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Tax Budget 2023 - Others

Tax Budget 2023 - Others
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Tax Budget 2023 - Others

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim have proposed some changes to the income tax rates under the new Budget 2023.

Key summary on tax budget 2023 for Others

Capital Gain Tax

The proposal to introduce a capital gains tax (CGT) on the disposal of unlisted shares has been welcomed as a move in the right direction by economists but a tax expert has cautioned a more in-depth study is needed.

The proposal is a sign the government is kickstarting its move to impose taxes on more capital items in the future.

Tricor Malaysia chairman Veerinderjeet Singh opines the government would have in theory three mechanism options for CGT implementation.

“Either a new legislation on CGT will be introduced, or the existing legislation on real property gains tax (RPGT) will be amended to include the sale of shares of unlisted companies, or it will be added within the Income Tax Act by defining it to include certain capital gains, which can be reported annually.”

Luxury Goods Tax

A luxury tax is a tax imposed on goods that are considered expensive, unnecessary and unimportant. Such items include cars, private jets, yachts and jewellery.

Retabling the budget in the Dewan Rakyat last week, Anwar who also holds the finance portfolio said that the government had no plans to reintroduce the goods and services tax (GST).

In Norway, cars and chocolate alike are considered a luxury and subject to a luxury tax. 

Let’s see how the government come out with detailed implementation in the coming months.

Special Voluntary Disclosure Program (SVDP)

The IRB and RMCD will implement the SVDP again. Under the SVDP, a 100% penalty remission will be granted with effect from 1 June 2023 to 31 May 2024.

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Tax Budget 2023 - Indirect Tax

Tax Budget 2023 - Indirect Tax
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Tax Budget 2023 - Indirect Tax

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim have proposed some changes to the income tax rates under the new Budget 2023.

Key summary on tax budget 2023 for Indirect Tax

Extension of Exemptions on Purchase of EV

• Full import duty exemption on components for locally assembled EV

Until 31 December 2027

• Full excise duty and sales tax exemptions on locally assembled CKD EV

Until 31 December 2027

• Full import duty and excise duty exemptions on imported CBU EV Until 31 December 2025

Expansion of Excise Duty and Sales Tax Exemptions on Sale, Transfer, Private Use or Disposal of Individually Owned Taxis and Hired Cars

• Excise duty and sales tax exemptions on the sale, transfer, private use or disposal of individually owned taxis and hired cars are expanded to include taxis (budget taxis, executive taxis and TEKS1M), airport taxis (budget and family) and hired cars.

• The vehicle age condition is relaxed to at least 5 years from the date of registration.

• For applications received by the RMCD from 1 March 2023.

Imposition of Excise Duty on Gel or Liquid Products containing Nicotine

• Excise duty to be imposed on gel or liquid products containing nicotine used for electronic cigarettes and vaping.

• Effective date and applicable rate yet to be announced.

Import Duty and Sales Tax Exemptions on Nicotine Replacement Therapy

• Import duty and sales tax exemptions on nicotine gum and nicotine patch for a period of 3 years.

• For applications received by the MOF from 1 April 2023 to 31 March 2026.

Import Duty and Sales Tax Exemptions on Studio and Filming Production Equipment

• Import duty and sales tax exemptions on studio and filming production equipment to providers of studio equipment, production and post- production services for a period of 3 years.

• For applications received by the MOF from 1 April 2023 to 31 March 2026.

Extension of Import Duty Exemption for BioNexus Status Company

• Import duty exemption on raw materials/ components and machinery/equipment for BioNexus Status Company to be extended for 2 years.

• For applications received by Malaysian Bioeconomy Development Corporation from 1 January 2023 until 31 December 2024.

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Tax Budget 2023 - Corporate

Tax Budget 2023 - Corporate
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Tax Budget 2023 - Corporate

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim have proposed some changes to the income tax rates under the new Budget 2023.

Key summary on tax budget 2023 for Corporate

Reduction of SME tax rates for first RM150,000 from 17% to 15%

Income tax rate to be reduced from 17% to 15% for the first RM150,000 of chargeable income from YA 2023 for resident companies with paid- up capital of RM2.5 million and below and annual sales turnover not exceeding RM50 million.

Chargeable income of RM150,001 to RM600,000 remains to be taxed at 17%; excess shall be taxed at the prevailing rate of 24%.

Tax deduction for non-commercial Electric Vehicles (EV)

Tax deduction for company that rents non- commercial EV increase to RM300,000 for YA 2023 to YA 2025.

Tax deduction on smart artificial intelligence (AI) driven reverse vending machine

Special tax deduction for donations or sponsorships of Smart AI-Driven Reverse Vending Machine.

For contribution/sponsorship and applications received by Ministry of Finance (MOF) from 1 April 2023 until 31 December 2024.

Extension of full stamp duty exemption on the restructuring of loan/finance agreement executed from 1/1/23-31/12/24

Tax incentive for chicken rearing in closed house system

100% Accelerated capital allowance & Income Tax Exemption on qualifying capital expenditure incurred from YA 2023 until YA 2025.

