Income Tax 2013 Booklet
Content
2012/2013 Malaysian Tax and Business Booklet
PP 131 13148/07/2 48/07/201 013 3 (032730)
20 2 0 12 / 2 0 13 M A L A Y S I A N T A X A N D B U SI SI N E S S B OOK L E T A quick reference reference guide guide outlining Malaysian Malaysian tax legislation and other business information The information provided in this booklet is based on taxation taxation laws and other legislation, as well as current practices, including legislative proposals and measures contained in the 2013 Budget announced onMalaysian 28 September 2012
This booklet incorporates in coloured italics the 2013 Malaysian Budget proposals announced on 28 September 2012. These proposals will not become law until their enactment which is expected to be in early 2013 and may be amended in the course of its passage through Parliament. This booklet also incorporates in coloured italics some other proposals announced recently which have not been enacted to date. This booklet is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material in this publication can be accepted by PricewaterhouseCoopers. Recipients should not act on the basis of this publication without seeking professional advice.
© 2012 2012 P Pric ricewa ewaterhous terhouseC eCoopers oopers.. All rig rights hts reserved. " Pricewate PricewaterhouseC rhouseCoopers" oopers" and/ and/or or " PwC" refe refers rs t o th e individual members members of the Pricewaterho PricewaterhouseC useCoopers oopers org organisation anisation i n Ma Malaysia, laysia, e each ach of w hich is a separate separa te and ind epe ependent ndent legal entity. Plea Please se see www.pwc.com/str uct ure for further details. Printed in Malaysia by SP-Muda Printing Services Sdn. Bhd. Tel: 0362735893, 62742463
CONTENTS TAX INFORMATION
AGRICULTURE ALLOWANCES ALLOWANCES Qualifying expenditure and rates
23 23
DOUBLE TAX TREATIES AND WITHHOLDING TAX RATES
24
26
30 30 31 32
INCOME TAX TAX Scope of taxation Basis of assessment
1 1 1
PERSONAL INCOME TAX TAX Tax residence status of individuals Self-assessment for individuals Rates of tax Personal reliefs Tax rebates
2 2 2 3 4 6
EMPLOYMENT INCOME INCOME Derivation Exemption (short-term employees) Employees of regional operations
6 6 7 7
TAX INCENTIVES A. Manufacturing / Services / Trading Sector Pioneer status Investment tax allowance (ITA) Enhanced pioneer status and ITA Special incentives scheme Allowance for increased export Approved services project (ASP) Food production
Types of employment income and valuation Benefits-in-kind (BIK) Collection of tax
7
Reinvestment allowance
32
8 11
Industry B. Biotechnology Industry
33
CORPORATE INCOME TAX TAX Residence status Income tax rates Self-assessment Profit distribution Losses
11 11 11 12 14 14
Group relief Business profits and deductions Transfer pricing Thin capitalisation
15 15 16 16
ALLOWANCES CAPITAL ALLOWANCES Industrial buildings Plant and machinery Accelerated capital allowances Disposals Controlled transfers
17 17 18 20 22 22
Disposals within 2 years Unabsorbed capital allowances
22 22
C. Financial Services Sector Closed-end fund company Foreign fund management company Insurance and trading of sukuk Issuance of agro-sukuk, retail sukuk and retail bonds Islamic Banking and Takaful Business Islamic fund management Islamic securities Islamic stock broking company Listing of foreign companies and foreign products in Bursa Malaysia Real Estate Investment Trust (REIT) / Property Trust Fund (PTF) Special purpose vehicle (SPV) for Islamic financing Venture capital industry
26 27 27
34 34 34 35 35 35 36 36 36
36
37 37
CONTENTS Treasury Management Centre (TMC) Tun Razak Exchange (TRX) D. Green Incentives Incentives Conservation of the environment Green Building Index (GBI) Certification Reduction of greenhouse gas emission Renewable energy source E. Healthcare Healthcare Private healthcare facilities Health tourism
39 39
40
48 48 49
J. Shipping Industry Industry
49
K. Special Economic Corridors Corridors Iskandar Malaysia (IM)
49
L. Tourism, Hotels and Exhibitions Conference promotion Domestic tours Group inclusive tours International trade exhibition
50 50 50 51
4 and 5 star hotels
51
M. Double Deduction
51
INCOME EXEMPT FROM TAX
53
48
41 41 41
42 43
F. Information and Communication Cost of developingTechnology websites Offshore trading via websites in Malaysia
I. Research and Development (R&D) Income tax exemption and Investment tax allowance Double deduction Ind Industrial ustrial building allowance Commercialisation of R&D findings
43 43
G. Other Incentives Infrastructure allowance Infrastructure for public use Owners of Malaysian brands Proprietary rights Private higher education institutions (PHEIs)
43 44 44 44 44
REAL PROPERTY GAINS TAX (RPGT) Charge to tax Real property company Chargeable person Withholding of RPGT
56
Private schools Pre-School Education Childcare centres Sponsorship of arts
45 45 45 46
Exemptions
57
SERVICE TAX Basis of taxation Rate of tax Taxable person / licensing Taxable persons and taxable services Payment of service tax / taxable period Refund of service tax on doubtful debts or “bad debts”
58 58 58 58 58
H. Regional Operations International Procurement Centre (IPC) International trading company Operational Headquarters (OHQ) company Regional Distribution Centre (RDC)
46 46 47 47
56 56 57 57
61 61
CONTENTS SALES TAX Basis of taxation Value of goods Rates of tax Class of goods Taxable goods Goods exempted Licensing Exemption from licensing Tax-free raw material Drawback Payment of sales tax / taxable period Refund of sales tax on doubtful debts or “bad debts”
62 62 62 62 62 62 63 63 63 64 64 64
IMPORT DUTIES Rates of duties
64 64
Tariff rate quota Value of goods Exemptions Prohibition of imports LICENSED MANUFACTURING WAREHOUSE
Stamping Penalty Relief / Exemption / Remission from stamp duty
69 69 69
OTHER BUSINESS INFORMATION
ECONOMIC INDICATORS AND DIRECTIONS
73
FINANCIAL REPORTING
78
EMPLOYEES’ PROVIDENT FUND Scope of EPF Rates of contributions Members' accounts Withdrawals
79 79 79 80 80
65 65 65 65
EMPLOYMENT GUIDELINES Guidelines for employment of expatriates Employment of foreign workers
81 81
66
EMPLOYEES’ SOCIAL SECURITY FUND Scope of SOCSO Rates of contributions
84
64
83
84 84
FREE ZONE
66
FREE TRADE AGREEMENTS
66
HUMAN RESOURCE DEVELOPMENT FUND (HRDF)
85
EXPORT DUTIES
66
EXCISE DUTIES Basis of taxation Rates of duties Excise licensing Payment of duty Exports
67 67 67 67 67 67
Scope of HRDF Rate of contribution Financial assistance
85 86 86
FOREIGN EQUITY GUIDELINES Manufacturing sector Other sectors Liberalisation measures
86 86 87 87
STAMP DUTY Basis of taxation Rates of duty
68 68 68
EXCHANGE CONTROL Remittances abroad Non-resident controlled companies
88 88 90
CONTENTS Purchase of immoveable properties by non-residents Borrowings in foreign currency by a resident Borrowings in ringgit by a resident Foreign currency accounts Non-resident accounts Exports from Malaysia MSC Malaysia companies Approved Operational Headquarters (OHQ) (OHQ) IMPORTANT FILING / FURNISHING DATES
91 91 91 92 92 93 93 94
94
I N C OM E T A X I N COM E T A X S co cop p e of ta t a x a t i on Income tax in Malaysia is imposed on income accruing in or derived from Malaysia with the following exception: •
A resident on a business of air/sea banking or company insurancecarrying is assessable on a world incometransport, scope. However with effect from (w.e.f) 1 January 2003, income attributable to a Labuan business activity of the branch or subsidiary of a Malaysian bank in Labuan is not subject to tax under the Income Tax Act 1967 but is subject to the provisions of the Labuan Labu an Business Activity Tax Act 1990. W.e.f year of assessment (YA) 2008 (under the Income Tax Act 1967), a Labuan company can make an irrevocable election to be taxed under the Income Tax Act 1967 in respect of its Labuan business activity.
•
In respect of Malaysian ownedofbanks, companies takaful companies, the profits newly insurance established overseas and branches or remittances of new overseas subsidiaries are tax exempt for 5 years, for applications received by Bank Negara Malaysia not later than 31 December 2015.
B asi s of of asse assessment ssment Income is assessed on a current year basis from YA 2000. The year of assessment is the year coinciding with the calendar year, for example, the YA 2013 is the year ending 31 December 2013. The basis period for a business sourcethe is normally the financial year ending that particular YA. For example basis period for the YA 2013 for a in business which closes its accounts on 30 June 2013 is the financial year ending 30 June 2013. From YA 2001, all non-business sources of income of a company are also assessed on the basis of the financial year. W.e.f YA 2004, all income of persons other than a company, cooperative or trust body, are assessed on a calendar year basis. Also, from that year of assessment, cooperative societies and trust bodies are assessed in the same way as companies, i.e. on the basis of the financial year ending in that particular YA.
1
P E R S ON ON A L I N C O M E T A X P E R S ON ON A L I N C O M E T A X Tax r esi de dence nce sta status tus of in div i dual dualss
•
An individual is regarded as tax resident if he meets any of the following conditions, i.e. if he is ‐ in Malaysia Malaysia for for at least 182 daysthan in a182 calendar year; the year a period of less days during ‐ in (“shorter period”) but that period is linked to a period of physical presence of 182 or more “consecutive” days in the following or preceding year (“longer period”). Temporary absences from Malaysia for certain specified reasons during the shorter or longer period are counted as part of the consecutive days, provided that the individual is in Malaysia before and after each temporary absence; more during the year and, in any 3 of ‐ in Malaysia for 90 days or more the immediately preceding he was in Malaysia for at least4 90 days or was residentyears, in Malaysia; ‐ resident for the year immediately following that year and for each of the 3 immediately preceding years.
S el elff - a s s es esss m en entt for f or i n d i v i d u a l s Self-assessment for individuals was implemented from YA 2004. Under the Self Assessment System (SAS), the responsibility for correctly assessing a person’s tax liability is transferred from the Inland Revenue Board (IRB) to the taxpayer. The prescribed Form B/BE/M for YA 2012 will be issued to individual taxpayers in January 2013 or earlier and will be due for submission not later than 30 April 2013 except for those who derive business income such as sole proprietors and partnerships where the deadline for tax filing is 30 June each year. The submission of the Form B/BE/M is deemed to be a notice of assessment for which tax is due and payable on the same date as the filing deadline. Under the SAS, the IRB monitors taxpayers’ compliance with the law through field audits.
2
P E R S ON ON A L I N C O M E T A X R ate atess of tax tax Resident individuals
•
Year of Year o f assessment 2013 2013 Chargeable Rate Tax Payable Tax Payabl e Income % RM RM 5,000
On the first On the next On the first On the next On the first On the next On the first On the next On the first
15,000 20,000 15,000 35,000 15,000 50,000 20,000 70,000
On the next On the first Above
30,000 100,000 100,000
2 6 11
19
0 300 300 900 1,200 1,650 2,850
3,800 6,650
24
7,200
13,850
26
A qualified person (defined) who is a knowledge worker residing in Iskandar Malaysia is taxed at the rate of 15% on income from an employment with a designated company engaged in a qualified activity in that specified region. The employment must have commenced on or after 24 October 2009 but not later than 31 December 2015. An approved individual under the Returning Expert Programme who is a resident is taxed at the rate of 15% on income in respect of having or exercising employment with a person in Malaysia for 5 consecutive years of assessment.
•
•
Non-resident individuals
YA 2013
Types of incom in com e
Rate Ra te (% (%))
•
Public Entertainer’s professional income
15
Interest
15
Royalty
10
Special classes of income: ‐ rental of moveable property
10 3
P E R S ON ON A L I N C O M E T A X YA 2013 Rate Ra te (%) (%)
Types of incom in com e
fees* ‐ technical or management services fees* ‐ payment for services rendered in connection with use of property or installation or operation of any plant, machinery or other apparatus purchased from a non-resident person Dividends (single tier) Dividends (franked) Business and employment income Income other than the above
10 10
Exempt 26 26 10
* Only fees for technical or management service services s rendered in Malaysia are liable to tax.
sonall r elie liefs fs P er sona
Resident Resid ent indi in divid viduals uals Types of relief
YA 20 2013 13 RM
Self Disabled individual - additional relief for self Spouse Disabled spouse - additional spouse relief Child per child (below 18 years years old) per child (over 18 years old) receiving full-time instruction of higher education in respect of: ‐ diploma level and above in Malaysia ‐ degree level and above outside Malaysia per child (over 18 years old) serving under article of indentures in a trade or profession Per physically / mentally disabled child Physically / mentally disabled child (over 18 years of age) receiving full-time instruction at institution of higher education or serving under articles of indentures in a trade or profession Life insurance premiums and EPF contributions •
9,000 6,000 3,000 3,500 1,000
•
•
6,000 6,000 6,000
•
5,000
•
6,000
* Maximum relief
4
6,000*
P E R S ON ON A L I N C O M E T A X YA2013 RM
Private Retirement Scheme contributions Deferred annuity scheme premium
3,000*
Insurance premiums for education or medical benefits
3,000*
Expenses on medical treatment, special needs or carer expenses for parents (evidenced by medical certification) Medical expenses for self, spouse or child suffering from a serious disease (including fees of up to RM500 incurred by self, spouse or child for complete medical examination) Purchase of sports equipment
5,000*
Fee expended for any course of study up to tertiary
5,000*
level other than a degree at Masters or Doctorate level, undertaken for the purpose of acquiring law, accounting, Islamic financing, technical, vocational, industrial, scientific or technological skills or qualifications or any course of study for a degree at Masters or Doctorate level undertaken for the purpose of acquiring any skill or qualification Purchase of supporting equipment for self (if a disabled person) or for disabled spouse, child or parent Cost incurred forother the purchase of books, journals, magazines and similar publications for the purpose of enhancing knowledge Relief for purchase of personal computer (once every 3 years) Deposit for child into the Skim Simpanan Pendidikan Nasional account established under Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997 (Effective from YA 2012 to YA 2017) (For YA 2007 to YA 2011 it was RM3,000) * Maximum relief
5
5,000*
300*
5,000*
1,000* 3,000* 6,000*
E M P L OY O Y M E N T I N C OM OM E YA 2013 RM
Relief on housing loan interest for the purchase of one unit residential property where the Sale and Purchase Agreement is executed between 10 March 2009 and an d 31 December 2010 (given for 3 consecutive years) Broadband subscription (YA 2010 to YA 2012)
10,000* 500*
* Maximum relief
Tax r eba bate tess Rebate for resident individuals If resident individual’s chargeable income is less than RM35,000, rebate granted is deducted from tax charged and any excess is not refundable.
•
Amount rebate and wife are jointly husband jointly assessed: ‐ where of 400 ‐ Individual 400 ‐ Wife/husband ‐ where husband and wife are separately assessed: 400 - Amount available to each, as an individual Actual amount Rebate for Zakat, Fitrah or other Islamic religious expended dues paid
•
E M P L OY O Y M E N T I N CO COM E D er i v a ti o n Employment income is regarded as derived from Malaysia and subject to Malaysian tax where the employee: exercises an employment in Malaysia for any period of ttime; ime; is on paid leave which is attributable to the exercise of an employment in Malaysia; performs duties outside Malaysia which are incidental to his employment in Malaysia; •
•
•
is employed to work on board an aircraft or ship operated by a person who is resident in Malaysia.
•
6
E M P L OY O Y M E N T I N C OM OM E E xe xemption mption ( shor t-t t-te er m emplo employy ees) Income of a non-resident from an employment in Malaysia is exempt: if the aggregate of the period or periods of employment in Malaysia does not exceed 60 days in a calendar year; or where the total period of employment which overlaps 2 calendar years •
•
does not exceed 60 days.
E mplo mployy ees of r eg i o nal ope operr at atii o ns Non-Malaysian citizens working in Operational Headquarters (OHQ) or Regional Offices (RO), or International Procurement Centre (IPC), or Regional Distribution Centre (RDC) or Treasury Management Centre (TMC) status companies, who are based in Malaysia would be taxable on time apportionment basis in accordance to the employment income attributable to the number of days they exercised in Malaysia.
Ty pe pess of emplo employy me ment nt i ncome and valuati on Benefit Bene fit to employee
Value to employee
Accommodation (unfurnished)
‐ lower of 30% of cash remuneration * or defined value of accommodation ‐ defined value of accommodation
employee/service director
•
directors of controlled companies Hotel accommodation
•
‐ 3% of cash remuneration *
•
employee/service director
* Cash remunerati remuneration on does not include equity-based equity-based income.
Allowances/perquisites (e.g. ‐ total amount paid by employer entertainment, housing, etc.) Petrol card/petrol/travel allowances ‐ exempted up to RM6,000 per for official duties or opt to be annum ** taxed based on the annual prescribed value for petrol without any exemption Childcare subsidies /allowances ‐ exempted up to RM2,400 per annum** •
**
The above exemptions are not extended to directors of controlled companies, sole proprietors and partnerships.
7
E M P L OY O Y M E N T I N C OM OM E Benefit Bene fit to employee
Value to employee
Parking fees/allowances Meal allowances Subsidies on interest on loans totaling RM300,000 for housing/ passenger motor vehicles and education Income tax Leave passages
**
‐ fully exempted **
‐ amount paid by employer ‐ cost to employer of providing leave passage to the employee and members of his immediate family ‐ exemption is given for: (i) one overseas leave passage up to a maximum of RM3,000 for fares only; or (ii) 3 local leave passages including fares, meals and accommodation
The above exemptions are not extended to directors of controlled companies, sole proprietors and partnerships.
