost less depreciation less accumulated & impairment losses

2.Revaluation model

Revalued amount less accumulated depreciation & accumulated impairment losses.

Complication

What is the treatment of property that is partly investment and partly owner occupied?

Mixed use property shall be separated between IP and PPE.

However, the entire property shall be accounted for as PPE if the fair value of the IP component cannot be measured reliably without undue costs or effort.

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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

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

KTP Lifestyle

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Notify change of financial year end LHDN

Notify change of financial year end LHDN
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Notify change of financial year end LHDN

Public Ruling 6/2021

Public Ruling 6/2021(PR6/2021): Notification of change in accounting period of a company, trust body, co-operative society issued on 29th December 2021, to replaces PR8/2019 on the same subject to reflect current legislation. There are no significant changes in the new PR.

The objective of this PR is to explain the requirement to notify the IRBM on change of accounting period by entity who liable to make payment on tax estimation.

Key takeaways:

You will understand: -

1. How to notify IRBM?

2. When to notify Inland Revenue Board (IRBM)?

3. What are the consequences of failure to notify IRBM?

Summary of learnings:

1. How to notify?

The IRBM has to be notified via Form CP204B.

2. When to notify IRBM?

It depends on whether the new accounting period is less than or more than the original accounting period:

i. the new accounting period is shortened

The IRBM has to be notified no later than 30 days before the end of the new accounting period.

Illustration A:

Original accounting period: 01.01.2021 – 31.12.2021

New accounting period: 01.01.2021 – 30.06.2021 (Shortened)

Notify IRBM: 30 days before 30.06.2021

ii. the new accounting period is extended

The IRBM has to be notified no later than 30 days before the end of the original accounting period.

Illustration B

Original accounting period: 01.01.2021 – 31.12.2021

New accounting period: 01.01.2021 – 30.06.2022 (Extended)

Notify IRBM: 30 days before 31.12.2021

3. What are the consequences of failure to notify IRBM?

The company fails to furnish the Form CP204B within the prescribed period, the following penalty will be imposed by the IRBM:

i. Subsection 107C (9): 10% increase when taxpayer’s failure to make the instalment payments

ii. Subsection 107C (10): 10% increase in respect of underestimation of tax payable (30% difference from actual tax payable).

iii. Subsection 112(3): Imposing penalty on estimated assessment raised under Section 90(3); and

iv. Paragraph 102(1)(i): Initiate prosecution action in respect of failure to notify the IRBM on change of accounting period.

Source:

Public Ruling: 6/2021 Notification of change of accounting period by a company / limited liability / partnership/ trust body/ co-operative society

https://phl.hasil.gov.my/pdf/pdfam/PR_06_2021.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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Deferment of CP204 Payment 2022

Deferment of CP204 Payment 2022
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Deferment of CP204 Payment 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).

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)

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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KTP (Audit, Tax, Advisory)

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

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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Foreign source income taxable in Malaysia 2022

Foreign source income taxable in Malaysia 2022
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Foreign source income taxable in Malaysia 2022

THE government has made a surprising U-turn on Dec 30, 2021 after announcing that foreign-sourced income received in Malaysia by Malaysian tax residents will be taxed.

Current Ruling

The following foreign-sourced income received will continue to be exempted from Malaysian income tax from 1 January 2022 to 31 December 2026 (5 years)

  • Dividend income received by resident companies and limited liability partnerships will be exempted to 2026.

  • All classes of income received by resident individuals will be exempted by 2026.

Why Partnership not Exempted?

Resident partnerships which carry on business will not be exempted. But partnerships as a general rule are not taxed. It is the individual partners who are taxed.

Final Words

Let’s wait for IRB further clarification on partnership matter

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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

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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Tax Filing Deadline 2022 Malaysia

Tax Filing Deadline 2022 Malaysia
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Tax Filing Deadline 2022 Malaysia

Return Form (RF) Filing Programme For The Year 2022 is now available on the IRBM official portal as a reference for taxpayers to submit their return form this year.

Key summary of the filling schedule

  • Form E : 31/3 (manual) 30/4 (E-filing)

  • Form BE : 30/4 (manual) 15/5 (E-filing)

  • Form B : 30/6 (manual) 15/7 (E-filing)

  • Form P : 30/6 (manual) 15/7 (E-filing)

  • Form M (employee): 30/4 (manual) 15/5 (E-filing)

  • Form M (business): 30/6 (manual) 15/7 (E-filing)

Source :

IRB official statement

https://phl.hasil.gov.my/.../ProgramMemfailBN_2022_2.pdf

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KTP (Audit, Tax, Advisory)

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

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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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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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

KTP Lifestyle

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Impairment of assets due to floodings

Impairment of assets due to floodings
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Impairment of assets due to floodings

Overview of Impairment-Assets Accounting

An asset impairment arises when there is a sudden drop in the fair value of an asset below its recorded cost. The accounting for asset impairment is to write off the difference between the fair value and the recorded cost.

Flooding continues across Malaysia! Do you know how to account for impairment of assets due to flood?

Here are some tips for you.

Key takeaways:

I. What is an impairment loss

II. What is an impairment test in accounting?

III. How do you treat the impairment of assets in accounting?

IV. How do you record an impairment of an asset?

V. Is an impairment an expense?

VI. Which accounting standard is applicable for impairment of assets?

VII. Indicators of impairment

Summary of learnings:

I. What is impairment loss?

An impaired asset is an asset valued at less than book value or net carrying value. In other words, an impaired asset has a current market value that is less than the value listed on the balance sheet. To account for the loss, the company's balance sheet must be updated to reflect the asset's new diminished value.

Floods can cause damage to the appliances on your premises. including the heating, ventilation and air conditioning system, water heaters or refrigerators. As a result, we can no longer recover any value through the use or sale of damaged assets.

