Tax & Business Update

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1 Boardroom Corporate Services (KL) Sdn Bhd (Company No X) Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama Petaling Jaya, Selangor Darul Ehsan, T: (603) F: (603) Tax & Business Update Issue 2 of 2012 Pencetak & Penerbit : Boardroom Corporate Services (KL) Sdn Bhd 3775-X PP17647/01/2013(031569) Strictly for internal circulation to clients and associates In this issue The 2012 Tax Filing Programme Preparing Income Statements for payments and other incentives made to agents, dealers or distributors (Form CP 58) n Code on Corporate Governance ( MCCG) 2012 Act 743 Limited Liability Partnerships Act 2012 Singapore 2012 Budget Changes Hong Kong 2012/2013 Budget Changes New Tax Guidelines & Public Rulings It s the Season for Tax Filings The 2012 Tax Filing Programme Taxpayers, be it companies; individuals or other entities alike will soon be receiving their tax return forms for filing of their respective tax returns for the tax filing under the 2012 tax filing programme. Employers will themselves be receiving their Form Es that require the submission of the 2011 income statements of their employees. With the new tax amendments announced in the 2012 Budget announcements as well as many new accounting standards now in practice, the filing of the 2011/2012 Returns on time would present a significant challenge for some. These, coupled with new and generally more punitive penalties for late lodgement of tax returns could pose a significant risk if the obligation is not well planned and managed. It is essential that the tax returns are prepared accurately and submitted on time. The submission of Income Tax Return Forms carries more repercussions than meets the eye. Timeliness aside, getting it right has always been an important feature under our self assessment regime, as not only heavy penalties await late filing, income underestimates due to incorrect or incomplete filing also attracts significant monetary penalties. The completion of Return Forms now demands greater attention and attention needs to be given to accuracy. There is also a whole host of new forms and requirements, new public rulings being issued and an ever vigilant and eager tax authority. Where incorrectly filed, there is the risk that it may later fail to withstand a tax audit, when the tax submission is scrutinized in greater detail. 1

2 Submission Deadline Income Tax Filing deadline Return Forms Forms BE, B, M, P, 30 April 2012 for TP, TJ and TF taxpayers not carrying out a business 30 June 2012 for taxpayers carrying out a business Forms C, R, C1, Last day of 7 months TA, TC and TR from the close of the accounting period Form E 31 March 2012 The income tax return forms submitted to the IRB after the due date but within the stipulated grace period shall be deemed to be received within the due date. Grace Period for Submission As usual, the Inland Revenue Board (IRB) has provided a grace period for the submission of income tax return forms in the current tax filing programme but for this year, the grace period is varied to favour electronic filing. This, especially for those with Dec 31, 2011 year ends, is as follows:- A grace period of 15 consecutive days is granted for submission through electronic filing A grace period of 3 working days is granted for submission made by post No grace period granted for submission made by hand The above grace period for submission is also applicable to the payment of balance of tax due under Section 103(1) of the Income Tax Act, 1967 (ITA). Taxpayers are therefore encouraged to resort to electronic filing (E-Filing), if it is obvious that you cannot file your regular returns on time in order to meet the deadline to avoid late filing penalties. Taxpayers can begin to lodge filings electronically for Forms BE, B, M, P and E from March 1. Electronic filing for Form C will be opened later. Application for Extension of Time Where due to extenuating reasons, the tax returns cannot be filed on time, taxpayers can attempt to seek an extension of time to the Director General via their IRB s Pengarah Bahagian Dasar & Operasi. Application for extension of time for the submission of income tax return form and the payment of balance of tax due can be made to the IRB with the condition that the application is received by the IRB at least 15 days before the due date for the submission. Whether approval will be granted is based on the merits of each case. 2

