Thursday, December 31, 2009
Real Property Gains Tax Exemption
Saturday, October 24, 2009
Budget 2010 - Personal Relief
However, I would think that the increment is insufficient as compare with the increase of the cost of living. An increment of RM1,000 per annum is only approximate to RM80 per month. Is this sufficient for us to cope with the rising cost of our daily spending (excludes luxury spending)?
I think the personal relief should be higher ranging from RM10,000 to RM12,000 per annum. Besides that, government should also increase the child relief for taxpayers in order to relieve the burden of taxpayers having children. Is the child relief of RM1,000 per annum still sufficient in nowadays?
Besides that, the government also propose for a reduction of maximum personal income tax rate from 27% to 26%. The reduction benefits those middle and upper income group taxpayers because the maximum personal income tax rate of 27% only taxed for taxpayers with yearly income of RM100,000 and above. As one of the taxpayer mentioned in an interview, it is good to have some saving but it is nothing to shout about. The move is generally not appreciated by those group of taxpayers as the saving is insignificant to them.
On the contrary, if the personal income tax rate would remain at 27% but the personal relief could be higher, it will help larger group of taxpayers.
In conclusion, the increment in personal relief is a welcome measure but it is also nothing to shout about.
Friday, October 16, 2009
Closure, Strike Off or Winding Up of a Sdn. Bhd.
If we would like to close a Sdn. Bhd., we need to segregate the company into two (2) categories, solvent and insolvent companies.
Solvent companies are those company having positive shareholders' fund (Share capital + retained profits) or in layman terms, company make money before and have enough money/reserve to refund to the shareholders.
Insolvent companies are those company having negative shareholders' fund (Share capital - accumulated losses) or in layman terms, company make losses previously and have no money/reserve to refund to the shareholders. Besides that, shareholders are expected to advance to the company in order to close the company.
Under S308 of the Companies Act 1965, the company may make application to the Registrar of Company to strike off the company. The strike off is the power given to the Registrar of Company to close the company.
We refer to the guidelines issued by SSM, insolvent companies which are dormant or ceased operations in prior years are allowed to apply to Registrar to strike off the company. There are other criteria stated in the guidelines i.e. the shareholders must not be corporate shareholders, all penalty due to government bodies fully settled and etc must be complied before the Registrar would consider the strike off application.
I would strongly encourage the businessman to make the application to strike off the company if the basic conditions are fulfill. As per our experience, it is unlikely that the strike off will be rejected if the conditions are fulfill. In addition, SSM has recently announce that the moratorium period to strike off the company has been extended to 31 December 2009. It is easier for SSM and the applicant to strike off the company during this moratorium period.
The most important thing that need to be noted is the cost involved to strike off a company is very nominal, application fee is only RM120 and accounting firm is charging normally around RM700 for the strike off exercise. Thus, the total cost involved is less than RM1,000.
The application process normally takes 3 - 6 months and it is faster as compare to closure of company under the winding up process.
Step up to apply to strike off the company if the company had ceased business operations and no intention to commence business in the near future. It is a cost saving measure rather than maintaining the company and expose to the penalty risk if any non compliance arises.
S308 SSM Strike Off Guidelines
Friday, September 4, 2009
Saturday, July 18, 2009
Tax Treatment of Directors' Fee and Bonus
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.
Friday, July 10, 2009
Financial Year End Stocktaking
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.
Tuesday, June 30, 2009
Company Expenses Without Invoices or Official Receipts
In view of the self assessment regime implemented in Malaysia, is there any potential tax audit risk and penalty in relation to those payments without suppliers' invoices or official receipts?
Under the self assessment system, the Inland Revenue Board (IRB) would require the taxpayers to provide supporting documents to support the expenses incurred by the company. Thus, for those payments without suppliers' invoices or official receipts, the taxpayers need to prepare its own documents and documentation to ensure that those expenses are tax deductible under S33 of the Income Tax Act 1967.
Taxpayers are requested to prepare a payment voucher which details the payee name, IC no, address, nature of payments and also in relation to which business project if it is sub contractors. In addition, the original payment vouchers must be signed by the payee and it is advisable to photocopy the payee IC for reference.
If the company pay the payee using cheque, it is highly recommended that they photocopy the cheque (Account Payee Only) as the supporting documents. We have encounter cases in which IRB requested for a copy of the cheque to substantiate an expenses. As a results, the taxpayers need to liaise with bankers in order to obtain a copy of the cheque which was archive for many years. In conclusion, it is a time wasting and irritating process.
I understand that the administrative work recommended maybe time consuming but considering the tax penalty the IRB may impose, it is worthwhile to maintain proper documentation and documents in order to be tax audit savvy.
Sunday, June 28, 2009
Income Tax Filing Deadline 30 June 2009
Saturday, June 27, 2009
Petty Cash Management in Malaysia
I noted that it is common for Malaysian businessman to have misconcept on the petty cash management. Normally, the company does not maintain a petty cash float for the company, instead the money collected from cash sales are used to pay for daily office or factory expenses. If the cash sales collection is in excess of the daily cash payment, the company will deposit to the company's current accounts. I would comment that this is not a good practice to manage the petty cash in this manner.
