DEEMED DERIVED FROM MALAYSIA SOURCE

Derived & remittance basis to originating cuase of income (activity/employment/bu

WHAT was done to obtain profit/inc

DEFINITION OF BUSINESS ITA 1967

Includes profession, vocation, trade, manufacture, adventure, concern in nature of

DEFINITION OF EMPLOYMENT (a) employment with relationship of master-servant

(b) appointment/office for which remuneration is payable

PROOF
Written agreement, extent of control by employer over employee, degree of skill, n
location, attendance, power to delegate

CAP/REV RECEIPTS Loss/damage to asset (perm structure) = capital in nature = capital asset =
Loss/damage to asset (15% of GP) = loss of income, not source = rev exp =

DEDUCTION OF EXPENSES

BASIS PERIOD/ ACC DATE

STOCK VALUATION

OTHER INCOME (S4 ITA) INTEREST INCOME = incurred wholly & exclusively in the production of income
DIVIDEND INCOME = Para 12B of Sch 6 exemption of single-tier div income
RENTAL INCOME = Can be grouped as single source, charged under S4(d)

RENTAL OR BIZ INCOME

INTEREST OR BIZ INCOME

DEEMED INTEREST INCOME

INTEREST EXPENSE, RESTRICTION S33(2) Restriction - interest exp disallowed is apportiones amongst investments fin
Int exp - rev in nature - incurred wholly & exclusively in production of income

Sum payable not paid during previous period, allowed as TAX DEDUCTION arriving
Notify DGIR in writing to claim int exp deduction on sum not later than 12 months

COMMENCEMENT/SEPARATE BIZ

SCHEDULE 3 ALLOWANCE

DIFFERENCES ITEM CO
IT rate % Standard 24%
Reduced IT rate? 17% up to first 600,000 for SME
Personal reliefs -
Eligible for incentives PS/RA/ITA/AIE
Proprietor eligible for EPF Yes on director's salry
Basis period Non-december
Instalment payments Statutory scheme
Distribution of profits Dividends only (single-tier)
Directors/proprietors benefits Taxable - public ruling by DGIR
come (activity/employment/business) in/outside Msia

dventure, concern in nature of trade, excludes employment

ver employee, degree of skill, nature of remuneration,

ature = capital asset = [NOT TAXABLE]

ot source = rev exp = [TAXABLE]

in the production of income

of single-tier div income
rce, charged under S4(d)
ones amongst investments financed by borrowing
in production of income

d as TAX DEDUCTION arriving to adj inc

um not later than 12 months in BP.

IND
Scale rate 0-30%
o first 600,000 for SME -
Yes
No
ector's salry No
31 Dec
Non-statutory scheme
only (single-tier) Whenevr
public ruling by DGIR Disallowed in computing adj biz inc
RESIDENCE STATUS Management and control normally exercised
AGM held at least once in Malaysia
where important decisions are made
Even if no business carried on in Malaysia = regarded as resident any time that man
Place of incorporation/registered office does NOT determine residence status

DIVIDEND

CAPITAL REDUCTION

LIQUIDATION OF ASSETS

SHARE BUY-BACK SCHEME

SINGLE-TIER TAX SYSTEM

SME No TAX ESTIMATE for first 2/3 YA

TAX ESTIMATE
Form e-CP204 before 1 March
Instalment must be paid every fifteenth day of relevant months
No penalty as SME not required legally for tax estimate

When PUOSC > 2.5m on first day BP = required to provide tax estimate before curr
if BP < 12 months = no requirement to submit tax estimates = no instalment payme

CIRCUMSTANCE EXCLUDING SME FROM ESTIMATE BENEFITS

Estimates for first 2/3 years & >50% of PUOSC:
of SME owned by related co
related co owned by SME
related co & SME owned by another co
Related co must be > 2.5m at beginning of BP

TAX COMPLIANCE MATTERS DIRECTORS

S75 and S75A ITA - responsibility to act on behalf of co
(a) Submit annual income tax return (form e-C, e-E) by e-filling
(b) Monthly tax deduction on emp. Remu -> remit tax -> deduct to DGIR
(c) Maintain routine tax compliance: submit tax return, pay monthly income tax ins
(d) Notify DGIR within 30 days on emp start/leave
(e ) Deduct tax from NR payments -> remit tax -> deduct to DGIR
(f) Complete & issue Form CP58 on payment to co's agents, dealers, distributors (R
 (g) Deduct tax S107D on payment to co's agents, dealers, distributors (NR)
Not personally liable to pay debt unless S75(A) - occupy as director in office, at leas

