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Reinvestment Allowance (RA) on Factory

Reinvestment Allowance (RA) on Factory
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The Myths on Reinvestment Allowance (RA)

What is RA?

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

The allowance will be withdrawn if the asset for which the allowance is granted is disposed of within five years

Definition of factory

Factory means “portion of the floor areas of a building or an extension of a

the building used for the purposes of a qualifying project to place or install plant or machinery or to store any raw materials, or goods or materials manufactured prior to sale:

1/10 ruling on factory

Provided that in respect of the portion of the building or extension of the building used for the storage of raw materials, or goods or materials, or both, it shall not be more than one-tenth of the total floor areas of the building or the

extension to that building;”

Tax planning tip

The restriction on warehouse/storage issues which taxpayers may not agree.

There are others tax incentive available in Malaysia namely Pioneer Status or Investment Tax Allowance from MIDA which is more business friendly.

Past KTP blog on RA

Read our past blog posting on RA

1. RA part 1 dated 26/02/21

https://www.ktp.com.my/blog/ra-part1/26feb2021?rq=reinvestment%20allowance

2. RA part 2 dated 04/03/21

https://www.ktp.com.my/blog/special-ra-part2/04march2021?rq=reinvestment%20allowance

3. RA part 3 dated 11/03/21

https://www.ktp.com.my/blog/special-ra-part3/11march2021?rq=reinvestment%20allowance

Source


IRB Practice Note 1/2022 - EXPLANATION IN RELATION TO THE DEFINITION OF FACTORY FOR THE PURPOSE OF REINVESTMENT ALLOWANCE CLAIM UNDER SCHEDULE 7A, INCOME TAX ACT 1967

https://phl.hasil.gov.my/pdf/pdfam/PN_1_2022.pdf

PS : Why opt for RA when there are others tax incentives available in Malaysia?

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Tax Deduction on Tax and Secretarial Fee 2022

Tax Deduction on Tax and Secretarial Fee 2022
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Tax Deduction on Tax and Secretarial Fee 2022

With the gazette of The Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee (Amendment Rules 2021), we are pleased to highlight the changes.

T&C apply.

Key summary of the special tax deduction of tax and secretarial fee

  1. The secretarial fee and tax filing fee are deductible in the Year of Assessment when the fees are incurred (the words “and paid” are deleted in the 2021 Rules) with effect from the Year of Assessment 2022.

  2. Secretarial and tax filing fees for YA 2020 and 2021 are only tax-deductible when the fees are incurred and paid.

Secretarial Fee

Secretarial fee charged in respect of secretarial services to comply with the statutory requirements under the Companies Act 2016 is deductible.

1. Lodgement of annual return and Financial statements.

2. Change of name

3. Add or delete business activities

4. Retainer fees

5. Issuance or transfer of shares

6. Update register of members and directors

7. Appointment of director or auditor

General secretary charges NOT deductible:

1. Incorporation fee for new company (include professional fees)

2. Fee for acquisition of shelf company (include professional fees)

3. Name search fee to SSM (include professional fees)

4. Preparation of registration documents

5. Company profile printout from SSM

6. Professional fee for preparation of ordinary/ special resolution

7. Professional fee for preparation of other resolution, confirmation letter to bank or solicitor

8. Professional fees for preparation of trust deed

9. Preparation fees for CTC documents

10. Attestation fees for commissioner for Oaths

Tax Filing Fee

A tax agent approved under the Income Tax Act 1967 (Not ACCA member, MIA member, accounting graduate, ex-tax staff..)

  1. Preparation and submission of income tax returns

  2. Estimate of tax payables

A person in respect of services provided for the preparation and submission of returns in the prescribed form for the purposes of:

  1. Section 26 of the Sales Tax Act 2018

  2. Section 26 of the Service Tax Act 2018

  3. Section 19 of the Departure Levy Act 2019;

  4. Section 19 of the Tourism Tax Act 2017

Read our past blog on the special tax deduction on secretarial and tax filing fee :

1. Tax and Secretarial Fee Tax Deduction Malaysia 2020 dated on 31.12.2020

https://www.ktp.com.my/blog/sectaxfee/31dec2020

2. Discover the latest update on tax deductibility for secretarial and tax fee from IRB guideline dated on 2.10.2020

https://www.ktp.com.my/blog/fwwses3ezyrg9gf-7r8xl-aaa5d-739bg-8lcep-c266s-s32bd-wf736-e4xsk-x3fp4-gj5z8-mwgzk-m3696-gw4b5-mmmbe-2nfz4-wxwag-s27pr-ldnya-zkdxr-2flme-xmbx6-n7fdm

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Myhijau tax incentive on power solar system in Malaysia

Myhijau tax incentive on power solar system in Malaysia
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Myhijau tax incentive on power solar system in Malaysia

☎️KTP's client tax question :

Any tax incentive on power solar system on my factory ?

