Bad debt deduction

To qualified for tax deduction one has to do the following at the minimum:

1. The debt is a trade debt

2. Action has been taken to recover the debts, at the minimum send legal letter

3. Appoint a person to evaluate the case, document the date, name and the information used in arriving at the decision

4. When claiming bed debts make sure the Company has stop business dealing with the customer for the simple reason:-

A debt considered as bad upon customer died, bankrupt, missing or no cost effective way to recover.

Hence there will be no valid business or commercial reason for a company to do business with the bad customer.

Entertainment Expense

 

The IRB has issued a revised Public Ruling on the above-mentioned in 22.10.2008.

The new PR give a guide in ascertaining deductibility of Entertainment Expense as follow:

First check is it fall under S18 entertainment expense, if not not allowed but may check if it can be classified to other type of expense.

Secondly test if it satisfied S33(1) wholly and exclusively test, if fail no deduction is allowed.

If pass the S33(1) test, check against S39(1)(i)-(viii) for 100% deduction, otherwise 50% only deductible.

For more comprehensive analysis refer Summary of Entertainment Expense

Leave Passage

Leave passage in 2007 extend to include fare, meal and accommodation.

It is tax exempted on the employee (limited to 3 times local and 1 time oversea (max RM3,000) per year ) otherwise will be part of remuneration that is taxable.

Does not apply to sole-proprietor and partner as no master and servant relationship exist.

From Employer perspective, the fare for a yearly events within Malaysia involving employer, employee and immediate family member of the employee allowed will be allowed a deduction in ascertaining adjusted income for a year of assessment.

Fare for employee leave passage other than above mentioned will not be deductible, but the meal and accommodation is allowed under 39(1)(i)

Economic Stimulus Package

(Speech of Second Economics Stimulus Package dated 10th March 2009)

 

Summary of RM60 B (implemented over two year - 2009 and 2010) package are as follow:

This package account for almost 9% of GDP and will result in increased in the Budget deficit from 4.8% to 7.6%.

The Package have four thrust together with the relevant allocation as shown below:

Thrust	RM B
1. Reducing Unemployment and Increasing Employment Opportunities	2
2. Easing the Burden of the Rakyat, in particular, the Vulnerable Groups	10
3. Assisting the Private Sector in Facing the Crisis	29
4. Building Capacity for the Future	19

The package will be implemented over two year in the following form

	Total RM B
Fiscal injection	15
Guarantee funds	25
Equity investments	10
Private finance initiative and off-budget projects	7
Tax incentives	3

fiscal injection

RM10 billion is allocated for 2009 and RM5 billion for 2010.

The RM10 billion for 2009 consists of RM5 billion for operating expenditure and RM5 billion for development expenditure.

 

Summary of various action under the relevant thrust: 

FIRST THRUST: REDUCING UNEMPLOYMENT AND INCREASING EMPLOYMENT OPPORTUNITIES

• Unemployment rate expected to increase to 4.5% (3.7% 2008)
• Since Oct 2008,
  • 25,000 worker retrenched
  • 30,900 temporary laid-off
  • 23900 tpaycuts
  • 100,000 no overtime work

Strategy

1. Providing Training and Creating Employment Opportunities

2. Welfare of Retrenched Workers

3. Creating Job Opportunities in the Public Sector

4. Opportunities for Post-Graduate Education

5. PROSPER Graduate Programme

6. Efforts to Reduce Foreign Workers

 

SECOND THRUST: EASING THE BURDEN OF THE RAKYAT, IN PARTICULAR THE VULNERABLE GROUPS

• Eliminate hardcore poverty by 2010
• assist oil palm and rubber smallholders affected by declining commodity prices
  • through re-planting, integrated farming and livestock breeding schemes
  • in the events income of smallholders falling below poverty line income, assistance under the Social Safety Net Scheme will be extended to them
• ensure prices of necessities and transport cost do not burden the rakyat
  • RM674 M for necessities price subsidies (sugar, bread, wheat flour)
  • RM480 M to curb increase in toll rates
• total subsidies in 2009 RM27.9 M

Strategy

7. Increasing Home Ownership

8. Improving Public Infrastructure

9. Government Savings Bonds

10. Improving School Facilities

11. Basic Amenities in Rural Areas

12. Programmes in Sabah and Sarawak

13. Microcredit Programmes

14. Assisting the Less Fortunate

15. Ensuring Welfare of Retrenched Workers

16. Incentives for Banks to Defer Repayments of Housing Loans

 

THIRD THRUST: ASSISTING THE PRIVATE SECTOR IN FACING THE CRISIS

17. Working Capital Guarantee Scheme

18. Industry Restructuring Loan Guarantee Scheme

19. Facilitating Access to Capital Market

20. Attracting High-Net-Worth and Skilled Individuals

21. Reducing Cost of Doing Business

22. Promoting the Automotive Sector

23. Aviation Industry

24. Accelerated Capital Allowance

25. Carry Back Losses

26. Profit Levy on Oil Palm

27. Promoting Tourism

 

