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What is the royalty based method of intangible assets valuation?

What is the royalty based method of intangible assets valuation?
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What is the royalty based method of intangible assets valuation?

The relief from royalty (RFR) approach is based on the idea that the fair value of an intangible asset equals the present value of the cost savings realized by the owner of the asset that results from not having to pay royalties for the use of the intangible asset to another party.

Relief from royalty method under income approach on trade names, brands and technology assets.

There is various legislation governing IP rights available in Malaysia from the Patents Act, Industrial Design Act, Trade Mark Act & Copyright Act

In short, the RFR is based on the measurement of the license payments, from a market database, which has been saved as a consequence of having ownership of the assets.

Six steps on relief from royalty methods

Step 1: Set the preliminary


1.1 Purpose of valuation
1.2 Standard or basis of value (market vs investment vs liquidation value)
1.3 Premise of value

Step 2: Understand the subject intangible assets

Step 3: Estimate economic benefits (revenue projection)

Step 4: Estimate hypothetical royalty rate

4.1 25% on gross margin, profit margin, EBIT, OPM, EBITDA

The “25 percent rule” is a general rule of thumb that suggests, as a starting point in a negotiation, that a licensee would pay 25 percent of its expected profits as a royalty for products that incorporate the licensed intellectual property (IP)


4.2 Industry royalty rate: RoyaltySource

RoyaltySource has been tracking intellectual property news and licenses related to technology (patent, know-how, trade secret, and business method), software, trademark, trade name, brand or logo, copyright and right of publicity for 30 years..

https://www.royaltysource.com


4.3 Company disclosures: Audited financial statement, paid subscription (Bloomberg, S&P Capital IQ), Free (Yahoo Finance, Bursa, Malaysiastock.biz)

4.4 Transactional approach

Step 5: Estimate discount rate


5.1 Weighted average cost of capital (WACC)
5.2 Cost of equity = R (risk free) + beta {R(market)-R(risk free)}

Step 6 : Calculation (to be continued)

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Will you slap your auditor just like Will Smith in Oscar 2022

Will you slap your auditor just like Will Smith in Oscar 2022
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Will you slap your auditor just like Will Smith in Oscar 2022

Are auditors happy?

Auditors are one of the least happy careers in the United States. At CareerExplorer, we conduct an ongoing survey with millions of people and ask them how satisfied they are with their careers. As it turns out, auditors rate their career happiness 2.5 out of 5 stars which puts them in the bottom 4% of careers.

How stressful is auditing?

Auditing is considered a stressful occupation because the job is often characterized by heavy workloads, many deadlines, and time pressures.

Is auditing exciting?

Although auditing is sometimes jokingly described as a not-so-exciting career involving a lot of long hours, the truth is that it offers both variety and opportunities for continued development.

What is busy season for auditors?

When is busy season? In the audit practice, this period of time occurs every year from March to July, but that timeline can depend on when your client's fiscal year-end is and whether they are a public or private company.

How do you survive a busy season (a per AICPA)?

  1. Early on

  2. Send up a flare. Remind family, friends, and the rest of your circle about what's going on in your work life. ...

  3. Pass the torch. Let someone else be the social chair. ...

  4. Holster that phone. ...

  5. Make sure you're reachable. ...

  6. Make time to recharge. ...

  7. Eat in. ...

  8. Prepare for letdown. ...

  9. Bank some sanity.

When is busy season end?

Regardless of what field of accounting you are in, busy season usually falls in the third quarter of the year. The reason for this is that most companies traditionally have a December 31st year end.

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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

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.

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Can a company loan to its director?

Can a company loan to its director?
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Can a company loan to its director?

With the entire globe weathering COVID-19, directors may encounter hardship in obtaining a personal loan from the approved financial institution. The option to get a loan from a financial institution is always available in the market; however, the requirement and fulfilment to obtain the loan is getting difficult compared to the old times. Is there any alternative option available for directors? Can directors take a loan from the company?

General ruling on loan to directors

A company’s constitution may give the power to its board of directors to lend money; however, Section 224(1) of Companies Act (CA) 2016 generally prohibits a company from:

a) giving loans; or

b) securities for loans

to its directors and related companies as defined under Section 7 of CA2016.

Exceptions

However, there are circumstances that allow for a company to give loans or provide any security for loans to directors as accordance with Section 224 (2) with the below criteria:

1. foreign company;

2. exempt private company;

3. loan to the director whereby enable him to meet the expenses incurred for the purposes of the company or to ease him to perform his duties as an officer;

4. provide funds to the director (full-time employment with the company or its holding company) to meet his expenditure incurred in purchasing a house; and

5. loan to the director (full-time employment with the company or its holding company) by passing a resolution to approve the loan schemes by the members at the general meeting.