B en ef ef i t ss -i n - k i n d ( B I K ) The IRB has issued Public Ruling 2/2004 and 4 addendums for the valuation of benefits-in-kind provided to employees. Under the Ruling, the value of BIK provided for an employee may be determined by either of the following methods: the formula method, or the prescribed value method • •
Under the formula method, annual value of BIK provided to an employee is computed using the following formula: Cost of the asset provided as a benefit/amenity Prescribed life span of the asset
8
= Annual va value
E M P L OY O Y M E N T I N C OM OM E
•
The prescribed life span for various benefits are as follows: Items Ite ms
Prescrib ed average life span Years
Motorcar
8
Furnishings: Air- conditioner Curtains & carpets Furniture Refrigerator Sewing machine Kitchen utensils/equipment Entertainment and recreation:
8 5 15 10 15 6
Organ Piano Stereo set, TV, video recorder, CD/DVD player Swimming pool (detachable), sauna Miscellaneous
•
10 20 7 15 5
Under the prescribed value method the following are some values of BIK prescribed in the Ruling: Value per year
Household furnishings, apparatus & appliances a) Semi-furnished with furniture in the lounge, dining room and bedroom b) Semi-furnished as above and with air-conditioners or carpets or curtains c) Fully furnished d) Service charges and other bills (e.g. water, electricity)
9
RM840 RM1,680 RM3,360 Charges and bills paid by employer
E M P L OY O Y M E N T I N C OM OM E
•
Other benefits ‐ Telephone (including mobile telephone), telephone bills, pager, personal data assistant (PDA) and broadband subscription ‐ Gardenersservants ‐ Domestic
‐
Corporate recreational club membership
Employers’ goods provided free or at a discount
Employers’ own services provided full or
at a discount Maternity expenses & traditional medicines
•
•
•
Exempted, limited to one unit for each asset* RM4,800 per servant RM3,600 per gardener Membership subscription paid by employer Discount up to RM1,000 is tax exempt Fully exempted Fully exempted
* The above exem exemptions ptions are not extended to dir directors ectors of controlled companie companies, s, sole proprietors and partnerships.
•
Standard rates for motorcar and fuel provided: Cost of o f car (when ne n ew)
An n u al p r esc es c r i b ed benefit of motorcar
An n u al prescribed benefit of fuel** f uel**
RM
1,200 2,400 3,600 5,000 7,000 9,000 15,000 21,250 25,000
RM
RM
Up to 50,000 50,001 – 75,000 75,001 – 100,000 100,001 – 150,000 150,001 – 200,000 200,001 – 250,000 250,001 – 350,000 350,001 – 500,000 500,001 and above
600 900 1,200 1,500 1,800 2,100 2,400 2,700 3,000
** Employee is given a choice to determine fuel benefit based on annual prescribed rates or exemption available for petrol usage.
10
C O R P OR OR A T E I N C O M E T A X
•
Annual value of driver provided: RM7,200
Collecti Collecti on of tax
Taxes are collected from employees through compulsory monthly deductions from salary under the Monthly Tax Deduction (MTD)
system. Individuals receiving non-employment income are required to pay by compulsory bi-monthly installments.
•
•
C O R P OR O R A T E I N C OM OM E T A X R esi de dence nce status A company is tax resident in Malaysia if its management and control cont rol is exercised in Malaysia. Management and control is normally considered to be exercised at the place where directors’ meetings are held concerning management and control of the company.
ncome me ta taxx r at ate es I nco
YA 2013
% Resident c comp ompanie anies s All income
•
25
W.e.f YA 2004, a resident company with paid-up capital of RM2.5 million or less, is taxed at the following rates: Chargeable Chargeabl e Incom Inc ome e
On the first In excess of
RM
YA 201 2013 3
500,000 500,000
% 20 25
W.e.f YA 2009, certain specified conditions must be met to qualify for the above rates.
11
C O R P OR OR A T E I N C O M E T A X Non-resident co mpanies Royalties Rental of moveable properties Technical or management service fees Interest Dividends – single tier – franked Business Income other than the above
•
10 10 10* 15 Exempt 25 25 10
* Only fees for technical or management services rendered in Malaysia are liable to tax.
Where the recipient is resident in a country which has a double tax treaty with Malaysia, the tax rates for specific sources of income may
•
be reduced. Interest paid to a non-resident by a bank or a finance company in Malaysia or on approved loans is exempt from tax. An approved loan is a loan granted to or guaranteed by the Malaysian government.
•
elff - a s s es esss m en t S el Self-assessment for companies came into effect from YA 2001. Public Rulings To facilitate compliance with the SAS, the Director General of Inland
•
Revenue (DGIR) is empowered by provisions in the Income TaxDGIR. Act, 1967 to issue Public Rulings. Public Rulings are binding on the All the Public Rulings can be downloaded from the IRB’s website at www.hasil.gov.my . The IRB issued the following Public Rulings from 8 October 2011 up to 28 September 2012: Ruling Rulin g
Subject
Date Date
8/2011
Foreign Nationals Working In Malaysia – Tax Treatment
16 Nov 2011
9/2011 10/2011 11/2011
Co-operative Society Gratuity Bilateral Credit And Unilateral Credit
16 Nov2011 2011 5 Dec 20 Dec 2011
12
C O R P OR OR A T E I N C O M E T A X Ruling Rulin g
Subject
Date Date
12/2011
Tax Exemption On Employment Income Of Non-Citizen Individuals Working For Certain Companies In Malaysia
20 Dec 2011
1/2012 2/2012
Compensation Employment For Loss Of Foreign Nationals Working In Malaysia – Tax Treaty Relief Appeal Against An Assessment Deduction For Loss Of Cash And Treatment Of Recoveries Clubs, Associations or Similar Institutions
27 Jan 2012 3 May 2012
3/2012 * 4/2012 5/2012
4 May 2012 1 June 2012 25 June 2012
* Supersedes Public Ruling No. 3/2001 and its Addendum
Ad van c e ru ruling s W.e.f 1 January 2007, a taxpayer may request for an advance ruling from the DGIR. The Director General may make an advance ruling on how any provision of the law applies to an arrangement described in the application. An advance ruling is only applicable to the person making the application.
•
Submissi Submission on of returns and assessment assessment Under the self-assessment system for companies, returns are required to be submitted within 7 months from the date of closing of accounts.
•
Particulars required to be specified in the return include the amount of chargeable income and tax payable by the company. On submission of the return, an assessment is deemed to have been made on the company. The return is deemed to be a notice of assessment, which is deemed to be served on the company on the day that it is submitted. Collectio ollection n of tax Payment of tax by 12 equal monthly installments has to be made, beginning from the second month of the company’s basis period
•
(financial year). An estimate of tax payable for the year of assessment must be furnished to the Director General one month before the beginning of the basis period. From YA 2008, a newly established 13
C O R P OR OR A T E I N C O M E T A X company with paid-up capital of RM2.5 million and less is exempted from this requirement for 2 years, beginning from the YA in which the company commences operation subject to certain conditions. From YA 2011, a company commencing operations in a YA, is not required to furnish estimates of tax payable or make installment payments if the basis period for the yearisofless assessment in which the company commences operations than 6 months. The balance of tax payable by a company is due to be paid on the last day by which the return must be submitted (see “Submission of returns and assessment” above). In general, tax on all income other than income from a business or employment source, or dividends received by non-resident companies are collected by means of withholding tax. The withholding tax is payable within one month of crediting or paying the non-resident company. OME
P r o f i t di s tr i bu ti ti o n From YA 2008, the imputation system of taxation was replaced by a single-tier system of taxation which came into effect from 1 January 2008. Under this system, tax on a company’s profits is a final tax and dividends are exempt in the hands of shareholders. Companies are no longer required to deduct tax at source from dividends distributed to shareholders. A transition period of 6 years is provided for implementation of the single-tier system. All companies will move to the single-tier tax system on 1as January 2014 even2013. though they may still have unutilized franking-credits at 31 December
Losses Business losses can be set off against income from all sources in the current year. Any unutilised losses can be carried forward indefinitely to be utilised against income from any business source. However, from YA 2006, companies are not allowed to deduct a loss brought forward from a prior year against income of a particular YA if the shareholders of the company at the beginning of the basis period for that YA are not substantially the same as the shareholders of the company at the end of the basis period for the (prior) YA in which the loss was initially ascertained. The Ministry of Finance has issued guidelines which state 14
C O R P OR OR A T E I N C O M E T A X that the above rule restricting carry-forward losses based on the shareholder continuity test would only apply to dormant companies.
lieff G r o up r elie From YA 2006 group relief is available for all locally incorporated resident provided that the conditions forofeligibility areadjusted met. A companycompanies that qualifies may surrender a maximum 50% of its loss for a year of assessment to one or more related companies. With effect from YA 2009, the maximum percentage of loss that can be surrendered is increased to 70%. To be eligible for group relief, claimant & surrendering companies must meet the following conditions: Must be resident and incorporated in Malaysia. Each has a paid-up capital of ordinary shares exceeding RM2.5 million at the beginning of the basis period. • •
Both companies must have same (12-month) accounting period. They are “related companies” as defined in the law, and must be “related” throughout the relevant basis period as well as the 12 months preceding that basis period. Companies currently enjoying certain incentives such as pioneer status, ITA, reinvestment allowance, etc. are not eligible.
• •
•
ness ss pr o fi ts and and de deduct ductii o ns B usi ne Business profits are computed on the basis of normal accounting principles as modified by certain tax adjustments. Generally, deduction is allowed for all outgoings and expenses wholly and exclusively incurred in the production of income. Deductions which are specifically disallowed include: Domestic or private expenses Income tax or similar taxes Preliminary or pre-operating expenses Capital expenditure Depreciation and amortisation General provisions
•
•
•
Interest expenses attributable to non-business investments
15
C O R P OR OR A T E I N C O M E T A X Lease rentals for passenger cars exceeding RM50,000 or RM100,000 per car, the latter amount being applicable to vehicles costing RM150,000 or less which have not been used prior to the rental Employer’s contributions to unapproved pension, provident or saving schemes Employer’s contributions to approved schemes in excess of 19% of employee’s remuneration Non-approved donations 50% of entertainment expenses with certain exceptions Employee’s leave passages Interest, royalty, contract payment, technical fee, rental of movable property or other payments which are subject to withholding tax in Malaysia but withholding tax was not paid
fer p r i c i n g T r a n s fe The DGIR is empowered to make adjustments on transactions of goods and services if the DGIR is of the opinion that the transactions were not entered into on arm’s-length basis. The following two rules were gazetted on 11 May 2012 but are deemed to have come into operation on 1 January 2009: ‐ Income Tax (Transfer Pricing) Rules 2012 ‐ Income Tax (Advance Pricing Arrangement) Rules 2012 The IRB has since then issued guidelines on transfer pricing and
•
•
•
advance pricing arrangement. The transfer pricing rules are applicable to to controlled transactions (including financial assistance). The rules specify the methods to determine the arm’s-length price and circumstances under which the DGIR may re-characterise transactions. The advance pricing arrangement rules are applicable only to crossborder transactions. The rules outline the application procedures for unilateral, bilateral and multilateral advance pricing arrangements.
•
•
Thi n c ap apii ta talisation lisation A new provision for thin capitalisation was introduced w.e.f 1 January 2009 under which the portion of interest charge that relates to the amount of financial assistance that is excessive is disallowed as a 16
C A P I T A L A L L OW OW A N C E S deduction. However, the implementation of specific rules relating to this provision has been deferred to December 2012.
CA P I T A L A L L O W A N C E S I n du d u s tr tr i a l b u i ldi ld i n g s Qualifying expenditure (QE) QE for purposes of industrial building allowance is the cost of construction of buildings or structures which are used as industrial buildings. With effect from YA 2005, QE in the case of a purchased building is the purchase price.
•
Types of industrial buildings An industrial building includes a building used: us ed: - as a factory - as a dock, wharf, jetty
•
-
as a warehouse for working a farm for working a mine for supplying water or electricity, or telecommunication facilities for approved research and approved training as a private hospital, maternity home and nursing home which is licensed under the law - as an old folks’ care centre approved by the Social Welfare Department - for a school or an educational institution approved by the Minister of Education - for technical or vocational training approved by the Minister of Finance - as a hotel, and that hotel is registered with the Ministry of Tourism Other qualifying expenditure
•
Expenditure on construction or purchase of the following, including expenditure on extension or improvement of ancillary structures - an airport - a motor racing circuit approved by the Finance Minister An office building will qualify for allowances where it physically physic ally forms part of an industrial building and its cost does not exceed 10% of the total building cost. 17
C A P I T A L A L L OW OW A N C E S Owners of new buildings occupied by MSC Malaysia status companies in Cyberjaya are eligible for Industrial Building Allowance for a period of 10 years. The Finance Minister may prescribe a building that is used for the purpose of a person’s business as an industrial building, and the rate
•
to be allowed. Types and rates of allowance
•
Initial Al l ow anc an c e %
An n u al Al l ow anc an c e %
10
3
Industrial building, whether constructed or purchased (w.e.f YA 2002)
Where annual allowance (AA) has been claimed for years prior to YA 2002 in respect of a building, and that allowance was calculated based on a permitted fraction* (PF), AA for that building for YA 2002 and subsequent years is calculated as follows:
•
3% x QE or PF x QE, if PF is greater than 3% 1 *PF = Unexpired life where “unexpired life” is the overall life of 50 years reduced by the number of expired years commencing from the first year in which the building was completed.
and machi Plant and machi ne nerr y Qualifying expenditure
•
Qualifying plant expenditure includes: - cost of assets used in a business, such as plant and machinery, office equipment, furniture and fittings, motor vehicles, etc. - the cost of construction and installation of plant and machinery (Where fees are paid to a non-resident in connection with installation of plant and machinery, withholding tax on that fees must be paid to qualify). - expenditure on fish ponds, animal pens, cages and other structures used for pastoral pursuits. 18
C A P I T A L A L L OW OW A N C E S Types of qualifying plant and rates of allowances
•
YA 2013 Ann An n u al al alll o w anc an c e %
Heavy machinery General plant and machinery Furniture and fixtures Office equipment Motor vehicles
20 14 10 10 20*
* Restriction on maximum qualifying expenditure: Maximum RM
New vehicles purchased on or after 28 October 2000 where on-the-road price is RM150,000 or less Vehicles other than the above
•
•
100,000
50,000
‐ Initial allowance of 20% is granted in the year the the expenditure is incurred and the asset is in use for the purpose of the business. ‐ Annual allowance at the prescribed rates calculated on cost is given for every year during which the asset is in use for the purpose of the business, and is so used at the end of that year. ‐ Claimant of initial and annual allowances must be owner of the asset. ‐ Expenditure on assets with with life spans of not more than 2 years is allowed on a replacement basis.
19
C A P I T A L A L L OW OW A N C E S ccel eler er a t ed cap ca p i t a l all al l ow a n ces A cc The following types of assets qualify for accelerated rates of initial or annual allowance:
Industrial buildings Public roads and ancillary structures which expenditure is recoverable through toll collection Buildings for the provision of child care facilities Buildings used as living accommodation for employees by a person engaged in a manufacturing, hotel or tourism business or approved service project Buildings used as a school or an educational institution approved by the Minister of Education or any relevant authority or for the purposes of industrial, technical or vocational training approved by the Minister Building used as a warehouse for storage of goods for export or for storage of imported goods to be processed and distributed or reexported Buildings purchased or constructed by a BioNexus status company for use in its approved business or expansion project Buildings constructed under an agreement with the government on a build-lease-transfer basis, approved by the Minister of Finance
Initial Al l ow anc an c e %
An n u al Al l ow anc an c e %
10
6
-
10
-
10
-
10
-
10
-
10
10
6
•
20
C A P I T A L A L L OW OW A N C E S Initial Al l ow anc an c e %
An n u al Al l ow anc an c e %
20 40 40
80 20 20
Plant and machinery (P & M) Computer and information technology
•
assets software (for YA 2009 toand YA computer 2013) Environmental protection equipment Buses using natural gas Equipment providing natural gas refueling at natural gas refueling outlet P & M for building and construction P & M for extraction of timber Tin mining equipment and machinery P & M of a manufacturing company used exclusively forwastes recycling or further processing of intowastes a finished product P & M of agriculture/plantation companies P & M for maintaining the quality of power supply Moulds used in the production of industrialised building system component
40 30 60 60
20 10, 14 or 20 10, 14 or 20 10, 14 or 20
40
20
20 20
40 40
40
20
Small-value assets of less than RM1,000 each are eligible for 100% capital allowances. The total value of such assets are capped at
•
RM10,000. This restriction to RM10,000 will not apply w.e.f YA 2009 to SMEs (as defined). Expenditure on installation of security control equipment and vehicle surveillance equipment can be fully claimed as capital allowance within 1 year subject to certain conditions. (YA 2008 to YA 2015 only).
•
21
C A P I T A L A L L OW OW A N C E S Disposals Balancing adjustments (allowance/charge) will arise on the disposal of assets on which capital allowances have been claimed. The balancing adjustment is the difference between the tax written down value and the disposal proceeds, except that balancing charge is restricted to the amount of allowances previously claimed. In the case of an industrial building, no adjustments will be made if the building is disposed of after the 50th year for expenditure incurred prior to YA 2005.
lle ed tr tr ansfe ansferr s Contr o ll No balancing adjustments will be made where assets are transferred between persons/companies under common control. In such cases, the actual consideration for the transfer of the asset is disregarded and the disposer/acquirer is deemed to have disposed of/acquired the asset at the tax written down value.
spo o sa sals ls w i th thii n 2 yea yea r s D i sp Capital allowances which have been previously granted shall be clawed back if the asset is sold within 2 years from the date of purchase, except by reason of death of the owner or other reasons the IRB thinks appropriate.
nabsorr be bed d capi tal allow allow ance ancess U nabso
Capital allowances are granted in respect of a business source only and any unabsorbed allowances can be carried forward indefinitely to be utilised against income from the same business source.
22
A G R I C U L T U R E A L L O W A N C E S However, effective from YA 2006, unabsorbed capital allowances brought forward from a prior year are not allowed to be deducted against adjusted income of a particular YA if the shareholders of the company at the beginning of the basis period for that YA are not substantially the same as the shareholders of the company at the end of the basis period for the (prior) YA in has which the capital allowances werethat ascertained. Ministry of Finance issued guidelines which state the rule The restricting carry-forward capital allowances based on the shareholder continuity test would only apply to dormant companies.
