With effect from 1st January 2012, the new Section 83A of the Income Tax Act 1967 (ITA 1967) imposes the responsibility to companies to issue a form CP 58 on any incentives (whether in monetary form or otherwise) to its agents, dealers or distributors. Agent, dealer or distributor is defined in Section 83A (4)of ITA 1967 to mean “any person who is authorized by a company to act as its agent, dealer or distributor, and who receives payment (whether in monetary form or otherwise) from the company arising from sales, transactions or schemes carried out by him as an agent, dealer or distributor.”
This new requirement applies to even a foreign company and foreign branch which operate in Malaysia BUT excludes those individuals carrying out a business or under partnership.
To ease some administrative burden, the IRBM had announced that from 31 December 2012 onwards, the form CP 58 only need to be prepared for those recipients where the monetary and non-monetary incentive payment are of an amount exceeding RM5,000 per annum. For non-monetary incentives such as motor vehicle or house, the actual value/amount incurred by the payer company will be the incentive deemed received by the recipient.
- trade discounts and bulk discounts;
- promotional items / gifts received which are not stipulated in the contract;
- incentives given for an open invitation to encourage the public/ customers to introduce more customers;
- special treatment in the form of preferential rate given to an independent agent who buys and sells goods on his own accord. He is a customer to the producers/wholesalers, except that he enjoys preferential rate due to his purchasing power;
- Credit rebate – i.e. Company selling products to supermarkets, sundry shops, minimarkets etc. Company gives customers a credit rebate (credit notes to offset their account) when they make a prompt payment & hit the yearly target/quota;
- Handling fees (i.e. loading and unloading of goods or luggage, etc) – i.e. company is in air transport business and sells air tickets to travelers. Company sub-contracts its ground handling services to an agent. The agent solely provides ground-services and does not sell air tickets to travelers. The agent is merely a sub-contractor to the company and merely receives handling fees; and
- Items such as umbrellas, pens, calendars etc. given to all agent, dealers and distributors which are not based on performance.
The payer company does not have to provide tax reference number and residence status of the payees in the form CP 58 if the information is not available. However, it is compulsory for the payer company to provide the registration number, identity card number, police number, army number or passport number of the recipients as well as the identity card number and signature of the designated officer.
The Form CP 58 shall be provided to the agent, dealer or distributor not later than 31 March in the year immediately following the year in which the incentives mentioned above are paid. Any payer which fails to prepare the form CP 58 as required under this Section 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 or to imprisonment for a term not exceeding six months or to both.
The CP 58 is a prescribed form. The payer company is not allowed to:
- provide stamped signature on the form CP 58, or
- generate the form CP 58 by computer (i.e. PDF or Excel), without signature or stamp, or
- generate form CP 58 with digital signature or electronic stamp of the company
- modify the form CP 58, for example changing the alignment, insert a line, etc.
The name, designation and NRIC number of the preparer of the payer company are required. Although NRIC number of the preparer is irrelevant to the agent, it becomes important to the Inland Revenue Board (IRB) when the form CP58 is produced as evidence in court in the event a case is brought to court.
The original copy of form CP58 must be retained by the payer company for a period of seven (7) years from the end of the calendar year in which the incentive is paid to the agent, dealer or distributor for the purpose of reference and examination by the IRB during a tax audit. A copy of the form should be given to the agent, dealer or distributor.
The IRB has agreed to extend the concession for payer companies not to issue Form CP58 for the calendar year 2012, provided that they had issued an annual statement to their agents, dealers and distributors for the year 2012. The statements must have information regarding monetary and non-monetary incentive payments.
Irrespective of whether a payer company issues Form CP58 or the yearly statement to its agents, dealers or distributors, the monetary and non-monetary incentive payment should be of amount exceeding RM5,000.
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