WITHOLDING 2% (E-107D) COMMISSION
A 2% Withholding Tax (WHT) will be imposed to agents, dealers or distributors whose commission exceed RM100k within 1 year. Besides, LHDN has deferred the remittance of WHT until 31.03.2022.
According to the latest FAQ, the company has to email Form CP107D to LHDN before payment made and agents must have a tax number.
What kind of income is subjected to WHT ?
All types of payments, such as commissions and incentives in the form of cash, arising from sales, transactions or programs made by the agents/wholesalers/suppliers.
Source : https://landco.my/social/details-of-agent-commission-withholding-tax/#faq-question-one
Form e-107D for 2% WHT for commission payments to Agents, Dealers or Distributors under s107D
On its website, the Inland Revenue Board of Malaysia (HASiL) released a media statement on 27 June 2023 in Bahasa Malaysia, announcing the introduction of Form e-107D.
This form allows for the online submission of the required documentation for the 2% tax deduction on commission payments made by a company to agents, distributors, or dealers under Section 107D of the Income Tax Act 1967.
The implementation of this new form began on 8 June 2023.
This new e-107D service allows taxpayers to submit Form CP107(D) online, encompassing functions such as:
- Online completion of payer and commission recipient information under Section 107(D);
- Downloading of CP107(D) attachments;
- Uploading of CP107(D) attachments; and
- Generation of Bill Numbers for Section 107(D) tax payments through the ByrHASiL service after successfully submitting Form CP107(D).
For the purpose of Section 107D tax payments using Bill Numbers, it can be done through the following methods:
- Payment via FPX:
- from the e-107D service through the ByrHASiL portal after generating the Bill Number; or
- Directly through the ByrHASiL portal at https://byrhasil.hasil.gov.my/HITS_EP/ on the HASiL Official Portal by entering the generated Bill Number from e-107D.
- Payment at the HASiL Central Management Counter (PPTH) using the Bill Number/Tax Identification Number (TIN).
For information, this service can be accessed through the MyTax application at https://mytax.hasil.gov.my/
MyTax users must log in first and select the Director or Director’s representative role to use this service.
Taxpayers can also refer to the User Manual of the Form e-107D on HASiL’s website as follows: HASiL website > MyTax > User Manual > User Manual CP107D
Frequently Asked Questions (“FAQs”) on Section 107D Withholding Tax (“WHT”) on Payments Made by a Company to Resident Individual Agents, Dealers and Distributors (“ADDs”)
Under the newly introduced WHT provision of Section 107D of the Income Tax Act, 1967, effective from 1 January 2022, payments made by companies in monetary form to their authorised ADDs arising from sales, transactions or schemes carried out by them, are subjected to 2% WHT. The WHT is only applicable where the ADDs are resident individuals who have received payments (in monetary form or otherwise) of more than RM100,000 from the same company in the preceding basis year for a year of assessment.
The Malaysian Inland Revenue Board (“MIRB”) has now issued its FAQs to provide further clarification on the application of Section 107D, with the following notable points:-
Applicability of Section 107D WHT
- The WHT is not applicable on payment in the form of credit note and discount given to ADDs and contra-transaction with ADDs.
- The scope of “individual” includes sole proprietor and individual partner in a partnership. The payment to a partnership (not the individual partner) or Limited Liability Partnership does not fall within the scope.
- In determining the applicability of Section 107D, the residency status of the ADDs in the immediate preceding year is irrelevant.
- The preceding year RM100,000 threshold value is to be tested each year (not on a one-off basis) in order to determine whether WHT will apply for payment made in the current year.
- The WHT is still applicable on the ADDs, even though they are subject to tax instalment payments under CP500.
- The 2% WHT shall be treated as an advance tax and be deducted in arriving at the “balance of tax to be paid”, upon submission of the income tax return form by the relevant ADDs.
Deferment of WHT Remittance under Section 107D
The applicable WHT shall be remitted to the MIRB within 30 days after paying or crediting the ADDs. However, a deferment has been granted by the MIRB previously. Please refer to our earlier Tax Whiz dated 13 January 2022 for the MIRB’s announcement.
In the FAQs, the MIRB has provided further clarification on the application of the deferment as follows:-
The period where payments are made to the ADDs | Due date to remit the applicable WHT to the MIRB |
From 1 January 2022 to 2 March 2022 | On 1 April 2022 |
On or after 3 March 2022 | Within 30 days from the date of paying / crediting the ADDs |
WHT Remittance Form and CP58
- Where a company is making payments to several ADDs, the company may complete the details of payment for each ADD in the appendix [Lampiran CP107D(1)], which is to be attached together with the WHT remittance form [CP107D]. Each appendix could cater up to 20 ADD recipients.
- The amended Form CP58 will include section to report the WHT deducted.
- The WHT remittance form and appendix as well as the updated Form CP58 have yet been released by the MIRB.
- The WHT can be made at the MIRB Service/Payment Counters.
The MIRB’s FAQs, which is only available in the Malay language, and the earlier KPMG Tax Whiz can be accessed via the above links.
Should you have any questions or require further clarification, please do not hesitate to email or contact any of our Executive Directors, Directors, Associate Directors or Managers whom you are accustomed to dealing with or who are responsible for the tax affairs of your organization.
