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Shareholders' rights Malaysia

Shareholders' rights Malaysia
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Rights of shareholders Companies Act 2016

A basic business necessity is having an effective way to obtain adequate funding whenever needed for operations and growth. A frequent method used to raise capital injection is by way of allotment of new shares in the company, and another method is to obtain a loan from a financial institution.

Allotment of new shares

According to Section 75 and 76 of the Companies Act (CA), 2016 governed the power to allot new shares in the company. There is another section of the act that provides default pre-emptive rights to new shares issued by a company, in which the new shares rank equally to existing shares as to voting or distribution rights.

This means that any allotment of new shares must first be offered to the existing shareholders. The company is only allowed to offer to any third party to subscribe to the new share if the existing shareholder rejected such offer.

The reason for such pre-emption rights is to protect the existing shareholder to ensure the shareholder is aware of any potential movement in shares to avoid any dilution of their voting or distribution rights.

Any Exception?

Is there any solution that allows the company to offer the allotment of new shares directly to a third party? The answer is yes.

Section 85 (1) of CA, 2016 stated that “Subject to the constitution, where a company issues shares which rank equally to existing shares as to voting or distribution rights, those shares shall first be offered to the holders of existing shares in a manner which would, if the offer were accepted, maintain the relative voting and distribution rights of those shareholders”.

Therefore, the company’s constitution would need to be amended to waive the default policy and allow for this approach.

Final Words

In conclusion, the company must decide whether to remain the default rights stated in the act without amending the constitution. This decision is crucial as any policy adopted in the constitution shall be most beneficial to the company.

 

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Who is the Employee?

Who is the Employee?
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Who is the Employee?

An employee is someone who gets paid to work for a person or company. Workers don't need to work full time to be considered employees—they simply need to be paid to work by an employer (the person or business that pays them).

Definition of Employee in Different Statutory

1. Employment Act 1955

“Employee” refers to anyone earning less than RM 2,000.00 per month, as well as all manual workers, regardless of their pay.

2. Income Tax Act

“Employee’’ is a servant who is employed by the master subsist, he/she is the one who holds the appointment of service.

3. EPF Act 1991

An “employee” is a person who is employed under a contract of service to work for the employer, either in writing or orally, and who does not fall under the first schedule of the EPF Act.

4. SOCSO Act 1969

“Employee” is a person who is employed under a contract of service with an employer either in a written or oral agreement.

5. Employment Insurance System

“Employee” is a person who is employed under a contract of service in the public sector with an employer either in a written or oral agreement.

6. HRDF

“Employee” is a person who is a Malaysian citizen and is employed under service of contract, but it is excluded for those who is employed as domestic servant.

In a conclusion, “employee” is an individual who was paid to perform a specific job which was bounded by contract of services.

However, it has different terms and conditions in different statutory. For more details, please find the link attached to the source.

Source :

https://jtksm.mohr.gov.myakta-borang/akta-peraturan

https://www.kwsp.gov.my

https://www.perkeso.gov.my

https://www.perkeso.gov.my/en/eis-registration

https://hrdcorp.gov.my

https://phl.hasil.gov.my/pdf/pdfam/PR_11_2016.pdf

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New Minimum Wages Order effective 1 May 2022

New Minimum Wages Order effective 1 May 2022
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New Minimum Wages Order effective 1 May 2022...Employers with less than 5 employees are exempted.

Minimum Wages Order 2022 was gazetted on 27 Apr 2022. Minimum wages increase to RM1,500 from 1 May 2022. There is a temporary exemption for employers with less than 5 employees until 31 December 2022 (not applicable to the professional service industry).

Key salient points from the Order as below :

1）On 27 April 2022, the Minister, in the exercise of the powers conferred by section 23 of the National Wages Consultative Council Act 2011 [Act 732], Gazette the Minimum Wages Order 2022 [P.U. (A) 140].

2）This Order shall not apply to a domestic servant as defined under subsection 2(1) of the Employment Act 1955 [Act 265], subsection 2(1) of the Sabah Labour Ordinance [Cap. 67] and subsection 2(1) of the Sarawak Labour Ordinance [Cap. 76].

3）The Minimum Wage of RM 1,500 will come into effect on 1 May 2022 for the following two types of employers.:-

a) an employer who employs five or more employees; and

b) regardless of the number of employees employed, an employer who carries out a professional activity is classified under the Malaysia Standard Classification of Occupations (MASCO) as published officially by the Ministry of Human Resources.

4.1) If the employee is paid on a daily basis, the Minimum Wage will be as follows:-

a) 6 working days in a week - RM 57.69 per day

b) 5 days in a week - RM 69.23 per day

c) 4 working days in a week - RM 86.54 a day

4.2) if the employee is paid on an hourly basis, the wage is not less than RM 7.21 per hour

5.1) For employers employing less than 5 employees, the Minimum Wage of RM 1,500 will come into effect on 1 January 2023

5.2) For Employer with less than 5 employees that do not carry out a professional activity classified under the Malaysia Standard Classification of Occupations (MASCO), the Minimum Wage will be as per the Previous Order until 31 December 2022, i.e.

a) Place of employment is in the City Council or Municipal Council area - RM 1,200

b) Place of employment is located at Other than City Council or Municipal Council area - RM 1,100

6. In addition to the Minimum Wages Order 2022 [P.U.(A) 140/2022], we have also compiled a list of past Minimum Wage Orders and the Malaysian Standard Classification of Occupations.

