Stay current. Be tax savvy TaXavvy www.pwc.com/my Sept 2012

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Stay current. Be tax savvy
TaXavvy
Sept 2012
Issue 5/2012
Inside this issue
Tax Laws
• Treasury Management Centre – Exemption Orders have been gazetted
• Deduction of sponsorship of scholarship
• Revocation of double deduction incentives
3
Tax Administration
• Incentive claim forms no longer required to be submitted to Inland
Revenue Board effective 17 August 2012
• Guidelines on treatment of single tier dividend for the purposes of actuarial
surplus transferred to shareholders’ fund
• Guidelines for application for approval under Section 44(6) of the Income
Tax Act 1967 for a Public School Contribution Fund
• Guidelines on non-application provisions for Accelerated Capital Allowance
Rules
5
Tax Cases
7
Upcoming Events
9
TaXavvy is a
bi-monthly publication
which aims to provide
concise updates on
developments in tax laws,
cases, guides, administrative
practices and other
regulatory developments
Tax Laws
Treasury Management Centre – Exemption Orders have
been gazetted
The following Exemption Orders were gazetted on 6 August 2012 in
respect of a Treasury Management Centre (TMC). Both Orders are
effective from year of assessment 2012:
Income Tax (Exemption) (No.5) Order 2012 – Income tax
exemption for a TMC
Salient points include:
1) Income tax exemption for 5 consecutive years of assessment on
statutory income from provision of qualifying services (QS) to
related companies. The statutory income comprises:
•
70% of statutory income from provision of QS to related
companies outside Malaysia, and
•
a portion of QS to related companies in Malaysia, based on a
specified formula.
2) Current year and carried forward tax losses from the provision of
QS to related companies outside Malaysia cannot be utilized
against the income of QS to related companies in Malaysia and
other businesses. Losses cannot be carried forward after the
exempt years of assessment.
3) Where service fee or interest charged is not at arm’s length or
excessive, the price may be substituted or the excessive amount
may be disallowed.
4) The TMC is required to provide QS to at least 3 related companies
outside Malaysia for each year of assessment.
5) The list of QS are available on MIDA’s website (www.mida.gov.my
> Services Sector > Incentives for investments).
6) Application has to be made to MIDA before 1 January 2017.
Income Tax (Exemption) (No.6) Order 2012 – Income tax
exemption for non-residents which provide financing to a
TMC
Salient points include:
1) Exemption from income tax is given on interest on borrowings
obtained by a TMC from a non-resident person for purposes of
providing QS, for the years of assessment in which the TMC is
exempted from income tax.
2) A ‘non-resident person’ in this case means a non-resident related
company of a TMC or a non-resident financial institution.
The abovementioned two Exemption Orders complete the list of
incentives accorded to a TMC. Earlier on, Exemption Orders had been
issued for exemption on income for foreign individuals working in a
TMC and stamp duty on all instruments of loan and service
agreements executed by the TMC.
3
Tax Laws
Deduction of sponsorship of scholarship
Revocation of double deduction incentives
The Income Tax (Deduction for the Sponsorship of Scholarship to
Student of Higher Education Institution) Rules 2012 was gazetted on
26 July 2012. The Rules are effective for years of assessment 2011 to
2016. Salient points of the Rules include:
The following Exemption Orders giving double deduction incentives
have been revoked. The revocation takes effect from year of
assessment 2016.
•
It applies to a resident company which executes a scholarship
agreement with a student from 8 October 2011 to not later than 31
December 2016.
•
Student means a Malaysian resident citizen receiving full time
study at a higher educational institution without a means of his
own and whose parents’ or guardians’ total monthly income does
not exceed RM5,000.
•
A double deduction is given for the scholarship sponsorship
expenses incurred which include course fees, educational aid and
reasonable cost of living expenses.
•
Income Tax (Deductions of Insurance Premiums for
Importers) Rules 1982 for double deduction for insurance
premiums incurred with any Malaysian incorporated insurance
company in respect of cargo imported.
•
Income Tax (Deductions of Insurance Premiums for Exporters)
Rules 1995 for double deduction for insurance period incurred with
any Malaysian incorporated insurance company in respect of cargo
exported.
•
Income Tax (Deductions for Freight Charges) Rules 1990 for
double deduction for freight charges incurred in respect of rattan
and wood based products exported.
4
Tax Administration
Incentive claim forms no longer
required to be submitted to Inland
Revenue Board effective 17 August
2012
Guidelines on treatment of single
tier dividend for the purposes of
actuarial surplus transferred to
shareholders’ fund
Guidelines for application for
approval under Section 44(6) of the
Income Tax Act 1967 for a Public
School Contribution Fund
The Inland Revenue Board (IRB)
announced on 17 August 2012 that with
effect from 17 August 2012, Incentives
Claim Forms need not be submitted to the
Tax Policy Department, Head Office of
IRB. The original copy of the claim form is
to be kept by the claimant company
together with the supporting documents
for audit purposes.
