BASIS PERIOD COMPANY

Section 21 A, Income Tax Act, 1967

Basis Period For All Sources of Income For Companies

Subject to and in accordance with this Act, a tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia
(w.e f Y/A 2004, for resident individuals and Hindu Joint Family were exempted from income received in Malaysia from outside Malaysia) Sch 6 Para 28(1) and Company Para 28(2).

Therefore, YEAR OF ASSESSMENT IS RELATED TO BASIS YEAR AND BASIS PERIOD

Basis Period S 20, ITA 1967

BEFORE 01/01/2000 For the purpose of this Act, the calendar year immediately preceding a year of assessment shall constitute the basis year for that year of assessment ON & AFTER 01/01/2000

For the purpose of this Act, the calendar year coinciding with a year of assessment shall constitute the basis year for that year of assessment

Example : Before 01/01/2000

Basis Year / Calendar Year Y/E 31/12/1997

Example : On & After 01/01/2000

Y/A 1998

Basis Year / Calendar Year

Y/A

Y/E 31/12/2000

2000

SAS

Therefore, w.e.f 1 Januari 2000 basis year and year of assessment will follow the same calendar year
Example : Calendar Year Y/E 31.12.00 Basis Year Y/E 31.12.00 Year of Assessment 2000

SAS

Taxation Concept
BASIS PERIOD ~ Is a period in which year of assessment, the income obtained should be assessed.

BASIS PERIOD S21, ITA 1967

Explained the basis year for a year of assessment of a person (other than a company, trust body of cooperative society) shall constitute the basis period for that year of assessment.

Self Assessment System (SAS) has been started since 2001 for Companies Therefore, S21A has been introduced to determine the companys basis period. As such, the basis of assessment for any year of assessment from all income for companies are based on basis period. Hence, Public Ruling No. 7/2001 has been issued.

Basis Period Generally

Year of Year of Assessment Assessment 2001 2002 y/e for 2001 y/e for 2002 Year of Assessment 2003 After the last day of the basis period y/a 2003 to 31.12.03 Year of Assessment 2004 and subsequent Calendar Year / Basis Year ended 31 December

Category Individual S21

Company S21A

y/e of the particular year

The provision of this Section is that the Basis Year is the Basis Period of that year of assessment for a Company

Example: Basis Year y/e 31.12.00 y/e 31.12.01 y/e 31.12.02

Basis Period 01.01.00-31.12.00 01.01.01-31.12.01 01.01.02-31.12.02

Year of Assessment 2000 2001 2002

Introduction to SAS

Sectionn 21A(2)
The provision of this Section is that the Accounting Period is being used as a Basis period for a Year of Assessment for the accounting period OTHER THAN 31 December. The Accounts has been prepared for 12 months.
Example: Accounting Period 01.07.00 - 30.06.01 01.04.01 31.03.02

Basis Period Year of Assessment 01.07.00 - 30.06.01 2001 01.04.01 - 31.03.02 2002

Basis Period for Company (SAS) ~ Section 21A~

The introduction of the term operations for business activity and non-business activity for Company under Section 21A According to S21A(8) ~ Operations includes activities that comprised of : Carrying on of a business
Make Investment Carrying of both activities and make investment, or Make investment before commence business activities or

after ceased business activities

Example: The Company closed its accounts on 31 August

Year of Assessment 2000

Sources of Income Section 4(a) Business Section 4(c) Dividend Section 4(c) Interest
Year of Assessment 2001 Sources of Income Section 4(a) Business Section 4(c) Dividend Section 4(c) Interest

Basis Period 01.09.99 31.08.00 01.01.00 31.12.00 01.01.00 31.12.00

Basis Period 01.09.00 31.08.01 01.09.00 31.08.01 01.09.00 31.08.01

Basis period for 3 situations

1. Continuance of Companies Operations

2. Commencing its Operations

3. Changing the accounting date

1.

