IMPUTATION SYSTEM-S108 Credit Balance Account

Deduction of Tax from Dividends
By Tan Thai Soon

Section 108(1)
Where a dividend is paid or credited by a company to its shareholders, the company shall be entitled to deduct tax therefrom at the rate applicable to the company on the chargeable income for the year of assessment.

Comment:
a) The dividend is deemed to be derived from Malaysia:Section 14

b) Company will deduct a tax from the dividends and shareholders would received a net dividends.

c) Company will maintains S 108 credit balance account.
S 108 account increases when company paid corporate tax or has credits (s110) from dividend income. On the other hand, S108 account reduced when there is a tax refunded and/or a dividends has been paid in the basis period.

d) S108 credit balance account is carried forward into the following year

e) Company need to maintains it S108 account by submitting From R to Inland Revenue Department (IRD).

f) With effect from YA2008:i) no additional credit balance to be added to the existing s108 account; ii) company can elect to disregard s108 account balance by filing Form 50 with IRD; or iii) continue to maintain S108 balance (as at 31.12.07) until nil balance or end of the transitional period (as at 31.12.2013).

g) With effect from YA2014: i) all unutilized S108 credit balance will be forfeited; ii) company does not need to maintain S108 account; and iii) all company will move from the existing imputation system to single tier tax system (STS).