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

#KTP

#Thk

#windingup

#SSM

What should you do on tax matters after the conversion from enterprise to sdn bhd ?

Form CP 502

Upon conversion from enterprise to sdn bhd, you shall vary the instalment payments if do not agree with the Notice of Instalment Payments (CP500).

Form CP502 must be filled up by using a black ink pen and be submitted to the respective IRBM branch which handles the taxpayers' file.

The due date for submission of Form 502 is not later than 30 June 2020.

CP 204 Tax estimation for Sdn Bhd

Submission of tax estimate in Malaysia is mandatory under Section 107C of the Malaysian Income Tax Act, 1967.

According to Public Ruling 07/2011, A company which has been in operation (existing) should furnish estimation of tax payable not later than 30 days before the beginning of the basis period for a year of assessment.

For those that have just commenced business the estimate of tax payable should be furnished within 3 months from the date of commencement of business of the company, trust body or co-operative society.

SME is not required to furnish an estimate of tax payable or make instalment payments for a period of 2 years beginning from the year of assessment in which the SME commences operations.

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

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

What is the valuation of stock for the conversion from enterprise to Sdn Bhd?

Referring to Public Ruling 2/2020 Tax Treatment of Stock in Trade Part 1 - Valuation of Stock

Valuation of Stock equal to

1. Price paid on the sales or

2. Value of the consideration

Valuation of Stock is not market value of the stock

Conditions

Where a person permanently ceases to carry on his business and –

(a) any stock of the business is transferred on cessation or shortly after cessation for a valuable consideration to another person who intends to use that sold or transferred stock in his business

(b) the cost of the transferred stock is deductible as an expense in computing the other person’s adjusted income for the basis period for a year of assessment of his business

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KTP

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

Instructional Video - How to Register with HRDF

Background

Recently, the Government has expanded the scope of industries for employers who have more than 10 employees to register Human Resources Development Funds (HRDF).

The objective is to increase the training opportunities for all employees to up-skill themselves and be prepared for a future ready workforce against technology displacement.

The Government has also encouraged those employers who are not mandatory to register to submit the Form 1 as well.

We understood this is a challenge for some employers on how to do the registration.

To clear your doubt, please watch our video with one click.

https://bit.ly/3sFAzWN

Sources:

Human Resources Development Fund Official Website https://www.hrdf.com.my/

P.U.(A) 84 Pembangunan Sumber Manusia Berhad (Amendment of First Schedule) Order 2021

https://www.hrdf.com.my/wp-content/uploads/2016/12/FEDERAL-GOVERMENT-GAZETTE-PEMBANGUNAN-SUMBER-MANUSIA-BERHAD-AMENDMENT-OF-FIRST-SCHEDULE-ORDER-2021.pdf

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

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𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

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

What is control transfer under income tax act for the conversion from sole proprietorship to Sdn Bhd?

As per refer to Public Ruling 1/2018 Public Ruling 1/2018 Disposal of Plant and Machinery Part II - Controlled Sales

Control transfer is transaction of asset between two parties.

• The acquirer of the asset has control(at least 50%) over the disposer and; vice versa

• Some other person has control over the disposer and acquirer of the asset

• The disposal is effected in consequence of a scheme of reconstruction or amalgamation of companies

The disposal is effected by way of a settlement or gift or by devolution of the property in the asset on death

The conversion of sole proprietorship to Sdn Bhd will subject to control transfer.

 As the control right of sole proprietorship and Sdn Bhd come from one person.

Treatment in tax

• The disposal of asset from sole proprietorship to Sdn Bhd.

• The assets deemed transfer at residual expenditure instead of the transaction price.

• Disposer would not subject to balancing charge or allowance.

• Acquirer's can't claim the initial allowance and claim annual allowance based on disposer's acquisition price but restricted to the residual expenditure.