The Malaysian Standard Classification of Occupations.

1) The Malaysia Standard Classification of Occupations (MASCO) is a national benchmark for the classification of occupations in the employment structure of the country.

MASCO has been developed in accordance with the International Standard Classification of Occupations (ISCO) with changes and modifications to meet the needs of the country.

MASCO lists down the descriptions and tasks as well as the code for each position listed.

It contains ten categories of major groups, namely:

  • Major Group 1: Managers

  • Major Group 2: Professionals

  • Major Group 3: Technicians and Associate Professionals

  • Major Group 4: Clerical Support Workers

  • Major Group 5: Service and Sales Workers

  • Major Group 6: Skilled Agricultural, Forestry, Livestock, and Fishery Workers

  • Major Group 7: Craft and Related Trades Workers

  • Major Group 8: Plant and Machine Operators and Assemblers

  • Major Group 9: Elementary Occupations

  • Major Group 0: Armed Forces

Source :

CCS & Co blog dated 28 Apr 2022

The Minimum Wage is officially RM1,500 from May 1 | 5月1日起最低工资RM1,500

https://bit.ly/3EXuw6Y

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Special Tax Deduction Rental Reduction

Special Tax Deduction Rental Reduction
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Special Tax Deduction Rental Reduction IRBM FAQ (Revised 22 March 2022)

Key salient points on the revised FAQ :

1. Deduction for rental reduction period has extended to:

SME: from April 2020 extend to Jun 2022 (P.U.(A) 479/2021) (Previously is until December 2021)

Non-SME: January 2021 extend to Jun 2022 (P.U.(A) 480/2021) (Previously is until December 2021)

 

2. Eligible person for deduction has extended to include Micro, previously only for Small and Medium Enterprise (SME)

 

3. SME Certificate issued by SME Corporation Malaysia from Apr 2020 to Dec 2020 can be used as verification of the SME status for rental reduction until 30.06.2022.

 

4. The supporting document needs to be kept as follows:

 

  • Stamped tenancy agreement (new/renewal)

  • Statement of rental income

  • Certificate issued by the SME Corp. Malaysia for SME

    (only for the rental period: April 2020 – December 2020 need the certificate for verification)

  • Need to furnish the Worksheet

HK-C16B – Sdn Bhd, LLP and business trust

HK-4E – Other than Sdn Bhd, cooperatives, LLP, and business trust

Read our past Facebook postings on the special tax deduction on rental reduction :

1. Great News to Landlords! The special deduction on rental reduction with at least 30% to Small and Medium Enterprise (SMEs) and Non-Small and Medium Enterprise (Non-SMEs) has been gazette on 02 September 2021 (Publication date on 08 September 2021). dated on 23.09.2021

https://www.facebook.com/www.ktp.com.my/posts/6183426361699606

2. 中小企业租金特别扣除 dated on on 15.01.2021

https://www.facebook.com/www.ktp.com.my/posts/4948113128564275

3. 没有宪报的命令 (gazette order ) @ 29/11/20, 这些税收优惠只能视为 ''真的假不了，假的真不了''. dated on 30.11.2020

https://www.facebook.com/www.ktp.com.my/posts/4752532264789030

4. We, as approved tax agent, cannot claim these two tax incentives namely dated on 30.11.2020

https://www.facebook.com/www.ktp.com.my/posts/4752610054781251

5. 我的店主和我拿SME Status Certificate!! dated on 3.7.2020

https://www.facebook.com/www.ktp.com.my/posts/4046044398771157

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Is director’s medical expense tax-deductible in Malaysia?

Is director’s medical expense tax-deductible in Malaysia?
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Is director’s medical expense tax-deductible in Malaysia?

In general, medical fee for the employee is tax-deductible under S 33 of the Income Tax Act 1967.

However …

 

Public Ruling No. 11/2019 - Benefits In Kinds.

Under section 13(1) b Income Tax 1967, medical and dental benefits are exempted from income tax for employees

Under paragraph 8.3.1 , if the employee receiving BIK from the employer has control over his employer (company) there is no exemption on the medical fee on the director in control company.

What is control?

For a company, the power of an employee to control is through :

  1. The holding of shares or

  2. The possession of voting power in or

  3. By virtue of powers conferred by the articles of association or another document.

Question on tax deductibility

So what is your tax position on director’s medical fee (allowable vs not-allowable expenditure) in Sdn Bhd (controlled company)?

  1. If the medical fee on the director is BIK and PCB is deducted accordingly on the director’s remuneration. Or

  2. If medical fee is DEEMED as tax exempted BIK !

What is your tax position on this taxing issue?

