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BUSINESS AND PARTNERSHIP

INTRODUCTION

Gains or profits from carrying on a business, trade, vocation, or profession are liable to tax.

Business includes :

  • Sole Proprietorship/Self Employed
  • Individual carrying on a business on his own
  • Partnership
  • Includes any business venture of two or more individuals combining ownership, authority, work force or skill in running a business where profits are shared. Partnership can exist between :
  • Individuals
  • Two companies
  • Individual and Company
  • Individual and trustee

Examples of Business :

  • Sundry business
  • Direct selling
  • Agriculture and farming
  • Stalls
  • Clinics, Law Firms or other Professional practitioners
  • Writers and Actors
  • Remisiers  

RESPONSIBILTIES

  • To register as a taxpayer (if eligible) – link Register File
  • To get a copy of Income Tax Return Form from the nearest LHNDM Branch (if the form does not reach on time)
  • To complete Form B (Sole Proprietor) and Form P (Partnership)
  • To prepare statement of accounts and other statements such as rental statements and commission statements.  
  • To engage qualified tax agent to prepare business accounts (if required)  
  • Refer to supporting documents such as life insurance receipts, donation receipts, receipt books, zakat receipts for deductions, reliefs and rebate
  • Refer to Explanatory Notes as guide – link Form B Explanatory Notes, Form P Explanatory Notes  
  • Additional Information on Partnership  
    • The Precedent Partner is responsible for filling up Form P and issuing Form CP30 to each and every partner.
    • CP30 shows distribution of income (profit/loss) to each partner.
    • Every partner has to report his share of partnership income in his Form B.
    • Precedent Partner is also responsible for informing LHDNM officially if the partnership ceases/changes to a sole proprietorship/private limited company
  • Husband and wife have to fill separate Income Tax Return Forms.
  • To compute their tax payable.
  • To check and  SIGN duly completed Income Tax Return Form
  • To submit the Income Tax Return Form by the due date.
  • All supporting documents like business records, CP30 and receipts need not be submitted with Form P.
  • Keep all business records, supporting documents for deductions, reliefs and rebate for a period of 7 years.
  • Business records include profit and loss account, balance sheet, sales records, purchase records, stock receipts, bills and bank statements.
  • The last date for submission of Form B and P is 30th June.
  • Payment of tax due (if any) should be made on or before 30th June.
  • To comply with the installment scheme  (CP500) - link Installment Scheme CP500


GROSS INCOME FROM BUSINESS

Gross Income from Business includes :

  • Cash Receipts from sale of goods or from services provided.
  • All debts incurred from sale of goods and services provided.
  • Receipts in Kind
  • Recovery of Bad Debts
  • Insurance compensation received for business loss
  • Withdrawal of business stock or stock taken for personal use

ADJUSTED INCOME FROM BUSINESS SOURCE

Is derived from gross income after deduction of business expenses such as :

  • Allowable business expenses
  • Allowable specific expenses 
  • Double deduction expenses allowable under Income Tax Act 1967
  • Export Allowances

 

BUSINESS EXPENSES

Allowable

Not Allowable

Expenses incurred in the production of income
Example :
  • Payment for wages/ salary
  • EPF Payment  
  • Rental of business premise  
  • Interest on business loan
  • Expenses for repair of premise and vehicles used for business purpose
Personal expenses

Example :
  • Accommodation benefit
  • Payment of telephone bills  
Purchase of personal assets
Example :
  • Personal Car
  • Furniture

Initial Expenses
Example :

  • Expenditure on incorporation of business venture
  • Advertisement expenses


ALLOWABLE SPECIFIC EXPENSES

Specific expenses that are allowable such as :

  • Expenditure incurred in providing equipment for disabled employee (OKU)
  • Expenditure incurred in respect of publication in National Language.  
  • Donation to libraries
  • Expenditure incurred in providing services, public amenities and contribution to a charity or community project.
  • Expenditure incurred in providing and maintenance of a child care centre for the benefit of employees.
  • Expenditure incurred in establishing and managing a musical or cultural group.  
  • Expenditure incurred in sponsoring any art or cultural event.  

CAPITAL ALLOWANCE
Is given as deduction from business income in place of depreciation expenses incurred in purchase of business assets.

  • Examples of assets used in a business are motor vehicles, machines, office equipment, furniture and computers.
  • Conditions for claiming capital allowance are  :
    • Operating a business  
    • Purchase of business assets
    • Assets are being used in the business
    • Owner of the assets
  • Rates are determined according to the types of assets.
  • Types and rate of Capital Allowance are as follows :

TYPES OF ALLOWANCES

TYPES OF ASSESTS

RATE (%)

Initial Allowance

All types of assets

20 %

Annual Allowance

Motor Vehicles and Heavy Machinery

20 %

Plant and Machinery

14 %

Office Equipment , Furniture and Fittings

10 %

Computer

40 %

 

Hit(s) : 288,061
Updated : : 2018-03-09 16:43:57

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