Section 224(3) of CA 2016 clearly stated that a company shall not authorise the making of any loan or securities for loans to the director unless obtained prior approval from the company on the resolution to disclose the purpose and the amount of the loan.

Last minutes remedy

What if the company authorised the loan without prior approval on the resolution? Any other remedies for this?

Yes, the company may authorise the making of loans or securities for loans to the director:

1. at or before the next following Annual General Meeting for a public company;

or

2. within six months from the making of the loan or securities for the loan to the director for a private company.

Contravention

What are the consequences of contravention of this section?

The company shall recover the loan and discharge the securities given in contravenes with this section.

Reference is made to a legal case Harta Empat Sdn Bhd v Koperasi Rakyat Bhd [1997] where the Court of Appeal decision that security created pursuant to a loan that contradicts with this Section was deemed invalid.

Referring to the Section 224(6), the directors will be jointly and severally liable to indemnify against any loss incurred. Upon conviction, a penalty will be imposed and be subject to imprisonment for a term not exceeding 5 years or a fine not exceeding RM3million or both according to Section 224(10) of CA2016.

Conclusion

In conclusion, it is clear that Section 224 of the Companies Act 2016 prohibits loans or providing securities to its directors unless there is a resolution approving such loan passed by its members. This section protects the company, its shareholder, and creditors as a precaution against any unlawful dilution of the company’s assets to the hands of directors or their related parties.

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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)

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

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Form E 2021 top 10 questions

Form E 2021 top 10 questions
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Top 10 FAQ on Form E 2021

1. What is Form EA?

Form EA is a yearly statement of remuneration for the employees.

 

2. Who is employee?

The employee has included full time, part time, contract employees and interns.

 

3. Does the employee include the foreign employees?

Yes, companies need to prepare Form EA for foreign employees.

 

4. Does the company required to prepare Form EA for the owner of sole proprietors and partners of a partnership?

No, the owner of sole proprietors and partners of a partnership is considered the owner of the company.

 

5. Does the company required to prepare Form EA to the director of the company?

Yes, director is treated as one of the employees of the company.

 

6. Does the company required to prepare Form EA to the partners of Limited Liability Partnership (LLP)?

Yes, partner of LLP is treated as one of the employees of the company.

 

7. How to fill in the number of children qualified for tax relief?

The number of children qualifies for tax relief is according to the monthly PCB calculation.

 

8. An employee who got married on 24 June 2021, and his wife is working, which category does the employee belong to?

The employee is in to Category 3 (Married and husband or wife is working).

 

9. Which period does the Form EA indicate the income for?

It indicates the calendar year (01/01/2021-31/12/2021) income.

 

10. What type of income need to report under Form EA?

Paragraph 13 (1) (a) – Monetary Benefits

Example: Wages, salary, remuneration, bonus, leave pay, overtime pay, commission, fee, gratuity, tip, tax allowance, perquisites, reward or allowance (whether in money or otherwise).

 

Paragraph 13 (1) (b) – Benefits in kind (Benefits not convertible into money)

Example: Motor vehicle, leave passage, driver, gardener, household servant & etc.

 

Paragraph 13 (1) (c) – Living of Accommodation (VOLA)

Example: Living accommodation provided for the employee by his employer.

 

Paragraph 13 (1) (d) – Withdrawal from unapproved pension fund

Example: Amount received by the employee from an unapproved pension or provident fund, scheme or society (employer’s portion only) as would not have been so received if his employer had not made contributions in respect of the employee to the fund, scheme or society or its trustees.

 

Paragraph 13 (1) (e) – Compensation for loss of employment

Example: Amount received by the employee by way of compensation for loss of the employment, whether before or after his employment ceases.

 

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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)

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Are gifts from employer taxable in Malaysia?

Are gifts from employer taxable in Malaysia?
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Are gifts from employer taxable in Malaysia?

Common questions on gifts from our clients?

1. Cash is given to an employee by the employer for passing the professional examination with excellent results? Taxable?

2. Wedding gifts whether, in the form of cash, jewelry or other items were given to an employee by the employer? Taxable?

3. Gift or reward from my employer during the New Year celebration? Taxable?

Overview

In a competitive business climate, a gift or reward has been proven to improve organizational values, enhance team efforts, increase customer satisfaction and motivate certain behaviors amongst members of staff.

However, do you know the tax impact of the gift or reward received?

Key takeaway

You will understand the:

• Meaning of perquisites

• Tax treatment of perquisites

What are Perquisites?

