Many companies do not realize the existence of CP58, not understand how to prepare form CP58, nor know the function of issuing form CP58. Therefore, let us solve all your doubts and questions by continuing reading below.
What is form CP58?
According to Section 83A (1) of the Income Tax Act 1967 (ITA 1967), this provision had imposed the responsibility and duty to companies to issue and prepare form CP58 on any monetary incentive or non-monetary incentive payment to its agents, dealers or distributors.
- Monetary incentive which can define as cash reward paid to its agent, dealers, or distributors. Cash reward includes basic allowance, commissions, or bonuses. The payer company must declare the full actual amount paid in the form of CP58.
- Non-monetary incentive includes incentives, tour packages, tickets accommodation, motor vehicles, house, voucher, etc. Similar as a monetary incentive, non-monetary incentive must report the actual cost into the form CP58.
Who is required to prepare form CP58?
- Recipient or payer company who made the monetary incentive or non-monetary incentive payment to its agents, dealers, or distributors more than or exceeding RM5,000 per annum will be subject to prepare form CP58 and hand it over to each agent.
- It’s important for payer Company to keep proper hand-over record such as sending of the CP58 via registered postage or email, which shall justify the payer’s effort in fulfilling its duties and shall be accepted by the tax office.
- As for amount below RM 5,000; it shall only be prepared upon request by the payee.
- This new stipulation also applies to a foreign company and foreign branch which operate their business in Malaysia BUT excludes those individuals carrying out a business or under the partnership.
- Form CP58 is unlike other tax filing form, it is not required to be submitted to IRBM, which is why the payer company tend to ignore from preparing CP58 or they might not even know the existence of CP58.
- Nevertheless, if the tax office requires the detail information on the rewards or incentives paid to the agents, dealers or distributors, the payer company must provide all the incentive information for the tax office including those rewards which are worth less than RM5,000.
- The original copy of form CP58 must be retained by the payer company for a period of 7 years from the end of the calendar year in which the incentive is paid to the agents, dealers or distributors for the purpose of reference and examination by the IRBM during a tax audit.
- A copy of the form should be given to the agents, dealers, or distributors.
When is the deadline to provide form CP58?
- The form CP 58 shall be provided to the agents, dealers, or distributors not later than 31 March in the year immediately following the year in which the incentives mentioned above are paid.
- Any payer company which fails to prepare the form CP 58 as required under Section 83A of Income Tax Act 1967 shall be guilty of an offence under Section 120(1)(b) and shall, on conviction, be liable to a fine of not less than RM200 and not more than RM20,000 or to imprisonment for a term not exceeding 6 months or to both.
What is exempted from CP58?
- Trade discounts and bulk discount provided.
- Provide special discount rates to independent agents.
- Promotional items or gifts which are not stated in the contract with the agents.
- Subcontract payment
- Incentives are given for public or customers as an open invitation to encourage them to introduce more customers. Example: referral fee
- Free items that are not based on performance, such as umbrellas, pens, notebook, and calendars.
- Special treatment in the form of preferential rate given to an independent agent who buys and sells goods on his own accord.
- Credit rebate
- Handling fees
Link of form 58: http://lampiran2.hasil.gov.my/pdf/pdfborang/Borang_CP58_1.pdf
Guideline source from http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=5&bt_posi=3&bt_unit=7000&bt_sequ=2
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