Tax incentive for automation in manufacturing, service and agriculture sector

100% Accelerated capital allowance

• Scope of automation to include the adaptation of Industry 4.0 elements.

• Scope of tax incentive is expanded to include agriculture sector.

• Capital expenditure threshold to be increased up to RM10 million.

• Application extended to 31 December 2027

Extension of tax incentive on electrical and electronic

Extension of existing relocation incentives for the manufacturing sector.

Extension of tax incentive on biotechnology and food production

Existing tax exemption for BioNexus status companies is increased from 70% to 100% of statutory income and is extended to 31 December 2024.

Existing tax incentive for food production projects is extended to 31 December 2025 and expanded to include agricultural projects based on Controlled Environment Agriculture.

Extension of tax incentive on aerospace and shipbuilding

Existing income tax exemption and investment tax allowance for the aerospace industry is extended to 31 December 2025.

Existing tax incentives for the shipbuilding and ship repairing industry are extended to 31 December 2027.

Tax incentive for manufacturing of electric vehicle (EV) charging equipment

100% Income tax exemption on statutory income commencing YA 2023 to YA 2032 or 100% Investment tax allowance for a period of 5 years to set off against 100% of statutory income.

For applications received by Malaysian Investment Development Authority (MIDA) from 25 February 2023 until 31 December 2025.

Tax incentive for Carbon Capture and Storage (CCS)

Companies undertaking CCS in-house activity

• Investment tax allowance of 100% for 10 years to set-off against 100% of statutory income.

• Full import duty and sales tax exemption on equipment for CCS technology from 1 January 2023 until 31 December 2027.

• Tax deduction for allowable pre-commencement expenses within 5 years prior to the date of commencement of operation.

Companies undertaking CCS services

100% Investment tax allowance for 10 years to set-off against 100% statutory income or 70% Income tax exemption on statutory income for 10 years

• Full import duty and sales tax exemption on equipment used for CCS technology from 1 January 2023 until 31 December 2027.

• Tax deduction on fees incurred for use of CCS services for YA 2023 to YA 2027.

For applications received by MOF from 25 February 2023 until 31 December 2027.

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Tax Budget 2023 - Individual

Tax Budget 2023 - Individual
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Tax Budget 2023 - Individual

Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim have proposed some changes to the income tax rates under the new Budget 2023.

Key summary on tax budget 2023 for individual

Reduction of 2% tax rates for chargeable income between RM35,001 to RM100,000
 
Increase of 0.5% to 2% tax rates for chargeable income between RM100,000 to RM1million

Stamp duty exemption from 50% to 75% for purchase of first residential home with value above RM500,000 to RM1million
Stamp duty exemption 100% for transfer of property by way of love for first RM1 million of property value.
Stamp duty exemption 50%  for transfer of property by way of love for the remaining balance above  RM1 million of property value.

Petron Oil (M) Sdn Bhd & Anors v Ketua Pengarah Hasil Dalam Negeri

Petron Oil (M) Sdn Bhd & Anors v Ketua Pengarah Hasil Dalam Negeri
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Petron Oil (M) Sdn Bhd & Anors (Appellants) v Ketua Pengarah Hasil Dalam Negeri (IRB)

Lesson from Tax Case:

To claim the tax deduction on the finance expenses and related cost, the Company is advised to keep proper documentation on purpose of the loan amount used, list the related expenses incurred and claim the tax deduction in the year assessment incurred.

Background information

This is an appeal case made by three companies (Appellants) against the Deciding Order of the Special Commissioners of Income Tax (SCIT).

On 7.8.2013 the Appellants had submitted its tax returns (Forms C) for YA 2012 without taking a deduction for the Financing Expenses.

On 23.8.2013, the Appellants filed notices of appeal against their own assessments to claim deduction on the following expenses:

1) upfront fees

2) stamp duty charges

3) legal fees.

On 30.1.2020 SCIT via a Deciding Order dismissed the Appellants’ appeal as the finance cost incurred are not deductible under section 33(1) of the Income Tax Act 1967 (ITA).

Tax Issue:

Whether the Financing Expenses incurred for the YA 2012 by the Appellants in respect of the financing obtained are deductible under section 33(1) of the ITA.

IRB opinion:

The abovementioned expenses are not deductible under section 33 (1) of the ITA as the expenses were incurred in order to secure the granting of the facility by the financier.

The expenses are capital in nature.

The decision by The Court of Appeal

1) The nature of the Appellants businesses was dealing with the sale, marketing, distribution and refining petroleum and petroleum related products and does not deal with monitory, where finance fund used for share investment.

2) The related expenses claimed by the Appellants were incurred to obtain the loan.

3) That the expenses claimed were capital in nature and thus not deductible under section 39(1)(c) of the ITA.

4) To be eligible for deduction under section 33(1) of the ITA, an expense must fulfil “wholly and exclusively incurred in the production of gross income”.

