DTC 2022

Workshop Series 1
9th September 2022
 Type of
Tax
Direct Indirect
Tax Tax
Income Custom
Tax Duties

Petroleum Excise
IT Duty

Real
Service
Property
Gain Tax Tax

Stamp
Sales Tax
Duty

GST
2
 Basic Income Tax regulations
governing Individuals and Company
 Resident status
Individual
Company

• A company is resident in Malaysia

for the basis year for a YA if at
any time during that basis year the
management & control of its
business of any one of its
businesses, are exercised in
Malaysia

• Directors’ meeting place where

decisions are made to control
/direct the company
 Tax Computation of Individuals

Sole trader of X
Enterprise GM of Sun Berhad Rent out bungalow in KL
Business Income
Employment Income Rental Income
Gross Income
Gross Income Gross Income
Less:
Less: Less:
Deductible expenses
Deductible Expenses Deductible Expenses
Special deduction
---------------------------------- ----------------------------------
Double deduction
--------------------------------- + Statutory Income +
-----------------------------------
Statutory Income
-----------------------------------
Adjusted Income
Less: Capital allowance
---------------------------------- Aggregate Income Less: Business Adjusted loss
Statutory Income
Total Income
Approved donation (limit to 10% of Agg Inc)
Less: Adjusted loss b/f Less: Personal Relief
-------------------------------- Chargeable Income
Statutory income
------------------------------------- x Tax Rate = Tax Liability
 Tax Computation of Partnerships
XY & Co. Parnership Income
Divisible Income 40k
Partner X Less: Capital allowance
----------------------------------
(40%) Statutory Income (Biz)
Statutory Income (rental)
S4(a) -----------------------------------
Aggregate Income
Stationery Business Less: Approved donation (limit to 10% of Agg Inc)
----------------------------------
Business Income Total Income
Less: Personal Relief
Gross Income --------------------------------
Chargeable Income
Less:
-----------------------------------
Deductible expenses
Special deduction
Double deduction Parnership Income
--------------------------------- Partner Y Divisible Income 60k
Less: Capital allowance
Provisional Income (60%) ----------------------------------
Less: Statutory Income (Biz)
Statutory Income (interestl)
Salary earned by partners -----------------------------------
Aggregate Income
---------------------------------- Less: Approved donation (limit to 10% of Agg Inc)
Divisible income = 100k ----------------------------------
Total Income
---------------------------------- Less: Personal Relief
--------------------------------
Chargeable Income
-----------------------------------
 Tax Computation of Companies
XYZ Sdn Bhd

S4(a) S4(d) S4(a)

Stationery Business Rent out house in KL Shoe Business
Business Income Business Income
Rental Income
Gross Income Gross Income
Gross Income
Less: Less:
Less:
Deductible expenses Deductible expenses
Deductible Expenses
Special deduction Special deduction
----------------------------------
Double deduction
+
---------------------------------
Statutory Income +
-----------------------------------
Double deduction
---------------------------------
Adjusted Income Adjusted Income
Less: Capital allowance Less: Capital allowance
---------------------------------- Aggregate Income
----------------------------------
Statutory Income Less: Current biz adjusted Loss 7Statutory Income
---------------------------------- Approved donation (limit to 10% -----------------------------------
of Agg Inc)
Total/Chargeable Income
x Tax Rate = Tax Liability
 Tax Computation
Formula

Tax treatment for

1. Unabsorbed business losses
2. Unutilised capital allowances

Unabsorbed business losses & CA:

• Available to be utilized within 7 consecutive years

8 YA2022 Business losses c/f/CA c/f (till YA2029)

Capital allowance for business assets
Benefits of Resident Individual
Benefits of Resident Individual
Benefits of Resident Company
SAS, Obligations, Tax Administration and
Communication
• TYPES OF RETURN SUBMISSION
➢ Form B - Resident individual with business source
➢ Form BE – Resident individual without business source
➢ Form M – Non resident individual
➢ Form P – Partnership
Link to Sample of IRB Forms

• DUE DATE FOR RETURN SUBMISSION

➢ Form B – by 30 June of following year.
➢ Form BE – by 30 April of following year.
➢ Form M – business (by 30 June); non business (by 30 April)
➢ Form P – by 30 June of following year.