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An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

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Applicability Of Section 140 Of The ITA 1967 on Transfer Pricing Adjustment

Applicability Of Section 140 Of The ITA 1967 on Transfer Pricing Adjustment
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Applicability Of Section 140 Of The ITA 1967 on Transfer Pricing Adjustment

SECTION 140 – POWER TO DISREGARD CERTAIN TRANSACTIONS

Section 140 of the Act provides wide and general powers to the Director

General of the Inland Revenue (DGIR) to combat tax avoidance by disregarding certain transactions and computing or re-computing tax liability of a taxpayer.

 

Where the DGIR has reason to believe that any transaction produces the effect

of:

• altering the incidence of tax

• relieving from a tax liability

• evading or avoiding tax, or

• hindering or preventing the operation of the Act

 

he may disregard or vary such a transaction to counteract its intended effect.

In particular, DGIR may invoke Section 140 in respect of transactions between:

• related parties – ie persons, one of whom has control over the other or both are under common control, or

• individuals who are relatives (parent, child, sibling, uncle, aunt, nephew,

niece, cousin, grandparent, grandchild)

on the grounds that such transactions are not on par with transactions

between independent parties dealing at arm’s length.

 

Transfer pricing adjustment

Whilst the Revenue is empowered to counteract any tax avoidance scheme via Section 140(1) of the ITA, this provision does not extend to transfer pricing adjustments.

We examine a recent decision by the Special Commissioner of Income Tax in OMSB v KPHDN where the Revenue’s transfer pricing adjustments were set aside.

RDS analysis on OMSB v KPHDN

Read the full story on the RDS blog on “Transfer Pricing Adjustments: Applicability Of Section 140 Of The ITA”

https://www.rdslawpartners.com/post/transfer-pricing-adjustments-applicability-of-section-140-of-the-ita

 

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How to amend tax return after filing under S 131 of the Income Tax Act 1967

How to amend tax return after filing under S 131 of the Income Tax Act 1967
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How to amend tax return after filing under S 131 of the Income Tax Act 1967

Overview

Inland Revenue Board (IRB) allows taxpayers to file an Amended Return Form (ARF) if taxpayers need to fix an error or mistake and result in under-payment of taxes.

However, how about if the taxpayer has overpaid the taxes because forgot to claim a tax credit or deduction in Income Tax Return Form (ITRF)? Don't worry, the taxpayer can make an application for relief under Section 131 and 131A of the Income Tax Act 1967 (ITA).

Let's see the conditions and procedure to be satisfied with the application.

Key takeaway:

You will understand:

1. What is considered an error or mistake in ITRF?

2. What are the time frames for the application?

3. What are the conditions for application?

4. How to apply for relief?

Summary of learning:

What is considered an error or mistake in ITRF?

The taxpayer had paid excessive tax because of the following reason:

- Error or omission to deduct an allowable expense

- Arithmetical error

- Misleading of laws

- Income for the previous YA is reported in current YA

- Other non-error or mistake, for example, approval of tax exemption under Promotion of Investment Act 1986.

What is the conditions for application?

The conditions under Section 131 and Section 131(A) of ITA are:

1. To take note that the application will not be considered if the ITRF is in accordance with known stand, rules and practices the DGIR prevailing at the time when the assessment is made.

o Example of the known stand, rules and practices are private ruling or advances ruling, guidelines by IRB, case law and any other written evidence.

2. Taxpayer must pay all the taxes for the relevant year of assessment.

3. Taxpayer must make an application within the time frames after the year assessment.

What are the time frames for the application?

The application for the relief can be made within the following time frames:

i. Within 5 years after the end of the year:

o The errors or mistakes found after the end of the year of assessment in which the assessment is deemed.

o Approval of any exemption, relief, remission, allowance or deduction is granted after year assessment in which the ITRF is furnished; or

o Deduction is granted under ITA or written law gazetted after the ITRF is furnished;

ii. Within 1-year after the end of the year:

o Deduction on expenses is allowed after the payment of withholding tax and related increased taxes.

How to apply for relief?

Taxpayers can make an application for relief by a letter or Form CP15C by stating the reason in detail relating to the application.

Sources:

Public Ruling 7/2020 Appeal Against An Assessment And Application For Relief

https://phl.hasil.gov.my/pdf/pdfam/PR_07_2020.pdf

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(Latest update) Withholding Tax on Payments to Agents

(Latest update) Withholding Tax on Payments to Agents
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(Latest update) 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

Key salient points from IRB Response to Chartered Tax Institute of Malaysia Comments on 15/4/2022

1. LLPs are excluded from the definition of a payer company.

2. The definition of “Cash” includes transactions via payment vouchers, prepaid credit and e-wallets.

3. The WHT is applicable on the amount before the any contra transactions are made. Hence, the earlier comment in the FAQ that credit notes are excluded from the WHT.

4. Section 107D is applicable on ADD who receive the commissions based on the achievement of sales or services rendered for the payer company.

5. The WHT is not applicable to the payer company’s staff who are ADD if the commission is subjected and the commission is reported in the Form EA.