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What Do You Mean by LLP?

What Do You Mean by LLP?
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What Do You Mean by LLP?

Limited Liability Partnership (LLP) is simply a combination of the feature if a partnership and a limited liability company.

Advantages of LLP company:

a) Limited Liability. Under LLP, the partners are only liable for the amount invested in the company (capital) if the company suffers a loss.

b) Separate Legal Entity. It is a separate legal entity like a company, thus this means a LLP can own property, enter into contracts and conduct business in its own name.

c) Flexible Management. LLP is considered to have a flexible management style where the partners could manage the business by themselves or appoint a manager to operate the business on behalf of them. This allows partner to focus on their areas of expertise.

d) Need Not Be Audited. For a LLP company, there is no need to lodge the audited financial statements under normal circumstances. This help the LLP company to save costs.

e) Continuity. The company can still continue to exist and operate even if one or more partners leave the company or die.

Circumstances LLP is Suitable

a) Professional Services. LLP is suitable for professional services provider like accountants, lawyers, consultants and etc. This is because they could benefit from the flexible management feature of the LLP that allows them to focus their own areas of expertise

b) SME. LLP is suitable for SME company because this type of business entity would normally prefer to have limited liability protection for its partners. Especially in the early stage of start-up when the company has very limited resources to repay any potential losses.

Reference

Limited Liability Partnership Act 2012

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Can my Sdn Bhd appoint more than one (1) company secretary ?

Can my Sdn Bhd appoint more than one (1) company secretary ?
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Can my Sdn Bhd appoint more than one (1) company secretary ?

Recently we encountered a question raised by Company Director asking whether Sdn Bhd can appoint more than 1 secretary for the company.

Section 235(1) of the Companies Act (CA) 2016 states that a company shall have at least 1 secretary. This means there is no prohibition to appoint more than 1 person to act as secretary for the company.

CA only prohibition this person to act in dual capital (ie as secretary and at the same time as a director) under Section 242 of CA2016 to avoid authorisation by the same person.

Additionally, the company cannot simply appoint anyone to act as the secretary.

There are requirements to be fulfilled before the appointment and the requirements are listed below:

I) Basic

a) a natural person;

b) age 18 years old and above; and

c) citizen or permanent resident of Malaysia who resident and having a principal address of residence in Malaysia

II) Qualification/ Professional requirement

a) a member of a body listed in the Fourth Schedule of CA2016; or

b) a person licensed under Section 20G of the Companies Commission of Malaysia Act 2001.

Who is responsible to appoint a company secretary?

Company Directors may not have a full understanding of the technical knowledge in compliance according to the act. Hence, he requires the assistance of a qualified person to attend to compliance matters.

Therefore, the secretary holds an official role in the company and is also an officer under Section 2 of the CA 2016.

This means the secretary is binding to the company. He/ she is required to play his/ her role as administrator to maintain the registered record with the Registrar of Company according to the act.

When to appoint a company secretary?

Within 30 days from the date of incorporation with written consent from the Company Secretary as stated in Section 236(2)&(3) of CA2016.

The appointment of a subsequent company secretary is made by the Board of Directors depending on the terms and conditions of such appointment.

Generally, Sdn Bhd may choose to have more than 1 company secretary.

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Form E & EA FAQ

Form E & EA FAQ
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Form E 101

Form E 2022 - HR/ACCOUNT 们别错过了我们为您准备的常见 Form E 问题!

⚠️有些什么更新 ❓

⚠️又有些什么常见问题呢❓

阅读我们过去在 Facebook 上的 E/EA 表格上的分享 :

1) Tax Filing Deadline 2022 Malaysia dated on 10/01/2022

https://bit.ly/3r5k2go

2) E呈报(E Filing)Form E 终极秘籍 dated on 15/03/2021

https://bit.ly/35pjcm9

3) 温馨提示 - Form E 截至日期为31/03/2021 dated on 12/03/2021

https://bit.ly/35wKebq

4) Form EA 有什么? Dated on 22/02/2021

https://bit.ly/3g1LQMg

5) 花红几时需要报进Form EA? Dated on 16/02/2021

https://bit.ly/349JSGZ

6) 公司给员工红包可不可以扣税? Dated on 10/02/2021

https://bit.ly/3KPMI4G

7) Deadline for Form E submission is approaching! dated on 09/02/2021

https://bit.ly/3KMqsZL

8) 是时候呈报𝐅𝐨𝐫𝐦 𝐄了,让我们为您复习一遍!dated on 28/01/2021 各位雇主与员工请注意!!!

https://bit.ly/3u4aSCz

9) 你知不知道 ... IRB不再打印+发E表格(Form E) 给雇主! Dated on 25/01/2021

https://bit.ly/349K4pH

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Update of withholding tax

Update of withholding tax
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Key Update of Withholding Tax for past 5 years