CONTINUANCE COMPANIES OPERATIONS

Accounts prepared for 12 months Ended Other 31/12 -S21A(2)

Accounts prepared for 12 months Ended 31/12

Accounting Period is the Basis Period of that Year of Assessment when the accounts closed

ABC Sdn Bhd has prepared its accounts from 01.07.2001 to 30.06.2002. The sources of income are Business, Rental and Interest.

Answer for Activity 1: Basis Period 01.07.08 30.06.09 for all sources of income. Year of Assessment 2009

2.
COMMENCING ITS OPERATIONS

The date of commencement of the Basis Period must be determined bcoz:-

x It will determine the first Year of Assessment.

x Revenue expenditure incurred before the date cannot be deducted to arrive at adjusted income. x Capital Expenditure which is qualified for capital allowance can only be taken during the first Basis Period for a year of assessment.

Criteria of Basis Period on Commencing Operations

2.1 First year Accounts prepared for 12 months period

2.2
2.3

First year Accounts not prepared for 12 months period

Requirement of any law of the place of incorporation {Section 21A(5)(a)}

2.4

Same accounting period within a group of Companies {Section 21A(5)(b)}

Company with existing operation, commence new operation {Section 21A(6)} Company joining a partnership

2.5

2.6

2.1

First year Accounts prepared for 12 months period

Accounts Ended 31 December {Section 21A(1)} Accounts Ended Other than 31 December {Section 21A(2) and Section

21A(4)}

X Sdn. Bhd. commence operation 1 April 2003. First year accounts 01.04.03 31.03.04 Subsequent: Year Ended 31 Mac Basis Period Nil {Section 21A(4)} 01.04.03 31.03.04 01.04.04 31.03.05 Year Assessment 2003 2004 2005

2.2

First year accounts not prepared for 12 months period. Period until the accounts is complete for 12 months. Example 1 Acc year end 31 December

Sectionn 21A(1) applies which year end 31 Disember will be the Basis

First Accounting Period Second Accounting Period Subsequent Basis Period 01.05.03 31.12.03 01.01.04 31.12.04

: 01.05.03 31.12.03 : 01.01.04 31.12.04 : Year end 31 December Year of Assessment 2003 (8 mths) 2004 (12 mths)

First Accounts Less 12 months

Example 2 Acc ended other 31 December

First Accounts Less 12 months

First Accounting Period Second Accounting Period Subsequent

: 01.07.03 30.09.03 (3 mths) : 01.10.03 30.09.04 (12 mths) : Year end 30 September

Basis Period Year of Assessment 01.07.03 31.12.03 2003 (6 mths) 01.10.03 30.09.04 2004 (12 mths) (overlapping period from 1.10.03 to 31.12.03 (3 mths))

Example 1 Acc Ended 31 Disember First Accounting Period Second Accounting Period Subsequent Basis Period 01.07.02 31.12.02 01.01.03 31.12.03 01.01.04 31.12.04 : 01.07.02 31.12.03 (18 mths) : 01.01.04 31.12.04 (12 mths) : y/e 31 December Year of Assessment 2002 (6 mths) 2003 (12 mths) 2004 (12 mths)

First Accounts more 12 mths

Example 2 Acc Ended Other 31 December

First Accounting Period Second Accounting Period Subsequent

: 01.03.02 31.03.03 (13 mths) : 01.04.03 31.03.04 (12 mths) : year ended 31 Mac

Basis Period Year of Assessment 01.03.02 31.12.02 2002 (10 mths) 01.01.03 31.12.03 2003 (12 mths) 01.04.03 31.03.04 2004 (12 mths) (overlapping period from 01/04/03 to 31.12.03 (9 mths))
First Accounts more 12 mths

Example 3 Acc Ended Other 31 December First Accounting Period Second Accounting Period Subsequent : 01.07.01 31.03.03 (21 mths) : 01.04.03 31.03.04 (12 mths) : year ended 31 Mac

