Tax Booklet YA 2005

Easy Guide to MalaysianTax and Accounting Information 2005/2006

KTM Station, Kuala Lumpur

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INCOME TAX (Scope of Taxation) • BASIS PERIOD (Taxable Period) • PERSONAL INCOME TAX

AcknowledgementThis booklet has been made possible with technical input andcontribution from Mr Alan Yeo Miow Cheng, FCCA.

The information provided in this booklet is based on taxation laws and otherlegislation, including legislative proposal and measures contained in the 2006Malaysian Budget annoucement on 30 September 2005. The 2006 Budgetproposals are in coloured italics.

Whilst every effort has been made to ensure the accuracy of the content,ACCA does not take responsibility for the accuracy of information presentednor for any loss which may arise form information contained in thispublication.

@ACCAPrinted October 2005

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Contents

TAX INFORMATION

1 Income Tax (Scope of Taxation)2 Basis Period (Taxable Period)3 Personal Income Tax4 Corporate Income Tax5 Schedule 3 Allowances

(Tax Depreciation)6 Double Tax Agreements7 Tax Incentives8 Income Exempt from Tax9 Real Property Gains Tax10 Service Tax11 Sales Tax12 Import Duties13 Export Duties14 Excise Duties15 Licensed Manufacturing

Warehouse16 Free Zone17 Stamp Duty

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TAX INFORMATION (cont’d)

18 IRB Exchange Rates(Average Annual Rates)

19 List of Public Rulings Issued20 Important Filing Dates

ACCOUNTING INFORMATION

21 Financial Reporting Standards22 Malaysian Approved

Standards on Auditing23 Recommended Practice Guides (RPG)24 MIA By-Laws

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Contents(cont’d)

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3

TAX INFORMATION

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INCOME TAX (Scope of Taxation) • BASIS PERIOD (Taxable Period)

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1 INCOME TAX (Scope of Taxation)

a) Income tax is charged on income accruing in or derived fromMalaysia by a chargeable person. Remittance of foreign income by aperson (other than b) is tax exempt.

b) A resident company carrying on a business of banking, insurance,sea or air transport is charged to tax on a worldscope basis.

c) Offshore company carrying on offshore business activity in or fromLabuan is taxed under the Labuan Offshore Business Activity Tax Act1990 (LOBATA) instead of the Income Tax Act 1967. Under LOBATA,it is taxed at the lower of 3% of accounting profit or RM20,000.

2 BASIS PERIOD (Taxable Period)

a) Company, Co-operative or Trust BodyBasis period (taxable period) shall be the financial year ending in thatparticular year of assessment, for example the accounting yearended 30 June 2005 shall constitute the basis period for Year ofAssessment (Y/A) 2005.

b) Individual and Person other than (a) aboveBasis period shall be the calendar year coinciding with the year ofassessment, that is, for Y/A 2005, it shall be from 1 January 2005to 31 December 2005.

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PERSONAL INCOME TAX

3 PERSONAL INCOME TAX

3.1 Tax Residence of Individuals

An individual is regarded as a tax resident if he meets any of thefollowing conditions:

a) in Malaysia for 182 days or more in a calendar year;

b) in Malaysia for a period of less than 182 days during the year(“shorter period”) and that period is linked to or by a period of182 or more consecutive days (“longer period”) in the followingor preceding year. Temporary absence from Malaysia for certainspecified reasons are ignored, provided that the individual is inMalaysia before and after the temporary absence;

c) in Malaysia for 90 days or more during the year and, in any 3out of 4 immediately preceding years, he was either in Malaysiafor at least 90 days or was resident in Malaysia;

d) resident for each of the 3 immediate preceding years and alsoresident for the immediate following year.

3.2 Self Assessment System (From Y/A 2004)

Under the Self Assessment System (SAS), the responsibility forassessing a person’s tax liability is transferred from the InlandRevenue Board (IRB) to individual taxpayer.

Tax Return Form B or BE for YA 2005 will be issued to individualtaxpayers in January 2006 and will be due for submission not laterthan 30 April 2006 except for individual taxpayers with businesssource of income, the due date for tax filling is 30 June 2006. Thesubmission of the Form B or BE is deemed to be a notice ofassessment for which any balance of tax must be paid on or beforethe filling deadline.

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PERSONAL INCOME TAX

3.3 Rates from Y/A 2005

a) Resident individuals

ChargeableIncome Rate Tax PayableRM % RM

On the first 2,500 0 0On the next 2,500 1 25On the first 5,000 25On the next 15,000 3 450On the first 20,000 475On the next 15,000 7 1,050On the first 35,000 1,525On the next 15,000 13 1,950On the first 50,000 3,475On the next 20,000 19 3,800On the first 70,000 7,275On the next 30,000 24 7,200On the first 100,000 14,475On the next 150,000 27 40,500On the first 250,000 54,975Above 250,000 28

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PERSONAL INCOME TAX

b) Non-resident individuals

Types of income Rate%

i) Public Entertainer’s professional income 15*ii) Interest 15*iii) Royalty 10*iv) Special classes of income:

- payment for services rendered in connectionwith use of property or installation or operationof any plant, machinery or other apparatuspurchased from a non-resident person 10*

- technical or management services fees foronshore services** 10*

- rental of moveable property 10*v) Dividends and others 28*

* Taxes collected by way of withholding tax** Fees for training in the performance of art and production

of craft be exempted for a period of 5 years, effective from 1-10-2005.

3.4 Personal Reliefs for Resident Individuals

From Year of Types of relief Assessment 2005

RMa) Self 8,000

b) Disabled individual (additional) 6,000

c) Spouse 3,000

d) Alimony payment to former wife 3,000

e) Disabled spouse (additional) 3,500

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PERSONAL INCOME TAX

From Year of Types of relief (cont’d) Assessment 2005

RMf) Child

i) each qualifying child (18 years and below of age) 1,000ii) each qualifying child (over 18 years of age),

receiving education at diploma level and above*or studying under articles or indentures in a tradeor profession- in Malaysia ≤4,000

* automatic child relief of RM4,000 fromY/A 2006.

- outside Malaysia, if higher education commenced:- before 17.10.1997 2,000- from 17.10.1997 1,000- from Y/A 2006, studying at degree level

and above 4,000iii) Child of East Malaysian studying in West Malaysia 4,000

g) Disabled child 5,000- From Y/A 2006, disabled child studying at local

institution of higher learning at diploma level and above. 9,000- From Y/A 2006, disabled child studying outside

Malaysia at degree level and above. 9,000

h) Life insurance premiums and EPF contributions ≤6,000

i) Insurance premiums for education or medicalbenefits ≤3,000

j) Premium on annuity purchased under EPFannuity scheme ≤1,000

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PERSONAL INCOME TAX

From Year of Types of relief (cont’d) Assessment 2005

RMk) Medical expenses for:

i) parents ≤5,000ii) self, spouse or child suffering from a serious

disease (including fees of up to RM500 incurredfor complete medical examination) ≤5,000

l) Fee expended on approved courses(extended to professional, accountancy and lawcourses from Y/A 2006) ≤5,000

m) Purchase of supporting equipment for a disabledperson (self,child or parent) ≤5,000

n) Cost incurred for the purchase of books, journals,magazines and other similar publications for thepurpose of enhancing knowledge ≤700

3.5 Tax RebatesRM

a) Rebate for resident individuals whose chargeable incomedoes not exceed RM35,000.i) where husband and wife are jointly assessed:

- Individual 350- Wife 350

ii) where husband and wife are separately assessed:- Individual 350- Alimony payment to former wife 350- Wife 350

b) Rebate for Zakat, Fitrah or other Islamic Actual amountreligious dues paid expended in Malaysia

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PERSONAL INCOME TAX

RMc) Rebate for purchase of personal computer

(claimed once in every 5 years by individualor spouse) 500

d) Rebate for levies paid for employment pass,visit pass Actual amount(temporary employment), or work pass expended

3.6 Employment Income

a) DerivationEmployment income is regarded as derived from Malaysia: -i) the employment is exercised in Malaysia for any period of

time;ii) the employee is on paid leave which is attributable to the

exercise of an employment in Malaysia;iii) the employee performs duties outside Malaysia which are

incidental to his employment in Malaysia;iv) a person is a director of a resident company in Malaysia;v) the employment is exercised on board an aircraft or ship

operated by a person who is resident in Malaysia.

b) Exemption (short term employees)Income of a non-resident from a employment in Malaysia is exempt:i) if the period of employment in Malaysia does not exceed

60 days in a calendar year, orii) where the total period of employment which overlaps

2 calendar years does not exceed a continuous period of60 days.

iii) where a continuous period of employment of not more than 60 days together with another period does not exceed60 days in aggregate.

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PERSONAL INCOME TAX

c) Exemption (Tax Treaties)Employment income is tax exempt provided:i) an employee is present in Malaysia for a period of not more

than 183 days (certain tax treaties provided only 120 days,for example, tax treaty with Singapore)

ii) remuneration is paid by a non-resident person; andiii) remuneration must not be deductible against the taxable

profit of a permanent establishment.

d) Employees of AOHQ and ROEffective from Y/A 2003 expatriates working in OperationalHeadquarters (AOHQ) or Regional Offices (RO) based in Malaysiawould be taxable on their employment income, on a timeapportionment basis in accordance with the number of daysspent in Malaysia.

e) Types of Employment IncomeTaxable Value

i) Section 13(1)(a)Cash remuneration, perquisite, Amount paid byallowance and employee’s employerpecuniary liability paid byemployer.

Employees’ Share Option Difference between Scheme market value and

discounted price on the date of offer

The lower of market valueon the date exercisable or the date the share option isexercised less the price paid by employee, from Y/A2006

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PERSONAL INCOME TAX

ii) Section 13(1)(b)Benefits not convertible into Public Ruling 2/2004money. Certain benefits areexempted from tax

iii) Section 13(1)(c)Unfurnished accommodation* Lower of 30% x Section

13(1)(a) or defined valueof accommodation

Hotel accommodation 3% x Section 13(1)(a)iv) Section 13(1)(d)

Unapproved Fund/Scheme Employer’s portion ofcontribution

v) Section 13(1)(e)Compensation of loss of Exempted if due to illemployment health approved by the

1RB. Otherwise, exemptionof RM6,000 for eachcompleted years of service.