NOTIFICATION OF CHANGE OF ACC DATE

Notified in prescribed form (Form e-CP204B) 30 days before end of new acc period
end of original acc period)
PENALTY
S120(1)(i) ITA = conviction = fine 200 - 20000/imprisonment up to 6 months/both
Any increased sum under S107C & penalty S112(3) in original acc period remain re

LATE SUBMISSION
Form e-C = shall impose penalty of not < 300% amount on IT befpre set-off/repaym
DGIR = best judgment = issue notice to comply -> still defaults S120(1)(i)
Court may make further order = pay within 30 days

ERROR/MISTAKE
S131 = entitled to claim for relief provided:
1. error/mistake was contained in return/statement before final assessment
2. claim within 5 years after wrong assessment
3. DGIR consider application, relief/reject on case-by-case (but taxpayer has right t

INCREASE OF ITP WITHOUT NOTICE

- Co fail to provide tax estimates
- No direction for instalment payments issued by DGIR
- No prosecution S120 for failure to furnish estimate
Increase sum by 10%, recoverable by DGIR as tax payable

CAPITAL STATEMENT FAILURE TO COMPLY

S78 = offence
S120(1)(i) = if prosecuted & convicted = fine min 200 max 20000/imprisonment up
DGIR = raise additional assessments (S91 ITA) if no previous assessments ever
= normal = 5 years
= suspision of fraud, wilful default, negligence = TBD (S91(3))
= IT still must be payable despite appeal (S103(1))
Co entitled to appeal against additional assessments (onus to prove they were exce

PURPOSE
Compare FP (cover whole period under suspicion)
Compare A&L at each DoAss from biz & personal source -> net total ITP
(amount of A&L - changes in finance [declared income CY, tax payments, living cost
 PENALTIES
DGIR to review CS -> proposal on amount treated as declared inc -> propose settlem
(amount undercharged/+ max penalty up to 100%) + cert of full disclosure + admis
= create agreement in writing + additional composite assessment (if any)
S113(2) = no prosecution = penalty = tax undercharged + admission in writing (D
S113(1) = tried by court = min 1000 max 10000 + special penalty (double tax)

ADDITIONAL ASSESSMENT DATE OF APPEAL

30 days from date of service of notice of assessment

S103 ITA = paid within 30 days from date of service of notice of assessment, notwit
DGIR = 12 months to finalise appeals received by taxpayer (request within 30 days
Taxpayer -> appeal to Special Commissioners (deciding orders) -> DGIR
Tax appeal to SC = for additional ITP complying with public ruling (submit Form Q) w

Unpaid IT = late payment penalty 10% S103

Civil proceedings S106 = S106A civil suits against DGIR does not relieve person from

PENALTY
S120
S112(1A) special penalty = 3 times amount of tax determined by DGIR best judgm
 as resident any time that management & control exercised
termine residence status

ovide tax estimate before current YE (commence 3 months later)

timates = no instalment payment

x -> deduct to DGIR

n, pay monthly income tax instalment& bal of tax and tax appeals

uct to DGIR
agents, dealers, distributors (RS)
lers, distributors (NR)
py as director in office, at least 20% PUOSC

before end of new acc period (if new acc period < 12 closed before

onment up to 6 months/both
n original acc period remain recoverable by DGIR (co must pay)

nt on IT befpre set-off/repayment/relief
defaults S120(1)(i)

before final assessment

-case (but taxpayer has right to appeal to Special Commissioner)

max 20000/imprisonment up to 6 months/both

no previous assessments ever made

nce = TBD (S91(3))

(onus to prove they were excessive on co)

rce -> net total ITP

e CY, tax payments, living cost changes) = surplus = assumed undeclard income
declared inc -> propose settlement scheme
cert of full disclosure + admission in writing + request to compound offence
assessment (if any)
rged + admission in writing (DGIR may reduce penalty under S124)
pecial penalty (double tax)

f notice of assessment, notwithstanding appeal

payer (request within 30 days for extension of max 6 months by MOH)
ng orders) -> DGIR
public ruling (submit Form Q) within date of deemed assessment

