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Learn more about Accounting in Malaysia

As a business, you must handle both financial and management accounting. Financial accounting is painstakingly recording, summarizing, and presenting the company’s financial activities in the Financial Statement of Accounts. Income statements, balance sheets, and cash flows are all part of the accounting financial statement. Financial accounting also includes bookkeeping, accounts payable, accounts receivable, payroll processing, managerial accounting, and tax preparation.

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What are the Accounting standards in Malaysia?

Accounting businesses in Malaysia frequently provide the following services:

Accounting: includes creating budgets, financial statements, producing local, state, and federal tax filings, collaborating with auditors to undertake audits and business appraisals, and providing forensic accounting services to firms dealing with fraud.

Bookkeeping: includes handling accounts, billing, payroll, and keeping a record of transactions in your firm that may be needed for future decision-making.

Staffing decisions: entail assisting you with payroll and handling government paperwork, tax and insurance obligations, and calculating the cost of recruiting, training, and paying an employee, especially if there are mergers or expansions.

Consulting: entails advising you on financial strategies, tax burdens, business updates, financial investments, and future moves in terms of mergers and acquisitions, as well as assisting you in setting Key Performance Indicators (KPIs) and troubleshooting the problem, testing solutions, and resetting the KPI accordingly.

Automated accounting workflow: entails giving you the most up-to-date accounting software and cloud accounting, allowing you to have a clear data inventory, automated workflows, and KPI tracking.

Tax management: includes creating financial reports, calculating the company’s tax burden, ensuring all tax deadlines are fulfilled, completing and filing tax returns, as well as assisting you in lowering your tax exposure and dealing with past tax arrears.

Can I outsource these responsibilities?

If you plan to outsource these obligations to accounting companies, the professional accountants in the businesses will undertake tax planning and preparation, and the firm will work with licensed auditors to deal with the Malaysian Inland Revenue Board (IRBM). The company may also assist you with valuation studies for funding, mergers, and acquisitions. You may be confident that these accountants will handle your company’s compliance and taxes issues with care. Accountants will also assist and advise you on your present financial situation as well as your future financial actions.

What is the VAT rate in Malaysia?

The Value Added Tax (VAT), also known as Sales and Service Tax (SST) in Malaysia, was implemented on September 1, 2018 to replace GST (Goods and Services Tax). The fixed rate is 6%, and some items and services are exempt from it, while others are taxed at variable rates. In this country, every firm with a yearly revenue of more than MYR 500,000 is needed to register for VAT. VAT registration in Malaysia is a multi-step procedure that begins with establishing if the firm exceeds the appropriate threshold and then proceeding through the usual application process with the Customs Office.

Malaysia’s VAT/SST system is heavily influenced by the UK VAT system. The VAT/SST is primarily a consumption tax on goods and services. The basic idea behind VAT in Malaysia is that only the value added to products or services would be taxed. The VAT system is intended to ensure that the VAT price is eventually paid by the final consumer and does not impose an additional burden on businesses throughout the value chain. There are mandatory and voluntary registrations available, with the latter applicable in the case of taxable products that are below the threshold or in the instance of individuals who were exempt from registration but prefer to go through this procedure.

1. What categories of businesses are liable to VAT?

Local supply of goods and services that are not rated at a zero VAT taxation, exempt or provided relief, as well as imported products and services, are subject to the regular VAT rate in Malaysia. Companies are generally required to register for VAT in Malaysia, although in rare situations, they are exempt. The following companies are subject to this rule:

➤ Firms that produce non-taxable items
➤ Manufacturing company located below the registration threshold
➤ Subcontractor manufacturer to whom the registration threshold applies
➤ Manufacturing companies that are specifically exempt from registration

2. What are the exemptions?

The sales tax does not apply to any goods manufactured in the country that are destined for export. Aside from this, certain sorts of items are free from SST. These are as follows:

➤ Books, magazines, periodicals, journals
➤ Bicycles, along with some parts and accessories
➤ Natural mineral substances, chemicals, medications, fertilizers
➤ Goods manufactured by a goldsmith, including certain types of jewelry

3. How to register for VAT?

Determine whether the business is a manufacturing one that is subject to this tax.

1. Determine the threshold: this is critical since it will determine whether registration is mandatory or voluntary.

Fill up and submit the Registration Application for Sales Tax or Service Tax to the appropriate authorities.

2. Verification: The application will be reviewed by a Customs Officer, who may seek additional supporting documentation.

3. Approval: Once the verification is complete, the report is sent to the Approval Officer, who will assign the status “registered” or “rejected.”

4. Receive the outcome: The outcome, whether authorized or refused, is sent through email or via the web portal.

Following that, if a firm receives its registration, it will also receive the login information for the MySST site, where the company representative will update the company information.

What is Malaysian corporate income tax?

In Malaysia, corporate income tax is a direct tax paid to the government levied on both resident and non-resident corporations receiving income from Malaysia. The corporate income tax rate varies depending on the type of business. Companies in Malaysia are required to file a corporate income tax return within seven months of closing their books. Tax due must be paid by the last day of the seventh month following the close of the accounts. Companies must furnish estimates of their tax payable for a fiscal year no later than 30 days before the start of the base period.

Differences between Accounting and Bookkeeping

Bookkeeping organizes data that will be evaluated throughout the accounting phase. Accounting is the process of summarizing, evaluating, and conveying financial data for an organization, whereas bookkeeping is just concerned with recognizing and documenting financial transactions. Management may utilize accounting data to make crucial decisions when the procedures incorporate financial reporting rather than bookkeeping. Accounting necessitates analysis and yields corporate knowledge. Bookkeeping does not provide information about a company’s financial status. Accounting helps to provide a comprehensive picture of a company’s financial situation.

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