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Chapter 1-part IV - Coggle Diagram
Chapter 1-part IV
Treasury shares
Previously issued but now repurchased, redeemed or otherwise acquired by such company and not cancelled
Tax treatment for expenditure on treasury shares offered to an employee under equity based remuneration
When the employee exercised their rights to acquire the treasury shares, the cost incurred by the company shall be allowable in that basis period
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If the cost paid by the employee exceeds the cost of treasury shares, the excess amount shall be kept by the company to be used for subsequent treasury shares purchase
If the holding company transfers treasury shares to the subsidiary company, the cost incurred by the subsidiary company is only allowable to the subsidiary company and not the holding company
Tax rebate
Effective from Y/A 2021, tax rebates may be granted for a period of 3 consecutive years from the commencement of the business, the amount is equivalent to its operating or capital expenditure which it has incurred limited to a max amount of RM20000 for each year of assessment
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Excess of tax rebate
The excess shall not be paid to the company, or be available as credit to set off the tax liability of the company for that year or subsequent year
LLP also eligible
However, the paid up ordinary shares shall be replaced by contribution of capital by the LLP whether in cash or in kind
Liquidation of company
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Before liquidation, the distribution to shareholders may be dividend or capital (authorised capital reduction)
To pay dividends, the company must ensure that
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Single-tier dividend
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Benefits
Reduce admin cost and enhance efficiency for companies and the IRB, as there is no need to maintain section 108 balances
Companies with capital gains and non-taxable accounting profits would be able to declare dividends without any constraints of tax franking credit
Before 1 Jan 2014, individuals in a high income bracket need not pay tax on the differential tax rate of 1% which is the marginal tax rate of 26% and the deemed tax deducted rate of 25%
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Drawbacks
Interest expenses that are attributable to the financing of investments will no longer be tax deductible under para 12B of sch 6
Companies that have issue fixed rate of return on shares, for example, preference shares, would need additional cost on payment of dividends
Individuals in a lower income bracket, such as pensioners and retirees, will not be able to enjoy any tax refunds on the imputed tax credit from tax paid by investee companies
Income tax rates for SME
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First RM600,000 is 17%, excess 24%
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Related companies are companies with paid up ordinary shares more than RM2.5m at the beginning of the basis period
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Dividend
Limited companies not in liquidation cannot make payments to its shareholders by way of return of capital unless as a step in authorised capital reduction
Instead, the return to the shareholders must be by way of profits