Stay current. Be tax savvy TaXavvy www.pwc.com/my March 2013

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TaXavvy
March 2013
Issue 2/2013
Inside this issue
Tax Laws
• Gazette Orders for Tun Razak Exchange
• Gazette Orders for Refinery and Petrochemical Integrated Development
(RAPID) Complex
• Other Gazette Orders
3
Tax Administration
• Filing Programme for 2013
• Public Ruling 1/2013 – Deduction for Promotion of Exports
• Guidelines on Taxation of Electronic Commerce
11
Tax Cases
14
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
Gazette Orders for Tun Razak Exchange (TRX)
Following the announcement of incentives for the TRX (formerly the Kuala Lumpur International Financial District) in the 2012 Budget, the
gazette orders for the incentives have been issued.
Tun Razak Exchange
Income Tax (Industrial
Building Allowance) (Tun
Razak Exchange Marquee
Status Company) Rules
2013
Gazetted on 31 January
2013
Income Tax (Accelerated
Capital Allowance) (Tun
Razak Exchange Marquee
Status Company) Rules
2013
The rules provide an industrial building allowance of 10% per year of assessment for a commercial building
which is constructed or purchased, and owned by the TRX Marquee status company.
“Commercial building” means a commercial building or part of a commercial building located in the TRX and
used for the purpose of a banking, insurance, or regulated financial activities, or leased to a person (other than
an individual) who undertakes such activities.
The rules are effective from year of assessment (YA) 2014.
The rules provide for accelerated capital allowance (initial allowance 20%, annual allowance 40%) on specified
renovation cost incurred on a building or part of building located in the TRX used for the TRX Marquee status
company’s business. The cost is to be certified by an external auditor.
The rules are effective from 1 January 2014 to 31 December 2020.
Gazetted on 31 January
2013
3
Tax Laws
Tun Razak Exchange
Income Tax (Exemption)
(No.4) Order 2013
Gazetted on 31 January
2013
This order exempts a resident approved developer, approved by the Minister of Finance, from income tax on
70% of its statutory income for 5 YAs. The income exempted is in respect of income derived from:
• disposal of a building or rights over a building or part of a building up to YA 2022, and
• rental of a building or part of a building up to YA 2027.
“Building” means a building located within TRX constructed by an approved developer in accordance with the
TRX development plan.
This exemption is effective from YA 2013.
Income Tax (Deduction
for Relocation Costs for
Tun Razak Exchange
Marquee Status
Company) Rules 2013
The rules provide for a deduction on relocation costs incurred by a TRX Marquee status company which
relocates whole or part of its business to the TRX before 31 December 2020. The costs would have to be
certified by an external auditor.
The rules are effective from YA 2014.
Gazetted on 31 January
2013
Income Tax (Deduction
for Rental Payments) (Tun
Razak Exchange Marquee
Status Company) Rules
2013
Gazetted on 31 January
2013
The rules provide for an additional deduction of 50% of the rental cost incurred by a TRX Marquee status
company on a rented commercial building used in its business in the TRX. The deduction is given for 10 years
from the date the company undertakes whole or part of its business in the TRX, which must not be after 31
December 2020.
The rules are effective from YA 2014.
4
Tax Laws
Tun Razak Exchange
Stamp Duty (Exemption)
Order 2013
Gazetted on 31 January
2013
Stamp Duty (Exemption)
(No. 2) Order 2013
Gazetted on 31 January
2013
This order provides stamp duty exemption for any instrument of service agreement executed on or after 1
January 2014 but not later than 31 December 2022 between a service provider and a TRX Marquee status
company.
This order provides stamp duty exemption for any loan agreements or instruments of transfer for purchase of
commercial property, or lease agreement for commercial property (first owner / first lessee), by a TRX Marquee
status company executed on or after 31 January 2013 but not later than 31 December 2020.
“Commercial property” means a building or part of a building located within the TRX and used for the purposes
of the business of a TRX Marquee status company.
