CPD EVENTS
INTRODUCTION
Basically, the three major sources of corporate financing are retained earnings, debt capital, and equity capital. Retained earnings is a generalized term that refers to any net income that remains after any expenses and obligations are paid off. The Malaysian Tax implication can be quite complex when it comes to corporate financing.
Debt or Equity Financing?
Both debt and equity financing can be risky. Debt financing obligates companies to repay creditors. Failure to repay can result in default or bankruptcy which can affect corporate credit scores. Interest deductibility issues revolving around deductibility, withholding tax, timing of taxability are very technical and a proper understanding of it will help participants appreciate the Malaysia tax implications.
As for equity financing, whilst companies are not obligated to repay any debts with equity financing, there are no direct tax benefits associated with equity financing. There’s also a risk of dilution of ownership since it involves adding more shareholders to the mix. Investors (new and old) may also expect a share of corporate profits.
A discussion on the features of the one-tier system and its impact on dividend distribution by Malaysia companies as well as when dividend income is received from foreign companies will be discussed in details. A comparison with the imputation system of taxation will also be done.
COURSE OUTLINE
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Equity vs Debt financing
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Loan financing and tax related issues –
• deductibility of interest expense;
• interest restriction
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Loan financing and tax related issues –
• earning stripping rules;
• related party loans
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Hybrid instruments
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Preference Shares / Redeemable Preference Shares
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Bonds, ICULS, loan stocks – taxability / deductibility of discounts or premiums and related issues
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Case studies