秘KTP assistance to our KTP's client

The solar system can be qualified under Green Investment Tax Allowance (GITA):

Conditions:

1. To check solar system is the qualifying asset in the MyHIJAU Directory.

2. Otherwise, the Applicant shall notify the manufacturer or supplier to register under the MyHIJAU Mark.

3. Submit application to MIDA/MGTC before incurred capital costs.

4. Submission before 31.12.2023.

5. GITA of 100% against 70% of statutory income

6. & more

Reference:

MGTC Green Technology Tax Incentives Guidelines

https://bit.ly/3FexEd0

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

THK (Secretarial, Account, Payroll, Advisory)

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

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Special Tax Deduction on Rental Reduction - Extension

Special Tax Deduction on Rental Reduction - Extension
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Special Tax Deduction on Rental Reduction - Extension

Latest update

The qualifying period on special tax deduction on rental reduction extends to 30 June 2022 following the issuance of

1. The Income Tax (Special Deduction for Reduction of Rental to a Small & Medium Enterprise) (Amendment) Rule 2021.

2. The Income Tax (Special Deduction for Reduction of Rental a Tenant other than a Small & Medium Enterprise) (Amendment) Rule 2021.

General information

A tax deduction is given to taxpayers which provide a reduction of rental on business premises of at least 30% of the monthly rental.

All other conditions remain unchanged.

Past Blogs

Read our past blogs on the special tax deduction on rental reduction :

1.      Special deduction on rental reduction to SME and Non SME dated on 23.09.2021

https://www.ktp.com.my/blog/special-deduction-on-rental-deduction/23sept21

2.      Special Deduction On Rental Reduction - Can taxpayer claim with any gazette order? dated on 15.01.2021

https://www.ktp.com.my/blog/special-rental-deduction/15jan2021       

3.      Can you claim special deduction on RENTAL & RENOVATION under PENJANA Stimulus Package now? Dated on 29.11.2020

https://www.ktp.com.my/blog/ns9lfg2j36acs7w-bphe6-pbtm3-k6mng-gzk5f-747ye-d46bb-dhhms-specialdeductiononrentalrenovation

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

THK (Secretarial, Account, Payroll, Advisory)

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

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Special Tax Deduction on Renovation - Extension

Special Tax Deduction on Renovation - Extension
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Special Tax Deduction on Renovation - Extension

The qualifying period on special tax deduction on renovation extends to 31 December 2022 following the issuance of the Income Tax (Cost of Renovation and Refurbishment of Business Premise) (Amendment) Rule 2021.

Introduction

A special tax deduction on the renovation on business premises is subject to a maximum of RM300,000 incurred for the qualifying period.

All other conditions remain unchanged.

Read our past blogs on the special tax deduction on the renovation :

1. How to claim special tax deduction for renovation? dated on 02.04.2021

https://www.ktp.com.my/blog/how-to-claim-deduction-renovation/02april2021

2. FAQ (English version translated by KTP) on special deduction for the renovation cost Part II dated on 19.03.2021

https://www.ktp.com.my/blog/faq-rennovation-part-2/19march2021

3. FAQ (English version translated by KTP) on special deduction for the renovation cost Part I dated on 17.03.2021

https://www.ktp.com.my/blog/faq-rennovation-part-1/16march2021

4. Special Deduction for Renovation & Refurbishment of Business Premise dated on 29.12.2020

https://www.ktp.com.my/blog/specialdeductionrenovation/2020dec29

5. Can you claim special deduction on RENTAL & RENOVATION under PENJANA Stimulus Package now? Dated on 29.11.2020

https://www.ktp.com.my/blog/ns9lfg2j36acs7w-bphe6-pbtm3-k6mng-gzk5f-747ye-d46bb-dhhms-specialdeductiononrentalrenovation

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WSP 5.0 for the tourism industry

WSP 5.0 for the tourism industry
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WSP 5.0 for the tourism industry

WSP 5.0 is only for Tourism industry. No salary restriction according to the FAQ of “SIP Subsidi Upah Bersasar Pertubuhan Keselamatan Sosial (Perkeso)” which issued by PERKESO on 30 December 2021.

Key takeaways:

You will understand the update of the WSP 5.0 as follows: --

1. Who can apply for WSP 5.0?

2. Which business activity is categorised under Tourism Industry?

3. When to apply?

4. How much is the subsidy for each employee?

5. Subsidy for how many months?

6. Do I need to submit the application for WSP5.0 if I have applied before for WSP4.0 or WSP3.0?

7. What type of documents are required for new application?

Summary of learning

1. Who can apply for WSP 5.0?

- Employer and employees who have registered or contributed to Socso before 1 Jan 2022.

- Employer should have registered with the Companies Commission of Malaysia (SSM) or the relevant local authority before 1 Jan 2022.

- Company’s revenue which reduced by 30% or more of total monthly revenue in October/November/December 2021 compared to any month in 2019/2020/2021 prior to the outbreak of the COVID-19 outbreak.

2. Which business activity is categorised under Tourism Industry?

- Hotel, travel agency, money changer and etc, for full listing of business activities under Tourism Industry, may refer to “Lampiran A”.

3. When to apply?

- Effective from 1 January 2022 until 31 March 2022.

4. How much is the subsidy for each employee?

- RM600 per employee per month and up to 500 employees only.