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

KTP

• Website www.ktp.com.my

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• Linkedin https://bit.ly/3sapf4l

• Telegram http://bit.ly/3ptmlpn

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

• Instagram https://bit.ly/3u2PxHg

• Facebook http://bit.ly/3rPxz9o

𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

• Website www.thks.com.my

• Facebook http://bit.ly/3duvQ5z

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

Question 7: Is professional firm considered as employer? (eg: sole-proprietor, partnership and LLP)

Answer:

Yes, all are considered as employer if they have contract of service with employee.

“Employer means any person who has entered into a contract of service to employ any other person as an employee, and includes an agent, manager or factor of such first-mentioned person.”

Question 8: What is the compound for not registering?

Answer:

According to Section 13(2) of PSMB Act 2001, the employer is liable to a fine of not exceeding RM10,000 or imprisonment not exceeding 1 year or both.

Question 9 : How to define employees?

Answer:

It included all the employees who are under “Contract of Service”.

Included: partners from partnership, trainee, part time, non-professional employees (eg: cleaner, coffee lady, receptionist)

Excluded: Internship

“Contract of service means any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee, and includes an apprenticeship contract”

Question 10 : Is internship consider under contract of service?

Answer:

No. Internship is not under contract of service.

Question 11 : How to define wages?

Answer:

Wages = salary + fixed allowance. Not include: no fixed allowance, bonus.

 “Wages means the basic salary and fixed allowances or other emoluments of a like nature paid in cash by or on behalf of an employer to an employee, and includes any leave pay and arrears of wages but does not include: -

a)       any contribution paid by an employer on his own account to any pension fund, provident fund, superannuation scheme, retrenchment, termination, lay-off or retirement scheme, thrift scheme or any other fund or scheme establish for the benefit or welfare of the employee;

b)      any travelling allowance or the value of any travelling concession;

c)       any sum payable to the employee to defray special expense entailed on him by the nature of his employment;

d)      any gratuity payable on discharge or retirement;

e)      any bonus or commission; or

f)        any allowances paid to apprentice under apprenticeship contract;”

“Monthly wages means the wages paid by an employer to an employee for the whole or part of the month during which the employee id employed by the employer.”

 Question 12 : Is director fee subject to HRDF?

Answer:

A director who only receive director fees is not considered as employee.

Question 13 : What are the steps to claim HRDF?

Answer:

Step 1: Send application first and is approved training (registered under HRDF)

Step 2: Approved and attend training (include registered under HRDF and internal training (eg: conduct by manager)

Step 3: Submit complete document for the claim after training (will have a workshop on guiding how to claim)

Question 14 : Any expire date to utilize the fund?

Answer:

Yes, you need to claim the fund within 24 months. Otherwise, it will be forfeited after 24 months from the date of contribution.

Question 15:  The levy payment is exempted from March to May 2021. Does it mean the first levy payment is on wages for June 2021 and the payment due date is on or before 15 July 2021?

Answer:

Yes, the company need to pay the levy on salaries from June 2021 onwards. Levy payment to be made no later than 15th of the month.

Question 16 :  How much is the rate of levy if number of employees reduce to less than 10? Do I need to notify Corporation?

Answer:

No, you no need to notify Corporation. The rate of levy shall remain at 1% of the monthly wages of each of the employees until the end of the current year.

However, the rate of levy shall be 0.5% if the number of employees remains below 10 after the current year.

