Vaughan Sdn. Bhd. (VSB), a Malaysian incorporated company with an authorized share capital of RM10 million. VSB has a major customer, Florence Sdn. Bhd. (FSB). In November 2021, FSB unexpectedly terminated the contract that it had signed with VSB in 2018. The termination of the contract by FSB had caused VSB to suffer huge losses and there were continuous pressures from the bankers and creditors to demand for the settlement of debts. Various efforts including selling most of the VSB's assets have been carried out to mitigate the adverse impact of the termination of the contract by FSB. VSB received a lump sum compensation of RM15 million from FSB. 

Required:

Discuss whether the compensation amount of RM15 million received by VSB is subject to income tax.

Answer rating: 100% (QA)

Whether the RM15 million compensation received by VSB is subject to income tax in Malaysia depends on the nature of the compensation Heres an analysis ... View the full answer