Corporate tax note - TAX317 PDF

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Summary

CORPORATE TAXAllowable and Non-Allowable Expenses (may refer Chapter 14, 15, 16, 17 and Chapter 26 in textbook for details):- Allowable Expenses i) Sec: General deduction “ All outgoings and expenses wholly and exclusively incurred during that period by that person in the production of gross busines...

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CORPORATE TAX Allowable and Non-Allowable Expenses (may refer Chapter 14, 15, 16, 17 and Chapter 26 in textbook for details):1) Allowable Expenses i) Sec.33: General deduction “ All outgoings and expenses wholly and exclusively incurred during that period by that person in the production of gross business income” E.g: - Salaries paid to employees - Electricity bills of business premise ii)

Sec. 34: Specific deduction Section Item S.34(2) Specific provision for trade bad debts S.34(4)

S.34(6)(f)

Contribution to approved scheme (e.g. EPF, PRS) Provision of equipment and renovation of building for disabled person Translation/Publication of book

S.34(6)(g)

Provision of library facilities

S.34(6)(h),(ha)

Social responsibility payment

S.34(6)(i)

Provision and maintenance of child care centre for the benefits of employees Establishing/managing Musical or Cultural group Sponsoring arts, cultural or heritage activities

S.34(6)(e)

S.34(6)(j) S.34(6)(k)

S.34(6)(l)

Provision of scholarship to students

S.34(6)(m)

Obtaining accreditation for a laboratory or as a certification body, from Department of Standards Malaysia Practical training to non-employees

S.34(6)(n) S.34(6)(o)

International Standardization (ISO) activities e.g. conference, workshop, etc approved by Department of Standards Malaysia

Restriction No restriction – Fully deductible Restricted to 19% of employee’s remuneration No restriction – Fully deductible No restriction – Fully deductible Deductible up to RM100,000 per year No restriction – Fully deductible No restriction – Fully deductible No restriction – Fully deductible Deductible up to RM1 million per year ( but for foreign arts/cultural/heritage activities, up to RM300,000 only) No restriction – Fully deductible No restriction – Fully deductible No restriction – Fully deductible No restriction – Fully deductible

Double deduction Section S.34(6)(ma)

iii)

Item Obtaining certification for recognised quality systems and standards; or halal certification

Gazette Order/Case Law: Item a)

Statutory audit fees

b)

Secretarial and tax filing fees (w.e.f YA2020)

c)

Guarantee and commitment fees

d)

Compensation paid to employee for dismissal of employment Cost of listing in Bursa Malaysia (for technology-based companies and SMEs) PTPTN loan repayment on behalf of employee (for repayment made from 1 January 2020 to 31 December 2021) Cost of developing website

e) f)

g)

h)

Cost of acquiring Proprietary rights* (Available to manufacturing company only) * patents, industrial designs, or trademarks

Restriction No restriction – Fully deductible Deductible up to RM15,000 per year No restriction – Fully deductible No restriction – Fully deductible Deductible up to RM1.5 million No restriction – Fully deductible Deductible at 20% per year (i.e. spread throughout 5 years) Deductible at 20% per year (i.e. spread throughout 5 years)

Double deduction a) Childcare centre: - provision and maintenance of child care centre registered with the Department of Social Welfare; - child care allowance to employees b)

Training cost for unemployed graduates

c)

Vendor Development Programme - Amount qualified for double deduction shall not exceed RM300,000 in each year of assessment (YA) for 3 consecutive YAs.

d)

Expenditure on issuance of Sukuk (effective YA2019 -2020)

e)

Remuneration paid to disabled employee

f)

Structured Internship Programme (SIP) i.e. approved internship programme conducted for students. (effective YA2017 – 2021) - Limited to RM5,000 per student per year

2)

g)

Remuneration paid to an employee who is a senior citizen or ex-convict (effective YA2019 – 2020)

h)

Promotion of Exports, such as: - registration of patent, trademark and product licensing in overseas - International trade fair held in Malaysia - Advertising expenditure on Malaysian brand name goods - Export credit insurance premium

i)

Approved training provided - to employees - non-employees (disabled person)

j)

Freight charges for shipping goods from Sabah/Sarawak to Peninsular Malaysia

k)

Approved Research & Development (R&D) Expenditure

l)

Cash contributions to approved research institute

m)

Rental paid for Tun Razak Exchange (TRX) building (effective: YA2014 – 2020) - Amount qualified for double deduction is 50% of the rental paid

Non-Allowable Expenses (details in Chapter 26 of textbook; pg 479 – 480) Can be categorised into four groups:a)

Expenses that are not incurred e.g. - depreciation - general provision for bad debts - provision for stock obsolescence - unrealised exchange loss * *

Tax treatment for exchange gain/loss (PR 12/2019) Exchange Gain - is an income Type of transaction Trade

Nature of income Revenue

Realised/Unrealised Realised

Revenue Capital

Unrealised Realised/Unrealised

Tax treatment Taxable as business income Not taxable Not taxable

Non-Trade

Revenue

Realised

Revenue Capital

Unrealised Realised/Unrealised

Not taxable as business income BUT is taxable as non-business income if not exempted. Not Taxable Not taxable

Exchange Loss – is an expense Type of transaction Trade

Non-Trade

Nature of expenditure Revenue

Realised/Unrealised

Revenue

Unrealised

Capital

Realised/Unrealised

Revenue

Realised

Revenue

Unrealised

Capital

Realised/Unrealised

Realised

Tax treatment Allowable expense Non-allowable expense Non-allowable expense Non-allowable expense for business income but is allowable for the respective non-business income Non-allowable expense Non-allowable expense

b)

Capital expenditure e.g. - cost of printing and distribution of annual reports - stamp duty and secretarial fees for increased share capital - legal and professional fees relating to violation of laws, capital structure of company, acquisition of loan or assets. - donations and zakat - lump sum payment for early termination of leasing contract - registration of trademark - Compensation to competitor to restrict competition (restrictive covenant) - loss on disposal of fixed assets

c)

Expenses related to investment income (i.e. non-business income, e.g. dividend, interest)

d)

Prohibited expenses (Sec.39) e.g. - leave passage ( except for yearly leave passage for employees within Malaysia) - payment made to non-resident which is subjected to withholding tax (WHT), where the company failed to pay the WHT to the tax authority. - lease rental exceeding RM50,000 (or RM100,000 in special circumstances) in aggregate on non-commercial vehicle. - Entertainment expenses for potential client - Entertainment allowance for employees, only 50% allowable....