Public ruling 3/2020 : Tax Treatment of Stock in trade – Withdrawal of Stock (Part II)
𝐎𝐯𝐞𝐫𝐯𝐢𝐞𝐰
On 03.06.2020, IRB had issued a public ruling on Tax Treatment of Stock in trade Part II – Withdrawal of Stock to explain the valuation and tax treatment on withdrawal of stock.
𝐊𝐞𝐲 𝐭𝐚𝐤𝐞𝐚𝐰𝐚𝐲
You will understand the:
1. Valuation of stock if the withdrawal is for own use or other reason.
2. Timing of taxability on withdrawal of stock.
𝐒𝐮𝐦𝐦𝐚𝐫𝐲 𝐨𝐟 𝐥𝐞𝐚𝐫𝐧𝐢𝐧𝐠
1. Valuation of stock withdrawn for own use or other reason.
- It should be recognised as market value when the stock has withdrawn.
- If the withdrawal is use for business purpose as a capital asset (e.g. fixed asset), the asset cost in tax (e.g. qualifying expenditure) will be based on the market value during the withdrawal time.
2. Timing of taxability on withdrawal of stock
- It is taxable upon the withdrawal of stock.
- If the value of stock sold is lower than the market value. The difference between the value of the stock and market value is taxable at the time of stock withdrawn.
- For property developer, when there is compensation received for the compulsory acquisition of the land, the amount would be treated as gross business income under paragraph 4(a) of the ITA for the relevant period.
𝐒𝐨𝐮𝐫𝐜𝐞𝐬
PR 3/2020 Tax treatment of stock in trade, Part II
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