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

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Stay current. Be tax savvy
TaXavvy
March 2012
Issue 2/2012
Inside this issue
Tax Laws
• Income Tax (Exemption) Order 2012
• Income Tax (Deduction for Expenditure on Franchise Fee) Rules 2012
3
Tax Administration
•
Filing Programme for 2012
•
New Public Ruling 1/2012 – Compensation for Loss of Employment
4
Tax Cases
6
Upcoming Events
11
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
Income Tax (Exemption) Order 2012
The Income Tax (Exemption) Order 2012 was gazetted on 19 January
2012 and is effective from 1 January 2010 to 31 December 2014. This
exemption order applies to private healthcare facilities as defined under
Section 2 of the Private Healthcare Facilities and Services Act 1998.
The order provides for the exemption from income tax on statutory
income derived from a qualifying project. The amount of exemption
provided is 100% of the qualifying capital expenditure incurred within a
period of 5 years, as determined by the Malaysian Investment
Development Authority for applications made between 1 January 2010 to
31 December 2014.
A qualifying project is a project approved by the Ministry of Health
(MOH) and verified by the Malaysian Healthcare Travel Council (MHTC)
which is:
Income Tax (Deduction for Expenditure on Franchise Fee)
Rules 2012
These rules, gazetted on 12 March 2012, provide for deduction on
expenditure incurred on franchise fee paid by a franchisee for the
purposes of his franchise business, prior to the commencement of
business.
These rules apply to franchise fees paid to a franchisor (defined under
Section 4 of the Franchise Act 1998) who wholly owns the local
franchise brand, and in the case of a franchise company, where at least
70% of the issued share capital is Malaysian owned.
Franchise fees are fees paid for the right to use a mark, trade secret,
confidential information, intellectual property or system of franchise,
but does not include royalty or other periodical payments.
These rules are effective from year of assessment 2012.
•
•
A new private healthcare facilities business; or
A project for expansion, modernisation or refurbishment of existing
private healthcare facility business that has not been granted
exemption under this Order and involves new investment.
Qualifying capital expenditure is the:
•
•
Cost of purchasing / constructing a new building which is licensed
with the MOH and registered with the MHTC; and
Cost of medical devices or other facilities used for the project as
verified by the MOH and approved by the Minister.
3
Tax Administration
Filing Programme for 2012
Income tax returns with statutory filing deadlines falling in the 2012 calendar year
- Grace period for submission of income tax return forms and payment of taxes
Submission via
Grace period for submission of
income tax return formsa
e-filing
15 days (calendar days) from the
stipulated filing due date
Grace period for payment of taxes
Payment of balance of taxes under section 103(1) of the Income Tax
Act 1967 (ITA) in respect of income tax return formsa
15 days (calendar days) from the stipulated filing due date
Payment of debt due / payable under the Finance Acts 2007 (Act 683)
and 2009 (Act 693)b
15 days (calendar days) from the stipulated filing due date
a
b
Hand delivery
Not applicable
Not applicable
Post
3 working days from the stipulated
filing due date
Payment of balance of taxes under section 103(1) of the ITA in respect
of income tax return forms a
3 working days from the stipulated filing due date
Forms BE, B, M, P, TP, TJ, TF, C, R, C1, TA, TC and TR
Forms C, R, C1, TA, TC and TR
If submissions are not made within the grace period, the submission will be deemed to be late and penalties under Section 112(3) will be computed
from the stipulated filing due date and not the extended due date.
4
Tax Administration
Filing Programme for 2012 (cont’d)
Form E (due on or before 31 March
2012)
A grace period of 15 calendar days from the
stipulated filing due date is also available
for Forms E submitted via e-filing. If filing
is done by post, a grace period of 3 working
days from the stipulated filing due date is
given.
New Public Ruling 1/2012 –
Compensation for Loss of
Employment
The IRB issued the Public Ruling 1/2012 –
Compensation for Loss of Employment on
27 January 2012 which comes into effect
from year of assessment 2012. The public
ruling explains the following :
•
Payments for termination of
employment and compensation for loss
of employment.
