WEEK 1

BASIS PERIOD

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BASIS PERIOD
Basis period sets the time frame for the
ascertainment of income for each source.
Aggregate sources of income chargeable
income computation of income tax payable

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CURRENT YEAR BASIS
Basis period = the period relative to a year of
assessment.
Malaysia switched from the preceding-year basis to
the current-year basis in the calendar year 2000.
This was achieved by amending the provision in
section 20 by inserting the word 'coinciding', so the
section now reads as follows:
'For the purposes of this Act, the calendar
year coinciding with a YA shall constitute the basis
year for that YA.

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BASIS PERIOD
Before 1 January 2000 (for business income of
company) states that the calendar year
immediately preceding a year of assessment
would constitute the basis year for YA.
Basis period is year 1999
YA is year 2000
After 1 January 2000 states that calendar year
coinciding with the YA shall constitute the basis
year for YA.
Basis Period is year 2000
YA is year 2000

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Basis Period (s.21)
Section 21 applies to all persons other than a company,
LLP, trust body or co-operative society.
applicable to individuals and bodies of persons.
the period included in a year of assessment is always the
calendar year.
This rule prevails even if, for example, an individual
derives income from a business source.
Illustration 1
Mr Dee is employed as the accounts manager of a retail
outlet. In the evenings, he runs a business supplying
floral table arrangements to caterers and hotels.
Basis period for YA2014 = calendar year 2014 i.e. 1
January 2014 to 31 December 2014 for both his
employment income and his business income.
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Basis Period (s.21A)
for a company, LLP, trust body or a co-operative
society.

Generally, calendar year = basis period for a YA.

YA 2014 = 1 January 2014 to 31 December 2014.
This is the same rule as applies to individuals and
bodies of individuals.

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Basis Period (s.21A)
where a set of accounts have been made up for a
period of 12 months ending on a day other than 31
December, that period shall constitute the basis
period for the YA.
FY ending on 30 June each year = basis period of
the relevant YA.
E.g. basis period for YA 2014 = 1 July 2013 to 30
June 2014.

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Basis Period

With effect year 2004, the company may have an

option to close their financial accounts either on 31
Dec or non-31 Dec.

But for person (other than company, trusts, co-

operatives societies) can only close his accounts
to 31 Dec for his income sources.

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Commencement of Business
Commencement date & year end date are important
Why?
Any revenue expense incurred before the date of
commencement is not deductible
Capital allowance on qualifying capital expenditure
would be available beginning from first basis period
where commencement date falls
Results in the determination of first YA

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Commencement of Business
The determination of the date of commencement of the business
activity involves a question of fact: generally, it refers to the date
when the core or integral activity of the business commences.
E.g. manufacturing business - when its plant and machinery are in
place and the inventory (stock) has arrived i.e when the
manufacturing process is able to proceed.
E.g. retail business - when business is first open to members of the
public with its offering of goods, regardless of whether the first sale
is actually made on this date.
E.g. hotel business - when it is able to offer food, beverage and
accommodation services/facilities to members of the public.
Apart from a business activity, the definition of 'operations' also
includes the making of investments i.e. the purchase of stocks and
shares, the deposit of monies in the bank to earn interest, the
making of any loans for interest, and the acquisition of any
investment properties.
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Commencement of Business (S.21A(4))
When an entity makes up its first set of accounts to any date falling in
the 1st, 2nd or 3rd year YA after the date of commencement of
operations, the period covered by the accounts (from the date of
commencement) is accepted as the basis period for the first applicable
YA.
The YAs before that YA will therefore be deemed to have no basis
periods.
Illustration 2
Ace Sdn Bhd was incorporated on 1 November 2014 and commenced
operations on 1 December 2014.
It is contemplating closing its 1st set of accounts to one of the following
alternative dates:
(i) 31 December 2014 (2 months), thereafter to 31 December
annually
(ii) 31 March 2015 (5 months), thereafter to 31 March annually
(iii) 30 November 2015 (13 months), thereafter to 30
November annually, or
(iv) 31 March 2016 (17 months), thereafter to 31 March 11 annually.
Commencement of Business (S.21A(4))