Basis Period Year of Assessment 01.07.01 31.12.01 2001 (12 mths) 01.01.02 31.12.02 2002 (12 mths) 01.01.03 31.12.03 2003 (12 mths) 01.04.03 31.03.04 2004 (12 mths) (overlapping period 01.04.03 to 31.12.03 (10 mths))
First Accounts more 12 mths

2.3

Requirement of any law of the place of incorporation {Section 21A(5)(a)} A Company closed its accounts at a particular date in accordance to the law of the place of incorporation, the basis period for the year of assessment is the date commencing operation until the date of accounts closed. Contoh Date commence operation First year accounts closed at Subsequent account closed at Basis Period 01.10.02 31.03.03 01.04.03 31.03.04

: : :

01.10.02 31.03.03** y/e 31 Mac Year Assessment 2003 2004

** last date according to the local law where the company is incorporated

A Company closed its accounts on a particular date to follow the same date with another Company within a Group, Basis Period for a year of assessment is date commencing operation until the date accounts closed. Example Date commence operation First year accounts closed at Basis Period 15.03.04 31.10.04 01.11.04 31.10.05 : : 15.03.04 31.10.04** Year Assessment 2004 2005

** Last date follow group year end.

2.5

Company with existing operation, commence new operation {Section 21A(6)}

Where a Company which is already carrying on existing operation commence new operation, the Basis Period for the existing operation is also the Basis Period for the new operation

Example: Date new operation commence Basis period existing operation Basis period (new operation) 01.07.04 30.09.04

: :

01.07.04 y/e 30 September

year Assessment 2004

2.6

Company with existing operation, commence new operation {Section 21A(6)} Partnership is deemed as new operation. Therefore, the Basis Period from Partnership source are the same as basis Period of existing operation.

Example: Company Accounting Period end Date of new Partnership commence First Partnership Accounts Subsequent Accounts

: : : :

y/e 30 Jun 18.02.03 18.02.03 31.12.03 y/e 31 December

Basis Period from Partnership Source are as follows:Basis Period 18.02.03 30.06.03 01.07.03 30.06.04 Year Assessment 2003 2004

Activity 1
ABC Sdn. Bhd. (y/e 30 Jun) and XYZ Sdn. Bhd. (y/e 30 Sept) has commenced new joint venture business on 01.05.03. First and subsequent accounts for Joint Venture were closed on 31 December every year. Information regarding the business are as follows:Accounting Period 01.05.03 31.12.03 (8 mths) 01.01.04 31.12.04 Income RM6,000 RM9,000

Profit sharing ratio is 50% - 50%

Answer Activity 1
Basis Period for both Companies for income derived from Joint Venture are as follows: ABC Sdn. Bhd. 01.05.03 30.06.03 01.07.03 30.06.04 XYZ Sdn. Bhd. 01.05.03 30.09.03 01.10.03 30.09.04 Y/A 2003 2004

Answer Activity 1
ABC Sdn. Bhd.:Basis Period 01.05.03 30.06.03 Income {2/8 x 6,000} x 50% Jumlah 750

01.07.03 30.06.04

{6/8 x 6,000} x 50% {6/12 x 9,000} x 50%

2,250 2,250

Answer Activity 1
XYZ Sdn. Bhd.:Basis Period 01.05.03 30.09.03 01.10.03 30.09.04 Income {5/8 x 6,000} x 50% {3/8 x 6,000} x 50% {9/12 x 9,000} x 50% Total 1,875 1,125 3,375

Notes: No matter what accounting period for Partnership is, Basis Period of a Company from that source = Basis Period of existing Operation

Basis Period Criteria on Commencing Operations

12 mths
Accept

Comply Law
Accept

Within the Group

Accept

Not 12 mths
First Basis Period ended

31 December

New Operation

Joint Partnership
Deemed new operation

Second Basis Period

still 31 Dec if accounts not 12 mths.