5. Subsidy for how many months?

- 3 months

6. Do I need to submit the application for WSP5.0 if I have applied before for WSP3.0 or WSP4.0?

- Yes, employer has to submit new application through Perkeso website prihatin.perkeso.gov.my.

7. What type of documents are required for new application?

- Employee listing (follow the standard format in PERKESO website);

- Employer’s bank account information (copy of first page of the bank statement);

- Letter of Business Registration Number (BRN) (normally used to open the company bank account);

- SSM/ROS/ROB/relevant local authority registration certificate;

- Declaration form of WSP5.0

Sources

FAQ for WSP 5.0 on 30 December 2021

https://psu.perkeso.gov.my/Erpc-portlet/lampiran/Soalan%20Lazim%20Program%20SIP%20Subsidi%20Upah%20BERSASAR%20PSU5.0.pdf

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Deferment Of Tax For Floods

Deferment Of Tax For Floods
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Deferment Of Tax For Floods

IRB has issued a press release on the deferment of tax payment for taxpayers affected by the recent floods on 28/12/2021.

Key summaries of the media release

Estimated tax instalment CP204 for Dec 2021

  • Deferred to 31/01/22

  • Email to anggarancukai@HASIL.GOV.MY

Payment of PCB/CP 38 for the month of Dec 2021

  • Deferred to 31 January 2022

  • Complete the form in HASIL website

Instalments on audit/investigation/collection/civil suits on Jan 2022

  • Deferred to February 2022

  • Complete the form in HASIL website

Balance of tax payable

  • Taxpayer application but subject to IRB approval

  • Complete the form in HASIL website

Taxpayers are to furnish full supporting documents. IRB will approve based on the merits of each case

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How is an intangible asset accounted for?

How is an intangible asset accounted for?
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How is an intangible asset accounted for?


The accounting for an intangible asset is to record the asset as a long-term asset and amortize the asset over its useful life, along with regular impairment reviews. The accounting is essentially the same as for other types of fixed assets.

What is Intangible assets?

It is an asset which is identifiable, non-monetary without physical substance.

  •  Identifiable - can be separated when acquired

  •  Non-monetary - cannot convertible to cash easily

  •  Without physical substance - unable to touch

Example of intangible assets

  •  Patent

  •  Copyright

  •  Trademark

  •  Brand

  •  Software

  •  Franchise agreements

Recognition and measurement of Intangible Assets

1. Separate acquisition

Measured at cost at the acquisition date

Costs included:-

  •  Purchase price

  •  Import duties, non-refundable taxes, discount or rebate

  •  Any directly attributable cost of preparing the asset for its intended use

2. Acquired as part of a business combination

 Measured at fair value at the acquisition date

Measurement after Recognition

Cost model

Cost

Less: accumulated amortisation

Less: accumulated impairment losses

Amortisation Period

  •  Systematic basis over its useful life

  •  Amortisation begins when the intangible asset is available for use

  •  The amortisation charge shall be recognised as an expense

Amortisation Method

  • Straight-line method or

  • Amortisation method that reflects the pattern in which it expects to consume the asset’s future economic benefits

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LHDN FAQ-Deferment of Tax Instalment 2022

LHDN FAQ-Deferment of Tax Instalment 2022
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LHDN 常见问题解答-延期缴税 2022

LHDN FAQ-Deferment of Tax Instalment 2022

1. SME企业获得的标准是什么？

PMKS 的标准是：

• 在课税年度初，公司的实收资本需少于RM2,500,000.00； 和

• 在课税的年度里，总收入不能超过RM50,000,000.00.

What are the criteria the business gets PMKS status?

The criteria for PMKS are:

• Paid -up capital no more than RM2.5 million for ordinary shares at the beginning of the basis period for a year of assessment; and

• Gross income business amounting to RM50 million and below.

2. 有限合伙企业(PLT) 也有资格延期 给 PMKS 的税？需要的条件标准是什么？

有限合伙的延期付款条件需符合1967年《所得税法令》的第1的2D条件以下：

• 在课税年度初，实收资本贡献(现金或实物)需少于RM2,500,000.00；和

• 在课税的年度里，总收入不能超过RM50,000,000.00.

Is a Limited Liability Partnership entity (PLT) also eligible for deferment tax as given to PMKS? If so, what are the eligibility criteria for LLP to obtain such a deferment?

Yes. An LLP is eligible to obtain deferral of payment based on criteria determination as set out below Paragraph 2D, Table 1, ITA as follows:

• Maximum amount of capital contribution (cash or in-kind) not exceeding RM2.5

million at the beginning of the basis period; and

• Total gross income from business source not exceeding RM50 million for the basis period

3. CP204 的延期付款只限于 课税年度的2022年12月31日还是全部的课税年度呢？

是全部的课税年度，但是延期的付款期限为 2022 年 1 月1日直到 2022 年 6 月 30日。

Is the deferment of payment of CP204 only eligible for all basis periods or limited to the basis period ending 31 December 2022 only?

Deferment of payment of CP204 is eligible for all basic periods from 1 January 2022 to June 30, 2022.

4. 什么是CP204分期付款延期资格？

CP204的延期付款资格，是根据LHDNM收到最新的所得税表格 (BNCP).

