When is directors' fee taxable ?
Why I have to PAY TAX even though not yet received my money???
Mr X (Director): Aiya..I haven’t received my director fee which accrued in YR2019 account because of this Covid-19.
Mr K (Tax Agent): Oh.. So sad to hear about this.. But, did you pay your PCB for the accrued director fee?
Mr X (Director): Why I need to pay??? I haven’t received my director fee!!!
Mr K (Tax Agent): You are required to do so if you are the person who has the right to control the company.
Mr X (Director): …… Yes, I am.
Mr K (Tax Agent): So, your director fee which accrued in Year 2019 is required to
• pay PCB before 15.01.2021 and
• reported in Year 2020 Form EA before 28.02.2021.
Deemed income provision under Income Tax Act
If you met the conditions under S29(4) of ITA:-
a) Persons one of whom has controlled over the other
b) Individual who are relatives of each other
c) Person both of whom are controlled by some other persons
So, the “income” is required to declare in the Income Tax Return Form even though it is not yet received.
Director Fee (Past vs Now)
In the past, the directors receive the directors fees are not taxed on them until they are actually received,
But...
With effect from 2016, irrespective of whether the directors’ fees/bonus are actually paid in cash from the company bank account, or credited to the directors’ loan account...
... 𝐃𝐄𝐄𝐌𝐄𝐃 𝐑𝐄𝐂𝐄𝐈𝐏𝐓 is applicable.
It mean the directors must declare his/her director fee in personal tax in the following year.
Real Story of Deemed Income Provision under S29 (4) of the Income Tax Act
Given #1 Kena Tax Sdn Bhd Balance Sheet show :
Accrual of director fee since 2018 RM100,000
Accrual of director fee since 2019 RM150,000
Accrual of director fee since 2020 RM200,000
Given #2 Director of Kena Tax Sdn Bhd never pay the personal tax on the director fee (assuming not yet receipt).
Given #3 Kena Tax Sdn Bhd never pay PCB on the accrued director fee.
Question to taxpayer ;
How to appeal to tax officer during tax audit on such accrual director's fee?
Does IRB officer has the right to add back those accrued director fee in Kena Tax Sdn Bhd?
Trivial of Deemed Income Provision
PS #1 : Why our tax people always ask directors on the reporting of director fee?
PS #2 : Why our account people always review accrual account in the balance sheet for Form E compliance work?
𝐒𝐨𝐮𝐫𝐜𝐞𝐬 of Deemed Income Provision
Income Tax Act 1967 – Section 29(4) Basis period to which income obtainable on demand is related
Visit us www.ktp.com.my
Visit us www.thks.com.my
Archive
- November 2024
- October 2024
- September 2024
- August 2024
- July 2024
- June 2024
- May 2024
- April 2024
- March 2024
- February 2024
- January 2024
- December 2023
- November 2023
- October 2023
- September 2023
- August 2023
- July 2023
- June 2023
- May 2023
- April 2023
- March 2023
- February 2023
- January 2023
- December 2022
- November 2022
- October 2022
- September 2022
- August 2022
- July 2022
- June 2022
- May 2022
- April 2022
- March 2022
- February 2022
- January 2022
- December 2021
- November 2021
- October 2021
- September 2021
- August 2021
- July 2021
- June 2021
- May 2021
- April 2021
- March 2021
- February 2021
- January 2021
- December 2020
- November 2020
- October 2020
- September 2020
- August 2020
- July 2020
- June 2020
- May 2020
- April 2020
- March 2020
- November 2019
- September 2019
- August 2019
- July 2019
- June 2019
- May 2019
- April 2019
- March 2019
- February 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- January 2016