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MIDA tax incentives on logistic

MIDA tax incentives on logistic
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What is the Government Support for logistics services companies?

 The Malaysian Investment Development Authority (MIDA) supports the growth of companies undertaking integrated logistics services (ILS) by offering tax incentives for 5 years as below：

1.     Pioneer status (PS)

-       Tax exemption of 70% of statutory income.

 2.     Investment tax allowance (ITA)

-       60% of qualifying capital expenditure*

 *Qualifying capital expenditure means capital expenditure incurred on factory or any plant and machinery used in Malaysia in connection with and for the purposes of ILS.

Key takeaways:

You will understand: -

1.     What is the integrated logistics services?

2.     What are the qualifying criteria for ILS incentive?

3.     How to apply?

 Integrated logistics services (ILS)

ILS refers to a company that performs a variety of end-to-end logistics-related service activities like air, ocean, road and rail transportation, warehousing and other value-added services that make up a total logistics services package.

Main activities involved:

·         Warehousing

·         Transportation

·         Freight Forwarding

·         Distribution

·         Other value added services (Example: break bulking, palletising, labelling, etc)

 Qualifying criteria

1.     Locally incorporated

i.    Incorporated under Companies Act 2016 and resident in Malaysia; and

ii.   60% equity held by Malaysian.

2.     Eligible services

Must undertakes 3 principal activities:

i.    Freight forwarding

ii.   Warehousing

iii.  Transportation

and at least one of the following activities:

i.    Distribution

ii.   Supply chain management

iii.  Other related and value-added services/activities

-       Palletizing, product, assembly/installation, breaking bulk, consolidation, packaging/re-packaging, procurement, quality control, labelling/re-labelling, testing etc.

3.     Minimum Infrastructure to be owned by applicant company

i.    Commercial vehicles: 20 units

-     Motor vehicle for the purpose of carrying goods.

ii.   Warehousing facilities: 5,000 sq metres

-     To provide various facilities and services covering small dock-off depots to large scale warehouses and distribution centers.

 

Procedure for application

1.     Register an account under https://investmalaysia.mida.gov.my.

2.     Submit the application online for MIDA approval.

3.     Proceed to apply for tax incentive certificate after get approval from MIDA.

Reference

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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)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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如果您总是喜欢使用Director account支付费用

如果您总是喜欢使用Director account支付费用
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所得税 ..如何用这一招 超senang查您的account!

如果

  • 您总是喜欢使用Director account支付费用

    • Dr Expense 费用

    •  Cr Director account

  • 您Director account 年末 balance 很高!

Why? 所得税

  • 总是会看 Director account. .

  • 会问您为什么要使用Director account支付费用 ?

  • 将检查您的director 个人税 (personal income tax)

结果

  • 根据《所得税法》第S140A条，所得税可以向Director 收取Deemed利息!

  • 当您将来注销 (write off) Director account 时… 债务免税 (waiver of debt 可能中税的

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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Record keeping 7 years Malaysia

Record keeping 7 years Malaysia
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Keeping sufficient records are mandatory required by the followings Act in Malaysia:

1.     Section 82 of Income Tax Act 1967

 2.     Section 245 of Companies Act 2016

 What are the records to be kept by company?

1.     Accounting records -  a cash book, a sales ledger, a purchases ledger and a general ledger

 2.     Supporting documents -  invoices, bank statements, pay-in slips, cheque butts, receipts for payments, payroll records and copies of receipts issued should be retained.

 3.     Receipts issued should be serially numbered when sales of goods exceed RM150,000 or services performed exceeds RM100,000.

 4.     A valuation of the stock in trade or work in progress should be made at the end of each accounting period and the appropriate records maintained

 5.     Other documents necessary to verify entries in any books of accounts

 What are the requirement under Income Tax Act 1967 and Companies Act 2016?

1.     Accounting entries for each transaction should be recorded not later than 60 days after the transaction.

 2.     Records and books of accounts should be written in the national language or the English language.

 3.     The company is required to keep sufficient records for a period of 7 years.

 4.     All documents that relate to any income in Malaysia shall be kept and retained in Malaysia.

 5.      If the records and books of accounts are kept outside Malaysia, the records and books of accounts should be produced at the registered office or the business premises of the company.