A G R I C U L T U R E A L L O W A N C E S Qualii fyi ng expe Qual xpenditur nditur e and r at ate es
Types Type s of qualifyi ng agricul ture expendi expenditure ture (QAE) (QAE)
Clearing and preparation of land Planting (but not replanting) of crops on cleared land Construction of a road or bridge on a farm Building used as living accommodation or for welfare of a person employed in working a farm Any other building
23
Rates ates %
50 50 50 20 10
D OU T A X TR T R E A T I E S A N D W I T H H O L D I N G TA TA X R A T E S O U B L E TA OU U B L E T A X TR T R E A T I E S A N D W I T H H O L D I N G TA TA X R A TE S DO The following countries have concluded double tax treaties with Malaysia: Treaty Tre aty countri cou ntries es
Rate of withh w ithholdi olding ng tax % Interest Royalties Techn Technical ical Fees
Albania Australia Austria Bahrain Bangladesh Belgium Bosnia & Herzegovina *
10 or Nil 15 or Nil 15 or Nil 5 or Nil 15 or Nil 10 or Nil 10 or Nil
10 10 or Nil 10 8 10 or Nil 10 8
10 Nil 10 10 10 10 10
Brunei Canada China, People’s Republic Chile Croatia Czech Republic Denmark Egypt Fiji
10 or or Nil Nil 15 10 or Nil
10 or Nil 10 10
10 10 10
15 10 or Nil 12 or Nil 15 or Nil 15 or Nil 15 or Nil
10 10 10 10 or Nil 10 10
5 10 10 10 10 10
Finland France Germany Hong Kong* Hungary India Indonesia Iran Ireland
15 or Nil 15 or Nil 10 or Nil 10 or Nil 15 or Nil 10 or Nil 10 or Nil 15 or Nil 10 or Nil
10 or Nil 10 or Nil 7 8 10 10 10 10 8
10 10 7 5 10 10 10 10 10
Italy Japan
15 or or Nil Nil 10
10 or Nil 10
10 10
24
D OU T A X TR T R E A T I E S A N D W I T H H O L D I N G TA TA X R A T E S O U B L E TA Treaty Trea ty cou ntr ies
Rate of w ithholdi ithh olding ng tax% Interest Royalties Techn Techn ical Fees
Jordan Kazakhstan
15 or Nil 10 or Nil
10 10
10 10
Korea Republic Kyrgyz Republic Kuwait Laos Lebanese Republic Luxembourg Malta Mauritius Morocco Mongolia Myanmar Namibia Netherlands New Zealand Norway Pakistan Papua New Guinea Philippines Poland
15 or or Nil Nil 10 10 or Nil 10 or Nil 10 or Nil 10 or Nil 15 or Nil 15 or Nil 10 or Nil 10 or Nil 10 or Nil 10 or Nil 10 or Nil 15 or Nil 15 or Nil 15 or Nil 15 or Nil 15 or Nil 15 or Nil
10 or Nil 10 10 10 8 8 10 10 10 10 10 5 8 or Nil 10 or Nil 10 or Nil 10 or Nil 10 10 or Nil 10 or Nil
10 10 10 10 10 8 10 10 10 10 10 5 8 10 10 10 10 10 10
Qatar Romania Russian Federation San Marino Saudi Arabia (full agreement) Senegal* Seychelles Republic Singapore Sri Lanka South Africa
5 or Nil 15 or Nil 15 or Nil 10 or Nil 5 or Nil
8 10 or Nil 10 10 8
8 10 10 10 8
10 or Nil 10 or Nil 10 or Nil 10 or Nil 10 or Nil
10 10 8 10 5
10 10 5 10 5
25
C E N TI TI V E S T A X I N CE Treaty Tre aty countri cou ntries es
Rate of withh w ithholdi olding ng tax % Interest Royalties Technical Fees
Spain Sudan
10 or Nil 10 or Nil
7 10
5 10
Sweden Switzerland Syria Thailand Turkey Turkmenistan United Arab Emirates United Kingdom Uzbekistan Venezuela Vietnam Zimbabwe
10 or Nil 10 or Nil 10 or Nil 15 or Nil 15 or Nil 10 or Nil 5 or Nil 10 or Nil 10 or Nil 15 or Nil 10 or Nil 10 or Nil
8 10 or Nil 10 10 or Nil 10 10 10 8 10 10 10 10
8 10 10 10 10 Nil 10 8 10 10 10 10
* Pending ratification
There is no withholding tax on dividends paid by Malaysian companies. Fees for technical and management services rendered in Malaysia are liable to Malaysian income tax. There is a restricted double tax treaty with Argentina and the United States of America which deals with the taxation of air and sea transport operations in international traffic.
TA X I N C E N TI V E S
Malaysia offers a wide range of tax incentives ranging from tax holidays, allowances based on capital expenditure and enhanced tax deductions. These tax incentives are generally available for tax resident companies.
A . M A N U F A C T U R I N G / S E R V I C E S / TR TR A D I N G S E CT OR P i o ne nee er stat status us Eligibility:
Companies intending to engage engage or commenced operations less than a year in a promoted activity or to produce a promoted product in the 26
C E N TI TI V E S T A X I N CE manufacturing, food processing, agricultural, hotel, tourism or other industrial or commercial sectors. Incentive:
Tax exemption on 70% of statutory income for 5 years from production day. Tax exempt dividends may be paid out of exempt income.
•
•
A Pioneer Status company which intends to undertake undert ake reinvestment before expiry of its pioneer status may opt for reinvestment allowance, provided it surrenders its pioneer status.
nvestme stment nt tax allo allow w anc ance e ( I TA ) I nve
Eligibility:
Companies intending to engage or commenced operations less than a year in a promoted activity or to produce a promoted product in the manufacturing, food processing, agricultural, hotel, tourism or other industrial or commercial sectors. ITA is an alternative to pioneer status. ITA is deemed not to be given if the asset is disposed of within 2 years from the date of acquisition. Incentive:
60% of qualifying capital expenditure (QCE) incurred within 5 years of approval date to be offset against 70% of statutory income for each year of assessment until allowance is fully allowed. Tax exempt dividends may be paid out of exempt income.
•
•
A company which intends to undertake reinvestment re investment before expiry of its ITA status may opt for reinvestment allowance, provided it surrenders its ITA.
E nhanc nhance ed pionee pioneer sta status tus and I TA Examples: (a) Approved projects located in promoted areas such as Kelantan, Terengganu, Pahang, the district of Mersing in Johor, Perlis, Sabah and Sarawak (applications received by the Malaysian Investment Development Authority (MIDA) by 31 December 2010). Manufacturing activities relocated to promoted areas (applications by 31 December 2010). 27 •
•
C E N TI TI V E S T A X I N CE Pioneer status statu s
ITA ITA
‐ 100% of QCE incurred within 5 years to be offset against 100% of statutory income (for projects located
‐ Tax exemption on 100% of statutory income for 5 years (for projects located in promoted areas).
in promoted areas). High technology companies participating in a new and emerging technologies or an industrial linkage programme. Companies participating in strategic knowledge-intensive activity Companies participating in automotive component modules industry
•
•
•
(b)
Pioneer status statu s
ITA ITA
‐ Tax exemption on 100% of statutory income for 5 years.
‐ 60% of QCE incurred within 5 years to be offset against 100% of statutory income.
Companies upgrading an existing testing laboratory for testing medical devices. (applications from 8 September 2007 to 31 December 2012) Pioneer status statu s
IT ITA A
‐ None
‐ 60% of QCE incurred within 5 years to be offset against income 100% of statutory
(c)
Companies providing technical or vocational training; Private higher education institutions providing qualifying science courses (applications after 1 October 2005)
• •
Pioneer status statu s
IT ITA A
‐ None
‐ 100% of QCE incurred within 10 years to be offset against 70% of statutory income
28
C E N TI TI V E S T A X I N CE (d)
Projects of national and strategic importance. Companies producing specialised machinery and equipment Companies utilising oil palm biomass to produce value added products
• •
•
(e)
Pioneer status statu s
ITA ITA
‐ Tax exemption on 100% of statutory income for 5 years (may be extended for 5 more years)
‐ 100% of QCE incurred within 5 years to be offset against 100% of statutory income
Companies reinvesting in post-pioneer period in: production of machinery machinery and equipment, including heavy or specialised machinery, equipment and machine tools. cold chain facilities and services for perishable agricultural produce. •
•
Pioneer status statu s
‐ Tax exemption on 70% on increased statutory income for 5 years (f)
ITA ITA
‐ 60% on additional QCE incurred within 5 years to be offset against 70% of statutory income
Companies with halal certification from JAKIM and other quality certification producing halal food (applications from 11 September 2004) Pioneer status statu s
ITA ITA
‐ None
‐ 100% of QCE incurred within 5 yearsoftostatutory be offsetincome against 100%
(g)
Providers of industrial design services (applications from 8 October 2011 until 31 December 2016 Pioneer status statu s
ITA ITA
‐ Tax exemption on 70% of statutory income for 5 years
‐ None
29
C E N TI TI V E S T A X I N CE S p eci a l i n cen t i v e s ch em eme e Eligibility:
A company incorporated and resident resi dent in Malaysia, deriving income from an “approved business” which is approved by the Minister of Finance under the special incentive scheme. Incentive:
Income tax exemption of 70% of statutory income (or any other rate prescribed by the Minister) of the approved business; or Income tax exemption on statutory income of the approved business by way of an allowance (rate of allowance to be determined by the Minister) Exempt dividends may be paid out of exempt income
•
•
A l l ow a n c e f or i n cr ea eass ed exp ex p or t Eligibility:
Resident company engaged in manufacturing or agriculture, which has exported manufactured products or agricultural produce, or services. Incentive:
Allowance at the following rates, deductible up to 70% of statutory income:
•
% of value added*
Manufactured products
Al l o w anc an c e (% of incr eased eased expor expor ts)
30
10
50 Agricultural produce Designated “Qualifying Services” -
15 10 50
*Value added means ex-factory price less total cost of raw materials.
Unabsorbed allowance can be carried forward. Tax exempt dividends may be paid out of exempt income.
•
•
Enhanced incentive:
Local companies engaged in manufacturing or agricultural activities qualify for enhanced allowance rates of: 30% of increased export value where significant increase (at least 50%) in exports is achieved; 50% of increased export value if new markets are penetrated; or 30 •
•
C E N TI TI V E S T A X I N CE 100% of increased export value if the company is awarded the “Export Excellence Award” by the Ministry of International Trade and Industry. For services, the incentive of 100% of increased export value is extended to recipients of “Export Excellence Award (Services) and Brand Excellence Award” w.e.f YA 2008.
•
A p p r ov ed ser s er v i ces p r oj ect ( A S P ) Eligibility:
Resident companies in the communication, utilities and transportation services subsectors which have incurred QCE on ASP. An ASP is defined as a project in any of the above services subsectors, which has been approved by the Minister of Finance. Incentive:
Investment allowance of 60% of QCE incurred within 5 y years ears to be
•
againstdividends 70% of statutory income. offset Tax exempt may be paid out of exempt income. An alternative incentive is exemption from income tax under section 127 of the Income Tax Act 1967 of 70% of statutory income for 5 years. Industrial building allowance for buildings constructed or purchased for ASP purposes. Exemption from customs duty and sales tax on imported material and machinery which is not available locally, or, if locally purchased, such items must be used as direct inputs in ASP.
• •
•
•
Enhanced relief is available for the following projects: Projects located in Sabah, Sabah, Sarawak and Eastern Corridor of Peninsular Malaysia (applications by 31 December 2010). •
Investment allow ance
Secti Se ction on 127 exemption exempti on
‐ 80% of QCE to be offset against 85% of statutory income
‐ 85% of statutory income for 5 years
Projects of national and strategic importance.
•
Investment allow ance
Secti Se ction on 127 exemption exempti on
‐ 100% of QCE to be offset against 100% of statutory income
‐ 100% of statutory income for 10 years
31
C E N TI TI V E S T A X I N CE Last mile network facilities provider ‐ Investment allowance of 100% of QCE on broadband infrastructure can be used to offset 70% of statutory income (application by 31 December 2012).
•
F o o d pr o duc ducti ti o n Eligibility:
Companies that invest in its subsidiary company which is engaged in approved food production activities. Incentive:
Tax deduction equivalent to the amount of investment made in that subsidiary. Eligibility:
Subsidiary company engaged in approved food production activities. Incentive:
100% tax exemption on statutory income for 10 years for new project or 5 years for expansion project (Applications by 31 December 2015 to the Ministry of Agriculture and Agro-based Industry).
R ei nv estme stment nt allow allow ance Eligibility:
A Malaysian resident company which has been in operation for not less than 36 months (12 months prior to YA 2009) and has incurred QCE on a factory, plant and machinery used in Malaysia for the purpose of a qualifying project. The following entities are also eligible: an agro-based co-operative society an Area, National or State State farmer’s or State fisherman’s association • •
A “qualifying project” means: (a) a project in expanding, modernizing, automating an existing business of manufacturing a product or diversifying an existing business into a related product; or (b) cultivation an agriculture expanding, modernizing or diversifying a andproject farminginbusiness. 32
C E N TI TI V E S T A X I N CE Incentive:
Allowance of 60% of QCE to be offset against 70% of statutory income for 15 years beginning from the year of assessment the reinvestment allowance is first claimed. Tax exempt dividends may be paid out of exempt income.
•
• •
Allowance of 60% of QCE toproject be offset against 100% statutory income where the qualifying has achieved theoflevel of productivity as prescribed by the Minister of Finance.
B . B I O T E CH C H N OL O L OG O G Y I N D U S TR TR Y Eligibility:
Company undertaking biotechnology activity with approved BioNexus status from Malaysian Biotechnology Corporation Sdn Bhd. Incentive:
100% exemption forfrom 10 years (i.e. New 5 yearsderives (i.e. Expansion project) the first year in business) which the or company statutory income; or ITA of 100% on QCE incurred within a period of 5 years to be offset against 100% of statutory income. Tax exempt dividends may be paid out of exempt income. Import duty and sales tax exemption on raw materials/components and machinery/equipment. •
•
Effective 2 September 2006, the following additional incentives are available: Income tax exemption on statutory income derived from an approved •
business, determined by a specific formula, for 10 years upon expiry of tax exempt period (i.e. Based on the prevailing tax rate of 25%, effectively statutory income will be taxed at 20%). Stamp duty and real property gains tax exemptions given to a BioNexus company undertaking approved merger and acquisition scheme with a biotechnology company. Industrial building allowance over 10 years given on buildings used solely for approved business or expansion project of a BioNexus company.
•
•
Eligibility:
Company or individual investing in a BioNexus company.
33
C E N TI TI V E S T A X I N CE Incentive:
Tax deduction equivalent to the total investment in seed capital and early stage financing (w.e.f. 1 May 2005).
TOR C . F I N A N C I A L S E R V I C E S S E C TO Closed-e Close d-end nd fun d company company Eligibility:
Public limited company incorporated in Malaysia and approved by the Securities Commission (SC), engaged wholly in investment of funds in securities. Incentive:
Exemption from income tax tax on gains from realisation of investments and certain interest income.
•
•
Deduction up to 25%may of certain expenses”. Tax exemptofdividends be paid“permitted out of exempt income.
•
F o r ei g n fund manag eme ment nt co co mpany Eligibility:
Company incorporated in Malaysia and licensed under the relevant Act, providing fund management services to foreign investors, or to both foreign and local investors. Incentive:
Chargeable from a source relating only to the of managementincome services to foreign investors is provision taxed at 10%. Tax exempt dividends may be paid to shareholders.
I nsur anc ance e and tr ad adii ng o f suk uk Eligibility:
Holder of relevant licence and registered person under the Capital Markets and Services Act 2007, undertaking activities of arranging, underwriting and distributing of or dealing in non-Ringgit sukuk. The sukuk must originate from Malaysia and be issued or guaranteed by the Malaysian Government or approved by the SC or the Labuan Financial Services Authority. 34
C E N TI TI V E S T A X I N CE Incentive:
Exemption from income tax on statutory income from the above activities (YA 2009 to YA 2014).
I ssuanc ssuance e o f ag ag r o -suku k , r eta taii l sukuk and r eta taii l bo bonds Eligibility: A company that issues agro-sukuk, retail sukuk and retail bonds approved by the SC or the Labuan Financial Services Authority. Incentive: Double deduction on the expenses for the issuance of Agro-Sukuk (YA 2013 to YA 2015). Double deduction on additional expenses (such as rating rationale fee, underwriting and placement fees, facility agency fee, advertising cost and cost of printing prospectus) for the issuance of retail sukuk and •
•
(YA 2012 to 2015). retail Stampbonds duty exemption onYA instruments relating to the subscription of
•
retail sukuk and retail bonds executed by individual investors (for instruments executed from 1 October 2012 to 31 December 2015).
I sl slam amii c B anki ng a nd Takaf Takaful ul B usine usiness ss Incentive:
Income tax exemption from YA 2007 to 2016 for: Islamic banks and Islamic banking units licensed under the Islamic Banking Act 1983 on income from Islamic banking business conducted •
international currencies. in Takaful companies and takaful units licensed licensed under the Takaful Act 1984 on income from takaful business conducted in international currencies.
•
I sla slami mi c fund manag eme ment nt Eligibility:
Malaysian fund management company managing funds of local and foreign investors established under the Syariah principles. Funds must be approved by the SC.
35
C E N TI TI V E S T A X I N CE Incentive:
Income tax exemption on statutory income from a business of providing fund management services to local investors (from YA 2008) and foreign investors (from YA 2007) until YA 2016.
I sla slami mi c se seccur i tie tiess Incentive:
Deduction for expenditure incurred in the issuance of Islamic securities approved by the SC (YA 2011 to YA 2015) or the Labuan Financial Services Authority (YA 2011 to YA 2015). Extended to include issuance of Islamic securities based on Wakalah principle (YA 2012 to YA 2015).
sla a mic sto st o ck b r o k i ng co mpa mpany ny I sl Incentive:
Establishment expenditure incurred prior to commencement of an Islamic stock broking business allowed as a from deduction provided the company commences businessiswithin 2 years the date of approval. Applications received by the SC from 2 September 2006 to 31 December 2015.