Last date = Existing operation

3. Change Accounting

Date

Reasons for Change Accounting Period Restructuring or Amalgamation group of Companies Compliance of Law / Companys Procedures or Partnership Board of Directors Decision / management /administration Acquisition of companies having different accounting period Business Interest Tax Planning Income Tax Benefit Declaration of Dividend

Change Accounting Period 3.1 Normal acct ended 31 Disember 3.2 Normal acct ended other than 31 December and new acct prepared less than 12 mths 3.3 Normal acct ended other than 31 December and new acct prepared more than 12 mths

Summary:
Change Accounting Date

Normal accounts ended 31/12

Normal accounts ended other 31/12

< 12 mths

> 12 mths

< 12 mths

> 12 mths

New accounts ending in the following year

New accounts ending in the same year

New accounts ending in the following year

New accounts ending in the third year

3.1 Normal Accounts Ended 31 Disember

Basis Period still 31 December Subsequent year = still 31 December until accounting period is complete 12 months
New account less than 12 mths

Contoh 1 Normal Acc 01.01.07 - 31.12.07 Change 01.01.08 - 30.09.08 (9 mths) Subsequent 01.10.08 - 30.09.09 Basis Period 01.01.07 - 31.12.07 01.01.08 - 31.12.08 01.10.08 - 30.09.09 Y/A 2007 2008 2009 (12 mths)

Example 2 Normal Acc : 01.01.06 - 31.12.06 Change : 01.01.07 - 31.03.08 (15 mths) Subsequent : 01.04.08 - 31.03.09 (12 mths)

New Accounts more 12 bulan

Basis Period 01.01.06 - 31.12.06 01.01.07 - 31.12.07 01.01.08 - 31.12.08 01.04.08 - 31.03.09

Year Assessment 2006 2007 2008 2009 (12 mths)

3.2 Normal Accounts ended other 31 December and new accounts prepared less than 12 months

New accounts ending in the following year (less 12 months )

New accounts and last accounts ending in the same year

Failure Year
A year in which it fails to close at the normal accounting period (for accounting period other than 31 December)

New accounts ending in the following year (less than 12 months)

Example: Normal Accounts : 01.10.03 - 30.09.04 Change : 01.10.04 - 31.03.05 (6 mths) Subsequent : 01.04.05 - 31.03.06
New Accounts less than 12 mths

Basis period 01.10.03 - 30.09.04 01.10.04 - 31.03.05 01.04.05 - 31.03.06

Y/A 2004 2005 Failure year** 2006

**New accounting period = Basis Period for a year of assessment in the failure year

New Accounts and Last Accounts ending in the same year

Example: Normal Acc Change Subsequent

: 01.07.03 - 30.06.04 : 01.07.04 - 30.11.04 : 01.12.04 - 30.11.05 01.12.05 - 30.11.06 (12 mths)

New Accounts less 12 months

Basis Period 01.07.03 - 30.06.04 01.07.04 - 30.11.05 (17 mths) 01.12.05 - 30.11.06

Y/A 2004 2005 (failure yr) 2006

Basis Period = new acctg period + subsequent acctg period

3.3 New Accounts Ended other 31 Disember and new accounts prepared more than 12 mths New Accounts Ending in the following year New Accounts ending in the third year

New Accounts Ending in the following year

Example: Normal Accounts : 01.08.03 - 31.07.04 Change : 01.08.04 - 31.10.05 (15 mths) Subsequent : 01.11.05 - 31.10.06
New Accounts more 12 mths

Basis Period 01.08.03 - 31.07.04 01.08.04 - 31.10.05 01.11.05 - 31.10.06

Y/A 2004 2005 (Failure year)** 2006

**New accounting period = Basis Period for a year of assessment in the failure year

New Accounts Ending in the Third Year

Example 1: Normal Accounts : 01.12.05 - 30.11.06 Change : 01.12.06 - 31.03.08 (16 mths)** Subsequent : 01.04.08 - 31.03.09
New Accounts more 12 mths

Basis Period 01.12.05 - 30.11.06 01.12.06 - 31.07.07** 01.08.07 - 31.03.08** 01.04.08 - 31.03.09