What are the consequences if sufficient records are not kept?

1.     Additional tax payables arise from:

i.              The chargeable income of the taxpayer may be determined according to the best judgement of IRB and an assessment made accordingly.

ii.             Deduction is not allowed If the taxpayer fails to provide supporting records.

 2.     The financial statement of the company is not reliable

i.              It will affect the auditors’ opinion on financial statement and modified audit opinion will be issued according the effect of misstatement.

ii.             A modified audit opinion will limit the company’s ability to borrow money from banker.

 iii.            The supplier might evaluate company’s creditworthiness through audited financial statement. If the company’s financial statement is not reliable, the supplier may reluctant to give longer credit terms.

 3.     It is an offence under the laws in Malaysia:

 i.              Section 119 of Income Tax Act 1967

-          A fine of RM300 to RM10,000; or

-          to imprisonment for a term not exceeding 12 months or to both.

 ii.             Section 245 (9) of Companies Act 2016

-          A fine not exceeding RM500,000; or

-          to imprisonment for a term not exceeding 3 years or to both.

Sources

 1.     Public Ruling No. 4/2000 (Revised) Keeping sufficient records (Companies & Co-operatives)

2. Public Ruling No. 5/2000 (Revised) Keeping Sufficient Records (Individuals & Partnerships)

3.     Public Ruling No. 6/2000 (Revised) Keeping Sufficient Records (Persons other than Companies & Co-operatives)

 4.     Income Tax Act 1967

 5.     Companies Act 2016

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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)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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Extension/Renovation of factory building is allowed for tax deduction?

Extension/Renovation of factory building is allowed for tax deduction?
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Extension/Renovation of factory building is allowed for tax deduction?

What is Industrial Building Allowances (IBA)?

IBA is allowed a person who incurred cost of factory building expenditure for the purpose of his business to claim allowances.

Eligibility to claim:

  • Initial Allowance (IA): 10%

  • Annual Allowance (AA): 3%

How do you know your factory building expenditure incurred is eligible for IBA?

A simple checklist

  1. The building carry out manufacturing or processing operation?

  2. The expenditure incurred is for production area?

  3. The expenditure incurred is for the purpose of building improvement.

If all the question is “Yes”, then the expenditure is eligible for IBA claim

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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Do you know IRB refund policy on excess tax payment?

Do you know IRB refund policy on excess tax payment?
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Do you know IRB refund policy on excess tax payment?

  • 30 working days after submission date for Return Forms submitted via e-Filing.

  • 90 working days after submission date for Return Forms submitted by post or by hand.

Terms & Conditions :

The tax refund is only applicable on correct and complete information is provided in the Return Form.

Sometimes the only thing I can say is “Really”?

But you can

  1. Contra against CP204 payment.

  2. Wait for 2% compensation on IRB late refund since 2013… So far we have managed 1 case approved since 2013 !

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

#KTP


 

waiver of debt tax implication in Malaysia

waiver of debt tax implication in Malaysia
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IRB tax me on ''write off on advance from director's account'' (waiver of debts)

Alamat #$@%^& 天理何在

Today, many companies are suffering from the after-effect of Covid-19, the ongoing MCO, EMCO, and RMCO have a tremendous impact on business. Some businessman decided to strike off their company. To smoothen the strike-off process, the company always clear off the accounts before application of strike off.

So, what is the tax implication if I waive off my directors’ account?

Let’s illustrate with a simple real case:

Scenario

ABC Sdn Bhd is going to strike off due to the company is unsustainable. The directors have injected money as a loan for the company’s operation over the years. But now, due to striking off, the company decided to waive of director’s account.

Struggles

Is the waiver of the director’s account taxable?

Solution:

Generally, yes. the waiver of debts is a taxable income to the company. Why?

Under Section 30(4) of ITA 1967, the waiver of debts is taxable if the debts have either: -

i) taken a tax deduction under Section 33 of the Act; or

ii) claimed a capital allowance under Section 42 and Schedule 3 of the Act.