L i st stii ng o f for for ei g n compa compani ni es and fo f o r ei g n pr o duc ducts ts in B ur sa M a l a y s i a Eligibility:
An approved person who is a member of the due diligence working group established under the Guidelines on Due Diligence Conduct For Corporate Proposal as issued by the SC. Incentive:
Income tax exemption on statutory income from advisory fees relating to structuring and listing of a foreign corporation or foreign investment product on an approved stock exchange (YA 2009 to YA 2013).
R ea l E s ta ta te te I n v es es tm tm en en t Tr u s t ( R E I T) /P r ope perr t y Tr u s t F u n d (PTF) Eligibility:
Must be approved by the SC.
36
C E N TI TI V E S T A X I N CE Incentive:
Exemption from stamp duty on instrument of transfer of real property to REIT/PTF. Exempted from tax on all income if at least 90% of total income is distributed.
•
•
Dividends paid by REIT listed on Bursa Malaysia received by noncorporate/foreign institutional investors are subject to final withholding tax of 10% from 1 January 2009 till 31 December 2016. Deduction for consultancy, legal and valuation service fees incurred in the establishment of REIT. Effective from YA 2008, disposals of buildings from companies to REITs are not subject to balancing charge and REITS are eligible to claim the balance of unclaimed industrial building allowance of the disposers
•
•
•
S p eci a l pu p u r p o s e v eh ehii cl cle e ( S P V ) f or I s l a m i c fi n a n ci n g Eligibility:
Companies established under the Companies Act 1965 or the Labuan Companies Act 1990 electing to be taxed under the Income Tax Act 1967 solely for the purpose of complying with Syariah requirement in the issuance of Islamic securities. Incentive:
SPV - not subject to income tax and not required to comply with administrative procedures under the Income Tax Act 1967. Company establishing the SPV SPV - deduction for cost of issuance of
•
•
Islamic bonds. Company is deemed to be the recipient of the SPV’s income and taxed accordingly.
V entur e cap apii ta tall i ndust ndustrr y 1. Ventu Ventu re capital capi tal co mpany mp any (VCC) (VCC) Eligibility:
Investment in a venture company (VC) involved in promoted products or activities, which is not the VCC’s related company at the point of first investment.
37
C E N TI TI V E S T A X I N CE Incentive:
(i) Exemption on statutory income from all sources, other than interest income from savings or fixed deposits and profits from Syariahbased deposits for the following duration: Exempt Period
10 years
5 years
Conditions
‐ at least 70% of invested funds is invested in VC; or ‐ at least 50% of invested funds is invested in VC in the form of seed capital ‐ at least 30% of invested funds is invested in VC in the form of seed capital, start-up or early stage financing; and ‐ applications between 30 August 2008 and 31 December 2013.
(ii) Deduction of the value of investment made in a VC against business income. (iii) For applications received by Ministry of Finance from 1 January January 2013 to 31 December 2017, 2017 , deduction of value of investment is allowed against all income subject to the following qualifying criteria:
‐ 51% shares in the company are owned by Malaysians. ‐ Qualifying activities of VC are approved by Minister of Finance. ‐ Accumulated profit is not more than RM5 million and has a track record of less than 3 years. 2.Indi vidual vidu al inve in vestor stor Eligibility:
Funds must be invested in the early stage financing of VCs. Incentive
Deduction of the value of investment made in a VC against business income. For applications received by Ministry of Finance from 1 January
•
•
2013 to 31 December 2017, 2017 , deduction of value of investment is allowed against all income subject to the following qualifying criteria:
‐ An individual is not associated to the VC prior to investing. ‐ A tax resident with an annual income not less than RM180,000. 38
C E N TI TI V E S T A X I N CE ‐ Holds at least 30% of the shares in the VC for a period of at least 2 years. ‐ All his shares in the VC must be paid in cash. 3. Ventu Ventu re capi capital tal management management co comp mpany any Incentive:
Tax exemption on income from profit-sharing agreement with a VCC.
Tr eas asur ur y M ana anagg eme ment nt Ce Centr ntr e ( TM C) Incentive: 70% tax exemption on statutory income arising from qualifying treasury services rendered to related companies for 5 years. Withholding tax exemption on interest on borrowings from non-resident person for the purpose of providing qualifying services. Stamp duty exemption on loan and service agreements for qualifying activities executed between 8 October 2011 and 31 December 2016. Expatriates are taxed only on the portion of their chargeable income attributable to the number of days they are in Malaysia. •
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Applications must be received by MIDA before 1 January 2017. 201 7.
Tu n R a za k E x ch c h an a n g e ( TR X ) ( f or or m er er l y k n ow o w n as a s K u al ala L u m pu pu r I n ter ter n at a t i o n al al F i n an a n ci c i a l D i s tr i ct ) Incentive: 100% tax exemption for a period of 10 years and stamp duty •
exemption on loan and service agreements for TRX status companies.
Industrial building allowance and accelerated capital allowance for
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TRX Marquee-status companies. 70% tax exemption for a period of 5 years for property developers in TRX.
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B u si s i n es es s T r u s t ( B T ) BT is established under the Capital Market and an d Services Act 2007 and adopts the unit trust structure as a basis for its business. BT is given the income tax, stamp duty and real property prope rty gains tax (RPGT) treatments similar to a company from year of assessment 2013
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T A X I N CE C E N TI TI V E S Incentive: Stamp duty exemption on instruments of transfer of businesses, assets or real properties acquired for instruments executed from 1 January 2013. The disposer of real properties or shares in a real property company to •
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BT is given RPGT exemptions for disposal of real properties or shares in a real property company from 1 January 2013. The above incentives are provided on a one-off basis at the initial stage of the establishment of BT.
D . G R E E N I N C E N TI TI V E S Conserr vati o n o f the envi r o nme Conse nment nt 1. C Companies ompanies underta und ertaking king performance perform ance contracting con tracting service s ervice activities activiti es to conserve cons erve usage of energy energy Eligibility:
Applications from 8 September 2007 to 31 December 2015. Incentive: Incentive:
Tax exemption under pioneer status of 100% of statutory income for 10 years; or ITA of 100% of QCE incurred within 5 years to be offset against 100% of statutory income. Import duty and sales tax exemption on energy conservation equipment not produced locally and sales tax exemption on the purchase of equipment from local manufacturers.
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2. Companies which incur in cur capital expendit expenditure ure for conservin g energy for own consumptio n Eligibility:
Applications from 8 September 2007 to 31 December 2015. Incentive:
ITA of 100% of QCE incurred within 5 years years to be offset against 100% of statutory income. Import duty and sales tax exemption on energy conservation equipment not produced locally and sales tax exemption on the purchase of equipment from local manufacturers.
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T A X I N CE C E N TI TI V E S 3. Companies impor ting or o r purchasing purc hasing locally locall y ma manufactur nufactur ed energy energy efficiency (EE (EE)) equipment for third thi rd party cons umption umpt ion Eligibility:
Applications from 30 August 2008 to 31 December 2012. 2012 . Incentive: Import duty and sales tax exemption on EE equipment for importers. •
Sales tax exemption on purchase of locally manufactured EE consumer goods.
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G r een B u i l d i n g I n de d ex ( G B I ) C er er t i f i cat ca t i o n Eligibility:
A person (resident in Malaysia) who has obtained a green building index (GBI) certificate issued by the Board of Architects Malaysia from 24 October 2009 until 31 December 2014. Incentive:
Exemption of statutory income equal to the amount of qualifying expenditure incurred for the purpose of obtaining the GBI certificate. “Qualifying expenditure” means additional expenditure incurred for construction of a building, alteration, renovation, extension or improvement of an existing building or plant or machinery.
R educ ducti ti o n of g r eenhouse g as emi emi ssi o n Incentive:
Tax exemption on income from sale of Certified Emission Reductions (YA 2008 to YA 2012).
new w ab able le ene nerr g y so sour ur ce R ene 1.Companies usin g biomass, bio mass, hydr o pow er (not exceedin exceeding g 10 mega mega watts) or solar power for gene g eneration ration of o f energy energy Eligibility:
Applications from 8 September 2007 to to 31 December 2015. More than one company in a group may apply. Incentive: Tax exemption under pioneer status of 100% of statutory income for •
10 years; or ITA of 100% of QCE incurred within 5 years to be offset against 100% of statutory income.
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T A X I N CE C E N TI TI V E S Import duty and sales tax exemption on equipment used to generate energy from renewable sources not produced locally and sales tax exemption on equipment purchased from local manufacturers.
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2.Company generating generating renewable renewable energy energy for own consump cons umption tion Eligibility:
Applications from 8 September 2007 to 31 December 2015. Incentive:
ITA of 100% of QCE incurred within 5 years to be offset against 100% of statutory income. 3.Non-energy on-energy generating generating companies comp anies importi impo rting ng or purchasing pur chasing equipment for r enewable enewable energy energy generation generation for cons umption umpt ion by by third parties parties Eligibility: Applications from 30 August 2008 to 31 December 2012. 2012 . Incentive:
Import duty and sales tax exemption on solar photovoltaic equipment for usage by third parties for importers. Sales tax exemption on the the purchase of solar heating system equipment from local manufacturers.
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TH CA R E E . H E A L TH P r i vate he heal althc thcar ar e fac facii liti es ‘
Eligibility:
Resident incorporated company undertaking new private healthcare facility business or expansion, modernization, refurbishment of an existing private healthcare facility business. Applications received from 1 January 2010 to 31 December 2014. Incentive:
Exemption of statutory income of the qualifying project equal to 100% of QCE incurred for 5 years.
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T A X I N CE C E N TI TI V E S alth th to tour ur i sm H eal Eligibility:
Healthcare service providers resident in Malaysia offering services to foreign clients in Malaysia. Incentive: 100% of the value of increased export to be offset against 70% of
statutory income (YA 2010 to YA 2014).
F . I N F OR O R M A T I O N A N D C OM O M M U N I C A T I O N T E C H N OL O L OG OG Y
Cost of deve develo lopi pi ng w ebsi te tess Incentive:
Expenditure incurred on development of an electronic commerce enabled websites for a business is given an annual deduction of 20% for 5 years.
Offsh fsho o r e tr a ding vi a w eb site sitess i n M al alaysi aysi a Of Eligibility:
An approved offshore trading company compan y trading with non-residents through a website in Malaysia, in foreign goods for consumption outside Malaysia. Incentive:
Chargeable income is exempted from tax for a period of 5 years based on the following formula:
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Exempt chargeable income = A - [(10/B x A) @ B] where: A is the chargeable income; B is the prevailing tax rate applicable to approved offshore trading company Tax exempt dividends may be paid out of exempt income.
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G . O T H E R I N CE CE N T I V E S I nfr ast astrr uct uctur ur e al allo low w anc ance e Eligibility: A Malaysian resident company which has incurred QCE on infrastructure for its business in a promoted area. “Infrastructure” includes a bridge, jetty, port or road.
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T A X I N CE C E N TI TI V E S Incentive:
100% of QCE to be offset against 100% of statutory income.
I nfr ast astrr uct uctur ur e fo forr pub public lic use Eligibility:
Companies that incur expenditure on infrastructure approved by Minister of Finance in relation to its business, which is available for public use. Incentive:
100% deduction of the expenditure.
Ow ne nerr s of o f M a la layy sian br a nds Eligibility:
Owners of Malaysian brand name which outsource manufacturing activities to contract manufacturers. Incentive:
Import duty and sales tax exemption on certain imported raw material and imported semi-finished goods.
P r o p r i et et a r y r i g h ts ts Eligibility:
Manufacturing companies at least 70% owned by Malaysian citizens which acquire proprietary rights (e.g. patents, trademarks) to be used for purposes of the business. Incentive:
Deduction for cost of acquisition at 20% of cost per year of assessment.
P r i v ate a te h i g h er er ed u ca ca ti ti o n i n s ti t i t u ti ti o n s ( P H E I s ) Eligibility:
PHEIs incurring expenses on development of new courses which comply with regulatory requirements relating to those courses. Incentive:
Deduction over 3 years.
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T A X I N CE C E N TI TI V E S P r i vate scho schoo o ls Eligibility:
Private schools providing education services 1.Non Profit Prof it Oriented Private, Pri vate, Internatio nal, Exp Expatriate atriate Schools Schoo ls Incentive:
100% income tax exemption on income received from management of a school. 2.Profit Oriented Priv ate ate,, International Internation al Scho ols
Incentive (for application received by 31 December 2015): 70% income tax exemption for a period of 5 years; or ITA of 100% on QCE incurred within 5 years can be used to offset 70% of statutory income. • •
The following incentives are also granted to profit oriented private schools and international schools: Import duty and sales tax exemption for educational equipment (applications from 8 October 2011); and Double deduction for overseas promotional expenses (from Y YA A 2012). •
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P r e-Scho -Schoo o l E duc ducat atii o n Eligibility: New and existing private pre-schools must be registered with the State Education Department (This is effective from YA 2013) Incentive: Tax exemption at the statutory level on all income in come for a period of 5 years; and IBA with an annual rate of 10% on pre-school buildings. •
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Chi ldc ldcar ar e ce centr ntr es Eligibility: New and existing private childcare centres registered with the Social Welfare Department.
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T A X I N CE C E N TI TI V E S Incentive: Tax exemption at statutory level on all income for 5 years; and Industrial building allowance at an annual rate of 10% for buildings used as childcare centres. (Effective from YA 2013) • •
S p on s or s h i p of ar a r ts Eligibility:
Companies that sponsors local and foreign art and cultural performances approved by the Minister of Information Communications and Culture. Incentive:
Deduction on sponsoring such performances of up to RM500,000 per year, restricted to RM200,000 for foreign performances.
H . R E G I ON A L OP E R A T I O N S I nte nterr nat natii o nal Pr o cur eme ment nt Centr Centr e ( I PC ) Eligibility:
Companies incorporated in Malaysia with: minimum paid-up capital of RM500,000 and minimum annual business spending of RM1,500,000; handling of goods directly through Malaysian ports and airports; minimum turnover of RM50 million by third year of operations. •
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Incentive: •
The income tax incentives for IPC applicable where turnover exceeds RM100 million, subject to are certain other conditions (see RDC). Customs duties exemption on import import of raw materials, materials, components or finished products into Free Zones or licensed manufacturing warehouses for repacking, cargo consolidation and integration before distribution to final consumers. Expatriate posts granted based on needs. Foreign currency accounts to retain export proceeds allowed.
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I nte nterr nat natii o nal tr ad adii ng c o mpa mpany ny Eligibility:
Companies incorporated in Malaysia (registered with MATRADE) with
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T A X I N CE C E N TI TI V E S at least 60% Malaysian owned equity and has minimum annual sales turnover of RM10,000,000; Uses local services for banking, finance, insurance and uses local ports and airports.
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Incentive: Income tax exemption equivalent to 20% of the increased export value
up to a maximum of 70% of statutory income for 5 years.
Oper at Oper atii o nal H ead adqua quarr te terr s (OH Q) c o mpa mpany ny Eligibility:
Companies incorporated in Malaysia: Providing qualifying services approved by MIDA to its offices or related companies within or outside Malaysia; Paid-up capital of at least RM500,000 with minimum annual business •
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spending of RM1.5 million. Incentive:
Income tax exemption for 10 years excluding income from qualifying services provided to related companies in Malaysia exceeding 20% of total income from qualifying services. Tax exempt dividends may be paid from the exempt account.
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R eg i o n al a l D i s tr tr i bu ti ti o n C en en tr e ( R D C ) Eligibility:
Companies incorporated in Malaysia: With minimum paid-up capital of RM500,000 and minimum annual business spending of RM1,500,000; Annual turnover of RM100 million or more. •
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Incentive:
Statutory income exempted for 10 years excluding income from local sales exceeding 20% of total sales. Import duty and sales tax exemption on goods for distribution. Expatriate posts granted based on needs.
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Tax exempt dividends may be paid out of exempt income.
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T A X I N CE C E N TI TI V E S I . R E S E A R C H A N D D E V E L OP OP M E N T ( R & D ) I nco ncome me Tax E xe xemption mption and I nve nvestme stment nt Tax A ll llo o w anc ance e 1. Approved Appr oved resea research rch com pany or instituti insti tution on Incentive:
100% tax exemption on adjusted income for 5 years. 2. Company omp any underta und ertaking king approved in -house R&D R&D projects Incentive:
ITA of 50% on QCE for 10 years to be set off against 70% of statutory income. 3. Contract R&D R&D company which whi ch provi pr ovides des R R&D &D servic services es to thir d parties Incentive:
Pioneer status with 100% tax exemption on statutory income for 5 years; or ITA of 100% on QCE for 10 years to be set off against 70% of statutory income. 4. R&D R&D company company un dertaking dertaking projects for its o wn gr oup and thi rd parties Incentive:
ITA of 100% on QCE for 10 years to be set off against 70% of statutory income.
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D ouble de deducti ducti on ‐ Revenue expenditure incurred on approved research. ‐ Cash contributions to approved research institutions. for services of approved research companies or ‐ Payment for institutions / contract R&D companies / non-related R&D companies / related R&D companies which are not enjoying the ITA incentive.
ndustr tr i a l bui bui ld ldii ng al alll o w anc ance e I ndus ‐ QCE incurred on buildings used for approved research.
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T A X I N CE C E N TI TI V E S Commer ciali sati on of Commer of r esour ce ce-ba -base sed d and non-r esour ce b a s ed ed R & D f i n di di n g s Eligibility:
Company incorporated and tax resident in Malaysia; Malaysia; Investor company should own at least 70% of the equity of the company that commercialises resource-based R&D findings; Commercialisation of R&D findings findings is within a year year from approval of the of incentive; Resources-based Resources-base d R&D findings: Applications received from 11 September 2004 onwards. Non-resources-based R&D findings: Applications received from 29
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September 2012 until 31 December 2017. Incentive:
Investor company - tax deduction equivalent to the amount of investment made in subsidiary; and Subsidiary company undertaking the commercialisation of the R&D findings - pioneer status with 100% tax exemption on statutory income for 10 years.
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J . S H I P P I N G I N D U S T R Y Eligibility:
Resident person (including a partnership) carrying on a business of: transporting passengers or cargo by sea on Malaysian ships owned by that person; or time or voyage charter of Malaysian ships owned by that person. •
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Incentive:
Income tax exemption of:- 100% of statutory income until YA 2013; and - 70% of statutory income from YA 2014. Tax exempt dividends may be paid out of exempt income.
