(Sec Update) Understanding the Role of Directors under the Companies Act 2016 Under The Companies Act 2016, directors have very important duties and can face severe penalties if they don't follow the rules. This includes big fines or even jail time if they misuse their role or cause financial harm to their company. A key court case, known as ''Delta-Pelita Sebakong Sdn Bhd v. Wong Hou Lianq & Ors And Other Appeals [2020] MLRAU 41,'' showed how important it is for directors to be open about any personal interests they might have in deals the company is considering. This openness is crucial to avoid conflicts of interest and to make sure directors are looking out for the best interests of the company. Therefore, directors play important roles in steering the course of a company. The Companies Act 2016 outlines the duties, powers, and responsibilities of directors within Malaysian companies. Understanding these provisions is essential for directors to fulfill their obligations effectively and ensure the sustainable growth and success of their organizations. Duties of Directors Directors owe fiduciary duties to the company, including: 1. Duty of Care, Skill, and Diligence Directors must act with reasonable care, skill, and diligence in the performance of their duties. This involves making informed decisions, staying informed about the company's affairs, and thinking carefully before making decisions. 2. Duty to Act in Good Faith: Directors must act honestly and in the best interests of the company, prioritizing its success over personal interests or relationships. 3. Duty to Avoid Conflicts of Interest: Directors must avoid situations where their interests conflict with those of the company. If a conflict arises, directors must disclose it and refrain from participating in related decisions. 4. Duty to Not Misuse Information or Position: Directors must not misuse confidential information or their position for personal gain or to the detriment of the company. Powers of Directors Directors are empowered to manage the company's business and exercise its powers, subject to the company's constitution and any restrictions imposed by shareholders through resolutions passed at general meetings. These powers include: 1. Power to Manage: Directors are responsible for managing the company's day-to-day affairs and strategic direction. 2. Power to Delegate: While directors can delegate certain tasks, they remain ultimately responsible for the company's actions and decisions. 3. Power to Enter Contracts: Directors have the authority to enter into contracts on behalf of the company, subject to any limits set by the company's constitution or shareholders. Conclusion Directors play a crucial role in the governance and success of companies, and their responsibilities are outlined in detail under the Companies Act 2016. By understanding and fulfilling their duties, directors can contribute to the long-term viability and growth of their organizations while upholding the principles of good corporate governance. Visit Us Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru KTP (Audit, Tax, Advisory) An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients Website www.ktp.com.my Instagram https://bit.ly/3Rko5kN Linkedin https://bit.ly/3sapf4l Telegram http://bit.ly/3ptmlpn 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 Website www.thks.com.my Facebook https://bit.ly/3nQ98rs KTP Lifestyle An internal community for our colleagues on work and leisure. Tiktok http://bit.ly/3u9LR6Q Youtube http://bit.ly/3ppmjyE Facebook http://bit.ly/3ateoMz Instagram https://bit.ly/3jZpKLo KTP Career An external job community on vacancies in Johor Bahru for interns, graduates & experienced candidates. Instagram https://bit.ly/3u2PxHg Facebook http://bit.ly/3rPxz9o #Thk #KTP read more

(Tax Update) Capital Gain Tax Malaysia Effective 1 January 2024, Malaysia introduced a capital gains tax (CGT) through the Finance (No. 2) Act 2023 under which gains or profits from the disposal of capital assets are treated as income chargeable to income tax under the Income Tax Act 1967 (ITA). Welcome to our guide on Capital Gains Tax (CGT)! If you're new to taxes or finding CGT confusing, don't worry. We, #ktp, here to help you understand everything easily. In this video, we'll explain CGT basics in simple terms. We'll cover when CGT starts, who has to pay it, what it applies to, and more. Let's get started on CGT 1. What is Capital Gain Tax (CGT)? 2. What is the effective date of CGT? 3. Who is liable/ chargeable to CGT? 4. What is the scope of CGT imposition? 5. How are the disposal and acquisition dates be determined? 6. How is the disposal price determined? 7. What constitutes a gain arise from disposal of CG? 8. How are losses treated under CGT? 9. What is the rate of tax? 10. When are returns required to be filed and taxes paid? Video Watch 15 minutes CGT video on our Youtube https://youtu.be/GNtW58J0Bio Visit Us Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru KTP (Audit, Tax, Advisory) An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients Website www.ktp.com.my Instagram https://bit.ly/3Rko5kN Linkedin https://bit.ly/3sapf4l Telegram http://bit.ly/3ptmlpn 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 Website www.thks.com.my Facebook https://bit.ly/3nQ98rs KTP Lifestyle An internal community for our colleagues on work and leisure. Tiktok http://bit.ly/3u9LR6Q Youtube http://bit.ly/3ppmjyE Facebook http://bit.ly/3ateoMz Instagram https://bit.ly/3jZpKLo KTP Career An external job community on vacancies in Johor Bahru for interns, graduates & experienced candidates. Instagram https://bit.ly/3u2PxHg Facebook http://bit.ly/3rPxz9o #Thk #KTP read more