Perquisites are benefits in cash or in-kind which are convertible into money received by an employee from his/her employer or from third parties in respect of having or exercising employment.

Perquisite is a chargeable income to tax as part of the gross income from employment under paragraph 13(1)(a) of the ITA.

Tax treatment

1. In respect of having employment or exercising an employment

a) Gift

The value of the gift is chargeable to tax when it is received, can be sold, assigned, or convertible into cash, and is received in appreciation for the performance of past services.

However, there is an exemption of RM2,000 under paragraph 25C, Schedule 6 of the ITA if is for a long service award.

b) A sum of cash

Cash money is considered a perquisite if it is an appreciation for the excellent service rendered even though it is given voluntarily by the employer.

* The phrase having employment or exercising employment includes the performance or any duties by an employee.

2. Not related to having or exercising the employment

Pure gifts or testimonials received by an employee from his employer or third parties purely for personal appreciation or for specific personal reasons are not taxable.

Examples of pure gifts or testimonials include:

a) wedding gifts whether, in the form of cash, jewelry or other items were given to an employee by the employer.

b) cash is given to an employee by the employer for passing the professional examination with excellent results.

c) cash, other items and certificate of appreciation given to an employee for his/her extraordinary achievement.

Source:

Perquisites from Employment (PR 5/2019)

http://lampiran1.hasil.gov.my/pdf/pdfam/PR_05_2019.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, Bookkeeping, Payroll, Advisory)

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

KTP Lifestyle

An internal community for our colleagues on work and leisure.

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Internship in Johor Bahru

Internship in Johor Bahru
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Internship in Johor Bahru

Applications for the KTP Internship Program (KTP IP) on Audit, Marketing, IT are now open!

KTP is not the largest accounting firm in Johor Bahru.

However, we believe we are a people-driven firm with a focus on people besides being an ACCA accredited platinum employer.(以人为本是我们的核心价值观).

We are on the lookout for innovative, energetic and motivated students to drive our purpose of building a #KTPLifesytle #KTPCareers.

Apply at: https://bit.ly/3hCsezu

If you’re curious to find out more about this program, watch our webinar video/essay on interns story here

🔥Ask Me Anything My Intern Story At KTP @ KTP Youtube

https://bit.ly/3I7r8Gw

🔥Bryan Kam My First 5 days with KTP @ KTP Lifestyle

https://bit.ly/34DdeOu

🔥Jorge My Audit Internship Story – First Active Assignment @ KTP Careers

https://bit.ly/3i3NXA7

Let's start your learning experience with KTP.

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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, outsource bookkeeping, and payroll services to clients

KTP Lifestyle

An internal community for our colleagues on work and leisure.

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Withholding Tax on Payments to Agents

Withholding Tax on Payments to Agents
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Withholding Tax on Payments to Agents

With effect from Jan. 1, 2022, a 2% withholding tax (WHT) will be imposed on monetary payments made by companies to their authorized agents, dealers or distributors, arising from sales, transactions or schemes carried out by the Agents.

A new Section 107D of the Income Tax Act 1967 (ITA) was introduced under the Finance Bill 2021 following the Budget 2022 announcement on 29 October 2021.

The WHT is applicable on in-scope payments made to resident agents, dealers or distributors who are individual residents and who have received more than RM100,000 of such payments in monetary form and/or non-monetary form from the same company in the immediately preceding year of assessment (YA)

The tax withheld is to be remitted to the lRBM within 30 days from date of payment or crediting the payment to the agent, dealer or distributor.

Companies which fail to comply with this requirement will be subject to an increase in tax equivalent to 10% of the outstanding WHT and the underlying gross expenses which are subject to the WHT would be denied a tax deduction

Deferment of remittance of withholding tax

To ensure that all companies which are liable to make payment are able to make appropriate preparations and notifications to their agents, dealers and distributors, that payer companies are allowed to defer the ''remittance'' of the WHT until 31 March 2022 where payer companies are allowed to remit the WHT related to payments for the months of January until March 2022 from 1 April 2022 without being subject to any increase in tax.

Key salient points from the IRBM FAQ:-

• The WHT is not applicable on payment by way of credit note, contra-transaction and discount given to an agent, dealer or distributor.

• The payer company is required to apply the WHT even though the agent, dealer or distributor is subject to CP500 tax instalment payment.

• The category of individual includes sole proprietor and individual partner in a partnership. However, it excludes payment made to a partnership or a Limited Liability Partnership.

• The threshold amount of RM100,000 in the preceding year is to be determined each year. In determining the applicability of section 107D, the residency status of the agents, dealer or distributor in the immediate preceding year is irrelevant

• The preceding year RM100,000 threshold value is to be tested each year (not on a one-off basis) in order to determine whether withholding tax will apply for payment made in the current year.