What is the eligibility for deferment on CP204 installment payment?

Eligibility for deferment of payment CP204 determined based on PMKS criteria as stated in the Return Form Latest Income Tax (BNCP) received by LHDNM.

5. 符合条件的纳税人，是否需要一次缴清CP204延期付款和 CP500？

当呈交报税表格时，有的差距才需要一次缴清收税的余额.

Are taxpayers eligible deferment of payment of CP204 and CP500 need to clear the deferred payment all at once after the deferment period is over?

No. Payment must be made on time submission of ITRF for the year of assessment

relevant if it still has a balance taxes.

6. 延期付款会触发1967年《所得税法令》的第107B（3）和107C(9)条规吗？

不会.

Is there an increase under subsection 107B (3) and 107C (9) of the ITA ?

No. Increase under subsection 107B (3) and 107C (9) of the ITA will also not apply to the taxpayer who gets deferment of payment of CP204 and CP500.

7. 如果在CP204和CP500的延期期间还的延期付款，可以带在没有延期的时间吗？

不可以带下去.

Do the CP204 and CP500 which has been paid in the deferral period can be brought forward to pay of CP204 and CP500 in the post period of deferral period?

No. Such payments are not allowed for brought forward to the month after expiration deferment period or the next year of assessment.

8. 纳税人是否可以选择拒绝延期支付 CP204 和CP500 自动执行此操作并继续分期付款？ 如果有，纳税人是否需要通知 IRBM？

是的。 纳税人可以拒绝. 无需通知LHDNM。

Whether taxpayers can opt to reject the deferment of payment of CP204 and

CP500 automatically? If so, are the taxpayers need to inform the IRBM?

Yes. Taxpayers can reject deferment of installment payments immediately and there is no need to inform the parties LHDNM.

9. CP500纳税人是否需要做申请延期付款？

不需要。 符合的纳税人可以延期支付从 2022 年 1 月 1 日至 2022 年 6 月 30 日

Are taxpayers subject to CP500 payment need to make application for deferment of payment?

No. Taxpayers subject to CP500 payment is allowed deferment CP500 payment from 1 January 2022 to 30 Jun 2022.

10. IRBM 是否会通知符合资格的纳税人有关延期付款 CP204 和 CP500的通知.

LHDNM根据最新的报税表格并通过注册的电子邮件，通知符合 PMKS 标准的纳税人.如果没有收到电子邮件的纳税人，但是还是符合资格也可以应许延期.

Whether the IRBM will issue notification to the taxpayer eligible for deferment of payment on this CP204 and CP500

Notifications will only be issued to taxpayers who meet the PMKS criteria based on the information specified in up-to-date ITRF and has a registered email with LHDNM. New taxpayers meet the criteria of PMKS or do not have emails registered with the IRBM will not receive the notification.

However, no notification deferment of payment of CP500 to taxpayers because the delay is

allowed automatically.

11. 如果符合资格延期的纳税人，但是没有注册电子邮件就不会收到LHDNM的通知吗？

是的。符合条件的纳税人如果没有收到允许电邮通知，可以在以下的地址申请：

penangguhancp204@hasil.gov.my

Is the deferment of payment of CP204 possible allowed to the taxpayer qualifies for deferment but does not receive a notification for not having an email registered with the IRBM?

Yes. Taxpayers are allowed to deferment of payment of CP204 subject to applications and notifications submitted by email to the following address:

penangguhancp204@hasil.gov.my

12. 符合延期的纳税人是否可以在第 6 个月/或第9个月/或第11个月对CP204 或CP500做修改？

是的

Are taxpayers can file amendments to CP204 in the 6th month/ or the 9th month and / or the 11th month or make amendments to CP500 before 30 June 2022?

Yes

13. 纳税人是否还会收到CP500

是的

Are taxpayers subject to CP500 will still receive CP500 for the Year of Assessment 2022?

Yes

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HRDF Levy 2022 for *newly* registered employers

HRDF Levy 2022 for *newly* registered employers
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HRDF Levy 2022 for *newly* registered employers

What is the meaning of HRDF?

The HRDF is an abbreviation of the term Human Resource Development Fund. This is a pool of funds collected from the various companies and manufacturers that come under the HRDF act. The funds are collected as levies from the employers of the manufacturing and service sectors, and the registered companies

Newly Registered Employers under First Schedule of PSMB Act 2001

Exemption of HRDF levy payment extend to 31.12.2021 (6 months) HRDF Exemption.

January 2022

The levy payment on this newly registered employers under the First Schedule of the PSMB Act 2001 start from January 2022. The payment is due on 15th February 2022.

10% penalty on late payment charges will be imposed on any payment before the due date.

