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Secured Debt ranks in priority against Real Property Gains Tax (RPGT)

Tue, 10 Oct 2017 10:46:00 GMT

Chye Hup Heng Sdn Bhd (in liquidation) v Ketua Pengarah Hasil Dalam Negeri

Judicial Review No WA-25-120-07/2016) (HC)

This is a note on a recent significant decision of the High Court that addresses the issue relating to the entitlement of the Director General of Inland Revenue (“DGIR”) to immediate payment of real property gains tax (“RPGT”) arising from disposal of a charged property by a liquidator.

Chye Hup Heng Sdn Bhd (“CHH”) created a land charge over a piece of property (“the property”) in favour of Malayan Banking Berhad (“Maybank”) to secure banking facilities. After CHH was wound up by the court, the liquidators of CHH took steps to dispose of the property. Arising from the disposal of the property, the DGIR assessed that RPGT was payable on the gains made from the disposal of the property and demanded payment within 30 days. However, the sale proceeds of the property were insufficient to settle the debt due to Maybank which was secured by the land charge (“the secured debt”).

CHH filed an application for judicial review to challenge, inter alia, the entitlement of the DGIR to immediate payment of the RPGT. CHH contended that pursuant to ss 213, 291 and 292 of the Companies Act 1965, and on settled principles, the RPGT due to the DGIR should be ranked below the secured debt due to Maybank. For this reason, CHH contended that the sale proceeds of the property should be first applied towards payment of the secured debt before payment of the RPGT. The DGIR contended that he was entitled to immediate payment under the Real Property Gains Tax Act 1976 in preference over the secured debt.

On 12 January 2017, the High Court allowed CHH’s application and quashed the decision of the DGIR. The court also ordered the DGIR to refund the RPGT paid by CHH. The High Court, in its broad oral grounds, held that it is clear from ss 291 and 292 of the Companies Act 1965 that the secured debt must be paid first in preference over RPGT.

Source : Lee Hishammuddin Allen & Gledhill, Issue 9, January 2017

Key Highlights on the Bankruptcy (Amendment) Bill 2016

Tue, 18 Apr 2017 05:12:00 GMT

The rapid increase in the number of bankruptcy in Malaysia is of particular concern. According to the Malaysian Insolvency Department statistics, a total of 97,215 people were declared bankrupt between January 2012 and September 2016, with Selangor heading the list with 27,269 cases. As a result, the government introduced the Bankruptcy (Amendment) Bill 2016 ("the Bill") with the aim to curb such continuing increase. The Bill was tabled for its first reading on 21 November 2016 and was passed by the Parliament during its second reading on 29 March 2017. It will make significant changes to the bankruptcy law once it is duly gazetted and enforced.

This article will highlight the key amendments under the Bill which, among others, includes the following:

Change of Name from Bankruptcy to Insolvency

The Bankruptcy Act 1967 will be renamed as the Insolvency Act 1967. All references to the Bankruptcy Act 1967 in any written law or document shall be construed as references to the Insolvency Act 1967 when the Bill comes into operation.

Introduction of Voluntary Arrangement as a Pre-Bankruptcy Rescue Mechanism

Voluntary arrangement is defined as a composition in satisfaction of a debtor's debt or a scheme of arrangement of a debtor's affairs. A debtor may propose a voluntary arrangement to his creditors at any time before he is adjudged bankrupt and work out a proposal for settlement of debt with his creditors.

The debtor is required to appoint a nominee to supervise the implementation of the voluntary arrangement and to simultaneously apply to the court for an interim order of voluntary arrangement. It is pertinent to note that the nominee must be a registered chartered accountant, an advocate and solicitor, or such other person approved by the Minister upon recommendation by the Director General of Insolvency and must fulfil other conditions stated in the Bill.