Summary of update in withholding tax for the past five (5) years

1. Tax Update on Withholding Tax dated 07.11.2022

https://www.ktp.com.my/.../tax-update-on.../07nov22

2. Small Value Withholding Tax Payment (update) dated 07.10.2022

https://www.ktp.com.my/.../small-value.../07oct22

3. Small Value Withholding Tax Payment dated 19.08.2022

https://www.ktp.com.my/.../small-value.../19aug22

4. (Update) 2% Withholding Tax on Commission to Agents dated on 12.07.2022

https://www.ktp.com.my/.../2percent-withholding.../12july22

5. (Latest update) Withholding Tax on Payments to Agents dated 21.04.2022

https://www.ktp.com.my/.../2percent-withholding.../21apr22

6. Withholding Tax on Payments to Agents dated 17.03.2022

https://www.ktp.com.my/.../2percent-withholding.../17mar22

7. Top 5 Withholding Tax Questions dated 28.01.2022

https://www.ktp.com.my/.../top-5-withholding-tax.../28jan22

8. 2% withholding tax on commission dated 30.12.2021

https://www.ktp.com.my/.../2-withholding-tax-on.../30dec21

9. (English Version) Do you know how to reduce withholding tax with the certificate of residence (COR)? Dated 23.11.2021

https://www.ktp.com.my/.../certificate-of.../22nov21

(Chinese Version) 您知道如何使用居住证 (COR) 减少预扣税吗?dated 23.11.2021

https://www.ktp.com.my/.../certificate-of.../22nov21

10. (English Version) Budget 2022 – SME edition dated 18.11.2021

https://www.ktp.com.my/.../tax-budget-2022-sme.../18nov21

(Chinese Version) 2022 年预算摘要 - 中小企业版dated 19.11.2021

https://www.ktp.com.my/.../tax-budget-2022-sme.../19nov21

11. 两个重要改变 - 预扣税(withholding tax)dated 11.11.2021

https://www.ktp.com.my/blog/withholding-tax-malaysia/11nov21

12. Purpose and usage of certificate of residence under withholding tax in Malaysia dated 23.04.2021

https://www.ktp.com.my/.../certificate-of.../23april2021

13. 马来西亚预扣税 (𝐖𝐢𝐭𝐡𝐡𝐨𝐥𝐝𝐢𝐧𝐠 𝐭𝐚𝐱)的规则概述(第3篇) dated 21.09.2020

https://www.ktp.com.my/.../fwwses3ezyrg9gf-7r8xl-aaa5d...

14. 马来西亚预扣税 (𝐖𝐢𝐭𝐡𝐡𝐨𝐥𝐝𝐢𝐧𝐠 𝐭𝐚𝐱)的规则概述(第2️⃣篇) dated 21.09.2020

https://www.ktp.com.my/.../fwwses3ezyrg9gf-7r8xl-aaa5d...

15. 马来西亚预扣税(withholding tax)的规则概述 (第1️⃣篇) dated 21.09.2020

https://www.ktp.com.my/.../fwwses3ezyrg9gf-7r8xl-aaa5d...

16. Withholding Tax In Malaysia Part 2 of 2 dated 28.06.2019 (eKTP 114)

https://www.ktp.com.my/.../withholding-tax-in-malaysia...

17. Withholding Tax In Malaysia Part 1 of 2 dated 28.06.2019 (eKTP 113)

https://www.ktp.com.my/.../withholding-tax-in-malaysia...

18. Withholding Tax Part 3 of 3 dated 13.10.2017 (eKTP 45)

https://www.ktp.com.my/blog/withholding-tax-part-3-of-3

19. Withholding Tax Part 2 of 3 dated 06.10.2017 (eKTP 44)

https://www.ktp.com.my/blog/withholding-tax-part-2-of-3

20. Withholding Tax Part 1 of 3 dated 28.09.2017 (eKTP 43)

https://www.ktp.com.my/blog/withholding-tax-part-1-of-3

Authored by Mqteo, audit and tax associates of the Firm.

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Common mistakes in Form EA : Benefits-In-Kinds (BIK)

Common mistakes in Form EA : Benefits-In-Kinds (BIK)
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Common mistakes in Form EA : Benefits-In-Kinds (BIK)

Overview

Must living accommodation provided by Company be declared under Form E and Form EA? How’s the declaration affect the tax of the director or employee?

Besides, what is the determination of the value of the living accommodation(VOLA) for employees and directors?

Let’s have a quick look below for more information on the benefit of living accommodation.

Key takeaways:

You will understand:

1. What consider the benefit of living accommodation?

2. What is the tax treatment for living accommodations?

3. How many categories of the value of living accommodation?

4. How to determine the value of the living accommodation?

5. Can the value of living accommodation be adjusted if provided for less than 12 months in a basis period?

6. What kind of expenses paid by employees allow them to set off the value of living accommodation provided by the employer?

Summary of learning

1. What consider the benefit of living accommodation?

- Living accommodation provided by the employer to its employee. This also includes if the benefit is provided to the employee’s spouse, family, servants, dependants or guests.

