What’s is Tax for You?
It’s simply an amount or amounts of money that you, whether as a person or as a company, must pay to the government, as required under tax laws.
An Overview of Common Taxes in Malaysia
The following are some of the most common taxes in Malaysia that you’d face:
We can see that taxation covers a lot of areas, and so neither yourself nor your company can escape tax obligation. Even if your income is not chargeable, you’re still paying tax whenever you’re buying things or engaging a paid service (SST).
Mechanics of Compliance
The essence to complying with any tax law is paying your tax due by the due date set. It sounds simple. However, it isn’t. Let’s take a case to illustrate our meaning.
Corporate Income Tax
In Malaysia, income taxes are assessed yearly, beginning on 1 January and ending on 31 December, which is referred to as Year of Assessment (let’s call it YA).
Suppose a company began operation on 1 January 2022 and with financial year ended 31 December 2022. Upon the closing of its accounting period, it has 7 months to submit a tax return in the form of Form C to LHDN regardless profit making or loss making.
1 Jan 2022
YA 2022 Accounting
31 Dec 2022
YA 2022 Accounting Period Ends
31 Jul 2022
Deadline for Tax Filling (Form C)
Tax filing only means confirming the income earned and expenses incurred in 2022. Your YA 2022 corporate tax payments must be paid in YA 2022 on a monthly basis, and the monthly estimated tax figures are based on forecasted monthly income. Of course, mistakes can happen, and thus, LHDN allows you to revise your estimates in the 6th month and 9th month of YA 2022.
YA 2022 Begins
6th month of the basis period
Company to submit the first revise estimate of tax payable (Form CP204A)
9th month of the basis period
Company to submit the second revise estimate of tax payable (Form CP204A)
1 month before the start of new financial year
Company to submit the estimate of tax payable (Form CP204)
YA 2022 Ends
However, if the gap between the estimate and actual payable tax is more than 30% of actual tax payable, not only will you have to pay for back taxes (the differences mentioned earlier), but also that there will be a 10% increase. LHDN also charges interest on back taxes and fines as you delay further in making payments.
With the tax return filed and the details on the monthly tax payments made, LHDN would compare to see if they match. Discrepancies are expected, and your company will have to pay for the difference where tax estimates were below the actual tax obligations.
The formula for calculating the amount of increase is as follows:
AMOUNT OF TAX TO BE INCREASED = [ ( AT – ET ) – ( 30% x AT ) ] x 10%
where: AT: actual tax payable; ET: revised estimated tax payable or original estimated tax payable (if no revised estimate furnished)
Concluding Points About Tax Compliance
Our Tax Services for You
We’re client-centric, and so we do emphasize on meeting your needs and solving your problems in providing our services to you. Whilst we’d do whatever that client requires of us, we actually do have a set of standard services that we provide.
The list is by no means exhaustive. We’re always looking for new ways for help you with your tax issues.
Having said that, the following are areas that we’re often engaged to provide services in:
LHDN Tax Payments and Filings
Tax payments and filings are the core of tax work, for it is why tax can be quite a chore for those not in the field. Our Tax Services is here to help you comply with routine tax submissions and payments, and we cover the following:
Personal Income Tax for:
Corporate Income Tax for:
Legal provisions exist to help you reduce your tax obligations under specified conditions. They’re known as tax reliefs, incentives, and grants. It’s often that you must apply for them to use them.
Our Tax Planning Service provides counselling covering, but not limited, to the following:
Malaysia Transfer Pricing (TP) Documentation Advisory
TP is basically pricing transactions between two related companies. LHDN requires that the pricing be the same as it would have been if the companies were not related. In order to do so, you’d have to draft TP documentation, detailing the transaction. We have experienced TP specialists that are more than capable in drafting the documentation for you.
If you’re selling goods or providing charged services in Malaysia, the chances are that they’re subject to Sales & Service Tax (SST). Like other forms of taxation, without proper tax planning, the tax could cost you more than it should.