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K . S P E C I A L E C O N O M I C C O R R I D O R S I s k an a n da da r M a l a y s i a ( I M ) Incentive: IDRID R-statu status s com pany – 100% tax exemption on statutory income
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T A X I N CE C E N TI TI V E S derived from qualifying activity provided to any person situated both within an approved node and outside Malaysia; or outside Malaysia only, for 10 years. – 100% tax exemption on statutory income from: Developer – (a) (b)
disposal of rights over land in an approved node (until YA 2015); and rental or disposal of building located in an approved node (until YA 2020).
– 100% tax exemption on statutory income from Developm De velopm ent manager – provision of management, supervisory or marketing services to developers (until YA 2020).
L . T OU R I S M , H OTE L S A N D E X H I B I T I ON S
Conferr ence pr omo Confe omoti ti on Eligibility:
Resident conference promoters promoting conferences held in Malaysia where at least 500 foreign participants are brought in annually. Incentive:
100% tax exemption on statutory income from organising conferences.
mestic stic tour to ur s D o me
Eligibility: Eligibility:
Resident company organising domestic tour packages. Incentive:
Tax exemption on income from domestic tour packages where the total local tourists is 1,500 or more per year (YA 2013 to YA 2015 ).
G r o up inclusive incl usive to to ur s Eligibility:
Resident incorporated companies carrying on an inbound tour operating business approved and registered with the Ministry of Tourism. Incentive:
Tax exemption on income from such tours where inbound tourists from outside Malaysia is 750 or more for the period (YA 2013 to YA 2015).
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T A X I N CE C E N TI TI V E S I nte nterr nat natii o nal tr tr ad ade e exhi b i tion Eligibility:
Resident incorporated companies organising international trade exhibitions approved by MATRADE held in Malaysia with at least 500 foreign visitors per year. Incentive:
100% tax exemption on statutory income from organising exhibitions.
4 and 5 star hote hotels ls Eligibility:
(i) New investments in Sabah and Sarawak. (ii) New investments in Peninsular Malaysia Applications received by 31 December 2013. 201 3. Incentive: (i) Tax exemption under pioneer status of 100% of statutory income for
5 years or ITA of 100% of QCE incurred within 5 years to be offset against 100% of statutory income. (ii) Tax exemption under pioneer status of 70% of statutory income for 5 years or ITA of 60% of QCE incurred within 5 years to be offset against 70% of statutory income.
M . D O U B L E D E D U C T I O N Double deductions can be claimed for the following expenses: Allowances paid by a company to participants of the Capital Market Graduate Training Scheme for unemployed graduates, for 3 years from the date of certification of the Training Scheme (w.e.f 2 September 2006). Expenditure incurred by companies on the training of employees under an approved training program. Expenses incurred by employers in training their employees in the following fields (YA 2009 to YA 2012): (i) post graduate courses in information technology and communication, electronics or life sciences;
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(ii) post basic courses in nursing or allied health care; or (iii) aircraft maintenance engineering courses.
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T A X I N CE C E N TI TI V E S Expenses incurred in obtaining recognized quality systems, standards and halal certification (w.e.f YA 2005). Expenses incurred in the promotion of Malaysia as an International Islamic Financial Centre (YA 2008 to YA 2015). Expenditure incurred on advertising Malaysian brand names registered
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locally or overseas and professional fees paid to companies promoting or advertising Malaysian brand names. Export credit insurance premiums based on takaful takaful concept. (w.e.f Y YA A 2011). Freight charges paid by manufacturers exporting rattan and woodbased products (excluding sawn timber and veneer) (until YA 2015). Freight charges incurred by manufacturers for shipping goods from Sabah and Sarawak to any ports in Peninsular Malaysia. Insurance premiums for the import and export of goods where risks are insured with an insurance company incorporated in Malaysia (until YA 2015). Promotional expenditure incurred on seeking opportunities for the export of manufactured products, agricultural produce and services. Remuneration paid to an employee who is physically or mentally handicapped. Expenditure incurred by companies in conducting an approved internship programme (YA 2012 to YA 2016). Expenditure incurred by private companies in providing scholarships to Malaysian students pursuing study at diploma and bachelor’s degree in local institutions of higher learning registered with the Ministry of Higher Education (YA 2012 to YA 2016). Expenditure incurred by companies in participating in career fairs abroad that are endorsed by TalentCorp (YA 2012 to YA 2016). Expenditure incurred by employers for the provision and maintenance
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of child care centres (w.e.f YA 2013). Childcare allowance given by employers to employees (w.e.f YA 2013). Interest expense and all costs involved in obtaining o btaining loans by a rescuing contractor to revive an abandoned housing project (for loans approved from 1 January 2013 to 31 December 2015 and applicable for 3 consecutive years of assessment from the year the loans are approved).
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COM E E X E M P T F R OM T A X I N CO COM E E X E M P T FR OM T AX I N CO Income exempt from tax includes: Charges collected (under the relevant statutory provisions) by a statutory authority, and donations received by a statutory authority.
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ompensation tion for loss of employment and payments payments for Compensa
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restrictive covenants:
‐ fully exempted if due to ill health; or ‐ RM10,000 for every completed year of service with the same employer or with companies in the same group if not due to ill health (for persons who lost their employment on or after 1 July 2008). Death gratuities or sums received as consolidated compensation for death or injuries. Dividends paid, credited or distributed by co-operative societies to their members. Fe Fees es or honorarium hono rarium for validating, moderating or accrediting franchised educational programmes in higher educational institutions which are verified by the National Accreditation Board. Foreign inco me of any person (other than a resident company carrying on the business of banking, insurance or sea or air transport) arising from sources outside Malaysia and remitted into Malaysia. Grant or subsi dy received from the Federal or State Government. Housi ng and Labuan Territor Territor y allow allow ance received by a citizen from an employment in Labuan with a Labuan entity (exempt to the extent of 50% of gross allowance) (YA 2011 to YA 2020). Income arisi arisi ng fr om transactio ns made under a Securities Securities Borrow ing and L ending Agreeme Agreement nt accruing to a borrower and a lender arising from a loan of securities listed on the KLSE and the return of the same or equivalent securities, and the corresponding exchange of collateral, in respect of securities borrowing and lending transactions (excludes dividends, lending fees, interest earned on collateral and rebates). Income from fro m emplo emplo yment on board a ship used in a business of a
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Malaysian shipping company. Income from dir ector’s fees fees received by a non-Malaysian citizen director of a Labuan entity (YA 2011 to YA 2020).
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COM E E X E M P T F R OM T A X I N CO Income of any any person p erson from the provision of qualifying professional services rendered in Labuan to a Labuan entity is exempt to the extent of 65% of the statutory income (YA 2011 to YA 2020). Incom Income e of a non-M non -Malaysian alaysian citizen cit izen from exercising of an employment in a managerial capacity with a Labuan entity in Labuan, co-located office or marketing office is exempt to the extent of 50% of gross income from the employment (YA 2011 to YA 2020). Income of a politic pol itical al association. association . Income from fro m manageme management nt of non-profit non -profit oriented or iented schools scho ols . Income of non -profit oriented bodies or persons derived derived fro m certain activities related to management of public cemetarial ground. Income received received b y non -residents -residents from renting ISO containers to Malaysian shipping companies. Income received received b y non -resident -resident persons who provide appro appro ved ved
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technical training services in the following fields (30 August 2008
until 31 December 2012): (i) post graduate courses in ICT, electronics and life sciences; (ii) post basic courses in nursing or allied health care; or (iii) aircraft maintenance engineering courses. Income of individu indi vidual al whose wh ose scientific rese r esearch arch has been been
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comm ercialised and commercialised and verif verified ied by th e Mini Ministr str y of Science, Techno Te chnolog log y & Inno Inno vation . Exemption of 50% of the statutory income
for 5 years from the date of first receipt. •
Interest accruing to any person in respect of: ‐ bonds issued under the the Bon Simpanan Malaysia Siri Kedua (BSM 2) by Bank Simpanan Nasional. ‐ any savings certificate issued by the government. ‐ Islamic securities originating from Malaysia, other than convertible loan stock, issued in any currency other than Ringgit and approved by Securities Commission or the Labuan Financial Services Authority. Interest income derived by non-resident persons from a bank or finance company licensed under BAFIA or Islamic Banking Act 1983, or any other financial institution approved by the Minister of Finance. Interest income derived by non-resident companies from: ‐ securities issued by the Government of Malaysia; or
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COM E E X E M P T F R OM T A X I N CO ‐ Islamic securities or debentures issued in Ringgit Malaysia, other than convertible loan stocks, approved by the Securities Commission. Interest or bonu s, gains or profits accruing to a resident individual from deposits placed in licensed institutions. Interest accruing to any individual in respect of Merdeka bonds issued by the Central Bank of Malaysia. Interest or discount accruing to any individual, unit trust and listed closed-end fund in respect of: ‐ bonds or securities issued or guaranteed by the Government; ‐ debentures or Islamic Securities, other than convertible loan stock, approved by the Securities Commission; or ‐ Bon Simpanan Malaysia issued by the Central Bank of Malaysia. Pensions paid to a person, which is derived from an employment
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exercised in Malaysia where: ‐ the recipient has reached the age of 55 or the compulsory retirement age; or ‐ retirement is due to ill health. Perquisites (in cash or in kind) for long service (more than 10 years of employment with the same employer), past achievement or service excellence, innovation, or productivity award up to an amount or value of RM2,000 a year. Retireme etirement nt gratuiti es are are full y exempt :
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where the retirement is due to ill health or on, or after reaching the ‐ age of 55 or other compulsory age of retirement, from an employment which has lasted 10 years with the same employer or with companies in the same group; or ‐ upon reaching compulsory retirement age pursuant to an employment contract or collective agreement at the age of 50 but before 55 and that employment has lasted 10 years with the same employer or with companies in the same group. Royalties received by non-resident franchisors from registered private institutions of higher learning for approved franchised educational programmes.
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TA X R E A L P R O P E R T Y G A I N S TA Royalties received by an individual resident in Malaysia in respect of:
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Am o u n t exem ex emp p t ed RM
‐ publication of, or the use of, or the right to use, any artistic work ‐ recording discs or tapes ‐ publication of, or the use of, or the right to use, any literary work or any original painting ‐ any musical composition
10,000 10,000 20,000 20,000
Statutory tatutory income derived from members’ members’ subscri ption fees fees received by trade associations. Inte Interest rest in come received by banking and financial institutions from a
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rescuing contractor of an abandoned project (for loans approved from 1 January 2013 to 31 December 2015 and applicable for 3 consecutive years of assessment from the year the loans are approved).
R E A L P R O P E R T Y G A I N S T A X ( R P G T) T) Char g e to ta taxx RPGT is chargeable on gains arising from the disposal of real property which is defined as: any land situated in Malaysia and any interest, option or other right in or over such land; or shares in a real property company (RPC). •
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The RPGT rates are as follows: Disposal RPGT rates for companies and individual 1 Jan 2012 to 31 Dec 2012 W.e.f 1 Jan 2013 Up to 2 years 10% 15% Exceeding 2 until 5 years 5% 10% Exceeding 5 years 0% 0%
R eal pr pr o pe perr ty c o mpa mpany ny A RPC is a controlled company holding real property prope rty or shares in another RPC as a major asset (i.e. defined value not less than 75% of the value of its total tangible assets).
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TA X R E A L P R O P E R T Y G A I N S TA Char g eab able le pe perr sons Every person whether or not resident in Malaysia is chargeable to RPGT in respect of any gains accruing on the disposal of real property or RPC shares in Malaysia.
h h ol ol d i n g o f R P G T W i t hh With effect from 1 January 2010, where the consideration consists of wholly or partly of money, an acquirer of chargeable asset must withhold 2% of the total value of the acquisition price to be paid or the whole of that money to the IRB within 60 days from the date of disposal.
Exemptions The following are some exemptions from RPGT that are available: an amount of RM10,000 or 10% of the chargeable gain, whichever is greater, accruing to an individual. Transfer of assets between spouses. gain arising on disposal as a result of compulsory acquisition of property under law. gain accruing to the government, State government, or a local authority. gain accruing to an individual who is a citizen or a permanent resident in respect of the disposal of one private residence. gift made to the government, State government, local authority or approved charity. •
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disposal of assets in connection with securitization of assets from 1 January 2001. gain arising from disposal of real property to Real Estate Investment Trusts and Property Trust Funds approved by the Securities Commission (SC). gain arising from disposal of chargeable asset pursuant to a scheme of financing approved by the Central Bank, Labuan Financial Services Authority, Malaysian Co-operation Societies Soc ieties Commission or the SC as a scheme which is in accordance with the principles of Syariah.
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SE E R V I C E T A X S S E R V I C E T A X
B asi s of of taxat taxatii o n Service tax is a consumption tax levied and charged on any taxable service provided by any taxable person. Service tax will be replaced with a single broad based Goods and Services Tax (GST), on a date to be announced.
tax R ate of tax The rate of service tax is 6% ad valorem effective from 1 January 2011 (previously 5%). This tax is levied on all taxable services, except for the provision and issuance of charge or credit card, the service tax is as follows:(i) RM50 per year on the principal card; and (ii) RM25 per year on the supplementary card. The service tax is chargeable on the date of the issuance of the card and every 12 months thereafter or part thereof after the issuance of the card or on the date of the renewal of the card and every 12 months thereafter or part thereof after the renewal of the card.
Taxabl Taxable e pe per son/l son/lii censi ng Any taxable person who carries car ries on business of providing taxable ser service vice must apply for a licence, and the term “person” includes an individual, a firm, society, association, a company and every other juridical person. No fee is payable for the issuance of a licence.
T axable pe perr sons and taxable se serr vi ce cess A complete list of taxable persons and taxable services servic es can be found in the Second Schedule to the Service Tax Regulations 1975. The following is a summary: Taxable person
1
Operators of hotels with more than 25 rooms (subject to some exclusions)
An n u al s al ales es turn tu rnover over (RM) (RM) *
58
SE E R V I C E T A X S
2
3
4
5 6 7 8 9 10
11 12
Operators of restaurants, bars, snack-bars, coffee houses or places located in hotels with more than 25 rooms, providing food, drinks and tobacco products wholly eat-in or partly take-away Operators of restaurants, bars, snack-bars, coffee houses or places located in hotels with 25 rooms or less, providing food, drinks and tobacco products wholly eat-in or partly take-away Operators of restaurants, bars, snack-bars, coffee houses or places located outside hotels, providing food, drinks and tobacco products wholly or partly take-away (subject to someeat-in exclusions) Operators of food courts Operators of night-clubs, dance halls and cabarets Operators of approved health-centres and massage parlours Operators of 1st, 2nd or 3rd Class Public House andof1st or 2ndclubs Class Operators private Beer House Operators of golf course or golf driving range (including operators of private clubs having total annual sales turnover of RM300,000 or less or any hotel having 25 or less rooms) Licensed private hospitals Insurance companies
An n u al s al ales es turn tu rnover over (RM) (RM) *
300,000
3 million (Effective 1 July 2008) 3 million (Effective 1 July 2008) * * * 300,000 *
300,000 *
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SE E R V I C E T A X S
13
An n u al s ales Ann al es turn tu rnover over (RM) (RM) Any person providing communication services who *
is registered under the Communications And Multimedia Act 1998 or licensed under the 14
15
16 17 18 19 20 21 22 23 24 25 26 27 28
Communications and Multimedia (Licensing) Regulations 2000 Any person who is given permission to act as agent for transacting business relating to the import or export of any goods or luggage under section 90 of the Customs Act 1967 Any person who is licensed under section 65 or 65E of the Customs Act 1967 and who is also given permission to act as an agent for transacting business relating to the import or export of anywarehouse goods or luggage that is storeddepot in the licensed or inland clearance Operators of parking space for motor vehicles Courier-services companies Operators of motor vehicles service and/or repair centres Licensed private agencies Employment agencies Hire-and-drive car and hire-car service companies Advertising companies Public Accountants Advocates and Solicitors Professional Engineers Architects Licensed or Registered Surveyors/Registered Valuers, Appraisers and Estate Agents Consultants (subject to some exclusions)
*
*
150,000 150,000 150,000 150,000 150,000 300,000 300,000 ** ** ** ** ** **
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SE E R V I C E T A X S
29 30
* **
Management companies Any person who is regulated by Bank Negara Malaysia and provides credit card or charge card services through the issuance of a credit card or a charge card
An n u al s ales Ann al es turn tu rnover over (RM) (RM) ** *
No threshold No threshold effective 1 January 2008
Taxable Ta xable services servi ces
Taxable services include the provision of rooms for lodging/sleeping accommodation, health services, certain professional services, certain telecommunication services including bandwidth services and certain value added services, management services, security services, provision of parking space, provision of golf course, golf driving range or services related to golf or golf driving range, courier delivery services (other than to destinations outside Malaysia), provision and issuance of charge card or credit card whether or not annual subscription or fee is imposed, the sale or provision of food, drinks and tobacco products and paid broadcasting services. With effect from 1 January 2003, certain professional services provided to companies within the same group would not be taxable subject to certain qualifying criteria.
P ay me ment nt of ser ser vi ce tax/ta tax/taxable xable pe perr i od Service tax is due when payment is received for taxable services rendered. If payment is not received within 12 calendar months from the date of issuance of invoice, the tax is due on the day immediately after the expiry of the 12-month period. Any service tax that falls due during a taxable period, perio d, which is 2 calendar months, is payable to the customs authorities within 28 days after the end of the taxable period.
ser vi ce tax on doubtful debts debts or “bad debts” debts” R efun d of ser
A licensee is eligible for a refund of service tax in relation to debts deemed as “bad debts” or provided as doubtful debts, subject to
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SA A L E S TA T A X S conditions. This includes debts which cannot be collected after 6 months from the date of payment of tax.
S A L E S T A X B asi s of of taxat taxatii o n
Sales tax is a single-stage tax imposed on certain locally manufactured goods, and on similar goods imported. Labuan, Langkawi, Tioman and Free Zones, do not fall within the ambit of this tax. Sales tax is a consumption tax and under the system, the onus is on the manufacturers to levy, charge and collect the tax from their customers. In the case of imported goods, sales tax is collected from the importer at the time the goods are released from customs control. Sales tax will be replaced with a single broad based Goods and Services Tax (GST), on a date to be announced.