The interim order of voluntary arrangement is valid for 90 days from the date of order and no further extension will be granted. During the validity of this interim order, the debtor is temporarily immune with all legal proceedings. No bankruptcy petition may be made or proceeded with against the debtor. Besides that, other legal proceedings, execution or legal process are not allowed to be commenced or continued against the debtor unless with leave of the court.

Once the interim order has been made, the nominee shall summon every debtor's creditor to a meeting for the purpose of approving the debtor’s proposal for voluntary arrangement. Special resolution is required to be passed in order to approve the proposed voluntary arrangement. The right of a secured creditor to enforce his security will not be affected unless with the secured creditor's consent.

The nominee shall report the decision of the meeting to the court if the debtor and creditors could reach a consensus on the terms of the voluntary arrangement. The approved voluntary arrangement will take effect from the date of meeting and bind on all creditors. If the debtor fails to comply with any obligation under the voluntary arrangement, any creditor bound by the voluntary arrangement may file or proceed with a bankruptcy petition against the debtor. However, if the creditors decide not to approve the debtor's proposal, the court may set aside the interim order.

Stricter Requirement for Service of Bankruptcy Cause Papers

There is no change in the mode of service of the bankruptcy cause papers i.e. it is required to be served personally on the debtor. However, stricter requirements are imposed in that substituted service will only be allowed if the creditor can satisfy the court that the debtor, with intent to defeat, delay or evade personal service, departs out of Malaysia or being out of Malaysia remains out of Malaysia or departs from his dwelling house or otherwise absents himself or secludes himself in his house or closes his place of business.

Increase in Minimum Debt Threshold

The minimum threshold to present a bankruptcy petition under the Bankruptcy Act 1967 will be increased from RM30,000 to RM50,000.

Introduction of Single Order for Bankruptcy

The Bill replaces the two-tier order system namely 'receiving order and adjudication order' under the Bankruptcy Act 1967 to a single order to be called 'bankruptcy order'.

Protection for Guarantors

The Bill provides an absolute prohibition to commence any bankruptcy action against a social guarantor. “Social guarantor” is defined as a person who provides, not for the purpose of making profit, the following guarantees:

a)	a guarantee for a loan, scholarship or grant for educational or research purposes;
b)	a guarantee for a hire-purchase transaction of a vehicle for personal or non- business use; and
c)	a guarantee for a housing loan transaction solely for personal dwelling.

Besides that, a creditor is also prohibited from commencing bankruptcy proceedings against a guarantor (other than a social guarantor) unless he has obtained leave from the court. Before granting the leave, the court must satisfy that the creditor has exhausted all modes of execution and enforcement to recover the debts owed to him by the debtor. In other words, the creditor shall have commenced all execution proceedings which include seizure and sale, judgment debtor summon, garnishment and bankruptcy or winding up proceedings against the borrower before applying for leave of court to commence bankruptcy proceedings against the guarantor.

No Objection for Discharge of Certain Bankrupts

Under the Bill, a creditor is prohibited from objecting to the discharge of the following categories of bankrupts:

a)	a person who was adjudged bankrupt because he was a social guarantor;
b)	a bankrupt with a disability under the Persons with Disabilities Act 2008;
c)	a bankrupt who has passed away; and
d)	a bankrupt suffering from a serious illness certified by a Government Medical Officer.

Automatic Discharge of Bankrupt

A bankrupt will be entitled to automatic discharge from bankruptcy after 3 years from the date of his submission of a statement of affairs provided that he has achieved an amount of target contribution of his provable debt and has complied with the requirement to render an account of moneys and property to the Director General of Insolvency.

The creditor may however object to the discharge on the following grounds:

a)	the bankrupt has committed an offence under the Bankruptcy Act 1967 or under certain provisions of the Penal Code relating to fraudulent disposition or concealment of his property to prevent the distribution to creditors;
b)	the automatic discharge would prejudice the administration of the bankrupt’s estate; or
c)	the bankrupt has failed to co-operate in the administration of his estate.

