Overview of Accounting, Auditing, and Tax Compliance in Malaysia
Free enterprise is practiced in Malaysia, and unrestricted foreign ownership of companies is permitted. Profits can be brought back home, and capital can be imported without restrictions. The nation has a territorial tax system, where income tax is levied annually. In general, even if it is received in Malaysia, income from overseas sources is not taxed. However, regardless of the source of their revenue, certain specialized industries, including banking, shipping, and insurance, is subject to income tax. All taxpayers in Malaysia use a self-assessment system, and taxes are calculated based on income for the most recent tax year. Taxes must be paid on any revenue from, derived from, or transmitted to Malaysia. It is essential for companies operating in Malaysia to maintain proper auditing and accounting records, as they provide a comprehensive record of financial and fiscal transactions. These records give managers the information they need to evaluate the company's financial health and make wise choices. To avoid the issue of double taxation, Malaysia has also signed a substantial number of double-tax treaties.
Tax Compliance in Malaysia
- Types of Taxes
- Corporate Income Tax:Both resident and non-resident businesses that generate money in Malaysia are obligated to pay the government the corporate income tax, which is a type of direct taxation. The corporate income tax rate varies depending on how the firm is classified. The standard rate is 24% for resident companies as well as non-resident companies.
- Stamp Duty: Stamp duty rates differ from transaction to truncation in Malaysia. For example, the stamp duty rate for the sale or transfer of property is between 1% to 4%. Stamp duty is to be paid by the buyer or the transferee.
- Sales Tax: Sales tax is a tax levied in Malaysia on things produced and manufactured there, as well as on taxable imports. A 5% is imposed on a number of items, including basic meals, construction supplies, fruit juices, personal computers, cell phones, and watches. A rate of 10% applies to all other commodities, excluding petroleum (which has particular rates) and exempted items.
- Service Tax: In Malaysia, a 6% service tax is levied on taxable services offered by registered businesses operating in the country.
- Import Duty: Import duties in Malaysia vary between 2% and 60% based on the ad valorem rates.
- Excise Duty: Excise charges are levied on several produced or imported items into Malaysia. These products include cigarettes with tobacco, motor cars, motorbikes, playing cards, mahjong tiles, and beer, stout, cider, perry, rice wine, etc. Depending on the kind of commodities, different excise duty rates apply. The rate is a combination of MYR 1.10 per liter and 15% of the value for several alcoholic beverages.
- Property Tax: The total yearly value of a property, as decided by the local governing bodies, is what is used to calculate the property tax.
- Real property gains tax (RPGT): A capital gains tax is imposed when a property is sold, and the seller receives a profit from the transaction.
- Withholding Tax: The amount that is withheld by the person making a payment (referred to as the payer) on income generated by a non-resident (referred to as the payee), according to the Inland Revenue Board of Malaysia, is referred to as withholding tax. The Malaysian Inland Revenue Board then receives the deducted sum. Payments paid to non-residents for services rendered or other payments relating to the use of moveable property under any agreement must have tax withheld by the payer, who may be an individual or a corporate organization operating in Malaysia. The Malaysian tax authorities are then given the withheld tax.
- Tax Return
In Malaysia, all employees are required to file an annual income tax return that discloses their wages. The deadline for filing these taxes is April 30 of the following year. The Inland Revenue Board of Malaysia (IRBM) is the government organization in charge of taxation in Malaysia. Failure to submit this form by either the employer or the employee can result in Malaysian government penalties. The tax return form can be completed online, or you can hire a payroll partner to handle it for you.
- Tax Period in Malaysia
The tax period in Malaysia is from January 1 to December 31.
Accounting and Auditing in Malaysia
In Malaysia, maintaining correct records and accounting is necessary for all businesses to abide by the rules. Additionally, within 18 months after the date of incorporation, every firm must produce financial accounts. The Inland Revenue Board of Malaysia and the Companies Commission of Malaysia (SSM) must receive copies of these financial accounts. The financial statements must go through an auditing procedure before being released. They are then delivered to every shareholder, those qualified to receive notifications of general meetings, the company's auditors, and holders of debentures.