• The agent, dealer or distributor must have an income tax reference number.

• The 2% WHT amount is to be reported in Form CP58.

• The 2% WHT will be considered as part of the payment for the balance of tax to be paid, upon submission of the income tax return form for the relevant YA by the agent, dealer or distributor.

• The WHT shall be remitted to the IRBM within 30 days after paying or crediting such payments to the agent, dealer or distributor. Remittance is to be made together with Form CP107D.

• If there is a failure to make the WHT payment to the IRBM within the stipulated time, a penalty of 10% would be imposed on the unpaid withholding tax. In addition, the tax deduction for the gross amount of the payment made to agent, dealer or distributor will be disallowed.

• Where a company is making payments to several agents, the company may complete the details of payment for each agents in the appendix [Lampiran CP107D(1)], which is to be attached together with the WHT remittance form [CP107D]. Each appendix could cater up to 20 recipients.

• The amended Form CP58 will include section to report the WHT deducted.

• The WHT remittance form and appendix as well as the updated Form CP58 have yet been released by the IRBM.

• The WHT can be made at the IRBM Service/Payment Counters.

Source

IRBM has issued a Frequently Asked Questions (FAQ) dated 28 February 2022 (only available in Bahasa Malaysia) on the application of the above Section 107D.

https://phl.hasil.gov.my/pdf/pdfam/Soalan_Lazim_Seksyen_107D_ACP_1967.pdf

Reference :

Read our past posting on withholding tax on payment to agents in our blog

1. 2% withholding tax on commission dated on 30.12.2021

https://bit.ly/3hRrk20

2. 预算案 2022 dated 19.11.2021

https://bit.ly/3tKU7dM

3. Budget 2022 - SME edition dated on 18.11.2021

https://bit.ly/3IWhAiR

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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, outsource bookkeeping, and payroll services to clients

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马来西亚对海外收入征税政策

马来西亚对海外收入征税政策
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马来西亚对海外收入征税政策...

真的是

一场游戏一场梦

不要谈什么分离 我不会因为这样而哭泣

那只是昨夜的一场梦而已

不要说愿不愿意 我不会因为这样而在意

那只是昨夜的一场游戏

雪消春水一场空....白费我们之前所做的

1. Foreign source income taxable in Malaysia 2022 dated on 11/01/2022

https://bit.ly/3KL1NUx

 

2. (u-turn update) foreign source income budget 2022 dated on 31/12/2021

https://bit.ly/3tXbici

 

3. FAQ on Special Income Remittance Programme (PKPP) dated on 27/12/2021

https://bit.ly/3CFoNBq

 

4. Special Income Remittance Programme (PKPP) to Malaysian Residents dated on 8/12/2021

https://bit.ly/35ObF0Z

 

5. 预算案 2022 dated on 19/11/2021

https://bit.ly/3tYpdPz

 

6. Budget 2022 - SME edition dated on 18/11/2021

https://bit.ly/3tRcq1i

 

7. Foreign source income taxable in Malaysia dated on 10/11/2021

https://bit.ly/3w5BG6y

 

8. Foreign Income Remitted Into Malaysia Taxable 2022 on 2/11/2021

https://bit.ly/3tTfJVI

 

9. 海外收入汇回大马时将被征税 dated on 2/11/2021

https://bit.ly/3Imb8k9

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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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Are you ready for SOSCO enforcement on WSP 4.0 compliance?

Are you ready for SOSCO enforcement on WSP 4.0 compliance?
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Are you ready for SOSCO enforcement on WSP 4.0 compliance?

Background of enforcement

With reference to item 3.13 of Employer Circular No 07/2021:-

  • The employer must include wage subsidy information in the employee’s payslip

OR

  • Employer to issue a memo/notice to notify the employee on the wage subsidy

What to do?

The employer must fill in the relevant information and upload the document to the following website within 14 days after receiving the email.  

https://eaduansip.perkeso.gov.my/tinjauan.php

How to do?

Step 1: Fill in employer information in item number 1 to 5

Step 2: Select the type of document that employer notify employees in item number 6

Step 3: Upload the selected document in item number 7

Step 4: Click at “Hantar”

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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, outsource bookkeeping, and payroll services to clients

KTP Lifestyle

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How do I file an exemption for an audit?

How do I file an exemption for an audit?
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How do I file an exemption for an audit?