3 M-Filing for Mobile Devices For the first time, income tax return of a resident individual who does not carry on a business (Form BE) can now also be submitted through mobile filing. The mobile phone devices that are supported include iphone and ipad with ios 4.0 and above, Android 2.2 (Froyo) and above, BlackBerry (with OS 6 and above), Playbook, Windows Phone 7 and above, 7.5 (Mango). Individual taxpayers can access to proceed with the m-be submission of their tax returns. Furnishing Details of Payments and Incentives Made to Agents, Dealers and Distributors on New Prescribed Form CP 58 As alluded to in our previous bulletin, further guidelines have been issued by the IRB on the duty of those making payments to agents; dealers and distributors, to complete details of payments made on a newly prescribed Form CP58. According to Section 83A of the ITA, every company making incentive payments (monetary or otherwise) shall each year prepare and provide a copy of the Form CP58 and issue them to their agent, dealer or distributor not later than 31 March in the year immediately following the year of payment. However, for such payments made in year 2011, this is to be completed by 31 May This represents a new compliance requirement, as announced in the 2012 Budget Announcements. A review of the details required to be made suggests that they are voluminous and require companies affected to address and review its own reporting systems with a view to generating the details necessary towards generating details to enable a full, timely and accurate generating of these income statements. Valuation of incentives made in kind could also be an issue. A one time review of information gathering, data generation and systems review is encouraged in order to be fully prepared for this new obligation and we would be pleased to assist should this service be required in order for companies to be compliant. Penalty for Failing to Comply with Section 83A of the ITA Section 120 (1) of the ITA states that any person who without reasonable excuse- (b) fails to furnish a return in accordance with subsection 83(1) or to prepare and render a statement in accordance with subsection 83(1A) or 83A(1); shall be guilty of an offence and shall, on conviction, be liable to a fine of not less than two hundred ringgit and not more than two thousand ringgit 3

4 or to imprisonment for a term not exceeding six months or to both. Section 120 (2) states: Where a person has been convicted of an offence under subsection (1), the court may take further order that the person shall comply with the relevant provisions of this Act under which the offence has been committed within thirty days, or such other period as the court deem fit, from the date the order is made. Please feel free to contact with our Executives should you require further clarification on this. n Code on Corporate Governance 2012 (MCCG 2012) The MCCG 2012 is specifically targeted at companies listed on Bursa. All companies are however encouraged to adopt the principles and recommendations of MCCG 2012 and make good corporate governance an integral part of their business dealings and culture. The MCCG 2012 will be effective on 31 December Listed companies are however encouraged to make an early transition to the principles and recommendations elaborated in the MCCG The MCCG 2012 advocates the adoption of standards that go beyond the minimum prescribed by regulation. Although observance of the MCCG 2012 by companies is voluntary, however, listed companies are required to explain in their annual reports how they have complied with the recommendations of MCCG Listed companies should explain and justify the reasons for nonobservance of any of the recommendations. Some of the key areas that have been strengthened in the MCCG 2012 are as follows: Roles and responsibilities of the Board The Board is required to formalise ethical standards through a code of conduct and ensure company strategies promote sustainability. It is also expected to formalise a Board charter. Composition of the Board The Board should establish a Nominating Committee, chaired by a senior independent director, who is responsible to oversee the selection and assessment of directors. The Nominating Committee is charged with developing a set of criteria including policies formalising its approach to diversity of the Board. Independence of independent directors. The tenure of independent directors is capped to 4

5 a cumulative period of nine years. Upon completion of the nine years, such directors can be redesignated as non-independent directors or in exceptional circumstances; the shareholders may decide that an independent director can remain in that capacity after serving a cumulative term of nine years. The Board should provide strong justification to the shareholders. In addition, the positions of Chairman and CEO should be held by different individuals. If the Chairman is not an independent director, the Board should comprise a majority of independent directors. Commitment of directors The Board is required to set out expectations on time commitment for its members and protocols for accepting new directorships. Remuneration of directors The Board should establish formal and transparent remuneration policies and procedures to attract and retain directors. A Remuneration Committee can perform this function. Risk management framework and internal controls system The Board is required to establish a sound framework to determine the company's level of risk tolerance and actively identify, assess and monitor key business risks. Integrity of financial reporting The Audit Committee should ensure financial statements comply with applicable financial reporting standards and assess the suitability and independence of external auditors. Relationship between company and shareholders The Board should encourage shareholder participation at general meetings and voting on resolutions by way of poll. Do contact our Executives if you wish to have any updates or clarification on the MCCG If you wish to obtain a copy of the MCCG, you can download it from the following link: pdf Act 743 Limited Liability Partnerships Act 2012 (Gazetted 9 Feb 2012) The Limited Liability Partnerships Act 2012 was gazetted on 9 February It spells out, among other things, the fundamentals of a Limited Liability Partnership (LLP), formation and registration, management of a LLP, conversion to LLP, foreign LLPs, windingup, dissolution and striking off, and enforcement. LLP is a new business vehicle which is a hybrid between a company and a conventional partnership. It is a form of 5