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Commencement of Business (S.21A(4))
In alternative (iv), where Ace Sdn Bhd makes up its first
set of accounts to 31 March 2016, the basis period for
YA 2016 will be 1 December 2014 (date of
commencement of business) to 31 March 2016 a
period of 16 months. There will be no basis periods for
the YAs 2014 and 2015.
In practice, a companys first set of accounts
is unlikely to exceed 16 or 17 months.
This is because the Companies Act stipulates that a
company must hold the first annual general meeting
(AGM) within 18 months of its date of incorporation.
Needs time to close, audit and present the final
accounts before AGM.
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Implications: Tax estimates
Furnishing of the first estimate of tax
If Ace Sdn Bhd has a paid up ordinary share capital >
RM2.5m, it will have to furnish its first estimate of tax within 3
months of the commencement of its operations ie by 31 Jan
2015.
This compliance requirement is relevant to alternatives (iii)
and (iv) because the first basis period is > 6 months
[s107C(4)].
[Note: Where a company with a paid up ordinary share capital
exceeding RM2.5m commences business operations in a YA
where the basis period for that YA is < 6 months, the company
is exempt from the requirement to furnish an estimate of tax
payable for that particular YA].

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Implications: Tax estimates
If Ace Sdn Bhd has a paid up ordinary share capital of
< RM2.5m at the commencement of its operations it
is a small-and-medium enterprise (SME)
As a SME, a moratorium will apply such that Ace Sdn
Bhd, being a company incorporated and resident in
Malaysia
will not be required to furnish an estimate of tax for
that YA and the immediately following YA.
This is the case in alternative (i) i.e. Ace Sdn Bhd
will not be required to furnish estimates of tax for YA
2014 and YA 2015.

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Implications: Tax estimates
Where a SME company has no basis period for the YA
in which it commences its operations, it will not be
required to furnish estimates of tax for the 2
immediately following YAs [s107C(4A)(a)].
This is the case in alternatives (ii) and (iii), where Ace
Sdn Bhd has no basis period for YA 2014 (the YA it
commences operations), it will not be required to furnish
estimates of tax for YA 2014, and the two immediately
following YAs of YA 2015 and YA 2016.

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Implications: Tax estimates
Where a SME company has no basis period in the YA
it commences and no basis period for the
immediately following YA, it will not be required to
furnish estimates of tax for the YA in which it
commenced operations and the two immediately
following YAs [s107C(4A)(c)].
Hence, in alternative (iv), where Ace Sdn Bhd has no
basis period for the YA in which it commenced and also
has no basis period for the immediately following YA, it
will similarly not be required to furnish estimate of tax for
YA 2014 and the 2 immediately following YAs of YA 2015
and YA2016.

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Company With Existing Operations
Commencing New Operations
Where a company which is already carrying on one or more
operations commences a new operation, the basis period for
the new operations is the same as the basis period of the
existing operation.
E.g. A company has been in operation for several years and
makes up its accounts ending on 30 September each year.
The company starts a new operation on 1.6.2014.
The basis period for the new operations is the same as the
accounting period of the existing operation i.e. year ending
30 September.
The basis period for the new operation for YA2014 is
therefore 1.6.2014 to 30.9.2014.

