During the courtesy visit to the Companies Commission of Malaysia (CCM) by CTIM on 30 April 2013, the Institute sought clarification on the requirement to lodge a solvency statement under specific provisions in the Limited Liability Partnerships (LLP) Act 2012. This was followed up by a letter to CCM.
Members may view the Institute’s letter sent to CCM and the corresponding response from CCM on the Institute’s website.
Please be guided accordingly.
Showing posts with label LLP. Show all posts
Showing posts with label LLP. Show all posts
Tuesday, 11 June 2013
Thursday, 7 March 2013
Limited Liability Partnership (LLP) Brochure and LLP Booklet
Further to our e-CTIM TECH. No.22/2013, dated 22 February 2013, please be informed that the Companies Commission of Malaysia (CCM) has recently uploaded the following at its website:-
(i) LLP Brochure; and
(ii) LLP Booklet.
Members may also view the LLP Brochure and LLP Booklet at our website. Please be guided accordingly
(i) LLP Brochure; and
(ii) LLP Booklet.
Members may also view the LLP Brochure and LLP Booklet at our website. Please be guided accordingly
Friday, 22 February 2013
Limited Liability Partnership (LLP) and Related Matters
Further to our e-CTIM No.146/2012, dated 4 October 2012, please be informed that the Companies Commission of Malaysia (CCM) has recently set up a MyLLP Portal and has issued the following:-
(i) General Guidelines for Registration of Limited Liability Partnership and Related Matters;
(ii) Frequently Asked Question (FAQ) on LLP; and
(iii) Relevant LLP Forms as follows:
In addition, the Inland Revenue Board (IRB) has also issued an FAQ on Issues Raised during the 2012 National Tax Seminar which provides clarification on some of the taxation issues relating to LLP. The FAQ can be viewed at the IRB website.
(i) General Guidelines for Registration of Limited Liability Partnership and Related Matters;
(ii) Frequently Asked Question (FAQ) on LLP; and
(iii) Relevant LLP Forms as follows:
- 1. Application For Reservation Of Name (Form 1);
- 2. Application For Registration Of New LLP (Form 2);
- 3. Application For Registration Of LLP For Professional Practice (Form 3);
- 4. Application For Registration Of Foreign LLP (Form 4);
- 5. Application For Conversion from Conventional Partnership to LLP (Form 5);
- 6. Application For Conversion from Private Company to LLP (Form 6);
- 7. Application For Change Of Name (Form 7);
- 8. Change Of Address Of Registered Office (Form 8);
- 9. Change Of Address Of Place Of Business (Form 9);
- 10. Change Of Nature Of Business/Principal Activities (Form 10);
- 11. Change Of Particulars Of Partner – Individual (Form 11);
- 12. Change Of Particulars Of Partner – Body Corporate (Form 12);
- 13. Change Of Particulars Of Partner – Government Agency (Form 13); and
- 14. Change Of Particulars Of Compliance Officer (Form 14).
In addition, the Inland Revenue Board (IRB) has also issued an FAQ on Issues Raised during the 2012 National Tax Seminar which provides clarification on some of the taxation issues relating to LLP. The FAQ can be viewed at the IRB website.
Thursday, 4 October 2012
Limited Liability Partnership (LLP)
The Finance (No.2) Bill 2012 (the Bill) proposes to amend the definition of ‘person’ in the Income Tax Act, 1967 (ITA) to include an LLP. An LLP is defined in the Bill as “a limited liability partnership registered under section 11 of the Limited Liability Partnerships Act 2012 (LLP Act) or a foreign limited liability partnership registered under section 45 of the LLP Act.
An LLP is a hybrid of a corporation and a partnership. The following are some salient features of an LLP as provided in the LLP Act:
1. Legal status (Section 3)
An LLP is a body corporate which has a legal personality separate from that of its partners and has perpetual succession; and its existence, rights and liabilities are not affected by any change in its partners.
It has unlimited capacity and is capable of -
· Suing and being sued;
· Acquiring, owning, holding and developing or disposing of properties;
· Doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.
2. Formation & Registration (Sections 6, 10-12, 45)
Any two or more persons (individuals or bodies corporate) associated for carrying on any lawful business with a view to profit may form an LLP in accordance with the terms of the LLP agreement.
