Elements in Computing Tax Payable for Am Bank Group

This report discusses the elements that Am Bank Group focuses on while computing tax payable, including taxation rates, net profit, total incomes, deductions, and allowed and disallowed expenses.

Taxation

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Analysis of elements which are focused in computing tax payable............................................1
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Taxation can be defined as a liability of all the business entities which is required to be
paid by them to the governmental parties on the profit which is generated by them during an
accounting year. If a company is not able to pay right amount of it then it may result in strict
actions of legal authorities against the organisation (Abdul Aziz, 2016). It is very important for
all the enterprises to make sure that they pay appropriate tax each year so that possibility of such
situation could be reduced. The company which is selected for this report is Am Bank Group. It
is a public entity which is operating bus9iness under banking and finance industry and founded
in year 1975 by Hussain Najadi. Its headquarter is in Kuala Lumpur and it is operating its
business with 175 branches. Present report will cover different elements which are required to be
focused by enterprises while computing taxation.
MAIN BODY
Analysis of elements which are focused in computing tax payable
Overview of the organisation: AmBank Group is one of the largest banks of Malaysia
and operating business in finance and banking sector. Its Chairman is Tan Sri Azman Hashim
and CEO of it is Sulaiman Mohd Tahir. There are 175 different branches of it in Malaysia. It
provides ATM facilities to the customers with more than 760 automatic tailor machines in the
country. Business of it is operated by more than 10800 staff members and its parent company is
AMMB Holdings Berhad. It was listed on the main market of Bursa Malaysia in year 1988. It is
considered as sixth largest banking group of the country according to its assets. Total value of its
assets is more than RM 137 billion (Overview of Am Bank Group, 2020). Market capitalisation
of it is around RM 11 billion on 31 March 2018. There are various types of services which are
provided by it to the clients. These are retail, investment, wholesale, life insurance, share and
stock broking, life assurance, takaful, management services in assets. Main objective of the
organisation is to help businesses and individuals of Malaysia so that they can attain growth and
win together.
Taxation can be defined as the total amount which is paid by organisations to the legal
authorities on the profits which are generated for an accounting year (Bidin and et.al., 2016). In
other words it could be descried as the liability which is imposed by local authority upon citizens
and entity. Main purpose of it is to accumulate finance so that all the activities which are
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performed by governmental bodies could be performed in systematic manner. It is essential for
all the organisations to pay right amount of tax so that possibility of legal actions could be
ignored. For Am bank Group it is very important to make sure that appropriate amount of
taxation is calculated by it so that it could be paid on yearly basis. Any type of mistakes may
result in unfavourable situations for the business (Musgrave and et.al., 2019). There are various
elements which are focused by the organisation while calculating tax payable. Description of all
of them is as follows:
Taxation rates: All the companies are required to pay tax on yearly basis on the
predetermined rates. It is very important for accounting professionals to make sure that they
calculate total amount of taxation according to the rates. If they are not able to compute
appropriate taxation then it may affect growth of business as well as leave negative impact upon
market image. In Malaysia it is very important for all the enterprises to pay right tax on yearly
incomes. The common rate of tax for corporate organisations in Malaysia is 25%. All the
companies within the country are taxed on income which is generated by them by performing
operations in the nation. All the banks, insurance and air transport entities have different tax slab.
For banking and other financial institutes the tax rate is 37.5% if they are listed and unlisted
enterprises have to pay the tax @ 40%. This factor is focused by Am Bank Group in order to
calculate the exact amount of tax which is required to be paid by it (Taxation rates for Banks in
Malaysia, 2020). By using this rate the total amount of taxation which is around RM 490 is
calculated by the organisation for the year ending 2019. For 2018 the amount is RM 286.9 which
is calculated by using same taxation slab.
Net profit: It is the total amount of profit which is generated by an organisation after
deducting all the expenses. It is very important for all the business entities to make sure that
profit is calculated appropriately so that a clear picture of company could be presented in front of
stakeholders. While computing taxation it is essential to be taken in to consideration because the
amount of it is calculated on net profit. While computing tax it is focused by Am Bank Group so
that accurate amount of tax can be calculated and paid to the legal authorities. By paying
attention towards it taxation is being determined by the accounting professionals of bank so that
taxation could be paid to legal authorities. The annual report of the enterprise is showing that net
profit before tax is RM 2095.4 for year 2019 (Annual report of Am Bank Group, 2020).
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Total incomes: It is the total amount of earnings which are generated by an organisation
during an accounting year. It is very important for the business entities to make sure that they
record accurate incomes in the profit and loss account so that exact value of taxation could be
calculated. In Malaysia and other countries it is very important for companies to provide
appropriate information of total incomes so that right value of tax could be analysed. As Am
Bank Group is a Malaysian enterprise therefore, it is very important for it to record detailed
information regarding all the incomes in annual report as all of them will be used to determine
actual taxable amount (Fadzillah and Husin, 2016). From the final accounts of Am Bank Group
it has been determined that proper and accurate amount of all the earnings is mentioned in the
statements which has helped to analyse tax for year 2019.