•
Determination of elements of
compensation and gratuity.
•
Tax treatment for compensation of loss
of employment.
Application for extension of time
Applicable for forms C, R, C1, TA, TC and
TR for year of assessment 2011 and Form E
for year 2011 only.
The application for extension of time for
submission and for payment of balance of
taxes must to be made at least 15 days
before the due date of submission of the
relevant form.
The Filing Programme for 2012 is available
on the Inland Revenue Board’s (IRB)
website at www.hasil.gov.my
5
Tax Cases
The following cases were decided recently:
Case
Issue(s)
Decision/ Status
Alcatel-Lucent Malaysia paid Alcanet for provision of global network
for voice, data and video communications.
1)
Whether the failure of the Director General of Inland Revenue
(DGIR) to give reason why the payments were subject to
withholding tax is unreasonable;
2) Whether the payments are royalty within the definition of
“royalty” under Section 2 of the Income Tax Act 1967 (ITA) as
contended by the Inland Revenue Board (IRB)or for provision
of services as contended by taxpayer.
IRB’s appeal dismissed on both issues
Whether a taxpayer enjoying pioneer status is excluded from
claiming reinvestment allowance on its non-promoted product by
virtue of paragraph 7(a)(ii) of Schedule 7A of the ITA.
IRB’s appeal allowed
Court of Appeal
Ketua Pengarah Hasil Dalam
Negeri v Alcatel-Lucent
Malaysia Sdn Bhd, Alcanet
International Asia Pacific Pte
Ltd
Ketua Pengarah Hasil Dalam
Negeri v Syarikat Kion Hoong
Cooking Oil Mills Sdn Bhd
(High Court: in favour of taxpayer)
(High Court: in favour of taxpayer
SCIT: in favour of IRB)
6
Tax Cases
Case
Issue(s)
Decision/ Status
Damco Logistic Malaysia Sdn
Bhd v Ketua Pengarah Hasil
Dalam Negeri
This is an application for judicial review by taxpayer on IRB’s
decision that EDP charges paid by the taxpayer were royalty under
the ITA and therefore tax should have been withheld on these
charges.
Taxpayer’s application allowed
Office Park Development Sdn
Bhd v Ketua Pengarah Hasil
Dalam Negeri
This is an appeal by:
Both taxpayer’s and IRB’s appeal dismissed
High Court
Taxpayer
1) Whether the sale proceeds should be assessed in the year where
the completion date of the sale was extended to (contended by
taxpayer) or in the year the sale crystallised (when Foreign
Investment Committee conditions were fulfilled) (contended by
IRB).
IRB
1) Whether taxpayer should be penalised for providing incorrect
returns.
2) Whether golf membership expenses are “entertainment” and
therefore not allowable deductions.
(SCIT :
Issue 1 – In favour of IRB
Issues 2 and 3 – In favour of taxpayer)
7
Tax Cases
Case
Issue(s)
Decision/ Status
Whether, upon succeeding in the judicial review to quash the
action of the IRB to tax gain from compulsory land acquisition on
the basis it is unlawful, the taxpayer is entitled for interest on the
sum unlawfully retained by the IRB.
Taxpayer’s application allowed
SPK Sdn Bhd v Ketua Pengarah
Hasil Dalam Negeri
1) Whether advance lease rental paid pursuant to a lease
agreement was deductible in the years of assessment the
payments were made, under Section 33(1)(b) of the ITA.
2) If Section 33(1)(b) did not apply, whether it qualified for
deduction under Section 33(1).
3) Whether penalty under section 113(2) of the ITA was wrongly
imposed.
Taxpayer’s appeal dismissed
SPS v Ketua Pengarah Hasil
Dalam Negeri
1) Whether there was a sale of shares as claimed by the taxpayer
or sale of properties as contended by the IRB who invoked
Section 140 on the taxpayer’s scheme.
2) Whether penalty under section 113(2) of the ITA was wrongly
imposed.
