(Tax Update) Key Changes and Updates for Employers - New Employee and Resignee Dear KTP Clients, We hope this newsletter finds you well. Here are the latest updates from the Inland Revenue Board of Malaysia (IRBM) concerning employer tax matters, effective from January 1, 2024: 1. Mandatory Use of e-Services for Selected Tax Matters IRBM has mandated the use of e-services for certain tax matters via the MyTax Portal. This includes various employer-related tax transactions to streamline processes and ensure efficiency. 2. Application for Employee Tax Clearance Letter (SPC) via e-SPC New Guidelines for SPC Applications Updated guidelines for SPC applications by employers were published on April 1, 2024. Employers can access these guidelines on the IRBM Portal under https://www.hasil.gov.my/en/employers/ section. Exemptions from SPC Applications Employers are exempted from applying for SPC for employees whose remuneration is not taxable or who have already had their tax deducted via the Monthly Tax Deduction (MTD) scheme and received no additional compensation.   3. New CP22A/CP22B Submission Format Starting September 1, 2024, submissions of CP22A/CP22B in batches through e-SPC must follow the new format specified by IRBM. 4. Amendments and Additional Applications for SPC From August 1, 2024, employers can make amendments or add to SPC applications through e-SPC. Manual applications for amendments or additional SPCs will no longer be accepted starting September 1, 2024. 5. Mandatory e-CP22 for New Employee Notifications Implementation Date Submission of new employee notifications via e-CP22 will be mandatory from September 1, 2024. Access Right Authorized individuals and tax agents can access e-CP22 through the MyTax Portal starting from August 1, 2024. Submission Methods Notifications can be submitted either through a web form or by uploading a data file in .txt format. The data file format can be downloaded from the e-CP22 application. Employee Departures Exceeding 3 Months Notification Requirement Employers must submit Form CP21 if an employee, chargeable to tax on their employment income, plans to leave Malaysia for more than 3 months. Form CP21 must be submitted at least 30 days before the employee’s departure date. Online Submission Starting January 1, 2024, Form CP21 must be submitted online via the MyTax portal using the e-SPC application. Frequent Travelers Exception Employers do not need to submit Form CP21 if the employee frequently leaves Malaysia as part of their job and IRBM is satisfied with this arrangement. Withholding Employee Payments Employers must withhold any payments to employees leaving Malaysia for more than 3 months without intending to return. These payments can only be released with IRBM’s permission, and only after 90 days from IRBM’s receipt of Form CP21. IRB Assistance For further inquiries, you can contact the HASiL Contact Centre at 03-8911 1000 or utilize the HASiL Live Chat and Feedback Form available on the official IRBM Portal. These updates aim to enhance the efficiency and accuracy of tax-related processes for employers. We encourage all our clients to familiarize themselves with these changes and make the necessary preparations to comply with the new requirements. Thank you for your attention and cooperation. Warm regards, KTP Team   read more

(Tax Update) Summary of High Court Ruling on Public Ruling No. 4/2011 Rental Income In the landmark case of BAZ Consolidated Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [2024] 1 AMR, the High Court made significant rulings on several critical tax issues concerning rental income and related deductions. Here are the key takeaways that are relevant to our clients at KTP : 1. Classification of Rental Income The court determined that rental income should be classified under Section 4(d) of the Income Tax Act (ITA), not Section 4(a). This classification is important due to the nature of the property rental activities, which lacked comprehensive maintenance and support services. This decision clarifies that properties rented out without extensive services should not be treated as business income under Section 4(a), but rather as rental income under Section 4(d). 2. Disallowance of Administration Expenses and Capital Allowances The court upheld the Revenue's decision to disallow the appellant's claims for administration expenses and capital allowances. This decision underscores the importance of correctly categorizing expenses for tax purposes. Property owners and investors must ensure that their expense claims are well-documented and justified, as incorrect classifications can lead to disallowed deductions. 3. Interest Expense Deduction Significantly, the court ruled that the appellant was entitled to deduct bank overdraft and term loan interest under Section 33(1)(a)(ii) of the ITA. These expenses were incurred for the purpose of earning rental income, even though no rental income was generated during the period. This ruling is crucial for property investors who may have periods without rental income but still incur loan interest expenses. It affirms that such expenses can be deductible, provided they are genuinely for the purpose of generating rental income. 