Application for registration is made to the Registrar of LLP, who is also the Chief Executive Officer of the Companies Commission of Malaysia (CCM). Upon application and payment of the prescribed fee, the Registrar may issue to that LLP a certificate of registration, or he may refuse to register the LLP for specified reasons [section 12(1)]. The name of an LLP shall end with the words “Perkongsian Liabiliti Terhad” or “PLT”.
3. Liability of Partners (Sections 21-23)
A partner is not personally liable for an obligation of the LLP (arising in contract, tort or otherwise) solely by reason of being a partner of the LLP. This does not absolve him from liabilities to a 3rd party arising from his wrongful act or omission in the course of business of the LLP or with its authority. An LLP is liable to the same extent as the partner and the liabilities shall be borne out of the property of the LLP.
Every partner of an LLP is regarded as the agent of the LLP and the LLP is bound by anything done by a partner in dealing with a third party, unless
(i) the partner is acting without authority, and
(ii) the third party with whom the partner is dealing
(a) knows that the partner has no authority or
(b) does not know that he is a partner of the LLP.
4. Cessation of Partnership Interest (Section 24)
A partner of an LLP may cease to be a partner –
· in accordance with the LLP agreement; or
· in the absence of such an agreement, by that partner giving 30 days’ notice of his/her intention to retire as partner to the other partners.
5. Appointment of Compliance Officer (Sections 27 and 46)
An LLP shall appoint at least one compliance officer from amongst its partners, or persons qualified to act as secretaries under the Companies Act, 1965 who is a citizen or permanent resident of Malaysia and ordinarily resides in Malaysia.
The compliance officer is responsible for complying with the requirements to:
· Register any changes in the registered particulars of the LLP;
· Keep and maintain documents which must be kept at the registered office of the LLP;
· Ensure that the name and registration number of the LLP is displayed outside its registered office.
6. Partners’ Annual Declaration and Accounts (Sections 46, 68-69)
A declaration by any 2 partners, stating their opinion on whether or not it appears that the LLP will be able to pay its debts as they become due in the normal course of business, must be lodged with the Registrar within 90 days of the end of the financial year.
An LLP must keep such accounting and other records as is sufficient to explain its financial position and enable accounts to be prepared which give a true and fair view of the state of affairs of the LLP.
7. Dissolution and Striking Off (Sections 47-51)
An LLP may be dissolved:
· By way of Court Order; or
· Where the LLP has ceased to operate and has discharged all debts and liabilities, by making an application to the Registrar (by a partner) for voluntary dissolution after compliance with requirements set out in section 50(3).
The Registrar may serve notice on the LLP to strike off its name from the register for reasons specified in section 51(1), which includes the circumstance that the LLP is not carrying on business or is not in operation, or it has contravened the LLP Act.
A foreign LLP shall lodge with the Registrar of LLP a notice of the fact that it has ceased to have a place of business or to carry on business in Malaysia within 7 days after the date of cessation.
8. LLP for Professional Practice (Section 8)
An LLP may be formed for the purpose of carrying on a professional practice, which partners must consist of natural persons practising the same profession and no one else, and have in force professional indemnity insurance approved by the registrar, or approved by the registrar in consultation with the relevant governing body of the profession.
An LLP is a hybrid of a corporation and a partnership. The following are some salient features of an LLP as provided in the LLP Act:
1. Legal status (Section 3)
An LLP is a body corporate which has a legal personality separate from that of its partners and has perpetual succession; and its existence, rights and liabilities are not affected by any change in its partners.
It has unlimited capacity and is capable of -
· Suing and being sued;
· Acquiring, owning, holding and developing or disposing of properties;
· Doing and suffering such other acts and things as bodies corporate may lawfully do and suffer.
2. Formation & Registration (Sections 6, 10-12, 45)
Any two or more persons (individuals or bodies corporate) associated for carrying on any lawful business with a view to profit may form an LLP in accordance with the terms of the LLP agreement.
Application for registration is made to the Registrar of LLP, who is also the Chief Executive Officer of the Companies Commission of Malaysia (CCM). Upon application and payment of the prescribed fee, the Registrar may issue to that LLP a certificate of registration, or he may refuse to register the LLP for specified reasons [section 12(1)]. The name of an LLP shall end with the words “Perkongsian Liabiliti Terhad” or “PLT”.
3. Liability of Partners (Sections 21-23)
A partner is not personally liable for an obligation of the LLP (arising in contract, tort or otherwise) solely by reason of being a partner of the LLP. This does not absolve him from liabilities to a 3rd party arising from his wrongful act or omission in the course of business of the LLP or with its authority. An LLP is liable to the same extent as the partner and the liabilities shall be borne out of the property of the LLP.