Taxpayer’s appeal dismissed
High Court
Pelangi Sdn Bhd v Ketua
Pengarah Hasil Dalam Negeri
Special Commissioners
8
Tax Cases
Case
Issue(s)
Decision/ Status
JPS v Ketua Pengarah Hasil
Dalam Negeri
1) Whether expenses incurred on vacant land which has yet to
generate any income or is not in a position to produce income,
can be deducted from the taxpayer’s other rental income.
2) Whether penalty under section 113(2) of the ITA was wrongly
imposed.
Taxpayer’s appeal allowed
BDHDSB v Ketua Pengarah
Hasil Dalam Negeri
1) Whether loan related costs such as underwriting and
guarantor’s commissions, agency fee, annual fee, annual
management fee, surveillance fee, are deductible under Section
33 of the ITA.
2) Whether the notices of additional assessment issued are statute
barred.
3) Whether penalty under section 113(2) of the ITA was wrongly
imposed.
Taxpayer’s appeal allowed
ICB v Ketua Pengarah Hasil
Dalam Negeri
Whether the outstanding amount after negotiated settlement of
disputed contractual claims fell within the ambit of section 34(2)
of the ITA i.e. whether the amount was “reasonably estimated in all
the circumstances of the case to be partly irrecoverable”.
Taxpayer’s appeal dismissed
Special Commissioners
9
Tax Cases
Case
Issue(s)
Decision/ Status
The taxpayer appealed against an assessment raised by the IRB by
submitting their letter of objection within 30 days from the date of
the assessment and Form Q after almost a year, as allowed by
Public Ruling 3/2001.
Taxpayer’s appeal dismissed and struck out.
Paragraph 3.3.3 of Public Ruling is ultra vires
to the ITA thus rendering it invalid.
Special Commissioners
MN Sdn Bhd v Ketua Pengarah
Hasil Dalam Negeri
1) Whether the taxpayer’s objection by letter was allowed in law
in lieu of requisite Form Q.
2) Whether paragraph 3.3.3 of Public Ruling 3/2001 was
consistent with provisions of the ITA.
10
Upcoming Events by The Academy
Corporate Tax Workshop Series
Income & Expenses - Optimising
your Tax Position
Date: 26 March 2012 (Monday)
Time: 9.00 am to 5.00 pm
Venue: PwC Training Centre, Level 16,
Sheraton Imperial Hotel
Corporate Tax Workshop Series
Corporate Tax Workshop Series
Withholding Tax – Unravelling
the Issues
2011/2012 Corporate Tax
Compliance Forum - Addressing
Key Issues and Challenges
Date: 12 April 2012 (Thursday)
Time: 9.00 am to 5.00 pm
Venue: PwC Training Centre, Level 16,
Sheraton Imperial Hotel
Corporate Tax Workshop Series
Effective Management &
Planning of Capital
Expenditure
Date: 16 May 2012 (Wednesday)
Time: 9.00 am to 5.00 pm
Venue: PwC Training Centre, Level 16,
Sheraton Imperial Hotel
Date: 18 April 2012 (Wednesday)
Time: 9.00 am to 5.00 pm
Venue: PwC Training Centre, Level 16,
Sheraton Imperial Hotel
Goods & Services Tax (GST)
Workshop Series
Getting the GST Essentials
Right
Date: 22 May 2012 (Tuesday)
Time: 9.00am - 5.00pm
Venue: Sime Darby Convention Centre
For more information/to register
please visit PwC’s website at
www.pwc.com/my/en/TheAcademy
or contact Che Sham Ahmad at
+60 (3) 2173 1188
11
PwC Contacts
Our offices
Our services
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Au Yong
Tel: +60(6) 283 6169
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Tel: +60(4) 238 9118
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Lorraine Yeoh
Tel: +60(3) 2173 1499
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Tel: +60(3) 2173 1828
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Tel: +60(7) 222 4448
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@my.pwc.com
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Emerging Markets
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Services
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Tel:+60(3) 2173 1657
[email protected]
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