Wednesday 27 July 2011

Penalty on Late Filing of Tax Returns

In the past, the IRB had imposed penalties ranging from RM200 to RM2,000 for late submission of tax returns, similar to the fines as stipulated in Section 112(1) of the Income Tax Act 1967 (ITA), based on the number of offences committed. The Institute would like to alert members that with effect from 1 June 2011, the IRB has deviated from the current practice and imposed penalties based on the length of delay that the return is submitted. From the information gathered through our members, the minimum penalty rate is 20% of the tax payable, before any set-off, repayment or relief. This power to impose the penalty is given under Section 112(3) of the ITA to the IRB who may impose a penalty “equal to treble the amount of the tax payable.”

The Institute has yet to receive any official notification on the new rates of penalties. However, members are warned to look into their backlog cases and advise their clients on the potential financial impact so that the clients are well-informed. The Institute is liaising with the authorities on the issue and will keep members informed of the developments.

Tuesday 26 July 2011

Reply to Memorandum on Technical Issues dated 8 April 2011

The IRB has issued a reply to the Memorandum on Technical issues held on 8 April 2011. Members may view the reply at the website of the Institute at http://www.ctim.org.my/cms/file/news/51/00730_Memorandum%20on%20Technical%20Issues%20(080411).pdf

IRB Minutes on Post-Budget Dialogue 2011

The minutes of the Post Budget Dialogue 2011 held on 8 April 2011 have been released by the Inland Revenue Board (IRB). Members may view the minutes at the Institute’s website at http://www.ctim.org.my/cms/file/news/122/00728_Minutes%20of%202011%20Post-%20Budget%20Dialogue%20(080411).pdf

Inland Revenue Board’s Media Release on Submission of Form C, R, C1, TA, TC & TR for Year of Assessment 2010

The IRB has issued a media release on 18 July 2011 to remind corporations, co-operatives and trust bodies with an accounting year ended 31 December 2010 to submit their tax return Form C, R, C1, TA, TC or TR for the Year of Assessment 2010 by the due date on 31 July 2011. Taxpayers are also required to settle the full tax liability not later than 31 July 2011. Filing of tax returns and payment of tax can be made online via e-Filing and e-Payments.

Members may view the IRB’s media release at the Institute’s website at IRB Media Release –Submission of Form C, R, C1, TA, TC & TR for Y/A 2010 or at the website of the IRB at http://www.hasil.gov.my/pdf/pdfam/HantarSegeraBORANG.pdf

Thursday 21 July 2011

Udated list of certification bodies under Section 34(6)(ma) of ITA

The IRB has issued on 11 July 2011 an updated list of certification bodies under Section 34(6)(ma) for the purpose of claiming double deduction of expenses incurred in obtaining certification for recognised systems of quality and standards and halal certification. The list has updated the accreditation period of some certification bodies. Please note that with effect from 15 June 2011, Globalgroup Asia Pacific Sdn. Bhd has withdrawn voluntarily from the Quality Management System accreditation program. Members may view the list at IRB’s website at http://www.hasil.gov.my/pdf/pdfam/ACCREDITEDLIST11072011.pdf or at the Institute’s website at IRB – Updated List of Certification Bodies Under S34(6)(ma) of ITA (110711).

Monday 18 July 2011

NARROWING THE AUDIT GAPS – A CALL FOR CHANGE

In the Circular No. 26/2011 issued by the Institute on 25 May 2011, members were informed that the International Auditing and Assurance Standards Board ("IAASB") has recently released a Consultation Paper titled “Enhancing the Value of Auditor Reporting: Exploring Options for Change”. The Consultation Paper is issued following perceptions that auditor reporting is not meeting the information needs of financial statement users in a global business environment especially with increasingly complex financial reporting requirements. Thus, the Consultation Paper is released to obtain better understanding and to determine whether there are common views among users of the audited financial statements and other stakeholders on the current usefulness of auditor reporting.

In order to facilitate better understanding and feedback on the IAASB Consultation Paper, the Institute has summarized the essence of the paper in an article titled “Narrowing the Audit Gaps – A Call for Change”. In the article, the expectations vis-à-vis the information gap identified by some stakeholders of the auditor reporting is diagrammatically drawn to illustrate the gap which is currently occurring between users’ expectation of the auditors and the financial statement audit and what the actual audit is. The article also summarises the three (3) models suggested in the Consultation Paper as possible options for change to reduce both gaps and to improve the communicative value of auditor reporting.

The Institute would like to highlight that improvements toward auditor reporting will introduce a shift in the auditing landscape and change the responsibilities of many stakeholders especially the auditing professionals. All stakeholders should take this opportunity to channel their concerns, suggestions and comments to IAASB in relation to the Consultation Paper via the Institute.

Please refer to the article by visiting Narrowing the Audit Gaps - A Call for Change for further information on how to submit your response.

Wednesday 13 July 2011

Updated list of certification bodies under Section 34(6)(ma) of ITA

The IRB has issued an updated list of certification bodies under section 34(6)(ma) for the purpose of claiming double deduction of expenses incurred in obtaining certification for recognised systems of quality and standards and halal certification. The updated list increases the number and accreditation period of certification bodies. A new certification body has been introduced for the Information Security Management System Program.

