BASIS PERIOD FOR BUSINESS & NON-BUSINESS SOURCES (COMPANIES)
1.0 TAX LAW

This Ruling applies in respect of section 21A of the Income Tax Act 1967. It is effective for the year of assessment 2001 and subsequent years of assessment. This Ruling supersedes Public Ruling No. 2/2000 dated 1 March 2000 where it relates to companies.
    2.1
 commencing its operations;
3.0 HOW THE TAX LAW APPLIES
    3.1
 A company is chargeable to income tax in respect of all its sources of income for a year of assessment [hereinafter also referred to as Y/A].

3.5.1

 Accounts prepared for less than or more than 12 months ending on 31 December

Where a company commences operations [see paragraph 4.5] and its first accounts are prepared for less than or more than 12 months ending on 31 December, the basis period for the year of assessment is the period ending on 31 December.

Example 1

A company commences operations on 11.05.2001 and the first accounts are closed on 31.12.2001.

The accounting period 11.05.2001 to 31.12.2001 is the basis period for the y/a 2001.

Example 2

A company commences operations on 01.09.2001 and the first accounts are closed on 31.12.2002.

The period from 01.09.2001 to 31.12.2001 is the basis period for Y/A 2001.

The period from 01.01.2002 to 31.12.2002 is the basis period for Y/A 2002.
    3.6
 Change of accounting date

3.6.1

 Normal accounts ending on 31 December

Where accounts are normally closed on 31 December and there is a change of accounting date, the basis period in the year of change is the year ending 31 December. The basis period for the subsequent year of assessment will also be the year ending 31 December unless there is a 12-month accounting period ending in that year, in which case that accounting period will be the basis period. Thereafter, the 12-month accounting period will be the basis period.

Example 1

A company which normally closes its accounts on 31 December changes its accounting date to 30 September and prepares accounts as follows: 01.01.2001 to 30.09.2001, and subsequently to 30 September each year.
The basis period for the y/a 2001 is 01.01.2001 to 31.12.2001.
The basis period for the y/a 2002 is 01.10.2001 to 30.09.2002.

Example 2

A company which normally closes its accounts on 31 December changes its accounting date to 31 March and prepares accounts as follows: 01.01.2001 to 31.03.2002, and subsequently to 31 March each year.

The basis period for the y/a 2001 is 01.01.2001 to 31.12.2001.
The basis period for the y/a 2002 is 01.01.2002 to 31.12.2002.
The basis period for the y/a 2003 is 01.04.2002 to 31.03.2003.

A)

 New accounts ending in the following year

The new accounting period is the basis period for the year of assessment in the failure year [see paragraph 4.6].

Example

A company’s accounts are normally prepared ending on 30 September. The company changes its accounting date and the accounts are now closed on 31 March. Accounts are prepared as follows: 01.10.2000 to 30.09.2001, 01.10.2001 to 31.03.2002 (6 months), and to 31 March for subsequent years.

The basis period for the y/a 2002 (the failure year) is 01.10.2001 to 31.03.2002 (6 months).
The basis period for the y/a 2003 is 01.04.2002 to 31.03.2003.

3.6.3

 Normal accounts not ending on 31 December and new accounts prepared for more than 12 months

A)

 New accounts ending in the following year

The new accounting period is the basis period for the year of assessment in the failure year.

Example

A company’s accounts are normally prepared ending on 31 July. The company changes its accounting date and accounts are now closed on 31 October. Accounts are prepared as follows: 01.08.2001 to 31.10.2002 (15 months), and to 31 October for subsequent years.

The basis period for the y/a 2002 (the failure year) is 01.08.2001 to 31.10.2002 (15 months).
The basis period for the y/a 2003 is 01.11.2002 to 31.10.2003.
    -
 [In determining the basis periods for the situations in paragraphs 3.6.2 and 3.6.3 above, no accounting period or year of assessment should be left out and there should be no overlapping of basis periods. Any fraction of a month should be treated as falling into the first period.]

Y/A

X Sdn. Bhd.

Y. Sdn. Bhd.
- [Note: In all the situations in Examples 1, 2 and 3 above, the adjusted income from the partnership source for the relevant accounting periods should be apportioned accordingly.]
- The adjusted income of the company’s business is as follows:

Accounting period ————————- Adjusted income
01.07.2001 to 31.03.2002 [A] ———— RM15,000
01.04.2002 to 31.03.2003 [B] ———— RM24,000

Applying paragraph 3.5.3, the basis periods for the company are:
Y/A —————— Basis periods
2001 —————– 01.07.2001 - 31.12.2001 (6 months)
2002 —————– 01.01.2002 - 31.12.2002 (12 months)*
2003 —————– 01.04.2002 - 31.03.2003 (12 months)*
[*Overlapping period: 01.04.2002 - 31.12.2002]

The adjusted income should be apportioned as follows:

        • Y/A & Basis period

          Apportionment

          Adjusted income
4.0 INTERPRETATION

For the purpose of this Ruling:
    4 .1
 If changes of accounting date are made in two consecutive accounting periods and the determinations in paragraph 3.6 above cannot be applied because a year of assessment or an accounting period will be left out, the Director General will, upon application by the company, give specific directions.
      • 4.5.1
 the carrying on of a business;
    4.6
 “Failure year” means the year in which there is failure to close the accounts to the normal accounting date (where that normal accounting date is not 31 December).