JULY 2015 ISSUE

ST has been effective for almost three months now and since implementation, the Royal Malaysian Customs Department

(“RMCD”) has been showered with numerous questions in relation to various issues. Many of the issues raised have been clarified by the RMCD via the GST guides (Industry and Specific) and also the DG’s Decision Statements published in the RMCD’s website.

However, there are still some issues that remain unsolved especially pertaining to the telecommunication and property development sector. The business community will need to keep abreast with the recent developments pertaining to respective industries as the RMCD has been constantly updating and will continue to update the GST Legislation and Guides.

Discussed below are some of the common questions raised by property developers and construction companies, regarded as one of the industries with complex business arrangements and transactions in terms of GST treatments.

Property Developers

1) Are developers supplying both commercial and residential property liable to be registered for GST purposes?

Developers supplying both commercial and residential properties are regarded as mixed supplier where commercial property supplied regarded as taxable supply whereas residential property supplied regarded as exempt supply. Mixed suppliers are liable to be registered if supply of commercial property exceeds the stipulated threshold.

2) How are properties classified whether it is of residential or commercial?

The test to determine if the property is residential or commercial depends on the usage (or intended usage) of the property. As such, any building or premises used for residential purposes or designed and adapted for use or intended to be used as dwelling is exempted. Any property other than this is considered to be of commercial use.

3) Is the supply of SOHO units classified as supply of residential or commercial property?

SOHO units can be classified as residential property if the development of such units meets the requirements of Housing Development (Control and Licensing) Act 1966 and Housing Development (Control and Licensing) Rules 1989. Hence, the SOHO units can be exempted pursuant to the GST (Exempt Supply) Order 2014. 4) Are subcontractors required to charge GST to property developers?

Subcontractors (if registered) will charge GST to the property developer regardless whether the services are provided to construct residential or commercial property. This is because subcontractors are mere service providers to the property developer and hence, the services provided will be wholly taxable supplies.

5) Should GST be charged on commercial property sold in Langkawi (designated area) by a GST registered property developer?

The commercial property sold is subject to GST. Similarly, any commercial property (owned by a GST registered company in Malaysia) rented out in Langkawi is also subject to GST.

6) Is supply of free car park, with an option to sell the extra car park subject to GST? How to treat the input tax in respect of the car park?

In respect of residential properties sold;

Supply of free car park and sale of extra car park

to owners of residential properties regarded as exempt supply, thus no GST is chargeable. Input tax incurred in construction of car park for residential properties cannot be claimed as it is regarded as ancillary to the supply of residential properties, which is an exempt supply.

In respect of non-residential / commercial properties sold;

Contrary to the above, the supply of free car park and sale of extra car park to owners of non-residential properties is standard rated as it is regarded as ancillary to the supply of standard rated supply. Input tax incurred in construction of the car park is fully claimable.

7) There may be reimbursements arrangements between property developers and construction companies, where developer may purchase materials on behalf of construction companies. Are these subject to GST?

Reimbursements are expenses incurred on behalf of another person for which payer may recover the expenses from the other person. The recovery of the expenses may be subject to GST as it constitutes a separate supply. As such, a tax invoice must be issued to contractors to claim back the amount paid on behalf. Nonetheless, the developer would be entitled to claim input tax incurred on goods and services procured provided the tax invoice issued by supplier must be in the name of the developer.

8) What is residual input tax?

Residual input tax is common input tax incurred for making both taxable and exempt supplies. Hence, it should be apportioned by using the standard turnover method prescribed in the GST Legislation (or other methods approved by RMCD) as only the portion attributable to taxable supplies is claimable.

It is crucial for the developer to attribute direct and common input tax accurately as otherwise there may be input tax leakage. >> cont. on page 2

Implications on Property Developers & Construction Industry

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JULY 2015 ISSUE

9) Is it possible for contractors to contra the materials value purchased by developers in their billings to developers?

No. The contractors must issue a tax invoice for the actual value of services rendered to developers and developers issue a separate tax invoice for the back charge of materials purchased on behalf.

10) Is booking fee received subject to GST?

Booking fee is refundable by nature as the sale of the property may not be certain at that point. As such, the booking fee is not subject to GST until the sale and purchase agreement is signed.

11) Is administration / processing fee charged for sale of commercial and residential property subject to GST?

Yes. The administration / processing fee charged by a GST registered developer would be subject to GST regardless whether the property sold is commercial or residential.

12) What is the GST treatment for liquidated damages?

Liquidated damages for delay in completion of contracts is not subject to GST as it is compensatory in nature and hence, not regarded as a supply.