* Furnishing is taxed under Section 13(1)(b)

f) Public Ruling (Benefits-In-Kind)Benefits-in-kind (BIK) provided to employee by the employer shallbe determined by: -i. the formula method; orii. the prescribed value method.

i) Formula methodEach benefit provided is ascertained as follows: -

aa) Assets other than motor carCost of the asset

= Annual value of the benefitPrescribed average lifespan of the asset

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PERSONAL INCOME TAX

bb) Motor Car

Cost of the Motor Carx 80% = Annual value of the benefit

Prescribed average lifespan

Items Prescribed average life spanYears

Motorcar 8Furnishings:

Air conditioner 8Curtains & carpets 5Furniture 15Refrigerator 10Sewing machine 15

Kitchen utensils/equipment 6Entertainment and recreation:

Colour television 7Organ 10Piano 20Stereo set 7Swimming pool 15Sauna 15Video 7

Others:For example, Mobile telephone 5

ii) Prescribed Value MethodThe above method can be used as an alternative todetermine the taxable BIK provided by the employer to hisemployee.

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PERSONAL INCOME TAX

Prescribed Value Method (Motor Car):

AnnualCost of car value of private(when new) usage of car Fuel per annumRM RM RM

Up to 50,000 1,200 60050,001 – 75,000 2,400 90075,001 – 100,000 3,600 1,200100,001 – 150,000 5,000 1,500150,001 – 200,000 7,000 1,800200,001 – 250,000 9,000 2,100250,001 – 350,000 15,000 2,400350,001 – 500,000 21,250 2,700500,001 and above 25,000 3,000

Where fuel is provided without motorcar, the actual value ofthe fuel provided is treated as the benefit received.

Prescribed Value Method (Other Assets):RM

aa) Household furnishings, apparatus & appliances- Semi-furnished with furniture 70 per month

in the lounge, dining roomand bedroom

- Semi-furnished as above and 140 per monthwith air conditioners or carpetsor curtains

- Fully furnished 280 per monthbb) Mobile Phone

- Hardware 300 p.a.- Rental & charges 300 p.a.

cc) Domestic servant 4,800 p.a.dd) Gardener 3,600 p.a.ee) Driver 7,200 p.a.

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PERSONAL INCOME TAX

iii) ConsistencyWhichever method is used, the basis of computing thebenefits (whether the formula method or the prescribedvalue method) must be consistently applied throughout theperiod of the provision of the benefits.

Prescribed Formula Method Value Method

1) Provided to employee Time Timefor less than a year apportionment apportionment

2) Shared with another Apportion Apportion employee accordingly accordingly

3) Used for purpose of To reduce value Nothe business of by business Adjustmentemployer portion

4) Employee required to To reduce the Nopay employer for the annual value of Adjustmentbenefits provided the benefits

5) Where a motorcar No adjustment To reduce the provided is more annual benefits 5 years old by 50%. No

adjustment for the taxable benefits of fuel.

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PERSONAL INCOME TAX • CORPORATE INCOME TAX

iv) Collection of taxaa) Taxes are collected from employees through compulsory

monthly deductions from salary under the Schedule TaxDeduction (STD) system.

bb) Individuals receiving non-employment income are requiredto pay by compulsory six bi-monthly instalments.

cc) Any balance of tax for a year of assessment must bepaid by 30 April or 30 June (with business source)following the year of assessment.

4 CORPORATE INCOME TAX

a) Residence statusA company is tax resident in Malaysia if its management and controlis exercised in Malaysia. Management and control is normallyconsidered to be exercised at the place where directors’ meetings areheld for policy decision.

b) Income tax ratesFrom

Year of assessment2005

i) Resident companies Rate %aa) Having a paid-up ordinary share capital of

RM2.5 million or less.

Chargeable IncomeOn the first RM500,000 20In excess of RM500,000 28

bb) Other companies Chargeable Income 28

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CORPORATE INCOME TAX

FromYear of assessment

2005ii) Non-resident companies Rate %

Royalties 10Rental of moveable properties 10Technical or management service fees 10 (Only fees for onshore technical or management services)Interest 15Dividends 28Business and other income 28

Where the recipient is resident in a country which has a double taxtreaty with Malaysia, the tax rates for specific sources of incomemay be reduced.

c) Self Assessment System (From Y/A 2001)i) Submission of returns and assessment

aa) Tax returns (Form C & R) are required to be submitted within7 months from the date of closing of accounts.

bb) On submission of the return, an assessment is deemed tohave been made on the company. The return is deemed tobe a notice of assessment, which is deemed to be servedon the company on the day that it is submitted.

ii) Collection of taxaa) Payment of tax by 12 *equal monthly instalments has to be

made, beginning from the second month of the company’sbasis period (taxable period). An estimate of tax payable forthe year of assessment must be furnished to the DirectorGeneral one month before the beginning of the basis period.

From Y/A 2006, an estimate should not be less than 85% ofthe previous year’s estimate or revised estimate.

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bb) The balance of tax payable by a company is due to be paidon the last day by which the return must be submitted.

* Number of instalments shall be increased or reduceddepending on the number of months of basis period(taxable period) for a year of assessment.

iii) Tax on interest, royalties, rental of moveable properties andtechnical or management service fees for onshore servicesreceived by non-resident companies are collected by means ofwithholding tax. The withholding tax is payable within one monthof crediting or paying to the non-resident company.

4.1 Dividend (Profits Distribution)

a) Malaysia adopts an imputation tax system for distribution ofnon-exempt dividend.

b) From YA 2001, the concept of available credit for purposes offranking a distribution of dividend is changed from tax chargeableon a company to tax paid by the company up to the end of thebasis period for a year of assessment.i) A "new" dividend franking account is created from Y/A 2001

and is kept separate from the "old" dividend franking account(for years of assessment prior to year of assessment 2001).

ii) The balance of credit in the old dividend franking accountshall be reduced by the amount of tax deducted in respect ofdividend paid, credited or distributed on or after 1 January2001 until the balance is fully utilised.


For property developers, estimated losses of low costhousing project be set-off against estimated profits of otherproperty development project in the above estimates.

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iii) Where the tax franking for a dividend payment exceeds theavailable tax credits, the shortfall becomes a debt due tothe IRB payable not later than 7 months after the company’sfinancial year ending.

4.2 a) Business LossesBusiness losses can be set off against the Aggregate Income(income from all sources) in the current year. Any unutilisedlosses can be carried forward to reduce income from anybusiness source for the subsequent years until it is fully utilised.

b) Unabsorbed Capital AllowancesUnabsorbed capital allowances can be carried forward toreduce adjusted income for the same business source for thesubsequent years until it is fully utilised.

Ununtilised business losses and unabsorbed capital allowancesof a company are not allowed to be carried forward where thereis a change of more than 50% shareholdings in the company.

4.3 Group Relief

No group relief in Malaysia other than group relief available inrespect of certain approved projects, for example approved foodproduction, forest plantation, biotechnology, nanotechnology, opticsand photonics.

Companies granted group relief incentive before Y/A 2006 for theabove activities shall continue to set-off their income against 100%of losses incurred by their subsidiaries.

From Y/A 2006, group relief be available to all resident companieswhere 50% of the current year business loss can be set off againstthe Aggregate Income of another company within the same group,subject to the following conditions:

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a) the claimant (CC) and the surrendering companies (SC) each hasa paid-up capital of ordinary shares exceeding RM2.5 million.

b) both CC and SC must have the same accounting period.

c) shareholdings (direct or indirect) of SC and CC in the group mustnot be less than 70%.

d) the 70% shareholding must be on a continuous basis for thepreceding year and the relevant year.

e) losses resulting from acquisition of proprietary rights or aforeigner owned company be excluded for purpose of grouprelief.

f) Companies currently enjoying the following incentives are noteligible for group relief:-i) Pioneer Statusii) Investment Tax Allowance/Investment Allowanceiii) Reinvestment Allowanceiv) Exemption of shipping incomev) Section 127 exemptionvi) Deduction for Investment in an Approved Food Production

Project.

4.4 Business Income and Deductions

a) Business profits are computed on the basis of general acceptedaccounting principles as modified by certain tax adjustments toarrive at the adjusted business income.

b) Generally, deduction is allowed for all outgoings and expenseswholly and exclusively incurred in the production of income forthe basis period for a year of assessment.


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CORPORATE INCOME TAX • SCHEDULE 3 ALLOWANCES [Tax Depreciation]

c) Deductions which are specifically disallowed include:i) Domestic or private expensesii) Capital expenditureiii) General provisionsiv) Depreciation and amortisation of capital assets.v) Expenditure not wholly and exclusively incurred.vi) Contribution to unapproved fund/scheme.vii) Contribution to approved schemes in excess of 19% of

employee’s remuneration.viii) Payment made to non-resident person where withholding tax

provisions have not been compiled with.ix) Payment to a person other than the State Government or

statutory authority for the use of a license or permit toextract timber from a forest.

x) Lease rental for passenger cars exceeding RM50,000 orRM100,000, the latter amount only apply to new vehiclecosting not more than RM150,000.

xi) 50% of entertainment expenses with certain exception.xii) Leave passage (cost of fare)xiii) Interest expenses not attributable to business.xiv) Pre-commencement expensesxv) Incorporation expenses with an authorised capital exceeding

RM2.5 million.

5 SCHEDULE 3 ALLOWANCES [Tax Depreciation]

5.1 Capital Allowances (Plant & Machinery)

a) Qualifying plant expenditure includesi) cost of assets used in a business, include plant and

machinery, motor vehicles, office equipment, furniture andfittings, motor vehicles.

ii) the cost of construction and installation of plant andmachinery.

iii) expenditure on fish ponds, animal pens, cages and otherstructures used for pastoral pursuits.

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b) Rates of annual allowancesFrom Year of Assessment

Assets (Other than small value assets) 2005 %

Heavy machinery 20Motor vehicles (including non-commercial vehicle) 20General plant and machinery 14Office equipment, Furniture and fixtures 10

c) Maximum qualifying expenditure for motorcarMaximum

RMi) New vehicles purchased on or after 100,000

28 October 2000 where on-the-road pricedoes not exceed RM150,000

ii) Other vehicles (secondhand vehicle or vehicle 50,000costing more than RM150,000)

d) i) Initial allowance (normally at 20%) is granted in the year thequalifying expenditure is incurred and the asset is in use forthe purpose of the business.

ii) Annual allowance at the prescribed rates calculated onqualifying expenditure (cost) is given at the end of eachrelevant year during which the asset is in use for the purposeof the business.

iii) Claimant of initial and annual allowances must be owner of theasset.

iv) Expenditure on assets with life spans of not more than 2 years isclaimed under a replacement basis instead of capital allowance.

e) Accelerated Depreciation AllowanceCertain assets are claimed at an accelerated rates of initial or annualallowance, for example computers, assets used for environmentalprotection or energy conservation, assets acquired for providingnatural gas for vehicles, assets used to ensure quality of powersupply.