Deadline for submission of tax return for YA 2021: 13

Form B: by 30 June 2022
Form BE: by 30 April 2022
 SAS – Individual with business source
Tax Responsibilities of Taxpayer (Sole proprietorship)

• Estimate tax liability for the coming Year of Assessment

• Pay tax by instalment (bi-monthly basis) commencing in March of the particular

basis period
YA2021 (y/e-31 Dec 2021): 6 bi-monthly instalment: by 15th March 2021, May, July,
Sep, Nov, Jan 2022
• After the end of basis period (31 Dec)
- Complete tax return form (Form B): calculate actual tax liability

- Pay the balance of tax due to the IRB by 30 June of the following year

- File Form B to the IRB by 30 June of the following year

- Retain sufficient records for a period of seven years from the end of the
relevant year. For example, supporting documents for tax return in the YA
2021 need to be kept until 31 December 2028.
14
 SAS – Company
Tax Responsibilities of company

ABC Sdn Bhd Inland Revenue

Board
→ Submit CP204/CP204A

1. Notify IRB
- estimated tax payable for next YA
- Amount cannot be less than 85% of previous YA
tax liability
- Form CP204 to be submitted not later than 30 days
before the beginning of the accounting period
- Revision of tax estimates is allowed in the 6th/9th
month(s) of the financial year (Form CP204A)
2. Pay 12-monthly instalment
- start on second month of the current financial period
- due by 15th of the month
3. Filing tax return form 15

- File Form C to the IRB

- due by 7 months from the end of the financial year
 Penalties for non-compliance

http://www.hasil.gov.my/bt_goindex.php?bt_kump=5&bt_skum=5&bt_posi=3&bt_unit=7000&bt_sequ=11

16
 Group Relief
Criteria for Group Loss Relief

17
 Group Relief
Example of Group Loss Relief

18
Investment & Tax Incentives
 Investment & tax incentives
• Tax incentives [under the Promotion of Investment Act (1986)] are
available for resident company involved in promoted products/activities
(e.g. tourism, ICT, Iskandar Development Region & etc.)

OR

Pioneer Status Investment Tax

Allowance

• Incentive for Reinvestment Allowance (ITA, 1967)

 Pioneer Status
• Company can make an application to the Malaysian Industrial
Development Authority (MIDA) for PS incentive

• Available for manufacturing, agriculture, tourism and R&D companies who

participated in a promoted activity or produced a promoted product

• Example : high tech coy, renewable energy generating coy, automotive

component industry, coy of ICT or multimedia activities (Refer to
http://www.mida.gov.my for complete list of products/services)

• Tax relief period of 5 years would be granted and any extension of another
5 years shall be subject to certain conditions and approval

• Standard PS incentive is given exemption of 70% of Statutory Income from

promoted business (effective tax rate is 30% x 24% = 7.2%).

• Some PS may enjoy 100% exemption on Statutory Income. For example,

promoted projects located in promoted areas such as MSC, Iskandar
Malaysia, Northern Corridor Economic Region, East Coast Economic
Region). 21
 Investment Tax Allowance
• Company can make an application to the Malaysian Industrial Development
Authority (MIDA) for ITA incentive

• Available for manufacturing, agriculture, tourism and R&D companies who

participated in a promoted activity or produced a promoted product

• Example : high tech coy, renewable energy generating coy, automotive component
industry, coy of ICT or multimedia activities (Refer to http://www.mida.gov.my for
complete list of products/services)

• ITA Is mutually exclusive with pioneer status incentive.

• ITA is preferable over PS for projects which are capital intensive and which are not
expected to generate large profits in a short time.

• ITA is given on qualifying capital expenditure incurred (such as plant & machinery
& etc.) within 5 years from the date from which the approval is to take effect.