13) What are other critical issues to be considered by property developers?

a) Land development agreement with land owner;b) Capital goods adjustments;c) Change of use of property;d) GST planning for mixed development projects;e) Incorporating appropriate GST clause in the Sales and Purchase Agreement with buyers; andf ) Time of supply rules for supply of property and services.

Construction

1) Is a subcontractor liable to be registered?

Yes. If the taxable supplies of the subcontractor exceeds the prescribed threshold of RM500,000. 2) In certain circumstances, the main contractor may purchase materials on behalf of subcontractors. Can the subcontractor deduct the cost of material purchased by main contractor and issue a tax invoice on net amount?

The material cost should not be deducted in the tax invoice issued by the sub contractors. The tax invoice issued must be for the full value of services provided to the main contractor.

In this regard, the main contractor should issue

a separate tax invoice for the materials supplied to the subcontractors. Both main contractor and sub contractor is able to claim full input tax on purchase of materials.

3) Should GST be imposed on construction services provided by GST registered contractor to overseas customers?

Construction services provided to overseas customers may be regarded as zero rated supply pursuant to the GST (Zero-Rated Supply) Order 2014. Sub contractors should charge GST at zero percent on the services but will be able to claim all the input tax incurred in providing such services.

4) When should GST be accounted for construction services rendered?

Certificate of work done

For construction services which involve the issuance of a certificate of work done, the GST should be accounted for based on the earlier of the following:

(i) Date of issuance of certificate of work done;(ii) Date of issuance of tax invoice; or(iii) Date of receipt of payment.

However, if the tax invoice is issued within 21 days from (i) above, the time of supply will be based on the date of the invoice. However, any part payment received or tax invoice issued before the issuance of certificate of work done, the GST must be accounted for upon receipt of the part payment or issuance of tax invoice (whichever earlier).

No certificate of work done

For construction services which does not involve the issuance of a certificate of work done, the GST should be accounted for based on the earlier of the following:

(i) Date of issuance of tax invoice; or(ii) Date of receipt of payment.

However, for any part payment received in advance, the GST must be accounted for upon receipt of the part payment. The balance would be subject to GST based on (i) or (ii) above (whichever earlier).

5) Is retention amount for each progress claim subject to GST? A construction contract would generally allow the customer to withhold a percentage from the payment of each progress billing pending satisfactory completion of the entire contract. In this regard, the retention payment is not subject to GST when the initial tax invoice (detailing the total value of work less the retention sum) is issued to the customers.

For retention sum, the GST should only be accounted for based on the earlier of the following:

(i) Date of tax invoice issued for the retention payment; or(ii) Date the retention payment is received.

Note: The contractor must issue a valid invoice for the full amount of retention sum. Any deduction by the developer / main contractor for rectification work or damages is considered a separate supply for GST purposes.

6) How to treat retention amount that straddles between pre and post-GST implementation? Retention sum deducted for the construction contracts that would span GST implementation date should also be apportioned based on the percentage of work done determined as at 31 March 2015. Only the sum attributable to work done on or after 1 April 2015 will be subject to GST.

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JULY 2015 ISSUE

A Session with ACCA Sector Focused Career Fair

Harvest Court Industries Berhad (HCIB)

Representatives from the Association of Chartered Certified Accountants (ACCA) and HELP College of Art and Technology (HELP CAT) has conducted their presentation and sharing session with our staff at Morison AAC’s training room on 23 January 2015, which is an effort to promote the ACCA qualifications among students, affiliates, members and employees of the firm. It is also the firm’s effort to encourage staff to further pursue their professional education.

ACCA and HELP CAT have been continuously working together with the firm to ensure the necessary support are provided and to bridge the gap between the employees and employer.

Morison AAC was invited to participate in the Career / Internship Fair @ HELP

College of Art and Technology to disseminate information on the internship

opportunities and career paths.

Approximately 750 graduates and students attended the career fair, which was

held on Wednesday 22 April 2015 from 10.00 am till 4.00 pm.

Company No.(36998-T)Industries Berhad

Client Focus

We were appointed as the auditors for Harvest Court Industries Berhad, a company listed on the Main Market of Bursa Malaysia Securities Berhad. The principal activities of the Group is mainly manufacturing and marketing of timber doors and other related products.

HCIB Group has been the market leader for manufacturing extensive range of timber products, e.g.timber doors, timber mouldings and engineered products. They have been a reliable supplier in various housing and building projects by providing quality and fine designed timber doors. All of their efforts are made with the objective of creating beautiful façade entrances to any homes.