(Sec Update) The Amended Occupational Safety and Health Act The Minister of Human Resources in exercise of the powers conferred by subsection 1(2) of the Occupational Safety and Health (Amendment) Act 2022 – Act A1648 and subsection 1(2) of the Factories and Machinery (Repeal) Act 2022 – Act 835, appoints 1st June 2024 as the date on which the Act A1648 and Act 835 comes into operation. The Act A1648 and Act 835 will affect all organizations (exemption is given to domestic workers, the Malaysian army, and workers on board ships) regardless of risk level and nature of business. With effect from 1st June 2024, some provisions under the Factories and Machinery Act 1967 (FMA 1967) [Act 139] will be migrated as new regulations under the Occupational Safety and Health (OSHA 1994) [Act 514]. We set out below the key changes under the Amended OSHA as below Implementation and Scope: Effective Date The new amendments, Acts A1648 and Act 835, will be enforced starting 1st June 2024. Affected Legislation Provisions from the Factories and Machinery Act 1967 are integrated into the Occupational Safety and Health Act 1994. Coverage The updated legislation applies to all workplaces across Malaysia, including public services and statutory authorities, but excludes domestic workers, the Malaysian army, and maritime workers. New Regulations and Provisions Risk Assessments and Emergency Procedures Employers are required to conduct thorough risk assessments and develop procedures to handle emergencies at the workplace. Principal's Responsibilities A new duty for principals to ensure the safety of contractors and subcontractors, emphasizing the safety of workers under their directive control. Workers' Safety Rights Workers now have the right to remove themselves from situations of imminent danger without repercussions. Occupational Health Services Mandatory health services and the designation of an OSH Coordinator in organizations with five or more employees. Training and Licensing Specific training is mandated for certain classes of persons, along with integrity and licensing requirements for machinery. Penalties The penalty structure is revised with significant increases, including fines up to RM500,000 and/or imprisonment for severe violations. Appointment of occupational safety and health coordinator The new provision mandates that employers who operate workplaces not specifically classified under existing regulations, and who have five or more employees, must appoint an Occupational Safety and Health Coordinator (OSH Coordinator). The primary responsibility of the OSH Coordinator is to manage and coordinate safety and health issues at the workplace. This role is distinct from that of a Safety and Health Officer (SHO), who is tasked with ensuring compliance with the Occupational Safety and Health Act (OSHA) and its regulations across different workplaces. Specific Regulatory Updates Plant Certification and Licensing New regulations under the Occupational Safety and Health (Plant Requiring Certificate of Fitness) Regulations 2024 and the Occupational Safety and Health (Licensed Person) Order 2024 detail requirements for plant operations and certifications. Director and Officer Liability Directors and specified office bearers are made jointly and severally liable for safety breaches, with provisions for defense in cases of unknowing violations. Enhanced Notification and Inspection Notification Requirements Expanded obligations for reporting the usage of workplace premises and activities, focusing on proactive enforcement. Certification of Fitness Stringent standards for the certification and inspection of plants, ensuring their operational safety and compliance. Overall Impact These amendments aim to enhance workplace safety across all sectors in Malaysia, increasing accountability, broadening the scope of coverage, and reinforcing the regulatory framework for occupational safety and health. The increased penalties and comprehensive coverage intend to foster a safer working environment nationwide. 