- This benefit is a benefit-in-kind and is not convertible into money.

2. What is the tax treatment for living accommodations?

- The benefit is taxable together with the employment gross income employment.

- Gross income from employment includes wages, salary, remuneration, leave pay, fee, commission, bonus, gratuity, perquisite or allowance (whether in money or otherwise) in respect of having or exercising the employment.

3. How many categories of the value of living accommodation?

- 3 categories of the employees/director received the benefit: -

a) Category 1 – For employees (private sector) or service director

b) Category 2 – For the director (not service director) of a controlled company

c) Category 3 – For the employee/service director/officer of the Government/Statutory Bodies.

4. How to determine the value of the living accommodation?

- Category 1 (For employees (private sector) or service director)

a) Defined value of the living accommodation (eg. rental of the living accommodation); or

b) 30% of the gross income from employment

Whichever is the less

- Category 2 (For the director (not service director) of a controlled company)

a) The defined value of the living accommodation

- Category 3 (For the employee/service director/officer of the Government/Statutory Bodies)

 For employees and directors except for a director (not a service director) of a controlled company

a) 3% of the gross income from employment

5. Can the value of living accommodation be adjusted if provided for less than 12 months in a basis period?

a) The value of the living accommodation should be reduced appropriately.

b) The basis of reduction can be based on the period of accommodation provided instead of the actual period of occupation.

6. What kind of expenses paid by employees allow them to set off the value of living accommodation provided by the employer?

a) Rent

b) Any public rates or insurance premiums

c) Expenses on repair or maintenance of premises.

Source

Public Ruling No. 3/2005 Living Accommodation Benefit Provided For The Employee By The Employer

https://phl.hasil.gov.my/pdf/pdfam/addendum_pr_3_2005.pdf

 

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A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

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Common mistakes on Form CP21

Common mistakes on Form CP21
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Why IRB return my Form CP21?

Types of the common mistakes

1. Failure to use the prescribed form issued by IRBM

• Missing pages from the submitted form.

• Not comply with the printing specification as follow:

i. Plain white A4

- (210mm x 297mm) / 80gsm (minimum)

ii. Printing format

- Portrait, using laser printing,

- in one page (one-sided)

iii. Printing colour

- Black/ pure black/ monochrome

2. Incomplete information

• Incomplete employer information

• Failure to provide the basic employee information

• Failure to submit a copy of the employee IC/passport (if information submitted previously has changed)

• Failure to provide information in the ‘Particulars of Remuneration’ / ‘Monthly Remuneration Information’ Section.

• No complete date in the Form, such as:

i. Date of commencement of employment

ii. Date of resignation/retirement death

iii. Expected date to leave Malaysia

3. Mistakes under the Declaration section

• Incorrect or incomplete information:

- Name, Identification / Passport Number and Designation

• No signature or signature not using black ink pen.

• The use of signature stamps and digital signatures is not permitted.

• The Form is not signed by the empowered person.

4. Form submitted using an unauthorised method

• The form cannot be submitted via email or fax.

What are the consequences of an incomplete form?

i. The incomplete form will not be processed by Inland Revenue Board Malaysia (IRBM).

ii. Penalty will be imposed under Paragraph 120(1) of the Income Tax Act 1967 as a result of delay or failure to submit the form:

• A fine of not less than RM200 or not more than RM20,000;

• An imprisonment not exceeding six months; or

• Both.

How to fill in and submit the form?

To fill in the relevant fields using:

• Black ink pen and in block letters; or

• Typed using a computer and printed it on the Form.

To submit Form CP21, CP22A and CP22B:

• Through the e-SPC application.

• To the IRBM Branch that handles the employee income tax file.

• To the nearest IRBM office.

To submit Form CP22:

• To the IRBM Branch that handles the employer tax file.

• To the nearest IRBM office.

Source:

Criteria on Incomplete Form CP21, CP22, CP22A and CP22B Which is Unacceptable | Lembaga Hasil Dalam Negeri Malaysia

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public ruling compensation for loss of employment

public ruling compensation for loss of employment
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Tax Treatment on Compensation for Loss of Employment

Overview

Many economists and financial experts predict the global recession to start in 2023. The global recession has led the organisation to cut costs by laying off employees. Those employees will receive money either in the form of compensation for loss of employment or gratuity.

Do you know whether the incomes received by the employees from loss of employment are taxable or exempted in Malaysia?

