Prior to the year of assessment 2009, Special Classes of SME refers to companies resident in Malaysia which has a paid-up capital in respect of ordinary shares of RM2.5mil and less at the beginning of the basis period for a year of assessment is given preferential tax treatment as spelt out in the relevant provisions of the Act.
From year of assessment 2009 onwards, the definition of the “Special Classes of SME” is amended to refer to resident companies that has a paid-up capital in respect of ordinary shares of RM2.5mil and less at the beginning of the basis period for a year of assessment but EXCLUDE companies if more than:
50% of the paid up capital in respect of ordinary shares of the company is directly or indirectly owned by a related company;
50% of the paid up capital in respect of ordinary shares of the related company is directly or indirectly owned by the first mentioned company; or
50% of the paid up capital in respect of ordinary shares of the first mentioned company and the related company is directly or indirectly owned by another company.
Related company means a company which has a paid up capital in respect of ordinary shares of more than RM2.5 million at the beginning of the basis period for a year of assessment. As such, currently resident SME companies with a paid up ordinary share capital not exceeding RM2.5 million which form part of a group where there is direct or indirect control of/by a related company is not eligible for preferential tax treatment or considered as “Special Classes of SME”.
For Special Classes of SME, the corporate tax rate with effect from year of assessment 2017 to 2018 is as follows:-
On 1st RM500,000 Chargeable Income – 18%
On subsequent Chargeable Income – 20% to 24%
For resident company which does not fulfil the definition of being SME, i.e. with paid up capital above RM2.5 million at the beginning of the basis period, will be taxed at rate from 20% to 24% since year of assessment 2017.
For non-resident company, the tax rate will be 24%.
Every company shall submit its tax return within six (6) months from the close of the financial year end. However, commencing from the year of assessment 2002 onwards, the Inland Revenue Board (IRB) has granted an administrative concession for companies to file their tax returns within seven (7) months from the close of the financial year end. In addition, the Revenue has further extended the deadline of submission by one month extra (grace period) for e-filing purpose. For example, the year of assessment for a company with financial year end of 31st December 2017 will be YA 2017. Form C of such company must be submit before or on 31st July 2018 or 31st August 2018.
Under the self-assessment system, a notice of assessment is deemed served upon submission of the Form e-C to the IRB. Therefore, the Form e-C is final and cannot be amended. If an appeal is required, this must be lodged within 30 days from the date of the deemed notice of assessment, i.e. within 30 days of the submission of the Form e-C.
Penalty due to late submission of ITRF
Failure to furnish within the stipulated period will result in the imposition of penalty under subsection 112(3) of the Income Tax Act 1967 (ITA 1967) where a rate of 20% to 35% penalty will be imposed. The penalty would be charged based on the delay duration between 12 and 36 months.
Notice of Appeal
Paragraph 3.1.4 of Public Ruling No. 3/2001 (Appeal Against an Assessment) states that in the case of a deemed assessment, where a person, in the course of making a self-assessment, has compiled with a ruling with which he does not agree, the notice of appeal may be filed together with the return.
The IRB has clarified that if a taxpayer disagrees with a particular stand/opinion of the IRB, and/or has not compiled with any Public Ruling, the taxpayer should submit a letter to the IRB indicating the disagreement in relation to the interpretation and the rationale for such a disagreement, together with the tax return.
The IRB will then issue a Notice of Additional Assessment (relating to the issues in dispute) and the taxpayer will have a 30-day period to lodge a formal appeal.
In the event the taxpayer adopts a different tax position and no notice/letter is submitted indicating the difference, any subsequent tax audit will result in the issuance of a Notice of Additional Assessment and penalties may be imposed.