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

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Stay current. Be tax savvy
TaXavvy
May 2013
Issue 3/2013
Inside this issue
Tax Laws
• Gazette orders for petroleum industry
• Gazette orders for business trust
• Gazette orders for abandoned projects
• Other gazette orders
3
Tax Administration
• Public Ruling 2/2013 – Perquisite from Employment
• Public Ruling 3/2013 – Benefits in Kind
• Public Ruling 4/2013 – Accelerated Capital Allowance
• IRB Audit Framework 2013
7
Double Taxation Agreement
• Malaysia – Hong Kong DTA enters into force
• New Malaysia – India DTA enters into force
8
Tax Cases
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
Gazette Orders for Petroleum Industry
The following gazette orders for the petroleum industry were gazetted on 29 March 2013 and came into operation from 30 November 2010.
Petroleum Income Tax
Petroleum (Income Tax)
(Accelerated Capital
Allowances) (Marginal
Field) Rules 2013
Provides accelerated capital allowance on qualifying plant expenditure incurred from YA 2010 to YA 2024 to a
chargeable person carrying on petroleum operations in a marginal field.
Petroleum (Income Tax)
(Investment Allowance)
Regulations 2013
Provides tax exemption via an investment allowance of 60% of qualifying capital expenditure against 70% of
statutory income, for a period of 10 years, to a chargeable person carrying on petroleum operations in respect of
a qualifying project.
Petroleum (Income Tax)
(Marginal Field)
Regulations 2013
Specifies the tax treatment for a chargeable person carrying on petroleum operations in marginal fields.
Petroleum (Income Tax)
(Exemption) Order 2013
Provides exemption for a portion of chargeable income from marginal fields resulting in a reduction of the
effective tax rate from 38% to 25% for a chargeable person carrying on petroleum operations in marginal fields.
3
Tax Laws
Gazette Orders for Business Trust
The following gazette orders in respect of transfers of business, assets or real property to a business trust (BT) were gazetted on 3 April 2013 and
are effective from 1 January 2013. The disposals must be made on or after 1 January 2013 but not later than 31 December 2017.
Business Trust
Stamp Duty (Exemption)
(No. 7) Order 2013
Exemption from stamp duty on all instruments executed by the trustee-manager on behalf of the BT in relation
to the transfer of any business, asset or real property to a BT for the purpose of initial offering of the BT.
Real Property Gains Tax
(Exemption) Order 2013
Exemption from real property gains tax on disposal of any chargeable asset executed by any person to a trusteemanager on behalf of a BT in relation to the initial offering of the BT.
4
Tax Laws
Gazette Orders for Abandoned Projects
The following Income Tax gazette orders were gazetted on 12 March 2013 in relation to abandoned housing projects and are effective from YA
2013. The two Stamp Duty gazette orders were gazetted on 14 March 2013.
Abandoned Projects
Income Tax (Exemption)
(No. 9) Order 2013
Provides income tax exemption for a period of 3 consecutive YAs, on statutory income from interest income
derived from a business of giving loans to a rescuing contractor or developer which is carrying on rehabilitation
works for an abandoned project.
Income Tax (Deduction
for Expenses in relation to
Interest and Incidental
Cost in Acquiring Loan for
Abandoned Projects)
Rules 2013
Provides a double deduction on expenditure incurred by a qualifying person on acquiring loan and additional
deduction on interest incurred for 3 consecutive years on the loan, primarily or principally for the purpose of an
abandoned project in the basis period for a year of assessment the project is completed. It applies to loans
approved on or after 1 January 2013 but not later than 31 December 2015.
Stamp Duty (Exemption)
(No. 5) Order 2013
Provides stamp duty exemption, to the original purchaser, on loan instrument / agreement for financing, and
instrument of transfer for the revived residential property in relation to the abandoned project. It applies to
instruments executed by an original purchaser on or after 1 January 2013 but not later than 31 December 2015
Stamp Duty (Exemption)
(No. 6) Order 2013
Provides stamp duty exemption on instruments executed by a rescuing contractor or developer to carry on
rehabilitation works for an abandoned project. These instruments are the loan instrument / agreement for
financing of the abandoned project, and instrument of transfer for the revived residential property in relation to
the abandoned project which are executed on or after 1 January 2013 but not later than 31 December 2015.
