Taxation of limited liability partnership 2

Taxation Of Limited Liability Partnership (LLP)

Loh Boon How, CAUpdated on 14/8/2015

B. H. Loh & Associates

What is a Limited Liability Partnership (LLP)?

1. At least 2 partners, however not limit, wholly or partly of individuals and bodies corporate,

2. A separate legal entities, can be sued, acquired, developed and disposal of any properties,

3. Perpetual succession,4. Any changes of partners do not affect the

rights and liabilities of the existing of any partners.


How to determine the residence status of LLP?

•The management and control are exercise in Malaysia,

•The management and control are exercised in Malaysia by its partners,

Local and foreign LLP


Who are compliance officer?It can be either :

1. If appointed amongst the partners,

2. If not appointed by any or all of the partners,

3. A company secretary under the Companies Act 1965.


What are the duties of compliance officer?

•Prepare a tax estimation,

•Pay tax instalment payments,

•Keep a complete accounting records for 7 years,

•Submit a form PT


What is the partner’s salary?The partner’s salary 1. Included :

a) Basic salaryb) Fixed allowance,

2. Excluded :a) EPF,b) Socso,c) Insurance


What are the treatment of partner’s salary?

1. If stated in Partnership Agreement▫Deductible

2. If not stated / No Partnership Agreement▫Not deductible


How to treat the partner’s share of profit?

The distribution of profit to partner,

Each of the partner is exempted from income tax,

Each of the partner is not subject to the withholding tax.


What are the incorporation expenses? The incorporation such as :

1. Preparing of prospectus,2. Underwriting commission,3. Cost of common seal,4. Cost of registering company,5. Cost of contract and stamp duties.


How does the treatment of incorporation expenses?

•If the partners capital contribution less that RM2.5 million, deductible,

•If the partners capital contribution more that RM2.5 million, not deductible.


What are the treatment of conversion?

•The unabsorbed adjusted loss will be carried forward to LLP,

•The unabsorbed capital allowance will be carried forward to LLP


How to claim a capital allowance from previous entity?

•The qualified expenditure (QE) will be treat as control transfer, in which residual expenditure taken as the qualified expenditure (QE) in LLP.


How to treat which has been claim by previous entity?• If the capital allowance has been claim by

previous entity,

• The LLP will not entitle to claim the capital allowance in the year that the capital allowance has been claim by previous entity,

• However, the LLP is eligible to claim such capital allowance in the next assessment year.


How to submit a tax estimation?•During the year of incorporation, the LLP

required to submit a tax estimation within 3 months from the date of commencement,

•At the subsequent year, the tax estimation will be submitted 30 days before the beginning of basis period.


What is the tax rate?1. If the contribution below RM2.5 M

▫The chargeable income first RM500,000 taxed at the rate of 20% (YA 2016 : 19%),

▫The subsequent chargeable income, taxed at the rate of 25% (YA 2016 : 24%)

2. If the contribution above RM2.5M, will be taxed at 25%. (YA 2016 : 24%)


What circumstances not applicable?

•More that a 50% capital directly / indirectly contributed by a company,

•More that a 50% capital directly / indirectly owned by the LLP,

•More that a 50% capital directly / indirectly owned by a another company,


What is the treatment of foreign source of income?

•Normal company – exempted from tax,

•Specify industry (banking, insurance, sea & air transportation) – Not exempted from tax.

Conclusion•The tax treatment for a LLP is similar to a

normal company,

•All the partners and LLP are deemed to be a separate entity.



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Taxation of limited liability partnership 2