Members may view the list at the website of the Institute at the following link IRB - Updated List of Certification Bodies under Section 34(6)(ma) of ITA (140611)

Guidelines for tax treatment on interest income for pawnbroking industry

The IRB has issued on 3 June 2011 the Guidelines for tax treatment on interest income for the pawnbroking industry. The guidelines explain the basis of recognition and the tax treatment of interest income for the pawnbroking industry.

Pursuant to Section 24 of the ITA, interest income arising from the pawnbroking business shall be recognised and accrued from the date the charge begins. The IRB has now given a concession to the conventional and Islamic (Ar-Rahnu) pawnbroking industry to recognise interest income from the date of redemption if the charge was made in the basis period for the year of assessment 2009 and subsequent years. Examples are provided in the Guidelines to illustrate the tax treatment.

During the transition period (Y/A 2009, 2010 and 2011), the following concessions are given to pawnbrokers to allow them to adapt to the change in practice:

a. For the pawnbroker who closes the accounts on 30 September to 31 December for Y/A 2009, the IRB has agreed to accept the income reported for Y/A 2008 and before on the cash basis or accrued basis as already adopted previously without any adjustment and penalty imposed.

b. For the pawnbroker who closes the accounts on 31 January to 31 August for Y/A 2009, the IRB has agreed to accept the income reported for Y/A 2009 and before on the cash basis or accrued basis as already adopted previously without any adjustment and penalty imposed.

The claim for deduction of expenses pursuant to Section 33(1) and 39(1) is based on the accrual principle.

For the purposes of tax audit, the IRB will accept the income recognition method adopted by the pawnbroker for the Years of Assessment 2008 or 2009 (where applicable) and prior years without adjustment. However, where there is under-declaration of income and over-claiming of expenditure based on the existing basis of revenue recognition, then penalties will be imposed under the Section 113 (2) of ITA 1967.

No penalties will be imposed under Section 107B(4) and 107(C) ITA 1967 for the difference in the amount of tax payable and estimated tax payable for the Years of Assessment 2009 and 2010. Where a penalty has been imposed, the pawnbroker should submit an appeal to prove that the difference had arisen from adjustments due to changes in the tax treatment as provided for by the guidelines.

Islamic pawn-broking (Ar-Rahnu)

With effect from 2007, the Islamic pawnbroking (Ar-Rahnu) is also subject to the provisions of Pawnbrokers Act 1972 [Act 81] and come under the purview of the Ministry of Housing and Local Government (MHLG). Since the concepts of conventional pawnbroking and that of the Islamic pawnbroking have certain differences, the MHLG has exempt Islamic Pawnbrokers from certain provisions of the Pawnbrokers Act 1972 [Act 81] and Pawnbrokers (Control & Licensing) Regulations 2004 [P.U. (A) 317/2004].

Guidelines for the Implementation of Islamic Pawnbroking business (Ar-Rahnu) approved under the Pawnbrokers Act 1972 [Act 81] and Pawnbrokers (Control and Licensing) Regulations 2004, issued by the MHLG, are attached to the principal Guidelines.

Members are requested to read the Guideline for Tax Treatment on Interest Income for Pawnbroking Industry carefully and thoroughly for the detailed changes. You may also view the Guidelines at http://www.hasil.gov.my/pdf/pdfam/GarisPanduanIndustriPajakGadai.pdf.

Submission of Form CP204 for small and medium enterprises (SMEs)

The Inland Revenue Board (IRB) has issued the above notice on 9 June 2011. Pursuant to Section 107C(4A) of the Income Tax Act 1967 (ITA), a Malaysian resident company need not submit the estimate of tax payable in a prescribed form for the first two years of assessment in which it first commences operations, provided it is an SME (i.e. the paid up ordinary share capital of the company is not more than RM2.5 million at the beginning of the two basis periods and that it does not control or is controlled by a related company which has a paid up ordinary share capital of more than RM2.5 million at the beginning of the basis period for a year of assessment).

However, the IRB is unable to identify an SME when:

a. imposing a penalty on underestimate pursuant to Section 107C(10) ITA 1967.

b. issuing notification of legal proceedings for offences committed under Section 120(1)(f) ITA 1967.

As such, the IRB has amended the Form CP204 to allow a taxpayer to inform the IRB of its ‘SME’ status without furnishing the estimate of tax payable. A similar amendment is made in the e-Filing Form CP204.

The amendment is effective from 3 March 2011. However, the SME that does not submit a Form CP204 in the first year, is requested to submit a Form CP204 in the second year if it is still an SME. Where a penalty under Section 107C(10) is imposed or notification of legal proceedings under Section 120(1)(f) is issued to an SME, please refer to the IRB Branch where the Company income tax returns are maintained, for waiver of the penalty.

Members may view the letter at the following link IRB Letter - Submission of Form CP204 for Small and Medium Enterprises (SMEs) (090611)

Monday 4 July 2011

Sample of dividend voucher

The IRB has issued the new sample dividend voucher showing the different categories of dividends paid. You may view the new sample at the IRB’s website at

http://www.hasil.gov.my/pdf/pdfam/BaucarDividen.pdf

CCS Group's Official Website

We are thrilled to announce that CCS Group has launched a new website at www.ccs-co.com Some of the great new features of this newly designe...