Unless the taxpayer can prove that they did not claim any of the above two categories.

Sources:

Income Tax Act 1967 – Section 30(4)

http://www.agc.gov.my/agcportal/uploads/files/Publications/LOM/EN/Act%2053.pdf

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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How to amend Borang BE?

How to amend Borang BE?
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If you have over declared your income or under claimed the tax reliefs in your e-BE submission, you can amend the information via the e-Application for Amended BE.

T&C apply:

i. The original tax return form is submitted via e-Filing (e-BE Form).

ii. e-BE Form must be submitted within the stipulated period (not a late submission).

iii. e-Application for Amended BE can be submitted once only, within a year of assessment.

iv. Supporting documents should be uploaded using the format required in the column provided.

The e-Application for Amended BE for Year of Assessment 2020 can be accessed from 1 April 2021 via https://mytax.hasil.gov.my/ > e-Filing

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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What is the difference between director's fee (董事费) and director's remuneration (董事薪金)?

What is the difference between director's fee (董事费) and director's remuneration (董事薪金)?
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What is the difference between director's fee (董事费) and director's remuneration (董事薪金)?

DIRECTOR FEE

  1. The annual fees paid by any employer including retainer fee and meeting fees as compensation for setting on the board of directors.

  2. Pay once a year.

  3. Require approval at board of director meeting and subsequently approval from the member of meeting.

  4. Subject to PCB only.

  5. Declare in personal tax.

DIRECTOR REMUNERATION

  1. It is the salaries, allowance and bonuses which are paid to director on monthly basis.

  2. Pay every month.

  3. No need approval, it is base on employment contract.

  4. Subject to EPF, SOCSO, EIS, PCB.

  5. Require to declare in personal tax.

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

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Update MIDA - Smart Automation Grant (SAG)

Update MIDA - Smart Automation Grant (SAG)
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Update MIDA - Smart Automation Grant (SAG)

If you are SME, 🇲🇾 government will give grant on a matching basis (1:1) based on eligible expenditures, up to a maximum grant of RM1 million per company.

Read the full story in our blog
https://www.ktp.com.my/blog/mida-sag/26aapril2021

Source SAG:
https://www.mida.gov.my/forms-and-guidelines/special-tax-incentives-under-penjana/smart-automation-grant-under-penjana-b/

𝐕𝐢𝐬𝐢𝐭 𝐮𝐬 :
Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

𝐊𝐓𝐏 (𝐀𝐮𝐝𝐢𝐭,𝐓𝐚𝐱, 𝐀𝐝𝐯𝐢𝐬𝐨𝐫𝐲)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (𝐎𝐮𝐫 𝐢𝐧𝐭𝐞𝐫𝐧𝐚𝐥 𝐜𝐨𝐦𝐦𝐮𝐧𝐢𝐭𝐲 𝐟𝐨𝐫 𝐨𝐮𝐫 𝐜𝐨𝐥𝐥𝐞𝐚𝐠𝐮𝐞𝐬)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (𝐎𝐮𝐫 𝐞𝐱𝐭𝐞𝐫𝐧𝐚𝐥 𝐣𝐨𝐛 𝐜𝐨𝐦𝐦𝐮𝐧𝐢𝐭𝐲 𝐟𝐨𝐫 𝐢𝐧𝐭𝐞𝐫𝐧𝐬, 𝐠𝐫𝐚𝐝𝐮𝐚𝐭𝐞𝐬 & 𝐞𝐱𝐩𝐞𝐫𝐢𝐞𝐧𝐜𝐞𝐝 𝐜𝐚𝐧𝐝𝐢𝐝𝐚𝐭𝐞𝐬 )

𝐓𝐇𝐊 (𝐒𝐞𝐜𝐫𝐞𝐭𝐚𝐫𝐢𝐚𝐥, 𝐀𝐜𝐜𝐨𝐮𝐧𝐭/𝐏𝐚𝐲𝐫𝐨𝐥𝐥, 𝐀𝐝𝐯𝐢𝐬𝐨𝐫𝐲)

We are one-stop (2️⃣0️⃣years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

Purpose of certificate of residence under withholding tax in Malaysia

Purpose of certificate of residence under withholding tax in Malaysia
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What is the purpose and usage of certificate of residence under withholding tax in Malaysia?