Establishment of Insolvency Assistance Fund

The Bill introduces a fund to be known as the Insolvency Assistance Fund to be administered and controlled by the Director General of Insolvency for the following purposes:

a)	for payment of all costs, fees and allowances to advocates or other persons in any proceedings on behalf of a bankrupt’s estate or to recover assets of the estate;
b)	for payment of such costs and fees in the administration of a bankrupt’s estate as the Director General of Insolvency may determine;
c)	for payment of any expenses to provide an efficient and effective administration of a bankrupt’s estate that meets an appropriate standard of service; or
d)	for such other purposes as may be prescribed.

Source : Messrs. Tay & Partners http://www.taypartners.com.my/tp/2015/index.php/insidertaps-20170414

SETIAUSAHA SYARIKAT DIDAKWA KERANA MEMBERI MAKLUMAT PALSU

Tue, 03 Jan 2017 03:43:46 GMT

Khamis, 8 Disember 2016: Wong Tunk Hing, pengarah dan setiausaha syarikat Asiapura Lands Sdn Bhd telah didakwa di Mahkamah Sesyen Johor Bahru atas kesalahan membuat pernyataan palsu kepada Suruhanjaya Syarikat Malaysia (SSM) di bawah Seksyen 364(2) Akta Syarikat 1965 yang membawa hukuman penjara tidak melebihi 10 tahun atau denda tidak melebihi RM250,0000.00, jika sabit kesalahan.

Wong Tunk Hing didakwa membuat pernyataan palsu di dalam Borang 48E bertarikh 23 November 2009 berkaitan pengosongan jawatan beliau sebagai setiausaha syarikat Asiapura Lands Sdn Bhd atas alasan pengarah syarikat yang lain tidak dapat dihubungi di alamat kediaman terakhir yang diketahui. Wong Tunk Hing telah mengaku tidak bersalah di hadapan Puan Sabariah Atan, Hakim Mahkamah Sesyen Johor Bahru. Mahkamah menetapkan RM10,000 sebagai wang ikat jamin dengan seorang penjamin.

Pendakwaan dikendalikan oleh Najia Abdul Razak, Pegawai Pendakwa Kanan SSM manakala Wong Tunk Hing diwakili oleh Chua Yee Leng.

SURUHANJAYA SYARIKAT MALAYSIA
Bertarikh: 8 Disember 2016

Source : SSM

Hefty discounts for companies that settle CCM fines speedily

Wed, 09 Sep 2015 09:50:06 GMT

KUALA LUMPUR: Discounts will be given to companies that have received notices from the Companies Commission of Malaysia (CCM) for various offences.

Domestic Trade, Cooperatives and Consumerism Minister Datuk Hamzah Zainudin said those who came forward to pay the compounds as early as possible will be given discounts of up to 80%.

He said the discounts would be gradually reduced every month.

"If you come forward to settle your compound this month, you will be given a discount of 80%.

"If you settle in December, then you will receive a 50% discount.

"After that, there will be no discount given," said Hamzah in a press conference after officiating the CCM National Conference 2015 on Tuesday.

He said the discount was being given to prevent overdue in the accounts.

Hamzah said since 2012,179,179 notices have been issued with compounds valued at about RM150mil.

He said among the offences were failure of companies to submit their annual returns together with audited statements to CCM.

Others included failure to conduct the annual general meeting.

He said action could be taken against companies that failed to settle their compounds.

Hamzah also said under the proposed Companies Bill 2015, individuals could register companies with just one director.

Currently, there should be at least two individuals as directors.

"This will make it easier for those who want to start their own businesses," added Hamzah.