V alue of g oo oods ds The valuation of goods for sales tax purposes is based on the World Trade Organsation (WTO) principles of customs valuation.
R ate atess of tax tax Sales tax is generally an ad valorem tax. Specific rates of sales tax are currently only imposed on certain classes of petroleum (generally, refined petroleum). The ad valorem rates are as follows:
Class of g oo oods ds Rate %
Fruits, certain foodstuff, timber and building materials Cigarettes and tobacco Liquor and alcoholic drinks All other goods, except petroleum subject subjec t to specific rates and goods not specifically exempted
oods ds T axable g oo
5 5 5 10
All goods manufactured in Malaysia or imported are taxable tax able unless they are specifically exempted by order of the Minister of Finance.
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SA A L E S TA T A X S G oo oods ds exempted exempted All exports are exempted from sales tax. Goods which are specifically exempted include: ‐ Live animals, fish, seafood and certain essential food items including meat, milk, eggs, vegetables, fruits, bread, etc. ‐ Medical and educational equipment including sports equipment, books, etc. ‐ Photographic equipment and films. ‐ Motorcycles below 201 c.c. capacity, bicycles for adult use including parts and accessories. ‐ Machinery for textile industry, food preparation industry, paper and printing industry, construction industry, metal industry, etc. ‐ Primary commodities including cocoa, rubber and their related products. ‐ Naturally occurring mineral substances, chemicals, etc. ‐ Helicopters, aircraft, ships and other vessels.
• •
Li cen s i n g No person is permitted to manufacture taxable goods unless the person is duly licensed as a licensed manufacturer. The term “manufacture” in relation to goods other than petroleum, means the conversion by manual or mechanical means of organic or inorganic materials into a new product by changing the size, shape or nature of such materials and includes the assembly of parts into pieces of machinery or other products but does not include the installation of machinery or equipment for the purpose of construction. In relation to petroleum, the term “manufacture” means refining or compounding and includes the addition of foreign substance.
E xe xempt mptii o n fr o m li li c ensi ng A manufacturer of taxable goods whose whos e total sales value did not exceed RM100,000 in the preceding year and is not expected to exceed RM100,000 during the next twelve months may apply for a certificate of exemption from licensing. The certificate is renewable on a yearly basis. However, such manufacturer may choose to be licensed in order to enjoy tax-free inputs.
63
O R T D UT UTI E S I M P OR In addition, certain manufacturing operations are also exempted from the licensing requirements. They include the developing and printing of photographs and production of film slides, preparation of ready-mixed concrete, repacking of bulk goods, repair of second hand goods and the installation of air conditioners in motor vehicles.
Tax-frr ee r aw mat mate er i al Tax-f In order to maintain the single-stage concept, there are facilities available to allow for inputs (raw materials and components) to be imported or acquired free of sales tax by a licensed manufacturer for use in the manufacturing process.
Drawback A licensed manufacturer or importer can claim drawback drawb ack on the sales tax paid in respect of goods, which are subsequently exported.
of sales sales tax/taxable pe perr i od P ay ment of Generally, sales tax shall be due at the time the taxable goods are sold, or disposed of otherwise than by sale by the taxable person. Any sales tax that falls due during any taxable period, which is normally 2 calendar months, shall be paid to the customs authorities within 28 days from the expiration of the taxable period. However, in relation to the classes of petroleum that are subject to sales tax, special provisions apply regarding the time when sales tax is due and payable.
R efu nd of sales tax on doubtfu l debts debts or “bad debts” debts”
A licensee is eligible for a refund of sales tax in relation to debts deemed as “bad debts” or provided as doubtful debts”, subject to conditions. This includes debts which cannot be collected after 6 months from the date of payment of tax.
I M P OR OR T D UTI E S R ate atess of duti es Import duties are levied on goods that are subject to import duties and imported into the country. Import duties are generally levied on an ad valorem basis but may also be imposed on a specific basis. The ad valorem rates of import duties range from 2% to 60%. Raw materials,
64
I M P OR O R T D UT UTI E S machinery, essential foodstuffs and pharmaceutical products are generally non-dutiable or subject to duties at lower rates.
Tar i ff r at ate e quo quota ta Effective 1 April 2008, Malaysia implemented tariff rate quota (TRQ) on selected agricultural products, such as chicken, milk and cream, hen eggs, cabbages. Under TRQ, the tariff charged depends on the volume of imports. Imports within quota (volume) attract duties at a lower tariff rate while a higher tariff rate applies on goods in excess of the quota volume “out-quota tariff rate”. The quota applicable is determined by the relevant agency, e.g. Department of Veterinary Services.
V alue of g oo oods ds The value of goods for the purpose of computing import duties is determined largely in accordance with the World Trade Organisation (WTO) principles of customs valuation.
Exemptions There is a range of duty exemptions on specific goods that prescribed persons are eligible to claim, subject to prescribed conditions under an Order made by the Minister. In addition, manufacturers are eligible to apply for merit-based duty exemptions on: raw materials and components used directly for the manufacture of goods for export and domestic markets. dutiable machinery and equipment which are used directly in the manufacturing process. Approval is subject to Confirmation of Local Availability rule. Manufacturers are required to apply to the relevant authorities for exemption. •
•
mporr ts Pr o hibiti o n of i mpo Import restrictions are seldom imposed except on a limited range of products for protection of local industries or for reasons of security and public safety. An import licence has to be obtained for the importation of prohibited goods.
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L I C E N S E D M A N U FA F A CT C T U R I N G W A R E H O U SE SE L I C E N S E D M A N U F A CT C T U R I N G W A R E H O U SE SE Manufacturers who export 80% or more of their finished products can apply for licensed manufacturing warehouse (LMW) status. Raw materials, components and machinery used in the manufacturing process are exempted from import duties and sales tax.
F R E E ZO N E A free zone is deemed to be a place outside Malaysia. Malaysia . Subject to certain exclusions, goods and services can be brought into or provided in free zones without payment of customs / excise duties, sales and service tax.
FREE TRADE AGRE EMENTS Malaysia has concluded several regional and bilateral free trade agreements and several more are still under negotiation. One of the key features of free trade agreements is the preferential tariff treatment accorded to member countries. Currently, the following free trade agreements are in force:
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
ASEAN Trade in Goods Agreement ASEAN China Free Trade Agreement ASEAN Korea Free Trade Agreement Malaysia-Pakistan Closer Economic Partnership Malaysia-Japan Economic Partnering Agreement ASEAN-Australia-New Zealand Free Trade Agreement ASEAN-Japan Comprehensive Economic Partnership ASEAN-India Trade in Goods Agreement Malaysia-Chile Free Trade Agreement Malaysia-India Comprehensive Economic Cooperation Agreement Malaysia-New Zealand Free Trade Agreement Malaysia-Australia Free Trade Agreement (concluded on 30 March 2012, expected to come into force on 1 January 2013)
The preferential tariff treatment and the rules of origin may vary from one free trade agreement to another.
E X P OR OR T D U T I E S
Export duties are generally imposed on the country’s main commodities such as crude petroleum and palm oil for revenue purposes.
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TI E S E X C I S E D U TI E X C I S E D U TI TI E S B asi s of of taxat taxatii o n Excise duties are imposed on a selected range of goods manufactured in Malaysia or imported into Malaysia. Goods which are subject to excise duty include beer/stout, cider and perry, rice wine, mead, undenatured ethyl alcohol, brandy, whisky, rum and tafia, gin, cigarettes containing tobacco, motor vehicles, motorcycles, playing cards and mahjong tiles.
R ate atess of duti es The rates of excise duties vary from a composite rate of 10 sen per litre and 15% for certain types of spirituous beverages, to as much as 105% for motorcars (depending on engine capacity).
E xcise lice licensi nsi ng
Unless exempted from licensing, a manufacturer of tobacco, intoxicating liquor or goods subject to excise duties must have a licence to manufacture such goods. A warehouse licence is required for storage s torage of goods subject to excise duty. However, a licence to manufacture tobacco, intoxicating liquor or goods subject to excise duty also permits the holder to store such goods.
P aym ent of duty As a general rule, duty is payable at the time the goods leave the place pla ce of manufacture. However, excise duty on a predefined list of motor vehicles for transport of persons is not payable until the vehicles are registered with the Road Transport Department, provided that a security is provided (up to maximum of 4 years from the date of removal from the place of manufacture).
E x po r ts No excise duty is payable on dutiable goods that are exported.
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S ST T A M P D U T Y S T A M P D U T Y
B asi s of of taxat taxatii o n Stamp duty is chargeable on instruments and not on transactions. If a transaction can be effected without creating an instrument of transfer, no duty is payable. An unstamped or insufficiently stamped instrument is not admissible admiss ible as evidence in a court of law, nor will it be acted upon by a public officer. With effect from 1 January 2009, payment of stamp duty by way of electronic medium is available for persons who have registered with the Collector.
R at ate es of duty duty The rates of duty vary according to the nature of the instruments and transacted values. Generally, transfer of properties can give rise to significant stamp duty: Properties (other than share s hares s or o r marketable marketable securities) securiti es)
•
Value RM
On the first
100,000
On the next
400,000
In excess of
500,000 500,000
Rate Ra te
RM1 per RM100 or part thereof RM2 per RM100 or part thereof
Duty payable RM
1,000 8,000 9,000
RM3 per RM100 or part thereof
Shares RM3 for every RM1,000 or any fraction thereof based on consideration, or value whichever is greater. The Stamp Office generally adopts one of the 4 methods for valuation of ordinary shares for purposes of stamp duty: ‐ price earnings ratio; ‐ assets;and saletangible consideration; ‐ net ‐ par value.
•
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S ST T A M P D U T Y Se Service rvice Agreements Agreements and Loan Agreements Agreements Stamp duty of 0.5% on the value of the services/loans. However, stamp duty may be exempted or stamp duty in excess of 0.1% may be remitted for the following instruments:
•
(i) Service agreement (executed on and after 1 January 2011) Stamp dut duty y
All service agreement (one tier) Multi-tier service agreement (a) Non-government contract (i.e. between private entity and service providers
(b) Government contract (i.e. between Federal /State Government of Malaysia or State / local authority and service providers)
Ad valorem rate of 0.1% First level Subsequent level(s) First level Second level Subsequent level(s)
Ad valorem rate of 0.1% Up to RM50
Exempted Ad valorem rate of 0.1% Up to RM50
(ii) Loan agreement / loan instrument: Stamp duty in excess of 0.1% remitted for loan agreements or loan instrument without security and repayable on demand or in single bullet repayment.
S t a m p i n g Instruments executed in Malaysia which are chargeable with duty must be stamped within 30 days from the date of execution. When the instruments are executed outside Malaysia, they must be stamped within 30 days after they have first been received in Malaysia.
Penalty The penalty imposed for late stamping varies based on period of delay.
lief/ f/E E xe xempt mptii o n/R emi ssi o n fr o m stamp stam p duty dut y R elie Exemption, remission or relief of stamp duty may be available: where shares and undertakings are transferred under a scheme of reconstruction or amalgamation of companies (conditions apply). •
69
S ST T A M P D U T Y on the transfer of assets between associated companies, where either company owns 90% or more of the other company, or where a third company owns 90% or more of both associated companies (conditions apply). for refinancing of business loans to the extent of the duty that would be
•
•
payable on the existing term loan’s principal balance amount. for securitisation of assets from 1 January 2001. for offers to subscribe for, or the issue and transfer of debentures approved by the Securities Commission (SC). for transfer of securities listed listed on MESDAQ for a borrowing and lending transaction made under a Securities Borrowing and Lending Agreement. for instruments of the Asset Sale/Purchase/Lease Agreement executed between customer and bank made under Syariah law principles for renewing any Islamic revolving / Islamic overdraft financing facility (provided instrument for existing facility is duly stamped). for instruments executed between a customer and a financier made under Syariah law principles for rescheduling or restructuring any existing Islamic financing facility. Stamp duty is remitted to the extent of the duty that would be payable on the existing Islamic financing facility’s principal balance amount (provided instrument for existing Islamic financing facility is duly stamped). stamp duty in excess of RM200 is remitted remitted for certain contract notes relating to the sale of any shares, stock or marketable securities which are listed on a stock market of a stock exchange approved under subsection 8(2) of the Securities Industry Act 1983. stamp duty in excess of RM200 is remitted remitted for certain contract notes relating to the sale of shares, stocks or marketable securities in companies incorporated in Malaysia or elsewhere between a local broker and an authorised nominee on behalf of a foreign broker. remission of 50% of stamp duty chargeable on the instrument of transfer of immovable property operating as voluntary disposition between parent and child. 100% remission for transfers of immovable property operating as voluntary disposition between husband and wife. for specified instruments executed for purchase of certain low cost houses. for instruments to secure a loan not exceeding RM10,000 (conventional or Islamic banking principles) granted by Bank Pertanian
• •
•
•
•
•
•
•
•
•
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S ST T A M P D U T Y Malaysia for financing agricultural based projects. for loan instruments for loans up to RM50,000 under the Micro Credit Scheme executed with Bank Simpanan Nasional or Bank Pertanian Malaysia. for securities of companies not listed or removed from the KLSE’s list
•
•
executed in favour of the Malaysian Central Depository Sdn Bhd (MCD), or the beneficial interest of such securities not listed or removed from KLSE’s list held for the transferor’s account by the MCD. instruments of deed of assignment and instruments of ttransfer ransfer of real property to Real Estate Investment Trust or a Property Trust Fund approved by the SC. instruments relating to the purchase of property by any financier for the purpose of leaseback under the principles of Syariah. for instruments executed pursuant to a scheme of financing approved by the Central Bank, the Labuan Financial Services Authority or the SC, as a scheme in accordance with Syariah principles, where such instrument is an additional instrument strictly required for complying with those principles but not required for any other schemes of financing, effective from 11 September 2004. for instruments executed for a scheme of transfer of the Islamic banking business and/or the Islamic financial business by a licensed institution to its related corporation licensed or to be licensed under the Islamic Banking Act 1983 (scheme must be approved by the Minister of Finance on Central Bank’s recommendation).
•
•
•
•
for sale and purchase agreements executed from 24 October 2009 to 31 December 2014 for purchase of property issued with a green building index (GBI) certificate by the Board of Architect Malaysia. The exemption applies to instruments executed between a purchaser (first owner of the property) and a housing or property developer. The exemption is on the cost constituting part of the cost of a property pursuant to the purchase of that property issued with GBI certificate. 20% stamp duty remission on instruments instruments used in Islamic ffinancing inancing between 2 September 2006 until 31 December 2015. for instruments executed by BNM Sukuk Berhad for the issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase, the Sukuk Bank Negara Malaysia-Ijarah and transfer of such securities.
•
•
•
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S ST T A M P D U T Y for instruments executed for an approved scheme of merger or acquisition between a BioNexus status company and a biotechnology company (between 2 September 2006 and 31 December 2011). for sale and purchase agreements (SPA) executed from 1 January 2011 to 31 December 2012, remission of 50% is given on instruments
•
•
of transfer for purchase of only one unit of residential property by a Malaysian citizen at a price not exceeding RM350,000 provided the purchaser does not own any other residential property at the date of execution of the sale and purchase agreement. Remission of 50% is also given on the loan agreement instrument executed to finance purchase of the residential property. The above remissions are extended to 31 December 2014 and the qualifying price of the residential property is raised to not exceeding RM400,000 for SPA executed from 1 January 2013 to 31 December 2014.
all instruments executed by Labuan Corporation.
•
sale and purchase agreements executed from 1 January 2012 to 31 December 2016 for purchase of one unit of residential property priced up to RM300,000 under the PR1MA Scheme. loan instruments for loans up to RM50,000 executed between micro enterprises and SME with any banking and financial institutions from 1 January 2012 under the Micro Financing Scheme. loan instruments for loans up to RM50,000 executed between any professionals with Bank Simpanan Nasional from 1 January 2012 under the Professional Services Fund. loan instruments under the Syariah executed from 15 June 2011 to 31 December 2014 between a SME approved under the Green Lane Policy of Ministry of Finance and certain banks. stamp duty in excess of RM50 is remitted from 1 May 2011 for deed of assignment between a contractor and subcontractor pursuant to Dasar Pengagihan Kerja kepada Kontracktor Bumiputera Kelas E & F. instruments of loan and service agreements executed from 8 October 2011 to 31 December 2016 by Treasury Management Centre for provision of qualifying financial and fund management services in Malaysia. for all instruments executed by a Labuan entity in connection with a Labuan business activity, for all Memorandum and Articles of Association, various instruments under unde r which a Labuan entity is established and the scope of that entity’s function, business, powers
•
•
•
•
•
•
•
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O N OM E C ON O M I C I N D I C A TO T O R S A N D D I R E C TI TI ON S and duties are set out and all instruments of transfer of shares in a Labuan entity. The following instruments executed by a rescuing contractor of an
•
abandoned housing project: ‐ instrument of loan agreement to finance the revival of the abandoned housing project ‐ instrument of transfer of land or houses in the abandoned housing project where the sale and purchase agreements are executed from 1 January 2013 to 31 December 2015. The following instruments executed by an original house purchaser in an abandoned project: ‐ instrument of loan agreement for additional financing ‐ instrument of transfer of the house where the sale and purchase agreements are executed from 1
•
January 2013 to 31 December 2015.
E C ON O N OM O M I C I N D I C A T OR O R S A N D D I R E C TI TI ON S M a l a y s i a n econ ec on om y t o g r ow bet betw w een 4 . 5 % a n d 5. 5 % i n 2 0 13 , su s u p p or t ed by s t r on g d om es estt i c dem a n d The Malaysian economy expanded by 5.1% in the first half of 2012, mainly supported by robust private investment and consumption. Although the global economy is expected to further moderate during durin g the second half of 2012, the Malaysian economy is estimated to expand between 4.5% and 5.0% in 2012, underpinned by the implementation of the Economic Transformation Programme (ETP). Growth is expected to strengthen further in 2013 to between 4.5% and 5.5%, supported by strong domestic demand and improving exports, on the assumption that global growth will pick up in the second half of 2013. On the trade front, Malaysia’s total trade is envisaged to expand by 4.4% to RM1.32 trillion in 2012 (2011: 8.7%; RM1.27 trillion), with imports estimated to expand faster than exports. Gross imports to grow at 6.5% to RM611.5 billion (2011: 8.6%; RM574.2 billion) on account of strong demand for capital goods related to capacity expansion, particularly in the oil and gas (O&G) and transport services sectors.
