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Tax In Malaysia: My View As Business Owner

When i first started my business; i always thought that for profit; it will be my material cost, and after that minus whatever i sell it for; the balance is the profit.


Turns out i was so wrong! 


I forgot to put in my manpower, my rental, my advertising cost etc.


And so at the end of the day; i barely had money even though the business was making money. And this was during my nail polish business days. 


But i didnt really learn from mistake then because it was a very high volume business where i had money coming in daily; resulting in me thinking it was ok. 


And when i opened my pharmacy; i did the same thing. Only this time; this cashflow (whatever thts left after paying everything) was the reason i sank and closed down within 8 months. (If you want to learn more about how to calculate click here


Now with soaplab; i was a little more aware; and so i fixed it nicely when it came to profit (something that ive covered how you can do in the natural business course in FB grp for free


So today; ill be meeting my accountant as its tax season. And we will go over whatever financial related matter that soaplab did last year; to calculate wether i will hv to top up or ill get back refund from LHDN.


As a business thats been in business for 10years; we have this thing its called the CP204. 


Where business owners will have to assume how much of ‘profit’ they will be making that financial year ahead; and start paying to lhdn. We get to review it quarterly but thats basically the standard. 


And truthfully; at times it just hurts the cashflow! Our best months are usually mid half of the year but we will have to pay in advance for the profit from January for this CP204.


Of course now u will say why not just declare that we will get low profit if you dont want to fork out so much monthly kan? 


Well no! Heres the catch; if at all your profit is ‘more’ than whats declared monthly; you will get fine! So u have like 10% only +- that you can declare.


Example. If my profit tht year tht is gona be taxed (2023) i think its 12k, ill have to pay LHDN RM 1k every month. 


If lets say somehow i so teror in marketing and i made 30k instead, ill have to faster faster review and pay more monthly to lets say 3k plus top up for the months before that i paid 1k for. 


If i dont care and biar only continue paying 1k; next year in 2024 when its tax season; ill have to top up and pay a penalty fine for the amount i didnt pay as well🥲

Means i have to top up, thn pay like i think 20% fine on the underdeclared value also = roughly 38% instead of current 18%😫


So thats why as a business owner; we will have to be aware of what our profit is like

Or; figure out a way to ‘spend’ it before the year ends. Thats when you see businesses gives huge bonuses or retreats or makan2 for the staff.


But there is a limit to it:) 


In older days; the business owners used to underdeclare. So that they dont have to pay tax. So what they do? They pile up the money under the bed/ freezer (true story😂


But after sometime; they cant really buy true asset with the money; other than maybe have extravagant weddings holidays etc. But if you bought a lambo, or a big house; the tax police will come for you:) 


For me personally; i prefer to declare all and sometimes over declare. 


Yes it hurts the business cashflow sometimes coz there is alot going out monthly; but i prefer that than kena saman. Plus when i get back the money refund around end of the next yr; its like a huge bonus😂


Also truthfully; in older days; business was run in cash business where the transactions are cash. But now with ewallets, online banking, cc; theres records everywhere! You cant run!


And im so kedekut also; i dont wanna keep cash bawah tilam and cant use it while losing to inflation🥲 i prefer to spend on real assets like stocks and real estates which both needs financial documents so one cant run away..


So anyway; ill be meeting my accountant shortly and i hope i get a big fat bonus frm tax refund this year for last year😂 this is my bonus as business owner hehe..


Its so true when Benjamin Franklin say: ‘Death and Taxes are the only things we can be sure of. 🥲’ 


❤️Nisha 

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