Thursday, 18 February 2021

Malaysia's DTA with Cambodia now in effect

The provisions of the Double Taxation Agreement (DTA) between Cambodia and Malaysia are effective in Malaysia from 1 January 2021. The DTA was gazetted on 30 December 2019 and entered into force on 28 December 2020.

(Note: For the text of the treaty or further information about our Tax Subscriptions, contact us at (Malaysia)).

Wednesday, 20 January 2021

PERMAI Assistance Package

The Prime Minister of Malaysia announced the Perlindungan Ekonomi Dan Rakyat Malaysia (PERMAI) Assistance Package valued at RM15 billion on 18 January 2021. The package aims to:-

  • Combat the Covid-19 Outbreak
  • Safeguard the welfare of the people
  • Support the business continuity 

The following measures were announced by the Prime Minister:

  • Personal tax relief for private COVID-19 screening 
  • Tax deductions for contributions made towards curbing the spread of the COVID-19 pandemic
  • Extension of special personal income tax relief on the purchase of personal computer, smartphone or tablet
  • Extension of sales tax exemption on passenger vehicles 
  • Wage subsidy program 3.0
  • Shorter ownership period to qualify for excise duty and sales tax exemption for taxi owners 
  • Special deduction on rental discount extended given to non-SMES

(Note: For further information about our Tax Subscriptions, contact us at (Malaysia).

Tuesday, 22 December 2020

Malaysia's Indirect Tax - What's new

The following bills have been passed in Parliament: 

  • Tourism Tax (Amendment) Bill
  • Service Tax (Amendment) Bill
  • Sales Tax (Amendment) Bill
  • Customs (Amendment) Bill
  • Free Zones (Amendment) Bill
  • Excise (Amendment) Bill

The Tourism Tax (Amendment) Bill  seeks to make the following changes:
  • Tourism tax will be levied on accommodation premises made available through online booking.
  • The tourism tax shall be collected from a tourist by the digital platform service provider who made the accommodation premises available through online booking, and pay this tax to the Director-General.

The Service Tax (Amendment) Bill seeks to clarify:
  • That any registered person who ceases to carry on the business of providing any taxable service should notify the Director-General in writing within 30 days from the date of cessation. 
  • The Director-General will refund any balance in the amount of the refund after a registered person has made a deduction.

The Sales Tax (Amendment) Bill seeks to: 
  • Empower the Director-General to direct any registered manufacturer to deduct the amount of refund from the amount of sales tax to be paid from the return. 
  • Empower the Director-General to withhold any amount of refund to be credited to any following or subsequent taxable period.
  • Empower a proper officer of sales tax to seal goods that cannot be removed due to their nature, size or quantity.
  • Provides creditability of an agent provocateur's evidence. 

These bills: Customs (Amendment) Bill, Free Zones (Amendment) Bill and Excise (Amendment) Bill
  • Empowers a senior officer of  customs in relation to enforcement, investigation and inspection.
  • States that the evidence of an agent provocateur is admissible.
  • States that under the Customs and Excise (Amendment) Bill, the Director-General may authorise nine-tenths of the paid duties to be repaid as a tax return if the goods are re-exported after the duty has been paid.

(Note: For further information about our Sales and Service Tax (SST) subscription, contact us at (Malaysia).

Wednesday, 16 December 2020

Wolters Kluwer Tax and Accounting Asia Pacific Customer Welcome Announcement


KAP Hananta Budianto & Rekan transforms the audit experience for its clients with CCH® ProSystem fx® Engagement

One of Indonesia’s leading public accounting firms, KAP Hananta Budianto & Rekan, has completed its implementation of the award-winning CCH® ProSystem fx® Engagement solution for its busy audit practice. The implementation will see the firm achieve a 100% digital workflow for its audit team, increasing the efficiency, security, and accuracy of its client work.

CCH® ProSystem fx® Engagement delivers a full toolset for workpaper management; trial balance; audit preparation and execution; content and research; data analysis; and fraud protection.

For KAP Hananta Budianto & Rekan, implementing CCH® ProSystem fx® Engagement was key to ensuring its workplace was more efficient and effective. The eight-person audit team wanted to improve its audit workflow and benchmark the quality standards for its audit workpapers and documentation. With CCH® ProSystem fx® Engagement, the audit file would be more secure, with reviewers having confidence that changes made to a file would be automatically reflected in the audit work papers.