 

Purpose of certificate of residence

  1. to confirm the residence status of the taxpayer for them to claim tax benefit under the double tax agreement (DTA)

  2. to avoid double taxation on the same income

Usage of certificate of residence

  1. to enjoy lower rate on withholding tax for non-resident

  • if there is double tax agreement, by providing the resident certificate, the non-resident can be withheld a lower rate of withholding tax (from 0% - 10%).

Residence status can be determined according to Public ruling 9/2019.

  1.  bilateral credit and unilateral credit (refer to public ruling 11/2011)

  • if there is a double tax agreement, bilateral credit could be claimed.

It shall only be given to a person resident in Malaysia. The bilateral credit allowed would be the lower of the malaysia tax payable on the foreign income or the withholding tax held of the foreign income.

The claimed has to be made within two years after the end of that year of assessment.

  •  if there is no double tax agreement, unilateral credit could be claimed.

However, it is limited to the lower of one-half of the withholding tax held of the foreign income or malaysia tax payable on the foreign income.

 Sources:

Certificate of residence in LHDNM Official website

http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=6&bt_posi=6&bt_unit=1&bt_sequ=1&bt_lgv=2

Public ruling 9/2019 Residence status of companies and bodies of persons

http://phl.hasil.gov.my/pdf/pdfam/PR_09_2019.pdf

Public ruling 11/2011 Bilateral credit and unilateral credit

http://phl.hasil.gov.my/pdf/pdfam/PR11_2011.pdf

Visit us

  • Wisma 𝐊𝐓𝐏, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

  • Wisma 𝐓𝐇𝐊, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

𝐊𝐓𝐏 𝐂𝐚𝐫𝐞𝐞𝐫 (Our external community for interns, graduates & experienced candidates )

𝐓𝐇𝐊 (Secretarial, Account/Payroll, Advisory)

We are one-stop (20 years+ history) audit, tax, secretarial, accounting and payroll firms which commit to help and grow our clients business.

#Thk

#KTP


 

预付款和应计项目您掌握了多少呢? 相信大家在资产负债表里常看到预付款 (Prepayment) 和应计项目(Accrual), 但是您是否知道这两个账目的意义存在？该怎么在账目上呈现呢？ 科普时间

预付款和应计项目您掌握了多少呢? 相信大家在资产负债表里常看到预付款 (Prepayment) 和应计项目(Accrual), 但是您是否知道这两个账目的意义存在？该怎么在账目上呈现呢？ 科普时间
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预付款和应计项目您掌握了多少呢?

相信大家在资产负债表里常看到预付款 (Prepayment) 和应计项目(Accrual), 但是您是否知道这两个账目的意义存在？该怎么在账目上呈现呢？

科普时间到！让我们带大家一同了解这其中的迷思…

1. 顾名思义：

(a) 预付款

在当年度提前付款下一年的费用。

举个例子：一般上，公司的火险是以一年份的方式付费，公司所偿还的火险保障期已包括了下个年份的费用。

(b) 应计项目

每个月或每年公司应还的费用但是还未付款。

举个例子： 公司每个月都需要偿还电费，但是由于电单在下一个月才收到因此无法在当个月付款。此时我们就必须在当个月应记这笔开销。

2. 在年度报表有什么影响?

