Hi everyone, i would like to enquire matters relating to the corporate tax computation. i have some questions as per below:

Profit after tax xxx
(less) Non-business income (xxx) <---- the result will give you profit generated from business income
add Non-allowance expenses xxx <---- This is deducted because there are some profits that are non-deductible being deducted at the profit after tax level.
(less) Special deduction (xxx) <----[[/I]U]i dont quite understand this (why do we need to deduct since all expenses has been deducted at the profit after tax level.[/U]
(less) Double deduction (xxx) <--- i dont understand this as well.
[I]
= Adjusted income xxx


Can someone explain this to me? i would like to learn this tax computation well. However, i dont quite understand.

Or is there any sites/ platform available for me to understand better?

THank you !!!!!!!

special and double deduction works as tax incentives to your company. IE: government providing 200% allowance for expenses spent on staff welfare (this is just an ex).
thus, this will essentially reduce your overall taxable income, ie less taxes to be paid.

for illustrations or details on all the tax incentives, can visit lhdn website for the list. for accounting treatments, can study up ias 12.

I am still somewhat confused with the corporate tax computation =S
Anyhow thanks a lot

Thought i should give some insights. I hope it helps.

This post has been edited by paraben: Mar 19 2019, 09:13 PM

Trying not to be technical but hopefully I may answer a few of your doubts.

If of interest, you may want to read up the Malaysian Income Tax Act @ MITA or various public rulings (you may view it as tax guides) published by the LHDN.

Refer below for some comments on your initial post:-

a. Profit before tax - The tax computation for most business should start off with profit before tax (which may or may not required to be audited depending on your circumstances), unless we are talking about specialised industries such as life insurance, banking etc.

Does it make sense to you if we would to use profit after tax (PAT)? Since the tax expense booked would have taken corporate tax (sort of like double counting / the tax expense might be a provisional amount too?) & withholding taxes (might not be applicable to most cases unless have foreign income subjected to tax at the source country) into account.

b. Non-business income - Malaysian Income Tax Act (MITA) taxes income based on "classes of income", i.e. different sources (rental, business, dividends etc.) under different section of the Act.

Non-business income will still be taxed albeit at the lower section / towards the bottom of the tax computation (i.e. for the presentation of different income source) after adjusted income from the said business source.

c) Non-deductible expenses - Essentially these are expenses that are not incurred for the production of income or specifically disallowed under the MITA - i.e. "incurred test" has to be satisfied. e.g.of non-deductible expenses includes entertainment expenses (might be 100%, 50% or non-deductible depending who's being entertained), accounting depreciation (instead tax depreciation aka capital allowance would be allowed for deduction), personal expenses (100% non-deductible), provisions (i.e. no constructive obligation by the company to incur the expense) booked in company's account etc.

d) Special deduction - As mentioned by forummer above, these might be incentives (not to be mistaken with tax incentives in the form of tax holiday) given by the gov for certain governmental initiatives / special deduction for expenses otherwise non-deductible due to the "incurred test" (i.e. audit fees, secreterial fees, tax compliance fees etc)

e) Double deduction - These might be incentives given by the gov for certain governmental initiatives.

Simple illustration, apologies for the spacing & tabbing
PBT per P&L RM100
(-) Non-taxable income (might be taxed after business adjusted income / or not at all if say capital in nature) -RM10 from dividend income recognised in company's P&L
(+) Non-allowable expenses (to increase the taxable income as these expenses are non-allowable expenses for tax purpose) -RM25 from RM10 accounting depreciation, RM10 personal expenses and RM5 audit expenses recognised as company's expenses in the P&L
(-) Special deduction -RM5 (note that audit expenses is not incurred for the production of income, but it is specifically allowed, for presentation purpose to be shown under special deduction)
(-) Double deduction -RM0
Adjusted income (from business source) RM115 (RM90-RM10+RM25-RM5-RM0)

(+) Balancing charge / Balancing allowance (tax gain or loss on disposal)
(-) Capital allowance -RM12 (tax depreciation)

Statutory income (from business source) RM103 (RM115 above - RM12)

Income from non business source
(+)Dividend income RM10

Aggregate income RM113 (RM103+RM10)

(-)Business losses (if any from prior years, max capped at aggregate income, cannot be lower) RM0
(-)Approved donation (with suppporting) RM2

Chargeable income RM111 (RM113 - RM2)

Corporate tax at: Chargeable income * prevailing corporate tax rate (Different for SME and non-SME you may read that up as well)

(-)Tax credits to offset corporate tax (might not be applicable to all, such as foreign tax credits, R&D credits etc.)

Tax payable for the year = Corporate tax calculated less tax credits

This post has been edited by CrayonsEater: Mar 20 2019, 10:06 PM

Hi crayonseater, thank you for your in dept explanation. I really appreciate your effort and time.

I am still confused with the example you provided above. Why do we still need to add up the dividend income of RM10 to derive the aggregate income of RM113. I thought dividend is tax exempted ? Thanks !!

Argh my bad, yes you are right. A better example in my illustration above would be rental or dividend income. Single tier dividend income would be exempted from corporate tax.

Very informative and constructive.

Thank you brotha!