Overview of

Tax Compliance &

Risk Management

Wisma Cheng & Co www.chengco.com.my

No.16G, Jln. 2/114 Hotline +603 2935 9606
Kuchai Business Centre Tel +603 7985 9999
58200 Kuala Lumpur, Malaysia Fax +603 7980 0191

By:
2021 Cheng & Co Group ©
 Personal Tax Reliefs YA 2021 2

Maximum (RM) Notes Maximum Notes

Taxpayer 9,000 (RM)
Children
Parents’ medical 8,000 YA2011 – includes
- Below 18 2,000
expenses expenses for care
- Disabled * 6,000
Serious disease 8,000 Complete medical - Over 18 * 8,000 Full time study
medical expenses for examination RM1,000 - Disabled * 8,000 Further deduction
taxpayer, spouse & Fertility treatment * unmarried
children Vaccine cost RM1,000
Life insurance 3,000 Taxpayer & spouse
Disabled taxpayer 6,000 Further deduction
Approved provident 4,000
Disabled spouse 5,000 Further deduction fund contributions
Equipment for 6,000 Further deduction PRS or Annuity 3,000
disabled taxpayer, Premium
spouse & children SOCSO 250
Spouse relief 4,000 YA2017 – it is not
(combined qualified, If spouse has
assessment) income from outside
Malaysia 2

CHENG & CO TAXATI ON SDN. BHD.

 Personal Tax Reliefs YA 2021 3

Maximum Notes Maximum Notes

(RM) (RM)
Education or 3,000 Taxpayer, spouse or Parental care 1,500 each YA2016 to YA2020
medical insurance children
Lifestyle 2,500 Books, sport
Education fee 7,000 Tertiary or Master equipment, mobile
(technical, scientific, Degree or Doctorate
phone, tablet, Gym
technological, law, level
etc.
accounting, Islamic
financing, skills or Breastfeeding 1,000 Only for woman, for
qualification equipment child up to aged 2,
Skim Simpanan 8,000 Sec 46(1)(k) once in 2 years
Pendidikan Purchase of 2,500 w.e.f. 1 June 2020
Nasional for child handphones,
Fees paid to 3,000 Child up to aged 6, tablets & laptops
childcare centre / claimed by either Sport equipment, 500 YA2021
kindergartens parent, approved or entrance fee for
registered centre
soprt facilities,
registration fee for 3
sport competition
CHENG & CO TAXATI ON SDN. BHD.
 Compliance

Income Tax Employer’s

(includes Tax
TP, W/H Tax) Responsibility

Documentation & Technicality &

Supporting Practicality
Information Directors’ Real
personal tax Property
responsibility Gain Tax

Risks Management
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 INCOME TAX

Compliance Tax risks

• Submission • Taxability of income
• Tax return • Deductibility of expenses
• CP204 • Documentation
• Employer’s form • Technical
• Form E interpretation
• Form EA • TP Pricing basis
• PCB • Interpretation of the
• CP58 scope of withholding tax
• Transfer Pricing (TP)
• Withholding tax
 Managing Tax Risks - Income

Technical
• Business income is • Documents kept and
taxable on receivable available
• Deem to be the gross income • Explanation to IRB
basis of that person derived from
officer
• Other income is Malaysia from the business
• Supporting for
taxable on received • S. 24(1A) – service fee
received in advance appeal
basis • 29(3) Person deemed entitled
At the time to receipt of interest on Tax
transaction arises demand Audit/Investigation
• Withdrawal of stocks

• S.4(a), (b), (c), (d), (e), (f), 12, 13 etc.

 Expenses Deductibility – Tax Risks

Criteria for tax Documentation Difference in accounting and tax

deduction deduction
• Wholly & exclusively incurred in the production of income
• S.33(1), S.33(2), S.34 special deduction, S.39 prohibition
• Related party’s expenses
etc.
• Accrued director’s fees
• Sufficient documentation (wholly & exclusively)
• Liable to pay (incurred)
• Provision vs accrual
• Proof of payment (Incurred) • Property development
• Records in system/accounts
Common Mistakes

Benefits in Kind Directors’

Perquisite Remuneration

Imported
Purchases
Cash
Payment Private or
Expenses Family Expenses
Common Mistakes
Paid by Non-Tax Resident
• Royalty (FB, Google, etc)
• Commission
• Interest
• Service rendered in Malaysia
Overseas • Rental for moveable property
Withholding
business tax
trips

Bad debts
written off
 Transfer Pricing

Compliance
1. Contemporaneous TP Risk Factors
documentation
2. Full or Minimal documentation 1. Pricing basis and justification
2. Documentation
3. Intercompany loans
4.Tax impacts assessment
Common Issues For TP

Deemed interest Section 140A – Power to

on intercompany substitute price, disregard
loan structure and impose surcharge
 Common Issues On
Director’s Personal Tax

Assets Liabilities
CP 104
CP 105
Expenses Income
 Capital Statement

Assets
• Land & property Bank balance including
saving accounts, FD,
• Motor vehicle current accounts etc.
• Capital & accumulated Investments Other debtors
profit c/f in sole- Advances to company,
proprietorship / • Quoted shares friends, etc.
partnership • Unquoted shares
• Renovation • Unit trusts
• Jewellery, watches, etc. • Bonds etc.
 Capital Statement