4. Application of Public Ruling No. 4/2011 The court clarified that Public Ruling No. 4/2011 applies only from the year of assessment (YA) 2011 onwards and cannot be applied retrospectively to YA 2010. This means that taxpayers must be aware of the effective dates of public rulings and ensure compliance only from the applicable YA onwards. Public rulings should be seen as guidance and not as retrospective law. Tax Impact and Implications This ruling highlights several important tax implications for property owners and investors: Correct Income Classification Ensuring rental income is accurately classified under the appropriate section of the ITA can significantly impact tax liabilities. Misclassification can lead to incorrect tax filings and potential disputes with tax authorities. Expense Deductibility Proper documentation and justification of expenses are crucial for claiming deductions. This includes maintaining clear records of interest expenses on loans intended for generating rental income, even during periods without rental income. Public Rulings vs. Principal Act Public rulings are not law themselves; they must align with the Principal Act and prevailing tax principles. Staying updated with case law and understanding how public rulings apply is essential for accurate tax compliance. We strive to keep our clients informed about the latest developments in tax law. This recent case serves as a reminder to review and ensure compliance with current tax regulations. Proper tax planning and accurate classification of income and expenses are vital for optimizing tax positions and avoiding disputes. 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) E-Invoice Guideline (Version 3.2) This e-Invoice Guideline (Version 3.2) dated 30 July 2024 replaces the e-Invoice Guideline (Version 3.1) issued on 19 July 2024. The key changes made to this Guideline are  Key Updates in E-Invoice Guidelines ( Version 3.2) Interim Relaxation Period: A new Section 16 introduces a six-month interim relaxation period from the mandatory e-Invoice implementation date for each phase, offering taxpayers greater flexibility in adopting e-Invoice practices. Consolidated e-Invoices: Taxpayers can now issue consolidated e-invoices for all transactions, including self-billed e-invoices, during the relaxation period. Flexibility in Description Field: During the relaxation period, there's more leniency in the ''Description of Product or Service'' field, eliminating the need for specific receipt/statement/bill references. No Individual e-Invoices Required on Request: Taxpayers are not obligated to issue individual e-invoices upon buyer/supplier requests during the relaxation period, provided they comply with consolidated e-invoice requirements. Suspension of Prosecution: IRBM will not pursue prosecution under Section 120 of the Income Tax Act 1967 for non-compliance with e-Invoice requirements during the interim period, as long as consolidated e-invoice rules are followed. Implementation Timeline: Specific dates for the interim relaxation periods: Large businesses: 1 August 2024 to 31 January 2025 Medium-sized businesses: 1 January 2025 to 30 June 2025 All other taxpayers: 1 July 2025 to 31 December 2025 Exemption Expansion: Taxpayers with an annual turnover of less than RM150,000 are now exempted from issuing e-Invoices, including self-billed e-Invoices. Consolidated Self-Billed e-Invoices Specifics: Issued monthly, within seven calendar days after month-end, with required details such as supplier’s name (''General Public''), TIN number (''EI00000000010''), and MSIC code (''00000''). These updates aim to ease the transition to the e-Invoice system, giving businesses more time and flexibility to adjust their processes. 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 read more

(Tax Update) E-Invoicing : Grace Period for 6 Months The Inland Revenue Board (IRB) has announced significant concessions on e-invoicing, providing much-needed relief and flexibility to taxpayers. Based on a recent press conference by Hasil, here are the key points: Key Concessions Consolidated E-Invoicing Allowed All industries and activities can issue consolidated e-invoices, including self-billed e-invoices. In other words, consolidated e-invoice can be in importation of goods and services, payments to agents, dealers and distributors. Sellers are permitted to issue consolidated e-invoices even if buyers request individual e-invoices for each transaction. Flexible Product and Service Descriptions Any type of description can be entered in the ''description of product or service'' data field, offering more flexibility in invoicing details. Grace Period for Compliance There will be no prosecution for non-compliance with e-invoicing rules under Section 120 of the Income Tax Act 1967 from August 2024 to January 2025, provided taxpayers comply with the consolidated e-invoicing requirements. Implications