SCHEDULE 3 ALLOWANCES [Tax Depreciation]

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From Y/A 2006, purchase of moulds used in the production ofIndustrial Building system components be fully written off over aperiod of 3 years.

f) Small value assets (from Y/A 2006)Value of each qualifying asset of not more than RM1,000 shallbe given capital allowance of 100%. Total qualifying plantexpenditure of such assets shall not exceed RM10,000.

5.2 Industrial Building Allowance

a) Qualifying Building Expenditure (QBE)QBE for purposes of industrial building allowance is the cost ofconstruction of buildings or structures which are used asindustrial buildings. Before Y/A 2005, QBE for purchasedbuilding has to take into account a number of factors, includingthe purchase price, the cost of construction, and whether it wasused as an industrial building one month before the date ofpurchase. Effective from YA 2005, in the case of a purchasedbuilding the purchase price shall be taken to be QBE.

b) Types of industrial buildingsAn industrial building includes a building used:i) as a factoryii) as a dock, wharf, jettyiii) as a warehouseiv) for working a farmv) for working a minevi) for supplying water or electricity, or telecommunication

facilitiesvii) for approved research and approved trainingviii) as a private hospital, maternity home and nursing home

which is licensed under the lawix) for a school or an educational institution approved by the

Minister of Education

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x) as a hotel, and that hotel is registered with the Ministry ofCulture, Arts and Tourism

xi) as an old folks’ care center approved by the Social WelfareDepartment

c) The Finance Minister may prescribe a building that is used for thepurpose of a person’s business as an industrial building, and therate to be allowed.

From Y/A 2006, new buildings occupied by MSC status companiesin Cyberjaya shall be given IBA for a period of 10 years.

d) Other qualifying capital expenditureExpenditure on construction or purchase of the following,including expenditure on extension or improvement of ancillarystructuresi) an airportii) an approved motor racing circuit

e) An office building will qualify provided that it forms part of anindustrial building and its cost does not exceed 10% of the totalbuilding expenditures.

f) Rates of industrial building allowanceInitial Annualallowance allowance (AA)% %

i) Whether constructed or 10 3purchased

ii) Where AA has been claimed for years prior to YA 2002 inrespect of an industrial building, and that allowance wascalculated based on a permitted fraction (PF), AA for thatbuilding from YA 2002 is claimed at the higher of: -aa) 3% x QE; orbb) PF

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DOUBLE TAX AGREEMENTS

6 DOUBLE TAX AGREEMENTSRate of withholding tax

TechnicalRoyalties Interest Fees

% % %

Albania 10 10 10Argentina 10 15 10Australia 10 15 NILAustria 10 15 10Bahrian 8 5 10Bangladesh 10 15 10Belgium 10 10 10Canada 10 15 10China, People’s Republic 10 10 10Croatia 10 10 10Czech Republic 10 12 10Denmark 10 15 10Egypt 10 15 10Fiji 10 15 10Finland 10 15 10France 10 15 10Germany 10 15 NILHungary 10 15 10India 10 10 or 15 10Ireland 8 10 10Indonesia 10 15 10Iran 10 15 10Italy 10 15 10Japan 10 10 or15 10Jordan 10 15 10South Korea 10 15 10Kyrgyz Republic 10 10 10Lebanon 8 10 10Luxembourg 8 10 8

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DOUBLE TAX AGREEMENTS

Rate of withholding taxTechnical

Royalties Interest Fees% % %

Malta 10 15 10Mauritius 10 15 10Morocco 10 10 10Mongolia 10 10 10Myanmar 10 10 10Nambia 5 10 5Netherlands 8 10 8New Zealand 10 15 10Norway NIL 15 10Pakistan 10 15 10Papua New Guinea 10 15 10Philippines 10 15 10Poland 10 15 10Romania 10 15 10Saudi Arabia 10 15 10Seychelles 10 10 10Singapore 8 or 10 10 or 15 5 or 10Sri Lanka 5 or 10 10 or 15 10Sudan 5 or 10 10 10Switzerland 10 10 10Sweden 8 or 10 10 or 15 8 or 10Taiwan 10 10 7.5Thailand 10 15 10Turkey 10 15 10USSR 10 15 10United Arab Emirates 10 5 10United Kingdom 8 or 10 10 or 15 8 or 10USA 10 15 10Uzbekistan 10 10 10Vietnam 10 10 10Zimbabwe 10 10 10

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DOUBLE TAX AGREEMENTS • TAX INCENTIVES

7 TAX INCENTIVES

7.1 Pioneer Status or Investment Tax Allowance (ITA)

a) Normal Exemptioni) Companies intending to participate in a promoted activity or

producing a promoted product may apply for either one ofthe above incentives.

ii) The above incentive is available to manufacturing,agricultural, hotel, tourist, and other industrial sectors.

iii) For agricultural sector, it is available to person includingagro-based co-operative society, sole proprietorship,partnership, an Area, National or State Farmer Associationand an Area, National or State Fishermen Association.

iv) ITA an alternative to Pioneer Status, is suitable for thoseindustries which are capital intensive.

Pioneer status ITA

Tax exemption on 70% of 60% of qualifying capitalstatutory income for 5 years expenditure (QCE) incurredfrom production day within 5 years from date of

approval can be used to exempt up to 70% statutory income

Notes:The above rates may be reduced to NIL where provided in DTA, forexample, payments made in respect of: -

a) Approved royaltiesb) Approved industrial royaltiesc) Approved loan interest

There is no withholding tax on dividends paid by Malaysian companies.Tax sparing relief (deemed credit) available for certain tax treaties concluded.

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v)

CHOOSING THE RIGHT INCENTIVE

PIONEER INVESTMENTSTATUS TAX ALLOWANCE

1) Projected profit for Fairly accurate Not affected ifthe 5 year period wrongly forecasted.

2) Losses, suffered Affect the tax Does NOT affectduring the 5 year exempt income. the tax exemptperiod Unabsorbed income. Unabsorbed

losses shall NOT losses can bebe allowed to be carried forward untilcarried forward to fully utilised.post pioneer period.*

3) Capital Intensive Should NOT Should be

4) Long Gestation NOT suitable Not affected.Period

5) Unabsorbed Cannot be carried Can be carriedCapital forward to post forward until fullyAllowance pioneer period.* utilised.

6) Tax Exempt Depends on the Depends on theAmount pioneer income of amount of Qualifying

the 5 year period. Capital Expenditureincurred.Unutilised ITA(N% x QCE) can be carried forward untilfully utilised.

* Where pioneer period end on or after 1-10-2005 pioneer lossesand capital allowances unutilised be allowed to be carried forwardto post pioneer period.

TAX INCENTIVES

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TAX INCENTIVES

b) Enhanced Exemptionsi) aa) Approved projects located in promoted areas such as

Kelantan and Terengganu, designated areas in Pahang,North Eastern Johore, Sabah and Sarawak.

Pioneer status ITA

Previously - Previously -Tax Exemption on 85% statutory ITA of 80% of QCE incurredincome for 5 years over 5 years can be used to

exempt 85% statutory income.

Application received by MIDA Application received by MIDAfrom 13 September 2003 from 13 September 2003to 31 December 2005* 2003 to 31 December 2005*

Tax Exemption on 100% ITA of 100% of QCE incurredstatutory income for 5 years. over 5 years can be used to


* Extended for another 5 years to 31 December 2010.

bb) Manufacturing activities relocated to promoted areas inthe Eastern Corridor of Peninsular Malaysia, Sabah &Sarawak. (Where applications received by MIDA from11 September 2004)

Pioneer status ITA

Tax exemption on 100% of ITA of 100% of QCE incurred statutory income for 5 years. over 5 years can be used to

exempt 100% of statutory income.

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ii) aa) A project of national and strategic importance involvingheavy capital investment extensive linkages and whichhas significant impact on the Malaysian economy.

bb) High technology companies qualifying for MultimediaSuper Corridor (MSC) status located in the MSC corridorare considered a project of national and strategicimportance. MSC corridor is extended to Bayan Lepas,Penang, and Kulim High Technology Park, Kedah.

Pioneer status ITA

Tax exemption on 100% of ITA of 100% of QCE incurredstatutory income for 5 years. over 5 years can be used toWith a further extension of exempt 100% of statutory5 years. income.

iii) aa) Companies producing approved intermediate goods.

bb) High technology projects (i.e. projects in new andemerging technologies such as advanced electronics,biotechnology and aerospace) and companies granted“Strategic Knowledge-based Status”.

Pioneer status ITA

Tax exemption on 100% of ITA of 60% of QCE incurredstatutory income for 5 years. over 5 years can be used to


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iv) Companies providing technical or vocational training* inMalaysia.

Pioneer status ITA

None ITA of 100% of QCE incurred over 10 years can be used to exempt 70% of statutory income.

* Extended to qualifying science courses from 1-10-2005

v) Companies producing specified machinery and equipment.

Pioneer status ITA

100% of statutory income 100% of QCE incurred overfor 10 years. 5 years can be used to


c) Other Exemptionsi) Companies reinvesting in:

aa) production of machinery and equipment including heavyor specialised machinery, equipment and machine tools

bb) cold chain facilities and services for perishableagricultural produce

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1) Located outside promoted areas:

Pioneer status ITA

70% on increase statutory 60% on additional QCEincome for 5 years incurred within 5 years can

be used exempt 70% of statutory income

2) Located in promoted areas:

Pioneer status ITA

100% on increase statutory 100% on additional QCEincome for 5 years incurred within 5 years can

be used exempt 100% of statutory income

ii) Companies with halal certification from JAKIM and otherquality certification producing halal food

Pioneer status ITA

None. 100% of QCE incurred within 5 years can be exempt 100% of statutory income

iii) Selected companies recommended by the MultimediaDevelopment Corporation (MDC) undertaking ICT andmultimedia activities outside the Cybercities be given thefollowing incentive from 1-10-2005.

