Limited Liability Partnership (LLP) is a new form of business vehicle. However, the treatment of tax is totally difference with conventional tax computation. This presentation slide serves as a guide to understand how the LLP being taxed and the treatment of unabsorbed business loss and unabsorbed capital allowance.

1. Taxation Of Limited Liability
Partnership (LLP)
Loh Boon How, CA
Updated on 14/8/2015

2. 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.
B. H. Loh & Associates

3. 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
B. H. Loh & Associates

4. 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.
B. H. Loh & Associates

5. 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
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6. What is the partner’s salary?
The partner’s salary
1. Included :
a) Basic salary
b) Fixed allowance,
2. Excluded :
a) EPF,
b) Socso,
c) Insurance
B. H. Loh & Associates

7. What are the treatment of partner’s
salary?
1. If stated in Partnership Agreement
▫ Deductible
2. If not stated / No Partnership Agreement
▫ Not deductible
B. H. Loh & Associates

8. 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.
B. H. Loh & Associates

9. 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.
B. H. Loh & Associates

10. 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.
B. H. Loh & Associates

11. 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
B. H. Loh & Associates

12. 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.
B. H. Loh & Associates

13. 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.
B. H. Loh & Associates

14. 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.
B. H. Loh & Associates

15. 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%)
B. H. Loh & Associates

16. 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,
B. H. Loh & Associates

17. 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.
B. H. Loh & Associates

18. 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.
B. H. Loh & Associates

19. Thank you
1. Email to us bhlohass@gmail.com,
2. Visit us www.bhloh.com.my,
3. Like us on facebook bhloh.com.my.
B. H. Loh & Associates