A financial statement is a formal document that details the status and performance of a company or other entity's finances. In order for stakeholders to analyze the entity's financial health and make wise decisions, it gives an overview of the entity's revenue, spending, assets, liabilities, and equity. The Companies Act 2016 is an act of Malaysian legislation that controls how businesses are formed, run, and managed. There the Companies Act 2016's Section 248 states the timelines for financial statements for corporations. Within 18 months of the company's incorporation, the directors are obligated to prepare the financial accounts. This relates to the initial set of financial statements that must be created upon the incorporation of the business. The directors must prepare additional financial statements within six months of the company's fiscal year-end following the initial financial statements. This means that the directors will have six months to compile the financial statements for each succeeding fiscal year.
Companies in Malaysia are required to follow two sets of reporting requirements when creating their financial reports:
- For businesses that are accountable to the public, the Malaysian Financial Reporting Standards (MFRS) are applicable.
- Private businesses with annual reporting periods starting on or after January 1, 2016, are subject to the Malaysian Private Entities Reporting Standards (MPERS).
All businesses in Malaysia are normally required to undergo audits unless they satisfy the standards for audit exemption. The following criteria must be met to qualify for audit exemption:
- A Dormant Company:A legal body or corporation that is inactive or not carrying out any substantial commercial activity is referred to as a "dormant company." Although it is a registered corporation, it doesn't engage in any operational or trade activity at any one time. When a company temporarily halts operations, takes a break, or goes through a reorganization period, dormant firms frequently result. This indicates that the company's activities have ceased, and there are no accounting transactions taking place.
- A Zero-Revenue Company: A company or organization that makes no revenue from its activities is said to have zero revenue. It means that the corporation does not generate any income through its core operations, such as the sale of goods or the provision of services. This may be the result of several factors, including being in the early phases of development, having financial problems, or purposefully running without a revenue-generating strategy. Companies with no income may nonetheless have operating costs or expenses that may be compensated by investments, grants, or other outside financial sources. The total cost of the assets included in the financial statement is less than RM 300,000. In the financial accounts from the previous two years, the total asset values are also less than RM 300,000.
- Threshold- Qualified Company: These companies are small companies with sales in the current fiscal year and the two years prior to it of less than 100,000 ringgit. Additionally, in the current financial year and the two years previous, their total assets, which include items like money and property, did not surpass 300,000 ringgit. Since the current fiscal year is over, their accounting period for this specific year is also over.
Services Offered by Enterslice
Our extensive offering of services consists of the following:
- Tax Compliance: To ensure that your company complies with all tax requirements while maximizing deductions and lowering liabilities, we provide rigorous tax planning and preparation services. Our professionals keep updated on the most recent modifications to tax rules and regulations, allowing us to offer precise and fast advice catered to your unique company needs.
- Accounting Services: We provide a broad range of accounting solutions, including financial statement preparation, bookkeeping, payroll processing, and management reporting, through our committed staff of certified accountants. We ensure that your financial records are kept up to date and in compliance with applicable accounting standards, providing you with a comprehensive view of the financial situation of your company.
- Auditing Services: We undertake stringent, unbiased audits to guarantee the accuracy of your financial accounts. Our skilled auditors thoroughly examine your records, pinpoint any potential risks, and provide insightful recommendations for improvement.
- Advisory and Consultancy: we also provide personalized advising and consultation services to support your ability to make sound financial decisions. Regardless of if you require assistance with tax preparation, financial analysis, or business expansion ideas, our team of experts are here to offer sage advice catered to your particular situation.
Our team of highly qualified professionals is well-versed in Malaysian tax legislation, accounting principles, and auditing standards. You can reduce risks, maintain compliance, and improve your financial operations with the help of our services.