Source: The Star, 8 September 2015

Important dates for filing of GST-03

Tue, 02 Jun 2015 09:09:00 GMT

For annual turnover below RM5.0 million:
Year End	1^st Taxable period	Due date	2^nd Taxable period	Due date
January	01-04-15	31-05-15	01-05-15 to 31-07-15	31-08-15
February	01-04-15 to 31-05-15	30-06-15	01-06-15 to 31-08-15	30-09-15
March	01-04-15 to 30-06-15	31-07-15	01-07-15 to 30-09-15	31-10-15
April	01-04-15	31-05-15	01-05-15 to 30-07-15	31-08-15
May	01-04-15 to 31-05-15	30-06-15	01-06-15 to 31-08-15	30-09-15
June	01-04-15 to 30-06-15	31-07-15	01-07-15 to 30-09-15	31-10-15
July	01-04-15	31-05-15	01-05-15 to 31-07-15	31-08-15
August	01-04-15 to 31-05-15	30-06-15	01-06-15 to 31-08-15	30-09-15
September	01-04-15 to 30-06-15	31-07-15	01-07-15 to 30-09-15	31-10-15
October	01-04-15	31-05-15	01-05-15 to 31-07-15	31-08-15
November	01-04-15 to 31-05-15	30-06-15	01-06-15 to 31-08-15	30-09-15
December	01-04-15 to 30-06-15	31-07-15	01-07-15 to 30-09-15	31-10-15

Blocked Input Tax

Thu, 23 Apr 2015 04:59:26 GMT

BLOCKED INPUT TAX

190. Input tax incurred by a taxable person in respect of the following supplies shall be excluded from any credit under GST:-

(a) the supply to or importation by him of a passenger motor car;

(b) the supply of goods or services relating to repair, maintenance and refurbishment of a passenger motor car;

(d) club subscription fee including any joining fee, membership fee, transfer fee or other fees charged by any club, association, society or organization established principally for recreational or sporting purposes or by the transferor of the membership of such club, association, society or organization as the case may be.;

(e) any payment or contribution towards any insurance contracts or takaful certificates---

(i) for indemnifying the taxable person against the cost of medical treatment to any person;

(ii) against the cost of medical treatment in which the insured or participant is any person employed by the taxable person; or

(iii) against any personal accident in which the insured or participant is any person employed by the taxable person. But does not include any insurance contract or takaful certificate against any liability which the taxable person may incur under the Employees’ Social Security Act 1969 and the Workmen’s Compensation Act 1952 where such expenses is obligatory under the act or any collective agreement within the meaning of the Industrial Relations Act 1967;

(f) any medical expenses incurred in connection with the provision of all forms of medical treatment to any person employed by a taxable person but does not include medical expenses incurred under the Employees’ Social Security Act 1969 and the Workmen’s Compensation Act 1952 where such expenses is obligatory under the act or any collective agreement within the meaning of the Industrial Relations Act 1967;

(g) any family benefits including hospitality of any kind provided by the taxable person for the benefit of any person who is the wife, husband, child including adopted child in accordance with any written law or parents of any person employed by the taxable person; and

(h) entertainment expenses to a person other than employees or existing customers except entertainment expenses incurred by a person who is in the business of providing entertainment.

191. A passenger motor car means a motor car which is constructed or adapted for carrying not more than nine passengers including the driver and the unladed weight of which does not exceed three thousand kilograms but does not include:

(a) hire and drive car which is licensed under Land Public Transport Act 2010 and Tourism Vehicle Licensing Act 1999;

(b) a motor vehicle supplied to or imported by a taxable person for the purposes of being let on hire or sold by that taxable person who is a dealer of motor vehicle licensed under the Second-Hand Dealers Act 1946;

(c) an approved vehicle used for driving instructional purposes by a driving school or driving institute permitted under Motor Vehicles (Driving Schools) Rules, 1992;

(d) a motor car which forms part of the stock in trade of a motor manufacturer or a motor dealer; or

(e) any motor car which is used exclusively for the purposes of business as may approved by the Director General and subject to any condition as the Director General deems fit to impose.

192. Entertainment expense includes—

(a) the provision of any food, drink, recreation or hospitality of any kind; or

(b) the provision of accommodation or travel associated with the provision of food, drink or recreation;

by a person or an employee of his to anyone in connection with a trade or business carried on by that person.