Deductions: It can be defined as the amount which is deducted from total taxable income
of an individual or entity according to income tax law. It is very important for all the
corporations to make sure that they are paying attention towards accurate deductions to calculate
exact amount to taxation (Tax deductions in Malaysia, 2020). All the corporations which are
operating business in Malaysia may avail different types of them according to their incomes and
expenses. Some of them are as follows:
 Capital allowance: It is also known as tax depreciation which is applied on industrial
plant, machinery and other assets which are used by companies to carry out operations
(Manaf and et.al, 2014). Currently available rate of it for Malaysia organisations could be
analysed from following table:
Assets Annual allowance Initial allowance
Furniture and fixture 10 20
Office equipments 10 20
Motor vehicles 20 20
Buildings 3 10
In order to calculate the exact amount of tax all the above described allowances are
analysed by Am Bank Group. By paying attention towards all of them accurate value of tax for
year ending 2019 is calculated which is around RM 490 (Loganathan, Shahbaz and Taha, 2014).
 Interest: There is a clause for deduction of interest which could be acquired by banks or
other corporate companies (Kraal and Kasipillai, 2016). The major term which should be
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focused to get the deduction is that the interest should be incurred on the money
borrowed or employed in the generation of gross income. If the interest is laid out on the
assets which are used for performing operations then it can also be deducted from the
total taxable liability. This element is also taken in to consideration by accounting
professional of Am Bank Group so that accurate amount of taxation could be computed
and paid to the legal authorities.
 Allowable incomes: These are the incomes which are incurred while earning taxable
income. Hence this is essential for the company to conduct the business audit with the
purpose of earning taxable income. For Am Bank Group it is essential for to understand
the Malaysia-Corporate-Deductions as have to keep in while making income. The
allowable incomes are payment and wages for the employees working in the nation. EPF
and rental of business premises which comes under the allowable income. Along with
this expense for repair of vehicle used for the business purpose are consider as income
which are allowed employees to earn living. Further company which provide expenditure
for disabled employees comes under allowed income which worker can avail as per the
need and requirement of the Expenditure incurred in providing services, public amenities
and contribution to a charity or community project (Nanthakumar, Shahbaz and Taha,
2014).
 Expenditure incurred in providing and maintenance of a child care centre for the benefit
of employee individual. Beside this, the incomes which comes public amenities and
contribution to charity are the part of such income.
 Disallowed incomes: These are the income which are not allowed by the company who
are operating in Malaysia. Many of the companies do not provide accommodation
services for there employees as to create a better image and to motivate employees to
achieve desire objective for the company. In Malaysia such incomes comes under
disallowed slab rate where the accommodation charges are been collected by there
employees. Hence the company like Am bank group have to focus on such incomes and
they charge accommodation benefits from the employee salary. Another income which
are not allowed are the telephone bills which are not the part of the earning profit.
However purchase of personal cars and furniture comes under disallowed income where
the individual is liable for the loss or risk (Nor and Ismail, 2015). Company do not pay
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any amount which comes under such expenses. At last the expenditure of incorporation
of the business venture company also spend upon promotional activities such kind of
expenses are shown in the disallowed income slab.
 Total expenses: Total Expenses substance for any period for which such Total Expenses
are being resolute, the sum of the total gross cash spending of the Organization or any
subsidiary during such period, including all operating expenses, incentive fees, interest
expense and taxes. This means the Am bank group have to make effective decision which
help organisation to expand and explore the business to an larger extent. Total expenses
include cost to suppliers, worker wages, mill leases, and equipment depreciation.
Enterprise are allowed to write off tax-deductible cost on their income tax returns to
lower their taxable financial gain thus their tax liability (Wong, Chuah and Hope,
2016). All the income are allowed to firm to maintain the balance sheet which tend to
maintain the resource and capital in a well and effective manner. The management Am
bank group have to focus on the total expenses as follow all the guidelines and tax laws
as per the Malaysian tax. These are useful metric to compare a company spending habit
over the passage of time.
