Tax and Covid-19 Part 1

As the Covid-19 pandemic’s effect on the global economy is predicted to last for another year, taxpayers may be forced to take extraordinary measures in handling their business affairs during these extraordinary times. When making any financial decisions, taxpayers should take note that there may be tax repercussions arising from these decisions.

鉴于新型冠状病毒肺炎疫情蔓延而在国际经济上所造成的停滞不前的情况预测将持续至下一年,纳税人或被迫在这个异乎寻常地时间里采取特殊的措施。在做任何商业决定时,纳税人应意识到商业政策是否会对税务实务造成影响。 

This article aims to lay out some applicable principles of deductibility of different types of expenses that a taxpayer may incur during this period. The types of expenses to be explored are compensation for early termination, bad debts, compensation for retrenchment, subsidy received by the government and donations.

此文章旨在说明纳税人在这期间或将产生的一些费用的相关税务扣除制度。其中会进一步探讨的费用包括提前终止合约赔偿金、坏账、遣散费、政府给予的工资补贴计划以及捐献。

Under Section 33(1) of the Income Tax Act 1967 (“the Act”), the conditions in order to qualify for a tax deduction are:

  1. The expense was incurred in the basis period; and
  2. The expense is wholly and exclusively for the production of the taxpayer’s gross income.

根据所得税法1967 第33(1)条,获得扣税的条件如下:

  1. 该费用在此准基期限招致;以及
  2. 该费用是完全以及专门用于产生收入。

However, Section 39 of the Act provides that notwithstanding an expense fulfils the conditions under Section 33(1), no deduction is allowed. For example, Section 39(1)(c) provides that expenses incurred which are capital in nature are not tax-deductible.

无论如何,第39条说明就算有些费用满足第33(1)条的条件,该费用不允许扣税。例如,第39(1)(c)条陈述资本支出是不允许扣税。

1.Deductibility of compensation expense for early termination

1。扣除提前终止合约赔偿金

Parties seeking to put a contract to an end unilaterally may be required to compensate the counterparty for early termination. Before Covid-19, parties may have entered a contract in the course of trade with the vision that the contract would be profitable. If the contract now proves to be more a liability than an income source, any compensation payments made to terminate the contract generally ranks for a deduction.

假设合同当事人想单方提前终止合约,该合同当事人也许必须赔偿对方。在新型冠状病毒肺炎疫情爆发,合同当事人也许预期该合作会产生利润。如果该合同是明显的无法企及反而成了一个累赘, 为了提前终止合约所导致的赔偿金是可以扣除的。

However, if the early termination compensation is capital in nature, it is not tax-deductible. For example in CH & Co (Perak) Sdn Bhd v DGIR, the taxpayer had claimed a deduction for compensation expense to compensate the ground floor tenant for trade fixtures and fittings and loss of business as the taxpayer had a prospective tenant who wanted to lease the entire building for 14 years. The court found that the compensation was a capital expense. The reason for the court’s finding was twofold:

      1. The termination was to remove of a disadvantageous asset; and
      2. To make the building more advantageous and beneficial.

然而如果此赔偿金是资本支出,该赔偿金是不可扣除的。在CH & Co (Perak) Sdn Bhd v DGIR,该纳税人扣除了支付给在一楼的租户与所有固定装置和可拆除设备以及营业亏损所造成的赔偿金。为了提前解约的原因是因为有另一位准租户有意租用纳税人所属的楼宇长达14 年。法庭裁定该支出是中资本支出因为

    1. 纳税人终止合约是为了去除不利的资产;以及
    2. 为了使楼宇更有利和增加吸引力。

Generally, if the termination gave the taxpayer an enduring benefit, compensation for the early termination may not be deductible. Courts will scrutinize the surrounding circumstances and events that led to termination to determine the purpose of compensation payment and thereafter decide if it is revenue or capital in nature.

如果终止合约给予该纳税人持久的利益,所交付的赔偿金是不可扣除的。法庭在决定该赔偿金是资本支出还是公司营运费时会根据周围情况和提前终止合约的目的进行评估。

2. Deductibility of bad debt

2. 坏账的税务扣除

As demand for goods and services slumps amidst economic uncertainty, many companies may be in a precarious position where they are unable to pay creditors for goods. If parties have a cordial business relationship, it is common to write off debts as a sign of goodwill. However, in doing so, creditors inevitably expose themselves to the risk of being challenged that the bad debt expense is not deductible.

随着经济衰退以及消费者对货物与服务的需求逐渐下降,许多企业或许会因为面对现金流量的问题而至无法支付债权人。若双方是拥有和谐的关系,注销该债务是个常见的现象。然而,在注销债务时,债权人也许会面临被税务局挑战该坏账是不可扣除的。

It is trite law that when taxpayers take a deduction for bad debt incurred, he would need to demonstrate that there were efforts to recover the debt and any waiver of debts were based on sound commercial reasoning. The Public Ruling 1/2002 (“Public Ruling”) defines bad debt as “a debt that is considered not recoverable after appropriate steps have been taken to recover it”. The Public Ruling also suggests that reasonable steps taken to recover debts include debt restructuring scheme, legal action or reminder notices. Therefore, reasons such as “goodwill” or “personal relationships” will likely be insufficient.