From a humble start up as a manufacturer of solid timber doors, HCIB Group has today expanded to comprise of manufacturing, construction and

interior design divisions.

Furthermore, HCIB Group has recently ventured into construction business. The strength of its construction division lies in its wide network in the Malaysian construction industry. By combining expert local knowledge with an experienced management team, the Group caters to various project demands.

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JULY 2015 ISSUE

Integrated Reporting (IR)Communication Beyond Financial Results by Jeremy Kong

What are the benefits for company adopting IR?IR will create value to the stakeholders and enhances their reputation for their transparency. Furthermore, a research showed that a greater transparency can improve the company’s access to capital.

The release of Integrated Reporting (IR) marks an important milestone in corporate reporting. As businesses are becoming more complex, the change in business environment has prompted need for a new corporate reporting framework. Consequently, the IR was developed. The IR framework enhance the value of corporate reporting as well as to build and increase shareholders’ confidence. This resulted the need for IR as it is increasingly important for a corporation to articulate their business strategies, performance indicators, SWOT analysis, corporate governance and value creation for the stakeholders of the corporation.

What is Integrated Reporting?

IR brings together the corporate information about an organisation’s strategies, governance, performance, strength, opportunities and etc. The importance of IR is to convey these information and messages to the stakeholders of the company in a clear and concise way. Whereby, the primary audience of the company is the company’s investor.

Below are the guiding principles toIR in a nutshell:

What are the benefits for stakeholders?

IR will give rise to a clear and concise information about the value and direction of the company whereby the investor will have access to the company’s information which allows them for better decision making process.

IR Enhances Reputationfor

Their Transparency

”

“

Are you ready for Integrated Reporting?

Safeguarding Your Emails By Nor Zaidatul Akma

Email is an invaluable tool, which also makes it a great way for those with malicious intentions to achieve what they want. Below are some of the guidelines when handling emails in order to protect yourself from hackers.

1. Be skeptical of attachments.

Even when you know the person sending you the emails, if you are not expecting an attachment, don’t open it without confirming with the sender that it is legitimate.

2. Watch out for links to websites included in an email.

Sometimes the link that shows in the message is different from the underlying URL coded into the email message. If you click on the link, you will go to a phony site, rather than to the legitimate one. Instead of clicking on the link within your email message, copy the URL and paste it into your web browser. That way, you will know that you are going to the real website.

3. Never transmit financial, or any other information you consider private via email.

Sending an email message is like sending a postcard: it is easily read by people other than those for whom it was intended. For example,

someone forwarding your message to others could inadvertently expose information you intended for the original recipient alone.

4. Be suspicious when you receive an email asking you to enter personal information.

This is called “phishing.” Con artists try to trick you into providing personal information through email or onto a web page by pretending to be a legitimate business or organisation. Don’t click on a URL in an email (see the second item above), and don’t reply to the email. If you are unsure, contact the business or organisation by phone.

5. Never reply to spam.

Unscrupulous spammers will test their lists of email by sending out millions of messages–it doesn’t cost any more to send a million than it does to send one. If you reply, for example, by following the instructions for the “unsubscribe” option, you are just verifying that they have found a good address. Once they know they have a real address, you will be inundated with more spam.

6. Don’t panic if you receive an email from someone you either don’t know, or didn’t send a message to, stating that you sent them a virus.

There are a number of computer viruses that grab the email addresses from the address book of a computer they infect. Such a virus then begins sending out email messages that appear to come from the email addresses stolen from the infected computer. Simply delete the message.

7. Handle attachments with care.

Email attachments should be detached, then scanned with anti-virus software before they are opened.

8. Use Bcc (blind carbon copy) when emailing a group of people.

To protect your friends’ privacy, put your email address in the “To” field and all other addresses in the Bcc field. Email recipients will see only their email address, not the addresses for all other group members.

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JULY 2015 ISSUE

Ways to Motivate Employees By Zunaidah

When considering ways to motivate employees keep in mind that each individual is different and therefore everyone is motivated by different objectives. While one employee may be motivated by money another may be motivated by working with supportive co-workers. One way to find out what motivates your employees is to discover their “wants” and “needs”. One way to do this is by performing surveys or questionnaires.

Below are several factors that can motivate employees:-

IncentIves

Incentives are one of the most common ways of motivating employees. Employee incentives can be money, gift cards, gifts, vacation trips, etc. The best way to decide what incentive to use to motivate employees is by asking them what they would like. You may be surprised that it’s not always money that an employee seeks.

