Stock in trade is anything a business acquires, produces or manufactures, for the purpose of manufacturing, selling at a profit or exchanging. It is important for stock in trade of a business to be valued correctly at the end of a financial period to enable the profits and income tax payable of the business to be ascertained accurately.
PR4/2006 - Valuation of Stock In Trade and Work In Progress Part I was issued on 31 May 2006.
The Inland Revenue Board of Malaysia (IRBM) issued the following PRs on 3 June 2020 to provide guidance on the valuation and withdrawal of stock in trade:
Details of new PR
PR2/2020 - Tax Treatment of Stock in Trade Part I - Valuation of Stock Subsection 35(3) of the Income Tax Act 1967 (ITA) addresses the basis of valuation of stock in trade which is acceptable for income tax purposes as follows:
Prior to the year of assessment (YA) 2016, paragraph 24(1)(b) of the ITA only dealt with debts arising in respect of any services rendered which were brought to tax in the YA the debt arises. With effect from YA 2016, an amendment was made to paragraph 24(1)(b) of the ITA to also bring to tax debts arising in respect of any services to be rendered in the YA the debt arises. In YA 2016, a new subsection 24(1A) of the ITA was introduced to tax any advance payments for services in the year of receipt, notwithstanding that the services have yet to be rendered and there is no debt owing.
The IRBM issued the following PR4/2020 - Tax Treatment of Any Sum Received and a Debt Owing that Arises in Respect of Services to be Rendered on 16 June 2020 to explain the application of paragraph 24(1)(b) of the ITA and subsection 24(1A) of the ITA.
Details of new PR
The new PR highlights the following points in respect of the new provisions:
Stamp duty is chargeable on instruments of transfer and not on transactions. The sale of shares in a Malaysian incorporated company will be subject to stamp duty at the rate of RM3 for every RM1,000 i.e. 0.3%.
Guidelines On the Stamping Of Share Transfer Instruments For Shares That Are Not Quoted On The Kuala Lumpur Stock Exchange (Guidelines 2001) was issued in the year 2001.
The IRBM released the Guidelines On the Stamping Of Share Transfer Instruments For Shares That Are Not Quoted On The Kuala Lumpur Stock Exchange (Guidelines 2020) on 23 June 2020. Guidelines 2019 dated 6 November 2019 was also released on the same day but it was superseded by Guidelines 2020.