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O N OM E C ON O M I C I N D I C A TO T O R S A N D D I R E C TI TI ON S Gross exports are expected to grow at 2.7% to RM713 billion (2011: 8.7%; RM694.5 billion) with slower global demand for manufactured products, particularly in E&E and commodity goods.
Contin ntin ue ued d sur pl plus us i n cur r ent acc acco unt and str o ng ne nett Co i nte nterr national r ese serr ve vess The current account surplus in the balance of payments (BOP) is expected to remain sizeable at RM68.5 billion or 7.5% of Gross National Income (GNI) due to strong domestic activities. The surplus in the goods account is expected to remain large at RM128.8 billion in 2012 (2011: RM148.1 billion) despite weaker performance in commodity prices and slowdown in manufactured exports. The deficit in the services account is however expected to increase to RM9.9 billion (2011: -RM8 billion) dueprofessional, to continuedbusiness reliance on freight services and import of foreign andforeign technical services by domestic companies.
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O N OM E C ON O M I C I N D I C A TO T O R S A N D D I R E C TI TI ON S The income account is projected to record a higher deficit of RM28.1 billion (2011: -RM22 billion) on account of higher repatriation of profits and dividends by foreign companies. Nevertheless, a substantial portion of the investment income is expected to be retained in Malaysia for reinvestment. In the financial account, the inflows of foreign direct investment (FDI) are expected to continue, albeit at a slower pace, supported by investors’ confidence in the economic transformation initiatives and strong economic fundamentals. Potential sources of FDI include from O&G, high value-added industries and solar and light emitting diode (LED) industries. As at 30 August 2012, Malaysia’s international reserves reser ves remained strong at RM431.1 billion (US$134.9 billion) (2011: RM423.3 billion or US$133.6 levelthe is short-term adequate to financedebt. 9.5 months of retainedbillion). importsThe andreserves is 3.9 times external
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O N OM E C ON O M I C I N D I C A TO T O R S A N D D I R E C TI TI ON S M a r g i n a l i n f l a t i on a t 1. 1. 9 % f or t h e f i r s t sev s even en m on t h s of o f 20 2 0 12 Inflation, as measured by changes in the CPI (2005=100), registered a marginal growth of 1.9% in the first seven months of 2012 (January to July 2011: 3.1%) due to price controls imposed on essential consumer products and food. The full year inflation is expected to moderate to 2.0% to 2.5% in 2012 (2011: 3.2%).
Note: Effective January 2006, the Consumer Price Index (CPI) was rebased to 2 2005 005 with nine existing groups reclassified into twelve groups in order to reflect changes in household expenditure pattern. The three new groups are transport, communication and education.
B r o ad ad-b -base ased d g r o w th le led d by constr constr uction For 2013, all sectors are expected to record positive growth, supported by strong demand and ETPand initiatives led by higher capital outlays in domestic O&G, telecommunications transport-related industries.
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O N OM E C ON O M I C I N D I C A TO T O R S A N D D I R E C TI TI ON S The construction sector is envisaged to register the strongest growth at 11.2% in 2013 (2012: 15.5%), mainly supported by infrastructure projects implemented under ETP. The services sector is projected to grow by 5.6% (2012: 5.5%) on favourable domestic consumption, which is expected to boost growth in wholesale and retail, financial services, real estate and business services, as well as the telecommunications sector. The agricultural sector growth is expected to be moderate at 2.4% (2012: 0.6%) with higher output of palm oil, rubber and increased demand for food commodities such as livestocks, paddy, fruits and vegetables. With the recovery of external trade-related activities, growth in the manufacturing sector is anticipated to strengthen to 4.9% (2012:4.2%). The mining sector is expected to expand 2.7% (2012: 1.5%) on the account of higher production of crude oil and natural gas.
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F I N A N CI CI A L R E P O R T I N G F I N A N C I A L R E P OR OR T I N G The Malaysian Accounting Standards Board (MASB) has been established as the sole authority for issuing approved accounting standards and other financial reporting pronouncements in Malaysia. All financial statements prepared pursuant to any law administered by the Securities Commission (SC), Bank Negara Malaysia (BNM) and the Companies Commission of Malaysia have to comply with approved accounting standards. The MASB issued an IFRS compliant accounting framework, the Malaysian Financial Reporting Standards (“MFRSs or MFRS Framework”), in November 2011. Entities other than Private Entities shall apply the MFRS framework for annual periods beginning on or after 1 January 2012, with the exception of entities subject to the application of MFRS 141 Agriculture and/or IC Interpretation 15 Agreements for the Construction of Real Estate (“Transitioning entities”). Transitioning entities shall comply with the MFRS Framework for annual periods beginning on or after 1 January 2014. They may apply Financial Reporting Standards (FRS Framework) for annual periods beginning before 1 January 2014. An entity that consolidates or equity accounts or proportionately consolidates the transitioning entities are also granted similar exception. Entities are required to apply the MFRS 1 “First-time Adoption of Malaysian Financial Reporting Standards” in their first IFRS and MFRS financial statements, and each related financial are the first financial statements where the interim entity can assertreport. it fully These complies with IFRSs. Private Entity shall comply with either the Private Entity Reporting Standards (“PERS”) in its entirety or the MFRS Framework in its entirety for annual periods beginning on or after 1 January 2012. Alternatively it may apply the FRS Framework if it is a transitioning entity. Private entities are defined as private companies incorporated under the Companies Act 1965 that: (a) are not required to prepare / lodge any financial statements under any law administered by the SC or BNM; and (b) are not a subsidiary / associate of / jointly controlled by an entity which is required to prepare/lodge any financial statements under
78
E M P L OY OY E E S ’P R OV I D E N T F U N D any law administered by the SC or BNM.
E M P L OY OY E E S ’ P R OV I D E N T F U N D S co cop p e of E P F The Employees’ Provident Fund (EPF) is a compulsory savings scheme established to provide a measure of security for old age retirement to its members. Expatriates and foreign workers, who are not Malaysian citizens or permanent residents are not required to contribute to EPF although they may elect to do so.
ate es of of co co ntr i but butii ons R at The statutory rates of contributions are as follows: Malaysian and Expatriates and2 permanent permane ntcitizens residents foreign workers (mandatory) % of con trib utio n of employee’s employee’s wages (minimum) Employer Employee Employer Employee Till age 55
Income > RM5,000 Income ≤ RM5,0004
12%
11%1
RM5 per person
11%1
RM5 per person
5.5%
13%
Ag e 56 ti t i l l 75 (Fro (Fr o m 1 Febr Feb r u ary ar y 2008)
Income > RM5,000 Income ≤ RM5,0004 1
2
3
6%3 6.5%3
3
5.5%
From 1 January 2011, the rate reverted to 11%. From 1 January 2009 to 31 December 2010, the rate was 8% with option to contribute at 11%. Not required to contribute to EPF, but can elect to contribute. Exceptions: EPF monthly rate of contributions is maintained at 12% (employer’s share) and 11% (employee’s share) under the following circumstances: i. Employees who have attained the age of 55 years before 1 February
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E M P L OY OY E E S ’P R OV I D E N T F U N D
4
2008 and have not made 55 years withdrawal before 1 February 2008; ii. Employees who have made 55 years withdrawal before 1 February 2008 and have elected to re-contribute to EPF before 1 February 2008. If the employer pays bonus to an employee who receives monthly wages of RM5,000.00 and below and upon receiving the said bonus bon us renders the wages received for that month to exceed RM5,000.00, the calculation of the employer contribution rate shall be calculated at the rate of 13% / 6.5%, and the total contribution which includes cents shall be rounded to the next ringgit.
Effective 3 January 2010, the 1Malaysia Retirement Saving Scheme was introduced to allow self employed and individuals without fixed monthly income to contribute voluntarily based on the amount that they can afford.
M em embe berr s ’ a cc ccou ou n t s Effective 1 January 2007, the EPF account is divided into 2 parts: % of contrib utions
Account I - for retirement purposes at age 55
70
Account II - for housing, education, medical and withdrawal at age 50
30
Withdrawals EPF members are entitled to withdraw the full amount of contributions: - upon the death of the member (withdrawal made by beneficiary(ies)); - on attaining attaining the age of 55 years; - if the member is prevented from engaging in any further employment by reasons of physical or mental incapacitation; - for those expatriates/foreign workers who have contributed under the mandatory obligation which has been abolished with effect from August 2001; - on leaving Malaysia permanently (for non-Malaysian or Malaysian citizens who have revoked or renounced their citizenships); Under Account 2, members are entitled to withdraw for: - the purchase or construction of a residential house or for purposes of a housing on satisfying the prescribed conditions; - reducing on attaining attaining the agemortgage of 50 years; - purchase of a second house on condition that the first house is sold;
reduction or settlement of housing loan balance; 80
E M P LO L O Y M E N T G UI UI D E L I N E S - for housing loan repayment (withdrawal on a monthly basis) for one house; - setting aside part of savings to enable member to obtain a higher housing loan amount under the flexible housing withdrawal scheme; - further education for self and children’s tertiary education; - medical expenses incurred for the treatment of critical illnesses for themselves and their families; Alternatively, members may choose to withdraw under unde r the “Retirement Periodical Payment Scheme” upon reaching the age of 55 years. Withdrawal payment can be made in part lump sum and part monthly periodical payment or monthly periodical payments for all savings. Members at any time before reaching 55 years can make the withdrawal from savings exceeding RM1 million, subject to a minimum of RM50,000 at every interval of 3 months. Members who have reached 55 years and have not withdrawn all of their savings, can withdraw the annual dividend of their savings. Effective 1 February 2008, members can invest not more than 20%, (subject to minimum withdrawal of RM1,000 at 3 months interval) of their credit in excess of Basic Savings in Account 1 in approved external funds. The required Basic Saving in Account 1 varies according to age, ranging from a minimum of RM1,000 for members at age 18 to RM120,000 at age 55.
E M P L OY M E N T G U I D E L I N E S G ui de deli li ne ness for for emplo mployy me ment nt of expatr i ate atess Approvals for expatriate posts are given by b y different authorized bodies or agencies depending on the type of core business of the company. The Malaysian Investment Development Authority (MIDA) approves expatriate posts in the following fields: Manufacturing Manufacturing related services – Regional Office, Office, OHQ, IPC, Overseas Mission, etc Hotel and tourism industry Research and Development • •
• •
81
E M P LO L O Y M E N T G UI UI D E L I N E S The guidelines on employment of expatriate personnel issued by MIDA, are as follows: For manufacturing companies with foreign paid up capital of: (a) USD2 million and above: ‐ Automatic approval for up to 10 expatriate posts including 5 key posts, (top management post) for durations of up to 10 years for executive posts and 5 years for non-executive posts. (b) above USD200,000 but less than USD2 million: ‐ Automatic approval for up to 5 expatriate posts including at least 1 key post (top management post), for durations of up to 10 years for executive posts and 5 years for non-executive posts. (c) less than USD200,000: ‐ Consideration is given (based on merits of each case) for key posts where foreign paid-up capital is at least RM500,000. Time/Term posts can be considered for up to 10 years for executive posts requiring professional qualifications and experience and 5 years for non-executive posts that require technical skills and experience. For Malaysian-owned manufacturing companies: ‐ Approval is given upon request (application), for employment of expatriates for technical posts, including R&D posts.
•
•
Other approving agencies for expatriate post: Multimedia Development Corporation (MDeC) - for expatriate posts and skilled workers in IT based companies with MSC status •
Public Service Department (PSD) – doctors and nurses in government hospitals and clinics; lecturers and tutors in government institutions of higher learning; contract posts in public services and jobs offered by Public Service Commission or related government agencies Central Bank Malaysia (BNM) – posts in banking, finance and insurance sectors Securities Commission (SC) – employment in Security and Share market Expatriate Committee (EC) – employment in sectors other than the above
•
•
•
•
The employment of Malaysian nationals at all levels should, wherever possible, reflect the multi-racial composition of the country.
82
E M P LO L O Y M E N T G UI UI D E L I N E S The following minimum paid-up share capital requirement must be fulfilled before an application of expatriate position can be processed by the EC: RM
100% Malaysian owned company
250,000
Malaysian and Foreign owned company
350,000*
100% Foreign owned company
500,000
* If the applied post iis s a key post, foreign foreign capital in the co company mpany must be at least RM500,000.
Minimum salary of the expatriate employee is RM5,000 per month. On 15 July 2010, the Immigration Department announced that automatic approval will be given for expatriates with salaries of more than RM8,000 per month. Pass Unit. Applications must be made to the Director of Employment
E mp mplo loyy me ment nt of o f for for ei g n w o r k er s Employment of foreign workers is subject to conditions which are determined from time to time and will be considered after failing to find qualified local or permanent residents. Employment of foreign workers are allowed in the manufacturing, construction, plantation, agricultural, domestic help sectors and 3 services sub sectors i.e. restaurants, cleaning and sanitation, resort island. Nationals from the following countries are allowed to work in the specified sectors: Nationals of
Indonesia (female only), Cambodia, Laos, Myanmar, Nepal, Pakistan, Philippines (male only), Sri Lanka, Thailand, Vietnam, Turkmenistan,
•
Uzbekistan, Kazakhstan Indonesia (male only)
•
Appr oved Sector Sector
Manufacturing, construction, plantation, agricultural and services sectors
Same as above excluding manufacturing
83
E M P L OY O Y E E ’S S OC OC I A L S E C U R I T Y F U N D Nationals of
India
•
Appr oved Sector Sector
Services (restaurant only); Construction (fixing of high voltage cable only); Agriculture; and Plantation
An annual levy is imposed on employers of foreign workers. wo rkers. The rate of levy varies according to the category of worker. The One Stop Centre in the Ministry of Home Affairs handles applications for foreign workers except for application for domestic helpers which are processed by the Immigration Department.
E M P L OY O Y E E S ’ S OC OC I A L S E C U R I T Y F U N D S co cop p e of S O C S O The Social Security Organisation (SOCSO) administers the following schemes: Employment Injury Insurance Scheme; Invalidity Pension Schemes. • •
These schemes are aimed at providing cash and medical benefits to employees in case of temporary or permanent disablement/invalidity, death and employment injury, including occupational diseases. All employees with monthly wages of RM3,000 or less are covered c overed by the schemes. Any employee falling within the schemes will continue to remain may within the schemesexceed notwithstanding that of hisRM3,000. or her monthly wages subsequently the threshold
ate es of of co co ntr i but butii ons R at The rates of contributions are as follows: The first category (Employment Injury Insurance Scheme and Invalidity Pension Scheme) of contribution is by both the employer and employee, restricted to a maximum of RM51.65 and RM14.75 respectively. The second category (Employment Injury Insurance Scheme only) of •
•
contribution is solely under by the the employer for Pension an employee who restricted is not eligible for coverage Invalidity Scheme, to a maximum of RM36.90.
84
H U M A N R E S OU O U R C E S D E V E L OP O P M E N T FU FU ND ( H R D F ) Employees who earn more than RM3,000 and who have never registered nor contributed may choose to register and contribute, provided that both employer and employee are agreeable.
O U R C E D E V E L OP OP M E N T F U N D ( H R D F ) H U M A N R E S OU S co cop p e of H R D F The HRDF is aimed at helping the manufacturing, services and transportation sectors to develop the technical skills of their employees through involvement in training schemes. Employers engaged in the following activities must register and contribute to the HRDF: Type of activity activit y
No. of employees
Manufacturing
50 or more
Manufacturing with a paid-up capital of RM2.5 million or more Manufacturing with a paid-up capital of less than RM2.5 million Service sector (hotel industry, air transport services, tour operators and travel agencies, telecommunications, freight forwarders, shipping, postal/courier services, advertising, computer
10 to 49
• •
•
10 to 49*
•
10 or more
services, energy, training, higher education, direct selling, port services, engineering support and maintenance services, research & development, warehousing services, security services, private hospital services) Service sector (hypermarket, supermarket and departmental store services)
•
50 or more
* Such employers hav have e the option to contri contribute bute to the HRD HRDF F at the rate of 0.5% of the employees’ monthly wages.
85
FO OR R E I G N E QU Q U I T Y G UI UI D E L I N E S R at ate e o f co co ntr i but butii o n From 1 April 2011 onwards: 1% of employees’ monthly wages on a monthly basis for all employers except for small employers under manufacturing sector. •
•
0.5% rate for small employers under the manufacturing sector.
F i nancial assi a ssi sta stance nce An employer who has paid the levy upon registration reg istration is eligible to receive financial assistance at rates ranging from 50% to 100% of the allowable costs incurred for the purpose of training employees under various training schemes including the following: SBL Scheme; ‐ SBL (Skim Bantuan Latihan) and Special SBL ‐ PROLUS (Program Latihan yang Diluluskan); ‐ PLT (Pelan Latihan Tahunan);
‐‐ ‐ ‐ ‐ ‐
PERLA (Perjanjian Latihan Dengan Penyelia Latihan); Computer-based training Scheme (Software Development); Apprenticeship Training Schemes; Joint Training Scheme; Information Technology and Computer-Aided Training; Training; Purchase of Training Equipment and Setting Up of Training Room Scheme; ‐ English Language Programs for workers under the HRDF; ‐ SME On-The-Job Training; ‐ SME Training Partners Scheme (SMETAP);
‐ Accreditation of Prior Achievement scheme (APA).
FO OR R E I G N E QU I T Y G U I D E L I N E S M a n u f a ct ctu u r i n g s ect ector or Equity holdings in all manufacturing projects is fully liberalised effective from 17 June 2003. Foreign investors can hold 100% equity in all investment in new projects and investments in expansion or diversification projects by existing companies. This is regardless of the level of export and without any product/activity being excluded.