[Refer to Section 15(5) and Section 15(6) of PBSM 2001]

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

KTP

• Website www.ktp.com.my

• Instagram https://bit.ly/3jZuZuI

• Linkedin https://bit.ly/3sapf4l

• Telegram http://bit.ly/3ptmlpn

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

• Tiktok http://bit.ly/3u9LR6Q

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

• Instagram https://bit.ly/3u2PxHg

• Facebook http://bit.ly/3rPxz9o

𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

• Website www.thks.com.my

• Facebook http://bit.ly/3duvQ5z

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

Summary of MIA seminar with HRDF on 23/3/2021

1. Before 1st March 2021, any activities/industry covered under 1st Schedule

- Manufacturing

- Services

- Mining & Quarrying

2. After 1st March 2021, industry/sectors/activity under 1st Schedule is a mandatory category

- Employer with min 10 local employees

- 1% from total gross salary + fixed allowances

- Section 14 Imposition of levy

P.U (A) 84 Pembangunan Sumber Manusia Berhad (Amendment of first schedule) order 2021

3. Exemption levy payment from 1.3.2021 – 31.5.2021 under P.U (A) 85 Pembangunan Sumber Manusia Berhad (Exemption of levy) order 2021

4. Objective to expansion – increase training opportunities for all employees, to up-skilling, and to prepare a future-ready workforce against technology displacement.

5. Please submit Form 1 even though a dormant company with no staff, just for HRDF record. If not required, they will email to reply to you. Except for voluntary register

How to submit Form 1

Step 1 – Scan all the document as per requirement

Step 2 – go to the HRDF website and click register here

Step 3 – Fill in Form 1 and attached all the information

Step 4 – Click submit

Step 5 – within 7 days process.

Take note:

(i) Details of submission officer

Please put the account email instead of the boss email. Because HRDF maybe clarifies with the submission document.

(ii) Employer Integrity Pledge

No compulsory to be filling.

(iii) Employee with 5-9 Malaysian employees are given the option to register with HRDF

Tick for voluntary registration only. If not, please tick.

6. How do you define employees?

Employee included office boy, coffee lady, receptionist excluded internship.

“Contract of service” means any agreement, whether oral or in writing and whether express or implied, whereby one person agrees to employ another as an employee and that other agrees to serve his employer as an employee and includes an apprenticeship contract

7. What are wages?

- Basic salary + fixed allowance

“Wages” means the basic salary and fixed allowances or other emoluments of like nature paid in cash by or on behalf of an employer to an employee and includes any leave pay and arrears of wages.

Not included any pension fund. Provident fund, retirement fund, retrenchment, termination, any traveling allowance, gratuity, bonus, commission, director fee.

8. How to refund?

- No refund - For striking off the company.

- De-registered –

(i) Has do re-registered within a period of two years from the date of deregister shall continue to be eligible to receive any financial assistance.

(ii) If not re-register within a period of two years, the financial assistance will lose.

Can deregister under Section 14A decrease to below ten for three consecutive months.

9. How to claim?

- The courses need to approve by the HRDF organization.

- The claimable is based on your account balance has a minimum of 50% of the training fee. Disbursement by 2 times when the account has sufficient balance.

10. Any update for new staff or resign staff?

- No need to register and update new staff information in the system. You only required to fill in the total paid 1% of the number of employees during the contribution.

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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

• Website www.ktp.com.my

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• Linkedin https://bit.ly/3sapf4l

• Telegram http://bit.ly/3ptmlpn

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

• Tiktok http://bit.ly/3u9LR6Q

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

• Instagram https://bit.ly/3u2PxHg

• Facebook http://bit.ly/3rPxz9o

𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

• Website www.thks.com.my

• Facebook http://bit.ly/3duvQ5z

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

Registration Procedure:

1. Complete the Registration Form.

2. Every business owner and partners must sign on the registration form.

3. Owner or one of the partners may submit the application over the counter or submit through online via SSM EzBiz Online services in the SSM’s website at www.ssm.com.my.

4. Documents to be attached are as follows:

• Owner’s and /or partner’s identity card;

• Original Business Registration Certificate for the change of business type;

• Supporting document or approval letter from relevant agencies for certain type of business if required by Registrar of Business.