“We chose CCH® ProSystem fx® Engagement based on the industry-leading reputation of Wolters Kluwer and positive recommendations from our industry colleagues. The team had heard a lot about it being a user-friendly interface. And, we see this as a strength because previously 60% of our files were paper-based. Now we have moved to 100% digital files and removed paper from our audit workflow entirely,” said Mr Revano Hananta, Partner, KAP Hananta Budianto & Rekan.

Implementing CCH® ProSystem fx® Engagement during the remote work requirements resulting from the COVID-19 pandemic has also paid off for the firm. The audit team now can work from anywhere with secure access to digital files, helping them deliver their audit tasks effectively and efficiently. This meets ongoing COVID-19 working requirements should the firm face any future lockdowns and gives the staff more flexibility to work from home or remotely when required.

CCH® ProSystem fx® Engagement has increased the firm’s efficiency and effectiveness, particularly in terms of workflow. The firm expects to generate further efficiencies across project tracking, reporting, review, sign off, and archiving as the audit team onboards and completes each client audit. Hananta acknowledges they are aiming to free up additional storage space for files and potentially re-deploy it for new staff.

“By freeing up the firm’s auditors with our new sophisticated audit service, we are forecasting accelerated completion rates. What this means is we can move our focus away from administration and instead focus on solving our client’s business challenges. Our firm has built an excellent reputation by offering our clients personalised services that go beyond traditional accounting practices – this includes audit. This is the type of support they want from us, and it creates a value-added revenue stream for the practice," continued Hananta.

 KAP Hananta Budianto & Rekan is confident that CCH® ProSystem fx® Engagement will continue to support the professional standards for the firm and help foster growth. Improving the firm’s audit workflow and developing better quality control over audit workpapers and documentation is vital for greater productivity.

 All KAP Hananta Budianto & Rekan clients will have their workpapers and financial statements incorporated into the CCH® ProSystem fx® Engagement system. Replacing paper means these electronic binders will automatically link to client engagement and trial balance data and connect scanned documents to the correct engagement binder. When an audit review is closed, it will be secured with safe custody for working papers.

Hananta shared "Due to the COVID-19 pandemic, the team were all trained on CCH® ProSystem fx® Engagement via web training and there were no issues at all. It was easy for the team to adapt to a 100% digital system because of the excellent customer service and support from the Wolters Kluwer team.”

Monday, 14 December 2020

Build firm resilience with predictive intelligence


If 2020 has taught us anything, it’s that the future is full of unexpected surprises. But what if you could predict the future? Although there are still many unknowns, predictive intelligence can help you build resilience by proactively identifying how tax legislation or regulatory changes could affect your clients. Advanced technologies, like CCH iQ Client Match can help firms provide enhanced client service and deliver business insights that help streamline tax season and discover additional revenue streams.

Provide year-round superior client service

If you want clients to view you as advisors rather than just accountants, you need to anticipate their needs before they even ask you for help. Because if you don’t, you could lose their business. Up to 72% of small businesses have changed accounting firms because the firm wasn’t proactive about addressing tax law changes. With predictive intelligence, your firm can offer updates all year long on how regulatory changes might affect them, so clients can take action today.

Create an efficient tax season

With growing financial advisory services, your firm is keeping in touch with clients all year long, delivering important business insights proactively. But did you know that predictive intelligence also can save critical time during your busy season? With CCH iQ Client Match your firm can streamline the tax prep and review process by identifying which legislative changes could affect each client. This gives you a heads up for areas of the tax return that may require a bit of extra attention.

Discover new revenue sources

You can use the power of predictive intelligence to flip your firm’s mix of business from primarily commoditised compliance services to a higher percentage of lucrative advisory services. Position your firm as a trusted partner and open up additional revenue streams.


Wednesday, 2 December 2020

Upskilling your practice for the new normal in accountancy

Firms already on the path to digitalisation will have seen this period of prolonged remote working, and online collaboration, as justification for their continued investment in technology. For those pioneering firms that see technology as an enabler for the growth of their practice, it is very much a key factor in their ability to not only survive, but to thrive in a post-COVID world.

With so much reliance on technology, where does that leave the humble accountant? What now for your team of technical experts who have perhaps delivered services in the same way for many years? Whilst automation is expected to change 50% of accountancy and finance related jobs, the World Economic Forum estimates that it is not expected to eliminate any more than 5% of roles.