“Tun Razak Exchange Marquee status company” means any of the following which is approved by the Minister of Finance:
a) a licensed institution under the Banking and Financial Institutions Act 1989 carrying on a banking business or a merchant banking business
or a related company within the same group,
b) a company licensed under the Insurance Act 1996 carrying on insurance business or a related company within the same group,
c) a company licensed under the Islamic Banking Act 1983 carrying on an Islamic banking business or a related company within the same group,
d) a company registered under the Takaful Act 1984 carrying on takaful business or a related company within the same group,
e) a company which is a holder of a Capital Markets Service Licence licensed under the Capital Markets and Services Act 2007,
f) a person, other than an individual, who is a registered person under section 76 or 76A of the Capital Markets and Services Act 2007.
5
Tax Laws
Gazette Orders for Refinery and Petrochemical Integrated Development (RAPID) Complex
The following gazette orders have been issued in respect of incentives for qualifying activities / projects in the RAPID complex.
RAPID
Income Tax (Exemption)
(No. 5) Order 2013
Withholding tax exemption for non-residents for payments received in respect of qualifying activities in RAPID
complex, effective from 10 October 2011 to 31 December 2021,
Gazetted on 7 February
2013
Income Tax (Exemption)
(No. 6) Order 2013
10 year income tax exemption on statutory income equivalent to the qualifying capital expenditure (QCE)
incurred for qualifying activities in RAPID complex.
Gazetted on 7 February
2013
This order is effective for applications received by MIDA on or after 10 October 2011.
Income Tax (Exemption)
(No. 8) Order 2013
5 year income tax exemption on statutory income equivalent to QCE incurred for qualifying projects in RAPID
complex after expiry of income tax exemption granted under the Income Tax (Exemption) (No.6) Order 2013
Gazetted on 7 February
2013
This order is effective from YA 2011 and for applications made to MIDA within 90 days before the expiry of the
exemption period under the Income Tax (Exemption) (No.6) Order 2013.
Income Tax (Exemption)
(No. 7) Order 2013
15 year income tax exemption on statutory income derived from qualifying activities carried out in RAPID
complex.
Gazetted on 7 February
2013
This order is effective from YA 2011.
6
Tax Laws
RAPID
Income Tax (Deduction
for Pre-Commencement
Expenses in Relation to
Refinery and
Petrochemical Integrated
Development) Rules 2013
Deduction for pre-commencement expenses. This order is effective from YA 2010.
Gazetted on 7 February
2013
Stamp Duty (Exemption)
(No. 3) Order 2013
Stamp duty exemption for all instruments executed in relation to qualifying activities in RAPID complex. This
order is effective for all instruments executed on or after 10 October 2011 but not later than 31 December 2021.
Gazetted on 7 February
2013
Definition of ‘RAPID complex’:
A complex which consists of liquid cracker plants, refinery plants, petrochemical or chemical production plants and all support and auxiliary
facilities including but not limited to liquid natural gas (LNG), Receiving and Re-gasification Terminal (RGT), COGEN power plant, storage
facilities or waste disposal facilities, and located in Pengerang, Johor.
7
Tax Laws
Other Gazette Orders
The following gazette orders have also been issued:
Other Gazette Orders
Income Tax (Exemption)
(No. 3) Order 2013
Gazetted on 18 January
2013
This order exempts a person providing and maintaining a kindergarten registered with the Ministry of
Education Malaysia, from income tax on its statutory income. The exemption is for 5 YAs commencing from:
•
•
YA 2013 for an existing kindergarten, or
The first invoice for a kindergarten commencing business from YA 2013.
This order is effective from YA 2013.
Income Tax (Deduction
for the Provision of Child
Care Centre) Rules 2013
Gazetted on 18 January
2013
The rules provide a double deduction to a resident for expenses incurred in respect of:
•
•
the provision and maintenance of a child care centre, and
child care allowance given to his employees.