(1) Lodgement with SSM

(a) circulate to members within 6 months from financial year end [S258 (1)(a) of Companies Act (CA) 2016]; and

(b) submit to SSM within 30 days from circulation [S259(1)(a) of CA 2016]

(2) Prepare the unaudited account in compliance with approved accounting standard [S244 (1) of CA 2016]

(3) Lodged together with Directors’ report, Statement by Directors and Statutory Declaration [S251 and S252 of CA2016]

(4) accompanied by a certificate (refer to Appendix I) to be signed by a director.

Audit Exemption

SSM may exempt a company from appointing an auditor with criteria and conditions [Section 267(2) of CA2016].

Qualifying Criteria for Audit Exemption

Categories of private companies:

(A) Dormant companies

(B) Zero-Revenue Companies

(C) Threshold-Qualified Companies

Category A - Dormant companies

(a) has been dormant since incorporation, or

(b) dormant throughout the current and in the immediate preceding financial year.

Category B - Zero-Revenue Companies

(a) does not have any revenue during the current financial year; and

(b) does not have any revenue in the immediate past 2 financial years;

and

(c) total assets in the current and immediate past 2 financial years do not exceed RM300,000

Category C - Threshold-Qualified Companies

(a) revenue not exceeding RM100,000 in the current and immediate past 2 financial years; and

(b) total assets in the current and immediate past 2 financial years does not exceed RM300,000; and

(c) not more than 5 employees at the end of its current and immediate past 2 financial years.

Special Circumstance

The audit shall be required if receives a notice in writing from the following person not later than 1 month before the financial year-end

(a) member (holds at least 5%)

or

(b) SSM

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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, outsource bookkeeping, and payroll services to clients

KTP Lifestyle

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Auditor Report on Stocktake Attendance

Auditor Report on Stocktake Attendance
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Auditor Report on Stocktake Attendance

Question

If KTP is appointed after the FYE 31.12.2021, should we qualify the auditor report if the stock is material? if not, what should KTP do?

Opinion :

If the inventory is material to the financial statements, the auditor shall obtain sufficient appropriate audit evidence by either:-

• Attend the physical inventory counting and do the reconciliation of inventory with roll backward procedure; or

• Evaluate the management internal inventory report and perform relevant audit procedures on the report obtained to determine whether it accurately reflect actual inventory count results.

If the results are fairly stated, no qualified opinion shall be issued in the auditor’s report for inventory.

However, if the auditor is unable to perform any physical inventory counting or alternative audit procedures to obtain sufficient and appropriate audit evidence regarding the existence and condition of inventory, the auditor shall modify the opinion in the auditor’s report if the inventory is material but not pervasive.

Source:

ISA 501: https://www.mia.org.my/v2/downloads/handbook/standards/ISA/2018/06/01/ISA_501.pdf

ISA 705: https://www.mia.org.my/v2/downloads/handbook/standards/ISA/2018/08/08/ISA_705_Revised.pdf

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Maximizing Tax Benefits on Capital Expenditure

Maximizing Tax Benefits on Capital Expenditure
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Maximizing Tax Benefits on Capital Expenditure

Company may maximize their tax benefits on the capital expenditure. Below are actions, you may take in order to help you with tax saving.

No worries, we explain to you how to maximize your tax benefits by using some real-life cases.

Capital Allowance

Generally, capital allowance is eligible for plant and machinery, or tools and equipment for business.

What are tools and equipment?

Some examples of the case law to enhance our understanding.

KPHDN v Tropiland Sdn Bhd (2012) (Court of Appeal)

• The argument here is whether the 7-storey car park is a tool and equipment to the business?

• The taxpayer is a property developer and constructed a multi-story car park before letting it out. They claim a capital allowance for the car park.

• The taxpayer’s income was derived from the rental of the car park. Without the multi-story car park, the taxpayer could not have generated an income from the land.

Hence, they can claim the capital allowance for the car park.

Industrial Building Allowance(IBA)

If you own or rent a factory for your business, you may claim the qualifying expenditures under Industrial Building Allowance (IBA).

Reinvestment Allowance(RA)

The definition given by MIDA, RA is available for existing companies engaged in manufacturing and selected agricultural activities that reinvest for expansion, automation, modernization, or diversification into any related products within the same industry on condition.

Lavender Confectionery & Bakery Sdn Bhd V KPHDN

Lavender is a manufacturer, distributor and dealer in cakes, confectionery, bread and biscuits.

In YA 2011, the company claimed Industrial Building Allowance (IBA) for the additional demolition of substructures and renovation and Reinvestment Allowance (RA) for plant and machinery for JB factory and KL Outlet.

However, it had been rejected due to one of the demolition cost before constructing the buildings which did not form part of the Lavender’s factory. Company is also disallowed to claim under RA due to the items are not used in the factory.