Accountants, as any tax professional will attest, are incredibly resilient and adaptive to change. They are poised for growth if they can take the opportunities that will present themselves over the coming years. One way to prepare for this opportunity is to build a practice ripe for technology to work with skilled professionals in your practice.

Upskilling your practice to work hand in hand with the technology to provide an efficient practice that keeps up with the remote working regulations changes, changing client expectations. Beyond building a competitive customer experience, you will need to build a practice that keeps up with the changing expectations of individuals in the workplace, shifting social norms and values, and new types and levels of connectivity and demographics.

Learning from past economic downturns

In the early 1990s many practices understandably put recruitment on hold throughout the recession, with many cancelling graduate recruitment programs. A necessary move for cashflow perhaps, but within a few years this created a sizeable skills gap. There was a distinct shortage of part-qualified and semi-senior candidates coming through the ranks and it is very expensive to have fully qualified staff doing the work of part-qualifieds and semi-seniors.

Firms with a little more agility were able to cherry pick the best candidates during the recession and were primed for growth in the period of economic recovery. The same pattern today. The firms that are able to adapt quickly and repurpose their business for the changing times are able to keep their existing talent and attract the best of the rest.


Learning to work with automation

The synergy of accountant and machine can open doors to higher-value work, making practices more efficient, more productive, more interesting, and ultimately more meaningful. Automating routine tasks frees up time for your team to do more of what your client’s value most – providing insight and supporting their business ambitions.

Having the desire to work digitally creates momentum. Prioritise data analysis over data entry and valuable conversations with your clients will follow. Even with automation, the business of accountancy is still all about relationships.


Recruiting for change

Change inevitably impacts greatest on your people. Ensuring they have the skills to operate effectively in a new and uncertain landscape is always difficult. The soft skills of yesterday will become the essential skills of tomorrow. Until now you may have been recruiting people with great inter-personal skills, who quickly make people feel at ease in their company, who make great use of body language and can build rapport effortlessly. Are those people able to manage relationships as effectively over a video call as they are in person? If they aren’t, they will certainly need to.

Recruiting people who have a clear aptitude for change, a passion for new technology and the people skills needed to build strong connections with clients will be paramount. In addition to the expertise needed, these tech-loving accountants with the know-how in the profession and a passion for new ideas and innovative tech solutions will be keen drivers in the synergy between man and machine and the growth of advisory services in the business.

Technical proficiency has limited value for those unable to communicate effectively in a language client will understand.


Bring in the new or upskill the old

It’s important to understand the skill set that you've got within your practice today. Have you got the right people with the skills to offer advisory services, work remotely with your clients and meet their ever-changing needs?

If not, is there the potential to upskill your existing team or do you need to bring in new talent? Have you got a team of technologists? This could be an opportunity to recruit people with those skills to enrich your offering to clients.

Investing in people, technology and relationships is ultimately not just a strategy for making it out of an economic downturn but a strategy for riding the economic upturn that inevitably follows.


Tuesday, 10 November 2020

India: Direct Tax Alert: Ad-hoc Year-end Provisions Attracts Tax Withholding

 Reproduced with permission from BDO India LLP.


As per general accounting principles, under mercantile system of accounting, provisions need to be created in respect of expenses which have been accrued in order to have a true and fair picture of the financials. Hence, all businesses which follow the mercantile system of accounting are required to create year-end provisions for the expenses incurred in respect of services availed till 31 March of a financial year. More often than not, provision for expenses is reversed in subsequent month(s) when the actual invoice is received. This has led to a vexed issue – whether tax is required to be withheld on such year-end provisions or not. Even the judiciary is divided on this front.

Recently the Mumbai Tax Tribunal1 had an occasion to consider, apart from other issues, whether the disallowance under section 40(a)(ia) of the Income-Tax Act, 1961 (IT Act) is attracted on ad-hoc year-end provision for expenses. We, at BDO in India, have summarised the ruling of Mumbai Tribunal and provided our comments on the impact of this decision.

Facts of the case

Taxpayer, a public limited company, is engaged in the business of Direct to Home Services (DTH). It provides DTH services through Set Top Box installed at the subscriber's premises. For the fiscal year 2008-09, the taxpayer created an ad-hoc year-end provision of expenses aggregating to INR 56.92mn which included expenses such as sales promotion, legal and professional, interest and programming costs. The taxpayer did not withhold tax at source (TDS) in the absence of the receipt of invoices from the service providers. As the taxpayer had not withheld tax, the tax officer disallowed these ad-hoc provisions under section 40(a)(ia) of the IT Act and thereby added it to the taxpayer's income. Aggrieved, the taxpayer filed an appeal before the First Appellate Authority which upheld the additions made by the tax officer.