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(Tax Update) IRBM e-invoice Guideline Version 2.30 (published on 6/4/24) The Inland Revenue Board of Malaysia (IRBM) recently updated its Software Development Kit (SDK) and guidelines for e-invoice on 6 April 2024. With important deadlines approaching for businesses of different sizes, it's crucial for taxpayers to understand these changes and how they affect their operations. Here's a simpler breakdown of the updates: Self-Billed e-Invoice for Importation Malaysian businesses involved in importing goods and services must now issue a self-billed e-Invoice within a specific timeframe after receiving their Customs import declaration. This requirement aims to streamline tax documentation and compliance for imports, with deadlines tailored to the date of receiving the Customs declaration. To be more specific, for importation of goods, the self-billed e-Invoice is required to be raised by the end of the month following the month in which Customs declaration (K1) is obtained. As an example, if K1 is obtained anytime during the month of August, the self-billed e-Invoice is required to be raised by 30th September. As for importation of services, self-billed e-Invoice is required to be issued latest by the end of the month following the month in which the rule for timing of imported service tax is satisfied, i.e. earlier of payment and receipt of invoice. For avoidance of doubt, the requirement for self-billed e-Invoice applies regardless of whether imported service tax is required to be accounted on the invoice. FOREX Clarification The recent updates provide clarity on handling foreign exchange (FOREX) rates in transactions involving foreign currencies. Businesses have the flexibility to choose the FOREX rate based on their internal policy unless specific regulatory requirements dictate otherwise. This clarification helps businesses in accurately reporting their financial transactions involving foreign currencies. Non-Monetary Transactions The IRBM has clarified that e-Invoicing requirements extend to non-monetary transactions, such as incentive trips and gift vouchers given to dealers. This update ensures that all forms of transactions, whether monetary or non-monetary, are appropriately documented and compliant with e-Invoicing regulations. Credit Notes for Multiple e-Invoices It's now confirmed that businesses can issue a single credit note that adjusts the transaction values of multiple e-Invoices. This flexibility is particularly useful for businesses dealing with returns or adjustments across several invoices, simplifying the process without being constrained by character limits. Consolidated e-Invoices for Individuals Businesses can issue consolidated e-Invoices for payments made to individuals, simplifying documentation and reporting. However, payments to individuals acting as agents, dealers, or distributors require individual transactional self-billed e-Invoices, addressing tax compliance more rigorously. Interest Payments The updates outline specific requirements for issuing e-Invoices or self-billed e-Invoices for interest payments. The responsibility for issuing these documents depends on the nature of the transaction and the parties involved, aiming to close tax compliance gaps effectively. Flexibility for Statements as e-Invoices There's now greater flexibility in using statements as e-Invoices. Businesses can include adjustments and rebates within these documents, facilitating a more streamlined approach to e-Invoicing and compliance. Size Limitation New size limitations for e-Invoice submissions to the IRBM have been introduced, including a maximum submission size of 5MB, a cap of 100 e-Invoices per submission, and a maximum size of 300KB per e-Invoice. These limits are crucial for managing the data flow to the IRBM efficiently. Digital Signature Businesses can utilize the digital signature of their service provider for e-Invoice submission to the IRBM. This provision allows for a seamless integration and submission process, ensuring the authenticity and integrity of the e-Invoices submitted. 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(Tax Update) How to Pay Withholding Tax Online Paying and submitting withholding tax in Malaysia under the Electronic Transmission of Tax (eTT) system involves several steps, generally centered around using the Malaysian Inland Revenue Board's (LHDN) online platforms. The eTT system is designed to streamline the process of declaring and paying taxes, including withholding tax, which is a tax deducted at source on certain types of payments made to non-residents in Malaysia. Here’s a step-by-step guides : Start at the MyTax Website Access the MyTax website and head over to ''ezHasil Services.'' Select the ''e-TT'' option, followed by ''Electronic Telegraphic Transfer.'' Proceed Through the Steps Click ''Next'' to move forward. Enter your identification details and click ''Next'' again. Provide your email address and proceed to the next step. Input the One-Time Password (OTP) code you receive for verification. Enter Payment Details Navigate to the ''Payment Details'' section. Choose ''Withholding Tax (WHT)'' as