CHAPTER 1

BASIS PERIOD

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 Learning Outcomes
• Theory of Company Taxation:
– Classical system
– Fiscal transparency system
– Two tier system
– Single tier
– Imputation system
• Basis Period
Commencement date
Changes in Accounting Date
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 INTRODUCTION

MIGRATION TO SINGLE TIER TAX SYSTEM:

– Imputation system  single tier system
– Wef. YA 2008
– Profits will be taxed at the company level
– Dividends received by shareholders would be
exempted
– Transitional period: up to 31 December 2013
(6 years)

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 1. Single Tier System
 Profits will be taxed at the company level
 Dividends received by the shareholders being
exempted from tax
 Income tax payable on the chargeable income
of a company is a final tax
 Impact on share value

Reason for migration

 Simplify tax compliance
 Removes restrictions on distributions of dividends
 Lower administration cost for IRB
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 2. Imputation System

 Under this system, the tax paid by the company is

imputed to the s/holders so that the tax paid by the
company is taken as an advance tax payable by
the s/holders on their dividends received.

 The dividend received by a shareholders is

included in the computation of his total income.

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 3. Classical Theory

 In this system, the company is different and

separate from s/holder.
 The company is taxed on its profit based on
specific rate.
 S/holder – received profit (dividend) and also will
be taxed at another rate.
 S/holder will give a rebate for the tax suffered by
the company on the same income.
 If no rebate given – contribute to double taxation
on the same income.
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 4. Fiscal Transparency System

 The system ignores the legal entity of the

company.
 Company as intermediate recipient of income on
behalf of the s/holder.
 The income of the company must be allocated to
individual s/holders whether the dividend is declared
or not.
 Then the tax burden should be on the shareholders.
 This system is similar to the system of taxation for
partnership business.
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 5. Two-Tier System
 Under this system, the profits of the company are
classified into two types:
Distributed profits
Undistributed profits.
 It depend on the legal, social, economic and
political need of the country – whether it wants to
encourage distribution or retention of profits of the
company.
 The rates of taxes will be different between
distributed and undistributed profits.

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 BASIS PERIOD (PR7/2001)
 Basis period means the period relative to a year
of assessment.
 Before January 2001 (for buss. inc. of company)
– states that the calendar year immediately
preceding a year of assessment would constitute
the basis year for YA.
Basis period is year 1998
YA is year 1999
 After January 2001 – states that calendar year
coinciding with the YA shall constitute the basis
year for YA.
Basis Period is year 2001
YA is year 2001 9
 Basis Period…cont’
 Failure year concept:
year in which the business fails to prepare its
account for a financial year/ financial period/
accounting period ending on corresponding day
in the relevant YA.

 With effect year 2004, the company may have an

option to close their financial accounts either on 31
Dec or non-31 Dec.

 But for person (other than company, trusts, co-

operatives societies) can only close his accounts
to 31 Dec for his income sources.
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 Commencement date
A. Accounts End on 31 December

B. Accounts End other than 31

December

C. Company with existing operation

commencing new operations

D. Requirement under law of place of

incorporation
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 Commencement of Business
A. Accounts End on 31 December
When a company commences business and
prepares its first accounts are prepared for less or
more than 12 mths ending on 31 Dec, the basis
period for the YA is the period ending on 31
Dec.
Example 1
XYZ Bhd commenced operations on 10 April 12 and
prepared its first account to 31 Dec 12. Therefore the
basis period for YA 2012 is similar to accounting
period, i.e., 10 April 2012 to 31 Dec 2012.

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 Commencement of Business

B. Accounts End other than 31 December

When company commences operations and its first
accounts are made up for less or more than 12 mths
not ending on 31 Dec, therefore the first basis period
will end on 31 Dec and thereafter until the
accounting period is made of 12 months.

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Example 2
PQR Bhd commenced business on 26/6/10 and ended
it first account on 30/9/11 and subsequently on
30/9/12.The basis periods are as follow:
YEAR ASSESSMENT BASIS PERIOD
YA2010 26/06/10 – 31/12/2010
YA2011 01/01/10 – 31/12/2011
YA2012 01/10/11 – 30/09/2012

The above example show that the overlapping

period is from 01/10/11 – 31/12/11 (3 months)

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 Commencement of Business
C. Company with existing operation commencing
new operations
Where a company which is already carrying on one
operation commences a new operation, the basis
period for the existing operation is also the basis
period for the new operation.

Example 3
XYZ Bhd has been in operation for several year and
makes up its account ending on 30 Sept each year.
The company starts a new operation 1/6/12.
YA 2012 ; Basis period 1/6/2012 – 30/9/2012
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 Commencement of Business
D. Requirement under law of place of incorporation
Where a company commences operations and the law
of the place where it is incorporated requires it to close
its account on a particular date, the period from the date
of commencement to that accounting date is the basis
period for the first YA.