当纳税人要扣除坏账时,他必须证明他已采取适当努力以追回债务以及任何坏账是基于合理的商业理性。在税务局所发布的公共裁决 1/2002 (“公共裁决”)对于坏账的定义是 “采取合理的步骤后还是无法追回的债务”。公共裁决也提出为了追债的合理步骤包括了债务重组计划,采取法律行动以及提醒同知。因此,理由犹如 “信誉“和”人际关系” 是不足以获取税务扣除。

Based on our body of case law, the Malaysian courts had held along the same tune as the Public Ruling. Taxpayers must take reasonable steps to recover sums owed such as timely legal action, referring matters to dispute resolution and/ or settlement agreements.

根据我国的判例法, 马来西亚法院的裁定和公共裁决是一致的。纳税人应采取适当的步骤来追回债务例如尽快采取法律诉讼,提交仲裁或和解协议。

3. Deductibility of compensation expense for retrenchment of employees

3.税务扣除员工裁员的赔偿金

In efforts to reduce cost, companies may be forced to undergo a retrenchment exercise in endeavours to keep afloat. According to the respective employment contracts, the company may be required to pay compensation to the employees for loss of employment. Taxpayers would need to evaluate whether such payments are deductible or otherwise.

为了减低营业费用,企业或许会为了保持营业而被迫进行裁员行动。根据各自的劳动合同,该企业必须根据合约条件给予赔偿金。纳税人必须鉴定任何赔偿金是否可税前扣除。

If compensation payments paid to employees are part of the taxpayer’s strategy to reduce cost and sustain business continuity, the payments are deductible. In Kulim Rubber Plantations v DGIR, the Federal Court held that where a taxpayer makes a payment “in order to get rid of … a servant whose continuance in service is undesirable in the company’s interest”, it should be treated as a revenue payment and a deductible expense. Accordingly, compensation payments made to employees pursuant to a restructuring exercise are deductible if the purpose is to keep the company in operation.

如果裁员行动是为了减低营业费用和业务可以持续性发展,相关的赔偿金时可在税前扣除的。在 Kulim Rubber Plantations v DGIR,联邦法院已裁定如果纳税人支付赔偿金“为了摆脱…… 一个从公司的利益的角度想不理想的员工” 该赔偿金是属于公司营运费用和可扣除的。因此,如果裁员的目的是为了确保公司可以继续营业, 因企业重组所致的赔偿金是可扣除如果。

However, if the compensation payments are made due to the cessation of business, such payments are not deductible. The rationale is due to the fact that these payments were not made in the production of the taxpayer’s gross income but were made to put an end to the business. The court in Ampat Tin Dredging Ltd v DGIR held that it was not sufficient that the expense incurred is related to the production of income, but it must be wholly and exclusively incurred in the production of income. In this case, the retrenchment due to closure of business was found to have nothing to with the production of gross income.

然而,如果该赔偿金是为了停业而造成的,该赔偿金是不可扣除。原理是因为这赔偿并不是用于产生收入而招致的费用,而是为了停业的费用。法院已在 Ampat Tin Dredging Ltd v DGIR 指出任何费用不仅必须和产生收入有关系,该费用必须是完全以及专门的产生收入。在该案例里,为了停业而裁员所支付的赔偿金和产生收入毫无关系。

Taxpayers are advised to maintain contemporaneous documentation by stating the purpose and reason of any compensation payment made. Where retrenchment benefits were made to save the taxpayer from extinction, it would qualify for a tax deduction as expenses incurred in the production of gross income.

纳税人应当存同期文档并且注明赔偿金的目的以及理由。如果该裁员赔偿金是为了避免企业倒闭,该费用是属于用于取得所得收入的费用方可在税前扣除的。

4. Deductibility of employee wages under the govt grant

4. 政府雇员工资补助的税前扣除

On 6 April 2020, the Prime Minister of Malaysia had announced the Additional PRIHATIN SME Economic Stimulus Package (“PRIHATIN SME+”) in efforts to stimulate the Malaysian economy with emphasis placed on maintaining the sustainability of SMEs. In Malaysia, SMEs accounted for more than 98.5% of all business establishments but compared to larger multinationals, they are often strapped for cash and have lower liquidity ratios. With that in mind, the PRIHATIN SME+ had, amongst others, offered a wage subsidy program to assist in maintaining the job security of its employees and reduce the burden on expenses (“Program”).