(a） 预付款

让公司的年度报表更准确，以便管理层能够做出理想的判断与决定。

这项账目是呈现在年度报表中的流动资产 (Current Assets)。

(b） 应计项目

让公司明确的了解每个月或每年开销的数额，以便预先储备足够的现金以及避免不必要花费。

这项账目是呈现在年度报表中的流动负债 (Current Liabilities)。

3. 何时要输入进或出账目？

(a） 预付款

输入账目：在当下付款时就必须把下个月份或年份的费用归类去预付款的账目。

输出账目：当预付款的日期已达到时就必须把此账目输出到费用的账目。

(b） 应计项目

输入账目：每个月尾或年末时必须把应还但未付款的费用输入到应计项目。

输出账目：在付款的那一天就必须把应计项目输出。

4. 复式记帐法

(a) 预付款

输入账目：

Debit 费用

Debit 预付款

Credit 现金

输出账目：

Debit 费用

Credit 预付款

(b) 应计项目

输入账目：

Debit 费用

Credit 应计项目

输出账目：

Debit 应计项目

Credit 现金

5. 例子

(a） 预付款

公司收到保安公司的账单并在1月时已付款。单据中保安费的日期是从01/01/2021 致 28/02/2021总计RM 120。此时公司必须把1月的费用RM 60输入到保安费（Expenses），2月的预付数额RM 60输入到预付款的账目。当2月时才把预付款中的数额输出到保安费。

(b） 应计项目

公司在每个月为都会在月尾之前计算薪水并支付，但由于这个月的现金流动不是很宽裕。因为此，公司想把这笔薪水RM 12,000 在下个月的5号之前才

公司在每个月都会计算薪水RM 12,000并在下一个月的5号之前才将薪水支付给员工。即使公司还未支付，公司还是必须将当个月的薪水RM 12,000输入到应计项目。直到公司将薪水支付给员工时我们才将这笔费用输出。

欲知更多可参考以下网址： IFRS - Conceptual Framework

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Can newly incorporated investment holding company (IHC) enjoy tax rebate RM20,000 x 3 years?

Can newly incorporated investment holding company (IHC) enjoy tax rebate RM20,000 x 3 years?
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Can newly incorporated investment holding company (IHC) enjoy tax rebate RM20,000 x 3 years?

On 12 December 2020, LHDN released Practice Note. 4/2020 to clarify the changes in tax rate from 17% to 24%.

Effective from year assessment 2020 onwards, certain companies (see below) will NOT be entitled to enjoy the SME (17%) tax rate.

The following companies are NOT entitled to enjoy the SME (17%) tax rate:

a)    Company without business source of in

I.        Investment Holding Company (IHC) (not listed on Bursa Malaysia)

An investment holding company refers to a company that owns investments such as properties and shares for long term investment and derives investment income (''non-trade income'') such as dividend, interest or rental income. The company's principal activity is that of investment holding.

II.        Company ceased business operation but has other income such as rental income or interest gain.

Term and condition on tax rebate for company :

  1. Which has a gross income from source or sources consisting of a business not exceeding fifty million ringgits for the basis period for a year of assessment; and

  2. To enjoy the SME (17%) tax rate, the Company need to fulfil the following conditions:

a)    Share capital / Total capital contribution ≤ RM2.5 million; and

b)    *Must have gross income from source or sources consisting of a business not exceed RM50 million.

Unlisted investment holding company (IHC)  …. NO BUSINESS source ! Not SME ! So… IHC cannot enjoy tax rebate RM20,000 x 3 years.

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Tax rebate RM20,000 x 3 years on Investment Holding Company

Tax rebate RM20,000 x 3 years on Investment Holding Company
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𝐖𝐡𝐲 𝐩𝐞𝐨𝐩𝐥𝐞 𝐛𝐮𝐲 𝐩𝐫𝐨𝐩𝐞𝐫𝐭𝐲 𝐯𝐢𝐚 𝐚 𝐒𝐝𝐧 𝐁𝐡𝐝 (𝐩𝐫𝐢𝐯𝐚𝐭𝐞 𝐥𝐢𝐦𝐢𝐭𝐞𝐝 𝐜𝐨𝐦𝐩𝐚𝐧𝐲)? 𝐏𝐚𝐫𝐭 𝟑

Client called us to ask whether they can enjoy tax rebate RM20,000 x 3 years on new incorporated sdn bhd as investment holding company which buy property solely.

Let's run through the terms and conditions on RM20,000 x 3 years tax rebate.

Share your thinking with us in the comment section on the eligibility on tax rebate RM20,000 x 3 years on investment holding company.

We will share our professional opinion in coming days.