6. Out-of-pocket expenses incurred by the ADD have to be specifically identified in advance. If the expenses arise from sales, transactions or schemes carried out, then the WHT is applicable on the out-of-pocket expenses.

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. Withholding Tax on Payments to Agents dated on 17.03.2022

https://bit.ly/3L3JzOB

 

2. 2% withholding tax on commission dated on 30.12.2021

https://bit.ly/3hRrk20

 

3. 预算案 2022 dated 19.11.2021

https://bit.ly/3tKU7dM

 

4. Budget 2022 - SME edition dated on 18.11.2021

https://bit.ly/3IWhAiR

 

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没有资格获得退税2%的补偿

没有资格获得退税2%的补偿
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没有资格获得退税2%的补偿

  • 根据 ITA 在到期日之后提交的纳税申报表

  • 根据 ITA 第 110 条抵销的税款超过应缴税款

  • IRB 根据 ITA 第 90(3)、91、91A、92 和 96A 条提出的评估。

  • 纳税人申请延长报税时间。

  • 有人对评估提出上诉

  • 在提交截止日期后的 90 或 120 天内，IRB 审计需要缴纳额外的税款

  • 支付的超额税款不是根据 ITA 第 107,107B 和 107C 条分期付款

 

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退税2%的补偿

退税2%的补偿
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退税2%的补偿

你有权获得 2% 的补偿. 如果 IRB 迟退还 (refund) 多付的税款 (tax overpayment)

Terms & Conditions :

1. 在截止日期前提交所得税申报表. 所得税申报表必须按时,完整和正确提交.

2. 可退税的纳税类型

  • PCB：每月减税

  • CP500：分期付款通知书

  • CP204/CP205：估计公司/有限责任合伙企业/社会应缴税款

计算公式

2%的赔偿金按照以下公式支付：

𝑻𝒂𝒙 𝒓𝒆𝒇𝒖𝒏𝒅 × (𝑻𝒐𝒕𝒂𝒍 𝒏𝒐.𝒐𝒇 𝒅𝒂𝒚𝒔 𝒍𝒂𝒕𝒆 )/(𝟑𝟔𝟓 𝒅𝒂𝒚𝒔 ) × 2%

  • 通过电子填写, 自提交截止日期起 90 天后赔偿计算时间计算

  • 通过邮寄/快递,自提交截止日期起 120 天后 赔偿计算时间计算

 

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How do you audit the opening balance for initial engagement?

How do you audit the opening balance for initial engagement?
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How do you audit the opening balance for initial engagement?

Overview

The responsibilities and requirements to perform an audit of opening balances of the financial statements by a new auditor is outlined in the International Standard on Auditing (ISA) 510 Initial Audit Engagements – Opening Balances

The objective of audit opening balance

The objective of the auditor with respect to opening balances (OB) is to obtain sufficient appropriate audit evidence about whether:

1. The OB contain misstatements that materially affect the current period’s financial statements.

2. Appropriate accounting policies reflected in the OB that have been consistently applied in the current period’s financial statements or changes thereto are appropriately accounted for and adequately presented and disclosed in accordance with the applicable financial reporting framework.

The audit procedures

The auditor shall perform such additional audit procedures as are appropriate in the circumstances to determine the effect on the current period’s financial statements if the OB contain misstatements that could materially affect the current period’s financial statements.

General Audit Procedures

  1. The auditor shall read the most recent financial statements including disclosures.

  2. The auditor shall determine whether the prior period’s closing balances have been correctly brought forward to the current period or, when appropriate, have been restated.

  3. The auditor shall obtain sufficient appropriate audit evidence to determine whether the opening balances reflect the application of appropriate accounting policies.

  4. The auditor shall obtain sufficient appropriate audit evidence to review the predecessor auditor’s working papers to obtain evidence regarding the opening balances.

  5. The auditor shall obtain sufficient appropriate audit evidence to perform specific audit procedures to obtain evidence regarding the opening balances.

Predecessor action

What can be done if the predecessor auditor does not, or cannot, provide access to the audit working papers for the previous reporting period?

The successor auditor should evaluate whether audit procedures performed in the current period provide evidence relevant to the opening balances, or perform specific audit procedures to obtain evidence regarding the opening balances, and propose opening balance adjustments, if necessary.

The auditor might want to recompute the allowance for doubtful debts accounts at the end of the prior period and compare original and recomputed numbers for consistency and reasonableness.

The auditor might want to review the property and equipment and its depreciation schedules for the prior year to compare them to the opening balances, as well as review the consistency of depreciation policies.

Source :

MIA Accountant Today

ISA 510 Opening Balances dated 14 January 2020

https://www.at-mia.my/2020/01/14/isa-510-opening-balances/

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Tax Responsibility of Employer

Tax Responsibility of Employer
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Tax Responsibility of Employer

Overview

As an employer, are you aware of the responsibilities and deadlines you have to adhere to? To make sure that you do not miss the deadline, here is the summary to help you.