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COMMENCEMENT OF OPERATIONS OF A
COMPANY IN A GROUP, ETC [S21A(5)]
Where a company commences operations and is required under any
law to make up its accounts to a specified date, or being a member of
a group of companies, makes up its accounts to a date to be
coterminous (same accounting year end) with the rest of the group:
the period covered by the accounts i.e. from the date of
commencement of operations to the end of the accounting period, shall
constitute the basis period of the first YA.
Illustration 3
Alpha Sdn Bhd is a new company incorporated on 1 August 2014.
It is a member of the Beta group of companies which all make up their
accounts to 31 December annually.
Alpha Sdn Bhd commenced operations on 1 October 2014 and makes
up its first set of accounts to 31 December 2015 to be coterminous with
the group.
Thereafter, Alpha closes its accounts annually to 31 December, in line
with the group.
Alphas first YA is YA 2015 with the basis period covering 1 October
2014 to 31 December 2015. 19
CHANGE OF ACCOUNTING DATE [S21A(3)]
Where an existing company, LLP, trust body or co-operative society
has made up its accounts for a period of 12 months ending on a
day in the basis year, and then it fails to make up its subsequent
accounts to the corresponding day in the following year, there is
said to be a change of the accounting date.
Commencing from YA 2014, an entity which is in operations fails to
close its accounts on the same date in the following year (failure
year), the DGIR will determine the basis periods for the failure year
and the year following the failure year.
The accounting period made up by the taxpayer in the failure year
would generally be accepted by the DGIR provided that -
(a) there is no missing year of assessment;
(b) there shall not be two or more accounts closed in the same
year of assessment.
The provision applies to all cases irrespective of whether the accounts
before failure year are closed on 31 December or on a date other
than 31 December.
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CHANGE OF ACCOUNTING DATE [S21A(3)]
Illustration 4
XYZ Sdn Bhd made up its accounts annually to 31 March.
In 2015, it decided to change its accounting date to 30
September.
The terms used and their respective periods are:
1. the last normal accounts 1 April 2013 to 31 March 2014
2. the last normal YA YA 2014
3. first set of new accounts 1 April 2014 to 30 September
2015
4. failure year YA 2015 (the year in which the company
fails to make up its accounts to the normal accounting
date of 31 March)
5. following year 2016
6. the third year 2017
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Change of Accounting Date
Changing Accounting Period For Less Than 12 Months And Ending In
The Same Year
Bumi Senang Sdn. Bhd. normally closes its accounts on 28 February every
year and changes the accounting period to 31 December (less than 12
months) in the same year.
The failure year is
2014. The DGIR will
determine the basis
periods for the YA2014
and 2015.
The accounts for the entire period from
1.3.2014 to 31.12.2014 and 1.1.2015 to
31.12.2015 will be combined and taken as the
basis period for YA2015.

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Change of Accounting Date
Changing Accounting Period For Less Than 12 Months And Ending In
The Following Year
PLT normally closes its accounts on 31 December each year and changes the
accounting period to 30 April (less than 12 months) in the following year.

The failure year is 2014.

The DGIR will determine
the basis periods for YA
2014 and 2015.
Although the accounting
period for the failure
year <12 months, that
period would be
accepted as the basis
period for YA2014 as
the accounts in the
failure year are closed in
2014.
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Change of Accounting Date
Changing Accounting Period For More Than 12 Months And Ending In
The Following Year
Aizah Wahab Sdn. Bhd. normally closes its accounts on 31 July each year and
changes the accounting period to 31 October (more than 12 months) in
the following year.

The failure year is 2014.

The DGIR will determine
the basis periods for
YA2014 and 2015.
Although the accounting
period for the failure
year > 12 months, that
period would be
accepted as the basis
period for YA2014.

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Change of Accounting Date
Changing Accounting Period For More Than 12 Months And Ending In
The Third Year
Koperasi Rania Emas normally closes its accounts on 31 December each year
and changes the accounting period to 31 January (more than 12 months)
in the third year.

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Change of Accounting Date
Changing Accounting Period For More Than 12 Months And Ending In
The Third Year
Koperasi Rania Emas normally closes its accounts on 31 December each year
and changes the accounting period to 31 January (more than 12 months)
in the third year.

The accounts are prepared beyond one year of assessment, YA2014.

Therefore the DGIR will determine the basis periods for YA2014 and
2015.
The accounting period 1.1.2014 to 31.1.2015 involved 2 years of
assessment.
The basis periods for the years of assessment 2014 and 2015 are
determined by dividing that accounting period into 2 periods, 7 months for
YA2014 and 6 months for YA2015.
When there is an uneven division of the basis periods for the two years of
assessment, any fraction of a month should be treated as falling in the
first basis period.