PS : Term and condition of the tax rebate RM20,000 x 3 years

  1. A rebate may be granted for a period of three consecutive years from the year of assessment in which a company or limited liability partnership first commences operation, in an amount equivalent to its operating or capital expenditure which it has incurred limited to a maximum amount of twenty thousand ringgits [RM20,000] for each of assessment

  2.  Where the total amount of the rebate under subsection (1) exceeds the income tax charged (before any such rebate) for any year of assessment, the excess shall not be paid to the company or limited liability partnership, or be available as credit to set off the tax liability of the company or limited liability partnership for that year of assessment or any subsequent year.

  3. The company or limited liability partnership referred to in subsection (1) shall be a company or limited liability partnership resident and incorporated or registered in Malaysia-

  4. Which has a paid-up capital in respect of ordinary shares or contribution of capital (whether in cash or in kind) of two million and five hundred thousand ringgit and less at the beginning of the basis period for a year of assessment;

  5. Which has a gross income from source or sources consisting of a business not exceeding fifty million ringgits for the basis period for a year of assessment; and

  6. Which has commenced operation on or after 1 July 2020 but not later than 31 December 2021.

  7. The Minister may, by statutory order, impose such conditions as he thinks fit to give effect to or for carrying out the purposes of this section.

  8. Where in a year of assessment the company or limited liability partnership fails to fulfil the conditions specified in subsection (3) or (4), the amount of rebate under subsection (1) shall not be granted for that year of assessment in which the failure occurs and in the subsequent years of assessment.

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The disadvantages of buying property via Sdn Bhd (private limited company)

The disadvantages of buying property via Sdn Bhd (private limited company)
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The disadvantages of buying property via Sdn Bhd (private limited company)

#1 Taxation

The Sdn Bhd will be taxed 24% instead of SME preferential tax rate (17% on first RM600,000 chargeable income, 24% on subsequent chargeable income)

#2 Cost

The cost of setting up a Sdn Bhd run from thousands dollar.

The annual compliance cost on audit, tax and secretarial run from thousands dollar.

#3 Profit distribution

Shareholder can only reap the profit via dividend distribution under the Company Act 2016.

#4 Personal guarantor

The director/shareholder may act as personal guarantor to the bank for loan financing on the property.

#5 Loan Financing Ratio

Bank normally charge higher interest rate and borrowing limits to Sdn Bhd compared with individual.

#6 Transfer of shares

Shares of Sdn Bhd are not openly tradeable and may be difficult to find a buyer.

#7 Closure of company

The closure of sdn bhd may be time consuming and costly.

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The advantages of buying property via Sdn Bhd (private limited company)

The advantages of buying property via Sdn Bhd (private limited company)
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The advantages of buying property via Sdn Bhd (private limited company)

#1 Risk Diversification

Pool more money up to 50 shareholders into the Sdn Bhd to buy one/more property.

#2 Easy/Flexible disposal

The shareholders who want to exit the investment can be done via transfer of share of the sdn bhd instead of disposal of property.

#3 Execute legal document

The shareholders of the Sdn Bhd can delegate the signing of documents to director of the company.

#4 Estate planning

Share of the deceased shareholder can be transferred to the beneficiaries.

#5 Debt Service Ratio

A ratio where bank use to determine the borrower capacity for payment of debt via company earning power.

#6 Loan to Share Capital Ratio

Higher share capital is used as one of criteria for bank borrowing on property.

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Accounting for bad debts

Accounting for bad debts
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Do you know what is the difference in Bad Debts, Provision for Doubtful Debts and Bad Debts Recovery?

Due to the impact of Covid-19, the economy has become worse. There are many companies that will face a situation in which the debts cannot be collected.

However, if the companies are unable to collect the debts, what should we do on account?

Don’t worry, let us show you how to do it!

1. Definition：

(a) Bad Debts

- The uncollectible debts from customers.

(b) Provision for Doubtful Debts

- The estimation of future uncollectible debts from customers.

(c) Bad Debts Recovery

- The cash is recovered from bad debts written off previously.

2. What is the document needed to prepare?

(a) Bad Debts

- Issuing reminder notices.