5
Tax Laws
Other Gazette Orders
Other gazette orders
Stamp Duty (Exemption)
(No. 8) Order 2013
Gazetted on 4 April 2013
Income Tax (Deduction
for Payment of Premium
to Malaysia Deposit
Insurance Corporation)
Rules 2013
Gazetted on 4 April 2013
Labuan Business Activity
Tax (Exemption) Order
2013
Gazetted on 21 March
2013
Labuan Business Activity
Tax (Exemption) (No. 2)
Order 2013
Gazetted on 21 March
2013
Provides stamp duty exemption on instruments relating to the restructuring or rescheduling of loans executed
between a participant of the debt management programme approved by the Credit Counselling and Debt
Management Agency, a body corporate (per Central Bank of Malaysia Act 2009) and specified credit providers.
This applies to instruments executed on or after 1 January 2013 but not later than 31 December 2017.
This replaces the Income Tax (Deduction for Payment of Premium to Malaysia Deposit Insurance Corporation)
Rules 2011 and provides deduction for the first premium or annual premium paid in a YA by a member
institution to the Malaysia Deposit Insurance Corporation. These Rules are effective from YA 2005 to 2010 for a
financial institution under section 36(1)(a) of the Malaysia Deposit Insurance Corporation Act 2011 (MDICA)
and from YA 2011 onwards for a financial institution under section 36(1) and a takaful operator or an insurance
company under section 36(2) of the MDICA.
A Labuan International Commodity Trading (LICT) company under the Global Incentives for Trading (GIT)
programme, is exempted for 3 consecutive years from commencement of operation, from the payment of tax in
respect of its income derived from the trading of physical and related derivative instruments of liquefied natural
gas in any currency other than Ringgit.
This order is effective from YA 2013.
A LICT company undertaking a qualifying activity under the GIT programme is exempted from the provision of
subsection 7(1) of the Labuan Business Activity Tax Act 1990, that is the provision to elect to be charged to tax
of RM20,000 within 3 months from commencement of a year of assessment. This exemption does not apply to
a LCIT company which solely trades physical and related derivative instrument of liquified natural gas, for the
first 3 years of its operation.
This order is effective from YA 2013.
6
Tax Administration
Public Ruling 2/2013 – Perquisites from Employment
Public Ruling 2/2013 – Perquisites from Employment (dated 28
February 2013) was issued on 18 March 2013 and replaces PR
1/2006 - Perquisites from Employment (dated 17 January 2006) and
its first to third addenda. The new public ruling which combines PR
1/2006 and its addenda, covers:
•
•
•
•
•
•
distinction between perquisites and benefits in kind,
types of perquisites and their tax treatment,
tax exemption on certain perquisites received by an employee,
responsibilities of employer and employee,
monthly tax deductions,
tax deduction of perquisites provided to employees in the
employer’s tax return.
Public Ruling 3/2013 – Benefits in Kind
Public Ruling 3/2013 – Benefits in Kind (dated 15 March 2013) was
issued on 18 March 2013. It replaces PR 2/2004 – Benefits in Kind
(dated 8 November 2004) and its first to fourth addenda and Income
Tax Ruling 1997/2. The new public ruling which combines PR
2/2004 with its addenda, covers:
•
•
•
ascertainment of the value of a benefit in kind (BIK),
certain BIK and their tax treatment,
tax exemption on certain BIKs received by an employee,
•
•
responsibilities of the employer and employee,
tax deduction of BIK provided to employees in the employer’s tax
return.
Public Ruling 4/2013 – Accelerated Capital Allowance
This public ruling dated 15 April 2013, was issued on 18 April 2013 and
covers:
•
Special rate of allowances
•
Income tax rules on accelerated capital allowance (ACA)
•
Special allowances for small value assets
•
Plant and machinery on hire purchase
•
Disposal of assets within 2 years
•
Controlled transfers
•
Qualifying period of the ACA
•
Non-application of the ACA
•
Claim procedures for the ACA
All public rulings are available for download on IRB’s website
www.hasil.gov.my (Laws and Regulations > Public Ruling).
7
Tax Administration
Double Taxation Agreement
IRB Audit Framework 2013
Malaysia – Hong Kong DTA enters into force
The IRB has issued the new IRB Audit Framework 2013 on 8 May 2013.