于 4 月 6 日,马来西亚首相宣布了经济振兴中小企配套(增加版)(“配套”)来协助企业可持续发展。在马来西亚,中小企业占了所有企业的98.5% ,可是与大型企业相比,中小企业通常拥有较为紧张的现金周转压力而且拥较低的流动性比率。考虑到这方面的苦扰,政府在配套里介绍了万众期待的工资补贴计划目以提供雇员的保障以及减低企业开支的消费。

The Program would fall within the scope of the Income Tax (exemption) (No.22) Order 2006 (P.U.(A) 207/2006) (“Exemption Order”). Under the Exemption Order, where eligible persons receive income in the form of a grant or subsidy from the State or Federal Government, such sums received are exempted from tax. In light of the foregoing, the subsidy received by an SME company having fulfilled necessary conditions would be tax-exempted.

该配套应在所得税法令(豁免) (第。22) 2006 (P.U.(A) 207/2006) (“豁免法令”)。在该豁免法令,当有资格的纳税人获得由州政府或联邦政府给予的补助或补贴形式的收入,该收入是免税的的。正因如此,中小企业从配套里收到的工资补贴是,在满足了所有的条件后,将是免税的的。

However, expenses spent using the sums received under the Program is also not deductible. Therefore, if the taxpayer received RM50,000 under the Program, expenses incurred for its employees’ wages to the value of RM50,000 is not deductible.

然而,任何使用了配套中的补贴所支付的的费用是不可扣除的。因此,假设纳税人在配套中领取了RM50,000的补贴,相等于RM50,000 的雇员工资是不可扣除的。

Taxpayers should be aware that Clause 4 of the Exemption Order imposes an obligation to maintain separate accounts for income received as a grant or subsidy. With this in mind, taxpayers must maintain appropriate records detailing the amount of subsidy received under the Program and amount of deduction claimed in respect of expenses on employee wages.

纳税人应意识到豁免法令的第4条规定获得补助者必须在企业账户中另行记录所领取的补助或补贴。因此,纳税人应该保持适当的记录仔细说明纳税人从配套中收到的补贴以及相关的雇员工资费用。

5. Deduction for donation to Covid-19 fund

5. 捐献给冠病基金的税前扣除

In endeavours to raise funds to combat the pandemic, the Malaysian Government has announced that donations to the Covid-19 fund will qualify for a tax deduction. Taxpayers may choose to donate by cash or in-kind to the Covid-19 fund set up by the Prime Ministry Department and Ministry of Health (“Tabung Covid-19”), Organisations with Section 44(6) status or other approved community and charitable projects. The Act has various provisions which allow for deduction hence taxpayers must accurately identify which provision is relevant to their form of donation.

为了筹募基金助于对抗新型冠状病毒肺炎疫情,马来西亚政府已宣布任何为捐给了冠病基金可税前扣除。纳税人可选择以金钱还是以实物的方式捐款给首相署和卫生部的冠病基金,所得税法 第44(6)条认可的任何组织或合格机构将享受减免。所得税法拥有多个相关的条规所以纳税人必须准确的鉴定哪条与他们捐款形式一致。

Scenario 1: Cash donations made to Tabung Covid-19

      • Treatment: Section 34(6)(h) OR Section 44(6)
      • Condition: Approval required if claiming under Section 34(6)(h)

Scenario 2: Donation in kind to Tabung Covid-19

      • Treatment: Section 34(6)(h)
      • Condition: Approval required

Scenario 3: Cash donation to Organisations with Section 44(6) status

      • Treatment: Section 44(6)

Scenario 4: Donation in cash or in-kind to approved community and charitable projects

      • Treatment: Section 34(6)(h)
      • Condition: Approval required

范例 1:现金捐款给冠病基金

      • 待遇: 第 34(6)(h) 条规 或 44(6) 条规
      • 条件: 如果是 第34(6)(h) 条内,纳税者必须获得批准

范例 2:实物捐赠给冠病基金

      • 待遇: 第 34(6)(h) 条规
      • 条件: 纳税者必须获得批准

范例 3:现金捐款给第44(6)条认可的组织

        • 待遇: 第 44(6) 条规

范例 4:现金或实物捐赠给合格机构

      • 待遇: 第 34(6)(h) 条规
      • 条件: 纳税者必须获得批准

Conclusion

Taxpayers would need to reassess whether expenses incurred makes commercial sense, revenue or capital in nature or disallowed for deduction under the Act. Although case laws have been helpful in clarifying rules on deductibility such as which expenses are revenue and capital in nature, the question of whether tax deduction is allowed is often a question of fact as cases on the same facts but with different purposes may have different tax implications.

结论

纳税人应该慎重考虑任何费用的商业合理性,是公司营运费还是资本支出或是否在所得税法里的条规是不被允许扣除的。虽然判例法有助于誊清扣除原则例如费用是否是资本费用,但是某个费用是否可扣除经常是事实问题因为同一个开销可因不同的目的而对所得税务有不同的影响。

Note: If there is any inconsistency between the English and Chinese versions, the English version shall for all intent and purposes prevail. 

特别注明:英文版和中文版上倘出任何歧义,概以英文版本为准。上述仅供阅读参考。