Liabilities

Property Loans Hire Purchase Loan

Amount due Loans from Credit card

to company friends balance
 Capital Statement

• Living expenses e.g. foods, clothes,

house expenses, transports
Expenses
• Personal insurance, loan interest,
children education, travelling etc.
• Taxable income, not taxable income
• Gain on disposal of investments and
Income
assets
• EPF withdrawal etc.
 Capital Statement
Year 1 (31 Dec) Year 2 (31 Dec) Year 3 (31 Dec) Year 4 (31 Dec) Year 5 (31 Dec)
[Opening]

Gross Assets Amount 1,000,000 2,500,000 2,200,000 3,000,000 4,500,000

Less : Liabilities Amount 700,000 1,200,000 1,000,000 500,000 800,000

Net Assets Amount 300,000 1,300,000 1,200,000 2,500,000 3,700,000

Opening amount 300,000 1,300,000 1,200,000 2,500,000

Net increase 1,000,000 (100,000) 1,300,000 1,200,000

Add : Expenses 100,000 120,000 200,000 300,000

1,100,000 20,000 1,500,000 1,500,000

Less : Income 500,000 520,000 800,000 1,000,000

Discrepancy / (Surplus) 600,000 (500,000) 700,000 500,000

Total Income Under-declared 1,800,000

 Mean Test / Net Worth Analysis
Year 1 (31 Dec) [Opening] Year 5 (31 Dec)

Gross Assets Amount 1,000,000 4,500,000

Less : Liabilities Amount 700,000 800,000

Net Assets Amount 300,000 3,700,000

Opening amount 300,000

Net increase 3,400,000

Add : Expenses 720,000

4,120,000

Less : Income 2,820,000

Discrepancy / (Surplus) Total Income Under-declared 1,300,000

Pro-active Precaution
Mechanism
• Financial Healthiness
• Accounts & documentation
Review • Assess risks director’s capital
Assess statement / Mean Test

• Improving
documentation
Recommend
Restructure • Mitigate risks
• Staff remuneration
• Benefits

Monitor
Advise • Monitor the changes
• Support for any updates
• Advising on tax implication
 Liquidity Ratio Analysis 19

30/06/2019 30/06/2020 30/06/2021 Healthy Remarks

Range
Current ratio 1.46 1.27 1.22 > 1 & higher
better
Quick ratio 1.32 1.15 1.13 > 1 & higher
better
Gearing ratio 1.05 1.09 0.67 If > 1 and
higher is riskier
Trade debtor 89 107 133 Lower is better
collection
turnover days
Stocks 20 22 19 Lower is better
turnover days
Trade creditors 41 77 119 Lower is better
payment credibility
turnover days
Interest 4.77 0.21 1.37 Higher is better
Coverage
Ratio 19
CHENG & CO TAXATI ON SDN. BHD.
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Costing & Profitability Ratio Analysis

30/06/2019 30/06/2020 30/06/2021 Healthy Remarks

Range
Gross profit 44.77% 42.70% 37.80% higher better
margin %
Operating 7.55% 0.36% 1.59% higher better
profit %
General 38.01% 25.22% 21.03%
Administrative
expenses %
Directors’ 11.74% 9.06% 7.79%
Remuneration
%
Return on 16.56% 0.89% 4.21% higher better
equity
NTA / Share 6.33 6.39 6.67 higher better

EPS 1.05 0.06 0.28 higher better

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CHENG & CO TAXATI ON SDN. BHD.
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The profitability is dropping might be due to pandemic and MCO

• Profitability recovering in 2021 due to cost management.
• Debts restructuring or repayment has improved on Gearing ratio
• However, the trade debtors payment period is getting longer
and made the company has started to reply on trade creditors’
finance and funding from directors
• Recommend to assess any bad debts or doubtful debts and the
tax deduction procedures
• Can consider to get some long term funding to improve trade
creditors’ owing to improve the creditability as the profitability
started to recover

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CHENG & CO TAXATI ON SDN. BHD.
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Section 2
Tax Highlights

CHENG & CO TAXATI ON SDN. BHD.

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Tax Issues Highlight

Interest • To reduce the other debtors balance
Restriction • Check is it related to trade in nature

BIK • BIK not deducted PCB

• Car expenses paid for staff not

Perquisite declared as perquisite

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CHENG & CO TAXATI ON SDN. BHD.
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Tax Issues Highlight

Other • No movement for more than 1 year
payable
Director •
•
•
Director accounts show it was funds around 1 million injected
High risks IRB may ask the source of funds
Check with director on supporting

accounts • Can recommend want to do capital statement to assess the

risks

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CHENG & CO TAXATI ON SDN. BHD.
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Internal audit • Sales growth
• Shareholder structure • Cost management
• Corporate governance • Expenses control
• Irregularities e.g. • KPI, Balance
misappropriate of Scorecard & OKR
money
(reward systems)
• Family office
Structure
& Operation
Internal Management Profit = Income - Cost
Control

Compliance
Cash flow &
& Risks
Accounts
Management
• Data analysis • Tax risks
• Break even analysis • Legal e.g. Unclaimed
• Projection money
• Returns on • Employee Act, EPF,
investment Socso etc.
• Funding • FOREX, Product
liability etc.
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CHENG & CO TAXATI ON SDN. BHD.
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Hybrid Tax Advisory Services

One Fee for One Stop Professional Advisory Solution

Tax
Compliance Accounting review
Tax Risks
Documentation

Data
Analysis System & Digitalisation
Monthly
Company
Secretary
Ratio Coaching Guidance
Retainer Fee Analysis

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CHENG & CO TAXATI ON SDN. BHD.
Thank you