FOURTH THRUST: BUILDING CAPACITY FOR THE FUTURE

28. Investments by Khazanah Nasional Berhad

29. Off-Budget Projects

30. Private Finance Initiative (PFI)

31. Liberalisation of Services Sector

32. Role of Foreign Investment Committee (FIC)

33. Development of Creative Arts Industry

34. Effective Management of Government Financial Resources

Further reading

Appendix 10

Appendix b

Summary of Economics Stimulus Package dated 4th November 2008 (valued at RM7 B)

ESP25. Carry Back Losses

• to improve business cash flow
• current year losses of up to RM100,000
• carried back to immediate preceding year
• applicable to all businesses including sole proprietors and partnerships
• effective for year of assessment 2009 and 2010

ESP24. Accelerated Capital Allowance

• Expenses on plant and machinery incurred between 10.3.2009 to 31.12.2010 be given Accelerated Capital Allowance - claim within 2 years
• Expenditure on renovation and refurbishment incurred between 10.3.2009 to 31.12.2010 qualified for Accelerated Capital Allowance  claim within 2 years (currently not allowed).
• The allowance is capped at RM100,000 for 8 years of assessment per tax payer.
• the qualifying expenses are
• general electrical installation
• lighting
• gas system
• water system
• litchen fittings
• sanitary fittings
• door, gate, window, grill and roller shutter
• fixed partitions
• flooring
• wall covering
• false ceiling and cornices
• ornamental features or decorations excluding fine art
• canopy or awning
• fitting room or changing room
• children play area
• recreation room for employee
• effective  Year of assessment 2009

ESP7. Increasing Home Ownership

• RM200M to build 6,500 units of rumah mesra rakyat by Syarikat Perumahan Negara Berhad under First Stimulus packages
• In view of good response from low income group, additional RM200M allocation is made
• house buyers given tax relief on interest paid on housing loans up to RM10,000/year for 3 years.
  • Detail of the tax relief as follow
    • purchased from developer or third party
    • tax payer is a Malaysian citizen and a resident
    • limited to 1residential house (including flat, apartment or condominium
    • SPA executed between 10.3.2009 and 31.12.2010
    • 3 consecutive years from the first year the housing loan interest is paid
    • Effective Year of Assessment 2009

ESP2. Welfare of Retrenched Workers

Employers employed worker retrenched (including VSC) from 1 July 2008 be given double tax deduction on remuneration paid, condition - shall not exceed RM10,000 per months, limit to 12 months per employee. For worker employed from 10 March 2009 to 31 December 2010.

Condition for double deduction is as follow:

• workers must be Malaysian citizen and residents retrenched from 1.7.2008
• ther termination has been registered with the Director General of Labour, the Ministry of Human esources - includes those under Voluntary Seperation Scheme (VSS) or Mutual Seperation Scheme
• employment on full time basis
• remuneration expenses includes wages, salary and allowances not exceed RM10,00 per month for each worker, limit to maximum 12 months
• for worker appointed between 10.3.009 and 31.12.2010
• effective from Year of Assessment 2009

PUBLIC RULING ADDENDUM 5.2.2009

PERQUISITES FROM EMPLOYMENT
SECOND ADDENDUM TO PUBLIC RULING NO. 1/2006 (dated 25.2.2009)

This Addendum provides clarification in relation to tax exemption on perquisites received by an employee pursuant to his employment in respect of:

(a) innovation or productivity award - paragraph 25C, Schedule 6 of the Income Tax Act 1967 (ITA).

(b)  i. gift of a new personal computer - Income Tax(Exemption) (No. 4) Order 2008; and
      ii. allowances, subsidised interest and gifts (the relevant Income Tax exemption order yet to be gazetted.)

Public Ruling 1/2006 Second Addendum - Perquisites from Employment dated 25.2.2009

LIVING ACCOMODATION BENEFIT PROVIDED FOR THE EMPLOYEE BY THE EMPLOYER ADDENDUM TO PUBLIC RULING NO. 3/2005 (dated 5.2.2009)

This Addendum provides clarification on the change in the determination of value of living accommodation benefit provided for the employee by the employer.

Public Ruling No 3/2005 Addendum Living Accommodation Benefit Provided for the Employee by the Employer dated 5.2.2009

SPECIAL DEDUCTION

 

Expenditure specifically allowed as a deduction under S34(6) of ITA 1967.

Refer to Appendix D of Form C 2008 Explanatory Notes/Guidebook for further details on the scope and source of deductibility.