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 Exercise 1
State the date of commencement of business for the
following:
PVC Sdn. Bhd. was incorporated to carry on a retail
business. The following activities took place:
1/1/2015 Took delivery of rented premises
15/1/2015 Staff reported for work
1/2/2015 Retail stocks arrived & were arranged on
shelves
3/2/2015 Retail shop open to public
15/2/2015 First customers made purchases
1/3/2015 Official opening by Deputy Minister
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Answer
3/2/2015 when shop was open to public &
offered goods for sale.
When sales made not relevant.
Opening by Minister ceremonial only.

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 Exercise 2
State the date of commencement of business for the
following:
Manufacturing company for production of electronic
goods. The following activities took place:
1/3/2015 Purchased factory building
1/5/2015 Reconstructed of factory building
completed
1/6/2015 Plant and machinery installed
15/6/2015 Raw materials received
18/6/2015 Production of electronic goods commenced
1/9/2015 First batch of goods sold
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Answer
18/6/2015 when production commenced.
- When everything was in place, and production
could (and did) commence.

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 Exercise 3
Mee SB normally makes up its accounts to 30 June. On 1
Nov 2013, it became a wholly-owned subsidiary of Kwai SB
which has its financial YE on 30/9. Mee changed its
financial YE to 30/9 to conform to statutory requirements.
The accounts were prepared for the following periods:
1/7/2012 30/6/2013
1/7/2013 30/9/2014
1/10/2014 30/9/2015

State the basis periods for Mee SB for the YAs 2013-2015.

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 Answer
RULE:
The accounting period made up by the taxpayer in the
failure year would generally be accepted by the
DGIR provided that -
(a) there is no missing year of assessment;
(b) there shall not be two or more accounts closed in the
same year of assessment.

1/7/2012 30/6/2013 YA2013

Failure year 1/7/2013 30/9/2014 YA2014
1/10/2014 30/9/2015 YA2015

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 Exercise 4
Dee SB normally makes up its accounts to 31 August. It
changed its financial YE to 31 May for convenience. The
accounts were prepared for the following periods:
YE 31/8/2013
1/9/2013 31/5/2014
YE 31/5/2015

State the basis periods for Dee SB for the YAs 2013-2015.

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 Answer
RULE:
The accounting period made up by the taxpayer in the
failure year would generally be accepted by the
DGIR provided that -
(a) there is no missing year of assessment;
(b) there shall not be two or more accounts closed in the
same year of assessment.

YE 31/8/2013 YA2013
Failure year 1/9/2013 31/5/2014 YA2014
YE 31/5/2015 YA2015

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 Exercise 5
Unggul SBs accounts are prepared to 31 October each
year. However it has decided to change its accounting year
end to 31 January. Due to this change, the accounts are
prepared for a period of 15 months from 1/11/2013
31/1/2015, and thereafter to 31 Jan for each subsequent
year. State the basis periods for Unggul SB.

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 Answer
YE 31/10/2013
15 months 1/11/2013 31/1/2015 Needs to be divided
into 2 periods:
8 months & 7 months
YE 31/1/2016

YE 31/10/2013 YA2013
1/11/2013 30/6/2014 8 YA2014
mths
1/7/2014 31/1/2015 7 YA2015
mths
YE 31/1/2016 YA2016
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 Exercise 6
Woon SB had been preparing its accounts to 31 Dec each year. It
decided to change its accounting year end to 30 June as follows:
Adjusted income/(loss)
YE 31/12/2013 (5,000)
6 months ended 30/6/2014 8,000
YE 30/6/2015 10,800
On 1 October 2015, the company was acquired by Hill SB. In line with
its new holding companys financial YE of 30 April, Woon
closed/will close its accounts as follows:
Adjusted income/(loss)
1/7/2015 30/4/2016 (1,000)
YE 30/4/2017 13,200
Determine the basis periods/YAs & adjusted income/loss.

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 Answer
YA Adjusted income/
(loss)
YE 31/12/2013 2013 (5,000)
1/1/2014 - 30/6/2014 2014 8,000
1/7/2014 - 30/6/2015 2015 10,800
1/7/2015 30/4/2016 2016 (1,000)
1/5/2016 30/4/2017 2017 13,200

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THANK YOU
Q&A

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