the payment type. Fill in your tax number, address, and select the applicable tax section. Submission and Virtual Account Number Review all the information you've entered to ensure accuracy. Submit your information. Upon submission, you'll receive a Virtual Account (VA) Number. Print this out for your records. Complete the Payment Use the provided VA number to make your payment. This can be done via online banking, at a bank counter, or through an ATM. Email Supporting Documents After payment, email the necessary supporting documents. This includes the Withholding Tax form, a copy of the invoice, proof of payment, the VA number, and the bank transfer slip. This guide provides a general overview. The specific steps, forms, and procedures may vary slightly depending on various factors, including changes in the e-Filing system or updates in tax laws. For the most current and detailed instructions, it’s best to consult the LHDN’s official website or contact your trusted tax agent directly. Past Blog on Withholding Tax Tax Update on Withholding Tax on Royalties dated on 06.12.2023 https://www.ktp.com.my/blog/tax-treatment-on-copyright-and-software-payments-by-distributor-reseller-to-non-resident/06dec23   Tax Update: Use Of e-WHT For WHT Payment dated on 08.09.2023 https://www.ktp.com.my/blog/use-of-e-wht-for-wht-payment/08sept23   Tax Update - Form E-107D : 2% Tax Deduction For Commission to Agents, Dealers or Distributors dated on 29.06.2023 https://www.ktp.com.my/blog/2percent-tax-deduction-for-commission-/29june23   Tax Update on Withholding Tax dated 07.11.2022 https://www.ktp.com.my/blog/tax-update-on-withholding-tax/07nov22   Small Value Withholding Tax Payment (update) dated 07.10.2022 https://www.ktp.com.my/blog/small-value-withholding-tax-payment-update/07oct22   Small Value Withholding Tax Payment dated 19.08.2022 https://www.ktp.com.my/blog/small-value-withholding-tax-payment/19aug22   (Update) 2% Withholding Tax on Commission to Agents dated on 12.07.2022 https://www.ktp.com.my/blog/2percent-withholding-tax-on-payments-to-agents/12july22   (Latest update) Withholding Tax on Payments to Agents dated 21.04.2022 https://www.ktp.com.my/blog/2percent-withholding-tax-on-payments-to-agents/21apr22   Withholding Tax on Payments to Agents dated 17.03.2022 https://www.ktp.com.my/blog/2percent-withholding-tax-on-payments-to-agents/17mar22   Top 5 Withholding Tax Questions dated 28.01.2022 https://www.ktp.com.my/blog/top-5-withholding-tax-questions/28jan22   2% withholding tax on commission dated 30.12.2021 https://www.ktp.com.my/blog/2-withholding-tax-on-commission/30dec21   (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/blog/certificate-of-residence-lhdn/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/blog/certificate-of-residence-lhdn-chinese/22nov21   (English Version) Budget 2022 – SME edition dated 18.11.2021 https://www.ktp.com.my/blog/tax-budget-2022-sme-edition/18nov21   (Chinese Version) 2022 年预算摘要 - 中小企业版dated 19.11.2021 https://www.ktp.com.my/blog/tax-budget-2022-sme-edition-chinese/19nov21   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   Purpose and usage of certificate of residence under withholding tax in Malaysia dated 23.04.2021 https://www.ktp.com.my/blog/certificate-of-residence/23april2021   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/blog/fwwses3ezyrg9gf-7r8xl-aaa5d-739bg-8lcep-c266s-s32bd-wf736-e4xsk-x3fp4-gj5z8-mwgzk-m3696-gw4b5-mmmbe   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/blog/fwwses3ezyrg9gf-7r8xl-aaa5d-739bg-8lcep-c266s-s32bd-wf736-e4xsk-x3fp4-gj5z8-mwgzk-m3696-gw4b5   马来西亚预扣税(withholding tax)的规则概述 (第1️⃣篇) dated 15.09.2020 https://www.ktp.com.my/blog/fwwses3ezyrg9gf-7r8xl-aaa5d-739bg-8lcep-c266s-s32bd-wf736-e4xsk-x3fp4-gj5z8-mwgzk-m3696   Withholding Tax In Malaysia Part 2 of 2 dated 28.06.2019 (eKTP 114) https://www.ktp.com.my/blog/withholding-tax-in-malaysia-part-2-of-2   Withholding Tax In Malaysia Part 1 of 2 dated 28.06.2019 (eKTP 113) https://www.ktp.com.my/blog/withholding-tax-in-malaysia-part-1-of-2 Visit Us Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru KTP (Audit, Tax, Advisory) An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients Website www.ktp.com.my Instagram https://bit.ly/3Rko5kN Linkedin https://bit.ly/3sapf4l Telegram http://bit.ly/3ptmlpn 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 Website www.thks.com.my Facebook https://bit.ly/3nQ98rs KTP Lifestyle An internal community for our colleagues on work and leisure. 