Key takeaways:

You will understand:

1. What is included in compensation for loss of employment?

2. What is the difference between compensation and gratuity?

3. What are the tax treatments?

4. Circumstances not subject to tax exemption.

Summary of learning

1. What is included in compensation for loss of employment?

According to Paragraph 13(1)(e) of Income Tax Act 1967, it includes:

a) Salary or wages in lieu of notice;

b) Compensation for breach of a contract of service;

c) Payments to obtain release from a contingent liability (employer’s obligation) under a contract of service;

d) Ex-gratia or contractual payments such as redundancy payments, severance pay, etc. made to employees who have become redundant for reasons beyond their control;

e) A payment in consideration of a covenant, arrangement or similar agreement restricting the activities of an employee in respect of engaging in an employment of a similar kind after termination of his employment.

f) Voluntary Separation Scheme (VSS) or Mutual Separation Scheme

2. What is the difference between compensation and gratuity?

It is important to differentiate whether the payment made to an employee is compensation or gratuity, as there will have different tax treatment.

a) Compensation for loss of employment

- Compensation is a payment given to the employees when they are laid off before the end of the service contract.

b) Gratuity

- Gratuity is a payment given to the employees when they resign or retire after serving for a long period of time. It is a lump sum amount that is presented to recognise an employee’s past services.

3. What are the tax treatments?

The compensation for loss of employment received by an employee is given a full or partial exemption as follows:

a) Full Exemption

A full exemption will be given if the reason for loss of employment is due to ill health.

Criteria: The health condition of the employee is required to be certified in writing by a Medical Board.

b) Partial Exemption

An exemption of RM10,000 is given for each completed year of service.

Criteria: The employee must work with the same employer or companies within the same group during the period.

4. Circumstances Not Subject to Tax Exemption

a) Reemployment implied under separation schemes:

If the separation scheme offers the employees reemployment with the same employer or any other employer, the compensation under the scheme does not qualify for an exemption.

b) Compensation for loss of employment for non-service director:

Non-service director is a director employed in the service of the Company that owns more than 5% of the ordinary shares of the Company.

Payments made by controlled companies to non-service director is not eligible for any tax exemption.

Source:

Public Ruling No. 1/2012 – Compensation for loss of employment

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Difference Between Tax Capital Allowance and Accounting Depreciation

Difference Between Tax Capital Allowance and Accounting Depreciation
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3 Key Difference Between Tax Capital Allowance and Accounting Depreciation


1. New Asset Yet in Use
MPERS S17: Depreciation of an asset begins when available for use. The asset must be in use.

2. Assets Acquired from Related Party
Account point of view: Cost is depreciated over the asset’s useful life. Tax point of view: Only remaining residual expenditure qualifies.

3. Company Assets Used by Related Party
According to Public Ruling No. 5/2014, assets not for business purpose is not entitled to claim capital allowance.

References
1. Public Ruling No. 5/2014
2. MPERS 17 – Property, Plant and Equipment
3. Income Tax Act 1967

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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, Bookkeeping, Payroll, Advisory)

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Keyman Insurance Tax Deduction Malaysia

Keyman Insurance Tax Deduction Malaysia
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Quiz of the day - Keyman Insurance Tax Deductible Malaysia

1. Issue

KTP Tax Consultant Sdn Bhd can claim a tax deduction on Mr. Koh Teck Peng personal insurance in KTP Tax Consultants Sdn Bhd?

What is the personal tax impact on Mr. Koh Teck Peng?

In my opinion, the personal insurance paid by the Company for Mr. Koh is not tax allowable as Mr. Koh is control director of KTP Tax Consultants Sdn Bhd.

However, Mr. Koh has to declare the total amount of premium paid in his personal income tax which is taxed under paragraph 4(b) of the ITA

2. Fact

Company Tax impact

There are a number of requirements that must be met in order to claim a tax deduction.

According to Income Tax Act 1967 Section 33(1), expenses only can be deductible if it wholly and exclusively incurred in the generate of income is allowable as a tax deduction.

Refer to Paragraph 4 of Public Ruling No.2/2003 – Key Man Insurance, if the insurance meets the following two requirements, the premium payable on a term life policy or an accident policy which is no return after expiration policy is allowable as a deduction against gross income from a business:-

• The insurance has no element of investment

• beneficial of the insurance must remain with the employer or company not the “key-person” or his family

However, a whole life policy and endowment policy is deemed to have element of investment due to both of these policies have cash value that are redeemable.

Therefore, these two policies would be regarded as a capital asset of a Company and thus the premium paid on these policies would not be allowed for tax deduction under paragraph 5.

Connected person

Addition, if the premium paid for director insurance on life of that person who owns share in the company is not allow to claim tax deduction in controlled company. It is also not permitted to deduct the premium for a ''key-man'' insurance coverage on the life of a business partner or sole proprietor under paragraph 7.

Personal Tax Impact

Refer to paragraph 6.8 Insurance premiums - Public Ruling No.5/2019 – Perquisites From Employment

The amount of the annual premium paid by the Company on behalf of the employee (including his family, his nominee) is a perquisite to the employee and shall reported in employee Form EA.

By reporting in the Form EA in employee, this would results in the amount of annual insurance premium become taxable income for the employee.