- Legal action

(b) Provision for Doubtful Debts

- The aging report shows customers in slow payment and long outstanding.

(c) Bad Debts Recovery

- The payment slips form customer or Bank receipt.

3. When do we need to do the transaction in account?

(a) Bad Debts

- Once the debts are confirming uncollectible.

(b) Provision for Doubtful Debts

- The debts are overdue but still can be pursued for collection though difficult.

(c) Bad Debts Recovery

- The overdue is received from customers on the bad debts written off.

4. Double Entry：

(a) Bad Debts

Debit Bad Debts Written Off (Expenses)

Credit Account Receivable (Current Assets)

(b) Provision for Doubtful Debts

Debit Allowance for Doubtful Debts (Expenses)

Credit Provision for Doubtful Debts (Current Liabilities)

(c) Bad Debts Recovery

Debit Cash at Bank (Current Assets)

Credit Bad Debts Recovery (Income)

5. Example:

Example 1:

In year 2021, Company A’s account receivable is RM 100,000.00 and RM 10,000.00 is uncollectable due to the customer is bankrupt.

Answer:

The journal entry is debit Bad Debts RM 10,000.00 and credit Account Receivable RM 10,000.00.

Example 2:

In year 2020, Company A's account receivable amounted to RM 200,000.00. Company A decided to provide 5% for doubtful debts on the year.

Answer:

The journal entry is debit Allowance for Doubtful Debts RM 10,000.00 (RM 200,000.00 X 5%) and credit Provision for Doubtful Debts RM 10,000.00 in year 2020.

Example 3:

In year 2021, customer paid RM 1,000.00 to Company B for a debt which had already been written off as bad debts in year 2020.

Answer:

The journal entry is debit Cash RM 1,000.00 and credit Bad Debts Recovery RM 1,000.00 in year 2021.

You may refer to the link for more information of tax treatment on bad debts: Is Provision of Bad Debts eligible for tax deduction?! Is Provision of Bad Debts tax deductible?

🚫 Do you know LHDN (IRB) don’t accept cheque for tax payment at Bank !!!!

🚫 Do you know LHDN (IRB) don’t accept cheque for tax payment at Bank !!!!
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🚫 Do you know LHDN (IRB) don’t accept cheque for tax payment at Bank !!!!

Full story in our blog https://www.ktp.com.my/blog/tax-payment-at-bank/14april2021

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Case Study on the Transition of MFRS 16 Leases

Case Study on the Transition of MFRS 16 Leases
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Case Study on the Transition of MFRS 16 Leases

Background

ABC Sdn Bhd's financial statement is in accordance of Malaysian Financial Reporting Standards (MFRS).

The Company has signed a 5 years tenancy agreement since Year 2018 for the warehouse used in its business.

Struggles

The accountant of the Company is wondering whether

Ø   They should apply for MFRS 16 Leases to comply the Standards?

Ø   What is the corrective action if they fail to comply in Year 2019?

Ø   What is accounting entries to recognise the MFRS 16 Leases?

Q1: They should apply for MFRS 16 Leases to comply the Standards?

Solution Exemption requirement

The Company can elect not to apply only if the lease contract is:-

1. Short-term lease

- less than 12 months

 2. For low value assets

- Not highly dependent on, or highly interrelated with other assets

- Benefit from use of assets on its own or together with other sources that are readily available to the lessee

 If the Company is not exempted, it has to apply the Standard and determine the following items:-

1. Discount rate

- Implicit interest rate; or

- Incremental borrowing rate

2. Application method

- Retrospectively to each prior reporting period; or

- Retrospectively with the cumulative effect

Q2: What is the corrective action if they fail to comply in Year 2019?

Solution The Company has to do the restatement of its financial statement for the reporting period by applying MFRS 129 Financial Reporting in Hyperinflationary Economies.

Q3: What is the accounting entries to recognise the MFRS 16 Leases?

