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Chapter 10
Business Exp, Interest Exp, Entertainment Exp - Coggle Diagram
Chapter 10
Business Exp, Interest Exp, Entertainment Exp
Business Expenses
Exp :check:deductible
:red_flag: S33(1)
- exp must be wholly and exclusively incurred in the production of gross income’
:red_flag: S33(1)(a)
:red_flag: S33(2)
:red_flag: S33(4)
- deductible when int is due to be paid
:red_flag: S34(7), S34A, S 34B:red_flag: S34D
:red_flag: S35(S)
:red_flag: S39
:red_flag: Exemption orders
:money_with_wings: Revenue Expenditure vs :house: Capital Expenditure
:money_with_wings: Recurring in nature
:house: once off payment
:money_with_wings: :red_cross:enduring benefits
:house: :check:enduring benefits
:money_with_wings: in the production
:house: after production of INC / in order to produce income
:money_with_wings: circulating/ working capital
:house: fixed capital
:money_with_wings: business process
:house: business structure
:money_with_wings: improve/ maintain business efficiency
:house: acquired, expand, modify, remove business structure
:money_with_wings: replacing entire asset
:house: replacing part assset
-
Provision Account
- generally is contingent liability
- this is :red_cross: incurred, it :check: estimate
- :red_cross: deductible until real incurred
:red_flag: General provision for doubtful debts
- based % of the trade receivable
- is estimate= :red_cross: deductible (not relate to special debtors & not incurred)
:red_flag: Specific provision for doubtful debts
- reasonable action taken to recover the debts
- :check: deductible / :red_cross: deductible
- :check: dedutible
- trade - related debts
- include previous YA gross income
- business continuing / existing
- amount become irrecoverable
- specific trade debtors
Interest Exp
:check: deductible:red_flag: S33(1)
- int on debts (wholly &exclusively incurred in the production) but need strict requirement
:red_flag: S33(1)(a) int on money borrow
- int :no_entry: deductible(how monet borrowed is being used- Qualifying Purpose)
- wmployed in production
- laid out on asset in production
- purchase of revenue / capital asset of a business = :check: deductible
:red_flag: interest incurred prior commencement of business
- :red_cross: Deductible
:red_cross: CA
:red_cross: IBA
- due to int exp is NOT part of construction of B/P/M
:red_flag: int exp :red_cross: fully deductible is :moneybag: id used for
:red_flag: S33(2) int restriction
- laid out on investment + loan to other = :red_cross: deductible
- on;y portion laid out on business = :check: deductible
- (cost of investment / money borrowed) x int exp to p/l = int to be restricted
- Investment + Loan > :moneybag: borrowed = fully restricted*
- Investment + Loan < :moneybag: borrowed = partial restricted*
Application of the formula
- investment + loan < :moneybag:500,000 = year basis
- investment + loan > :moneybag:500,000 = monthly basis
:red_flag: year basis
(cost of investment / yr end outstanding loan bal) x yearly interest:red_flag: monthly basis
(cost of investment / yr end outstanding loan bal) x monthly interest
Non application of the interest restriction
:red_flag: company
- int exp < :moneybag:10,000
:red_flag: Individual
- int exp > :moneybag: 6,000
Interest Expense
deduction of int exp & recog of int inc for loan btw related person:red_flag: transaction btw un-related person
- S33(1)
- Interest expense payable on :moneybag: borrowed for the basis period = :check: deductible
- :moneybag: borrowed by that person must:
- employed in production
- laid out on assets used
:explode: B pay interest to L
- B : int exp = :check: deductible (when interest is payable)
- L : int inc= s4(d) investment inc
:red_flag: loan transaction btw related companies
- S33(4)
- int :check: deductible (when due to be paid)
- notify DG :red_cross: > 12 mths
:explode: S pay interest to H
- S: int = :check: deductible (when due to payment)
- H: int = :check: taxable (when received)
Interest Income
:red_flag: Loan btw unrelated person
- S29(1) int inc :pencil2: as inc when L int has been received
:red_flag: Loan btw related person
- Int inc :check: taxable (when int received)
- S29(3) int inc deemed to be received on the dat int is due to be paid by B
- Int inc :check: to tax
- int inc will be assessed when int receivable
- inc traded back to prior YA. prior tax comp must be revised
Entertainment Expenses
- prov of food, drink, hospitality, recreation
- prov of accommodation / travel (connect trade / business carried)
Promotion : activity to market a product / service to customer, dealers and distributors
:red_flag: S33(1)
- Entertainment Exp wholly & exclusively incurred = :check: deductible 50%
- the remaining 50% = prohibited under S39(1)
:red_flag: S39
- fall within 8 item = :check: deductible 100%
- entertainment of staff (refreshment, annual dinner)
- E for payment in the ordinary course of business (customers)
- prov of promotional gift & trade fairs/ trade / industrial exhibition outside Malaysia (sample, small souvenirs)
- prov of promotional sample of product for advertising
- prov of E for cultural or sporting event open to public
- prov of promotional gift within Msia of incorporating the logo
- prov of E relate to wholly to sales
- prov of leave passage benefits to employees