ResponsIbIlIty

Show your employees that you trust them by giving them responsibilities. Employees usually like having some control and making choices. It makes them feel as if they are a necessary part of the business.

pleasant WoRk envIRonment

If an employee is working in an environment where there is a lot of negativity between management and employees this can diminish his/her motivation. An employee will be more motivated if he/she is working with supportive co-workers and management.

InteRestIng WoRk

Performing the same tasks everyday will become boring and repetitive for employees unless they enjoy what they do. Find out what tasks your employee is good at and enjoys doing. Providing your employee with a task he/she enjoys can prove to be an effective method of motivating employees.

lIsten

Listen to your employee’s concerns and take them seriously. Employees can become more motivated when they discover that you care about their concerns and problems.

ReWaRd good WoRk

Acknowledge employees who put in the extra effort. You can have an “Employee of the Month” or Certificates of Appreciation. Employees like to feel that their hard work is being acknowledged. Even a simple “Thank You” can show appreciation and improve employee morale.

shaRe busIness success

Making employees feel like they are part of a bigger team can be a great tool for motivating employees. Provide business performance reviews to let the employees know how the business is doing. Encourage employees strive to achieve success and growing figures for the business. Reward the whole team when the business reaches it’s goals and beyond. You can reward them with bonuses or a pizza party.

The best way to decide on a reward is to ask the employees themselves what they want. You may think you know what employees want but you don’t. Pass out a survey with different reward options and find out what really motivates your employees.

Job secuRIty

When motivating employees, job security is essential. If employees feel they might be fired or laid off they are more likely not to put their best efforts into the job.

pRomotIon / gRoWth

Most employees have a natural wanting to improve. Everybody has dreams of where they wish to be in the future. If there is no goal or growth to be achieved, there is nothing to motivate them to work harder.

be posItIve

A positive attitude can be contagious. As a manager and leader it is important to have a positive attitude. Something as simple as a negative tone in your voice can be enough to reduce employee morale.

competItIve salaRy

Though money is not always an employee’s main motivation, a competitive salary can help an employee feel that they are receiving what they deserve for their job description. If an employee is under-paid they will often go searching for other jobs that offer competitive salaries.

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JULY 2015 ISSUE

CNY Lion Dance & Luncheon

Sports Club Activities

Sports Club Day

On 22 May 2015, the Morison AAC’s Sports Club Committee organised a Sports Club Day, a day where the Sports Club Committee unveils the major events where Morison AACians can look forward to throughout 2015. Smiles were all over the faces of Morison AACians as new interesting events were introduced for this year, including MorisonAAC 2015 Sports Day, 2015 Company Trip, the setting up of a Laughter Club, amongst many others. To finish off, the Firm catered a western lunch with grilled lamb chops, fish and spaghetti which gave the staff a joyous and satisfying end to the busy week.

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JULY 2015 ISSUE

Morison International (“MI”)25 Years Anniversary 1990-2015

Celebrating 25 Years of Successful Networking

Copenhagen welcomed over 150 delegates and 34 companions to celebrate Morison International’s (MI) 25th anniversary. Kallermann Revision hosted the joint MI and Morison International Europe and North America (MIENA) conference, 7th-10th May 2015.

Day one welcomed a number of external speakers: Mogens Elsberg, (CEO of E-conomics) who shared information on e-conomics accounting software and Lotte Kylberg (PriceGain) who led an interactive pricing workshop.

Day two focused on interest groups based on service lines. The tax group was led by Bernhard Madörin (Artax), the audit/accounting group was led by Karl-Heinz Wolf (Morison Frankfurt), corporate finance was led by Greg Hayes (Hayes Knight)

and the law group (MI InterAct) was led by Christopher Avery. The conference concluded with a presentation by Steve Bavister (Speak First) who explored the difference between gravitas and levitas, why they are important and how delegates could develop them.

Attendees were treated to a highly entertaining social programme. Guests were wined, dined and entertained at Denmark’s glamorous National Opera House. On the second evening guests experienced one of Denmark’s national treasures with dinner inside Tivoli Gardens at Brødrene Price. After dinner guests explored the gardens, some were even brave enough to ride some of the many amusement rides. The evening concluded with a firework display.

25th1990

Anniversary2015–

Morison International (MI) is pleased to inform that Raju Menon of Morison Menon (United Arab Emirates (UAE)), and director of Morison International Asia Pacific has been ranked number 78 in the Top 100 Indian Leaders in the Arab World by Forbes Magazine Middle East. This is the third consecutive year that Raju Menon has been listed, this is an impressive achievement for Raju Menon, Morison Menon and MI.

Raju Menon is currently the chairman and managing partner of Morison Menon Group, established in 1999.

