You Want to Know: Common Tax Questions by New Business Owners in Malaysia

If you were once an employee, paying income tax was a relatively straightforward affair. The good folks in the finance department would have set things up for you, and all you had to do was verify the information, fill in the deductibles and you’re pretty much done. But as a business owner who is just starting out, there’s a high chance that you are your own finance department (Yes, we’ve been there too—high five!).

Fret not, we’ve round up some pointers to help you get your head around corporate income tax. So get a cup of coffee and read on!
Do I need to pay taxes as a new business owner?

Yes, you do. But the amount of corporate income tax you have to pay is based on your chargeable income. And the good news is, for the year of assessment 2017, the rates will be lowered even further for your benefit.

Chargeable incomeYA 2015                        YA 2016YA 2017
The first RM 500,00020%                              19%18%
In excess of RM 500,00025%                              24% 24%
This is applicable only to businesses with a paid up capital below RM 2.5million

What are the deductibles that are available to me?

If you have previously filed for personal income tax, you would have enjoyed a fair amount of deductibles. You’d be happy to know that you can still file for deductibles as a small business owner. Here are some items that qualify for double deduction:

  • Expenses incurred in obtaining recognised quality systems, standards and halal certification
  • Expenditure incurred by companies on the training of employees under an approved training program
  • Childcare allowances given to your employees
  • Expenses for Goods and Services Tax (GST) related training of employees in accounting and information & communication technology
  • Expenditure incurred in participating in career fairs abroad that are endorsed by TalentCorp

Is it a must to employ a professional tax accountant to file my taxes?

It is not a legal requirement to have your taxes done professionally, but do bear in mind that there is a risk of being fined for common errors if you decide to choose the DIY route. Some of the common tax mistakes made by new business owners are:

  1. Submitting the wrong form
  2. Incorrect calculation of taxable income
  3. Failure to make timely instalment payments

When I was an employee, my income was deducted monthly via the PCB scheme. Is the process the same for corporate income tax?

The steps required for corporate income tax is different from personal income tax. Here’s the process in brief for a new business:

  1. Submit form CP204 within the first year
  2. Pay tax instalments if a profit is forecasted in the coming year
  3. Submit income tax return (Form C) within 7 months from the end of the company’s financial year
  4. Settle all unpaid taxes within 7 months from the end of the company’s financial year

What if my business is not profitable? Do I still need to pay taxes if I’m making a loss?

It’s normal to encounter losses in the first few years of running a business. So take heart, you may not have to pay taxes if your business is in the red (unless you have taxable expenses). Business losses can be offset against income from all sources in the current year, and any unutilised losses can be carried forward indefinitely.

Disclaimer: We hope the information here have been useful for first-time business owners and entrepreneurs. However, this post is only meant for general reading and should not be taken as qualified tax advice. Please consult a qualified registered tax accountant or refer to LHDN for the latest and most up to date information.

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