R does not relieve person from payment of tax liability

termined by DGIR best judgment

UNIT TRUST

REAL ESTATE INVESTMENT TRUST

NON-RESIDENT S107A ITA WHT 10% & 3%
NOT final tax
CAN be repaid/offset when complied all Malaysian IT obligations

10%
Any IT liability on inc derived from biz activity carried out in Msia
Tax credited against liability and excess repaid to co after settlement of tax liability

3%
On ITP of foreign employees employed in Msia
Co must make monthly IT deductions for wages/salaries paid
DGIR = authorise main contractor not to deduct from contract wages -> reduce tax
DGIR = no authorisation -> refund when all foreign workers settle IT liability

RESIDENT S4A(ii) ITA

Amount paid in consideration of advice/assistance/services rendered on managem

S4(iii) ITA
Rent ot other payments under agreement for use of movable property

Final tax, no reduction/repayment

 obligations

out in Msia
after settlement of tax liability

contract wages -> reduce tax deduction -> inc tax liability
orkers settle IT liability

ervices rendered on management/administration

movable property
DUAL RESIDENCE Tax credit in country of residence in respect of tax suffered in country of income so

DTA OVERRIDES DOMESTIC TAX LAWS

ffered in country of income source
PERMANENT ESTABLISHMENT

BRANCH

LOAN/SHARE CAPITAL
ACQUISITION

DISPOSAL Required to submit RPGT return(Form CKHT) within 60 days from D.o.D to DGIR (D

DEEMED DISPOSAL

NGNL

RPGT EXEMPTION

RPC SHARES

DEATH/INHERITANCE

TAX ADMIN/COMPLIANCE LATE SUBMISSION

DGIR = right to impose late submission penalty
60 days from D.o.D to DGIR (D.o.D = D.o.agreement/approval by gov)
PIONEER STATUS

INVESTMENT TAX ALLOWANCE

REINVESTMENT ALLOWANCE
TRUST

SETTLEMENTS
TRANSFER OF BIZ/ CHANGES TO BIZ
STRUCTURE
ANTI-AVOIDANCE LOANS TO DIRECTORS
S140B A-A PROVISIONS only under 2 conditions
1. Director holds > 20% PUOSC
2. Loan sourced from internal funds
YES = Co. incurred int. exp -> co deemed int. inc -> TAXABLE by co as int inc S4
NO = Co. incurred no int.exp - derived no deemed int. inc -> S140B APPLIES
unless incurred for staff benefit -> TAX DEDUCTIBLE

Loan benefit perquisites only when

1. Funds on loan facility on external sources
2. Rate of interest charged to employee by employer < rate of interest borne by em
Tax benefit = rate of interest in 2. (between borrowing cost & interest required to p

Interest free loan = benefit with quantifiable monetary benefit but no attributable

INTEREST DEDUCTIONS

STOCKS

CAPITAL ALLOWANCES
TAX LOSSES

TAX INCENTIVES

SHARE/ASSET DEAL
 -> TAXABLE by co as int inc S4(c) and specifically excluded from S4B biz inc
ed int. inc -> S140B APPLIES

< rate of interest borne by employer from bank

ng cost & interest required to pay by employee to employer)

ry benefit but no attributable value

EMPLOYMENT/REMUNERATION PACKAGE

LUMP SUM/SHARE OPTION

BUSINESS OR EMPLOYMENT INCOME EMPLOYMENT INCOME

also check: Deemed derived from Msia
Disallowed expenses/Allowable deductions 1. any period which emp exercised in Msia
2. any period of leave attributable to exercise of emp in Msia
3. any period which employee performs duties outside Msia incidental to emp in

Form BE Form B
Employees & other non-biz inc Business inc
30-Apr 30-Jun
IT on emp by monthly deduction scheme IT on non biz inc by 6 bi-monthly
by employer instalment by 30 Jun
IT on non biz inc by 6 bi-monthly
instalment by 30 Apr

INVESTMENT INCOME

RECEIPTS & DEDUCTIONS

MERGERS & ACQUISITIONS OF BIZ
ACTIVITIES

RESIDENCE STATUS & PLANNING TEMPORARY ABSENCE

Social visit (max 14 days) to visit immediate family members
Ill-health of self/immediate family member

S7(1)(a) present in Msia > 182 days

S7(1)(b) < 182 days (short period link to another period of >182 days) + permitt
S7(1)(c) present for > 90 days in CY and resident 3/4 PY
S7(1)(d) resident for 3 immediate preceding years & following year