86
OR R E I G N E QU Q U I T Y G UI UI D E L I N E S FO However, any equity and export conditions imposed on companies prior to 17 June 2003 will be maintained. There will be some flexibility given and companies can request for removal of these conditions depending on the merit of each case.
Othe Otherr se sect cto or s
Prior to 30 June 2009, under the revised Guidelines For The Acquisition of Interests, Mergers and Take-overs by Local and Foreign Interests, issued by the Foreign Investment Committee (FIC) which took effect from 1 January 2008, a basic condition that must be complied with is Bumiputra equity of at least 30%, with the remaining equity allowed to be held by either foreign or local interests or jointly by foreign and local interest. However, on 30 June 2009, the Prime Minister announced that the Guideline was repealed with effect from that date.
berr al alii sat satii o n me measur asur es L i be
The following liberalization measures were announced by the Prime Minister in 2009: 22 April 2009 - Liberalization of 27 services sub-sectors, with no equity condition imposed. These sub-sectors are in the area of health and social services, tourism services, transport services, business services and computer and related services.
•
29 April 2009 - Further liberalization of the financial services sector, including raising the limit on foreign equity ownership of investment
•
banks, Islamic banks, insurance companies and takaful operators from 49% to 70%. 30 June 2009 - Repeal of the FIC Guideline with with effect from that date. However any equity conditions forming part of the licensing requirements imposed by the relevant sector regulators will still remain. The government’s target of 30% Bumiputra equity ownership will now be maintained at the macro level instead of the equity ownership at firm level.
•
With respect to listing requirements, the requirement to have direct 30% Bumiputra equity upon floatation as imposed by the Securities Commission has similarly been abolished. However, the percentage of
87
E X C H A N G E C ON T R O L the allocation of the 25% public spread to the list of Bumiputra investors recognised by the Ministry of International Trade and Industry (MITI) has been increased from 30% to 50%.
E X CH A N G E CON T R O L R emi tt ttance ancess ab abrr o ad
•
A resident is freely permitted to: Make Ma ke payment payment i n Ringgi t* to no n-residents n-residents
(i) for import of goods & services, payment for services rendered in Malaysia, profits, dividends, fees, rental and royalties, purchase of ringgit assets; (ii) for payment to non-resident immediate family members (for any purpose); (iii) for extension of credit facilities in Malaysia to to non-resident individuals and non-bank companies to finance activities in the real sector in Malaysia or to refinance the purchase or construction of residential and commercial properties in Malaysia (excluding land); or (iv) for a Ringgit-denominated interest rate derivative, if the derivative is:‐ entered between Bursa Malaysia and a non-resident; or ‐ offered by a licensed onshore bank to to a non-bank nonresident. * provided the Ringgit is sourced from the sale of foreign currency with a licensed onshore bank or from Ringgit funds in External accounts)
Make Ma ke payment payment in for eign curr ency to non -resid -residents ents
(i) for import of goods & services, payment for services rendered in Malaysia, profits, dividends, fees, rental and royalties, purchase of Ringgit assets; (ii) for payment to non-resident immediate family members (for any purpose); or (iii) a Ringgit-denominated interest rate derivative, if the derivative is:‐ entered between Bursa Malaysia and a non-resident;or to a non-bank non‐ offered by a licensed onshore bank to resident.
88
E X C H A N G E C ON T R O L Investments abroad in foreign currency assets and extension of credit facilities in foreign currency in Malaysia are however subject to the rules for investment in foreign currency assets, i.e: ‐ a resident without domestic Ringgit credit facilities is free to invest any amount abroad; ‐ to invest any amount abroad from conversion of Ringgit up to RM50 million per annum (on corporate group basis) for corporations with domestic credit facilities. No limit if funded by own foreign currency funds maintained onshore or offshore or where prudential requirements (defined) are met and written permission is given by Bank Negara Malaysia; ‐ to invest any amount abroad from conversion of Ringgit up to RM1 million per annum for individuals with domestic credit facilities. No limit if funded by own foreign currency funds maintained onshore or offshore. Buying or selling of foreign currency against another foreign
currency with licensed onshore banks and International Islamic Banks to make payment to non-resident is permitted for any purpose. Buying or selling of foreign currency against Ringgit with licensed
•
onshore banks is allowed for:‐ international trade in goods and services; ‐ hedging foreign currency exposure of permitted investment abroad; ‐ committed capital inflow or outflow of funds. Prior permission of the Controller of Foreign Exchange (Controller) is required for a resident: ‐ to pay in Ringgit to a non-resident for international trade in goods and services if settlement is not through the non-resident's external account; ‐ to make payment to a non-resident in Ringgit or foreign currency for derivative products not transacted on an exchange in Malaysia1; 1
onshore banks and licensed International IslamiccurrencyBanks continue toLicensed be allowed to make payment to non-residents non -residents for foreign denominated derivatives or any foreign currency contracts.
89
E X C H A N G E C ON T R O L ‐ to convert Ringgit into foreign currency exceeding RM50 million (for companies)(with exceptions) and RM1 million (for individuals) per year for investment abroad. This applies to companies and individuals with domestic borrowings. Companies and individuals with no domestic borrowings are free to invest abroad; ‐ to make payment in foreign currency to another resident, other than: o payments for education or employment overseas; o resident individuals who are immediate family members; o repayment of foreign currency credit facilities from licensed banks or merchant banks; o payments for futures denominated in foreign currency traded on MDEX; o payments to purchase approved foreign currency investment products offered onshore; payments by all International Islamic banks, International Takaful Operators and International Currency Business Units of licensed onshore banks, takaful operators or retakaful operators for financial services rendered by resident intermediaries to these institutions; o payments to a resident company for settlement of goods and services whereby the funds are sourced from export earnings in the resident payer's foreign account; o
Prior permission is also required for: ‐ payments to Israel; ‐ a resident traveler to import or export Ringgit notes exceeding USD10,000; ‐ a non-resident traveller to import or export Ringgit notes exceeding USD10,000 equivalent.
•
N on-r esi de dent nt contr ol olle led d compani compani es A non-resident controlled company (i.e. a corporation, corpor ation, company or branch operating in Malaysia, controlled directly or indirectly by nonresidents) is permitted to: term trade financing of any amount in Ringgit or foreign ‐ obtain short term currency; and ‐ obtain domestic credit facilities locally without having to seek specific permission from the Controller.
90
E X C H A N G E C ON T R O L P ur chase of i mmove mmoveabl able e pr op ope er ti es by by non-r esi de dents nts Non-residents may borrow domestically for financing properties used for productive (real) activities such as manufacturing. Non-residents are permitted to borrow any amount of Ringgit credit facilities from residents (banks and non-banks) to finance the purchase or construction of any residential or commercial property in Malaysia (excluding financing for purchase of land only).
B o r r o w i n g s i n f or or ei g n cu cu r r en cy cy b y a r es i den den t A r esi es i d ent en t c o m p any an y is free to:
borrow any amount in foreign currency from its non-resident non-bank related companies, resident related companies, licensed onshore banks and licensed International Islamic Banks. However, where the non-resident non-bank related company is set up
•
solely to obtain foreign currency loans from a non-resident financial institution, the amount of borrowing from the non-resident non-bank related company continues to be subject to the prevailing aggregate limit of RM100 million equivalent. procure from non-resident suppliers, any amount of foreign currency supplier’s credit for capital goods. obtain up to RM100 million equivalent in aggregate by a resident company on a corporate group basis for other financing activities.
•
•
A r esi es i d ent en t i n d i vi d u al is free to:
borrow up to RM10 million million equivalent in aggregate for any purpose including financing overseas investments.
•
Both a resident company and resident individual are free to refinance outstanding approved borrowing in foreign currency (including principal and accrued interest)
B o r r o w i n g s i n R i n g g i t by by a r es i de d en t A r esi es i d ent en t c o m p any an y is allowed to borrow in Ringgit, including the
issuance of Ringgit-denominated redeemable preference shares or loan stocks: ‐ finance of any amount from its non-resident activities in the real sector innon-bank Malaysia;related company to ‐ up to RM1 million in aggregate from other non-resident non-bank
companies or individuals for use in Malaysia. 91
E X C H A N G E C ON T R O L However where the non-resident non-bank related company is set up solely to obtain foreign currency loans from a non-resident financial institution, the amount of borrowing from the non-resident non-bank related company continues to be subject to the prevailing aggregate limit of RM1 million on Ringgit borrowings from non-residents. A r esi es i d ent en t i n d i vi d u al is allowed to borrow in Ringgit up to RM1 million
in aggregate from non-resident non-bank companies and non-resident individuals for use in Malaysia. Ringgit borrowings obtained by residents (individual or company) whether from a resident or non-resident, are allowed to be converted (i.e. swapped) to foreign currency debt obligation with a licensed onshore bank, provided that there is no actual delivery of the foreign currency the inception of the transaction.
F o r ei g n cur cur r ency acc acc o unts In general, a resident is allowed to open foreign currency accounts with licensed onshore / licensed international Islamic banks / overseas banks for any purpose. A resident individual is allowed to maintain for any purpose, purpo se, joint foreign currency accounts with another resident individual and also with a nonresident individual who is an immediate family member. As for a resident exporter, export proceeds pro ceeds must be credited into foreign currency accounts maintained with licensed onshore banks only. There is no restriction on the maintenance of a foreign currency account by a non-resident.
N on-r esi de dent nt acco accoun un ts Non-residents may maintain any number of external accounts with any financial institution in Malaysia. Transfers of funds can be made between external accounts of the same account holder. There is no restriction on the Ringgit funds to be retained in the external accounts. Sources of Ringgit funding for the external account can be from: proceeds from sale of foreign foreign currency to a licensed onshore bank, Ringgit assets or goods and services to a resident; income earned in Malaysia, including salaries, wages, wages, commissions, fees, rental, interest, profits or dividends; •
•
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E X C H A N G E C ON T R O L drawdown proceeds or repayment of permitted permitted Ringgit credit facilities; cash deposit of up to RM10,000 per day; deposits of cheques up to RM5,000 per cheque for any purpose; transfers from other external account(s) of the same account holder; transfers from external account and/or resident account of different account holders by way of automated teller machine or internet-bank transfers not exceeding RM5,000 a day per bank.
• • • • •
Uses of funds in the account can be for the following purposes: purchase of foreign currency (excluding the currency of Israel) from licensed onshore banks; payment to a resident for own account for: ‐ purchase of Ringgit assets or payment for goods and services; ‐ payment of administrative and statutory expenses incurred in Malaysia; •
•
settlement of a permitted Ringgit-denominated financial or non‐ financial guarantee; ‐ granting, servicing or repayment any permitted Ringgit credit facility. payment to another non-resident for: ‐ purchase of Ringgit assets; ‐ granting, servicing or repayment of any permitted Ringgit credit facility; ‐ any amount of cash withdrawals.
•
Ringgit funds in the External Account may be converted into foreign currency, repatriated or used in Malaysia for permitted purposes.
E x po p o r ts fr fr om M a l a y s i a Resident exporters are required to submit quarterly reports on their export related transactions if the gross export proceeds exceed RM50 million per year.
M S C M a l a y s i a com co m p a n i es MSC Malaysia companies are exempted from the exchange control requirements by the Controller. However, such exemptions do not extend to dealings with Israel.
93
O R T A N T F I L I N G /F / F UR U R N I S H I N G D A TE TE S I M P OR A p p r ov ed Op O p er a t i on a l H ea ead d qu a r t er s ( O H Q ) OHQ with domestic Ringgit credit facilities are allowed to convert Ringgit into foreign currency up to RM50 million per calendar year for investments in foreign currency assets. No limit if foreign currency assets are funded with own foreign currency funds or where prudential requirements (defined) are met.
O R T A N T F I L I N G /F / F UR U R N I S H I N G D A TE TE S I M P OR Type of return retur n
Form
Income tax All taxpayers No prescribed ‐ notification of change of form address Individual (without business income)
Due date
•
Within 3 months of change.
•
of income ‐ submission tax return - Resident - Non-resident
Form BE Form M
No prescribed ‐ notification of form chargeability of an individual who first arrives in Malaysia Individual (with business income)
By 30 April in the year following that year of assessment. Within 2 months of date of arrival.
•
of income ‐ submission tax return Company ‐ submission of estimate of tax payable ‐ submission of revised estimate of tax payable
Form B
By 30 June in the year following that year of assessment.
Form CP 204
30 days before the beginning of the basis period. In the sixth or/and ninth month of the basis period.
•
Form CP 204A
94
O R T A N T F I L I N G /F / F UR U R N I S H I N G D A TE TE S I M P OR Type of return r eturn
Form
Due date
‐ submission of income tax return
Form C
‐ submission of statement of revised section 108 balance ‐ furnishing of particulars of payment made to agent, dealer & distributor Co-operative society ‐ submission of income tax return
Form R
Within 7 months from the date following the close of its accounting period. Within 7 months from the date following the close of its accounting period. 31 March of the following year.
Form CP58
•
Partnership ‐ submission of income tax return
Form C1
Within 7 months from the date following the close of its accounting period.
Form P
By 30 June in the year following that year of assessment.
Form TA
Within 7 months from the date following the close of its accounting period.
Form TP/TF
By 30 April (without business income) or 30 June (with business income) in the year
•
Trust Body
•
of ‐ submission income tax return Estate and Body of Persons ‐ submission of income tax return
•
following that year of assessment.
95
O R T A N T F I L I N G /F / F UR U R N I S H I N G D A TE TE S I M P OR Type of return retur n
Unit Trust ‐ submission of income tax return
Form
Due date
Form TC
Within 7 months from the date following the close of its accounting period. Same as above.
•
Real Estate Investment Trust/ Property Trust Fund Employer ‐ return of remuneration by an employer ‐ statement of remuneration of employee ‐ notification of employee’s commencement of employment ‐ notification of employee’s cessation of employment (in certain prescribed
•
Form TR
•
cases) ‐ notification of employee leaving Malaysia for more than 3 months ‐ statement of tax deduction by employer under Monthly Tax Deduction Scheme
Form E
By 31 March of the following year.
Form EA
By last day of February of the following year.
Form CP 22
Within one month of commencement of employment.
Form CP 22A
Not less than one month before cessation.
Form CP 21
Not less than one month before expected date of departure.
Form CP 39
Within 10 days after month end.
96
O R T A N T F I L I N G /F / F UR U R N I S H I N G D A TE TE S I M P OR Type of return retur n
Form
Due date
Withholding tax On interest or royalty to nonresidents
Form CP 37
Within one month of paying or crediting the nonresident, whichever is earlier Same as above
•
On contract payments to nonresident contractors On technical and management service fees, rental of moveable properties, etc. to non-residents On technical and management services fees, rental of moveable properties, etc. to non-residents carrying out activities in the Joint Development Area On Real Estate Investment Trust income exempted at the Trust level distributed to unit holders (other than resident companies) On payments to a nonresident person in relation to any gains or profits falling under Section 4(f) Real property gains tax Return of disposal of real property / shares in real property company •
•
•
•
•
•
Form CP 37A Form CP 37D
Same as above
Form CP 37D (1)
Same as above
Form 37E
Within one month of distributing income to the unit holders.
Form 37F
Within one month of paying or crediting the non-resident, whichever is earlier.
Form CKHT 1A / 1B & CKHT 3 (if applicable)
Within 60 days after disposal of real property / shares in real property company
97
O R T A N T F I L I N G /F / F UR U R N I S H I N G D A TE TE S I M P OR Type of return retur n
Form
Due date
Form CKHT 2A & CKHT 502 (if applicable)
Sales tax Submission of tax return
Within 60 days after acquisition of real property / shares in real property company
•
Form CJP 1
Within 28 days after end of each taxable period.
tax Service tax Submission of tax return
Form CJP 1
Within 28 days after end of each taxable period.
(SOCSO) Submission of remittance form
Form 8A
Not later than last day of the following month.
Fund Employees’ Provident Fund Schedule of Monthly contributions together with cheque
EPF 6 (Form A)
Within 15 days after month end, each month
Return of acquisition of real property / shares in real property company company
•
•
Social Security Organisation •
•
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PwC in Malaysia
Telephone/Telecopier
Mail Address
Tax Contacts
Kuala Lumpur Level 10, 1 Sentral Jalan Tra Travers vers Kuala Lumpur Sentral 50470 Kuala Lumpur
Telephone: [60] (3) 2173 1188 Telecopier: [60] (3) 2173 1288
PO Box B ox 10192 10192 50706 Kuala Lumpur
Jagdev Singh Telephone: [60] (3) 2173 1188
Pulau Pinang 16th Floor, Bangunan KWSP Jalan Sultan Ahmad Shah 10050 Pulau Pinang
Telephone: [60] (4) 238 9188 Telecopier: [60] (4) 238 9288
PO Box 856 10810 Pulau Pinang
Tony Chua Telephone: [60] (4) 238 9188
Ipoh Standard Chartered Bank Chambers 1st Floor, 21-27 Jalan Dato’ Maharaja Lela 30000 Ipoh
Telephone: [60] (5) 254 9545 Telecopier: [60] (5) 253 2366
PO Box 136 30710 Ipoh Perak
Tony Chua Telephone: [60] (4) 238 9188
Melaka Jaya 99 99, Jalan Tun Sri Lanang 75100 Melaka
Telephone: [60] (6) 283 6169 Telecopier: [60] (6) 284 4368
PO Box 140 75720 757 20 Melaka Mela ka
Teh Wee Hong Telephone: [60] (3) 2173 1188 Au Yong Yong Telephone: [60] (6) 283 6169
Johor Bahru Menara Ansar Level 16, Jalan Trus 80000 Johor Bahru
Telephone: [60] (7) 222 4448 Telecopier: [60] (7) 224 8088
PO Box 296 80730 Johor Bahru Johor
Lorraine Yeoh Telephone: [60] (3) 2173 1188 Telephone: [60] (7) 222 4448
Labuan Financial Park Labuan Jalan Merdeka 87000 Wilayah Persekutuan Labuan
Telephone: [60] (87) 42 2088 [60] (87) 42 1618 Telecopier: [60] (87) 42 2198
Level 13F, Financial Park Labuan Jalan Merdeka 87000 Wilayah Persekutuan Labuan
Jennifer Chang Telephone: [60] (3) 2173 1188
pwc.com/my