For IBA claim of the Company, the decision of the Court is the Company can claim for the IBA since they fulfilled the IBA claim requirement of building used for purpose of business and used as a factory.

The Company can claim for RA as they fulfilled the RA claim requirement as

• The Company must be a resident of Malaysia

• An operation for more than 36 months

• Incurred capital expenditures are for the expansion of their business.

As their outlet in KL continues the manufacturing process of bread and confectionaries in the principal factory at Plentong.

The capital expenditures incurred for plant and machinery that leads to the expansion of Company’ business is entitled to RA.

What does KTP say?

From the story above, we can understand that the determining factor between Capital allowance and Industrial building allowance is whether it is a “tool” to generate income or it is a ''building'' that is used as industrial business purposes.

Qualified expenditure can be the assets themselves and also the incidental cost incurred on the assets. To maximize your claim, we can always go back to the ruling or act to look at the definition.

Sources

KPHDN v Tropiland Sdn Bhd (2012) (Court of Appeal)

https://bit.ly/3MIlDBq

Lavender Confectionery & Bakery Sdn Bhd V KPHDN

https://bit.ly/35RDSnn

Qualifying Expenditure and Computation of Industrial Building Allowances

https://bit.ly/379lK8P

Qualifying Expenditure And Computation Of Capital Allowances

https://bit.ly/366wQek

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earning stripping rules malaysia lhdn

earning stripping rules malaysia lhdn
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Update on Earning Stripping Rule (ESR)

The Income Tax (Restriction on Deductibility of Interest) (Amendment) Rules 2022 (“Amendment Rules”) has been gazetted to amend the Income Tax (Restriction on Deductibility of Interest) Rules 2019.

The following two Principal Rules is amended in amendment rules:

1. Definition of qualifying deduction

2. Carrying forward of excess interest

The amendment rules came into operation on 1 February 2022.

Key takeaways:

You will understand: -

1. What is ESR?

2. Scope of application

3. New amendment on Principal Rules

4. Non-application

Summary of learnings:

1. What is ESR?

Effective from 01 July 2019, ESR was introduced under Section 140C of the Income Tax Act 1967 (ITA) to restrict the tax deduction on interest expenses in relation to financial assistance in a controlled transaction.

Under the ESR, the maximum amount of interest that can be deducted is 20% of the tax – EBITDA (earnings before interest, tax, depreciation, and amortization).

*Tax – EBITDA = Adjusted Business Income + Qualifying deduction+ Total Interest Expenses claimed in business Income.

2. Scope of application

ESR apply to interest expenses that arise from financial assistance granted by:

- its associated person outside Malaysia;

- its associated person outside Malaysia which operates through a permanent establishment in Malaysia;

- a third party outside Malaysia where the financial assistance is guaranteed by its holding company or any other enterprises under the same MNE Group

Financial assistance includes loans, interest-bearing trade credit, advance, debt, or the provision of security or guarantee.

3. New amendment on Principal Rules

The amendments are as outlined below:

i. Definition of qualifying deduction

Qualifying deduction is equal to the total incentive claims (special deduction, further deduction, double deduction, etc.) deducted in arriving at adjusted income. The definition is replaced as follows:

- where there is business expenditure incurred in the profit and loss account is allowed as deduction under the Act and the amount of the deduction allowed exceeds the amount of the business expenditure incurred, an amount equal to the difference between the amount of the deduction allowed and the amount of the business expenditure incurred in the profit and loss account; or

- where there is no business expenditure incurred in the profit and loss account, the amount of deduction is allowable under the Act.

ii. Carry forward rules

- The carry forward rules allow the restricted interest expenses in a year of assessment (YA) to be carried forward and to be deducted against the company’s adjusted income for the subsequent YAs.

- This rule now applies to any person and is not limited to a company.

4. Non-application

According to the De minimis threshold, ESR is not applicable where the total interest expenses for all financial assistance is equal to or less than RM500,000 in a YA.