6 business entity that offers protection of limited liabilities to its members. New Tax Public Rulings and Guidelines Issued Recently The following Public Rulings were issued recently by the IRB: Public Ruling 12/2011 covering tax exemption on employment income of non-citizen individuals working for certain companies in. Public Ruling 1/2012 dealing with compensation for loss of employment. Singapore 2012 Budget Changes Singapore, in the face of an expected slowdown in global economic growth to 2.5% in 2012, and with Singapore s own GDP expected to register a growth of 1% to 3%, tabled a 2012 Budget on February 17 described as caring and inclusive which focused on needs of the elderly and society at large. Assistance for businesses were fine-tuned and the bulk of resources were devoted to longer-term challenges. For the near term focus, effective steps were to address the needs of the senior citizens and the lower income group. For the longer term, it is hoped the introduction of measures in the workforce to reduce Singapore s dependence on foreign workers would help steer away on over-dependence on foreign workforce. Accordingly, no changes were made to lower the rate of tax for corporate, personal or GST. Tax rebate was also deemed not necessary, although a SME cash grant (capped at $5,000), was introduced. Regardless, it is heartening to note that the proposals include a credit scheme to enhance productivity and innovation, special employment credits, SME grants, providing certainty on taxfree capital gains, withholding tax exemptions, and providing GST vouchers for the lower income group were proposed. It is thought that these proposals would cover immediate needs - from businesses, including that of attracting foreign MNCs; to needy Singaporeans, especially the elderly and lower income group. The following changes were proposed: Business Tax Effective One-off SME Cash Grant YA2012 Enhancing the Productivity and Innovation Credit ("PIC") YA2013 YA2015 Scheme Enhancing the Renovation and YA2013 Refurbishment ( R & R ) deduction scheme Enhancing the Merger & Acquisition ("M & A") Scheme Simplifying capital allowance YA2013 claim for low-value assets Introducing the Integrated Investment Allowance ("IIA") years Scheme 6

7 Enhancing the Double Tax Deduction ("DTD") for Internationalisation Scheme Providing certainty of nontaxable of companies gains on disposal of Equity Investments Extending the filing and payment deadline for withholding tax Exempting vessel disposal gains derived by qualifying ship operators and ship lessors from tax Exempting charter fees for ships from withholding tax Enhancing the Maritime Sector Incentive - Maritime Leasing (Container) Award Extending and enhancing the Aircraft Leasing Scheme ("ALS") Enhancing the liberalised withholding tax exemption regime for banks Extending the withholding tax exemption for Over-The- Counter ("OTC") financial derivatives payments Extending the tax deduction for collective impairment provisions made under MAS Notices Enhancing the designated investment and specified income lists for Financial Sector Tax Incentive Scheme Extend to Extended from YA 2014 YA Liberalising the cash distribution requirement for tax transparency for Real Estate Investment Trusts ("REITs") Goods and Services Tax Granting GST exemption on investment-grade gold and precious metals Extending the GST Temporary Import Period from 3 to 6 months Extending the GST Tourist Refund System ("TRS") to tourists departing by International Cruise Simplifying GST import relief for incoming travellers Individuals Enhancing the Earned Income Relief for elderly and handicapped workers Increase in the CPF contribution rates GST voucher Others Special tax for Euro V Compliant Private Diesel Cars Carbon Emissions-Based Vehicle Scheme (CEVS) Removal of Additional Transfer Fee Enhancement of the Special Employment Credit (SEC) Excise Duties for Tobacco Product Jan YA / Permanent system Jan 2012 Dec