for Taxpayers These concessions offer substantial breathing room for businesses to transition to e-invoicing smoothly and with minimal disruption. By allowing consolidated e-invoicing and flexible descriptions, the IRB is reducing the immediate administrative burden on businesses, making the initial adoption phase more manageable. Incentives for Early Compliance To encourage timely adoption, taxpayers who implement e-invoicing as per the August 2024 timeline, without relying on the concessions, will be eligible for accelerated capital allowance. This benefit reduces the claim period from three years to two years for the Years of Assessment 2024 and 2025, applicable to capital expenditure on ICT equipment and software related to e-invoicing. Government Support and Commitment These measures reflect the government’s responsiveness to taxpayer concerns and its commitment to supporting the transition to more efficient tax governance. The relaxation of rules and the introduction of incentives highlight the government’s proactive approach in facilitating a smoother e-invoicing implementation process. Stay informed and take advantage of these concessions to ensure a seamless transition to e-invoicing while maximizing potential benefits for your business. 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) Unlock the Benefits of Tax Incentives for Your Food Production Business At KTP, we understand the value that strategic investments in the agricultural sector can bring to your business. With the release of Public Ruling No. 5/2023, the Inland Revenue Board of Malaysia has introduced enticing tax incentives for approved food production projects, designed to encourage investments and boost the agricultural industry’s growth. Here’s how you can capitalize on these incentives to enhance your business prospects: Overview of Tax Incentives The Malaysian government provides significant tax relief for approved food production projects, encompassing a variety of agricultural activities. Whether you are planting crops, engaging in aquaculture, or rearing livestock, these incentives are tailored to support and mitigate the risks associated with agricultural investments. Approved Projects for Tax Incentives The tax incentive covers a wide range of agricultural activities aimed at increasing food production in Malaysia. Here are some of the projects that qualify under Public Ruling No. 5/2023: Crop Plantation : Includes planting of kenaf, vegetables, fruits, herbs, spices, and other industrial or cash crops. Specific commencement dates apply to each type of planting. Aquaculture and Livestock Rearing : This encompasses the aquaculture of various species and the rearing of animals such as cows, buffaloes, goats, sheep, and deer. Fishing Activities : Both deep sea and high seas fishing activities are eligible for the tax incentives. Specialized Farming : Projects such as apiculture (beekeeping) and the cultivation of feed mill crops identified and approved by the Ministry of Agriculture and Food Security (MAFS). Who Can Undertake These Projects? Eligibility to participate in these incentive-backed projects extends to: Incorporated Entities : Companies and cooperatives incorporated under the Malaysian Companies Act 2016. Agricultural Associations : Includes Area, Federal, and State Farmers’ and Fishermen’s Associations. Individuals and Partnerships : Sole proprietors and partnerships engaged solely in agricultural or fisheries activities for the approved project. Key Tax Benefits Tax Exemption : Enjoy a 100% tax exemption for up to ten consecutive years for new projects, and five years for expansion projects. This exemption applies from the first year of assessment in which you derive statutory income from the project. Capital Allowances : Claim deductions for capital expenditures involved in your project, ensuring that your initial investment is economically feasible. Loss Carry Forward : Adjusted losses incurred before and during the exemption period can be carried forward, offsetting future taxable income once the exemption period concludes. Eligibility Criteria Type of Projects : The incentive covers a wide range of agricultural activities, from planting and aquaculture to livestock rearing and deep-sea fishing. Qualifying Entities : Eligible applicants include companies, cooperatives, and sole proprietors engaged solely in agricultural or fishery activities. Application Process : Applications must be submitted to the Ministry of Agriculture and Food Security (MAFS) before project commencement and within specified deadlines. How to Apply Visit the MAFS website for detailed criteria and application procedures. Ensure that your project meets all stipulated requirements and that you maintain separate financial records for the activities under the incentive. Strategic Investment Investing in related companies undertaking approved projects can also yield tax deductions, enhancing the financial viability of your broader corporate structure. Conclusion Leveraging these tax incentives can substantially decrease the financial risks associated with agricultural projects, making it an attractive investment opportunity. At KTP, we are ready to guide you through the application process and help optimize your tax position. For further information, please visit our website at www.ktp.com.my or contact us directly. Seize this opportunity to grow your business and contribute to Malaysia’s agricultural advancement with the support of KTP, your trusted tax agent. Source IRB Public Ruling 5/2023 AGRICULTURAL SECTOR INCENTIVE – TAX INCENTIVE FOR APPROVED FOOD PRODUCTION PROJECT Sector https://www.hasil.gov.my/media/tkqlzbit/draft-public-rulling-agricultural-sector-incentive.pdf 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 read more