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The Role of Company Secretaries on Money Laundering Company Secretaries stand at the forefront of efforts to combat money laundering and terrorism financing. As key figures within organizations, their responsibilities extend to implementing preventive measures outlined in regulatory frameworks like the Anti-Money Laundering Act. In this article, we'll explore the pivotal role company secretaries play in safeguarding financial systems against illicit activities and the essential steps they must take to mitigate risks effectively. Understanding Money Laundering: Money laundering is a complex process where cash obtained from illegal activities is integrated into the financial system to make it appear legitimate. This process involves three key stages: Placement This is the initial stage where cash proceeds from illegal activities are physically placed into the financial system. This could involve depositing cash into bank accounts or using it to purchase assets. Layering The illegally obtained funds are moved through a series of transactions to obscure their origin. This could involve transferring funds between accounts, converting them into different currencies, or making complex financial transactions to create layers of complexity. Until the funds look clean and from legal sources. Integration The final stage involves integrating the laundered funds back into the economy in such a way that they appear to be from a legitimate source. This could involve investing in businesses, purchasing real estate, or making other high-value transactions. Company Secretaries as Reporting Institutions: Company Secretaries play a crucial role in preventing money laundering activities. Under Part IV of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act (AMLA), Company Secretaries are considered Reporting Institutions (RIs) and have obligations both as individuals and at the firm level to combat or prevent money laundering activities. Preventive Measures Taken by RIs: To prevent their institutions from being used for money laundering or terrorism financing, RIs must undertake various preventive measures, including: Risk Assessments Conduct thorough assessments of the risks associated with their clients, products/services, geographical locations, and delivery channels. Customer Due Diligence (CDD) Verifying the identity of clients using reliable and independent sources and conducting enhanced due diligence for higher-risk clients. Screening Against Sanctions Lists Checking client names against relevant sanctions lists to prevent dealings with individuals or entities involved in terrorism or proliferation activities. Submitting Suspicious Transaction Reports (STRs) Reporting any suspicious activities to the appropriate authorities, such as Bank Negara Malaysia (BNM). Record Keeping Maintaining records of transactions, KYC information, and analysis of STRs for at least seven years. Keeping Information Updated: Regularly updating client information and conducting ongoing monitoring for any suspicious activities. Furthermore, company secretaries must adopt a Risk-Based Approach (RBA) to identify, assess, and mitigate money laundering and terrorism financing risks. This involves documenting risk assessments, considering relevant risk factors, and keeping assessments up-to-date through periodic reviews. In conclusion, Company Secretaries play a crucial role in combating money laundering and terrorism financing by implementing robust preventive measures, conducting thorough due diligence, and adhering to regulatory requirements outlined in the AMLA. By taking a proactive approach to risk management, they contribute to maintaining the integrity of the financial system and preventing illicit activities. PS : Authored by Mr Syazwan, our THK secretary associate, in his personal LinkedIn. 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(Tax Update) Foreign Capital Assets CGT Guidelines The Inland Revenue Board of Malaysia (“IRB”) has issued the Guidelines on Tax Treatment on Disposal of Foreign Capital Assets Received From Outside Malaysia (“Foreign Capital Assets CGT Guidelines”) dated 27 March 2024 on its website. The Foreign Capital Assets CGT Guidelines explain the CGT treatment on the gains or profits from the disposal of foreign capital assets situated outside Malaysia that occur on or after 1 January 2024 that are received in Malaysia by a resident that is a company, limited liability partnership, trust body or co-operative society. Key Summary of the Guideline Here's a summary of the guidelines for the tax treatment on gains from the disposal of foreign capital assets received in Malaysia, as outlined by the IRB: Introduction Capital Gains Tax (CGT) applies to gains from the disposal of capital assets in Malaysia, including foreign capital assets received in Malaysia, effective from 1 January 2024. Objective To explain the tax treatment on gains from the disposal of foreign capital assets received by a resident in Malaysia. Provisions of The Law Includes specific sections of the Income Tax Act 1967 and the Income Tax (Exemption) Order (No. 3) 2024 [P.U.