The child care centre has to be registered with the Department of Social Welfare and is to be provided for the
benefit of his employees. The rules are effective from YA 2013.
8
Tax Laws
Other Gazette Orders
Income Tax (Deduction
for Investment in a Project
of Commercialisation of
Research and
Development Findings)
Rules 2013
Gazetted on 15 February
2012
Income Tax (Deductions
for Freight Charges)
(Amendment) Rules 2013
Gazetted on 20 February
2013
Income Tax (Deduction
for Expenditure on
Issuance of Retail
Debenture and Retail
Sukuk) Rules 2013
Gazetted on 1 March 2013
The rules provide a deduction to a resident company for the value of investment made for the sole purpose of
financing a project on commercialisation of research and development findings (non-resource based activity /
product) in a related company (at least 70% owned). The claim of deduction is equal to the expenditure
incurred by the related company for the assets and operation of the commercialisation activity. If investment
via paid up share capital is disposed within 5 years from the date of last investment, the consideration is taxed
up to the amount of deduction previously claimed.
Applications to MIDA for approval of the commercialisation project has to be made on or after 29 September
2012 but not later than 31 December 2017, and the project has to commence within 1 year from approval date.
The Income Tax (Deductions for Freight Charges) Rules 1990 have been amended to exclude from freight
charges which qualify for a further deduction under the rules, freight charges incurred for transportation from a
factory to any port or airport in Malaysia or from any port or airport in a country of final destination outside
Malaysia to any destination in that country.
The amended rules are effective from YA 2013.
The rules are effective from YA 2012 to YA 2015. A deduction of the following additional expenses is given for
the issuance of retail debenture (double deduction) and retail sukuk (deduction on additional expenses)
approved or authorised by the Securities Commission:
•
•
•
•
professional fees for due diligence, drafting and preparation of prospectus,
printing and advertisement cost of prospectus,
fees paid to Securities Commission and Bursa Malaysia, and
primary distribution fee.
9
Tax Laws
Other Gazette Orders
Stamp Duty (Exemption)
(No. 4) Order 2013
Gazetted on 18 February
2013
Petroleum (Income Tax)
(Deduction for
Participation in an
Approved Career Fair)
Rules 2013
This order provides stamp duty exemption on instruments relating to the sale and purchase of retail debenture
and retail sukuk as approved by the Securities Commision which is executed by a retail investor who is an
individual, on or after 1 October 2012 but not later than 31 December 2015.
The rules provide for a deduction of selected expenses incurred by a person for participating in an approved
career fair outside Malaysia which is approved by Talent Corporation Malaysia Berhad and the Minister of
Finance. The rules are effective from YA 2012 to YA 2016.
Gazetted on 18 January
2013
10
Tax Administration
Filing Programme for 2013
Income tax returns with statutory filing deadlines falling in the 2013 calendar year
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 forms
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)
15 days (calendar days) from the stipulated filing due date
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
3 working days from the stipulated filing due date
Payment of debt due / payable under the Finance Acts 2007 (Act 683)
and 2009 (Act 693)
3 working days from the stipulated filing due date
a
Forms BE, B, BT, M, MT, P, TP, TJ, TF, C, R, C1, PT, TA, TC, TR and TN
If submissions are not made within the grace period, the submission will be deemed to be late and penalties under Section 112(3) of the ITA will be
computed from the stipulated filing due date and not the extended due date.
11
Tax Administration
Filing Programme for 2013 (cont’d)
Form E (due on or before 31 March
2013)
A grace period until 30 April 2013 is given
for Form E furnished via e-Filing. If filing
is done by post, a grace period of 3 working
days from the stipulated filing due date is
given. No grace period is given for filing by
hand delivery.
do so and penalty shall be imposed under
section 112(3) of ITA based on the
stipulated filing due date.
Reduction in the rate of penalty
under section 112(3) of ITA
Application for extension of time
The rate of penalty stipulated by Inland
Revenue Board (IRB) in respect of penalty
under section 112(3) of ITA can be reduced
by 5% if the income tax return form is
submitted via e-Filing.