• Tax relief period of 5 years would be granted and any extension of

another 5 years shall be subject to certain conditions and approval
22
 Investment Tax Allowance
• Normal rate of ITA is 60% on qualifying capital
expenditure. ITA can be offset up to 70% of statutory
income (resulting effective tax rate for ITA coy is 7.5%
only)
• Some ITA may enjoy exemption of 100% on qualifying
capital expenditure & offset against 100% of Statutory
Income. For example, promoted projects located in
promoted areas such as MSC, Iskandar Malaysia,
Northern Corridor Economic Region, East Coast Economic
Region).
• Any unabsorbed ITA can be c/f to subsequent periods, to
be set off against the 70% statutory income, even after
the expiry of the relief periods.
• ITA will be withdrawn when disposal took place within 2
years from the date of acquisition. 23
 Example
• DEF Sdn Bhd, a company resident in Malaysia provides you
with the following for the years ended 31 December 20X1 and
20X5. As the tax consultant for DEF, compute the Chargeable
Income of the Company for Years of Assessment 20Xl and
20X5, by using Pioneer Status and Investment Tax Allowance
incentives respectively.

RM’000
20x1 20x2 20x3 20x4 20x5

Adjusted income/(loss) 0 100 200 300 400

Acquire machinery
- for qualifying product 200 0 0 0 0

24
 Pioneer status computation
PIONEER STATUS
20X1 20X2 20X3 20X4 20X5
ADJUSTED INCOME 0 100000 200000 300000 400000
LESS:
CAPITAL ALLOWANCE
INITIAL ALLOWANCE 40000
ANNUAL ALLOWANCE 28000 28000 28000 28000 28000
68000 68000
96000
STATUTORY INCOME 0 4000 172000 272000 372000
EXEMPTED 2800 120400 190400 260400
CHARGEABLE INCOME 1200 51600 81600 111600 246000

ITA computation
20X1 20X2 20X3 20X4 20X5
ADJUSTED INCOME 0 100000 200000 300000 400000
LESS:
CAPITAL ALLOWANCE
INITIAL ALLOWANCE 40000
ANNUAL ALLOWANCE 28000 28000 28000 28000 28000
68000 68000
96000
STATUTORY INCOME 0 4000 172000 272000 372000
EXEMPTED 2800 117200 0 0
CHARGEABLE INCOME 1200 54800 272000 372000 700000

CA C/F 68000
QUALIFYING COST 200000
ITA ELIGIBLE 120000
ITA C/F 120000 117200
Promoted areas (100% exemption on
Statutory Income from promoted
activities
Tax Incentives
(promoted
areas)

Northern East Coast Econ

Iskandar M'sia
Corridor Econ Region MSC
Region
Senai Airport-Tg Pelepas-
Pasir Gudang tourism Kelantan,
Perlis,Kedah, oil,gas & petrochemical Terengganu,
P.Pinang & Pahang,
manufacturing Mersing
Electrical & electronics northern Perak
agriculture
food & agro processing
education
tourism
Agriculture
health services
Manufacturing
education services
Tourism
financial services
Logistics
 Reinvestment Allowance
• Available for manufacturing and agriculture industries who have incurred
qualifying expenditure for either expansion, modernizing or automating, or
diversifying its existing manufacturing biz within the same industry.

• The claimant must have been in the business operation for at least 36
months.

• RA is given at a flat rate of 60% of qualifying capital expenditure(plant &

machinery, industrial building) incurred up to a period of 15 consecutive
YAs & deducted against statutory income (70% rule). Mechanism of
claiming RA is the same as ITA.

• The coy would not able to claim for any RA on assets acquired from
related coy.

• RA Is withdrawn if the qualifying assets are disposed within 5 years of

acquisition
27
Withholding Tax
 Scope of Withholding Tax
Where??
WHO?? (1)Derived
from M’sia,
Earned
Income
Non-Resident
(No business set
up in Malaysia or
no permanent
establishment in
Malaysia) WHAT?? (Loan
granted by NR)
Revenue Receipt
+
WHAT ?? (interest=10k)
WHEN?? categories of
Upon receipt Income??
How??
WHT Rate
IRB
Payer

Remit WHT (RM1,500)

(15% x 10k)
 Double Tax Agreement between Malaysia & Singapore
Definition of “permanent establishment" shall include especially:
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
and
(g) a building site or construction, installation or assembly project, which exists for more
than 6 months.