Raju acquired various professional degrees in law and is a chartered accountant and certified public accountant. Raju trained with leading audit firms both in India and UAE.

Morison AAC wishes to congratulate Raju Menon on this accolade.Chairman

Raju Menon

At Morison International’s (MI’s) 25th anniversary conference (8 May 2015), Jean-Pierre Larroze announced his decision to step down as Chairman from 1 January 2016.

Jean-Pierre, who is from one of MI’s 4 founding member firms (Aplitec, France) has tirelessly served MI for 14 years and overseen the association’s significant progress. After stepping down as Chairman, Jean-Pierre will continue as a Director of MI; Chairman of MI Europe and North America; Director of MI Africa and Director of MI InterAct.

MI Board has appointed Mark Levenfus, Managing Partner of New York member firm Marks Paneth LLP, as Chairman effective from 1 January 2016. With more than 30 years of experience Mark Levenfus has a deep knowledge of general accounting and

auditing. His area of specialist includes technology, media and entertainment industry and he is widely recognised for his expertise in financial services such

as hedge fund, private equity and fund structuring. Furthermore, Mark has been MI director for 3 years, during which time he has been a key contributor on all MI matters. Mark has already spearhead MI’s strategic development into North America and other key markets. He is a very well respected board director, and works efficiently and effectively with MI’s CEO. As such, he is well placed to take MI to the next level of development. Marks Paneth is now the 9th largest firm in the mid-Atlantic region, with over 550 professionals in 6 offices. The firm’s annual revenues are in excess of USD100 million.

We look forward to work closely with Mark to further enhance the synergies among the MI member firms.

Morison International Appoints New Chairman,Mark Levenfus

Raju Menon Recognised by Forbes

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JULY 2015 ISSUE

Quincy GanKrishnan Dorairaju

Zunaidah Binti Haja Mohideen

Norfadhila Binti JohariNor Zaidatul Akma

Jeremy KongEditor

18 Jalan Pinggir 1/64, Jalan Kolam Air OffJalan Sultan Azlan Shah (Jalan Ipoh) 51200 Kuala Lumpur, Malaysia.

Dato’ Patrick ChewAdvisor Committee Members

No

1

2

3

4

5

6

Speaker/Facilitator

Cheah Chun How

William Leong

Ramesh Ruben Louis

Kelvin Chew

Ramesh Ruben Louis

Kelvin Chew

Target Participants

Accounting personnel involved in GST Returns

Accountants, entrepreneurs, business owners

Auditors, finance professionals

Audit officers

Audit Seniors, Supervisors, Managers

Audit officers

Seminar Title

GST: Understanding the Tax Codes

Writing Effective Business Proposals for Soliciting Loans from Banks

Preparing to Transit from PERS to MPERS in 2016

Practical Audit Series Training Level 1 (Basic) 2 days

Practical Audit Series Training Level 2 (Intermediate) 2 days

Practical Audit Series Training Level 1 (Basic) 2 days

Dates

28th July 2015

11th August 2015

22nd & 23rd September 2015

13th & 14th October 2015

24th & 25th November 2015

8th & 9th December 2015

TRAINING CALENDAR

JUN - JUL 2015 ISSUE

8

Quincy GanKrishnan Dorairaju

Zunaidah Binti Haja Mohideen

Norfadhila Binti JohariNor Zaidatul Akma

Jeremy KongEditor

Jalan Sultan Azlan Shah (Jalan Ipoh) 51200 Kuala Lumpur, Malaysia.

Dato’ Patrick ChewAdvisor Committee Members

No

1

2

3

4

5

6

Speaker/Facilitator

Cheah Chun How

William Leong

Ramesh Ruben Louis

Kelvin Chew

Ramesh Ruben Louis

Kelvin Chew

Target Participants

Accounting personnel involved in GST Returns

Accountants, entrepreneurs, business owners

Audit Seniors, Supervisors, Managers

Seminar Title

GST: Understanding the Tax Codes

from Banks

Preparing to Transit from PERS to MPERS in 2016

Practical Audit Series Training Level 1 (Basic) 2 days

Practical Audit Series Training Level 2 (Intermediate) 2 days

Practical Audit Series Training Level 1 (Basic) 2 days

Dates

28th July 2015

11th August 2015

22nd & 23rd September 2015

13th & 14th October 2015

24th & 25th November 2015

8th & 9th December 2015

TRAINING CALENDAR

FEBRUARYFEBRUARY

JANUARY

JANUARY

JUNEJUNEAPRIL

APRIL

MARCHMARCH

MAYMAY