Every partner of an LLP is regarded as the agent of the LLP and the LLP is bound by anything done by a partner in dealing with a third party, unless
(i) the partner is acting without authority, and
(ii) the third party with whom the partner is dealing
(a) knows that the partner has no authority or
(b) does not know that he is a partner of the LLP.
4. Cessation of Partnership Interest (Section 24)
A partner of an LLP may cease to be a partner –
· in accordance with the LLP agreement; or
· in the absence of such an agreement, by that partner giving 30 days’ notice of his/her intention to retire as partner to the other partners.
5. Appointment of Compliance Officer (Sections 27 and 46)
An LLP shall appoint at least one compliance officer from amongst its partners, or persons qualified to act as secretaries under the Companies Act, 1965 who is a citizen or permanent resident of Malaysia and ordinarily resides in Malaysia.
The compliance officer is responsible for complying with the requirements to:
· Register any changes in the registered particulars of the LLP;
· Keep and maintain documents which must be kept at the registered office of the LLP;
· Ensure that the name and registration number of the LLP is displayed outside its registered office.
6. Partners’ Annual Declaration and Accounts (Sections 46, 68-69)
A declaration by any 2 partners, stating their opinion on whether or not it appears that the LLP will be able to pay its debts as they become due in the normal course of business, must be lodged with the Registrar within 90 days of the end of the financial year.
An LLP must keep such accounting and other records as is sufficient to explain its financial position and enable accounts to be prepared which give a true and fair view of the state of affairs of the LLP.
7. Dissolution and Striking Off (Sections 47-51)
An LLP may be dissolved:
· By way of Court Order; or
· Where the LLP has ceased to operate and has discharged all debts and liabilities, by making an application to the Registrar (by a partner) for voluntary dissolution after compliance with requirements set out in section 50(3).
The Registrar may serve notice on the LLP to strike off its name from the register for reasons specified in section 51(1), which includes the circumstance that the LLP is not carrying on business or is not in operation, or it has contravened the LLP Act.
A foreign LLP shall lodge with the Registrar of LLP a notice of the fact that it has ceased to have a place of business or to carry on business in Malaysia within 7 days after the date of cessation.
8. LLP for Professional Practice (Section 8)
An LLP may be formed for the purpose of carrying on a professional practice, which partners must consist of natural persons practising the same profession and no one else, and have in force professional indemnity insurance approved by the registrar, or approved by the registrar in consultation with the relevant governing body of the profession.
Monday, 1 October 2012
2013 Budget --- The President’s Message
Dear Members
The 2013 Budget was announced on 28 September 2012. It was a Budget focussed on both long-term growth of the economy and the lower-income groups.
Having reviewed the Budget proposals and the Finance (No.2) Bill 2012 (The Bill), I wish to highlight to you a few important areas which may impact taxpayers and they are summarised as follows:
Limited Liability Partnership (LLP)
CTIM, together with the other professional bodies, has been actively involved in the past year, submitting our suggestions on the tax treatment of LLP. Our proposals were to offer the taxpayers an irrevocable choice of taxing LLP either as a partnership or a company.
The 2013 Budget has stipulated that it will be taxed as a corporate entity. The Institute will issue a separate e-CTIM highlighting the key features of an LLP as stated in the Limited Liability Partnerships Act 2012 (Act 743).
Issues on this subject that remain unresolved are:
(i) the real property gains tax and stamp duty implications on the transfer of assets and liabilities upon the conversion into an LLP
(ii) Tax treatment on the transfer of the balance sheet items such as stock-in-trade, debtors, creditors, etc.
The Finance (No.2) Bill 2012 is silent on these areas and there will be tax costs associated with such transfer. If the authority wishes to encourage the conversion of partnerships and companies to LLPs, then I believe tax neutrality should be maintained at the point of the transfer. In this respect, CTIM will take up these issues from the income tax, real property gains tax and stamp duty angles with the Ministry of Finance (MOF).
Business Trust (BT)
Business trust is a new business vehicle established under Capital Market and Services Act 2007 (CMSA). It adopts the unit trust structure as a basis for its business and is governed by Section 256K to 256ZP of CMSA. The introduction of the BT will broaden the range of investment products and vehicles in the Malaysia capital market.