Read our past blogs on the HRD Levy

1. Latest update on HRDF 2021dated on 09/03/2021

https://www.ktp.com.my/blog/hrdf/09march2021?rq=hrd

2. Key Summary – MIA seminar with HRDF @ 23/03/2021 dated on 25/03/2021

https://www.ktp.com.my/blog/hrdf-part1-/25march202?rq=hrdf

3. FAQ - MIA seminar with HRDF @ 23/03/2021 Part 2 dated on 26/03/2021

https://www.ktp.com.my/blog/hrdf-faq-part2-/26march202?rq=hrdf

4. FAQ - MIA seminar with HRDF @ 23/03/2021 Part 3 dated on 29/03/2021

https://www.ktp.com.my/blog/hrdf-faq-part3-/29march202?rq=hrdf

5. 今天是最后一天登记 HRDF! dated on 30/03/2021

https://www.ktp.com.my/blog/hrdf-register/30march2021?rq=hrdf

6. 3 minutes video on how to register HRDF dated on 01/04/2021

https://www.ktp.com.my/blog/hrdf-registeration-video/01april2021?rq=hrdf

7. Extension of HRDF registration dated on 06/04/2021

https://www.ktp.com.my/blog/hrdf-registeration-extension/06april2021?rq=hrdf

8. Tax matters under Pemerkasa... dated on 01/06/2021

https://www.ktp.com.my/blog/tax-matters-pemerkasa/01june2021

9. HRDF exemption 2021 dated on 11/06/2021

https://www.ktp.com.my/blog/hrdf-exemption-2021/11june2021?rq=hrdf

10. HRDF exemption 2021 dated on 17/08/2021

https://www.ktp.com.my/blog/hrdf-exemption-2021/17aug21?rq=hrdf

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What is the difference between Investment property & PPE?

What is the difference between Investment property & PPE?
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What is the difference between Investment property & PPE?

Investment Property (IP)

Land or building (or a part of it), or both, held for the following specific purposes:

  • To earn rentals;

  • For capital appreciation; or

  • Both

Accounting for IP

IP shall be measured at fair value at each reporting date.

The IP shall use the cost model if the fair value cannot be measured reliably without undue cost or effort

Undue costs or effort means the costs and benefits from obtaining or determining the information necessary to comply with a requirement

Property, plant and equipment (PPE)

  • For use in production or supply of goods or services

  • For administrative purposes

  • It is expected to be used during more than one period.

Accounting for PPE

1.Cost model

Cost less depreciation less accumulated & impairment losses

2.Revaluation model

Revalued amount less accumulated depreciation & accumulated impairment losses.

Complication

What is the treatment of property that is partly investment and partly owner occupied?

Mixed use property shall be separated between IP and PPE.

However, the entire property shall be accounted for as PPE if the fair value of the IP component cannot be measured reliably without undue costs or effort.

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Notify change of financial year end LHDN

Notify change of financial year end LHDN
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Notify change of financial year end LHDN

Public Ruling 6/2021

Public Ruling 6/2021(PR6/2021): Notification of change in accounting period of a company, trust body, co-operative society issued on 29th December 2021, to replaces PR8/2019 on the same subject to reflect current legislation. There are no significant changes in the new PR.

The objective of this PR is to explain the requirement to notify the IRBM on change of accounting period by entity who liable to make payment on tax estimation.

Key takeaways:

You will understand: -

1. How to notify IRBM?

2. When to notify Inland Revenue Board (IRBM)?

3. What are the consequences of failure to notify IRBM?

Summary of learnings:

1. How to notify?

The IRBM has to be notified via Form CP204B.

2. When to notify IRBM?

It depends on whether the new accounting period is less than or more than the original accounting period:

i. the new accounting period is shortened

The IRBM has to be notified no later than 30 days before the end of the new accounting period.

Illustration A:

Original accounting period: 01.01.2021 – 31.12.2021

New accounting period: 01.01.2021 – 30.06.2021 (Shortened)

Notify IRBM: 30 days before 30.06.2021

ii. the new accounting period is extended

The IRBM has to be notified no later than 30 days before the end of the original accounting period.

Illustration B

Original accounting period: 01.01.2021 – 31.12.2021

New accounting period: 01.01.2021 – 30.06.2022 (Extended)

Notify IRBM: 30 days before 31.12.2021

3. What are the consequences of failure to notify IRBM?

The company fails to furnish the Form CP204B within the prescribed period, the following penalty will be imposed by the IRBM:

i. Subsection 107C (9): 10% increase when taxpayer’s failure to make the instalment payments

ii. Subsection 107C (10): 10% increase in respect of underestimation of tax payable (30% difference from actual tax payable).

iii. Subsection 112(3): Imposing penalty on estimated assessment raised under Section 90(3); and

iv. Paragraph 102(1)(i): Initiate prosecution action in respect of failure to notify the IRBM on change of accounting period.

Source:

Public Ruling: 6/2021 Notification of change of accounting period by a company / limited liability / partnership/ trust body/ co-operative society

https://phl.hasil.gov.my/pdf/pdfam/PR_06_2021.pdf

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Deferment of CP204 Payment 2022

Deferment of CP204 Payment 2022
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Deferment of CP204 Payment 2022

The Postponement of Estimated Tax Payable (CP204) and Instalment Payment Scheme (CP500) will be given automatically to qualified taxpayers with the status of micro, small and medium enterprises (MSMEs or PMKS) from Jan 1 to June 30, 2022.

