Real Property Gains Tax Exemption

The Honourable Prime Minister had announced that with effect from 1 January 2010, chargeable gains from the disposal of real properties which are held more than 5 years will be exempted from the Real Property Gains Tax (RPGT) of 5%. Therefore, any gains from the disposal of real properties in which the holding period is within 5 years from the date of acquisition of the real properties will be subject to RPGT at the rate of 5%.

This exemption is applicable on gains from all types of real property including shares in real property companies disposed by all categories of property owners who are individuals (citizens, permanent residents, noncitizens and non-permanent residents of Malaysia), companies as well as other property owners.

Budget 2010 - Personal Relief

The Budget 2010 announced on 23 October 2009 proposes for increment of personal relief from RM8,000 to RM9,000 is a welcome measure as the Malaysian are facing a difficult time following the economic downturn in 2008.

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.

Closure, Strike Off or Winding Up of a Sdn. Bhd.

Businessman are keen to know the procedures, time required and costs involved in setting up a Sdn. Bhd. in Malaysia. However, as a well organised businessman, we should aware or familiar the procedures, time required and costs involved in closing or winding up of a Sdn. Bhd. I would think that closure of company is important too when the business does not develop as per our initial business plan, we need to close the company in a proper manner to ensure our name are not being blacklisted by Suruhanjaya Syarikat Malaysia (SSM).

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

http://www.ssm.com.my/berita/media/New308_070112.pdf

Professional Indemnity Insurance

PR3.2009

Perquisites from Employment

PR1.2006 (A3) Perquisites From Employment

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.