Since this is a new business vehicle in Malaysia, CTIM will shortly send a separate e-CTIM outlining the basic information and operation of a BT. You may also visit the Securities Commission website to search for further information.
Withholding Tax (WHT) – New Section 109H – Appeal by Payer
The Bill now allows the payer to appeal on the Sections 109, 109B and 109F withholding taxes. However, the right of appeal will be denied to the payer if
(i) An appeal has been filed with the Special Commissioners of Income Tax by the non-resident recipient, to whom the payer was liable to make the payment; or
(ii) Such payment to the non-resident is disallowed as a deduction under S.39 of the Income Tax Act 1967 (ITA), or
(iii) The amount due has not been paid to the Director General of Inland Revenue
An issue will arise here if the payer legitimately believes (and has legal ground to do so) that the payer does not need to withhold the taxes but in a later tax audit, the tax auditors take a different position and disallow the payment to the non-resident under S. 39 and further demand the payment of the withholding tax. In such an event, under the proposed changes in the Bill, the payer will be denied the right to appeal.
This position is completely contrary to the basic principle that a taxpayer cannot be denied his right of appeal.
Again, this is a matter that needs to be brought to the attention of MOF
Change in Tax Treatment of Interest Income
The treatment of interest as a business income under S.4(a) has now become extremely restrictive under the New Section 4B. The Bill seeks to confine interest income as business source if the amended S.24(5) applies, i.e. interest arising from a business of lending money and the business is licensed under any written law.
A strict interpretation appears to exclude interest income e.g. overdue interest payment from trade debtors, etc. as business income. The decisions in the Malaysian Courts such as that on Pan Century Edible Oils may no longer apply.
This treatment is not conducive to encouraging the use of funds in carrying out business activities and this treatment would likely result in increasing the cost of doing business in Malaysia.
Treasury Shares (TS)
The Bill proposes that a deduction be given to the company having a business income on the cost of acquiring the treasury shares which are to be transferred to its employees under the employee-based remuneration scheme. The details of the proposal are available in the Bill.
Members should be aware of the following issues:
(i) As defined in the Bill, “treasury share” means a share of a company that was previously issued but was repurchased, redeemed or otherwise acquired by such company and not cancelled. It does not apply to new issue of shares to employees.
(ii) Significant efforts in keeping track of costs of acquisition on a First In First Out (FIFO) basis will be required for many larger organizations, where the shares are acquired over a period of time and subsequently transferred to the employees at different points in time.
This is a potential issue which could lead to disputes between the taxpayer and the tax auditors from the Inland Revenue Board in future.
Again CTIM will raise this issue to the MOF.
Assets Held for Sale (AHFS)
The Bill proposes that assets classified as AHFS shall be deemed to have ceased to be used for business for Schedule 3 of ITA purposes. Consequently, such classification will lead to a deemed disposal and computation of balancing allowance/balancing charge has to be done.
The legislation is silent on what happens if such as asset is then reclassified (back) as an asset that is being used again: will the balancing allowance/balancing charge calculated be reversed? The mechanism for this reversal is missing.
Again CTIM will raise this issue to the MOF
Meanwhile, we would be pleased if you could also forward your suggestions, comments and feedback on the 2013 Budget proposals to the Institute as soon as possible. The Technical Committees (both direct tax and indirect tax) will review all suggestions, comments and proposals and where appropriate, include them in the Memorandum for submission to the Ministry of Finance, Inland Revenue Board and Royal Malaysian Customs.
Please submit all comments and proposals to technical@ctim.org.my or fax to 03-2162 8990.
The 2013 Budget was announced on 28 September 2012. It was a Budget focussed on both long-term growth of the economy and the lower-income groups.
Having reviewed the Budget proposals and the Finance (No.2) Bill 2012 (The Bill), I wish to highlight to you a few important areas which may impact taxpayers and they are summarised as follows:
Limited Liability Partnership (LLP)
CTIM, together with the other professional bodies, has been actively involved in the past year, submitting our suggestions on the tax treatment of LLP. Our proposals were to offer the taxpayers an irrevocable choice of taxing LLP either as a partnership or a company.
The 2013 Budget has stipulated that it will be taxed as a corporate entity. The Institute will issue a separate e-CTIM highlighting the key features of an LLP as stated in the Limited Liability Partnerships Act 2012 (Act 743).