 Allowable expenses: It is essential cost which organizations keep to their operations
properly and it is tax deductible that means company does not allow to pay tax on
particular expenses. Such as those expenditures which occur to provide equipment to
their disabled employees. Expenses which done on publication on national language and
when organization donate money to libraries. In addition, allowable expenses are
application on those services which provided for public amenities and charity to the
society. Provide maintenance to the child care for the benefits of employees also consider
under allowable income in Malaysia-Corporate-Deductions (Wong, Chuah and Hope,
2019). Along with this, if any organization Spooner any culture of art in their country
than they also get the benefits. These deductions will provide to motivate organizations to
done such actions which helps in providing sustainable environment. These allowance
also consider by the Am Bank Group professionals and ensure that company get the
benefits of these expenses which they done for the specific purpose. In the Am Bank
Group, management does not give any political donations but they done several charities
for sustainable society. Such as Deepavali Charity Programme with 85 students from
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Sekolah Jenis Kebangsaan Ladang Diamond Jubilee in Jasin, Malacca. Am Bank Group
Christmas Charity Programme where they celebrate Christmas with 45 mentally and
physically challenged childrens who are underprivileged residents of Bukit Harapan
Therapy Community in Menggatal, Sabah. These allowance expenses motivate
organizations to done such actions or programme provide sustainability to the economy.
 Disallowed expenses: It is the another term where organizations does not allow any
deduction on expenditure. Disallowed expenses are generally include the personal
expenses which are done by owners for their personal use (Yee, Moorthy and Soon,
2017). List of disallowed expenses are such as personal expenses which includes the
accommodation benefits or payment of personal mobile bill. Purchase of personal assets
also includes used disallowed expenses such as buy personal car, furniture etc. In
addition, any kind of expenditure which done by organization or owners for personal
purpose and not related to the business operations. In context of Am Bank Groups, there
is no such expenses done by organization which discussed in disallowed expenses.
CONCLUSION
From the above project report it has been concluded that while calculating taxation it is
very important for all the organisations to pay attention towards different elements. In Malaysia
different components are focused by tax payers whether they are individuals or entities. All of
them are taxation rates, net profit, total allowed and disallowed incomes, deductions such as
capital allowance and interest. Apart from this, other components which are also focused while
calculating tax are total, allowable and disallowed expenses etc. Ignorance of any one of them
may result in issues for business to meet expectations of stakeholders.
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REFERENCES
Books and Journals:
Abdul Aziz, S. (2016, August). E-Taxation: The attitude and intention to use technology in
Malaysia. In International Conference on Accounting Studies (ICAS) 2016 (pp. 1-4).
Bidin, Z., & et.al., (2016). Determinants of attitude toward proposed good and services tax
among business communities in Malaysia. International Review of Management and
Marketing. 6(8S). 193-197.
Fadzillah, N. S. M., & Husin, Z. (2016). The acceptance level on GST implementation in
Malaysia. Gading Journal for the Social Sciences (e-ISSN 2600-7568). 19(01).
Kraal, D., & Kasipillai, J. (2016). Finally, a goods and services tax for Malaysia: A comparison
to Australia's GST experience. Austl. Tax F. 31. 257.
Loganathan, N., Shahbaz, M., & Taha, R. (2014). The link between green taxation and economic
growth on CO2 emissions: fresh evidence from Malaysia. Renewable and Sustainable
Energy Reviews. 38. 1083-1091.
Manaf, A., & et.al, (2014). Effect of taxation and fiscal arrangement on marginal oil field
investment climate: A theoretical framework. Asian Social Science. 10(15). 57-61.
Musgrave, R. A., & et.al., (2019). Taxation and Economic Development Among Pacific Asian
Countries. Routledge.
Nanthakumar, L., Shahbaz, M., & Taha, R. (2014). The effect of Green Taxation and Economic
Growth on Environment Hazards: The Case of Malaysia.
Nor, P. N. S. M. M., & Ismail, S. (2015). Effect of Industrial Training on Academic
Performance: Evidence from Malaysia. Journal of Technical Education and Training.
7(2).
Wong, K. Y., Chuah, J. H., & Hope, C. (2016). Carbon taxation in Malaysia: insights from the
enhanced PAGE09 integrated assessment model. Carbon Management. 7(5-6). 301-312.
Wong, K. Y., Chuah, J. H., & Hope, C. (2019). As an emerging economy, should Malaysia adopt
carbon taxation?. Energy & Environment. 30(1). 91-108.
Yee, C. P., Moorthy, K., & Soon, W. C. K. (2017). Taxpayers’ perceptions on tax evasion
behaviour: an empirical study in Malaysia. International Journal of Law and
Management.
Online
Overview of Am Bank Group. 2020. [Online]. Available through:
<https://www.ambankgroup.com/eng/AboutUs/Pages/OurVision.aspx>
Taxation rates for Banks in Malaysia. 2020. [Online]. Available through:
<https://home.kpmg/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-
tax-rates-table.html>
Annual report of Am Bank Group. 2020. [Online]. Available through:
<https://www.ambankgroup.com/eng/InvestorRelations/AnnualReports/Documents/2019/
AMMB%202019%20Annual%20Report%20(Corporate).pdf>
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Tax deductions in Malaysia. 2020. [Online]. Available through:
<http://taxsummaries.pwc.com/ID/Malaysia-Corporate-Deductions>
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