The term "permanent establishment" shall be deemed not to include:

(a) the use of facilities solely for the purpose of storage, display or delivery of goods or
merchandise belonging to the enterprise;
(b) the maintenance of a stock of goods or merchandise belonging to the enterprise solely
for the purpose of storage, display or delivery;
(c) the maintenance of a stock of goods or merchandise belonging to the enterprise solely
for the purpose of processing by another enterprise;
(d) the maintenance of a fixed place of business solely for the purpose of purchasing goods
or merchandise, or of collecting information, for the enterprise;
WHT: What Types of Income &
Rates?
TYPES OF INCOME TAX RATE

INTEREST (Sec 109) 15

ROYALTY (Sec 109) 10%

CONTRACT PAYMENT (Sec 107A) 13%

PUBLIC ENTERTAINER (Sec 109A) 15%

SPECIAL CLASSES OF INCOME (SEC4A & SEC109B) 10%

OTHER GAINS & PROFITS (SEC 4(F) INCOME) 10%

31
Special Class of Income

32
 Examples of WHT
1. UNMC borrowed RM1 million from HSBC bank in Hong Kong with interest 8% per annum.
On 31 Dec 2013, UNMC paid RM80K as interest to the bank. Any WHT implications?

2. UNMC borrowed RM1 million from HSBC bank in Kuala Lumpur (resident company) with
interest 8% per annum. On 31 Dec 2013, UNMC paid RM80K as interest to the bank. Any WHT
implications?

3. UNMC borrowed RM1 million from HSBC bank in Kuala Lumpur (non-resident company)
with interest 8% per annum. On 31 Dec 2013, UNMC paid RM80K as interest to the bank. Any
WHT implications?

4. Lee, a Malaysian is married to a Singaporean and lives in Singapore. She is a

housewife and visits Malaysia for a period of less than 90 days each year. In January
2009, Lee met her former varsity mate Maggie, at a school in Singapore where their
children attend. Maggie is an insurance agent and resident in Malaysia.

Lee introduced Maggie to the mothers whose children also commute daily from Johor
Bahru to the school in Singapore. A few weeks later, Maggie contacted the mothers
who were introduced to her and successfully sold insurance policies to a few of them.
Commission due by Maggie to Lee for RM2,000. Maggie claims the commission as an expense
in her profit and loss account in the year 2009. Discuss the tax implications on the above.
 Examples of WHT
5. A Sdn Bhd purchased a machine from Singapore Ltd, with the following costs:

Cost of purchase of the machine RM150,000

Delivery cost 5,000
Import duty 3,000
Installation costs 13,500
Reimbursement of air ticket 4,000
1. If the installation is for 20 days in Penang. Discuss WHT implication on A.
2. If the installation is for 210 days in Penang. Discuss WHT implication on A.

6. Kumar Advertising Sdn Bhd engaged the service of Miss Hutchins, a non-resident
(Australia) specialist designer for a fee of RM133,000. The design was prepared in
Holland and sent by courier to Kuala Lumpur. The fee was paid on 1 September 2010.
 WHT Compliance
Consequences of Non-compliance with Withholding Tax

Payer shall withhold tax on the relevant type of expenses paid to the non-resident.

Within 1 month after paying/crediting the account of non-resident, shall remit the
withholding tax to IRB

• Late payment penalty on non-compliance to WH tax is 10% of unpaid tax amount.

• The expense shall not be allowed for deduction until the payer remitted the WH
tax amount together with the penalty payment.

• The cost of installation and commission for the plant & machinery that is in
connection with income charged under Sec4A will be excluded as qualifying capital
expenditure for purposes of claiming capital allowance. Such cost will be allowed
for CA upon settlement of the withholding tax and penalty due to IRB.

35
Benefits of Double Tax Agreement
• Dual residence
-It is possible for a person to be resident of more than one country
-The danger of dual residence is double taxation
-The DTA would set out rules to eliminate dual residence through the
application of preferential test, as follows :-

(1) Individual
❖ Permanent home
❖ Central of vital interest
❖ Habitual abode
❖ Nationality
❖ Mutual agreement between two countries tax authorities
(2) Company
❖ Place of effective management, i.e. Day to day the management
of a coy is carried on

(3) Lower WHT rates as prescribed in the DTA than the standard rate
Real Property Gains Tax
 RPGT on individual