(Tax Update) Understanding Taxpayer Identification Number (TIN) for E-Invoicing in Malaysia Introduction As Malaysia embraces the new era of e-invoicing starting from 1st August, understanding the integration and utilization of the Taxpayer Identification Number (TIN) becomes essential for all business entities. This guide, brought to you by KTP (www.ktp.com.my), aims to simplify the TIN formats for both individuals and businesses, ensuring that our clients are well-prepared and compliant with the upcoming changes. What is a Taxpayer Identification Number (TIN)? The Taxpayer Identification Number (TIN) is an alphanumeric code essential for tracking business transactions and ensuring tax compliance in Malaysia. With the shift to e-invoicing, having a TIN will become indispensable for all financial and tax-related activities. TIN Formats in Malaysia For Individuals: Current Format: Post-2nd January 2023, the TIN for individuals starts with ''IG'' followed by a 9-11 digit unique identifier. Previous Format: Before this date, it began with ''OG'' or ''SG.'' Example: IG845462070, IG57303584070 For Companies and Other Entities: Format Overview: Begins with a prefix that denotes the entity type, followed by a 10 or 11-digit number. An extra ''0'' has been included after the TIN number for non-individual entities since 2nd January 2023 to standardize the format. Entity Prefixes: Companies: C Cooperative Societies: CS Partnerships: D Employers: E Associations: F Examples: Company: C20830570210 Cooperative Societies: CS1234567890 How to Apply for a TIN in Malaysia For new taxpayers, obtaining a TIN involves visiting the official tax authority's website or office, providing necessary documentation, and submitting an application form. This process ensures that all your business dealings are recorded and taxed appropriately. Finding Your Existing TIN Existing taxpayers can locate their TIN by checking previous tax returns, accessing the tax authority's online portal, or contacting the tax authority directly for assistance. Importance of TIN in the E-Invoicing System The integration of TIN into the e-invoicing system ensures as TIN is one of compulsory fields under E-Invoicing system Compliance: Streamlines tax compliance and simplifies audits. Accuracy: Enhances the accuracy of financial transactions. Security: Minimizes the risk of errors and fraud. Conclusion: As Malaysia progresses towards a more digitalized economy, understanding and applying the correct TIN format is crucial for seamless business operations. KTP is committed to assisting our clients through these transitions, ensuring that your business remains compliant and efficient in handling all tax-related matters. For more insights and support on e-invoicing in Malaysia, visit us at www.ktp.com.my or contact our support team for personalized assistance. 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 read more

(Tax Update) E-Invoicing Update: A Breakthrough for Micro-SMEs in Malaysia Early Development to MSME In early July 2024, during a parliamentary session, Finance Minister II Datuk Seri Amir Hamzah Azizan announced new e-invoicing regulations and supports for MSMEs. These regulations exempt MSMEs with annual revenues below RM150,000 from the obligation to issue e-invoices. However, they also permit these MSMEs to issue consolidated e-invoices that summarize monthly sales transactions, offering flexibility in managing their invoicing requirements. Latest Development to MSME Abu Tariq, CEO of the Inland Revenue Board of Malaysia (LHDN), has announced a important update to e-invoicing regulations, marking a significant development for small enterprises nationwide on 16 July 2024 Major Update Micro-SMEs with annual revenues below RM 150,000 are now completely exempt from e-invoicing mandates. Impact of the Exemption: No requirement to issue e-invoices: Micro-SMEs are relieved from the obligation of generating electronic invoices, allowing them to continue using their current billing systems without additional upgrades or changes. No need to consolidate e-invoices: These enterprises are not required to merge multiple e-invoices into a single document, which typically helps in reporting and compliance, thus saving time and reducing complexity. Full exemption from adopting the e-invoicing system: This complete waiver