Source:

Income Tax (Restriction on Deductibility of Interest) (Amendment) Rules 2022:

https://phl.hasil.gov.my/pdf/pdfam/ESR_Rules_Pindaan_2022.pdf

Restriction on the deductibility of interest guidelines:

http://lampiran1.hasil.gov.my/pdf/pdfam/RDIG_05072019.pdf

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Form E 常见错误

Form E 常见错误
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Form E 常见错误

回顾我们过去在 2021 年 16 月 3 日为 KTP|THK 客户举办的免费网络研讨会,由 Ms Caroline Lim 主持 as speaker.

https://youtu.be/84szaL-0Tok

阅读我们过去在 Form E 上的社交媒体帖子

Part 2 Form EA - Benefit in kind and perquisites

1) 董事医疗费 是 免税 (tax free) ??? 实物受益(benefit in Kind) ??? dated 19/02/2021

https://bit.ly/32E99c1

2) 1分钟学习“如何在BIK / Perquisites计算PCB” dated on 17/02/2021

https://bit.ly/3IJN76T

3) 只要你点进来,你能看到员工薪酬-税务节省大秘密 BIK 章 Part I dated 10/02/2021

https://bit.ly/32E9cVf

4) 只要你点进来,你能看到员工薪酬-税务节省大秘密 Part II dated 08/02/2021

https://bit.ly/3r8Gbun

5) 注意!你是否有正确的计算与提交预扣税(PCB)。dated on 26/01/2021

https://bit.ly/3r66XTR

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E呈报(E Filing)Form E

E呈报(E Filing)Form E
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E呈报(E Filing)Form E

Read our full story in our blog
https://www.ktp.com.my/blog/efiling-forme-2021/08mar2022

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

Reinvestment Allowance LHDN

Reinvestment Allowance LHDN
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Common mistakes in claiming reinvestment allowance

Reinvestment Allowance is a red flag to IRBM so Reinvestment Allowance is always scrutinized by our IRBM during tax audit/investigation.

What is reinvestment allowance?

Reinvestment allowance (RA), as the name suggests, is an incentive to encourage companies to reinvest and expand their businesses. It is only granted after the company has been in business for a certain period of time, and only to companies resident in Malaysia.

How good is reinvestment allowance?

The allowance is given for 15 years from the first year of claim. The allowance is computed at 60% of QCE incurred and can be utilised against 70% of statutory income

Latest development in reinvestment allowance

Budget 2021 has announced that a special Reinvestment Allowance (RA) will be given for eligible manufacturing and agricultural projects in Years of assessment (YA) 2020 to YA 2022.

This means that eligible companies that have fully utilized their 15-years RA can enjoy additional RA claims for 3 years (YA2020 to YA2022).

Common mistakes in claiming reinvestment allowance

  • The purchase invoice is the only supporting document available. The absence of a project paper, feasibility study, business plans, budgets, directors resolutions, and other relevant documents supporting the project;

  • Mismatch between the company incurring the investments and the company using the plant and machinery;

  • Claim RA on assets incurred for the benefits of related companies/directors.

  • Claim RA on non-qualifying activities.

  • Claim RA on the transfer of assets from related parties who have previously claimed RA on the same assets.

  • The absence of payment records to support the qualified assets.

  • Supporting documents are not kept for at least 7 years.

  • Clain RA concurrently with other tax incentives (like PS, ITA & etc).

  • No written/ pictorial production flow on the qualifying project

     

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Investment in Associates MPERS

Investment in Associates MPERS
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Investment in Associates MPERS

Commonly asked question on investment in associates :

* How do you account for investment in associates?

* Is investment in associates a current asset?

* How do you record investment in accounting?

What is an investment in associates?

An investor has a significant influence on the investee’s decision of its

- Financial policy; and

- Operating policy

What is a significant influence?

- Power to participate in the financial and operating decisions of the investee

- Investor holds directly or indirectly ≥ 20% voting power of the investee

- For shareholdings < 20%, the significant influence must be clearly demonstrated to classify the investment as associate

What is the document showing the significant influence of an investor?

- Representation on the board of directors

- Participation in the investee’s policy-making processes, including participation in decisions about dividends or other distributions

- Material transactions between the investor and the investee

- Interchange of managerial personnel

- Provision of essential technical information

Recognition and measurement of investment of associates

(i) Cost model

- Cost less accumulated impairment losses.

- Recognise dividends and other distributions received from the investment as income.

(ii) Equity method

- Recognised at the transaction price (include transaction costs)

- Share of post-acquisition profits or losses

- Dividends received from an associate merely reduce the carrying amount of the investment.

(iii) Fair Value model

- Measured at the transaction price (exclude transaction cost)

How to Present

- classify investments in associates as non-current assets

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Form E 2021 LHDN

Form E 2021 LHDN
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Top 7 questions on Form E 2021

Overview

From 01 March 2022, the employer must submit Form E for the Year 2021 and the submission can be done through LHDNM electronic filing system.

Let's mark the date so that we will not miss the deadline.