6 instalment deferment

The Inland Revenue Board (IRB) informed that qualified taxpayers are based on records or the latest Income Tax Statement Form received by the board.

CP 204 deferment

For CP204 payment, business criteria that qualify for the PMKS status are companies, cooperatives, trust bodies and limited liability partnerships with a paid-up capital of less than RM2.5 million for ordinary shares at the start of the basic period of an assessment year.

In addition, the entity’s gross business income of RM50 million or below for an assessment year.

The postponement of CP204 payment to the taxpayer who fulfils the criteria will be sent via registered email with HASiL (the IRB).

What if taxpayers don’t want the deferment?

Taxpayers want to maintain the current tax instalment scheme.

  • IRB is not required to be notified as qualified taxpayers are allowed to follow the original CP 204 or CP 500.

  • Any tax instalments paid during the deferment period will be treated as payments towards the tax instalments for those respective months and will not be allowed to be carried forward for settlement of tax instalments after the deferment period.

Tax estimation

No changes to existing eligibility to revise tax estimates in the 6th or the 9th month and the special 11th month revision (subject to existing conditions)

CP500 deferment

The IRB informed that the postponement of CP500 payment is allowed automatically to all taxpayers concerned for the 2021 assessment year payment (for the payable date of Jan 1, 2022) and the 2022 assessment year payment (for the payable dates of March 1, 2022 and May 1, 2022).

FAQ on deferment

Frequently asked questions (FAQ) on the postponement could be accessed via the link https://phl.hasil.gov.my/pdf/pdfam/SOALAN_LAZIM_PINDAAN_BAJET_2022_CP204.pdf and the public can contact the HASiL Recovery Call Centre (HRCC) at 03-8751 1000 for further information.

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Foreign source income taxable in Malaysia 2022

Foreign source income taxable in Malaysia 2022
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Foreign source income taxable in Malaysia 2022

THE government has made a surprising U-turn on Dec 30, 2021 after announcing that foreign-sourced income received in Malaysia by Malaysian tax residents will be taxed.

Current Ruling

The following foreign-sourced income received will continue to be exempted from Malaysian income tax from 1 January 2022 to 31 December 2026 (5 years)

  • Dividend income received by resident companies and limited liability partnerships will be exempted to 2026.

  • All classes of income received by resident individuals will be exempted by 2026.

Why Partnership not Exempted?

Resident partnerships which carry on business will not be exempted. But partnerships as a general rule are not taxed. It is the individual partners who are taxed.

Final Words

Let’s wait for IRB further clarification on partnership matter

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Tax Filing Deadline 2022 Malaysia

Tax Filing Deadline 2022 Malaysia
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Tax Filing Deadline 2022 Malaysia

Return Form (RF) Filing Programme For The Year 2022 is now available on the IRBM official portal as a reference for taxpayers to submit their return form this year.

Key summary of the filling schedule

  • Form E : 31/3 (manual) 30/4 (E-filing)

  • Form BE : 30/4 (manual) 15/5 (E-filing)

  • Form B : 30/6 (manual) 15/7 (E-filing)

  • Form P : 30/6 (manual) 15/7 (E-filing)

  • Form M (employee): 30/4 (manual) 15/5 (E-filing)

  • Form M (business): 30/6 (manual) 15/7 (E-filing)

Source :

IRB official statement

https://phl.hasil.gov.my/.../ProgramMemfailBN_2022_2.pdf

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Tax Rebate for New Incorporated Company Malaysia with new T&C

Tax Rebate for New Incorporated Company Malaysia with new T&C
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Tax Rebate for New Incorporated Company Malaysia with new T&C

Income Tax (Conditions for the Grant of Rebate under Subsection 6D(4) Order 2021 @ 31/12/21

This order has effect from the year of assessment 2021.

Conditions for the grant of rebate

  1. Own by the company with paid-up share capital not more than RM2.5 million.

  2. Different premises from its related company.

  3. Shall not use the plant, equipment & facility of the related company.

  4. Employee (except CEO & director) is different from related company.

  5. Business is different from related company.

  6. Business is different from sole proprietorship.

  7. Not M&A with paid up share capital more than RM2.5m or revenue RM50m.

Other pertaining key information

Related company refer as more than 50% of paid up share capital.

A rebate may be granted for YA 2021 and 2022 on company commence business operation after 1/7/2020 with basis period ended 31/12/2020.

Source :

PU Order 504_2021 Income Tax (Conditions for the grant of rebate under subsection 6D(4) order 2021 on 31.12.2021.

