I'm thinking that perhaps TS's company has not yet made RM5k profit. Perhaps he hasn't even prepared a set of accounts and do not know how much profit has been made.

He had simply looked at the bank balance, see it has a lot of cash, and thinks that it does not need so much cash sitting in the current account earning no interest. There's plenty of cash to keep the business running, even if he takes out the RM5000 he originally put in.

In that case, the company can loan you RM5000. The company is doing well, expected to return a healthy profit at the end of the year, and will pay the shareholders a dividend. This RM5000 will then be offset against whatever dividend is declared at the end of the year. If the dividend turns out to be less than RM5000, you can repay the balance then, or let the balance carry forward to offset against the next year's dividend.

There is a tax implication if the company is paying any interest (bank term loan or overdraft), if it has also advanced interest free loans to it's directors. But if it isn't paying any interest, then it's fine, and there's no problem with taxation.

The alternative is to shrink the share capital from RM5k down to RM2, which nobody does. It just does not look very good when you're asking for credit terms from your suppliers if your sharecap is only RM2.

Thank you the details explanation. Company profits already more then the capital. So I thought of take back my capital. The Company still more then enough amount to run the business So, if i take out the original put in amount is not taxable because it's not profits.

only profit is taxable right?

Thank you.

Only profits are taxable. But regardless of whether you take out the profits of leave it in the company, this has no effect on the amount of company tax. Once profit is generated, it is taxable. Not when you're taking it out. Even if you leave the money in the company, tax is still payable. The only way to reduce the tax is to reduce the profits.

There are only two ways to take money out, reduce the share capital, or pay dividend (reduce accumulated profits).

Whichever way you choose to take out your money (or even if you leave it in), it has no effect on the amount of tax you or your company have to pay.

It is inadvisable to reduce the company's paid up share capital from RM10k to RM2. There is no benefit in doing so. It looks much worse than reducing the company's accumulated profits from RM20k to RM15k. But if you are dead set on doing that (for whatever reason I cannot understand), you can just contact your company secretary. You have to leave RM2. The only way to take the last RM2 would be to wind up the company, and you said it is profitable.

Im just gonna park my butt here to learn a thing or two.

Certain business requires minimum paid up capital, you better check with your secretary

One more question here.

If the company profits already taxed and paid dividend to shareholder. The dividend need to pay 1 more time to personal income taX?

For example, profits after taxed is RM50k and there is 3 shareholder, each shareholder entitle to get RM10k dividend. Transfer the RM10k to my personal account. Question is RM10k is taxable for individual?

Tax thingy make me headache I'm new to this
Thank you.

This post has been edited by BlackPen: Dec 9 2015, 04:03 PM

The dividends that your company paid to the respective shareholders are now single-tier dividends which are not taxable in the hands of the shareholders. Therefore, in your example, the RM10k dividend entitlement to each shareholders will not be taxable at their personal income tax level. As informed by other bros in the previous posts, those dividends already being taxed at company's level (i.e. reduced your retained earnings).

Hope the above helps.

i like this thread haha

Nice thread!

Just in general but you don't need to have anyone you know personally become a Director in case you don't trust them. From what I've seen long-term staff of your Company Secretary can fill in as a sleeping Director. Sdn Bhd also has significant expenses though even for dormant companies. Expect to pay at least a few thousand per year for Income Tax Agent/Secretary/Audit fees even if you're not doing business. If you're not serious about running the business then Sdn. Bhd. is a bad choice because you have regulatory requirements under the Companies Act 2016 and the Income Tax Act 1967 which require filings every year and that costs certain roughly fixed amounts. If you fail to do so then you'll get fined by SSM and IRB for not-insignificant amounts. Most small-time Audit firms have a related Secretary firm which makes it easier for them to handle your affairs.