Key takeaways:

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

1. Who is the employer?

2. What are the employer’s responsibilities?

3. What are the consequences of failing to comply?

Summary of learning

1. Who is the employer?

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

2. What are the employer’s responsibilities?

a) Register an Employer’s number (E)

The E number can be registered through https://edaftar.hasil.gov.my/.

b) Monthly Tax Deduction (MTD)

The MTD must be calculated based on the employee’s monthly remuneration and remitted to IRBM on or before the 15th of the subsequent month.

c) Employee’s Statement of Remuneration (Form EA)

Form EA has to be prepared and provided to employees on or before the last day of February of the following year.

d) Return Form of Employer (Form E)

Complete and submit the Form E with C.P.8D on or before 31 March of the following year via e-Filing.

e) Notification of New Employee (CP22)

To notify IRBM who is or is likely to be chargeable to tax within 30days after commencement of employment and submitted to any IRBM office.

f) Notification of cessation of employment or cessation by reason of death for an employee in private section (CP22A)

To notify IRBM who is or is likely to be chargeable to tax not less than 30days before the cessation of employment and submitted online via e-SPC or at IRBM office which handles the employee income tax number.

g) Notification of cessation of employment or cessation by reason of death for an employee in the public sector (CP22B)

To notify IRBM who is or is likely to be chargeable to tax not more than 30days after being informed of the death and submitted online via e-SPC or at IRBM office which handles the employee income tax number.

h) Notification of employee leaving Malaysia for more than 3 months (CP21)

To notify IRBM who is chargeable to tax not less than 30days before the expected date of departure and submitted online via e-SPC or at IRBM office which handles the employee income tax number.

i) Statement of monetary & non-monetary incentive payment to an agent, dealer or distributor pursuant to Section 83A of the Income Tax Act 1967 (CP58)

- To prepare the CP58 for its agents, dealers, and distributors.

- To render the CP58 by 31 March of the following year to its agents, dealers, and distributors, if the amount of incentive (monetary and non-monetary) exceeds RM5,000 during the calendar year.

- If LHDN requests for a listing of CP58 information, the employer shall include all information of the agent, dealer or distributor even if the amount is below RM5,000.

j) Withholding Tax (WHT) on Payments to agent, dealer or distributor

Effective from 1 January 2022, the 2% 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.

3. What are the consequences of failing to comply?

a) Failure to furnish a Return Form

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

b) Late payment

- 10% shall be imposed on the amount unpaid without any further notice.

Sources

Employer Responsibility

https://www.hasil.gov.my/en/employers/responsibility-of-employer/

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What is the tax treatment for the income received by medical practitioners (Specialist Doctors)?

What is the tax treatment for the income received by medical practitioners (Specialist Doctors)?
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What is the tax treatment for the income received by medical practitioners (Specialist Doctors)?

IRB has produced a guideline on tax treatment for specialist doctors again.

Summarised below are the key salient points :

Case study 1

A specialist doctor with a Sdn Bhd has an agreement with a private hospital.

- Doctor has received consultation fees from the hospital.

- Patient was referred by the private hospital and paid to the hospital directly.

- Facilities in the private hospital have been used during medical treatment.

Tax treatment: The consultation fee received shall be reported under S4(a) of ITA 1967 as individual business income.

Case study 2

A specialist doctor with a Sdn Bhd has been involved in consultation services and medical-related fields (i.e. medical goods trading, pharmaceuticals, and health aids).

Tax treatment: As there are two types of income, it shall be declared with separated sources of income.

a) The consultation fee received shall be reported under S4(a) of ITA 1967 as individual business income.

b) The medical goods trading income shall be reported under S4(a) of ITA 1967 as individual or company business income.

*** Form B: S4(a) of ITA 1967 as individual business income

*** Form C: S4(a) of ITA 1967 as company business income

Case study 3

A specialist doctor with a Sdn Bhd owns a clinic in a private hospital.

- Patient visits the clinic directly without any referral by the private hospital.

- No facilities in the private hospital are being used during medical treatment.

Tax treatment: The consultation fee received shall be reported under S4(a) of ITA 1967 as company business income.

Case study 4

A specialist doctor under an employment contract with a private hospital.

- Doctor has received director remuneration from the hospital.

Tax treatment: The director remuneration received shall be reported under S4(b) of ITA 1967 as employment income.

Expenses can be claimed against S4(a) business income of ITA 1967

Condition: The expenses incurred are wholly and exclusively in the production of gross income.

Example for expenses:

  •  Professional indemnity insurance

  •  Seminars, workshops or conferences approved by CPD Review Committee

  •  Rental of equipment/ operating room in a private hospital

  •  Medical practitioner license and etc.

Capital allowance can be claimed against S4(a) business income of ITA 1967

Persons Eligible to Claim Capital Allowances

  •  A person who is carrying on a business;

  •  Has incurred capital expenditure on an asset for the business;

  •  The asset is used for business purposes.

Source:

Garis Panduan Layanan Cukai Ke Atas Pendapatan Pengamal Perubatan (Doktor Pakar) Di Hospital Swasta Sama Ada Ditaksir Di Bawah Individu Atau Syarikat

https://bit.ly/37bHJfQ

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How are joint ventures accounted for?

How are joint ventures accounted for?
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How are joint ventures accounted for?

i. What is an investment in a joint venture?

