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Group relief for companies - Coggle Diagram
Group relief for companies
Surrendering company
Resident
Incorporated in Malaysia
Surrender adjusted loss
Not more than 70% to one or more related companies (claimant company), who is also resident and incorporated in Malaysia
For 3 consecutive years of assessment
Commencement of basis period for surrendering of adjusted loss
Immediately following the year the surrendering company commences, basis period of which consists of 12 months, or
Immediately following the second basis period the surrendering company commences, if the basis period is less than 12 months and the second basis period consists of a period of 12 months
Traditional provision for surrendering of adjusted loss
Only apply to new companies and is restricted to 3 consecutive years of assessment, effective from YA 2019
covering within the 4 years from commencement not including the year of commencement, starts from 2019
Criteria to be eligible
Related companies for the current and previous year
70% of paid up ordinary share of surrendering company is directly or indirectly owned by the claimant company, or otherwise
70% of the paid up ordinary shares of the surrendering and claimant company are directly or indirectly owned by another company
Paid up ordinary share more than RM2.5m at the beginning of the basis period
Have 12 months' basis period ending on the same day
Make an irrevocable election to surrender or claim an amount of adjusted loss in the return furnished for that year of assessment
Are subject to income tax at 24%
The claimant company has a defined aggregate income for that year of assessment
Mutually exclusive
Pioneer company or has been granted approval for ITA under PIA 1986
Has unutilised ITA or adjusted loss from a pioneer business
Exempt from tax on its income
Has made a claim for RA
Has made a claim for deduction in respect of an approved food production project
Has made deduction for cost of acquisition of proprietary rights
Has been granted deduction for cost of acquisition of foreign owned company
Has made a claim for deduction under section 154 ITA
Claimant company must have a defined aggregate income
Aggregate income reduced by deduction under 44(1)(a-d)
a
Adjusted loss
b
Mining expenditure, qualifying pre-operating expenditure
c
Donations to approved institutions and government, gift of artefact, manuscript or painting to government
d
Donations to approved libraries, gift of painting to the National Art Gallery, zakat perniagaan etc. pls refer to the workbook
Adjusted loss to be surrendered
From the surrendering company to the claimant company, in arriving at the total income of the claimant company
Shall not exceed the defined aggregate income of the claimant company for that year of assessment - meaning that, it cannot be that the total income is 0
Priority of losses surrendered
Must be fully deducted by the first claimant company first, and then the second
The adjusted loss from the first surrendering company shall be utilised first before the second
If cannot be effected by the order of priority, then it shall be dealt with in such manner as the DG thinks reasonable and proper
Additional criteria
The surrendering company is entitled to at least 70% of
Any residual profits of the company, available for distribution to that other company's equity holder
Any residual assets of the other company, available for distribution to that other company's equity holders on a winding up
Definitions
Residual assets
Net assets after deducting amounts returned to creditor and preference shareholders
If no residual asset, then a notional amount of RM100 shall be deemed to be one
Residual profits
Profits after deducting fixed dividends and variable return to non-commercial creditor
If no residual profits, then a notional amount of RM100 shall be deemed to be one
Equity holder
Holder of ordinary shares
Any creditor in respect of non-commercial loan
Additional assessment, penalty and appeals
If the adjusted loss is not being utilised by the claimant company, the DGIR may, in that year or within 5 years after the expiration, make additional assessment in respect of that company in order to utilise any loss of tax
If the surrendering company gives incorrect information in respect of the adjusted loss surrendered, it needs to pay penalty equal to the amount of tax which had or would have been undercharged by the claimant company
If the surrendering company is dissatisfied with the penalty, it may, within 30 days of being notified, appeal to the SC as if the notice were a notice of assessment
Any income tax appeal shall be submitted to the Tax Appeal Tribunal from year 2021