Disposal
RP

Chargeable
Gain/Loss Relief
Not chargeable

RPGT at between 0-30% Exempted - one RP in a Deemed as "no gain no loss"

depending on the holding lifetime (Malaysian transaction(Schedule 2)
period** Citizen or Permanent
Resident)

Paragraph 12 Paragraph 3
Disposal Price (or “deemed disposal price”) - Transfer among - Transfer from deceased
spouse, parent- to trustee
Less
Acquisition Price child, grandparent- - Gift to
child governments/charity
-Compulsory acquisition,
& etc

Gain
Less: Schedule 4 Loss
deduction
WIH - set off from current
10% of gain or year gain
RM10,000 - Can be c/f indefinitely
38
 Chargeable Gain/Allowable Loss (Individual & Company

Chargeable Gain
Allowable Loss

Disposal Price
Acquisition Price

ACQUISITION PRICE IS
➢ CONSIDERATION PAID,PLUS
DISPOSAL PRICE IS
➢ INCIDENTAL COST INCURRED IN THE ACQUISITION OF RP, SUCH AS
- STAMP DUTY
◼ CONSIDERATION RECEIVED, LESS - LEGAL FEES
- TAX AGENT FEES
◼ CAPITAL EXPENDITURE TO ENHANCE THE RP; - PAYMENT FOR LAND VALUATION PURPOSE
◼ LEGAL FEES IN PRESERVING THE TITLE OF THE LAND - ADVERTISING COST FOR SEEKING A SELLER
◼ INCIDENTAL COST OF DISPOSAL, SUCH AS
- BROKERAGE FEES LESS
- VALUATION FEES
- LEGAL FEES ◼ COMPENSATION RECEIVED FOR DAMAGES TO THE RP 39
- ADVERTISEMENT COST TO SEEKFOR BUYER ◼ INSURANCE RECOVERIES FOR LOSS/DAMAGE TO THE RP
◼ DEPOSIT FORFEITED IN RESPECT OF ANY ABORTED DISPOSAL OF RP
RPGT FOR COMPANY: SCOPE OF CHARGE(1)

Gain chargeable under

RPGT Act

Capital Gain Revenue Gain

Disposal of real
properties (RP) disposal of shares in RP
Companies(RPC)
Refer to next flowchart

What is RPC?
(1) companies with ≤50
shareholders,
RPGT at 10%-30% - (2) Controlled by ≤5
depends on the holding shareholders
period Loss
(3) With ≥75%
- cannot be set off from
tangible assets
current yr CG
or c/f indefinitely
RPGT FOR COMPANY: SCOPE OF CHARGE (2)
Disposal RP

Chargeable
Not chargeable
Gain/Loss Relief

RPGT at 10%-30% - Deemed as "no gain

depends on the no loss"
holding period transaction(Sch 2)

Disposal Price (or Para 17(1)-3 years restriction

deemed disposal
(a)Disposal among related companies
price)
(1) ≥75% shares consideration Para 3
Less
Acquisition Price (2) Transferee is R company - Gift to governments/charity
-Compulsory acquisition, etc

Loss
(b) Transfer under restructuring scheme
- set off from (comply with government policy)
current yr CG
(1) Transferee is R company
c/f indefinitely

(c) Transfer by liquidator under

restructuring scheme
(1) Transferee is R company
RPGT RATES
 Review Question
• PAAC Holdings Sdn Bhd (PAAC) acquired for investment purposes 2
million ordinary shares of RM1 each in CAAP Sdn Bhd (CSB), a controlled
company, for a consideration of RM3 million on June 1, 2015. At that
time, CAAP’s owned 2 units of factory premises which worth
RM20,000,000, which forms 70% of its tangible assets. On 13 May 2016,
CSB purchased RM3,000,000 shares in AXB S/B (controlled company),
which 90% of its assets are property held for investment purpose. On
the same day, CSB total tangible assets valued at RM30 million. On 8
September 2020, PAAC sold half of its shares in CSB for RM5 per share.

