If You Have an Agent, Then You Need to Prepare Form CP58
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Does your company engage agents, dealers, and distributors? Have you ever treated them to an overseas vacation? If you have, did you prepare Form CP58 for them?
What?! You don’t even know what’s that? In that case, hurry and learn about this right now!
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Form CP58 is not a tax return form, it is an income statement that details the income of agents, dealers, and distributors obtained
from incentives, allowances, bonuses, and etc. It is similar to the EA form received by employee.
According to section 83A(1) of the Income Tax Act 1967, from 1 January 2012 onwards, each company must prepare and provide Form CP58 to the company's agents, dealers, and distributors (hereinafter referred to as agents) by
March 31 each year in accordance with the format stipulated by the Director general of the Inland Revenue Board (IRB).
Agents must report the commissions received as personal or business income in accordance with Form CP58.
The IRB stipulates that if a company pays more than RM5,000 in cash or non-monetary incentives to agents in the relevant calendar year, it must prepare Form CP58 to these agents separately. These forms do not have to be
presented to the IRB, but if the IRB requires information on all commissions and incentives paid, the company must provide all the bonus payment information, including rewards worth less than RM5,000.
As Form CP58 does not need to be submitted to the IRB, even though this regulation has been in place for several years, many companies tend to ignore the fact that they did not prepare Form CP58. Most agents also do not ask
for this form from the relevant companies because they are unaware of it, and as it result, it leads to them reporting less tax, which may even be regarded as tax evasion!
If the company does not prepare Form CP58 for the agent, it can be fined no less than RM200 and no more than RM20,000, or imprisonment
for no more than 6 months, or both.
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An agent, dealer, or distributor is any person or company authorized by a company to carry out agency, dealership, or distribution work.
These agents receive payments in monetary or other forms from the company through sales, transactions, or execution of plans. Employees of the company, tax agents, lawyers and engineers, or clients who enjoy the product or
service in question, are not considered agents.
When a company offers commissions and incentives to agents:
(1) Which of these should be reported?
The commissions and incentives received by agents upon hitting KPIs are mainly divided into two categories:
The first is monetary rewards.
It includes basic allowances, commissions, or bonuses.
If a company pays a monetary reward to its agents, it must report the actual amount paid in Form CP58.
The second type is non-monetary rewards.
It includes incentives, travel packages, plane tickets and accommodations, cars, houses, etc.
As for non-monetary rewards, companies must prepare Form CP58 based on the actual costs paid.
(2) Which of these do not need to be reported?
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Trade and volume discounts provided by the company;
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Promotional items or gifts not indicated in the agency contract;
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Open invitations to encourage the public or customers to introduce more customers (in other words “referral fees");
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Offers of special discount rates to independent agents;
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Subcontracted payments;
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Handling fees;
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Loan rebates;
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Free items such as umbrellas, pens, and calendars that are provided not based on performance.
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If you are an employer, we advise you keep two copies of Form CP58. The first copy will be given to the dealer or agent, while the other copy is retained so that it is made available when you are being audited by the
IRB.
These are the following acceptable documents for substantiated evidence to show you have paid such commission out:
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Supporting documents - Form CP58, payment voucher
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Basis to compute the commission paid - Percentage of the commission, sales value entitled for commission
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Type of service performed - Scope of work
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Evidence that payment has been made - Payment receipt, transfer slip, bank-in slip.
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