The above guidelines were issued to
provide guidance on the treatment of single
tier dividend for the purposes of actuarial
surplus transferred to shareholders’ fund.
The IRB issued the above guidelines to
provide guidance on the procedure and
requirements for the application of a Public
School Contribution Fund to be an approved
organisation under Section 44(6) of the ITA.
The guidelines sets out the mechanism for
determining the portion of net single-tier
dividend income in the actuarial surplus
transferred to shareholders’ fund so as to
exclude the amount from being subject to
income tax.
Both the guidelines are available on
www.hasil.gov.my (Law & Regulation >
Technical guidelines)
5
Tax Administration
Guidelines on non-application provisions for various
Accelerated Capital Allowance (ACA) Rules
The IRB has issued the ACA guidelines which provide guidance on
the tax treatment in respect of the non-application provisions in the
various ACA Rules currently in existence. Salient points of the
guidelines are:
1) A person (including a company) who has elected to claim the
following incentives will not be allowed to claim ACA:
•
•
•
Incentives under the Promotion of Investments Act 1986
Reinvestment allowance under Schedule 7A of the Income
Tax Act 1967 (ITA), and
Exemptions under Sections 127(3)(b) or 127(3A) of the ITA.
5) Paragraph 71 of Schedule 3 requires clawback of capital allowance
claimed for assets disposed within 2 years of acquisition. With
effect from year of assessment 2009, paragraph 71 of Schedule 3 of
the ITA will not be applied on disposals resulting from death of
the asset owner or any other reasons which the IRB thinks
appropriate.
6) In a control transfer situation, assets disposed within 2 years of
acquisition will be subject to the provisions of paragraph 71 of
Schedule 3. Balancing charge will be made on the disposer. In
addition, the transferee may only claim capital allowance based on
the normal rates instead of rates prescribed by ACA Rules.
The guidelines is available on www.hasil.gov.my (Law & Regulation >
Technical guidelines)
2) ACA Rules are not mutually exclusive with any of the directions
issued by the Minister under Section 154(1)(b) of the ITA (power
to prescribe rules) in respect of deductions.
3) ACA for small value assets under paragraph 19A Schedule 3 of
the ITA is given to a person for the purposes of a business. The
guidelines have now clarified that the abovementioned ACA is
applied on a per asset basis. Hence, assets not subject to
paragraph 19A provisions are allowed to be claimed under other
ACA Rules.
4) A taxpayer is not allowed to claim capital allowance at a lower
rate prescribed in any of the ACA Rules if the asset is eligible for
a higher rate of capital allowance under any other Rules.
6
Tax Cases
The following cases were decided recently:
Case
Issue(s)
Decision/ Status
This is a judicial review against the decision of the Director General
of Inland Revenue (DGIR) to invoke Section 14o of the Income Tax
Act 1967 (ITA) on the grounds that:
The taxpayer’s appeal allowed
High Court
Port Dickson Power Bhd v
Ketua Pengarah Hasil Dalam
Negeri
•
•
Government of Malaysia v Chiu
Kuok Cheng
the notices of additional assessment were bad as the DGIR did
not specify which limb of Section 140 it was invoking, and
the DGIR had not shown or disclosed his grounds for invoking
Section 140 of the ITA.
This is an application for summary judgement by the Government of
Malaysia (GoM) for outstanding taxes and penalties. The taxpayer
had raised the following issues against the application:
•
•
•
GoM’s application dismissed
that statutory time bar period should apply
that the GoM had accepted full settlement of the additional
assessment, and
that penalties under Section 113(2) were discretionary and the
DGIR had not exercised proper due consideration when imposing
the penalties.
7
Tax Cases
Case
Issue(s)
Decision/ Status
Lembaga Hasil Dalam Negeri v
Kang Keng Tee & Anor.
This is a preliminary objection by the taxpayers that the DGIR does
not have the power to institute criminal proceedings against the
taxpayer by the discretion given in the Inland Revenue Board of
Malaysia Act 1995 without having to first obtain authorization from
the public prosecutor.
Taxpayers’ objection dismissed
Wincor Nixdorf (M) Sdn Bhd v
Menteri Kewangan & Anor.
This is an application for judicial review by the taxpayer to quash the
decision of the Minister of Finance to reject the taxpayer’s application
for remission of whole or part of the customs duties it had to pay due
to failure of Customs in performing their statutory duties.
The taxpayer’s appeal allowed
High Court
8
The Academy brings to you…
Kuala Lumpur
Date: 4 October 2012 (Thursday)
Venue: Hilton Kuala Lumpur
Contact: Che Sham Ahmad at 03-2173 0410
Penang
Date: 9 October 2012 (Tuesday)
Venue: Hotel Equatorial
Contact: Ann Yew or Ong Bee Ling at 04-238 9291 / 04-238 9170
Johor Bahru
Date: 10 October 2011 (Wednesday)
Venue: Persada International Convention Centre
Contact: Noraini Riduan or Anson Loo at 07-222 4448 (ext: 129 / 124)
For more information/to register please visit PwC’s website at
www.pwc.com/my/en/TheAcademy
9
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