List below expenses entitled for special deduction:

1. Equipment for disabled employees; or expenditure on the alteration or renovation of premises for the benefit of disabled employees (Amended with effect from Year of Assessment 2008)

2. Translation into or publication in the national language of books approved by Dewan Bahasa dan Pustaka

3. Provision of library facilities or contributions to libraries not exceeding RM100,000

4. Provision of services, public amenities and contributions to approved charity/community projects pertaining to education, health, housing infrastructure, information and communication technology

5. Revenue expenditure on the provision and maintenance of child care centre for employees’ benefit

6. Establishment and management of approved musical or cultural groups

7. Expenditure incurred in sponsoring any approved local and foreign arts, cultural or heritage activity:
– not exceeding RM500,000 in aggregate
– not exceeding RM200,000 for sponsoring foreign arts, cultural or heritage activity

8. Provision of scholarship to a student receiving full-time instruction leading to an award of diploma/degree (including Masters/Doctorate)

9. Capital expenditure incurred in obtaining accreditation for a laboratory or as a certification body

10. Revenue expenditure on scientific research directly undertaken and related to the business

11. Incorporation expenses

12. Cost of acquisition of proprietary rights

13. Corporate debt restructuring expenditure

14. Information technology-related expenditure

15. Pre-commencement of business training expenses incurred within one year prior to the commencement of business

16. Contribution to an approved benevolent fund/trust account in respect of individuals suffering from serious diseases

17. Provision of practical training in Malaysia to resident individuals who are not own employees

18. Promotion of exports - registration of patents, trademarks and product licensing overseas

19. Implementation of RosettaNet

20. Investment in a venture company

21. Deduction for gifts of new personal computers to employees (Year of Assessment 2001 - 2003)

Deduction for gifts of new personal computer and monthly broadband subscription fee to employees (Year of Assessment 2008 - 2010)

22. Cost of developing website

23. Investment in an approved food production project

24. Cost on acquisition of a foreign owned company

25. Investment in a project of commercialisation of research and development findings

26. Promotion of exports - hotel accomodation and sustenance provided to potential importers

27. Expenditure on issuance of Islamic securities

28. Expenditure on issuance of asset backed securities

29. Expenditure on issuance of Islamic securities pursuant to Istisna’ principle

30. Cash contribution and sponsor of a cultural or arts show held in Federal Territory Kuala Lumpur

31. Investment in an approved food production project

32. Audit expenditure

33. Expenditure incurred for the development and compliance of new courses by private higher education institutions

34. Expenditure for establishment of an Islamic stock broking business

35. Expenditure incurred for participating in international standardization activities approved by the Department of Standards Malaysia

36. Expenditure incurred on the provision of infrastructure in relation to its business which is available for public use, subject to the prior approval of the Minister

37. Deduction for investment in a Bionexus status company 

38. Deduction for cost of spectrum assignment

39. Deduction for cost of obtaining Chain of Custody Certification from Malaysian Timber Certification Council

SMALL VALUE ASSETS

SME with less than 2.5m capital at beginning of YA and not controlled by another company with more than 2.5m capital qualify for:

Small value asset write-off – ie asset value less than RM1,000 can be claimed in a year with no maximum amount. (Effectice YA 2009)

For non-SME the limit is RM10,000 total for a year. (also apply to SME before YA 2009)

PERSONAL RELIEF

 

SKIM SIMPANAN PENDIIKAN NASIONAL

established under Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997

Net deposit of RM3,000 per year effective 2007

Depositor - Parent

Beneficiary - Child

Managed by

1. Bank simpanan nasional

2. BANK Kerjasama Rakyat Malaysi BHD

3. Bank Pertanian Malaysia

4. Bank CIMB

5. Bank Islam Malaysia Bhd.

KEY-MAN INSURANCE

SOURCE : PUBLIC RULING 2/2003 "KEY-MAN" INSURANCE

 

CRITERIA

1 To recover moneys to replace loss of profits due to death, critical illness, sickness, accident or injury

2 On life of "key" person, director and employee whose absence result in reduce profits

3 Insurance proceeds remain with the employer or company and is not payable to the "key-person" or his family

4 The policy has no element of investment

 

SUMMARY

Type	Term life	Accident	Wholelife	Endowment
Nature	No return of premium	No return of premium	Cash value	Cash value and lump sum payment upon maturity
Investment elements	No	No	Yes	Yes
Deductibility	Against gross income	Against gross income	Not deductible	Not deductible
Proceeds	Taxable on company	Taxable on company	Not taxable	Not taxable

 

CONTROLLED COMPANY, PARTNER OF PARTNERSHIP, SOLE-PROPRIETOR

If on life of director or employee own shares in the company NOT ALLOWED.

Because there are other motives ie for the advantage of the director or employee in the capacity as shareholders of the company.

 

 

Controlled company Section 2(1)

A company having not more than fifty members and controlled, in the manner described by Section 139 by not more than five members

Generally control means entitled to greater part of issued share capital, and can be by indivudual or two or more person