The chargeable income of your company may be different from the net profit/loss shown in its accounts. This is because some of the expenses incurred by your company may not be deductible for tax purposes. Similarly, some of the income received by your company may not be taxable or it may be taxed separately as a non-trade source income.
Besides, you may wish to claim for capital allowances on your fixed assets or claim for un-utilised losses/capital allowances brought forward from your previous Years of Assessment (YA). Generally, you may need to make the following adjustments to your net profit/loss:
Deduct income which are not taxable
Deduct investment income (e.g. interest, dividend and rental) which are to be assessed separately as non-trade income
Add disallowable expenses
Add direct expenses relating to the investment income (to be allowed against the respective investment income taxed as non-trade income)
Deduct Section 14Q deduction for expenditure incurred on renovation or refurbishment works where applicable (only applies to qualifying expenditure incurred from 16 Feb 2008 to 15 Feb 2013)
Add net investment income such as interest, dividend and rental (after deducting the direct expenses relating to the investment income)
Deduct unutilised capital allowances brought forward from previous YA where applicable
Deduct capital allowances for the current YA if you wish to claim for capital allowances on fixed assets
Deduct unutilised losses brought forward from previous YA where applicable
Deduct unutilised donations brought forward from previous YA where applicable
Deduct donations made to approved institutions of a public character if any
Value added tax (VAT), or goods and services tax (GST) is a consumption tax (CT) levied on any value that is added to a product. In contrast to sales tax, VAT is seen as neutral with respect to the number of passages that there are between the producer and the final consumer whereas sales tax is levied on total value at each stage (though in the U.S. and many other countries, sales tax is charged only at the point of final sale to the final consumer, and a use tax only to the final user; there are no sales taxes paid at wholesale or production level). The result is a cascade (downstream taxes levied on upstream taxes). A VAT is an indirect tax, in that the tax is collected from someone who does not bear the entire cost of the tax.
Personal end-consumers of products and services cannot recover VAT on purchases, but businesses are able to recover VAT on the materials and services that they buy to make further supplies or services directly or indirectly sold to end-users. In this way, the total tax levied at each stage in the economic chain of supply is a constant fraction of the value added by a business to its products, and most of the cost of collecting the tax is borne by business, rather than by the state. VAT was invented because very high sales taxes and tariffs encourage cheating and smuggling. Critics point out that it disproportionately raises taxes on middle- and low-income ...