Our tax services can help to reduce your indirect tax costs by developing efficient indirect tax structures, preventing leakage, and mitigating damages caused by non-compliance. Apart from that, our indirect taxation services also cover the following:
As mentioned, these are just some services that we’re frequently hired to provide. If your tax problem doesn’t fit in any of the mentioned, don’t skip. Please feel free to reach us directly to tell us of your issue.
Peace of Mind
Have more time and peace of mind to focus on what concerns you more, generating revenue.
Enjoy efficient tax compliance (meeting your tax obligation on time, with minimal effort, low cost, and minimal, if not no, fines).
Maintain a steady rapport with tax authorities (be a good sport).
Great Public Image
Maintain a great public image (a solid company that always meets their obligations).
Maintain healthy financials (minimise tax-related debts, avoid hefty fines, avoid legal costs).
Service is people. Therefore, our greatest advantage in service provision is our people. Our tax team is made up of tax professionals who are experienced, licensed, and trained to serve as your tax advisor. They are led by our Tax Managing Director, Mr. Lam Kwai Soon, and our Senior Tax Manager, Mdm. Jack Wong Ai Ying. Feel free to browse at their profiles for your information.
COO & Tax Managing Director
Mr. Lam Kwai Soon
20+ years’ tax experience. CA(M), ACCA, CTP, CFP., MBA.
Expert on Malaysian Taxation System.
Leading our team consulting clients on various assignments, including:
Senior Tax Manager
Mdm. Jack Wong Wai Ying
10+ years’ tax experience.
Associate member of CTIM and specialist in corporate tax compliances.
Provides taxation service to business in a variety of industries, including:
Our team is led by licensed tax advisors with at least a decade of tax experience. Furthermore, they’re armed with knowledge not only in tax laws and procedures, but also in finance, accounting, and other areas in managing your business. All mentioned capabilities are needed to ensure that all of our tax solutions fits with your needs 100%, no more or less.
Furthermore, Cheng & Co Group is a multi-field business problem solver, with tax services being important but not the only problems we resolve. In order to serve you to the fullest as your tax advisor, we would begin with understanding your tax problem(s) and also your business(es).
Should we spot any other problems, potential or actual, tax-related or otherwise, we’d let you know and advise you further on how you may go about tackling them. We have teams in other fields such as internal auditing, management consulting, and even business process outsourcing.
Coming back to the question of “Why Us”, you would only benefit from our service as we’re centred on serving your needs, whether it be tax, non-tax, or a combination of the two. Imagine that, for a fee, we’re hired to resolve a specific tax issue, but, still, we’re committed to helping you in any way possible.
Frequently Asked Questions
Does your organization provide consultancy for the submission of tax to LHDN?
Yes, we certainly do. As tax agents, our primary tasks, apart from representing you to LHDN, revolves around advising you on how to comply with LHDN’s tax regulations. As discussed in our service section above, it falls under our services relating to LHDN tax payments and filings.
In this area, we provide all advices necessary to guide you and your business towards successfully complying with LHDN’s requirement for tax payments and submissions.
For instance, Companies, Trust bodies, cooperatives and Limited Liability Partnerships are required by LHDN to provide tax estimates prior to actually making monthly tax payments. Our services in that regard includes advising on due dates for CP204 (tax estimation form), completing and submitting CP204, and also helping you to prepare CP204A should there be a need to revise or amend CP204 already submitted.
Should I do my own tax or hire someone else to do it for me?
In order to answer this question, we need to consider the pros and cons of each option carefully. If you’re running a business, you actually have three options to consider, which are: doing it yourself; having your business’ accountant do it for you; or hiring a tax agent to settle it.
Consider the pros and cons laid out in the following table.
Looking at it objectively, relying on yourself or your accountant could work for the best, provided that both are knowledgeable and experienced in tax work, and also that both have ample time to focus solely on this task. The reality is that, in running a business, both of you would have to struggle in allocating sufficient time in tax work and all other important duties, such as bookkeeping and running day-to-day business operations.