- A contractual agreement involved two or more parties.

- The parties involved have joint control over the business activity.

ii. Types of Joint venture

- Jointly controlled operations

- Jointly controlled assets

- Jointly controlled entities

iii. Recognition and measurement

1. Jointly controlled operations

Definition:

- Two or more venturers use their resources or expertise to produce a product.

- Each venture bears its expenses and liabilities and raises its finance.

- The revenue from the sale of the joint product and any expenses incurred in common are shared among the venturers.

Recognition in venturer's financial statements:

- Assets and liabilities incurred

- Expenses incurred and share of income

2. Jointly controlled assets

Definition:

- The joint control, and often the joint ownership, of assets dedicated to the joint venture.

Recognition in venturer's financial statements:

- share of the jointly controlled assets

- share of any liabilities incurred jointly or incurred by the venturer

- share of income

- share of expenses incurred.

3. Jointly controlled entities

Definition:

- A corporation, partnership, or other entity in which each venturer has an interest.

Recognition in venture’s financial statements:

(i) Cost model

- Cost less accumulated impairment losses

- Recognise distributions received from the investment as income

(ii) Equity model

- Recognise at the transaction price (including transactions costs)

- Subsequently adjusted to reflect the investor’s share of the profit or loss

(iii) Fair value model

- Initially, measured at transaction price (exclude transaction cost).

- Subsequently, measured at fair value, any changes recognized in profit or loss

4. What differentiates an interest in the joint venture from an investment in an associate?

Investment in associate = The investor has significant influence over the investee, by possessing the power to participate in their financial and operating decisions.

Joint venture = The parties involved have the power to joint control over the arrangement.

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Tax clearance Malaysia LHDN

Tax clearance Malaysia LHDN
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Tax clearance Malaysia LHDN

Latest tax audit operasi

IRB has initiated tax audit on the following

1. CP21 - Notification by Employer on Employee's departure from Malaysia

http://phl.hasil.gov.my/pdf/pdfborang/CP21_Pin.1_2021.pdf

2. CP22 - Notification of New Employee

http://phl.hasil.gov.my/pdf/pdfborang/CP22_Pin.1_2021.pdf

3. CP22A - Notification of Cessation of Employment

http://phl.hasil.gov.my/pdf/pdfborang/CP22A_Pin.1_2021.pdf

Penalty on non-compliance on CP21, CP22 & CP22A

Delay in submitting the application for tax clearance may be subjected to penalty. The penalty will be in the form of fines between MYR 200 and MYR 20,000 and imprisonment for up to six months.

LHDN may take legal action against the employer who fails to pay the outstanding tax as per the Tax Clearance Letter.

How to submit CP21 + CP 22A online via IRB e-SPC.

STEP 1: Go to LHDN Website: https://ez.hasil.gov.my （网站）~ Key in New IC number

STEP 2: Key in password

STEP 3: Select e-SPC

STEP 4: Key in Employer’s number

STEP 5: Select Form and Key in accordingly

  • CP22A – Private （私人公司）

  • CP22B – Government （政府）

  • CP21 – Foreign Leaver （外国人)

STEP 7: Select Log Out

What documents IRB ask for?

Basically these are the documents required in a typical tax audit on employer on CP21, CP22 & CP22A :

•Staff listing

•Form E – Return of C.P.8D

•Form 22

•Form 21

•Form 22A

•Payroll System Data

•Latest of Form 9, 24,49 and 13

•Borang D(Kaedah 13)and Borang A(Maklumat Perniagaan)

•Form EA/EC

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New e-Telegraphic Transfer (e-TT) System for Tax Payments

New e-Telegraphic Transfer (e-TT) System for Tax Payments
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New e-Telegraphic Transfer (e-TT) System for Tax Payments

Following the Inland Revenue Board (“IRBM”)’s media release on 3 March 2022, the IRBM has rolled out the new e-TT system which will generate a unique Virtual Account Number (VA) as a payment identification.

This will assist the IRBM to trace the electronic transfer of funds by taxpayers to its accounts and identifying the taxpayers.

Effective from 1 April 2022, taxpayers who wish to make payments through Telegraphic Transfer, Electronic Funds Transfer and Interbank Giro from within and outside Malaysia, are required to obtain a Virtual Account Number.

Key summary of the new e-TT system for tax payment

1. Virtual Account (VA) number is required as a payment identification identity from IRBM for tax payment with effect from 1st April 2022.

2. Taxpayer will receive the e-TT notification in your email from IRBM.

3. Each VA number is limited to one transaction.

4. In case of withholding tax (WHT) payment, do remember to email the FULL documents to WHToperasi@hasil.gov.my on the day of payment.

5. & more

Type of tax payments

The Virtual Account Number generated under the e-TT system caters for the following types of taxes:-

(i) Income tax

(ii) Withholding tax

(iii) Petroleum income tax

(iv) Compound

(v) Public entertainer

(vi) Real Property Gains Tax – Section 21B retention sum payment

Each Virtual Account Number can only be used for one transaction.