Pioneer status ITA

Exemptionof 50% Statutory 50% of QCE incurred within 5Income for a period of 5 years years used to exempt 50% of

statutory income

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7.2 Reinvestment Allowance

a) A Malaysian resident company which:i) is in operation at least 12 months;ii) has incurred QCE on factory, plant and machinery used in

Malaysia for the purpose of a qualifying project.

b) The following entities are also eligible:i) an agro-based co-operative societyii) an Area, National or State farmer’s associationiii) an Area, National or State fishermen’s association.

c) A “qualifying project” must be for manufacturing or processing,approved industrial adjustment or agriculture and it is forpurpose of: -i) expansion of production capacity;ii) modernisation of production facilities;iii) diversification into related products oriv) automating existing business of manufacturing or

processing.

d) Rearers of chickens and ducks who undertake a project intransforming the chicken/duck rearing business from an openhouse to a closed house system (verified by the Minister ofAgriculture) are also eligible.

Effective from Y/A 2005, it is extended to rearers of parent andgrand parent stock of chicken and ducks approved by Ministryof Agriculture and Agro-based Industry.

e) Exemptionsi) RA of 60% on QCE used to exempt 70% of statutory

income.ii) Available for 15 years beginning from the year of

assessment in which reinvestment allowance was firstclaimed.

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f) Enhanced exemption for RA is claimable by companies withprojects located in a promoted area (Sabah, Sarawak, Labuan,Kelantan, Terengganu, Pahang, and the District of Mersing in Johor.)i) RA of 60% on capital expenditure used to exempt 100% of

statutory income.

7.3 Industrial Adjustment Programme

a) Companies in operation before 31.12.1990 undertaking anapproved industrial adjustment programme. It includesmodernisation, mergers, takeovers, relocation and diversificationwith a view to:i) strengthening industrial self-sufficiencyii) improving industrial technologyiii) increasing productivityiv) enhancing the efficient use of natural resourcesv) efficient management of manpower.

b) Exemptionsi) Industrial Adjustment Allowance (IAA) of up to 100% of QCE

on factory, plant and machinery incurred within 5 years fromthe date of approval used to exempt 100% adjusted income.

ii) Reinvestment Allowance (RA) of 60% of QCE (IAA and RA aremutually exclusive) used to exempt 70% statutory income.

iii) Double deduction for training and research and development(R&D).

iv) Industrial Building Allowance for buildings used for training orR&D.

7.4 Infrastructure Allowance

a) A Malaysian resident company which has incurred capitalexpenditure on infrastructure in respect of a business operationin a promoted area. "Infrastructure" includes a bridge, jetty, portor road.

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b) Exemptionsi) 100% of QCE used to exempt 85% statutory income each

year until fully utilised.ii) For pioneer company, QCE shall be deemed incurred in the

post pioneer period.

7.5 Approved Services Project (ASP)

a) Resident companies in communication, utilities andtransportation services subsectors approved by the Minister ofFinance.

b) Exemptionsi) aa) Investment Allowance (IA) of 60% of QCE incurred within

5 years from the date QCE was first incurred. IA can beused to exempt 70% of statutory income; or

bb) Exemption of 70% of statutory income for 5 years undersection 127 of the Income Tax Act 1967.

ii) IBA for buildings constructed or purchased for ASPpurposes.

iii) Exemption from customs duty and sales tax on importedmaterial and machinery which is not available locally, or, iflocally purchased, such items must be used as direct inputsin ASP.

iv) Double deductions for expenses incurred:aa) in undertaking of R&D activities;bb) on promotion of export of services.

c) Enhanced Exemptions:i) Projects located in Sabah, Sarawak and Eastern Corridor of

Peninsular Malaysia.

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Investment allowance Section 127 exemption- 80% of QCE can be used to - 85% of statutory income

exempt 85% of statutory for 5 yearsincome

ii) Projects of national and strategic importance

Investment allowance Section 127 exemption- 100% of QCE can be used - 100% of statutory income

to exempt 100% of statutory for 10 yearsincome

7.6 Increased Export Allowance

a) Resident companies engaged in manufacturing or agriculture,which has exported manufactured products or agricultureproduce in the basis period for the year of assessment.

b) Exemptionsi) Export allowance at the following rates can be used to


% of value Export Allowanceadded (% of increased

exports)Manufactured products 30 10

50 15Agricultural produce - 10Designated “Qualifying - 50Services”

ii) Value added means ex-factory price less total cost of rawmaterials.

iii) Unabsorbed export allowance can be carried forward.

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c) Enhanced ExemptionEffective from YA 2003, tax exemption on statutory income isavailable at the following rates:i) 30% of increased export value if a company achieves a

significant increase in exports;ii) 50% of increased export value if a company penetrates new

markets;iii) full tax exemption on increased export value if a company

achieves the highest increase in exports.

7.7 International Trading Company

a) Eligibilityi) Company incorporated in Malaysia;ii) Minimum annual sales turnover of at least RM10,000,000;iii) Minimum 60% equity owned by Malaysians;iv) Market goods manufactured by small and medium scale

industry; andv) Registered with MATRADE.

b) ExemptionsIncome tax exemption equivalent to 20% of the increased exportvalue used to exempt 70% statutory income, for 5 years.

Exempt dividend can be distributed for incentives from 7.1 to 7.7

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7.8 Approved Agricultural Project (Abolished from Y/A 2006)

a) i) Minimum hectarage of land for specified crops.ii) Capital expenditure incurred within the stipulated time (which

would be entitled to agriculture allowances) but an electionbe made to claim under this deduction.

b) Exemptionsi) 100% of QCE deducted from Aggregate Income of a person.ii) Unabsorbed expenditure can be carried forward to set off

against future income (defined aggregate) until fully utilised.

Benefits enjoyed by any person before Y/A 2006 for the above shallcontinue to be given until the stipulated time expires.

7.9 Accelerated Capital Allowance (ACA)

a) i) Manufacturing and food producing companies engaged inproduction of promoted products.

ii) Companies undertaking waste recycling activities.

b) i) ACA on capital expenditure, granted on expiry ofreinvestment allowance.

ii) ACA on waste recycles equipment.

7.10 Unit Trust

a) Non-taxable gains from realisation of investments;

b) Exemption from income tax on interest income from specifiedsecurities and deposits with licenced financial institutions.

c) Special capital allowance on plant and machinery used inproperty-letting business.

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d) Deduction of up to 25% of certain “permitted expenses” notnormally deductible for income tax purposes.

e) Distributions of exempt income to unit holders.

7.11 Closed-End Fund Company

a) Public limited company incorporated in Malaysia and approvedby the Securities Commission to engage wholly in investment insecurities.

b) Exemptionsi) Exemption from income tax on gains from realisation of

investments and interest income.ii) Deduction of up to 25% of only certain “permitted

expenses”.iii) Tax exempt dividends can be paid out of exempt income.

7.12 Real Estate Investment Trust (REIT)

a) Trust fund must be approved by Securities Commission.

b) Exemptionsi) Real property gains tax from disposal of real property to

REIT.ii) Stamp duty on instrument of transfer of real property to

REIT.iii) Income distributed by REIT to unit holders shall be tax

exempt at REIT level (undistributed total income will betaxed at 28%).

c) Fees for consultancy, legal and valuation services incurred inthe establishment of REIT be allowed as tax deduction.

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7.13 Approved Unit Trust

a) Unit trust approved by the Minister of Finance.

b) Tax exemption for approved unit trust.

c) Dividends from approved unit trust is tax exempt at unit holderlevel.

7.14 Venture Capital Industry

a) Exemptionsi) Venture Capital Company (VCC) investing in venture

companies (VC) involved in promoted products or activities.ii) VCC and VC should not be companies within the same group.iii) At least 70% of funds must be invested in early stage

financing of venture companies.iv) Tax exemption on statutory income from all sources (other

than interest) for 10 years or the life of the fund, whicheveris the lesser.

b) Deductions of investment i) Any resident person investing in venture companies involved

in promoted products and activities.ii) Resident VCC and VC should not be companies within the

same groupiii) Funds must be invested in the early stage financing of

venture companies.iv) Individual means individual who has a business sources.v) Holding of investment for at least 2 years.

c) Others (From Y/A 2003)Company that professionally manages venture capital funds(venture capital management company) be given tax exemptionon income arising from profit-sharing agreement with venturecapital company.

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7.15 Foreign Fund Management Company

a) Company incorporated in Malaysia and licensed under theSecurities Industry Act 1983.

b) Providing fund management services to foreign investors, or toboth foreign and local investors.

c) Chargeable income from a source relating to provision ofmanagement services to foreign investors is taxed at aconcessionary rate of 10%.

d) 90% of chargeable income credited to tax exempt account maybe paid to shareholders as exempt dividend.

7.16 Conference Promotion

a) i) Company incorporated in Malaysia promoting conferencesheld in Malaysia.

ii) Bringing in at least 500 foreign participants per annum.

b) Tax exemption on income derived from bringing at least 500foreign participants per annum.

7.17 International Trade Exhibition

a) i) Organisers of international trade exhibitions held in Malaysia.ii) Exhibition approved by MATRADE.iii) At least 500 foreign visitors per year.

b) Income tax exemption for income from organisation of theexhibition.

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7.18 Rental of Luxury Yachts

a) Company providing chartering services of luxury yachts.

b) Tax exemption for 5 years

7.19 Income from Group Inclusive Tours (up to Y/A 2006)

a) Resident carrying on an inbound tour operating businessapproved and registered with the Ministry of Culture, Arts andTourism.

b) Tax exemption on income from such tours where the totalnumber of inbound tourists from outside Malaysia is 500 or morefor the period.

7.20 Income from Domestic Tours (up to Y/A 2006)

a) Companies organising domestic tour packages.

b) Tax exemption on income from domestic tour packages wherethe total number of local tourists is 1,200 or more per year.

7.21 Deemed Industrial Building

a) Hotel business carried on by pioneer company or companyenjoying investment tax allowance.

b) Hotel building of approved standard in Malaysia.

c) Extending or modernising an existing hotel building to approvedstandard in Malaysia.

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7.22 Approved Regional Distribution Center (RDC)

a) Company incorporated in Malaysia i) Paid-up capital of at least RM500,000ii) Annual turnover of RM100 million or moreiii) Located in free zones, licensed warehouse or licensed

manufacturing warehouse.

b) i) Statutory income exempted for 10 years except for localsales exceeding 20%.

ii) Import duty and sales tax exemption on goods fordistribution.

iii) Expatriate posts granted based on needs.iv) Tax exempt dividends may be paid out of exempt income.