On the other hand, you’ll benefit more from hiring a licensed tax agent to do your tax work. The only significant additional cost to bear is the fee that you must pay for the tax agent’s service. In exchange for the fee, you’ll be able to settle your tax obligations, avoid or minimise tax penalties, and still get all your work done.
How do I know if I have to file a tax return?
You’re obliged to file a tax return if your income is taxable. Income, by nature, is subject to tax. However, the tax rate would depend on the amount. Below a certain amount, the tax rate would be 0%, any amount below that would not be taxable.
If your income has reach that threshold, you’d have to file a tax return, even if your employer has already done your monthly tax deduction. You are required to do so in order to confirm the your statutory income earned for the Year of Assessment as well as the monthly tax deduction. You must keep a copy for the EA form as a source document for the filing.
If you have any other income, let’s say from a side business, the tax return is your chance to declare your income. LHDN will then calculate the amount that you must pay based on the additional income info provided, and you are given a period of time to make payment. Not taking this chance to report your side income will land you in trouble later when LHDN discovers that you had not declared your income as it could tantamount to tax evasion.
Apart from additional income, tax return is also your chance to claim reliefs that are applicable to you. However, for whatever you entered in your filing, please ensure that there original copy of the source document (e.g., receipts and invoices) are kept for at least 7 years from then onwards. LHDN could call upon you to ask for those documents anytime within those 7 years. Failure to produce could lead to tax penalty.
What income do I have to pay taxes on?
If you define income as revenue generated from any activity that you are either hired to undertake or that you undertake as a business, then all income earned in Malaysia are subject to income tax. This means your wages/salaries, commissions, rents, dividends, and profits received are all taxable.
Conversely, any gains that you made from a non-business sales transaction is not construed as an income, as the transaction would be one-off and done to recover your capital. For example, let’s say you’ve held shares of a few blue-chip companies for investment purposes, and now you wish to dispose of them in order to regain the amount that you spent to acquire those shares.
Whilst the dividends that you received when holding those shares are taxable, the capital gain made from selling those shares (i.e. capital gain = selling price – purchasing price) is not. Even if it’s a gain, your intention would have been to recover your capital, and not to realise a profit. This means that, even if capital gain were zero, you would still have proceeded with disposing the shares.
However, if it is your job or business to buy and sell shares at a premium, as in day trading, then any gains from such transactions would be income or business revenue, not capital gains, and, thus, are taxable. Hence, whether a gain is taxable depends on whether it was received as part of business or employment.
However, it should be noted, not all capital gains are exempted from tax. For example, in the case of selling off some real properties that you’ve held, the gains are subject to Real Properties Gain Tax. The tax rate may be 0%, depending on current ruling and how long you’ve held the properties prior to disposal. However, whatever the rate is, you’d still be obliged to furnish a tax return on the gains, meaning you still have to report the gains.
What filing status should I choose?
Filing status will depend on who you are filing as. For example, if you an employee that also receives income from a side business, then your filing status should reflect as so. If you are married and your spouse also derives income, you have a choice between being assessed jointly or separately. The former means that you will submit only one filing for both persons. It also means that any application for reliefs will count both of you as one application, not two.
What tax form should I use?
Tax forms depend on who are you paying as and also for what for what purpose. LHDN categorises forms into the following types of taxpayer:
– Non-Company & Non-Individual;
– Employer; and
– Labuan Entity.
Furthermore, the forms are also broken down into the following purposes:
– Stamp Duty
– Incentive Claims
– Real Property Gains Tax;
– Withholding Tax;
– Registration; and
There are also other forms. You may find the forms in the link.
Forms are shown in English and in Malay. However, for the purpose of submission, you are to submit the Malay copy with your details. You may use the English copy only as reference.
To illustrate of what we mean when we say that it depends on who are you paying as and for what purpose, let’s take the case of an employee looking to do income tax filing.
If he earns no other income than his wages, then he may submit Form BE with all pertinent details to LHDN.