Following the announcement of the Budget 2022, the Deputy Finance Minister I Mohd Shahar Abdullah tabled the first reading of the Finance Bill 2021 on 9 November 2021.

Related read: The Budget 2022 Highlights

The aforementioned bill will involve amendments to eight acts as follows:

•         Income Tax Act 1967,
•         Real Property Gains Tax Act 1976,
•         Stamp Act 1949,
•         Petroleum (Income Tax) Act 1967,
•         Labuan Business Activity Tax Act 1990,
•         Investment Promotion Act 1986,
•         Finance Act 2021, and
•         Finance Act 2018.

In this article, we will briefly discuss how the Finance Bill 2021 will affect your commission in the year of assessment 2022. This is following the proposed amendments to the Income Tax Act 1967.

Withholding Tax

1. Payments made to an agent, a dealer or a distributor, in monetary form, will be subject to a 2% withholding tax under the proposed new section 107D of the Income Tax Act 1967. This payment is to be made within 30 days to the Director General of Inland Revenue (DGIR).
2. It is to be noted that this payment is only applicable if the total sum of payment arises from sales carried out by agent, dealer or distributor amounting to more than RM100,000 in the previous year of assessment (e.g if your commission income in 2021 is more than RM100,000, you will be subject to the withholding tax in 2022).
3. A failure to make the payment within the stipulated time will result in a 10% penalty.
4. The payment made can be set off against the tax payable for the year of assessment by the agent, dealer or distributor.
5. DGIR has the discretion to waive off the penalty imposed as per item 3 above.
6. It must be noted that tax deduction is not allowed for the above-mentioned withholding tax under the proposed s 39(1)(s) of the Income Tax Act 1967.

Also read: Withholding Tax on Foreign Service Providers