8 Clients wishing a copy of the synopsis or further details on the proposed changes can contact Ms Sam Guai Gam of our Singapore Office: GuaiGam.Sam@Boardroomlimited.com or access our website: Hong Kong 2012/2013 Budget Changes The Hong Kong Government Budget was tabled on 1 February 2012 proposing the Government s revenue and expenditure for the year 2012/13. In an economic outlook for Hong Kong for the upcoming fiscal year described as rather uncertain and volatile, the Government proposed a relatively prudent yet robust Budget for the year 2012/13. In response to the general public s call for tax relief, the Financial Secretary proposed a number of tax relief measures to ease the pressure for both the businesses and the middle class. in the taxpayers 2011/12 final tax payables. Salaries Tax The progressive Salaries Tax rates for the year of assessment 2012/13 remain the same as the previous year and the standard rate of Salaries Tax remains at 15%. Net chargeable Tax rate Income (in HK$) First $40,000 at 2% Next $40,000 at 7% Next $40,000 at 12% Balance 17% In line with the public s expectations, the Financial Secretary proposed a reduction of 75% in Salaries Tax and tax under personal assessment for 2011/12, subject to a ceiling of HK$12,000. The reduction will be reflected in the taxpayers 2011/12 final tax payables. Profits Tax The Profits Tax rate for corporations will remain at 16.5% for 2012/13, while it will remain at 15% for unincorporated businesses. Exceeding the general public s expectations, a 75% Profits Tax rebate was proposed, subject to a ceiling of HK$12,000. The rebate will be reflected Further, an increase to the following allowances and deductions, ranging from 5% to 25% was also proposed:- a) Increase in personal allowances of up to 11%. b) Child allowances increased by 5%. c) Increase of dependent parent/ grandparent allowances of 5.6%. d) Increase in dependent brother/ sister allowance by 10%. 8

9 e) Increase in disabled dependant allowance of 16%. f) Uplift in Ceiling of elderly residential care expenses deduction by 5.6%. g) Increase in contributions to recognised retirement schemes deduction ceiling by 25%. h) Additional 5 years (from 10 to 15 years) deduction on home loan interest. There were other measures proposed in the 2012/13 Budget. If you require a copy of the Hong Kong Budget Synopsis 2012/13, please feel free to contact us. Due Dates for Tax Filings By 30 April 2012 By 31 May By 30 June By 31 July CP 204 (FYE) - Income estimates May year end Jun year end Jul year end Aug year end 6th Month Revisions (FYE) Oct year end Nov year end Dec year end Jan year end 9th Month Revisions (FYE) Jul year end Aug year end Sept year end Oct year end Tax Return Forms C & R (FYE) Sept year end Oct year end Nov year end Dec year end ooo00000ooo Cautionary Note This summary of tax and business updates has been prepared to keep you informed of recent developments in the tax environment and practise; amendment to tax and corporate laws and regulations in and elsewhere that may have significance to n businesses. While we take care to ensure that the information given is correct, the information contained herein is general in nature and is not intended to address the circumstances of any particular individual or entity. The information contained in this document should therefore not be taken as a substitute for detailed advice nor relied upon as a basis for formulating business decisions. Do not act upon such information without professional advice. Materials published may only be reproduced with our consent. 9

10 About Boardroom Boardroom is one of Asia s leading business solutions provider. It showcases an integrated suite of services comprising: accounting, payroll and taxation, corporate secretarial, share registration, internal audit risk management and liquidation service offerings with an illustrious portfolio of 4,000 publicly listed and privately owned companies. We are able to offer a one-stop service to our clients operating in the Asia Pacific region including Singapore,, Hong Kong, China and in Australia via our offices in those countries. Kindly let us know should you wish to outsource your tax, secretarial, accounting, payroll, share registration, employment pass, liquidation, poll scrutineering or any other related services. We would be pleased to be of assistance to you. For further clarification, you may wish to contact any one of our following personnel at their DIDs. Name Samantha Tai Managing Director Country Contact (DID) Address (603) Samantha.Tai@Boardroomlimited.com Liew Irene Tan Ai Ning Lau May Chee Cheang Siow Voon Corp Sec Corp Sec Business Solutions Share Reg (603) Irene.Liew@Boardroomlimited.com (603) Aining.Tan@Boardroomlimited.com (603) Maychee.Lau@Boardroomlimited.com (603) Siowvoon.Cheang@Boardroomlimited.com Name Country Contact (DID) Address William Chua Head of Tax Regional (65) William.Chua@Boardroomlimited.com Kenneth Lim Tax (603) Kenneth.Lim@Boardroomlimited.com Clements Joseph Tax (603) Clements.Joseph@Boardroomlimited.com Sam Guai Gam Singapore (65) GuaiGam.Sam@Boardroomlimited.com Wilson Lam China/Hong Kong (852) Carol Xu China (86) Carol.Xu@Boardroomlimited.com.cn 10

Tax & Business Update

Tax & Business Update & Business Update Boardroom Corporate Services (KL) Sdn Bhd (Company No. 3775-X) Lot 6.05, Level 6, KPMG Tower 8 First Avenue, Bandar Utama 47800 Petaling Jaya, Selangor Darul Ehsan, T: (603) 7720 1188