7.23 International Procurement Centre (IPC)

a) Company incorporated in Malaysia with:i) minimum paid-up capital of RM500,000;ii) minimum total business spending of RM1,500,000 per year;iii) direct goods handling through Malaysian ports and airports;iv) minimum turnover of at least RM50 million by third year of

operation.

b) i) Import of raw materials, components of finished productswithout customs duties payment into Free Zones or licensedmanufacturing warehouse for repacking, cargo consolidationand integration before distribution to final consumers;

ii) Expatriate posts granted based on needs;iii) One or more foreign currency account to retain export

proceeds allowed;iv) Approval for foreign exchange forward contracts;v) The income tax incentives for RDC are also applicable to IPC

where turnover exceeds RM100 million.

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7.24 Approved Operational Headquarters (AOHQ) Company

a) Malaysia incorporated companyi) Providing qualifying services to related companies outside

Malaysia;ii) Paid-up capital of at least RM500,000;iii) Total annual business spending of at least RM1.5 million; andiv) Approved by the Minister of Finance.

b) i) Income tax exemption for 10 years except for income fromrelated companies in Malaysia exceeding 20% of totalAOHQ’s income.

ii) Exempt dividends can be declared from the exempt account.

7.25 Shipping Industry

a) Resident person carrying on a business of:i) Transporting passengers or cargo by sea on Malaysian ships

owned by that person; orii) Time charter or voyage charter of Malaysian ship owned by

that person. “Person” includes a partnership.

b) i) Exemption of statutory income.*ii) Tax exempt dividends may be paid out of exempt income.

* Advisable not to claim for capital allowance.

7.26 Environmental Conservation

a) Companies providing energy conservation servicesi) Application made on or before 31 December 2005*ii) Project implemented within 1 year from date of approval.

* Extended to 31 December 2010

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Pioneer status IA

Tax exemption of 70% statutory Investment allowance equalincome for 5 years or to 60% of QCE incurred

within 5 years, used to exempt up to 70% statutory income

b) i) Companies incurring capital expenditure on plant andmachinery used exclusively for conservation of energy, andcertified by the Ministry of Energy, Communications andMultimedia.

ii) Accelerated Capital Allowance on related equipment

7.27 New Energy Source

a) i) Companies using biomass, hydro power or solar power forgeneration of energy.

ii) Application received on or before 31 December 2005.*iii) Project implemented within 1 year from date of approval.

* Extended to 31 December 2010

Pioneer status ITA

Tax exemption of 70%* of 60%* of QCE incurred withinstatutory income for 5** years 5** years, used to exempt

70%* of statutory income

* Increased to 100% * Increased to 100%** Extended to 10 years ** Extended to 10 years

b) i) Existing companies utilising oil palm biomass to producevalue added products

ii) Applications received by MIDA from 13 September 2003.iii) Incentive for reinvestment shall be given as follows: -

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Pioneer status ITA

100% on increased statutory 100% on additional QCE income for 10 years incurred within 5 years can

be used to exempt 100% of statutory income.

c) i) New companies utilising oil palm biomass to produce valueadded products:-

ii) Applications received by MIDA from 13 September 2003.

Pioneer status ITA

100% of statutory income for 100% of QCE incurred within10 years 5 years can be used to


7.28 Approved Offshore Trading

a) An approved offshore trading company trading with non-residentsthrough a website in Malaysia.

b) Foreign goods purchased are for sales outside Malaysia.

c) Tax at a concessionary rate of 10% for 5 years.

d) 90% of chargeable income may be distributed as tax exemptdividend.

7.29 Investment Holding Company (IHC)

a) Company engaged wholly in making of investment and deriveincome from its investment.

An IHC is redefined as a company that derives at least 80% of itsgross income from holding of investment.

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b) The lower of 5% of taxable gross income or 25% of “permittedexpenses” be used to reduce Aggregate Income of a company.

Income of IHCs listed on Bursa Malaysia be treated as businessincome and expenses be given full tax deductions.

Losses and unabsorbed capital allowance of listed IHC shall notbe carried forward.

7.30 Consolidation of Smallholdings

a) Companies investing in 100% owned subsidiary which involvedin consolidation of management of smallholdings or idle land.

b) i) Holding CompanyDeduction equivalent to amount of investment.

ii) SubsidiaryExemption from service tax.

7.31 Planting of Rubberwood Trees

a) A non-rubber plantation company that plants at least 10% of itsplantation with rubberwood trees.

b) Planting expenditure is fully deductible.

7.32 Implementation of RosettaNet

a) Companies incurring expenditure in the management andoperation of RosettaNet Malaysia and in assisting local smalland medium scale companies to adopt RosettaNet.

b) Expenditure is tax deductible.

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7.33 Cost of Developing Websites

a) Expenditure incurred on development of websites for business.

b) Annual deduction of 20% of cost incurred for 5 years.

7.34 Acquisition of a Foreign Company

a) A locally owned company acquiring a foreign owned company forthe purpose of obtaining high technology for production within thecountry or to gain new export markets for local products.

b) Annual deduction of 20% of acquisition cost for 5 years.

7.35 Commercialisation of Resource-Based R & D Findings

a) i) Companies which are at least 70% owned by Malaysians;ii) Investor company should own at least 70% of the equity of the

company that commercialises the R & D findings;iii) Only resource-based R & D findings are eligible;iv) The commercialisation of the R & D findings should be

implemented within one year from the date of approval; andv) Application received by MIDA from 11 September 2004

b) i) Investor CompanyTax deduction equivalent to the amount of investment made insubsidiary.

ii) Subsidiary CompanyCompany undertaking the commercialisation of the R & Dfindings, pioneer status with 100% tax exemption on statutoryincome for 10 years.

7.36 Private Higher Education Institution (PHEI)

a) Technical and vocational coursesITA of 100% for 10 years to be used to exempt 70% statutory income.

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b) Expenses to develop and comply with regulations for newcourses are not tax deductible.

ITA be extended to qualifying science courses from 1-10-2005:-

i) Biotechnologyii) Medical and Health Sciencesiii) Molecular Biologyiv) Material Sciences and Technologyv) Food Science and Technology

From Y/A 2006, expenses incurred for development of newcourses and compliance with regulatory requirements be giventax deductions over a period of 3 years.

7.37 Research & Development (R & D)

Tax incentives to encourage R&D activities in the form of exemptionof income and double deductions, include: -

Double deductions/Exemption

a) Companies undertaking approved Investment taxin-house R&D projects allowance

b) Capital expenditure incurred on Industrial buildingbuildings used for approved research allowance

c) Contract R&D companies which Pioneer status or provide R&D services only to third Investment tax parties allowance

d) R&D companies undertaking R&D Investment tax projects mainly for group companies allowance

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Double deductions/Exemption

e) Approved research companies or 100% exemption of institutions undertaking R&D for adjusted income a particular industry allowance for 5 years

f) Cash contributions to approved Double deductionresearch institutions

g) Payment for services of: Double deductioni) approved research companies or

institutionsii) contract R&D companiesiii) non-related R&D companiesiv) related R&D companies which are

not enjoying the ITA incentiveh) Revenue expenditure incurred on:

i) research relating to own business Normal deductionii) approved research Double deductioniii) research undertaken by a company Double deduction

participating in an approvedindustrial adjustment programme

iv) expenditure for overseas R&D Double deductionactivities

7.38 Other Double Deductions

Double deductions of expenses, include the following expenses:a) Export credit insurance premiums with an approved company.

b) Insurance premiums incurred for the import and export of goodswhere the risks are insured with an insurance companyincorporated in Malaysia.

c) Interest payable on small business loan scheme.

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d) Promotional expenditure incurred on seeking opportunities forthe export of manufactured products, agricultural produce andservices.

e) Remuneration paid to an employee who is physically or mentallyhandicapped.

f) Freight charges paid by manufacturers exporting rattan andwood-based products (excluding sawn timber and veneer)

g) Expenditure incurred by companies on the training of employeesunder an approved training programme.

h) Freight charges incurred by manufacturers for shipping goodsfrom Sabah and Sarawak to Peninsular Malaysia using ports inPeninsular Malaysia.

i) Expenditure incurred on advertising Malaysian brand namesregistered locally or overseas and professional fees paid tocompanies promoting Malaysian brand names.

j) Salaries paid for 2 years (2004 and 2005) to hire unemployedgraduates registered with the Economic Planning Unit.

k) Expenses incurred in obtaining recognised quality systems,standards and halal certification.

l) Allowances paid by listed companies to participants ofUnemployed Graduate Training programme, endorsed by theSecurities Commission, from 1 October 2005 to 31 December2008 be given deduction for a period of 3 years from Y/A2005.

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8 INCOME EXEMPT FROM TAX

Income exempt from tax under Schedule 6 or Gazette Order, includes:a) Pension of a resident person, derived from an employment exercised

in Malaysia i) the recipient has reached the age of 55 or the compulsory

retirement age; orii) retirement is due to ill health.

b) Death gratuities or sums received as consolidated compensation fordeath or injuries.

c) Dividends paid, credited or distributed by Co-operative Societies totheir members.

d) Compensation for loss of employment and payments for restrictivecovenants:i) due to ill health; orii) RM6,000 for every completed year of service if not due to ill

health.

e) Interest accruing to any individual, unit trust and listed closed-endfund from:i) bonds or securities issued or guaranteed by the governmentii) debentures, other than convertible loan stock, approved by the

Securities Commission.

f) Interest accruing to a resident individual from: i) a savings account with Bank Simpanan Nasional, or money

deposited under the Bank’s "Save As You Earn" scheme.ii) deposits of up to RM100,000 in any savings accounts with a

registered co-operative society, Bank Pertanian Malaysia,Malaysia Building Society Berhad, Borneo Housing MortgageFinance Berhad or with any approved institution.