193. Employee, in relation to an employment, means:

(a) the servant, where the relationship of master and servant subsists; or

(b) where the relationship of master and servant does not subsist, the holder of the appointment or office which constitutes the employment.

194. Recreation or hospitality would include:

(a) a trip to a theme park or a recreation centre;

(b) a stay at a holiday resort;

(d) entry to sporting activities/events

195. Entertainment expenses to family members and potential clients (not existing clients) are disallowed.

(Source : General Guide dated 16.3.2015)

Residential maintenance fees to be GST-free

Thu, 26 Feb 2015 03:28:00 GMT

PETALING JAYA: Maintenance fees for residential stratified properties will be exempted from the Goods and Services tax (GST), said Datuk Ahmad Maslan.

The Deputy Finance Minister said the exemption covered all forms of residential stratified property, including low-cost housing projects, apartments and condominiums.

"The decision was made after taking into account that the maintenance services are not meant to make excessive profits," he told reports after attending a briefing on the GST, the 2015 Budget and current issues for Lembah Pantai residents here Wednesday.

Maintenance fees for residential stratified properties had previously been taxable under GST, but the Government decided on exemption after deliberating on the matter, said Ahmad Maslan.

Source: The Star, 25 February 2015

GST registration deadline looming in

Tue, 24 Feb 2015 09:47:05 GMT

With the extended GST registration deadline looming in, the Customs director-general Datuk Seri Khazali Ahmad has pointed to the unregistered companies to register for GST before 28 February 2015 or be prepare to pay RM15,000 in compound. He also mentioned that till date, there are more than 60,000 companies are yet to register for GST.

Meanwhile, for companies that does not register within the extended deadline, they will face a compound of RM15,000 and will be force registered for GST. The fine and registration by force are provided for under the GST Act 2014, he pointed.

Further, Khazali also mentioned that the customs department has sent an Acknowledge of Receipt (AR) registered mail reminding them to register for the GST. Subsequent to that, his department will carry out the Ops GST from 1 March 2015 where they would pay a visit to those whom have not registered.

Source: The Sun, 18 February 2015

No clarity on GST for secondary property market

Tue, 24 Feb 2015 09:45:10 GMT

With the GST to be implemented in 1 April 2015, the Malaysian Institute of Estate Agents (MIEA) President Siva Shanker has highlighted that there is no clear guidance or analysis on how property prices are going to be affected in the secondary market. This is a crucial for the investment community and there are many unanswered questions, he added.

Meanwhile, KP Bose Sdn Bhd tax consultant KP Bose Dasan has mentioned that guidelines from the customs has not taken into account on the investment community and does not provide a clear guideline for them whatsoever. Therefore, he has urged that customs provide clarification on the matter.

Meanwhile, he also mentioned that many buyers have aborted their sales and investors are unsure on whether to collect GST or not. Therefore the customs should clarify this matter to avoid damaging the property market, he added.

Source: The Sun, 17 February 2015

"Extremely" challenging year for developer?

Sat, 07 Feb 2015 05:35:54 GMT

IT was a somewhat sombre 8th Malaysian Property Summit on Wednesday with property consultants and a taxman highlighting how prices will move post-goods and services tax (GST) as a result of an over supply in most sub-segments. There will be more clarity by the middle of the year.

The main take-away was the over supply in high rise residentals, hotel rooms, office and retail space. The shortage is in affordable housing, shop houses, industrial land and landed units.

The event was organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) .

Says organising chairman James Wong: “There is a mismatch of what the market demands and what’s available, with developers not paying attention to affordable housing the last two years as they concentratre on high-end and upper middle housing.”

Jones Lang Wootton senior vice-president David Jarnell says 2015 will be an “extremely challenging year” for developers who will have to be less greedy. “The sector is definitely moving into slower growth,” he says during a panel discussion.

PEPs president Datuk Siders Sittampalam says the impending GST will not have a major impact on pricing.