We will need to provide impairment when the recoverable amount of an asset is less than the book value of an asset.

II. What is an impairment test in accounting?

An impairment test is an accounting procedure carried out to find out if an asset is impaired, i.e. whether the economic benefits that the asset embodies have dropped drastically. In general, if the carrying value of an asset exceeds the sum of undiscounted expected cash flows of an asset, the asset is impaired.

III. How do you treat the impairment of assets in accounting?

If the recoverable amount of the asset is more than the carrying amount, then the impairment loss has to be reversed and it has to be treated as income in the books of accounts. The reversal of impairment loss previously recognized for a cash-generating unit has to be allocated first to the assets, then goodwill.

IV. How do you record an impairment of an asset?

The total dollar value of impairment is the difference between the asset's carrying cost and the lower market value of the item. The journal entry to record an impairment is a debit to a loss, or expense, account and a credit to the related asset.

V. Is an impairment an expense?

Impairment is a non-cash expense that is reported under the operating expenses section of the income statement.

VI. Which accounting standard is applicable for impairment of assets?

The core principle in Malaysian Private Entities Reporting Standard (MPERS) – Section 27.5 to 27.9is that an asset must not be carried in the financial statements at more than the highest amount to be recovered through its use or sale. If the carrying amount exceeds the recoverable amount, the asset is described as impaired.

VII. Indicators of impairment

What are the other indicators except for flooding? Such as:-

External factors:

- Market value declines

- Negative changes in technology, markets, economy, or laws

- Increases in market interest rates

- Carrying amounts of assets higher than market value

Internal factors:

- obsolescence or physical damage

- asset is idle, part of a restructuring or held for disposal

- economic performance if an assets worse than expected

Source:

Malaysian Private Entities Reporting Standard (MPERS) – Section 27.5 to 27.9

https://www.cas.net.my/wp-content/uploads/2013/02/MPERS-Framework.pdf

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Why auditor ask any impairment on inventory

Why auditor ask any impairment on inventory
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Why auditor ask any impairment on inventory

MPERS section 13 Inventories

When performing an inventory audit, some of the most common challenges faced by the auditor include: Damaged inventory whose value must be adjusted to reflect its actual value to the company. ... Errors in shipping and receiving of goods can lead to an incorrect end-of-year cutoff total in inventory records

How should we value inventories?

Generally, inventories are valued at cost!

However, if the net realizable value (NRV) of the inventory is less than the cost, the NRV will usually need to be reported on the balance sheet instead of the cost.

What is the cost?

Cost consists of the cost of purchase, conversion, production overheads, joint products and by-products, and other relevant cost.

What is the net realizable value (NRV)?

Net realizable value (NRV) is defined as the expected selling price minus cost of completion.

In what situation we use NRV?

It requires the valuation of inventories at the lower of its historical cost or market value, but if market value cannot be calculated, then the net realizable value of the inventory should be used.

In practice, these are the scenarios where NRV come to the picture: -

1) Oversupply

2) Obsolescence

3) Price decline

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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

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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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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How do I transfer shares of a deceased person ?

How do I transfer shares of a deceased person ?
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How do I transfer shares of a deceased person ?

Introduction

Section 109 of the Companies Act, 2016 applies if the right of shares is transmitted to a person by operation of law.

When the right of shares can be transmitted?…. The existing member is deceased or becomes bankrupt.

How to transmit?

1. Give notice to the company in writing requesting his/ her name to be registered as a shareholder together with a copy of the Death Certificate of the deceased.

2. Supported by any document

a) the will or

b) letters of administration

3. Register the (beneficiary) person as a shareholder with SSM within 60 days.

Question:

Can the company directors refuse to approve the transmission of shares to the beneficiary?

Refer to the Malaysia case law: Ng Chong Wee v Ng Chong Geng & Sons Sdn Bhd

The Court of Appeal referred to the English case of Moodie v W & J Shepherd (Bookbinders) Ltd where the House of Lords explained the distinction between transfer and transmission.

Such transmission shall not affect any power of a company to register a (beneficiary) person as a shareholder to whom the right to shares has been transmitted by operation of law.

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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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Is expenses capital or revenue?

Is expenses capital or revenue?
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Is expenses capital or revenue?

Capital expenditures are for fixed assets, which are expected to be productive assets for a long period of time.

Revenue expenditures are for costs that are related to specific revenue transactions or operating periods, such as the cost of goods sold or repairs and maintenance expense

What is Capitalized?

A capitalized item is recognized as an asset on the Balance Sheet.

Normally It has the economic future benefit, able to generate revenues and the useful life is at least one year.

What is Expensed?

The expensed item is recognized as an expense/cost of goods sold on the Income Statement.

It is the money spent and the cost incurred by a company in running a business and generating profit.

Example of Capitalized Expenses

ABC Sdn Bhd is required to construct a new building as an office. For the construction, the company pays the cost of labour at RM15,000.00 and the cost of construction material at RM 50,000.00.

The total cost of RM 65,000.00 will be capitalized because the useful life of the building is more than one year, and it has the economic future benefit and the ability to generate revenues for the company.

Example of Expense-Off Expense

ABC Sdn Bhd has constructed a new building as an office on 2 years ago. During the year, the company pays RM 10,000.00 to repair the roof of the building.

In this case, the cost of repairs being expensed. This is because the cost occurs once, and it is to fix the damage part in order the company able to use the building to run the business.

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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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  • Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

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

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

KTP Lifestyle

An internal community for our colleagues on work and leisure.

KTP Career

An external job community on vacancy in Johor Bahru for interns, graduates & experienced candidates.

#Ktp #Thks

 

 


 

THK Management Advisory Sdn Bhd

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