INCOME EXEMPT FROM TAX

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iii) deposits of up to RM100,000 in any savings account with abank or finance company licensed under the Banking andFinancial Institutions Act 1989 (BAFIA).

iv) deposits or negotiable certificates of deposits of up toRM100,000 in any fixed deposit account for a period of lessthan 12 months with certain designated banks, or a bank orfinance company licensed under BAFIA.

v) fixed deposits or negotiable certificates of deposits for a periodexceeding 12 months placed with certain designated banks, orany bank or finance company licensed under BAFIA.

vi) Merdeka bonds issued by the Central Bank of Malaysia.

g) Gains or profits accruing to an individual from the following depositsunder Interest-Free Banking Scheme with Bank Kerjasama RakyatMalaysia Bhd, Bank Simpanan Nasional, or a bank or financecompany licensed under BAFIA or the Islamic Banking Act, 1983:i) any savings account of up to RM100,000;ii) any investment account of up to RM100,000 for a period of

less than 12 months;iii) any investment account for a period exceeding 12 months.

h) Bonus accruing to an individual from a savings account withLembaga Tabung Haji.

i) Income (other than gains or profits from a business and dividendincome) of trade union registered under any written law relating totrade union.

j) Retirement Gratuities:i) Full Exemption

aa) Where the retirement is due to ill health or bb) After reaching the age of 55 or other compulsory age of

retirement, from an employment which has lasted ten yearswith the same employer or with companies in the samegroup;

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ii) Partial ExemptionRM6,000 exemption for every completed year of service uponreaching compulsory retirement age pursuant to an employmentcontract or collective agreement at the age of 50 but before 55and that employment has lasted 10 years with the sameemployer or with companies in the same group (From YA 2003).

k) Foreign income received in Malaysia by any person other than aresident company carrying on the business of banking, insurance orsea or air transport.

l) Royalties received by a resident individual in respect of :Amount exempted

RMi) publication of, or the use of or the right to

use, any artistic work 6,000*ii) recording discs or tapes 6,000*iii) translation of books or literary work,

subject to conditions 12,000iv) publication of, or the use of or the right to

use, any literary work or any original painting 20,000v) any musical composition 20,000

* RM10,000 from Y/A 2006

m) Income from employment exercised in Malaysia not exceeding 60 days.

n) Income (other than dividend income) of an institution or organisationapproved under section 44(6) or non-profit religious institution ororganisation established in Malaysia.

o) Royalties received by non-residents from private institutions of higherlearning for franchised educational schemes.

p) Income from employment on board a Malaysian ship.


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q) Income received by non-residents from renting containers to shippingcompanies in Malaysia.

r) Subscriptions fees (calculated based on the attributable method)received by trade associations.

s) Fees or honorarium for validations and other services relating toeducational programmes in higher educational institutions which areverified by the National Accreditation Board.

t) Income of any person (other than a resident company carrying onbusiness of banking, insurance, sea or air transport) derived fromsources outside Malaysia and received in Malaysia.

u) 50% tax exemption of adjusted income in respect of income frombusiness which relates to qualifying assets or the letting of qualifyingassets in Labuan.

v) Income from Offshore Companies or Trusts, subject to certainconditions.

w) Scholarship or similar grant or allowance received by an individualwhether or not it is connected with employment of that individual.

x) Income of co-operative societies for the first 5 years from the dateof registration and thereafter if members’ fund at the first day of thebasis period is less than RM750,000.

y) Interest paid to non-resident by bank or finance company licencedunder the BAFIA Act 1989.

z) Related technical fees received by a non-resident individual who trainMalaysians in the field of performing arts and production of crafts beexempted from withholding tax for a period of 5 years from 1-10-2005.

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9 REAL PROPERTY GAINS TAX

9.1 Charge to Tax

a) Real property gains tax (RPGT), the only capital gains tax inMalaysia, charged on gains arising from the disposal of realproperty or share in a real property company (RPC).

b) Real property refer to any land situated in Malaysia and anyinterest, option or other right in or over such land.

9.2 Real Property Company

A RPC is a controlled company holding real property on shares inanother RPC where the defined value is not less than 75% of the valueof its total tangible assets.

9.3 Chargeable Persons

Every person whether or not resident in Malaysia is chargeable toRPGT in respect of any gains accruing on the disposal of realproperty or RPC shares in Malaysia. An acquirer can be deemed to bea chargeable person if the chargeable asset acquired is below marketvalue.

9.4 Chargeable Gains and Losses

A chargeable gain arises if the disposal price exceeds the acquisitionprice and an allowable loss is incurred if the disposal price is lessthan the acquisition price. Allowable losses shall be used to reduceany RPGT liability of the same year of assessment and any amountunutilised are carried forward for relief against future RPGT liabilities.A loss arising from the disposal of RPC shares does not qualify as anallowable loss.

REAL PROPERTY GAINS TAX

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RPGT Rates A B C

Category of disposal Companies Others Non Citizen except C and Permanent

resident% % %

Disposal within 2 years 30 30 30Disposal in 3rd year 20 20 30Disposal in 4th year 15 15 30Disposal in 5th year 5 5 30Disposal in 6th and 5 Nil 5subsequent years

9.5 Relief from RPGT

Relief from RPGT may be available where with prior approval assetsare transferred:(a) for greater efficiency in operation in a group;

(b) under a scheme of reorganisation, reconstruction oramalgamation between companies;

(c) by a liquidator and the liquidation of the company was madeunder a scheme of reorganisation, reconstruction oramalgamation.

Certain conditions must be satisfied before this relief is granted.aa) Consideration must be substantially in share for (a) above.

bb) Scheme must be to comply with Government policy for either(b) or (c) above.

9.6 Other Exemptions

a) an amount of RM5,000 or 10% of the chargeable gain, whicheveris greater, accruing to an individual (resident or non-resident);

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b) gain arising on disposal as a result of compulsory acquisition ofproperty under law;

c) transfer of a real property to a company controlled by thetransferor and/or connected person for a consideration of atleast 75% in shares

d) gift of chargeable assets within 5 years from acquisition datebetween husband and wife, parent and child and grandparent andgrandchild.

e) gain accruing to the government, State government or a localauthority;

f) gain accruing to an individual who is a citizen or a permanentresident in respect of the disposal of one private residence (oncein a lifetime exemption);

Effective from 1-10-2005, it is given to both husband and wife onone residential property each, once in a lifetime.

g) gift made to the government, State government, local authorityor approved charity;

h) disposal of assets in connection with securitisation of assets;

i) gain arising from disposal of assets under a scheme of mergerof operation of a licensed bank and a licensed finance company,where application for approval is submitted to Bank NegaraMalaysia between 15 January 2004 and 14 January 2006;

j) gain arising from disposal of real property to Real EstateInvestment Trusts and Property Trust Funds approved by theSecurities Commission;

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REAL PROPERTY GAINS TAX • SERVICE TAX

k) gain from disposal of chargeable assets relating to the issuanceof private debt securities under Islamic principles.

l) gain arising from mergers of private institutions of higherlearning approved by the Ministry of Higher Education andundertaken not later than 31 December 2006.

m) gain arising from disposal of chargeable asset pursuant to ascheme of financing approved by the Central Bank or theSecurities Commission as a scheme which is in accordance withthe principles of Syariah.

n) mergers and acquisition (M&A) by companies listed on BursaMalaysia, approved by the Securities Commission from 1-10-2005 to 31-12-2007 and such M&A be completed by31.12.2008

10 SERVICE TAX10.1 Charge of Tax

a) Service tax is a consumption tax levied and charged on anytaxable service provided by any taxable person at an ad valoremrate of 5%

b) It will be replaced by Goods & Services Tax in 2007.

10.2 Taxable Person/Licensing

a) Any taxable person who carries on business of providing taxableservice must apply for a license.

b) “Person” includes an individual, a firm, a society, an association,a company and every other juridical person.

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SERVICE TAX

10.3 Taxable Persons

Taxable person Annual sales turnoverRM

a) Operators of hotels with more than25 rooms (subject to some exclusions) N/A

b) Operators of restaurants, bars,snack-bars, coffee houses or placeslocated in hotels with more than 25rooms, providing food, drinks and tobacco products wholly eat-in or partlytake-away N/A

c) Operators of restaurants, bars,snack-bars, coffee houses or placeslocated in hotels with 25 rooms or less,providing food, drinks and tobaccoproducts wholly eat-in or partly take-away 300,000

d) Operators of restaurants, bars,snacks-bars, coffee houses or placeslocated outside hotels, providing food,drinks and tobacco products wholly eat-inor partly take-away (subject to someexclusions) 300,000

e) Operators of food courts 300,000f) Operators of night-clubs, dance halls and

cabarets N/Ag) Operators of approved health-centres and

massage parlours N/Ah) Operators of 1st, 2nd or 3rd Class

Public House and 1st or 2nd Class Beer House N/Ai) Operators of private clubs 300,000

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SERVICE TAX


j) Operators of golf course or golf drivingrange (including operators of private clubshaving total annual sales turnover ofRM300,000 or less or any hotel having25 or less rooms) N/A

k) Licensed private hospitals 300,000l) Insurance companies N/A

m) Any person providing communicationservices who is registered under theCommunications And Multimedia Act1998 or licensed under the Communicationsand Multimedia (Licensing) Regulations 2000 N/A

n) Any person who is given permission toact as agent for transacting businessrelating to the import or export of anygoods or luggage under section 90 of the Customs Act 1967 N/A

o) Any person who is licensed under section65 or 65E of the Customs Act 1967 andwho is also given permission to act as anagent for transacting business relating to the import or export of any goods or luggagethat is stored in the licensed warehouse orinland clearance depot N/A

p) Operators of parking space for motor vehicles 150,000q) Courier-services companies 150,000r) Operators of motor vehicles services

and/or repair centers 150,000s) Licensed private agencies 150,000t) Employment agencies 150,000u) Public Accountants

(now known as Chartered Accountants) 150,000v) Advocates and Solicitors 150,000

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SERVICE TAX


w) Professional Engineers 150,000x) Architects 150,000y) Licensed or Registered Surveyors/

Registered Valuers, Appraisers andEstate Agents 150,000

z) Consultants (subject to some exclusions) 150,000aa) Private veterinary clinics 300,000bb) Hire-and-drive car and hire-car

service companies 300,000cc) Management companies 150,000dd) Advertising companies 300,000

N/A: No Minimum Threshold.

10.4 Taxable Services

a) Taxable services include the provision of rooms forlodging/sleeping accommodation, health services, certainprofessional services, certain telecommunication servicesincluding bandwidth services and certain value added service,management services, security services, provision of parkingspace, provision of golf course, golf driving range or servicesrelated to golf or golf driving range, courier delivery services(other than to destinations outside Malaysia), and the sale orprovision of food, drinks and tobacco products

b) Certain professional services provided to companies within thesame group would not be taxable (subject to certain qualifyingcriteria), effective from 1 January 2003.