Tribunal ruling

Before the Tax Tribunal, the taxpayer relied on various judicial precedents2 to contend that it is not under an obligation to withhold tax on the ad-hoc year-end provisions. Hence, the same should not be disallowed under section 40(a)(ia) of the IT Act. The taxpayer also submitted that in the subsequent year, the year-end provisions were either reversed or paid after TDS. Revenue Authorities submitted that as per the provisions of Chapter XVII-B of the IT Act, TDS is required to be done either at the time of payment or at the time of credit (including even a credit in the suspense account) whichever is earlier. Therefore, there is no merit in the taxpayer's contention that TDS is not applicable on an ad-hoc year end provision for expenses.

After hearing the contentions of the taxpayer and the Revenue Authorities, Mumbai Tax Tribunal held that TDS is attracted on the year-end provision. For coming to this conclusion, it observed that:

  • The year-end provisions were debited in the profit and loss account and not added back to the computation of total income.
  • Once, the taxpayer has claimed these expenses by debiting in profit and loss account, it needs to withhold tax on such expenditure, even if not credited to respective vendor account.
  • Since, the taxpayer has not withheld tax, the provisioned expenses claimed as deduction are liable to be disallowed under section 40(a)(ia) of the IT Act.
  • Also, the taxpayers contention that in the subsequent year the provision has either been reversed or paid subject to TDS does not alter the legal position in so far as disallowance of expenses under section 40(a)(ia) of the IT Act is concerned.
  • With respect to judicial precedents relied by the taxpayer, all the cases are contrary to the provisions of Chapter XVII-B read with section 40(a)(ia) of the IT Act and hence are not followed.

BDO comments

This decision has only increased the complexity revolving around applicability of tax withholding provisions to ad-hoc year-end provisions. It is imperative to observe that Hon'ble Mumbai Tax Tribunal has simply brushed aside its earlier decision in case of Mahindra and Mahindra by stating that the decision is contrary to the provisions of Chapter XVII-B read with section 40(a)(ia) of the IT Act. It is pertinent to observe that in the case of Mahindra and Mahindra, Hon'ble Mumbai Tax Tribunal had held that if the party(ies) is not identified/identifiable, the tax withholding provisions are not attracted. While the instant decision has not given detailed reasoning, the Revenue Authorities could take support of this decision to make disallowance under section 40(a)(ia) of the IT Act. 

Further, the Revenue authorities could also treat the taxpayer as assessee-in-default for the purpose of section 201 and thereby initiate TDS proceedings against the taxpayer. Also, sight should not be lost to the recent decision of Delhi Tax Tribunal in case of Inter Globe Aviation Ltd3 wherein it held that "The amount of expenditure incurred can be determined only if, there is a recipient identified of the sum, there is a methodology available for working out the amount payable by the assessee to the recipient, there is a corresponding liability arising out of the existing contract or customs by the assessee with the recipient. If generally these ingredients are not satisfied assessee cannot be said to have incurred the expenditure. In absence of one of one of these criteria, if provision is made, it is not an ascertained liability but an unascertained liability, which does not satisfy the concept of accrual of expenditure. There may be reasons for receiving the bills by the service providers after certain time lag but that does not absolve the assessee from the liability of deduction of tax at source.

 In the present case the provision is made under the specified head, provision is also made to on certain basis thereby ascertaining the amount. It is not the case of the assessee that it has made an ad hoc provision. Thus, it cannot be said that the payee is not identified. Therefore, according to us, the tax is required to be deducted on the year-end provisions made by the assessee which are ascertained liabilities"

While the Delhi Tribunal has not relied on Mahindra and Mahindra4 decision, it has made an important observation that in its peculiar facts that the year-end provision for expenses were liable for withholding tax as these were ascertained liabilities and ad-hoc in nature.

From the said decisions, one may sum up that tax is required to be withheld on behalf of an identified payee. If the fact pattern suggests that while the liability has accrued but there is no precision as to the identity of the person to whom payment is to be made, the tax withholding requirement may not be capable of being implemented.

Malaysia's DTA with Cambodia now in effect

The provisions of the Double Taxation Agreement (DTA) between Cambodia and Malaysia are effective in Malaysia from 1 January 2021. The DTA w...