The new framework is effective from 1 April 2013 and consist of the
following:
The Malaysia – Hong Kong DTA has entered into force on 28
December 2012. The DTA is effective as follows:
1) Tax Audit Framework
2) Petroleum Tax Audit Framework
3) Transfer Pricing Audit Framework
The new framework is currently only available in Bahasa Malaysia. This
new framework supersedes the Tax Audit Framework issued in January
2009.
•
•
•
Withholding (WHT) tax - beginning on or after 1 January 2013
Corporate tax and other taxes - year of assessment 2013
Petroleum income tax - year of assessment 2013
The reduced WHT tax rates under the DTA are as follows:
It is available for download on IRB’s Bahasa Malaysia website
www.hasil.gov.my (Undang-undang dan Peraturan > Rangka Kerja Audit
LHDNM).
Type of payment
WHT rate
Interest
Nil or 10%
Royalty
8%
Technical fees
5%
New Malaysia – India DTA enters into force
The new Malaysia – India DTA has entered into force on 26 December
2012 and replaces the Malaysia – India DTA which came into force on
14 August 2003. The new DTA is effective as follows:
•
•
•
WHT tax - beginning on or after 1 January 2013
Corporate tax and other taxes - year of assessment 2013
Petroleum income tax - year of assessment 2013
8
Tax Cases
The following cases were decided recently:
Case
Issue(s)
Decision/ Status
This is an appeal against the summary judgement by the High Court
in respect of a claim for real property gains tax (RPGT) due and
payable.
Taxpayer’s appeal allowed by the majority
(There is a dissenting judgement)
Court of Appeal
Mudek Sdn Bhd v Kerajaan
Malaysia
Whether the summary judgement was wrongly granted against the
taxpayer as there were triable issues as:
1.
RPGT is not triggered as the land has not been disposed of
within the meaning of section 2 of the RPGT Act and therefore
there is no chargeable gain under section 3 of the same Act, or
2.
RPGT or income tax is applicable on the disposal of the land.
(High Court: In favour of IRB)
9
Tax Cases
Case
Issue(s)
Decision/ Status
Whether section 102(1) of the Income Tax Act 1967 (ITA) was
mandatory or directory on the DGIR to forward the Form Qs to the
Special Commissioner of Income Tax (SCIT )within 12 months.
DGIR’s appeal dismissed
High Court
Ketua Pengarah Hasil Dalam
Negeri v Scania (Malaysia) Sdn
Bhd
SCIT: In favour of taxpayer
Bandar Nusajaya Development
Sdn Bhd v Ketua Pengarah
Hasil Dalam Negeri
Ketua Pengarah Hasil Dalam
Negeri v Gracom Sdn Bhd
This was an application for judicial review by the taxpayer.
1.
Whether waiver of a non-business source debt was taxable under
section 22(2)(a) of the ITA.
2.
Whether the taxpayer was allowed to appeal by way of judicial
review.
Whether gains from disposal of land were trading receipts and
taxable under Section 4(a) of the ITA as business income as
contended by the DGIR or capital receipts and taxable under the
RPGT Act
Taxpayer’s appeal allowed
DGIR’s appeal dismissed
(SCIT: In favour of taxpayer)
10
Tax Cases
Case
Issue(s)
Decision/ Status
1.
Whether the notification of non-chargeability is an “assessment”
under section 91(1) of ITA.
Taxpayer’s appeal allowed for issues 1 & 2 but
appeal disallowed for issue 3.
2.
Whether “earth chamber” is part of a factory building for
purpose of industrial building allowance claim.
3.
Whether warranty expenses paid were incurred in the
production of gross income.
Both the taxpayer and IRB have lodged an
appeal against the SCIT’s decision to the High
Court.
1.
Whether certain parts of a factory and certain items of plant and
machinery qualify for reinvestment allowance claim.
Taxpayer’s appeal allowed
2.
Whether mixer trucks and batching plant qualify for capital
allowance claim.
3.
Whether the penalty imposed under section 113(2) of the ITA is
correct in law.
Special Commissioners
RM v Ketua Pengarah Hasil
Dalam Negeri
OCI Sdn Bhd v Ketua Pengarah
Hasil Dalam Negeri
11
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