The date of incorporation of a company is usually misinterpreted to be synonymous with the introduction of business for income tax objectives.
Once the business has been established to start for income tax purposes, business business will be able to claim deductions on expenses incurred in income production.
By the date of starting, all expenses will not be deducted by taxation except for some types of eligible capital expenses, which will be accumulated and claimed after the business starts.
The Income Tax Act has special provisions that allow some pre-evaluation expenditure-to qualify training expenses, to qualify training expenses and to give some expenditure-tax deductions abroad. These are exceptions and the permissible amount is relatively small.
There is no specific law that decides when a business starts, and it is a question of all facts that should then be determined from the current body of case laws in local and abroad.
General idea
Generally, any business is started the day when he started its operation that produces income. In a general business business, once people, campus and goods are available, whether it is physically or online, for sale, then business has started.
In manufacturing, business begins when the factory is ready to produce, raw materials are available for production and finished goods are available for sale.
In the case of a hotel, when the hotel is opened to the public, it will begin. Some industries, such as construction and development of property, are directed by specific public rule issued by the Inland Revenue Board.
In the case of construction, the first contract is secured, or the first letter of the prize is presented, or the construction site is obtained, or the start of an activity that is part of an activities that are actively performed during a construction contract business.
For property developers, the date of starting will be when you will buy property for development and start operations related to the development of the property (for example applying to the authorities for permission).
Some industries such as gardens, high technology or complex manufacturing are requiring a long conception period before coming into revenue.
However, early activities are important, integral and part of a series of activities that must eventually be performed in stages to generate revenue. Each of these stages forms a commercial operation of a complex business.
For example, in the plantation area, you need to spend plants in planting, fertilization and maintaining before producing fruits in the palm oil industry, or latex in the rubber industry. It usually takes several years before revenue is generated. But the business started from the time since the plants were sown.
Similarly, in complex industries, which would begin with the intention of production and development of the final product when a long pregnancy period will begin from the time of the onset. This drug is common in industry and IT industry.
Other supporting factors to justify the date of starting are to ensure that the business has complied with various regulatory requirements, and is proof of registration with various officers from various officers with provident funds, social security organizations, land officials, licenses.
It is important to separate activities supporting business and activities that are preparations for the beginning of business.
The article has been contributed by SM Thannemalai (www.thannees.com), Managing Director of Thanis Tax Consulting Services SDN BHD.
