Malaysia Corporate Income Tax | Company Income Tax 2009
Last month, I believe most of us have done the personal e-filing income tax. After individual income tax, here comes the Corporate or company income tax where the deadline for submission of income tax return form Year Assessment 2009 will due on 30 June 2010. For more information, you could refer to Income Tax on the Inland Revenue website.
Scope of Taxation
A Resident company is assessable on income derived from Malaysia and income remitted to Malaysia from sources outside Malaysia. Starting Year of Assessment (YA) 1995 onwards only income derived from Malaysia are taxable. Banking, insurance, shipping and air transport businesses are taxed on world income scope.
A Non-Resident company is liable to Malaysian tax when it carries on a business through a permanent establishment in Malaysia and is assessable on income derived only from sources within Malaysia.
Resident Status of Companies
A company is deemed to be resident if at any time during a basis year for a year of assessment, the management and control of its business is exercised in Malaysia. Management and control is normally considered to be exercised at the place where directors’ meetings are held.
Basis of Assessment
“Basis period” means the period of income relative to a year of assessment. With effective from the year 2000, the tax system has switched to the current year basis. Therefore, the basis year and the year of assessment would be the calendar year to 31 December coinciding with the year of assessment. However, for a company which has made up the accounts of its operations for a period of twelve months ending on a day other than 31 December in the basis year, that period shall constitute the basis period for that year of assessment for any of its sources of income.
Types Of Income Chargeable To Tax
1. Gains or profits from a business for whatever period of time carried on.
2. Dividends, Interests or Discounts.
3. Rents, Royalties or Premiums.
4. Any other gains of revenue in nature.
Self Assessment System
Estimate of Tax
Under the self assessment system, the burden of computing the taxpayer’s liability is shifted from the Inland Revenue Board (IRB) to the taxpayer and accordingly he is expected to compute his tax liability based on the tax laws, regulations issued by the IRB. Under the self assessment system, every company is required to determine and submit in a prescribed form (Form CP204) an estimate of its tax payable for a year of assessment, 30 days before the beginning of the basis period.
Under Section 120(f) of the ITA 1967, any person who, without reasonable excuse fails to submit the estimate of tax payable shall be guilty of an offence and upon conviction, be liable to a fine ranging from RM200 to RM2,000 or imprisonment for a term not exceeding 6 months or both.
Where for a year of assessment, no estimate is furnished by a company and tax is payable by that company pursuant to an assessment for that year of assessment, such tax payable shall be subjected to 10% penalty.(with effect from Year of Assessment 2011).
Instalment Payment Scheme
When the estimate of tax payable has been submitted to the IRB, the company is required to remit this amount to the IRB in equal monthly instalments according to the number of months in its basis period. Each monthly instalment is due and payable to the IRB by the 10th day of the 2nd month of the YA.
Failure to remit the instalments on a timely basis will result in an automatic penalty of 10% being imposed on the unpaid amount.
Revision of Estimate of Tax Payable
The estimate of tax payable for that year cannot be lower than the latest revised estimated submitted for the immediate preceding year of assessment, however with effect from YA 2006, companies are allowed to furnish estimates of tax payable for a year of assessment of not less than 85% of the revised estimate of tax payable for the immediate preceding YA.
Every company is allowed to review its estimate of tax payable by submitting a Form CP204A in the 6th month and/ or 9th month of its basis period from YA 2003 onwards. Where the revised estimate exceeds the amount of instalments paid to date, the difference shall be payable in the remaining months of the instalment scheme. Conversely, when instalments paid to date exceed the revised estimate, the company may discontinue its original instalment scheme.
Filing of Tax Returns
All Companies must file the tax returns within 7 months from the end of the accounting period. Balance of tax payable (if any) should be remitted to IRB together with the tax return.
Failure to submit a tax return: taxpayer will be liable to a fine ranging from RM200 to RM2,000 or to imprisonment for a term not exceeding 6 months or both.
Failure to remit tax payable: Penalty equivalent to 10% on the balance of tax payable and if the tax is still not paid after 60 days, a further 5% penalty will imposed.
Corporate Income Tax Rates
Resident companies YA 2009
All income 25%
With effect from YA 2004, a resident company with paid-up capital of RM2.5 million or less, is taxed at the following rates:
Chargeable income RM Rate % (YA 2009)
On the first 500,000 20
In excess of 500,000 25
With effect from YA 2009, certain specified conditions must be met to qualify for the above rates.
Non-resident companies YA 2009
Rental of moveable properties 10
Technical or management service fees 10 *
Income other than the above 10
*Only fees for technical or management services rendered in Malaysia are liable to tax.
Where the recipient is resident in a country which has a double tax treaty with Malaysia, the tax rates for specific sources of income may be reduced.
Assessment of Corporate Income Tax
Gross Income from business includes:
(a) Receipts in cash for goods sold or services rendered
(b) all debts arising in respect of goods sold and services rendered;
(c) receipts in kind;
(d) recovery of trading debts written off as bad;
(e) insurance recovery for loss of profit.
Deductions can be made for expenses which are revenue in nature and incurred wholly and exclusively in the production of income and for bad debts. However, specific provisions or reserves for anticipated losses or contingent liabilities are not deductible.
Note : No deduction is allowed for the book depreciation of fixed assets, however capital allowances is granted.
Expenses which qualify for deduction include:
(a) Wages and salaries for staff.
(b) Employees Provident Fund (EPF) deduction for employees.
(c) Rental paid for business premises.
(d) Interest paid towards bank loans / overdrafts taken and used for business purposes.
(e) Repairs on business premises / motor vehicles.
(f) Insurance premiums paid – fire / burglary.
(g) Transportation costs.
(h) Other expenses incurred in the production of business income.