Refer to Schedule 2 of the Service Tax Act for more details of taxableperson and taxable services

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SERVICE TAX • SALES TAX

10.5 Taxable Period

a) Service tax due when payment is received for taxable servicesrendered. If payment is not received within 12 calendar monthsfrom the date of issuance of invoice, the tax is due on the dayimmediately after the expiry of the 12-month period.

b) Any service tax that falls due during a taxable period, which is 2calendar months, is payable to the customs authorities within 28days after the end of the taxable period.

c) Late payment penalties ranging from 10% to 50% shall be imposed.

10.6 Refund of Services Tax on “Bad Debts”

With effect from 1 January 2003, a licensee is eligible for a refund ofservice tax in relation to debts deemed as “bad debts”, subject toconditions. This includes debts which cannot be collected after 12months from the date of payment of tax.

11 SALES TAX

11.1 Charge of Tax

a) Sales tax is a single-stage tax imposed on certain locallymanufactured and imported goods. It excludes Labuan, Langkawi,Tioman, Free Zones, and Licensed Manufacturing Warehouses.

b) Sales tax is also a consumption tax and the onus is on themanufacturers to levy, charge and collect the tax from theircustomers.

c) In the case of imported goods, sales tax is collected from theimporter at the time the goods are released from customscontrol.

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SALES TAX

d) The valuation of goods for sales tax purposes is based on theWorld Trade Organisation (WTO) principles of customs valuation

e) Taxable goodsAll goods manufactured in Malaysia or imported are taxableunless they are specifically exempted by order of the Minister ofFinance.

f) Goods exemptedi) All exports are exempted from sales tax.ii) Goods which are specially exempted under the Sales Tax

Exemption Order.

g) Rates of taxClass of goods Ad Valorem Rate

%Fruits, certain foodstuff, timber and buildingmaterials 5*Cigarettes and tobacco 25*Liquor and alcoholic drinks 20*All other goods, except petroleum subject tospecific rates and goods not specifically exempted 10*

* Reduced to 5%

h) It will be replaced by Goods & Services Tax in 2007.

11.2 Licensing

a) No person is allowed to manufacture taxable goods unless theperson is licensed as a licensed manufacturer.

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SALES TAX

b) “Manufacture” in relation to goods other than petroleum, means theconversion by manual or mechanical means of organic or inorganicmaterials into new product by changing the size, shape or nature ofsuch materials and includes the assembly of parts into pieces ofmachinery or other products but does not include the installation ofmachinery or equipment for the purpose of construction. In relationto petroleum, the term “manufacture” means refining orcompounding and includes the addition of foreign substance.

c) Exemption from licensingi) A manufacturer of taxable goods whose total sales value did

not exceed RM100,000 in the preceding year and is notexpected to exceed RM100,000 during the next twelvemonths may apply for a certificate of exemption fromlicensing. The certificate is renewable on a yearly basis.However, such manufacturer may choose to be licensed inorder to enjoy tax-free inputs (CJ 5 system).

ii) Certain manufacturing operations are also exempted fromthe licensing requirements, which include the developing andprinting of photographs and production of film slides,preparation of ready-mixed concrete, repacking of bulkgoods, repair of second hand goods and the installation ofair conditioners in motor vehicles.

11.3 Tax-free Raw Material (CJ 5)

In order to maintain the single-stage concept, there are facilitiesavailable to allow for inputs (raw materials and components) to beimported or acquired free of sales tax by a licensed manufacturer foruse in the manufacturing process.

11.4 Drawback

A licensed manufacturer or importer can claim drawback on the salestax paid in respect of goods, which are subsequently exportedsubject to certain criteria.

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SALES TAX • IMPORT DUTIES

11.5 Taxable Period

Generally, sales tax shall be due at the time the taxable goods aresold, or disposed of otherwise than by sale by the taxable person.Any sales tax that falls due during any taxable period, which isnormally 2 calendar months, shall be paid to the customs authoritieswithin 28 days from the expiration of the taxable period.

Late payment penalties ranging from 10% to 50% may be imposed.

11.6 Refund of Sales Tax on “Bad Debts”

With effect from 1 January 2003, a licensee is eligible for a refund ofsales tax in relation to debts deemed as “bad debts”, subject toconditions. This includes debts which cannot be collected after 12months from the date of payment of tax.

12 IMPORT DUTIES

a) Import duties are levied on taxable goods imported into the country.Import duties are generally levied on an ad valorem at basis rates ofimport duties range from 0% to 200%. Raw materials, machinery,essential foodstuffs and pharmaceutical products are normally non-dutiable or subject to duties at lower rates.

b) The value of goods for the purpose of computing import duties isdetermined in accordance with the World Trade Organisation (WTO)principles of custom valuation.

c) Exemptions (subject to conditions) in respect to import duties areavailable for: -i) raw materials and components used directly for the manufacture

of goods for export and domestic markets.ii) dutiable machinery and equipment which are used directly in the

manufacturing process and are not available locally.

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IMPORT DUTIES • EXPORT DUTIES • EXCISE DUTIES

d) Prohibition of importsQuantitative import restrictions may be imported on a certain rangeof products for protection of local industries or for reasons ofsecurity and public safety. An import license has to be obtained forthe importation of prohibited goods.

13 EXPORT DUTIES

a) Export duties are generally imposed on the country’s maincommodities such as crude petroleum and palm oil. With theexception of crude petroleum, which is subject to duty at a flat rateof 10%, duties on all other commodities are based on the cost plusconcept. Duties on such commodities are only imposed on theexcess of a threshold price which reflects the cost of production ofeach of the commodities. No export duties are collected when theprices of the commodities fall below the threshold.

b) For the purpose of computing export duty, the value of the goods isthe price which an exporter would receive for the goods calculatedto the stage where such goods are released by customs at the placeof export.

14 EXCISE DUTIES

14.1 a) Excise duties are imposed on a selected range of goodsmanufactured in Malaysia or imported in Malaysia. Goods whichare subject to excise duty include beer/stout, cider and perry,rice wine, mead, brandy, whisky, rum and tafia, gin, cigarettecontaining tobacco, motor vehicles, motorcycles and playingcards.

b) The rates of excise duties vary from 10 cents per litre forcertain types of spirituous beverages, to as much as 100% formotorcars.

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EXCISE DUTIES • LICENSED MANUFACTURING WAREHOUSE • FREE ZONE

14.2 Licensing

a) Unless exempted from licensing, a manufacturer of tobacco,intoxicating liquor or goods must have a licence to manufacturesuch goods.

b) A warehouse licence is required for storage of goods subject toexcise duty. A licence to manufacture tobacco, intoxicating liquoror goods subject to excise duty also permits the holder to storesuch goods.

14.3 Payment of Duty

a) As a general rule, duty is payable at the time the goods leave theplace of manufacture. For motor vehicles, duty is payable at thetime the vehicles are registered with the Road TransportDepartment.

b) No excise duty is payable on dutiable goods that are exported.

15 LICENSED MANUFACTURING WAREHOUSE

a) Manufacturers who export 80% or more of their finished product canapply for licensed manufacturing warehouse (LMW) status.

b) Raw materials, components and machinery used in the manufacturingprocess are exempted from import duties and sales tax.

16 FREE ZONE

A free zone is deemed to be a place outside the Principal Customs Area andis not subject to customs jurisdiction except, generally, in respect ofProhibition Orders on imports and exports. Subject to certain exclusions,goods and services can be brought into or provided in the free zoneswithout payment of customs duties, excise duties, sales tax and service tax.

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STAMP DUTY

17 STAMP DUTY

17.1 a) Stamp duty is chargeable on instruments and not ontransactions. If a transaction can be effected without creating achargeable instrument, it is out of the ambit of stamp duty.

b) The rates of duty vary according to the types of instruments andtransacted values. Generally, the transfer of properties arechargeable to stamp duty.

c) Properties (other than shares or marketable securities)

Value Rate Duty payableRM RM

On the first 100,000 RM1 per RM100 1,000or part thereof

On the next 400,000 RM2 per RM100 8,000or part thereof

500,000 9,000

In excess of 500,000 RM3 per RM100or part thereof

d) SharesRM3 for every RM1000 or any fraction thereof based onconsideration, or value whichever is greater. The Stamp Officegenerally adopts one of the 4 methods for valuation of ordinaryshares for purposes of stamp duty:i) price earnings ratio;ii) net tangible assets;iii) sales consideration; andiv) par value.

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STAMP DUTY

e) StampingInstruments chargeable with duty must be stamped within 30days from the date of execution.

f) PenaltyThe penalty imposed for late stamping varies based on period ofdelay.

17.2 Section 15 or 15A Exemption

a) Reconstruction or Amalgamation [Section 15]i) A company with limited liability (NewCo) is to be registered

with a view of acquiring the undertaking or share of anexisting company;

ii) For a consideration of at least 90% shares issued to theexisting company

iii) It must be stated in the Memorandum of Association of theNewCo that one of the objectives of the company is theacquisition of the undertaking or share of the existingcompany or resolution of a company.

iv) The sale instrument must be executed within 12 months ofthe registration of NewCo; and

v) The existing company should NOT cease to be the beneficialowner of shares in NewCo for 2 years, except for certaincircumstances.

b) Group Transfer [Section 15A]i) the transfer of beneficial interest in property from one limited

liability company to another.ii) Both companies are associated to each other, that is, the

existing company should hold not less than 90% shares inNewCo or a third company owns 90% or more of both theexisting company and NewCo.

iii) All consideration must be provided or received by associatedcompany.