Example 4
XYZ Bhd commences operation on 21/10/11 and and
makes up its account to 30/4/12 as required by the law
of the place of its incorporation.
YA 2012 ; Basis period 21/10/2011 – 30/4/2012

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Change of Accounting Date
i. Normal accounts ending on 31 December
ii. Normal accounts not ending on 31 Dec and the
new account prepared for period LESS than 12
months
a. New account end in following year
b. The new accounts and last accounts end in the
same year.
iii. Normal accounting period does not end on 31 Dec
and the new account are prepared for a period of
MORE than 12 months.
a. The new account end in the following year
b. The new account end in the third year
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Change of Accounting Date
I. Normal accounts ending on 31 December
Where normal accounts are normally prepared up to
31 Dec each year and there is a change of
accounting period to non 31 Dec, the basis period in
the year where changes are made shall end on 31
Dec.

The subsequent BP after the year of change also

should end at 31 Dec, unless there is 12-mths
accounting period ending in that year.

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 Example 5
Granite Bhd closes its accounts on 31 Dec each year.
On 1/1/12 the company decided to change its
accounting period to 31/10/12 and subsequently to 31
Oct each year.
Answer:
The BP before and after the changes will be as follows:
YEAR ASSESSMENT BASIS PERIOD
YA2011 01/01/11 – 31/12/2011
YA2012 01/11/11 – 31/10/2012

The overlapping period is 2 months (Nov & Dec 2011)

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 Change of Accounting Date
ii. Normal accounts not ending on 31 Dec and
the new account prepared for period less
than 12 months

a. New account end in following year

If new accounting period ends in the following
year, it shall be basis period for that YA in the
failure year.
No overlapping period.

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 Change of Accounting Date
Example 6
Mesra Sdn Bhd closes its accounts on 30 September each
year. In the basis year 2008, the company changed its
accounting period to 30 June, 2008. The following are the
accounting periods before and after the changes.
1 October, 2006 to 30 September, 2007
1 October, 2007 to 30 June, 2008
1 July, 2008 to 30 June, 2009
 Answer:
YEAR ASSESSMENT BASIS PERIOD
YA2007 01/10/06 – 30/9/2007
YA2008 01/10/07 – 30/6/2008 (9 months)
YA2009 1/7/2008- 30/6/2009 21
 Change of Accounting Date
b. The new accounts and last accounts end in
the same year.

Where the new accounting period and the last

accounts end in the same year, the basis period for
that year of assessment in the failure year shall be
both periods from last accounts and the new
accounts.

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Change of Accounting Date
Example 7
Cantik Bhd closes its accounts on 31 May each year.
In the basis year 2008, the company changed its
accounting period to 31 December, 2008. The
following are the accounting periods before and after
the changes.
1 June, 2007 to 31 May, 2008
1 June, 2008 to 31 December, 2008
1 January, 2009 to 31 December, 2009

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Change of Accounting Date
Example 7 (Answer)

YA2008; 1/6/2007 – 31/12/2008

(FY = 19 months)
YA2009; 1/1/2009 – 31/12/2009

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 Change of Accounting Date
iii. Normal accounting period does not end on 31
Dec and the new account are prepared for a
period of more than 12 months.

a. The new account end in the following year

If the new accounting period ends in the following
year, it shall be the basis period for that year of
assessment in the failure year.
No overlapping period

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 Change of Accounting Date
 Example 8
Gemilang Bhd closes its accounts on 31 March
each year. In the basis year 2009, the company
changes its accounting periods to 30 June, 2009.
The following are the accounting periods before and
after changes.
1 April, 2007 to 31 March, 2008
1 April, 2008 to 30 June, 2009
1 July, 2009 to 30 June, 2010
The basis periods for the years of assessment are
as follows:

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 Change of Accounting Date
Example 8 (Answer)

YA2008; 1/4/2007 – 31/3/2008 (current)

YA2009; 1/4/2008 – 30/6/2009
(FY = 15 months)
YA2010; 1/7/2009 – 30/6/2010

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 Change of Accounting Date
b)The new account end in the third year

Where the new accounting period ends in the third

year i.e. span over a period of three basis years, the
basis period for that year of assessment in the
failure year shall be apportioned into two periods
and these periods shall be the basis periods for the
first two years of assessment commencing in the
failure year.

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 Change of Accounting Date
 Example 9
Paremba Bhd's accounting period ends on 31 May
each year. In the basis year 2007, the management of
the company changes its accounting period to 31
August, 2008. The following are the accounting periods
before and after the changes.
1 June, 2005 to 31 May, 2006
1 June, 2006 to 31 August, 2008 – 27 months
1 September, 2008 to 31 August, 2009

The basis periods for the years of assessment are as

follows: 29
 Change of Accounting Date
Example 9 (Answer)
For accounting period 1 June, 2006 to 31
August, 2008 (27 months) is apportioned into 2
period, so that;
YA2006; 1/6/2005 – 31/5/2006 (current)
YA2007; 1/6/2006 – 31/7/2007 (FY - 14 mnths)
YA2008; 1/8/2007 – 31/8/2008 (FY - 13 mnths)
YA2009; 1/9/2008 – 31/8/2009

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THANK YOU
Q&A

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