Withholding Tax Payment operational issues

In case of WHT payment, do remember to email the FULL documents to WHToperasi@hasil.gov.my on the day of payment.

Full documents :

  1. Completed CP tax payment form

  2. Invoice

  3. Proof of payment

  4. Virtual Account No.

Source

1.Read the media release from IRBM on e-TT

Click https://bit.ly/37ptnID

2.How to generate a Virtual Account Number (VA) as a payment identification identity from IRBM?

Click https://bit.ly/3JhHe0K

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How BAD is a Qualified Audit Report?

How BAD is a Qualified Audit Report?
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How BAD is a Qualified Audit Report?

Overview

Under the Companies Act 2016, all companies incorporated in Malaysia must have their accounts audited by an approved auditor. The auditor will examine the financial statements and records of the company, to ensure that all reports and documents are accurate and free from misstatement. If the auditor is not able to conclude that the financial statements are free from material misstatement, they express a modified opinion.

Key takeaways:

You will understand: -

1. What is a modified audit report?

2. What are the types of modified audit reports?

3. What are the circumstances that can lead to a modified audit opinion?

4. What are the consequences of a modified audit report?

Summary of learnings:

1. What is a modified audit report?

- A modified audit report can be defined as the financial statements which are not free from material misstatement. In simple words, a modified audit report means an audit report which is not clean in the opinion of the auditor.

2. What are the types of modified audit reports?

- Qualified Opinion

- Adverse Opinion

- Disclaimer of Opinion

3. Circumstances when a modified auditor’s opinion is required

The auditor shall express a modified opinion when:

- There is a limitation of scope in the auditor’s work to obtain sufficient audit evidence.

- Disagreement with management regarding the application of accounting policies.

- The financial statements are not free from material misstatement based on the audit evidence obtained.

4. What are the consequences of a modified audit report?

-It is unfavourable for financial institutions to provide loans to the company. The financial institution may offer a higher borrowing interest rate than the market rate.

- The existing banking facilities of the company may be terminated by the financial institution.

-The suppliers of the company may shorter the credit terms.

Source:

ISA705 (Revised): Modifications to the Opinion in the Independent Auditor’s Report

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

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Difference Between GAAP vs IFRS

Difference Between GAAP vs IFRS
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Difference Between US GAAP vs IFRS

US GAAP vs IFRS are the two most dominant systems of accounting. The International Financial Reporting Standards (IFRS) are used by international companies while companies use GAAP in the U.S.

Summarised are the key difference on these US GAAP vs IFRS

  1. International Accounting Standard Board vs Financial Accounting Standard Board

  2. USA vs The rest of world

  3. Rule based vs Principal based with flexibility

  4. General interpretation for the entity vs Specific procedure for the entity

  5. LIFO as preferred method for inventory valuation vs LIFO is not preferred for inventory valuation

  6. Cost model on PPE vs Cost & Revaluation model can be used on PPE

  7. Fair value on intangible assets vs Future economic benefits on the intangible assets

  8. R&D is expensed off vs Some development cost can be capitalized and amortised

  9. Extraordinary & unusual items are show below net profit vs Not allowed

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Personal Income Tax Relief 2021 Malaysia

Personal Income Tax Relief 2021 Malaysia
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Personal Income Tax Relief 2021 Malaysia

It is tax season whereby taxpayers are to file tax returns and pay taxes accordingly. Other than truthfully declaring your income and reliefs, and submitting your tax files before the deadline stipulated by LHDN, taxpayers are also responsible for record-keeping.

.What is the 2021 personal deduction?

With that, here’s the full list of tax reliefs for YA 2021.

1.Individual and dependent relatives - RM9,000

2. Medical treatment, special needs and carer expenses for parents (Medical condition certified by medical practitioner) - RM8,000 (Restricted)

3. Purchase of basic supporting equipment for disabled self, spouse, child or parent - RM6,000 (Restricted)

4. Disabled individual - RM6,000

5.Education fees (Self)

  1. Other than a degree at masters or doctorate level - Course of study in law, accounting, islamic financing, technical, vocational, industrial, scientific or technology

  2. Degree at masters or doctorate level - Any course of study

  3. Any course of study undertaken for the purpose of up-skilling or self-enhancement recognized by the Director General of Skills Development under the National Skills Development Act 2006 – effective from YA 2021 until YA 2022. (Restricted to RM1,000)

RM7,000 (Restricted)

6. Medical expenses for serious diseases for self, spouse or child - RM8,000 (Restricted) 

7. Medical expenses for fertility treatment for self or spouse

8. Vaccination expenses for self, spouse and child. Types of vaccines which qualify for deduction are as follows:

  1. Pneumococcal;

  2. Human papillomavirus (HPV);

  3. Influenza;

  4. Rotavirus;

  5. Varicella;

  6. Meningococcal;

  7. TDAP combination ( tetanus-diphtheria-acellular-pertussis); and

  8. Coronavirus Disease 2019 (Covid-19)

RM1,000 (Restricted)

