The Inland Revenue Board of Malaysia (IRBM) has issued a new technical guidelines date 17th August 2022 on the deduction of expenses related to secretarial and tax filing fees from year of assessment 2022. The guide explains that secretarial and tax filing fees would normally not be deductible for tax purposes because they are not directly used in generating business income. However, from year of assessment 2015, secretarial and tax filing fees are deductible for eligible taxpayers doing business and resident in Malaysia.
The Income Tax Rules 2020 [P.U.(A) 162/2020] stipulate that a tax deduction of up to RM 15,000 per YA can be claimed for expenses incurred on secretarial and tax filing fees (i.e., the tax deduction limit for both secretarial and tax filing are combines)
The Income Tax Rules 2021 [P.U.(A) 471/2021] amended the Income Tax Rules 2020 with the removal of the words “and paid” thus allowing a deduction for secretarial and tax filing fees to be given to a resident who incurred the expenses.
The table above provides an overview of the deduction for Expenses concerning Secretarial and Fees Tax filing effective YA 2022.
Effective from YA 2022, tax deductions for expenses regarding secretarial and tax filing fees have been amended through Income Tax (Deduction for Expenses in relation to Fee Secretarial and Tax Filing Fees) (Amendment) 2021 [P.U. (A) 471/2021], which explains that expenses concerning secretarial and filing fees are eligible for deduction tax with the condition that is only ‘Incurred’ by the person within the basis period for each YA.
These expenses may only be deducted when they have been paid for, which must occur in YA 2022 or the assessment year that comes that. However, YA 2022 secretarial and tax filing fees will be eligible for a deduction, with RM 15,000 ceiling on the overall cost of those costs.
Secretarial and tax filing fees incurred prior YAs 2020
Beginning on January 1, 2022, taxpayers will no longer be able to claim a tax deduction for any expenses incurred before the basis period for YAs 2020 and 2021 but for which they had not previously claimed a deduction.
What do you need to qualify Secretarial Fees?
The payment of secretarial fees to a company who is registered under the Companies Act 2016 is a deductible business expense. This fee shall be related to the provision of secretarial services to comply with the legislative requirements outlined by the CA 2016.
Examples of the expenses related to secretarial work that may be deducted includes:
The provision of related advisory services at company meetings,
The preparation of director’s resolutions,
The issuance of shares
The submission of prescribed forms under CA 2016,
A variety of other company-related activities and duties.
The secretarial fee shall be eligible for deduction under KKCP P.U(A) 162/2020 in the basis period for an assessment year after the services has been received, even though the secretarial charge has not yet paid, as a result of change made by P.U.(A) 471/2021, as of YA 2022
Qualifying Tax Fees
The following sorts of tax filing fees, when charged by:
1. A tax agent that has been approved under the ITA 1967 in respect of:
a. The preparation and submission of return in the prescribed form for sections 77,77A,77B, 83 and 86 of the ITA 1967 for the basis period for the immediately preceding year of assessment.
b. Preparation and submission of forms prescribed for Section 107C of the ITA 1967, such as Forms CP 204, CP 204A and CP 204B.
2. A person who provides services in respect of the preparation and submission of return in the prescribed form fir section 26 of the Sales Tax Act 2018. [Act 806]
3. A person who provides services in respect of the preparation and submission of return in the prescribed form for section 26 of the Service Tax Act 2018 [Act 807]
4. A person who provides services in respect of the preparation and submission of return in the prescribed form for section 19 of the Departure Levy Act 2019 [Act 813]
5. A person who provides services in respect of the preparation and submission of return in the prescribed form section 19 of the Tourism Tax Act 2017 .
The tax filing fees listed above are eligible for deduction under P.U.(A) 162/2020 beginning with the YA 2022 tax year as a result of amendments made through P.U. (A) 471/2021. This is the case even if the expenditure is only incurred in the basis period for YA but has not been paid at the time of that YA’s filing.
So, if you have any tax deductible on Secretarial fees or Tax filing fees in this YA 2022, do it now!!