DISALLOWED EXPENSES/ALLOWABLE DISALLOWABLE EXPENSES ALLOWABL

DEDUCTION Proprietor's salary Employees salary (test of r
S39(1) ITA specifically prohibits contribution EPF Contribution Bonus
to unapproved funds EPF on bonus

EMPLOYMENT BENEFIT ITEM EXPLANATION

Cost of leave passage S39(1) ITA specifically prohibited - NO
Subcription (fitness club) - allowable at staff cost
Entrance fee one-off payment (co acquires asset o
nature, capital asset nature)
Insurance policies - investment value on insurance at be
= co acquires asset = capital nature -
- investment value on insurance at be
= rev exp = staff bears cost = DEDUCT
Share options Lower of share value exerciseable vs

Disc price on service by employer
Free consultation service
Disc on consumable product/service
Disc on purchase of investment products
Traditional Medicine
Maternity exp
Less: price paid by employee
Taxable benefit
up to max RM1000, excess = TAXABLE
on product/service by related group
by medical practitioner (register with
registered with MOH)
-NOT traditional medicine = DGIR pub
by medical practitioner (register with
registered with MOH)

TAX COMPLIANCE CHARGEABLE INCOME

Salary & BIK derived from Msia

NEW RESIDENT COMPLIANCE

1. Notify DGIR on chargeability of tax within 2 months arrival to Msia
2. Complete, submit, pay IT return (Form BE) each year
- Can elect not to furnish Form BE if:
Income only from employment
Monthly deduction paid by employer
Income tax not borne by employer

AMENDED RETURN
Request for variation of instalments = before 30 June (no request to change
DGIR = issue notice of late payment penalties
Allowed amendment to IT return = not later than 6 months from due dat
= increased sum fixed at 10%
e Msia incidental to emp in Msia

biz inc by 6 bi-monthly

riod of >182 days) + permitted temp. absence

& following year

ALLOWABLE DEDUCTION
Employees salary (test of reasonableness)

EPF on bonus

EXPLANATION CO BENEFIT? EMP BENEFIT?

specifically prohibited - NOT DEDUCTIBLE Taxed /
e at staff cost
yment (co acquires asset of enduring
pital asset nature) - NOT DEDUCTIBLE Taxed /
nt value on insurance at benefit to co
res asset = capital nature - NOT DEDUCTIBLE Taxed /
nt value on insurance at benefit to emp
= staff bears cost = DEDUCTIBLE / Taxed
hare value exerciseable vs exercised
paid by employee
/ Taxed
Full ex.
Full ex.
RM1000, excess = TAXABLE Taxed
t/service by related group Taxed
Taxed
l practitioner (register with bodies certified/ Exempt

tional medicine = DGIR public ruling Taxed

l practitioner (register with bodies certified/ Exempt

arrival to Msia

June (no request to change due dates)

han 6 months from due date

sum fixed at 10%
IBA Gain on disposal = capital gain [NOT TAXABLE] -> adjust by bal charge/allow
-> bal charge at residual valu
Capex on construction, reconstruction, extension, improvement = whereby exp rec
-> treated as IB, exp qualifies
Ancillary structures (completed & in use) -> eligible for IBA
Repairs/maintenance -> do not materially add valu
-> rev in nature = TAX DEDUC
Resurfacing costs -> capex

CA

QUALIFYING PLANT ITA 1967 DEFINITION

Apparatus used by person carrying on his biz but does not include building/IA/asse
which biz is carried on
EXAMPLES:
PLANT NOT PLANT
Functional test Mere setting
Used by professional to carry out biz Furniture/fittings
Functional role (commercial necessity) Repair and renewal (not mat
Replacement of asset (capital = NOT DEDUCTIBLE, eligible for CA)
 -> adjust by bal charge/allowance
-> bal charge at residual value, restricted to IBA
provement = whereby exp recoverable through inc
-> treated as IB, exp qualifies for IBA (IA & AA)
-> eligible for IBA
-> do not materially add value/prolong life of asset
-> rev in nature = TAX DEDUCTIBLE to adj inc

s not include building/IA/asset used fro functions as a place with

NOT PLANT
Mere setting
Furniture/fittings
Repair and renewal (not materially add value/prolong life of asset) = rev = TAX DEDUCTIBLE
gible for CA)
SALES TAX

SERVICE TAX