Tax Treatment of Directors' Fee and Bonus

Referring to Section 25 (2A) of the Income Tax Act 1967, bonus and directors' fee paid to employees or directors respectively are taxed in the year of assessment the bonus and directors' fee are received.

For example, Employee A received 2008 performance bonus in February 2009, this bonus shall be deemed to be income for the year of 2009 and declared in the EA Form 2009.

Prior to 2009, the bonus and directors' fee received was taxed in the period when the income was earned. For examples, 2008 bonus received in 2009 but the bonus must be reported and declared in 2008. As a results, it involves additional administrative work to revise the Form BE and payment of additional income tax as per latest computation.

Financial Year End Stocktaking

For those Malaysian companies involve in trading or manufacturing businesses, the inventories or stock are quite common that we can see from the financial report. The inventories or stock are categorised into three, raw materials, work in progress and finished goods.

When come to financial year end, no matter whether it is an enterprise or Sdn. Bhd. they are required to perform a financial year end stocktake to quantify the quantity and also the value of closing stock as at year end.

As per Income Tax Public Ruling 5/2000 (Revised), it is compulsory for a business to perform the stocktake to qualify the closing stock value. For the management, it should be a complete or 100% inventories count. After the counting, the physical quantity counted should be compare with the stock record (either in computer system or manual book), any difference noted should be adjusted to the income statement immediately.

Enterprise as there are no auditors involved, the stocktake will be performed by the management of the enterprise only. However, for Sdn. Bhd., the auditors have to attend the financial year end stocktake as per approved auditing standards in Malaysia. The auditors should observe and select samples on test checked basis to verify the quantity of the stock.

Please ensure the financial year end stocktaking is performed with proper documentation in order to avoid any tax audit risk.