(A) 75/2024]. Chargeable Person From 1 January 2024, companies, LLPs, Trust Bodies, and Co-operative Societies receiving gains from the disposal of foreign capital assets in Malaysia are subject to tax. Chargeable Gains from the Disposal Definition and Scope Gains from the disposal of foreign capital assets situated outside Malaysia are considered taxable income under paragraph 4(aa) of the Income Tax Act 1967 (ITA), subject to the prevailing tax rate. This includes assets such as immovable property (e.g., buildings, land), movable property (e.g., machinery, vehicles), intellectual property rights, and shares issued by companies incorporated outside Malaysia. Taxability Timing Only gains from the disposal of foreign capital assets that occur on or after 1 January 2024 are subject to tax. This includes gains received in Malaysia from such disposals, emphasizing the importance of the date of disposal and receipt of gains. Deductible Expenses In determining taxable gains, expenses wholly and exclusively incurred for the acquisition and disposal of the capital assets can be deducted. This includes legal fees, appraisal fees, advertising costs, and expenses to increase or maintain the capital value of the asset. Foreign Tax Credit Purpose To avoid double taxation of gains from the disposal of foreign capital assets that are also taxed outside Malaysia. Taxpayers can claim a tax credit for foreign taxes paid, which is either bilateral (if the country has a Double Taxation Avoidance Agreement with Malaysia) or unilateral (if there's no such agreement). Conditions for Claiming Taxpayers must keep records proving that foreign tax has been imposed on the income. The claim for tax credit must be supported by adequate documentation. Limitations If the foreign tax credit claimed for a year of assessment exceeds the Malaysian tax payable on the same gains, the excess amount cannot be carried forward or refunded; it is simply disregarded. Tax Exemption Eligibility Period: Gains from the disposal of foreign capital assets received in Malaysia are exempt from tax from 1 January 2024 until 31 December 2026, provided they meet specific economic substance requirements. Economic Substance Requirements To qualify for the exemption, entities must employ an adequate number of qualified employees and incur a sufficient amount of operating expenditures in Malaysia for carrying out specified economic activities. The determination of adequacy is based on the facts of each case, considering factors like the industry type, whether the business is capital or labor-intensive, and the nature of the employment (full-time or part-time). Specified Economic Activities For investment holding entities, this involves holding/managing equity participation in other entities and making strategic decisions regarding assets. For other entities, it refers to the operations of the business carried out in Malaysia. Outsourcing of Activities Entities can outsource specified economic activities if these are carried out in Malaysia, there's sufficient monitoring and control, and the outsourcing does not result in double counting of employees or expenditures. Tax Reporting Requirements for reporting gains from the disposal of foreign capital assets in the Income Tax Return Form (ITRF). 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(Tax Update) Investing in Kids' Future: Tax Incentives on Child Care and Kindergartens Investing in child care and kindergartens isn't just good for kids; it's a smart choice for investors too. With more parents working, there's a growing need for quality places where children can learn and grow. The government is stepping up, offering tax breaks to encourage investment in this important area. This means investing in child care and kindergartens can be financially rewarding and help shape the future of our children. Let's dive into why putting your money into early education is a win-win for everyone involved. Public Ruling 4/2016 Tax Incentive for Child Care Centre and Kindergarten Operators Public Ruling No. 4/2016 by the Inland Revenue Board of Malaysia, we draft out a compelling case study highlighting the significant tax incentives and their impact on the financial performance and sustainability of child care centres and kindergartens. This case study aims to provide potential investors with a comprehensive understanding of the financial benefits of investing in these operations, underscored by real-world examples and legislative support. Tax Incentives Overview: Registration Requirement Must be registered with the relevant authority: Department of Social Welfare for child care centres or the State Education Department under the Ministry of Education for kindergartens. Exemption of Statutory Income The tax exemption applies to business statutory income for a period of five consecutive years. For existing operators, the exemption commences from the Year of Assessment (YA) 2013. For new operators, the exemption starts from the YA during which the first invoice is issued. Industrial Building Allowance Operators who incur qualifying building expenditure on construction or purchase of a building used in their operations can claim a 10% industrial building allowance annually for ten years. This incentive is aimed at