Applicable for submission of Forms C, R,
C1, PT, TA, TC, TR, TN in the calendar year
2013 and Form E for year 2012 only.
Grace period for payment tax under
section 103(2) of ITA
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 previous concession of allowing an
additional 14 days for payment of tax /
balance of tax under section 103(2) of ITA
is no longer applicable. The grace
period is now reduced to only 7 days
(calendar days).
Companies whose applications for
extension of time for Forms C and R have
been approved are required to furnish their
Forms C and R via e-Filing. The approval
shall be withdrawn if the company fails to
12
Tax Administration
Public Ruling 1/2013 – Deductions for Promotion of Exports
Guidelines on Taxation of Electronic Commerce
The IRB has issued Public Ruling 1/2013 - Deductions for Promotion of
Exports which replaces the Guidelines and Procedures for Claiming
Deduction for Promotion of Exports and Guidelines and Procedures for
Claiming Professional Fees incurred on Packaging Design previously
issued.
The IRB has issued the Guidelines on Taxation of Electronic Commerce
(e-commerce) dated 1 January 2013, on 11 March 2013.
This public ruling aims to provide clarification on the tax treatment of
expenditure eligible to a company for promotion of exports under the
Income Tax Act 1967, the Promotion of Investments Act 1986 and
relevant Income Tax Rules. The salient points include:
•
•
•
•
•
qualifying company and qualifying product / activity,
types of deduction available (e.g. single / further / double deduction),
types of qualifying expenditure ,
restriction on deduction,
claim procedure.
This guideline seeks to provide guidance on the tax treatment of ecommerce transactions, including:
•
•
•
•
scope of charge and tax liability,
treatment of server and website in determining derivation of ecommerce income,
tax treatment under various business models,
issues on withholding tax and double taxation agreements.
The guideline is available for download on IRB’s website
www.hasil.gov.my (Laws and Regulations > Technical Guidelines).
The public ruling is available for download on IRB’s website
www.hasil.gov.my (Laws and Regulations > Public Ruling).
13
Tax Cases
The following cases were decided recently:
Case
Issue(s)
Decision/ Status
The original issues of this case were:
Taxpayer’s appeal on issue 1 allowed
DGIR’s cross appeal on issue 2 dismissed
Court of Appeal
Kyros International Sdn Bhd v
Ketua Pengarah Hasil Dalam
Negeri
1.
Whether franchise fees were exempt under paragraph 28 of
Schedule 6 of the Income Tax Act 1967, and
2.
Whether penalty under Section 113(2) was incorrectly imposed.
At the High Court, it was held that the franchise fees were not
exempted but the penalty was incorrectly imposed. Hence, the
following appeals to the Court of Appeal.
Taxpayer’s appeal:
That the High Court had interfered in the finding of facts of the
Special Commissioners.
DGIR’s cross appeal:
That the penalty under Section 113(2) was correctly imposed.
(SCIT: In favour of taxpayer on both issues
High Court: In favour of DGIR on issue 1 and in
favour of taxpayer on issue 2)
14
Tax Cases
Case
Issue(s)
Decision/ Status
1.
Whether supervision fees and other related expenses incurred in
the installation of new machinery qualify for Reinvestment
Allowance as contended by DGIR.
DGIR’s appeal dismissed
2.
Whether the penalty under Section 113(2) was correctly imposed.
1.
Whether certain capital expenditure incurred for the business of
manufacturing rubber gloves qualify for reinvestment allowance
under the Income Tax Act 1967.
2.
Whether the penalty under Section 113(2) was correctly imposed.
High Court
Ketua Pengarah Hasil Dalam
Negeri v Hicom-Suzuki
Manufacturing (M) Sdn Bhd
(SCIT: In favour of taxpayer)
Special Commissioners
RR v Ketua Pengarah Hasil
Dalam Negeri
Taxpayer’s appeal allowed
15
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