Director’s Remuneration and ways Profit are extracted from the Company have always been the popular area “attacked” in a Tax Audit by IRB.
The company is growing and you start to see cash flowing in. The most popular question being asked to an accountant is :
How Can I Extract Profit Out From the Company?
There are four common ways this is popularly done:
- Paying yourself a director’s salary.
- Issuing dividend payments from available profits.
- Take money out of a limited company as a directors’ loan.
- Claiming expenses for business-related items.
With so many restrictions on the Tax Deductibility, most Business Owners just use Dividend Distribution as the preferred mode to extract Tax Free Profit.
These are four other more adventurous approaches.
Instead of taking money out from the company, some would prefer to shift their expenses into the company. Such as :
- Buying car.
- Buying property and letting the owner stays in the property.
- Issuing salary to wife, children, parents and even maid.
- Buying luxurious painting, jewelry, furniture and many more.
Several of the above approach will attract skepticism and attack from Inland Revenue Board.
There are easier and more tax effective ways for you to extract profit from the company. The Taxguru Dr Choong Kwai Fatt will present the solution to this difficult tax question in the upcoming Payroll Tax seminar.
Have peace of mind knowing that you are taking the right approach. “TAX EFFECTIVE” and legal way to extract profit effectively from the company other than dividend approach.