frees micro businesses from the financial and logistical challenges associated with setting up and maintaining a compliant e-invoicing system. This amendment substantially alleviates the administrative load for thousands of micro businesses, enabling them to concentrate on growth and sustainable development. Our Thoughts This initiative indicates LHDN's acknowledgment of the unique hurdles that micro businesses encounter, demonstrating a commitment to support the smallest economic contributors in our country. To secure tax deductions from purchases made from MSMEs, taxpayers should meticulously document transactions and retain detailed invoices as proof for claims. However, potential abuse, such as overstating expenses, could occur. Buyers also need to conduct thorough due diligence on MSME transactions to ensure legitimacy and accuracy. This approach allows buyers to responsibly benefit from tax deductions while maintaining the integrity of the tax system. Final Words While larger enterprises will see the continued rollout of the e-invoicing system as planned, aimed at simplifying tax procedures and increasing transparency with effect from 1 August 2024. We will continue to monitor the progress of e-invoicing in Malaysia and provide further updates. Should you have any queries regarding your business’s e-invoicing obligations, please consult LHDN or your tax advisor.     read more

(Tax Update) Understanding Controlled Transfers in Taxation: A Guide for Businesses Controlled transfers, as outlined by the Inland Revenue Board of Malaysia, refer to the disposal and acquisition of assets between related parties under common control. This blog post explains the significance of these transfers, particularly in relation to plant and machinery, within the context of Malaysian tax law. Objective: Our aim is to demystify the tax implications of controlled transfers, helping businesses and accounting professionals grasp how such transactions affect their tax calculations and obligations. What is a Controlled Transfer? A controlled transfer occurs when assets are transferred between parties that are related or under common control. This could be due to ownership, partnership shares, or company management structures. In taxation terms, such transfers are handled uniquely to ensure tax fairness and prevent manipulation of tax liabilities. Tax Implications of Controlled Transfers: Tax neutrality In controlled transfers, the actual sale price is often disregarded. Instead, tax calculations are based on the residual expenditure of the asset, ensuring that tax outcomes remain neutral regardless of the transaction price. Capital Allowances The buyer in a controlled transfer inherits the seller's tax basis in the asset. This means the buyer steps into the shoes of the seller regarding capital allowances, which can impact the buyer's future tax deductions. Avoidance of Balancing Charges Normally, when an asset is sold for more than its tax-written value, a balancing charge arises, increasing taxable profits. However, in controlled transfers, these balancing charges (or allowances) are typically not recognized, avoiding unexpected tax liabilities. Where a disposal of an asset is subject to control, the sale price and the purchase price are ignored and no balancing allowance or balancing charge is imposed on the disposer. The qualifying expenditure (QE) incurred by the acquirer and the date the asset is deemed to have been acquired by the acquirer is determined. Benefits for Business Planning Understanding these rules can significantly aid in tax planning, particularly for groups of companies or partnerships where assets frequently change hands internally. Strategic planning of asset transfers can optimize tax positions across the group without triggering additional tax costs. Conclusion Controlled transfers, while complex, offer a mechanism for businesses to manage their assets within a controlled group without adverse tax consequences. By aligning with a knowledgeable tax agent, businesses can ensure compliance and optimize their tax positions effectively. Source IRB Public Ruling 1/2018 Disposal of Plant and Machinery Part II - Controlled Sales https://phl.hasil.gov.my/pdf/pdfam/PR_1_2018.pdf read more

(Tax Update) Reinvestment Allowance Common Mistakes The Reinvestment Allowance (RA) offers a significant tax incentive for Malaysian companies committed to reinvesting in qualifying projects related to agricultural, manufacturing, and integrated activities. Here are more common mistakes businesses make when claiming the Reinvestment Allowance (RA), based on detailed findings from the Inland Revenue Board of Malaysia (IRB): Insufficient Supporting Documentation: Lack of comprehensive documentation Many businesses rely solely on purchase invoices. The absence of project papers, feasibility studies, business plans, budgets, directors' resolutions, and other relevant documents supporting the project can lead to disqualification of the RA claim. Documentation retention Failure to keep supporting documents for at