9 (i) Complete medical examination for self, spouse, and child as defined by the Malaysian Medical Council (MMC). 
(ii) COVID-19 detection test including purchase of self detection test kit for self, spouse, child.
RM1,000 (Restricted)

10. Lifestyle – Expenses for the use / benefit of self, spouse or child in respect of:

  1. purchase and subscription of books / journals / magazines / newspapers (including electronic subscription) / other similar publications (Not banned reading materials)

  2. purchase of personal computer, smartphone or tablet (Not for business use)

  3. purchase of sports equipment for sports activity defined under the Sports Development Act 1997 and payment of gym membership

  4. payment of monthly bill for internet subscription (Under own name)

RM2,500 (Restricted)

11. Lifestyle – Purchase of personal computer, smartphone or tablet for self, spouse or child and not for business use

This deduction is an addition to the deduction granted under item 10.

RM2,500 (Restricted)

12. Purchase of breastfeeding equipment for own use for a child aged 2 years and below (Deduction allowed once in every 2 years of assessment) - RM1,000 (Restricted)

13. Payment for child care fees to a registered child care centre / kindergarten for a child aged 6 years and below - RM3,000 (Restricted)

14. Net deposit in Skim Simpanan Pendidikan Nasional (Net deposit is the total deposit in 2021 MINUS total withdrawal in 2021) - RM8,000 (Restricted)

15. Husband / wife / payment of alimony to former wife- RM4,000 (Restricted)

16. Disabled husband / wife - RM5,000

17. Each unmarried child and under the age of 18 years old- RM2,000

18. Each unmarried child of 18 years and above who is receiving full-time education (''A-Level'', certificate, matriculation or preparatory courses).

RM2,000

19. Each unmarried child of 18 years and above that:

  1. receiving further education in Malaysia in respect of an award of diploma or higher (excluding matriculation/ preparatory courses).

  2. receiving further education outside Malaysia in respect of an award of degree or its equivalent (including Master or Doctorate).

  3. the instruction and educational establishment shall be approved by the relevant government authority.

RM8,000

20. Disabled child - RM6,000

Additional exemption of RM8,000 disable child age 18 years old and above, not married and pursuing diplomas or above qualification in Malaysia @ bachelor degree or above outside Malaysia in program and in

Higher Education Institute that is accredited by related Government authorities

RM8,000

21. Life insurance and EPF INCLUDING not through salary deduction

  1. Pensionable public servant category

    • Life insurance premium

  2. OTHER than pensionable public servant category

    • Life insurance premium (Restricted to RM3,000)

    • Contribution to EPF / approved scheme (Restricted to RM4,000)

RM7,000 (Restricted)

22. Deferred Annuity and Private Retirement Scheme (PRS) - with effect from year assessment 2012 until year assessment 2025 - RM3,000 (Restricted)

23. Education and medical insurance (INCLUDING not through salary deduction) - RM3,000 (Restricted)

24. Contribution to the Social Security Organization (SOCSO) - RM250 (Restricted)

25. Payment for accommodation at premises registered with the Commissioner of Tourism and entrance fee to a tourist attraction

(Expenses incurred on or after 1st March 2020 until 31st December 2021)

Registered accomodation premises can be check thru link of : http://www.motac.gov.my/en/check/registered-hotel

RM1,000 (Restricted)

26. Additional lifestyle tax relief related to sports activity expended by that individual for the following:

  1. Purchase of sport equipment for any sports activity as defined under the Sport Development Act 1997 (excluding motorized two-wheel bicycles);

  2. Payment of rental or entrance fee to any sports facility; and

  3. Payment of registration fee for any sports competition where the organizer is approved and licensed by the Commissioner of Sports under the Sport Development Act 1997.

RM500 (Restricted)

 

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Bad debts written off LHDN

Bad debts written off LHDN
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一定要出律师信坏账才可以扣税吗?

让我们参考 IRB Public Ruling 4/2019 坏账被定义为 在采取适当措施收回后被认为无法收回的债务 :

  1. 发出提醒通知

  2. 债务重组计划.

  3. 债务清偿的重新安排.

  4. 有争议的债务的谈判或仲裁.

  5. 法律诉讼.

IRB Tax Ruling

Public Ruling No 4/2019 states bad debt is defined as a debt that is considered not recoverable after appropriate steps have been taken to recover it.

Public Ruling No 4/2019 described the basis of writing off a debt as bad and the actions to be taken to recover the debt as well as the evidence to prove such actions have been taken.

Reasonable steps have been taken to recover the trade debt:

  • Issuing reminder notices

  • Debt restructuring scheme

  • Rescheduling of debt settlement

  • Negotiation or arbitration of a disputed debt

  • Legal action

KTP/THK key takeaways

不必要出律师信....坏账才可以扣税吗?

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  • 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

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.

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

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THK Group of Companies THK Management Advisory Sdn Bhd 200401000220 (638723­X) THK Secretarial PLT 202304003367 (LLP0037327-LGN)

Wisma THK, No. 41, 41-01, 41-02, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru, Johor, Malaysia.
+6012-771 7903 (Secretary Department)
+6012-771 7803 (Account Department)
+607-361 3443

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