reducing operating costs and enhancing service quality. Non-Applicability The tax incentives do not apply to operators of private pre-schools whose activities are integrated with private primary schools. Separate Business Sources If an operator of a child care centre or kindergarten carries on another business, the income from that other business must be treated as a separate source of income, and separate accounts must be maintained. Adjusted Losses Adjusted losses incurred from the start of the business until the year before the exemption period, and during the exemption period, can be carried forward and deducted from the statutory income of the business in the post-exempt YAs until fully utilized. Discontinuation If the business ceases operation, any unutilized brought forward adjusted loss will be disregarded. Real-Case Examples: Situation ABC is an established child care centre that has been operating since 2020. For the year of assessment 2020, ABC reported an adjusted income of RM80,000. Impact of Tax Incentives Under the tax exemption incentive, ABCs' statutory income of RM80,000 is exempt from tax for five consecutive years, starting from the year of assessment 2020. This exemption translates into direct tax savings, enhancing the centre's cash flow and providing additional funds that could be redirected towards improving facilities, staff training, or further expansion. Benefit Analysis The immediate financial benefit is the preservation of cash that would otherwise be paid as tax. Assuming a corporate tax rate of 15% (concessionary SME rate), the savings amount to approximately RM12,000 for that year alone. Over the five-year exemption period, assuming steady income, the total tax savings could be significant, providing a substantial financial cushion that can be reinvested into the business. Conclusion The government's tax incentives for child care centre and kindergarten operators present a lucrative opportunity for potential investors. By reducing tax liabilities and aiding in the recovery of capital expenditures, these incentives enhance the financial attractiveness and sustainability of investments in the early childhood education sector. Investors are encouraged to leverage these benefits to contribute to the development of quality child care and education facilities, supporting societal needs and generating substantial returns on investment. 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(Tax Update) Buy Property Under Company or Individual Buying property under your personal name or through a Sdn Bhd (Sendirian Berhad, which is similar to a Private Limited Company) in Malaysia involves several considerations, including tax implications, liability, financing, and estate planning. As an approved tax agent, we would guide you through the pros and cons of each approach, tailored to your specific circumstances. It's important to remember that the right choice depends on your financial situation, investment goals, and personal preferences. Personal Name Purchase Pros: Simpler process: Generally more straightforward than company purchase. Tax Benefits: Eligible for RPGT exemptions and potentially lower stamp duties, especially for first-time buyers. Better Financing Rates: Often lower mortgage interest rates than those available to companies. Stamp duty : Residential properties purchased worth between RM500,001 to RM1 million will get a 75% stamp duty exemption only up until 31st December 2023. Cons: Personal Liability: You're personally liable for debts and legal issues. Limited Tax Deductions: Fewer opportunities for deductions on rental income-related expenses. Sdn Bhd Purchase Pros: Limited Liability: Shareholders' liability is capped, protecting personal assets. Tax Advantages: Can benefit from tax deductions on property expenses and potentially favorable corporate tax rates. Eligible for Investment Building Allowance (IBA) when leasing as industrial buildings. Watch out S60F Income Tax Act 1967 tax restriction on expenses. Estate Planning: Easier transfer of ownership through shares. Asset Management: Suited for managing multiple properties. Cons: Higher Costs: Involves setup, annual compliance, and accounting fees. Complex Tax Filings: Must file audited accounts and annual returns. Less Favorable Financing: Lower loan margins compared to individual purchases. Tax Considerations Rental Income: Non-SME Investment Holding Companies face a 24% tax on rental income. RPGT: Individuals benefit from no RPGT from the sixth year, whereas companies face up to 30% depending on the sale timing. Tax Audit Risks: High-risk profiles may trigger LHDN audits. Industry Building Allowance: Potential tax reduction for property used as industrial buildings. Capital Gain Tax : Be cautious of the new tax implications associated with the transfer of shares. Loan Considerations Financing: Individuals can secure up to 90% financing for residential properties, while Sdn Bhds may only get up to 60%. Administrative