https://lom.agc.gov.my/.../outputp/1719408/PUA504_2021.pdf

Update on our past blog on tax rebate

a. 有限公司或有限合伙企业的回扣 (RM20,000 x 3 years) – Post on 19.11.2020

https://www.ktp.com.my/blog/ns9lfg2j36acs7w-bphe6-pbtm3-k6mng-gzk5f-taxrebateenglish-bg3t3

b. 𝐓𝐚𝐱 𝐑𝐞𝐛𝐚𝐭𝐞 (𝐑𝐌𝟐𝟎,𝟎𝟎𝟎 𝐱 𝟑 𝐲𝐞𝐚𝐫𝐬) 𝐨𝐧 𝐟𝐨𝐫 𝐜𝐨𝐦𝐩𝐚𝐧𝐲 𝐨𝐫 𝐥𝐢𝐦𝐢𝐭𝐞𝐝 𝐥𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐩𝐚𝐫𝐭𝐧𝐞𝐫𝐬𝐡𝐢𝐩. – Post on 19.11.2020

https://www.ktp.com.my/blog/ns9lfg2j36acs7w-bphe6-pbtm3-k6mng-gzk5f-taxrebateenglish

c. The advantages of buying property via Sdn Bhd? Posting on 16 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd/16april2021

d. The disadvantages of buying property via Sdn Bhd (Copy) Part 2 Posting on 19 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd-part2/19april2021

e. Investment holding company enjoy tax rebate RM20,000 x 3 years ? Part 3 Posting on 20 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd-part3/20april2021-hgpza

f. Can unlisted investment holding company (IHC) enjoy tax rebate RM20,000 x 3 years? Part 4 Posting on 21 April 2021

https://www.ktp.com.my/blog/buy-property-via-sdn-bhd-part4/21april2021

g. 预算案 2022 Posting on 19 November 2021

https://www.ktp.com.my/blog/tax-budget-2022-sme-edition-chinese/19nov21?rq=20%2C000

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Impairment of assets due to floodings

Impairment of assets due to floodings
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Impairment of assets due to floodings

Overview of Impairment-Assets Accounting

An asset impairment arises when there is a sudden drop in the fair value of an asset below its recorded cost. The accounting for asset impairment is to write off the difference between the fair value and the recorded cost.

Flooding continues across Malaysia! Do you know how to account for impairment of assets due to flood?

Here are some tips for you.

Key takeaways:

I. What is an impairment loss

II. What is an impairment test in accounting?

III. How do you treat the impairment of assets in accounting?

IV. How do you record an impairment of an asset?

V. Is an impairment an expense?

VI. Which accounting standard is applicable for impairment of assets?

VII. Indicators of impairment

Summary of learnings:

I. What is impairment loss?

An impaired asset is an asset valued at less than book value or net carrying value. In other words, an impaired asset has a current market value that is less than the value listed on the balance sheet. To account for the loss, the company's balance sheet must be updated to reflect the asset's new diminished value.

Floods can cause damage to the appliances on your premises. including the heating, ventilation and air conditioning system, water heaters or refrigerators. As a result, we can no longer recover any value through the use or sale of damaged assets.

We will need to provide impairment when the recoverable amount of an asset is less than the book value of an asset.

II. What is an impairment test in accounting?

An impairment test is an accounting procedure carried out to find out if an asset is impaired, i.e. whether the economic benefits that the asset embodies have dropped drastically. In general, if the carrying value of an asset exceeds the sum of undiscounted expected cash flows of an asset, the asset is impaired.

III. How do you treat the impairment of assets in accounting?

If the recoverable amount of the asset is more than the carrying amount, then the impairment loss has to be reversed and it has to be treated as income in the books of accounts. The reversal of impairment loss previously recognized for a cash-generating unit has to be allocated first to the assets, then goodwill.

IV. How do you record an impairment of an asset?

The total dollar value of impairment is the difference between the asset's carrying cost and the lower market value of the item. The journal entry to record an impairment is a debit to a loss, or expense, account and a credit to the related asset.

V. Is an impairment an expense?

Impairment is a non-cash expense that is reported under the operating expenses section of the income statement.

VI. Which accounting standard is applicable for impairment of assets?

The core principle in Malaysian Private Entities Reporting Standard (MPERS) – Section 27.5 to 27.9is that an asset must not be carried in the financial statements at more than the highest amount to be recovered through its use or sale. If the carrying amount exceeds the recoverable amount, the asset is described as impaired.

VII. Indicators of impairment

What are the other indicators except for flooding? Such as:-

External factors:

- Market value declines

- Negative changes in technology, markets, economy, or laws

- Increases in market interest rates

- Carrying amounts of assets higher than market value

Internal factors:

- obsolescence or physical damage

- asset is idle, part of a restructuring or held for disposal

- economic performance if an assets worse than expected

Source:

Malaysian Private Entities Reporting Standard (MPERS) – Section 27.5 to 27.9

https://www.cas.net.my/wp-content/uploads/2013/02/MPERS-Framework.pdf

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Why auditor ask any impairment on inventory

Why auditor ask any impairment on inventory
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Why auditor ask any impairment on inventory

MPERS section 13 Inventories

When performing an inventory audit, some of the most common challenges faced by the auditor include: Damaged inventory whose value must be adjusted to reflect its actual value to the company. ... Errors in shipping and receiving of goods can lead to an incorrect end-of-year cutoff total in inventory records

How should we value inventories?

Generally, inventories are valued at cost!

However, if the net realizable value (NRV) of the inventory is less than the cost, the NRV will usually need to be reported on the balance sheet instead of the cost.

What is the cost?

Cost consists of the cost of purchase, conversion, production overheads, joint products and by-products, and other relevant cost.