Visit us

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

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

KTP

• Website www.ktp.com.my

• Instagram https://bit.ly/3jZuZuI

• Linkedin https://bit.ly/3sapf4l

• Telegram http://bit.ly/3ptmlpn

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

• Tiktok http://bit.ly/3u9LR6Q

• Youtube http://bit.ly/3ppmjyE

• Facebook http://bit.ly/3ateoMz

• Instagram https://bit.ly/3jZpKLo

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

• Instagram https://bit.ly/3u2PxHg

• Facebook http://bit.ly/3rPxz9o

𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

• Website www.thks.com.my

• Facebook http://bit.ly/3duvQ5z

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

Convert Enterprise (sole-proprietorship/partnership) to Sdn Bhd Explained. Part 1

Today we explain the difference between Enterprise and Sdn Bhd comprehensively.

1. Board of director

• Enterprise : Not required

• Sdn Bhd : Must have at least one (1) director

2. Liability

• Enterprise : The owner/partner(s) has unlimited liability and has to take risk in any loss of business fails

• Sdn Bhd : The shareholder(s) has limited liability. Company becomes separate entity

3. Tax Rate

• Enterprise : Tax rate for individual income tax between 0% to 30%

• Sdn Bhd : Annual gross business income not more than RM50 million and paid up ordinary share capital on or less RM2.5million, the tax rate is 17% for first 600K,24% for remaining.

4. Law

• Enterprise : Regulated under the Business Act 1956

• Sdn Bhd : Regulated under the Company Act 2016

5. Chargeable person

• Enterprise : The person is a chargeable person under tax.

• Sdn Bhd : The company is a chargeable person under tax.

6. Business Management

• Enterprise : The owner/partner(s) is to manage and run the business.

• Sdn Bhd : The board of director is to manage and run the business

7. Number of shareholder/owner/partner

• Enterprise : Sole proprietorship – at least one (1) owner. Partnership – at least two (2) to twenty (20) partners

• Sdn Bhd : At least one (1) to fifty (50) shareholders

8. Company secretary

• Enterprise : Not required

• Sdn Bhd : At least one (1) qualified company secretary

9. Statutory Audit Requirement

• Enterprise : Not required

• Sdn Bhd : Yes. Compulsory

10. Annual Compliance

• Enterprise : Not required

• Sdn Bhd : Yes. Compulsory to submit annual return and audited financial statement

11. Register Office and Statutory Records

• Enterprise : Required to keep accounting books and records at the place of business

• Sdn Bhd : Required to have a registered office within Malaysia which all correspondences & notices may be addressed. Required to keep registers.

12. Income Tax Position

• Enterprise : Tax on person either the owner or partner(s)

• Sdn Bhd : Tax on the company.

13. Public Access to Company Financial Situation

• Enterprise : No need to disclose.

• Sdn Bhd : Public can access to the financial performance & position of the company

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

• Website www.ktp.com.my

• Instagram https://bit.ly/3jZuZuI

• Linkedin https://bit.ly/3sapf4l

• Telegram http://bit.ly/3ptmlpn

𝐊𝐓𝐏 𝐋𝐢𝐟𝐞𝐬𝐭𝐲𝐥𝐞 (Our internal community for our colleagues)

• Tiktok http://bit.ly/3u9LR6Q

• Youtube http://bit.ly/3ppmjyE

• Facebook http://bit.ly/3ateoMz

• Instagram https://bit.ly/3jZpKLo

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

• Instagram https://bit.ly/3u2PxHg

• Facebook http://bit.ly/3rPxz9o

𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

• Website www.thks.com.my

• Facebook http://bit.ly/3duvQ5z

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

FAQ on special deduction for the renovation cost under P.U. (A) 381/2020 (Updated on 11.03.2021) Part II

Continue from Part I

5. What is the format/form of verification by the external auditors?

Verification of the external auditors needs to be made through a special certificate.

Special certificates can be made in any appropriate format/ form.

6. Is the payment of certification by external auditor is deductible with my R&R expenses?

- No, the fee of certification by external auditor is not included and it is not deductible.