Solution The accounting entries for recognition of right-of-use assets and lease liability will be as follow:-

Dr. Right-of-use assets

            Cr. Lease liability

Dr. Depreciation

            Cr. Accumulated depreciation

Dr. Interest on lease liability

            Cr. Lease liability

Dr. Lease liability

            Cr. Bank/Cash

 Source:

MFRS 16 Leases https://www.masb.org.my/pdf.php?pdf=BV2018_MFRS%2016.pdf&file_path=pdf_file

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special tax incentive for E&E sector

special tax incentive for E&E sector
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Background

The main objective of this incentive is to further promote high-value added activities in the E&E industry to transition into 5G digital economy and Industry 4.0.

This Special Investment Tax Allowance is to encourage companies in the E&E sector that have exhausted the Reinvestment Allowance in Malaysia to further reinvest in Malaysia.

Type of Incentive:

Investment Tax Allowance of 50% on qualifying capital expenditure to be offset against 50% of Statutory Income.

The exemption period is valid for a period of 5 years starting from the date of the approval letter.

Eligibility Criteria:

1. Manufacturing company incorporated under the Companies Act, 1965/2016, and residents in Malaysia.

2. Possess valid Business License from the relevant Local Authority.

3. Possess Manufacturing License (ML) from MITI or Confirmation Letter of Exempted from Manufacturing License from MIDA (whichever is applicable).

4. The applicant company is engaged in manufacturing activities in the E&E sector and intend to reinvest for the purpose of expansion, automation, diversification and modernization.

5. The applicant company has fully exhausted the eligibility period of fifteen years to claim Reinvestment Allowance (RA) under Schedule 7A ITA 1967 by 31 December 2019 and is currently not enjoying any other tax incentives approved by the Government.

6. The applicant company will be subjected to the following conditions:

 a. The minimum investment in the related proposed projects shall be at least RM1.5 million in capital expenditure within a period of five (5) years as proposed

b. The company to incur the minimum yearly operational expenses (as proposed by company); and

c. The company to hire minimum number of Malaysian full time workers (as proposed by company)

Application Process:

1. Company submits application to MIDA through MIDA e-Incentive portal.

2. MIDA evaluates the non-technical eligibility.

3. MIDA issues a ‘Consideration Letter’ to the Applicant Company and Carbon Copies (c.c.) to the Minister of International Trade & Industry (MITI), Ministry of Finance (MoF), and Inland Revenue Board (IRB).

Effective Date of Application:

Applications received by MIDA from 1 January 2020 until 31 December 2021 are eligible to be considered for this incentive.

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Weekly E-KTP Newsletter #191: Permanently increase of Indebtedness threshold to RM50,000

Weekly E-KTP Newsletter #191: Permanently increase of Indebtedness threshold to RM50,000
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Weekly E-KTP Newsletter #191: Permanently increase of Indebtedness threshold to RM50,000

Summary

A higher threshold for winding up proceedings against a debtor who inability to pay debts

Full story

Suruhanjaya Syarikat Malaysia (SSM) has permanently raised the indebtedness threshold for companies from RM10,000.00 to RM50,000.00 with effect from 1 April 2020; after introduced a temporary measure from 23 April 2020 to 31 March 2021 under Section 466 of the Companies Act 2016.

This initiative was aimed to reduce the burden and impact on companies facing cash flow problems. This is prevention to companies being winding up and able to continue doing business during the COVID-19 pandemic.

Upon implementation of this initiative, the number of winding-up petitions is expected to reduce and companies will be able to continue doing business without worry. This is supported by the number of petitions submitted to SSM from April to December 2020 recorded at 665 cases as compared to 1,760 cases in the year 2019 and 1,533 cases in the year 2018.

Is the threshold considered an appropriate amount? As elaborate from Datuk Seri Alexander Nanta Linggi, the Minister of Domestic Trade and Consumer Affairs, this amount was considered appropriate from two (2) perspective as below:

1. not too low in forcing companies to wind up due to small amounts of debt, and

2. not too high which could burden smaller creditors for not being able to take action against companies in debt.

Hence, SSM hopes that the implementation of this initiative will help and support the corporate sector during the economic recovery period, especially for companies affected by the COVID-19 outbreak.

Source :

SSM Press release https://bit.ly/3dLpE7s

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