3. Reference

  • Public Ruling No: 2/2003 “Key-man” Insurance

    https://phl.hasil.gov.my/pdf/pdfam/PR2_2003.pdf

  • INCOME TAX ACT 1967 - Section 33(1) Adjusted income generally

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

  • INCOME TAX ACT 1967 - Section 139 Controlled companies

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

  • Public Ruling No.5/2019 – Perquisites From Employment

    https://phl.hasil.gov.my/pdf/pdfam/PR_05_2019_2.pdf

Authored by Ms Lee Liu Shi, audit & tax associates, in her personal LinkedIn post.

DIRECTOR GENERAL OF INLAND REVENUE vs KAYUSAR SDN BHD

DIRECTOR GENERAL OF INLAND REVENUE vs KAYUSAR SDN BHD
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DIRECTOR GENERAL OF INLAND REVENUE vs KAYUSAR SDN BHD

Lesson from Tax Case:

Director General of Inland Revenue (DGIR) had the authority to charge the gain from disposal based on the market value if the taxpayer selling the property at equal to the purchase price to a connected person.

Background information

Kayusar Sdn Bhd is a reputable timber company.

The Company entered into a sale and purchase agreement by selling a condominium unit at RM398,000.00 which was equal to the purchase price.

Tax Issue:

Does transfer of ownership of property between connected persons stated under Para 23 Schedule 2 RPGTA required to be arm’s length price?

IRB opinion:

a) Section 25(2) of RPGT Act 1976 empowers DGIR to disregard and/or vary the transaction as the transaction has a direct effect on the chargeability of the tax.

b) DGIR charged the gain from the disposal of the condominium to the RPGT based on the market value determined by the Jabatan Penilaian dan Perkhidmatan Harta (JPPH).

The decision by The Court of Appeal

a) The Court of Appeal consistently found the Special Commission of Income Tax (SCIT) and High Court did not commit any error of law in their decision.

b) The responsibility was on the Company to prove that the market value determined by JPPH was inaccurate. However, the Company has failed to prove it.

c) The Company failed to discharge its obligation under its own name on 15 May 2014.

Therefore, the Company appeal is terminated with cost.

Source:

https://www.hasil.gov.my/media/rofh2uyb/20220427-revenews-kayusar.pdf

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What are 5 responsibilities of the director under SSM?

What are 5 responsibilities of the director under SSM?
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What are 5 responsibilities of the director under SSM?

1) Lodgement of Annual Return (AR)

Section 68(1) of Companies Act, 2016 require a company to lodge the AR to SSM not later than 30 days from the anniversary of its incorporation date.

Penalty: Fine not exceeding RM50,000.00

2) Prepare Financial Statements

Section 248(1) of Companies Act, 2016 require a company to prepare the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM500,000.00 or imprisonment not exceeding 1 year or both

3) Circulation of Financial Statements

Section 258(1) of Companies Act, 2016 require a company to circulate the financial statements within 6 months of its financial year end.

Penalty: Fine not exceeding RM50,000.00

4) Lodgement of Financial Statements

Section 259 (1) of Companies Act, 2016 require a company Lodge the financial statement to SSM within 30 days from the circulation date.

Penalty: Fine not exceeding RM50,000.00 and if continuing offence, a further fine not exceeding RM1,000 for each day

5) Late Lodgement Fee

SSM issued a Practice Directive No.1/2017 – The Lodgement Requirements and Related Matter that further details out the penalty for late lodgement of documents.

For any documents that is lodged to SSM later than the prescribed timeframe as per stipulated in the Act, the following late lodgment penalty shall apply:

After deadline Penalty(RM)

* 7 days to 3 months RM50
* 4 months to 6 months RM100
* 7 months to 12 months RM150
* 13 months onward RM200

The Company is required to pay this penalty amount on the spot at the time filing for the documents to SSM.

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MSC Malaysia - Tax Benefits

MSC Malaysia - Tax Benefits
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MSC Malaysia - Tax Benefits

Background

Since its introduction in 1996, MSC Malaysia has catalysed and transformed Malaysia into a knowledge-based economy. The strategic initiative was created to foster a conducive ecosystem driven by high-end infrastructure development and ICT companies’ catchment within the identified corridors.

MSC Malaysia, driven by the Malaysia Digital Economy Corporation (MDEC) as

the nation’s lead digital economy agency, has contributed immensely towards the growth of the nation’s digital economy.

Since 1996 Malaysia has attracted 2,794 active MSC-status companies.

What is Multimedia Super Corridor Status?

In 1996, Malaysia launched the Multimedia Super Corridor (''MSC'') initiative, aimed to promote and boost Malaysia's digital economy by offering a range of incentives, including tax exemptions to companies who are eligible to attain MSC status.

MSC Tax Benefits

Overall incentive

  • 100% pioneer status exemption of statutory income (Tier 1 & Tier 2)

  • 5 + 5 years (if extension approved) (Tier 1 & Tier 2)

  • 70% pioneer status exemption of statutory income (Tier 3)

  • 5 + 5 years (if extension approved) (Tier 3)

Category of Tier

  • Tier 1 = Designated premises within MSC Malaysia Cybercities or Cybercentres

  • Tier 2 = Other commercial premises within MSC Malaysia Cybercities or Cybercentres

  • Tier 3 = Not applicable

Other incentives

  • 100% Investment Tax Allowance on new investments from the date on which the first qualifying capital expenditure.