Key takeaways:

You will understand the responsibility and consequences as follows: --

1. What is Form E?

2. Who is the employer?

3. Who is compulsory to furnish Form E?

4. Who is exempted for the C.P.8D?

5. What is the information to be included in Form E?

6. What is the deadline for Form E & EA?

7. What is the consequence fail to submit Form E?

Summary of learning

1. What is Form E?

- Form E is a declaration report to be submitted by every employer to LHDNM every year not later than 31 March.

2. Who is the employer?

- The employer has included Company, Limited Liability Partnership, Partnership, Enterprise and etc.

3. Who is compulsory to furnish Form E?

- All employer (active and dormant companies) whether it has an employee or do not have any employees.

4. Who is exempted for submitted C.P.8D?

- Sole proprietorship, partnership, Hindu joint family and deceased person’s estate who do not have employees are exempted for the submission.

5. What is the information to be included in Form E?

There are 4 parts in Form E.

(a) Basic information

- Name of the employer as registered under SSM

- Employer’s E number

- Status of the employer

- correspondence with LHDNM and etc

(b) Information on a number of employees for the year ended 31 December 2021

- Number of employees as of 31/12/2021 included for those subject to Monthly Tax Deduction, new employees or ceased employment or died.

- Employees include full time/part-time/contract employees and interns.

(c) Declaration

- Declared by the employer.

(d) C.P.8D Return of Remuneration from the Employment, claim for deduction, and particulars of tax deduction under the Income Tax Rules (Deduction from Remuneration) 1994 for the Year Ended 31 December 2021

- Employers are required to complete all particulars of employees in C.P.8D.

6. What is the deadline for Form E & EA?

- Form EA: provide to employees not later than 28 February 2022

- Form E: submit to LHDNM not later than 31 March 2022

7. What is the consequence fail to submit Form E?

- The employer is liable to a fine of RM200 - RM20,000 or imprisonment for a term not exceeding six months of both.

Sources

Return Form of Employer (Remuneration for the Year 2021)

https://phl.hasil.gov.my/pdf/pdfam/ExplanatoryNotes_E2021_2.pdf

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Special Tax Deduction Flexible Working Arrangement

Special Tax Deduction Flexible Working Arrangement
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Special Tax Deduction Flexible Working Arrangement

The Flexible Work Arrangement (FWA) Income Tax Deduction is an initiative by our Malaysian government to support eligible employers who implement or enhance FWA for their company.

Scope of Expenses on Tax Incentive on FWA

A double deduction is given for the following expenses:

(a) Consultation fees

(b) Cost of capacity development

(a) Training courses or programme fees

(b) Internal trainer fees

(c) Cost of training materials

(d) Rental of training space

(e) Examination fees, and

(f) Training-related travelling expenses incurred by the trainers and employees as follows:

i. Transportation:

a. Travels from Malaysia to outside Malaysia, and vice versa

- Amount equal to economic class air fare

b. Travels within Malaysia

- Air transport: Amount equal to economic class air fare

- Land or water transfer: Actual cost

ii. Accommodation: Capped at RM300 per day

iii. Meals: Capped at RM150 per day

(c) Cost of software

(d) Software subscriptions

Tax Incentives on FWA

The deduction is given for a period of three consecutive YAs, commencing from the YA in which the certification of the implementation of FWA is given by TalentCorp.

The Income Tax (Deduction for the Cost of Implementation of Flexible Work Arrangements) Rules 2021 [P.U.(A) 377] were gazetted on 4 October 2021.

The Rules are deemed to be effective from YA 2020.

Qualified Company

A Malaysian-resident, which is a:

(a) Company incorporated under the Companies Act 2016

(b) Limited liability partnership registered under the Limited Liability Partnerships Act 2012, or

(c) Partnership registered under the Partnership Act 1961

How to apply?

1. Read the Guidelines and FAQ for the eligibility and criteria.

2. Fill in the Application Form and the Declaration Form

3. Submit the application via email flexworklife@talentcorp.com.my

4. Successful application will receive the Surat Pengesahan Pengaturan Kerja Flekisble, for your e-filing with LHDN.

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Can LHDN access your bank account?

Can LHDN access your bank account?
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Under what circumstance your bank information is accessible by LHDN?

The new provision does not give it absolute power to simply access taxpayers' bank account information.

It is only limited to cases involving garnishee orders allowed by the Court.

LHDN is required to go through a prescribed process of judgment and is only limited to cases that have already gone through a civil proceeding before.

What is garnishee order?

The garnishee proceedings are the process of enforcing a monetary judgment by seizing or withholding debts due to a specific party.

LHDN has the right to do so because of the existence of unpaid tax arrears by the taxpayer.

Source:

https://phl.hasil.gov.my/pdf/pdfam/KM_HASiL_18122021_HAD_AKSES_AKAUN_BANK.pdf

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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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