7. Are my expenses for R&R not allowed for special deduction if the cost is more than RM300,000?

- No, you are still entitled for the special deduction is your R&R expenses is more than RM300,000. The maximum to claim is RM300,000 and terms and conditions under P.U.(A) 381/2020 should be applied.

 For example:

a)    Mr Vincent incurred of RM350,000 for his homestay renovation on 01.06.2020. He is entitled to claim for special deduction for the renovation cost of RM300,000 in YA2020 under P.U.(A) 381/2020. The excess of RM50,000 is not allowed to carried forward.

 Mr Vincent incurred for another renovation cost amounting RM150,000 for his homestay renovation in February 2021. Mr Vincent is not entitled to claim special deduction for RM150,000 renovation cost in YA2021 due to he has claimed for the maximum amount of RM300,000 in YA2020.

 b)    Encik Rahim incurred of RM120,000 for his restaurant renovation on 01.08.2020. He is entitled to claim for special deduction for the renovation cost of RM120,000 in YA2020 under P.U.(A) 381/2020.

 Encik Rahim incurred for another renovation cost amounting RM300,000 for his restaurant renovation in July 2021. But Encik Rahim is entitled to claim special deduction for RM180,000 in YA2021 due to he has reached the maximum amount (RM300,000) that he can claim within the period of 01.03.2020 to 31.12.2021.

8. Is the renovation cost cannot be absorbed when the company has adjusted losses?

- Yes, if the renovation cost is not entitled to claim under P.U. (A)381/2020 and cannot be utilised from adjusted income as it is an adjusted loss to the company. The losses can be carried forward and subject to a restricted period under Subsection 44(5F) of ITA 1967.

9. Can I claim the special deduction for the renovation cost if I have also entitled to claim under subsection 33(1) of ITA 1967 or capital allowance under Schedule 2 or Schedule 3?

- No, you are not entitled to claim the special deduction for the renovation cost if you have claimed under subsection 33(1) of ITA 1967 or capital allowance under Schedule 2 or Schedule 3.

 10. What supporting document is required?

- The supporting documents should be kept for the required period under ITA 1967 and due to the requirement by LHDN. Supporting documents to be provided including:

 i)              Business registration certificate

ii)             Ownership of the premises (eg: Tenancy agreement)

iii)            Invoice for the renovation cost, and

iv)           Invoice for the renovation cost which certified by external auditor

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Tax deduction on cash loss?

Embezzlement is the act of someone wrongfully appropriating funds that have been entrusted to their care but which are owned by someone else. Many small businesses are victims of thefts perpetrated by employees.

From a tax perspective, can the cash loss eligible for tax deduction?

Let’s illustrate with a simple real case:

Scenario

 GGG Sdn Bhd (actual name of the company is conceived to protect confidentiality) has entrusted their account executive on the usage of company’s fund to smoothen the daily operation. However, they have recently found out he has been transferred funds to his accounts over the past 6 months.

 The account executive had run away and no way to be found. The total losses are approximately around RM100,000. Without hesitation, GGG had reported to the police.

 Struggles

• Can the cash loss eligible for tax deduction?

• Is a police report sufficient?

Solution:

 Yes, the cash loss is tax-deductible. However, sufficient documentation must be kept. A mere police report is arguably insufficient, as it was only proof that the incident happened.

 To avoid further disputes from IRB officer, KTP has advised GGG to prepare more documents as below: -

• Bank receipts of cash transfer to the account executive current account, letter of employment termination, and bank statement as proof of the person involved.

• Police report and minutes of the board of directors’ meeting as proof of the action taken.

Sources:

Public Ruling NO. 4/2012 - Deduction for Loss of Cash and Treatment of Recoveries

http://phl.hasil.gov.my/pdf/pdfam/PR_No_4_2012.pdf

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𝐓𝐇𝐊 (Our associate in secretarial & accounting services)

• Website www.thks.com.my

• Facebook http://bit.ly/3duvQ5z

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