  • Eligible for R&D grants.

  • Freedom to source capital globally.

  • Freedom of ownership by exempting companies from local ownership requirements.

  • Unrestricted employment of foreign knowledge workers

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MSC Malaysia - Promoted Activities

MSC Malaysia - Promoted Activities
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MSC Malaysia - Promoted Activities

Background

Since its introduction in 1996, MSC Malaysia has catalysed and transformed Malaysia into a knowledge-based economy. The strategic initiative was created to foster a conducive ecosystem driven by high-end infrastructure development and ICT companies’ catchment within the identified corridors.

MSC Malaysia, driven by the Malaysia Digital Economy Corporation (MDEC) as

the nation’s lead digital economy agency, has contributed immensely towards the growth of the nation’s digital economy.

Since 1996 Malaysia has attracted 2,794 active MSC-status companies.

What is Multimedia Super Corridor Status?

In 1996, Malaysia launched the Multimedia Super Corridor (''MSC'') initiative, aimed to promote and boost Malaysia's digital economy by offering a range of incentives, including tax exemptions to companies who are eligible to attain MSC status.

MSC Promoted Activities

PU(A) 389 2018 which comes into operation on 1 January 2019, the following activities are promoted activities for income tax exemption purpose under the MSC tax incentives.

  • Big data analytics

  • Artificial intelligence (AI)

  • Financial technology (FinTech)

  • Internet of things (IOT)

  • Cybersecurity

  • Data centre and cloud

  • Blockchain

  • Creative media technology

  • Sharing economy platform

  • User interface and user experience (UI/UX)

  • Integrated circuit (IC) design and software

  • 3D printing

  • Robotics

  • Autonomous

  • Systems/network architecture design and support

  • Global business services or knowledge process outsourcing

Additional new actitivities under Malaysia Digital

  • Virtual, augmented or extended reality

  • Drone technology

  • Advance telecommunication technology

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10% Sales Tax on Low Value Goods

10% Sales Tax on Low Value Goods
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Sales Tax Low Value Goods

Background

The 10% sales tax on low-value goods (LVG) will be in effect from April 1, according to the Royal Malaysian Customs Department.

Goods imported from overseas that are priced under RM500 will be subject to the tax.

RMCD Announcement

According to a statement on RMCD website, LVG sellers are responsible for acquiring ‘Registered Seller’ (RS) status with the Customs Department.

Registration will be required for both Malaysian citizens and foreigners who deal in low-value goods brought into the country via land, sea or air, and exceeds RM500,000 in total sales value within 12 months.

Key Summary :

1. RMCD Announcement on LVG (Low Value Goods) 1/2023

The Royal Malaysian Customs Department (RMCD) has issued an Announcement on LVG (Low Value Goods) 1/2023 (Announcement) dated 6 January 2023.

The Announcement states the following: -

a. The legislation related to sales tax on LVG have come into force on 1 January 2023.

b. The effective date for charging and levying sales tax on LVG will be from 1 April 2023.

c. In accordance with the legislations related to sales tax on LVG:-

i) any person whether in Malaysia or a foreigner;

ii) who sell LVG;

iii) brought into Malaysia by land, sea or air mode; and

vi) the total sales value of LVG into Malaysia exceeds RM500,000 within 12 months,

is responsible for being registered as a Registered Seller (RS).

d. Applicants can start applying to be registered from 1 January 2023.

e. More information regarding registration can be accessed via https://lvg.customs.gov.my

f. Any queries or feedback regarding Sales Tax on LVG can be emailed to mylvg@customs.gov.my

PS : Online shoppers should note that the tax will apply only to the actual value of the goods regardless of shipping fees.

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MSC Tax Incentive : Eligibility Criteria

MSC Tax Incentive : Eligibility Criteria
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MSC Malaysia

Background

Since its introduction in 1996, MSC Malaysia has catalysed and transformed Malaysia into a knowledge-based economy. The strategic initiative was created to foster a conducive ecosystem driven by high-end infrastructure development and ICT companies’ catchment within the identified corridors.

MSC Malaysia, driven by the Malaysia Digital Economy Corporation (MDEC) as

the nation’s lead digital economy agency, has contributed immensely towards the growth of the nation’s digital economy.

Since 1996 Malaysia has attracted 2,794 active MSC-status companies.

What is Multimedia Super Corridor Status?

In 1996, Malaysia launched the Multimedia Super Corridor (''MSC'') initiative, aimed to promote and boost Malaysia's digital economy by offering a range of incentives, including tax exemptions to companies who are eligible to attain MSC status.

Stay tune for more MSC in coming days.

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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, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients

KTP Lifestyle

An internal community for our colleagues on work and leisure.

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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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