Expenses Setup and Maintenance: Sdn Bhd entails initial and ongoing costs, whereas personal purchases incur no extra administrative expenses. Conclusion Your decision should be informed by a comprehensive analysis considering your financial situation, investment strategy, and goals. While personal purchases offer simplicity and certain tax benefits, Sdn Bhds provide liability protection and estate planning advantages but come with higher costs and stricter tax treatment on rental income. Consulting a tax professional or financial advisor is crucial for personalized advice, ensuring your choice aligns with financial goals and legal requirements. Visit Us Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru KTP (Audit, Tax, Advisory) An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients Website www.ktp.com.my Instagram https://bit.ly/3Rko5kN Linkedin https://bit.ly/3sapf4l Telegram http://bit.ly/3ptmlpn 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 Website www.thks.com.my Facebook https://bit.ly/3nQ98rs KTP Lifestyle An internal community for our colleagues on work and leisure. Tiktok http://bit.ly/3u9LR6Q Youtube http://bit.ly/3ppmjyE Facebook http://bit.ly/3ateoMz Instagram https://bit.ly/3jZpKLo KTP Career An external job community on vacancies in Johor Bahru for interns, graduates & experienced candidates. Instagram https://bit.ly/3u2PxHg Facebook http://bit.ly/3rPxz9o #Thk #KTP read more

(Tax Update) Is bad debt tax deductible? Non-trade debts that are written off as bad, or provisions made in respect of non-trade debts that are doubtful, either specific or general, are not deductible in the computation of adjusted income. Similarly, recoveries relating to non- trade debts written off earlier are not taxable. This tax question has become increasingly common “Should taxpayers use legal action to recover any debts for tax purposes?”. Let’s talk about the bad debts written off in a tax perspective : What Is Bad Debts Debts that are allowed as a deduction in ascertaining the adjusted income of a business is a trade debt that is irrecoverable either wholly or partly. Such debt is written off as bad. Trade debt is a debt that arises from the sales of goods or services and has been included in the gross income of the business. 1. Issue What is the tax treatment for bad debts? 2. Conclusion If reasonable steps have been taken to recover the irrecoverable debts but showing there is no way to recover the debt, the amount of irrecoverable debts is tax deductible. However, if there are still any other reasonable steps for recovery, such debt cannot be written off as irrecoverable. Thus, it is not tax deductible. 3. Reasons For a trade debt to be written off as bad and allowed as a deduction, generally two conditions are to be fulfilled. 1. The debt shall be an amount that has been included in the gross income of a person for the basis period for a YA before the relevant YA. 2. The debt is irrecoverable. To support a claim for deduction of a bad debt written off for tax purposes, there should be sufficient evidence of such steps taken, including one or more of the following: a) issuing reminder notices; b) debt restructuring scheme; c) rescheduling of debt settlement; d) negotiation or arbitration of a disputed debt; or e) legal action (filing of a civil suit, obtaining judgement from the court, and execution of the judgement). After reasonable steps for recovery have been taken, debt can be considered wholly irrecoverable on the occurrence of any one of the following : a) the debtor has died without leaving any assets from which the debt can be recovered; b) the debtor is bankrupt or under liquidation and there are no assets from which the debt can be recovered; c) the debt is statute-barred; d) the debtor cannot be traced despite various attempts and there are no known assets from which the debt can be recovered; e) attempts at negotiation or arbitration of a disputed debt have failed and the anticipated cost of litigation is prohibitive; or f) any other circumstances where there is no likelihood of cost-effective recovery. 4. Sources Public ruling no. 4/2019 Tax treatment of wholly & partly irrecoverable debts and bad debts Visit Us Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru KTP (Audit, Tax, Advisory) An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients Website www.ktp.com.my Instagram https://bit.ly/3Rko5kN Linkedin https://bit.ly/3sapf4l Telegram http://bit.ly/3ptmlpn 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 Website www.thks.com.my Facebook https://bit.ly/3nQ98rs KTP Lifestyle An internal community for our colleagues on work and leisure. Tiktok http://bit.ly/3u9LR6Q Youtube http://bit.ly/3ppmjyE Facebook http://bit.ly/3ateoMz Instagram https://bit.ly/3jZpKLo KTP Career An external job community on vacancies in Johor Bahru for interns, graduates & experienced candidates. Instagram https://bit.ly/3u2PxHg Facebook http://bit.ly/3rPxz9o #Thk #KTP read more