“The fundamentals of the market will affect pricing. But the GST will affect developers’ cost,” he says.

Obervers say unlike in Thailand, Singapore, Australia and Hong Kong, when the GST – or its equivalent – was introduced, there was a mild property boom in these countries. But this did not happen in Malaysia. Buyers and real estate personnel are waiting to see how prices will move after April.

The general sentiment is that developers may have to absorb the GST and the days of pricing one launch higher than the previous one are over.

Source : The Star, 7th February, 2015

Register for GST soon or face legal action

Wed, 04 Feb 2015 09:55:00 GMT

It has been stated by the Royal Malaysian Customs Department Director General Datuk Seri Khazali Ahmad that no legal proceedings will be taken against companies that register for GST by 28 February 2015. However, action will be taken for companies fails to do so and a crackdown will be launched from 1 March 2015 onwards.

Citing with accordance with the provisions in the GST Act 2014, he said if an eligible business entity fails to register for GST by 28 February 2015, the customs will forcibly register them for GST and legal action will be taken against them. Hence, he urged companies to register for GST if they haven do so.

Meanwhile, pursuant to s 184 of the GST Act 2014, businesses generating taxable income exceeding RM500,000 annually are compulsory to register for GST under the Act. Failure to do, companies may be liable to a fine not exceeding RM30,000 or imprisonment up to two years or both.

Source: The Star, 4 February 2015

Businesses to be penalised for late registration

Wed, 04 Feb 2015 09:52:33 GMT

With the deadline for GST registration over, the Malaysian Customs has begun imposing penalties for businesses that have not registered for GST within the stipulated deadline of 31 December 2014. The penalty is a graduated penalty, the quantum increases by RM50 every 20 days until April 1 when the GST kicks off, and the maximum penalty can go up to RM15,000.

Director of GST Datuk Subromaniam Tholasy said that the Customs will be force-registering those businesses that had yet to register for GST, citing that the department had the data of these businesses. However, businesses in Kelantan, Terengganu and Pahang have been given an extension until January 31 to register due to the flood problems in these states.

Subromaniam also clarified that the reason they wanted businesses to register early was so that the businesses could be divided according to sectors, and then taken into a hand-holding programme and trained on the GST.

Finally, he mentioned that income tax deduction under the Accelerated Capital Allowance and a further deduction for the ICT equipment and GST training was available for businesses that have registered for GST.

Source: The Star, 19 January 2015

GST on Pos Malaysia services

Wed, 04 Feb 2015 09:49:00 GMT

The Malaysian postal service provider Pos Malaysia are in discussion with the relevant authorities on whether GST will be imposed for utilities bills paid at its counters to its customers, stated Pos Malaysia group head of corporate communications and customer care Datuk Rohaiza Hashim.

However, she has denied allegations GST has already been imposed on customers when they pay utility bills such as water and electricity, and road tax renewal, and pointed that GST is only effective from 1 April 2015.

Source: The Star, 4 February 2015

Getting ready for GST

Tue, 06 Jan 2015 02:12:00 GMT

Business are looking towards a challenging year with the implementation of Goods and Services Tax (GST).

The question of how GST will affect SMEs in Malaysia was answered by SME Corporation Malaysia Chief executive officer Datuk Hafsah Hashim.

The areas that will experience changes are as follows:

There will be some impact of the running of daily operation due to the GST compliant accounting systems. This will give rise to additional operations costs.
SMEs will need to assess if their suppliers are GST registrants. This will help in the claiming of input tax.
SMEs will need to evaluate the potential impact of GST on their pricing and plan to manage their cost.

The implementation of the GST would benefit SMEs that have registered in terms of better financial management over time. This can be achieved through proper record keeping, having trained staff and moving towards the use of electronic payments. Thus, all this enhancement would have an overall efficiency and productivity on the running of the daily operations of the SMEs.

Source: The Star Online, 5 January 2015