least seven years as required by Malaysian tax law. Misalignment of Investment and Usage Mismatch of entities Sometimes, the company that incurs the investment is not the same as the company that uses the plant and machinery, leading to ineligible RA claims. Related party transactions Claiming RA on the transfer of assets from related parties who have previously claimed RA on the same assets is a significant error, as it can be seen as double-dipping into tax benefits. Improper Allocation of Expenditures Benefit to related companies/directors Claiming RA on assets incurred for the benefits of related companies or directors, rather than for qualifying business activities. Non-Qualifying activities Businesses sometimes mistakenly claim RA on activities or assets that do not qualify under the RA guidelines. Issues with Payment Records Absence of payment records Not maintaining proper payment records to support the acquisition and use of qualified assets can lead to RA claims being rejected during audits. Concurrent Claims with Other Tax Incentives Overlap with other incentives Businesses often err by claiming RA concurrently with other tax incentives like Pioneer Status (PS) or Investment Tax Allowance (ITA), without understanding the exclusivity clauses that might apply. Lack of Detailed Project Documentation No written or pictorial production flow Failing to provide a written or pictorial representation of the production flow for the qualifying project, which is essential to demonstrate the direct application of the investment towards eligible activities. Final Words These common errors underscore the complexity of tax planning and compliance. Businesses should ensure thorough documentation, accurate allocation of expenses, and clear understanding of the IRB's regulations regarding RA. Engaging with a tax professional can provide the necessary guidance and support to navigate these challenges effectively. Source Public Ruling 10/2022 Reinvestment Allowance Part 1 - Manufacturing Activity Public Ruling 11/2022 Reinvestment Allowance Part 2 - Agricultural and Integrated Activity 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 read more

(Tax Update) Reinvestment Allowance Public Ruling The Reinvestment Allowance (RA) offers a significant tax incentive for Malaysian companies committed to reinvesting in qualifying projects related to agricultural, manufacturing, and integrated activities. This guide simplifies the complex aspects of RA and explains how businesses can capitalize on this opportunity to reduce their tax liabilities. Objectives of RA Our primary goal is to ensure that businesses are well-informed about the benefits of RA and the conditions under which they can claim this allowance. This is particularly pertinent for companies planning substantial reinvestment into their operational capabilities. Eligibility Criteria of RA Company status Taxpayer must be a resident company in Malaysia. Operational duration Must have been in operation for at least 36 months. Project types Investment must be directed towards expansion, modernization, or automation of existing business operations within the same industry, or diversification into related products within the same industry. Qualifying Expenditures Capital expenditure Costs associated with the acquisition of new machinery, upgrading existing facilities, diversification or expanding production capacity are eligible. Specific activities For agricultural businesses, eligible expenses might include land preparation, crop planting, and installation of irrigation systems. Financial Advantage: Tax deduction RA allows for a claim of 60% of qualifying capital expenditure incurred during the year, which can be deducted against the statutory income of the business. Limitation The amount of RA claimed is restricted to 70% of the statutory income from the business for the year. Tax Implications: By reducing taxable income, RA not only decreases the immediate tax burden but also improves cash flow, enabling further investment in business growth and innovation. This fosters a cycle of reinvestment and development, enhancing long-term business viability and competitiveness. How to Claim Documentation Companies need to include RA claims in their annual tax returns using the specific forms provided by the Inland Revenue Board of Malaysia (IRBM). Compliance It is essential to retain all documents related to RA claims as these may be required for audit purposes. Latest Development RA 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). Conclusion The RA provides a tangible incentive for businesses to reinvest in enhancing their operational capacities. By understanding and utilizing this tax incentive, companies can significantly benefit from reduced tax liabilities while strategically positioning themselves for future growth. Source Public Ruling 10/2022 Reinvestment Allowance Part 1 - Manufacturing Activity Public Ruling 11/2022 Reinvestment Allowance Part 2 - Agricultural and Integrated Activity 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