The petty cash is used for payment of daily minor office or factory expenses and the fund or petty cash money should not be collected from cash sales, it should be withdraw from the company's current accounts (Cash out). Upon the full utilisation of petty cash money, the shortfall should be withdraw from the current accounts and top up to the petty cash float decided by the management.
For example, if the petty cash float is RM1,000 and existing petty cash balance is RM400 then the accounts staff should cash out RM600 as reimbursement of petty cash so that the petty cash float is maintained at RM1,000.
The company should fix a petty cash float or in layman term, the float is the maximum amount of cash the company should keep to pay for daily minor expenses. The float depends on the payment pattern and also the quantum of payment. Please take note that fixing a float for the company petty cash would enable the company to insure the cash loss risk from the insurance company, as this is the maximum exposure for cash loss.
The frequency of reimbursement of petty cash normally should be around 2 -3 weeks so that it reduces the administrative work of cash out from the current accounts.
All the cash sales money should be deposit to the company's current accounts intact so that it is easier for tracing and tracking and also minimise the tax audit risk.
With this petty cash management practice, it is clear and easier for the taxpayers to proof to the Inland Revenue Board on the cash sales collection which is fully recognised by the company.
MEDICAL EXPENSES FOR PARENTS INCOME TAX RELIEF
Medical Expenses for Parents [Section 46(1)(c) of Income Tax Act, 1967]
Malaysian taxpayers must aware that medical fee paid for parents' medical treatment is tax deductible. With this tax deduction, the taxpayers will enjoy lower taxable income and consequently lower income tax payments.
However, the medical fee paid must be incurred for the parents and in the official receipts it is advisable stating the patient's name and also payee's name. In this case, the patient will be the parents and payee must be the taxpayers.
The maximum tax relief for parent's medical fee is RM5,000 per annum and the official receipts must be issued by a medical practitioner or doctor registered with the Malaysia Medical Council. Besides that, the official receipts must be retained for proofing if requested by the Inland Revenue Board (IRB).
Taxpayers may refer to the Public Ruling 2/2005 Computation of Income Tax Payable By A Resident Individual under Paragraph 6.1.2 for further information.
With this clarification, it is clear that the costs of health products/health supplements incurred on parents does not fall within the ambit of medical expenses within the meaning of Section 46(1)(c) of the Income Tax Act 1967 and therefore are not eligible for personal relief to the individual.
Friday, June 26, 2009
Monday, June 22, 2009
Sunday, May 17, 2009
Tax Planning on Family Members
Besides that, we noted there are company paying above market rate salary to family members. For example, a company may be paying RM4,000 for a general administrative clerk. All this trigger Income Tax Department attention and they may disallowed those salary in excess of normal market rate. Consequently, a tax penalty will be imposed for under declaration of company profit.
In conclusion, businessman must be vigilant and seek professional advice from tax consultants or tax agents in order to ensure that all the particulars reported are in compliance with the rules and regulations.
Wednesday, May 13, 2009
Cash Basis Accounting in Malaysia
Cash Basis Accounting
Accruals Basis Accounting
Accruals basis accounting requires the company to recognise a transaction when it incurs. For example, sales are recognised when goods are delivered and accepted by the customers. The non payment of debt has nothing to do with the sales recognition. The non payment from the customers will be reflected as trade debtors under the company's assets category.
Besides that, purchases are recognised when goods are accepted by the company. The non payment of suppliers' goods will be reflected as trade creditors under the company's liabilities category.
Hope this article helps to clear the misunderstanding of Cash Basis Accounting.
Monday, May 11, 2009
Disadvantages of Sdn. Bhd.
(a) Costly
(b) Proper records for bookkeeping
Advantages of Incorporating Sdn. Bhd.
(a) Separate legal entity
However, under Enterprise, the owners or partners will be sued for any debts or borrowings owed by the Enterprise and consequently, the owners or partners may be sued for bankruptcy.
(b) Tax planning or savings
(c) Financing from bankers
(d) Branding
Sunday, May 10, 2009
Third Addendum Public Ruling Benefits In Kind
In relation to that, the taxpayers are entitled for tax exemption for the following:
(a) Discounted price for products or services purchased from employer
(b) Monthly telephone or broadband services provided by employer
(c) Traditional medical treatment paid by employer
(d) Exemption on petrol value
As the Public Ruling was issued closing to the tax filing deadline of 30 April 2009, IRB has requested the taxpayers to inform the IRB Branch and submit the revised tax return form which incorporated the tax exemption mentioned above.
Tax exemption is always welcome but amendment of rules and legislation should be timely. In this incident, the IRB has created unnecessary hassle for the taxpayers in completing the revised tax return form.
We need to be competitive and the tax administration should not be expected to cause hassle to the taxpayers or businesses. It should be friendly and hassle free.
We appeal to the government to speed up the effort in improving the delivery system so that we are more competitive as compare to other Asean countries.