Issues on this subject that remain unresolved are:
(i) the real property gains tax and stamp duty implications on the transfer of assets and liabilities upon the conversion into an LLP
(ii) Tax treatment on the transfer of the balance sheet items such as stock-in-trade, debtors, creditors, etc.
The Finance (No.2) Bill 2012 is silent on these areas and there will be tax costs associated with such transfer. If the authority wishes to encourage the conversion of partnerships and companies to LLPs, then I believe tax neutrality should be maintained at the point of the transfer. In this respect, CTIM will take up these issues from the income tax, real property gains tax and stamp duty angles with the Ministry of Finance (MOF).
Business Trust (BT)
Business trust is a new business vehicle established under Capital Market and Services Act 2007 (CMSA). It adopts the unit trust structure as a basis for its business and is governed by Section 256K to 256ZP of CMSA. The introduction of the BT will broaden the range of investment products and vehicles in the Malaysia capital market.
Since this is a new business vehicle in Malaysia, CTIM will shortly send a separate e-CTIM outlining the basic information and operation of a BT. You may also visit the Securities Commission website to search for further information.
Withholding Tax (WHT) – New Section 109H – Appeal by Payer
The Bill now allows the payer to appeal on the Sections 109, 109B and 109F withholding taxes. However, the right of appeal will be denied to the payer if
(i) An appeal has been filed with the Special Commissioners of Income Tax by the non-resident recipient, to whom the payer was liable to make the payment; or
(ii) Such payment to the non-resident is disallowed as a deduction under S.39 of the Income Tax Act 1967 (ITA), or
(iii) The amount due has not been paid to the Director General of Inland Revenue
An issue will arise here if the payer legitimately believes (and has legal ground to do so) that the payer does not need to withhold the taxes but in a later tax audit, the tax auditors take a different position and disallow the payment to the non-resident under S. 39 and further demand the payment of the withholding tax. In such an event, under the proposed changes in the Bill, the payer will be denied the right to appeal.
This position is completely contrary to the basic principle that a taxpayer cannot be denied his right of appeal.
Again, this is a matter that needs to be brought to the attention of MOF
Change in Tax Treatment of Interest Income
The treatment of interest as a business income under S.4(a) has now become extremely restrictive under the New Section 4B. The Bill seeks to confine interest income as business source if the amended S.24(5) applies, i.e. interest arising from a business of lending money and the business is licensed under any written law.
A strict interpretation appears to exclude interest income e.g. overdue interest payment from trade debtors, etc. as business income. The decisions in the Malaysian Courts such as that on Pan Century Edible Oils may no longer apply.
This treatment is not conducive to encouraging the use of funds in carrying out business activities and this treatment would likely result in increasing the cost of doing business in Malaysia.
Treasury Shares (TS)
The Bill proposes that a deduction be given to the company having a business income on the cost of acquiring the treasury shares which are to be transferred to its employees under the employee-based remuneration scheme. The details of the proposal are available in the Bill.
Members should be aware of the following issues:
(i) As defined in the Bill, “treasury share” means a share of a company that was previously issued but was repurchased, redeemed or otherwise acquired by such company and not cancelled. It does not apply to new issue of shares to employees.
(ii) Significant efforts in keeping track of costs of acquisition on a First In First Out (FIFO) basis will be required for many larger organizations, where the shares are acquired over a period of time and subsequently transferred to the employees at different points in time.
This is a potential issue which could lead to disputes between the taxpayer and the tax auditors from the Inland Revenue Board in future.
Again CTIM will raise this issue to the MOF.
Assets Held for Sale (AHFS)
The Bill proposes that assets classified as AHFS shall be deemed to have ceased to be used for business for Schedule 3 of ITA purposes. Consequently, such classification will lead to a deemed disposal and computation of balancing allowance/balancing charge has to be done.
The legislation is silent on what happens if such as asset is then reclassified (back) as an asset that is being used again: will the balancing allowance/balancing charge calculated be reversed? The mechanism for this reversal is missing.
Again CTIM will raise this issue to the MOF
Meanwhile, we would be pleased if you could also forward your suggestions, comments and feedback on the 2013 Budget proposals to the Institute as soon as possible. The Technical Committees (both direct tax and indirect tax) will review all suggestions, comments and proposals and where appropriate, include them in the Memorandum for submission to the Ministry of Finance, Inland Revenue Board and Royal Malaysian Customs.
Please submit all comments and proposals to technical@ctim.org.my or fax to 03-2162 8990.
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