What is the net realizable value (NRV)?

Net realizable value (NRV) is defined as the expected selling price minus cost of completion.

In what situation we use NRV?

It requires the valuation of inventories at the lower of its historical cost or market value, but if market value cannot be calculated, then the net realizable value of the inventory should be used.

In practice, these are the scenarios where NRV come to the picture: -

1) Oversupply

2) Obsolescence

3) Price decline

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Is interest rate tax-deductible?

Is interest rate tax-deductible?
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Is interest rate tax-deductible?

Interest expense

The Malaysian Income Tax Act 1967 (“Act”) specifically singles out interest expenses incurred under some circumstances to be deductible. Typically, interest expense arising from borrowing used for general working capital or purchase of fixed assets would qualify for this prescribed deduction.

A key summary of relevant sections under the Income Tax Act on interest expenses in Malaysia

Section 33 (1) the Income Tax Act 1967

Subject to this Act, the adjusted income of a person from a source for the basis period for a year of assessment shall be an amount ascertained by deducting from the gross income of that person from that source for that period all outgoings and expenses wholly and exclusively incurred during that period by that person in the production of gross income from that source.

Section 33 (4) the Income Tax Act 1967

For the purposes of paragraph (1)(a) and subsection (2), where any sum payable for a basis period for a year of assessment is not due to be paid in that period, the sum shall when it is due to be paid be deducted in arriving at the adjusted income of a person for that period.

Section 109 the Income Tax Act 1967

Where any person (in this section referred to as the payer) is liable to pay interest or royalty derived from Malaysia to any other person not known to him to be resident in Malaysia, other than interest or royalty attributable to a business carried on by such other person in Malaysia, he shall upon paying or crediting the interest (other than interest on an approved loan or interest of the kind referred to in paragraph 33, 33A, 33B, 35 or 35A of Part I, Schedule 6) or royalty deduct therefrom tax at the rate applicable to such interest or royalty, and (whether or not that tax is so deducted) shall within one month after paying or crediting the interest or royalty render an account and pay the amount of that tax to the Director General...

Section 140C the Income Tax Act 1967

(1) This section shall apply without prejudice to section 140 or 140A and subject to any rules made under this Act.

(2) In ascertaining the adjusted income of a person from each of his sources consisting of a business for the basis period for a year of assessment, no deduction from the gross income from that source for that period shall be allowed in respect of any interest expense in connection with or on any financial assistance in a controlled transaction granted directly or indirectly to that person which is in excess of the maximum amount of interest as determined under any rules made under this Act.

Section 140A the Income Tax Act 1967

(1) This section shall apply notwithstanding section 140 and subject to any rules prescribed under this Act.

(2) Subject to subsection (3), where a person in the basis period for a year of assessment enters into a transaction with an associated person for that year for the acquisition or supply of property or services, then, for all purposes of this Act, that person shall determine and apply the arm’s length price for such acquisition or supply.

Section 33(2) the Income Tax Act 1967

Where a person, being a person to whom paragraph (1)(a) applies in relation to gross income from a business of his for the basis period for a year of assessment and in relation to borrowed money, has made (otherwise than for the purpose of producing that gross income)any loan of money or any investment in movable or immovable property, and the loan or any part thereof is outstanding at any time in that period or the investment or any part thereof is held by him at any time in that period and it appears to the Director General that the loan or any part thereof or the investment or any part thereof has been financed wholly or partly or directly or indirectly out of the borrowed

money—

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Is rental income a business income?

Is rental income a business income?
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Is rental income a business income?

Tax Case - BCSB v. DIRECTOR GENERAL OF INCOME TAX

Income is received from the letting of the properties. Taxpayer declared and taxed under section 4(a) ITA 1967 as a business income from YA 2001 to 2011.

Tax audit finding

Income received from letting the properties from YA 2011 is to be taxed under section 4(d) of the ITA as rental income pursuant to Public Ruling No. 4/2011.

Tax audit action

1. Withdrew Capital Allowance for the properties

2. Capital Allowance for the properties

3. Added back the same in the tax computation for YA 2011.

4. Raised the Notices of Additional Assessment for YA 2010 and 2011.

The Company’s opinion

1. The rental income is the business income under section 4(a) of the ITA since its commencement in 2001.

2. The Public Ruling No 4/2011 has no force of law.

IRB argument

1. The Company had failed to provide comprehensive & active maintenance to the properties.

2. The Company only provided maintenance upon request by the tenants.

3. Public Ruling 4/2011 offers guidelines for the tax treatment of the rental income.

4. The Company is disallowed to claim the administration expenses and capital allowance for this non-business income.

5. The interest expenditure for the term loan and bank overdraft claimed by the Company are also not permitted.

6. Section 4 does not determine whether an income falls under subsection (a),(b),(c), (d),(e) or (f).

7. Therefore, the DGIR is authorized under s.138A of the ITA to issue a public ruling.

Decision

The Special Commissioners of Income Tax'' (SCIT) agreed with the IRB submission and totally dismissed the Company appeal.

The assessment and penalty imposed by the IRB for YA 2010 and 2011 are confirmed and maintained.

Source:

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

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