DISPOSAL PRICE 5,000,000

1/6/2015 13/5/2016 8/9/2020

LESS: ACQUISITION PRICE 1,500,000

Buy 2mil@RM1 CSB is RPC Disposed 1mil@RM5 GAIN ON DISPOSAL OF RP 3,500,000

CSB-non RPC DV(RP&RPC shares) RPGT RATE 15%
=23m/30m=76%
RPGT PAYABLE 525,000
COMPLIANCE REQUIREMENTS (INDIVIDUAL &
COMPANY)

• DUTY OF DISPOSER
– Submit form CKHT 1 return within 60 days from
the date of disposal

• DUTY OF ACQUIRER

- Submit form CKHT 2 return within 60 days from the

date of disposal
- Withheld 3% of total consideration value and remit
the sum to IRB within 60 days from the date of
disposal.
-If the acquirer fails to do so, a penalty = 10% of that
sum will be imposed
 Stamp Duty

Scope of Stamp Duty

Rates of SD
Exemptions of SD
Tax Administration of SD

https://www.pwc.com/my/en/publications/mtb/stamp-duty.html
 Sales Tax

https://www.pwc.com/my/en/publications/mtb/sales-tax.html
 SALES TAX MECHANISM
Sell Taxable
Customer
WHO? Goods (What?)
WHO?
Chargeable Person
WHERE?
Pay Sales Tax

Manufacturer of Importer of
Chargeable Exempted
Taxable Goods Taxable Goods

Registered Pay Sales Tax

Non-Registered

RMCD
Remit Sales Tax
(WHEN?)
 Sales Tax Administration
Rates of sales tax
Sales tax will be imposed at the rate of 5%, 10% or a specific rate for petroleum
products

48
 Sales Tax Administration
❖ Sales tax would be due at the time when invoices is issued (for manufacturers of
taxable goods) or goods are imported (for importer of taxable goods)
❖ The sales tax return is required to be furnished to the RMCD not later than the
last day of the month following the end of the taxable period.
❖ Submission of form SST-02 to the RMCD.

TAXABLE PERIOD DUE DATE FOR PAYMENT OF SALES TAX

• Sep-Oct 2021 30 Nov 2021
• Nov-Dec 2021 31 Jan 2022
• Jan-Feb 2022 31 March 2022
• March-Apr 2022 31 May 2022

49
 Sales Tax Administration

❖Late payment penalty

50
 Example of sales tax implication
During 1 Nov-31 Dec 2021, Larry (registered manufacturer) had the following transactions;

RM
Sales to Kuala Lumpur (excise duty: RM10,000) 200,000
Sales to Langkawi 100,000
Sales to Indonesia 300,000
Credit notes issued to KL customers (sales in Sep) 20,000
Import taxable raw materials from Japan (import duty: RM8,000) 22,000

Determine the amount of sales tax and the due date for tax payment.

RM
Sales to Kuala Lumpur (excise duty: RM10,000) 200,000
Sales to Langkawi 0
Sales to Indonesia 0
Credit notes issued to KL customers (sales in Sep) (20,000)
Import taxable raw materials from Japan (import duty: RM8,000) 22,000
Total taxable value 202,000
51
Sales tax (10%) 20,200
 Service Tax

https://www.pwc.com/my/en/publications/mtb/service-tax.html
 SERVICE TAX MECHANISM
Sell Taxable
Customer
WHO? Services (What?)
WHO?
Chargeable Person
WHERE?
Pay Service Tax

Provider of
Chargeable Exempted
Taxable Services

3 Groups
Turnover > RM0, 500k,
Registered Non-registered 1.5MIL

RMCD
Remit Service Tax
(WHEN?)
 Scope of service tax charge
❖ LEVIED ON TAXABLE SERVICES PROVIDED BY TAXABLE PERSONS

➢ Digital service

❖ Threshold for registration

(1) RM 0 : Provision of credit card & charge card services
(2) RM1.5 mil: Provision of food & beverages
54
(3) RM500k : all the others
 Service Tax Exemption
• Service tax does not apply to services exported,
sale of services in Labuan, Langkawi & Tioman.

Rates of service tax

Item Rate
All type of taxable services 6%

o Provision of credit card or charge card services

▪ A specific rate of tax of RM 25 is imposed upon issuance of
principal or supplementary card and every subsequent year
or part thereof
55
 References

https://www.pwc.com/my/en/publications/mtb.html

https://www.hasil.gov.my/en/

Tax Budget 2022

End of Workshop Series 1