Y/A 2006 2007 (8 mths) 2008 (8 mths) 2009

**The period will be divided into 2 basis period equally

New Accounts Ending in the Third Year

Example 2: Normal Accounts : 01.12.05 - 30.11.06 Change : 01.12.06 - 28.02.08 (15 mths)** seterusnya : 01.03.08 - 28.02.09
New Accounts more 12 mths

Basis Period 01.12.05 - 30.11.06 01.12.06 - 31.07.07** 01.08.07 - 28.02.08** 01.03.08 - 28.02.09

Y/A 2006 2007 (8 mths) 2008 (7 mths) 2009

**The period will be divided into 2 basis period equally

CONCLUSION:
Change Accounting Period

31 Dec
a/c still ending 31/12 until subsequent acctg period complete 12 mths

Not 31 Dec

Less 12 mths

More 12 mths

New acc in the following year

New acc and ending in the same year

New acc period + Subsequent acc period

New acc and ending in the following year

New acc period = Basis Period

New acc and ending in the third year

New acc period divide 2

New acc period = Basis period

Apportionment of income according to basis period Section 41

If the basis period and the accounting period are not at the same period, the income on the accounting period should be divided according to the no of days to arrive at the income of the determined basis period.

Example: DEF Sdn. Bhd. Commenced operation on 01.06.2008 and prepare its accounts as follows:Accounting period: 01.06.08 - 30.09.08 (4 months) 01.10.08 - 30.09.09 (12 months) Accounting Period
01.06.08 30.09.08 01.06.08 31.12.08 4 bln + 3 bln = 7 mths Basis Period Y/A 2009 3 mths 3 mths 01.10.08 30.09.09 Basis Period Y/A 2008 01.10.08 30.09.09 12 mths 3 mths = 9 mths

Overlapping Period

Treatment of Adjusted Income/loss in overlapping Period -S42(2) / S44(3)

Basis Period for the 2 years of assessment will be overlapped if: x the first accounting period is less than 12 months and not ending at 31 December, or x Changes in accounting period for accounts normally closed at 31 December. If overlapping period occurred, adjusted income/loss will only be assessed on the first basis period for a year of assessment. Adjusted income/loss for second year will be reduced to the amount in the first year of assessment.

Treatment of Adjusted Income/loss in overlapping Period -S42(2) / S44(3)

Example: XYZ Sdn. Bhd. Commence business on 01.07.02 and prepare its accounts as follows:Accounting period Adjusted Income 01.07.07 - 31.03.08 (9 months) RM16,000 01.04.08 - 31.03.09 (12 months) RM24,000 Therefore, basis period are:Basis Period Year Assessment 01.07.07 - 31.12.07 2007 01.01.08 - 31.12.08** 2008 01.04.08 - 31.03.09** 2009 **overlapping period (01.04.08 - 31.12.08)

Accounting Period

Example: overlapping period

01.07.07 31.03.08 (9 mths) RM16,000 01.07.07 31.12.07 6 months Basis Period Y/A 2008 Basis Period Y/A 2009 01.04.08 31.03.09 (12 mths) RM24,000 Basis Period Y/A 2007

01.01.08 -

31.12.08 (12 mths)

01.04.08 31.03.09 (12 mths)

Overlapping period

01.04.08 31.12.08 (9 mths)

Example: Computation of income according to basis period

01.07.07 31.03.08 (9 mths) RM16,000 01.07.07 31.12.07 RM16,000 x 6/9 bulan Basis Period Y/A 2008 Basis Period T/T 2009

01.04.08 31.03.09 (12 mths) RM24,000 Basis Period Y/A 2007 01.01.08 31.12.08

RM16,000 x 3/9 mths + RM24,000 x 9/12 mths

01.04.08 31.03.09 RM24,000 x 3/12 mths

Overlapping period

01.04.08 31.12.08 (9 mths)

THANK YOU
TERIMA KASIH