I had an registered enterprise company. Wondering if I need to change it to Sdn Bhd. My aim is to pay the least tax as possible.

Here the situation. I basically do design and mobile app stuff. So far is on freelance basis, and go under the radar. My total income fro that was under 25k for this 2 years.

However, I'm might get a project worth 1.5mil. It will takes 18 months to complete. And I need be sub contract some part of the work to other individual/company as well.

I have not pay any tax under Enterprise company, so I am not sure how it works. So here my question is:

- My initial start up is 50k, to buy software, hardware and lots of mobile devices (phone and tablet). Is this deductible from the tax?
- Payment to freelancer and other party for the sub contract work. Its deductible too rite? But some of the work will be sub to freelancer out of this country, will that be a problem?
- what other stuff that is deductible?

And all that taken into account, is there any need for me to upgrade to Sdn Bhd?

Short answer, if 1.5M, go for Sdn Bhd.
Your payment to subcontractors are deductible for both Sdn Bhd and Enterprise.

I think it will be a lot more helpful if you were to explain why you think TS should go for Sdn Bhd for that amount of income.

Yeah.. like the post below, can you enlighten me a bit?

1. You're taxed as an individual when you do your business as a Sole Proprietor. Sdn Bhd's tax highest tax bracket is 1% less than an individual. I can't recall the figures, pls do a search on google.

2. You get more deductions in the form of travel expenses, director fees etc from a Sdn Bhd.

That's the gist of it. There are tons more other tax advantages but these are the main ones I can think of.

For 1), it depends on your personal declared tax return and Sdn Bhd tax return. If you can keep your personal below MYR100k then it is better to declare income as personal, else Sdn Bhd

2) Same as above, as Sdn Bhd you get deduction, but director fees and stuff will add up to your personal tax return. So it's your call

3) Admin cost is a lot higher in Sdn Bhd, secretary fees, acc, audit, tax, gst

4) you get protection as limited liability from Sdn Bhd. Eh if anything goes bad to your company then it won't bring it to your own personal assets.

5) Bla bla bla and a lot more

Yea its just a summary. The subject is too broad and the variables too many.
But he mentioned RM1.5M, I would assume his profit will be way more than RM100K.

Thanks for the answer.
From what I gather, is it necessary to register under at least 2 director? What if the other director wanna quit later on? Need to find replacement?

Lastly, is there anywhere I can find whats is tax deductible for Sdn Bhd? Google didnt yield me any result. Thanks a lot for the patient.

It should not be a problem. Can use your grandma or grandson. If you're all alone with not a relative or friend in the world, can use one of your staff. The people holding the majority of shares can hire and fire directors at he wish, so ultimate control remains with you. So long as you retain a majority of shares.

Everything is deductible, except what is not. In other words, try searching for the opposite, what is NOT deductible for tax.

Yes minimum 2 directors and 2 shareholders.
Speak to a company secretary. I can recommend you mine if you're interested. PM me your phone number. We can chat further on whatsapp too if u want.

Haha!! I think this has potential to be quote of the year

Thank you for all the input guys, really appreciate it.

Dividend Magic alread PM-ed u.

Sorry for hijacking your thread..want to ask a question here..

I have fork out rm5000 as capital to start the business, after business run for few month, already earn back the capital, if i want to take back/transfer the capital to my personal account isn't subject to tax?

p.s: my company is Sdn Bhd

This post has been edited by BlackPen: Dec 8 2015, 11:46 AM

If you take back RM4998 of the capital, the company becomes a RM2 company. No good.

Pay dividend instead. The company already pays the tax, so when dividend is paid to the shareholder, the shareholder don't have to pay tax again.

My company already earn some of the profit. So company still have a sum of money. So if i want to take back the capital, mean i need to pay it as dividend ? dividend no subject to tax?

Dividends won't be subjected to tax. You would've already paid tax at company level.

Sorry for another noobs question, how is dividend been counted? any limit? and how many time you can do that annually?

As many times as u want. You can only pay dividends from the profit of your company. Lets say your profit after tax is RM500K this year, you can pay all RM500K as dividends.

Question here.. Do my capital 5k (5k actually is the money to create bank account) count as a profits? Taxable? Non taxable?

No. You have to prepare a proper P&L (profit & loss account). Either do it yourself or hire someone to do it. Then look for the line item that says "accumulated profit" (it might be called something else, so ask your bookkeeper/accountant you hired which is the equivalent name if you don't see it).