I have stated that Malaysia's company do not have a single brand that make our company a world class company.
It indicated that Malaysia's company unaware of tax incentive provided by Malaysia government on brand building.
Malaysia's government provide double tax relief on Advertising & Promotion expenses on Malaysian brand. It might not substantial at a glance. Based on Malaysia tax rate at 28%, double tax relief is 56%. This is more that half of the Advertising & Promotion Expenses you spend. Thus, this is a powerdful leverage strategy you unable to ignore.
If you never do any brand building but your competitor did. what is the difference? Let illustrated if a company have RM2 million profit per year.
It indicated that Malaysia's company unaware of tax incentive provided by Malaysia government on brand building.
Malaysia's government provide double tax relief on Advertising & Promotion expenses on Malaysian brand. It might not substantial at a glance. Based on Malaysia tax rate at 28%, double tax relief is 56%. This is more that half of the Advertising & Promotion Expenses you spend. Thus, this is a powerdful leverage strategy you unable to ignore.
If you never do any brand building but your competitor did. what is the difference? Let illustrated if a company have RM2 million profit per year.
No brand building
Profit 2,000,000.00
Advertising & Promotion 0.00
Net Profit after A&P expenses 2,000,000.00
Taxable profit 2,000,000.00
Tax Paid 28% 560,000.00
Net Profit after Tax 1,440,000.00
Tax Paid 28% 560,000.00
Net Profit after Tax 1,440,000.00
Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 0.00
Tax Paid 0.00
Profit After Tax 1,000,000.00
From the above illustration. Company with brand building pay RM0 tax wheareas company without any brand building expenses have to pay RM560,000.00.
Although Profit after tax for company without brand building expenses more RM440,000 than company with brand building expenses. However, in real life practise. Company with brand building expenses might generate more sales and thus more profit than company without brand building. Thus, usually company with brand building have more after tax profit than company that without any brand building expenses.
In theory, every RM1,o00,000 spend on advertising equivalent to RM440,000 on advertising expenses only. As government subsidise RM560,000. I rather pay the advertising company rather than pay to government. Amount pay to adversing company generate more sales than paying tax to government which generate RM0 additional sales.
If both company do pay advertising expenses but one with Malaysian brand that entitle to double tax relief but the other company pay advertising expenses but not Malaysian brand like OYL.
Non Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 1,000,000.00
Tax Paid 280,000.00
Profit After Tax 720,000.00
Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 0.00
Tax Paid 0.00
Profit After Tax 1,000,000.00
From the above illustration. Company with brand building pay RM0 tax wheareas company without any brand building expenses have to pay RM560,000.00.
Although Profit after tax for company without brand building expenses more RM440,000 than company with brand building expenses. However, in real life practise. Company with brand building expenses might generate more sales and thus more profit than company without brand building. Thus, usually company with brand building have more after tax profit than company that without any brand building expenses.
In theory, every RM1,o00,000 spend on advertising equivalent to RM440,000 on advertising expenses only. As government subsidise RM560,000. I rather pay the advertising company rather than pay to government. Amount pay to adversing company generate more sales than paying tax to government which generate RM0 additional sales.
If both company do pay advertising expenses but one with Malaysian brand that entitle to double tax relief but the other company pay advertising expenses but not Malaysian brand like OYL.
Non Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 1,000,000.00
Tax Paid 280,000.00
Profit After Tax 720,000.00
Malaysian brand
Profit 2,000,000.00
Advertising & Promotion 1,000,000.00
Net Profit After A&P Expenses 1,000,000.00
Taxable Profit 0.00
Tax Paid 0.00
Profit After Tax 1,000,000.00
There is still a different of RM280,000. Thus , it is advisable to used Malaysian brand if this does not affect sales.
There is another method of performance measurement call Economic Value Added Mehtod. Which Advertising and Promotion does not classified as expenses but classified as non-tangible assets. Thus, I strongly advise Malaysia company spend A&P on Malaysian brand to improve competitiveness of Malaysia company.
There is another method of performance measurement call Economic Value Added Mehtod. Which Advertising and Promotion does not classified as expenses but classified as non-tangible assets. Thus, I strongly advise Malaysia company spend A&P on Malaysian brand to improve competitiveness of Malaysia company.
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