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STAMP DUTY

17.3 Other Exemptions

Exemption or relief from stamp duty include the following: -a) Refinancing of loan for business purposes to the extent of the

duty that would be payable on the balance of the principalamount of the existing term loan;

b) Securisation of assets;

c) Transfer of securities listed on MESDAQ in respect of aborrowing and lending transaction made under a SecuritiesBorrowing and Lending Agreement;

d) Instruments of the Asset Sale Agreement or the Asset PurchaseAgreement, or Asset Lease Agreement executed between acustomer and a bank made under the principles of the Syariahlaw for the purpose of renewing any Islamic revolving financingfacility provided that the instrument for the existing Islamicrevolving financing facility has been duly stamped;

e) Instruments of Assets Sale Agreement executed between a customerand a financier made under the principles of the Syariah law for thepurpose of rescheduling or restructuring any existing Islamic financingfacility. The stamp duty is waived to the extent of the duty that wouldbe payable on the balance of the principal amount of the existingIslamic financing facility provided that the instrument for the existingIslamic financing facility had been duly stamped;

f) Certain contract notes relating to the sale of any shares, stockor marketable securities which are listed on a stock market of astock exchange between a local broker and a foreign investor oran authorised nominee on behalf of a foreign broker is remittedto the extent of stamp duty in excess of RM200;

g) Specified instruments executed in connection with the purchaseof certain low cost houses;

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STAMP DUTY

h) Loan instruments in respect of loans not exceeding RM50,000 givenunder the Micro Credit Scheme that are executed between theborrower and Bank Simpanan Nasional or Bank Pertanian Malaysia.

i) Instruments of transfer of real property to Real Estate InvestmentTrust and Property Trust Fund approved by the SecuritiesCommission;

j) Instruments relating to the purchase of property by any financierfor the purpose of leaseback under the principles of Syariah;

k) Instruments pursuant to a scheme of merger to rationalisebanking and finance company business and which involves themerger of the whole or any part of the business and operationsof a licensed bank and a licensed finance company 15 January2004 until 14 January 2006;

l) Instruments pursuant to a scheme of merger between privateinstitutions of higher learning (IPTS) to be approved by theMinistry of Higher Education undertaken from 11 September2004 to 31 December 2006;

m) Instruments executed pursuant to a scheme of financingapproved by the Central Bank or the Securities Commission as ascheme which is in accordance with the principles of Syariah,where such instrument is an additional instrument strictlyrequired for the purpose of compliance with those principles butwhich will not be required for any other schemes of financing,effective from 11 September 2004.

n) Mergers and acquisition (M&A) by companies listed on BursaMalaysia, approved by the Securities Commission from 1-10-2005to 31-12-2007 and such M&A be completed by 31-12-2008.

o) Remission of 50% stamp duty on loan instruments for a loan up toRM1 million taken by Small and Medium Enterprise, from 1-10-2005.

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IRB EXCHANGE RATES (Average Annual Rates)

18 IRB EXCHANGE RATES (Average Annual Rates)

Countries Currency 2000 2001 2002 2003 2004

Australia $1 2.2350 1.9874 2.0851 2.4967 2.8277New Zealand $1 1.7557 1.6148 1.7790 2.2299 2.5495Canada $1 2.5849 2.4793 2.4444 2.7407 2.9533U. Kingdom £1 5.8211 5.5292 5.7623 6.6299 7.0348USA $1 3.8000 3.8000 3.8000 3.8000 3.8000Thailand 1 Baht 0.0959 0.0863 0.0893 0.0925 0.0953Pakistan 1 Rupee 0.0714 0.0623 0.0643 0.0665 0.0658Sri Lanka 1 Rupee 0.0500 0.0430 0.0402 0.0398 0.0379Hong Kong $1 0.4925 0.4921 0.4921 0.4928 0.4927India 1 Rupee 0.0855 0.0814 0.0790 0.0824 0.0847Indonesia 1 Rupia 0.0005 0.0004 0.0004 0.0004 0.0004Brunei $1 2.2270 2.1436 2.1434 2.2038 2.2708Bahrain 1 Dinar 10.0839 12.5202 10.0815 10.0812 10.0822Philippines 1 Peso 0.0874 0.0753 0.0745 0.0709 0.0685Singapore $1 2.2270 2.1436 2.1434 2.2038 2.2708Taiwan $1 0.1230 0.1137 0.1113 0.1117 0.1150China 1 Renminbi 0.4636 0.4637 0.4637 0.4637 0.4637S. Korea 1 Won 0.0034 0.0030 0.0031 0.0032 0.0033Switzerland 1 Franc 2.2753 2.2776 2.4718 2.8512 3.0925Arab Saudi 1 Riyal - - 1.0234 1.0234 1.0234S. Africa 1 Rand - - 0.3665 0.5092 0.5978Euro 1 - - 3.6254 4.3339 4.7725Norway 1 Krone 0.4371 0.4274 0.4831 0.5433 0.5701

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LIST OF PUBLIC RULINGS ISSUED

19 LIST OF PUBLIC RULINGS ISSUED

To facilitate compliance with the Self Assessment System, the IRB hasissued the following Public Rulings:

Ruling No. Title of Ruling Date Issued/Updated

3/2005 Living Accommodation Benefit Provided 11.08.2005Provided For the Employee By The Employer

2/2005 Computation of Income Tax Payable By 06.06.2005a Resident Individual

1/2005 Computation of Total Income For Individual 05.02.20055/2004 Double Deduction Incentive on Research 30.12.2004

Expenditure4/2004 Employee Share Option Scheme Benefit 09.12.20043/2004 Entertainment Expenses 08.11.20042/2004 Benefits-In-Kind 08.11.2004

Addedum 20.05.20051/2004 Income from Letting of Real Property 30.06.20042/2003 Key-man Insurance 30.12.20031/2003 Leave passage 05.08.20032/2002 Allowable Pre-Operational & 08.07.2002

Pre-Commencement of BusinessExpenses for Companies

1/2002 Deduction for Bad/Doubtful Debts and 02.02.2002Tax Treatment for Recoveries

7/2001 Basis Period for Business and 30.04.2001Non-Business Sources (Companies)

6/2001 Basis Period for a Business Source 30.04.2001(Individuals and Persons other thanCompanies/Cooperatives)

5/2001 Basis Period for a Business Source 30.04.2001(Co-operatives)

4/2001 Basis Period for a Non-Business Source 30.04.2001(Individuals and persons other thanCompanies)

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LIST OF PUBLIC RULINGS ISSUED

Ruling No. Title of Ruling Date Issued/Updated

3/2001 Appeal Against An Assessment 18.01.20015/2001 Basis Period for a Business Source 30.04.2001

(Co-operatives)4/2001 Basis Period for a Non-Business Source 30.04.2001

(Individuals and persons other thanCompanies)

3/2001 Appeal Against An Assessment 18.01.20012/2001 Computation of Initial and Annual 18.01.2001

Allowances in Respect of Plant andMachinery

1/2001 Ownership of Plant and Machinery for the 18.01.2001Purpose of Claiming Capital Allowances

8/2000 Wilful Evasion of Tax and Related Offences 30.12.20007/2000 Providing Reasonable Facilities and 16.06.2001

Assistance6/2000 Keeping Sufficient Records (Persons other 01.03.2000*

than Companies and Co-operatives)Revised 30.06.2001

5/2000 Keeping Sufficient Records 01.03.2000*(Individuals and Partnerships)Revised 30.06.2001

4/2000 Keeping Sufficient Records 01.03.2000*(Companies and Co-operatives)Revised 30.06.2001

3/2000 Basis Period for a Business Source 01.03.2000*(Individuals and Persons other thanCompanies and Co-operatives)

2/2000 Basis Period for a Business Source 01.03.2000*(Companies and Co-operatives)

1/2000 Basis Period for a Non-business Source 01.03.2000*

* Superseded

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IMPORTANT FILING DATES

20 IMPORTANT FILING DATES

20.1 Submission of Tax Return Form

TAX SUBMISSION FOR YEAR OF ASSESSMENT 2005

Category Tax Return Form Due Date forSubmission

1 Resident Individualwith Business Income B 30 June 2006without Business Income BE 30 April 2006

2 Partnership P 30 June 2006

3 Non-Resident Individualwith Business Income M 30 June 2006without Business Income M 30 April 2006

4 Estatewith Business Income TP 30 June 2006without Business Income TP 30 April 2006

5 Associationwith Business Income TF 30 June 2006without Business Income TF 30 April 2006

6 Hindu Joint Familywith Business Income TJ 30 June 2006without Business Income TJ 30 April 2006

7 Company C & R 7th month after the close of accounting year-end

8 Co-operative Society CI 7th month after the close of accounting year-end

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Category Tax Return Form Due Date forSubmission

9 Unit Trust/Property Trust TC 7th month after the close of accounting year-end

10 Trust Body TA 7th month after the close of accounting year-end

11 Employers E 31 March 2006

20.2 Other Tax Compliance

Type of return Form Due date

a) All taxpayer- notification of change No prescribed Within 3 months of

of address change.

b) Companyi) submission of estimate Form CP 204 30 days before the

of tax payable beginning of the basis period

ii) submission of revised Form CP 204A In the sixth or/and estimate of tax payable ninth month of the

basis periodiii) submission of income Form C Within 7 months

tax return from the date following the close of its accounting period

iv) submission of section Form R Within 7 months 108 statement from the date

following the close of its accounting period

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v) Change of accounting Form CP204B One month beforedate the beginning of new

accounting period

c) Employeri) return of remuneration Form E; CP 159 Within 30 days from

by an employer the date of service or extended date granted (31 March)

ii) aa) notification of Form CP 22 Within one month ofemployee’s commencement ofcommencement of employmentemployment

bb) notification of Form CP 22A Not less than one employee’s month beforecessation of cessation.employment (incertain prescribedcases)

cc) notification of Form CP 21 Not less than one employee leaving month beforeMalaysia for more expected date of than 3 months Departure.

dd) monthly statement Form CP 39 Within 10 days afterof tax deduction by month end.employer underSchedular TaxDeduction Scheme

d) Withholding taxi) On interest or Form CP 37 Within one month of

royalty to non- paying or creditingresidents the non-resident,

whichever is earlier.

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ii) On contract Form CP 37A Within one month of payments to non- paying or creditingresident contractors the non-resident,

whichever is earlier.iii) On onshore interest Form CP 37C Bi-annual.

payments (other thanexempt interest) to resident individuals

iv) On technical and Form CP 37D Within one month of management service paying or creditingfees, rental of the non-resident,moveable properties, whichever is earlier.etc to non-residents

e) Real property gains taxi) Return of disposal of Form C.K.H.T. 1 Within one month of

chargeable asset date of disposal of chargeable asset.

ii) Return of acquisition of Form C.K.H.T. 2 Within one month of chargeable asset date of acquisition

of chargeable asset.iii) Notification of becoming Form C.K.H.T. 19 When Company

a Real Property becomes a RealCompany Property Company.

f) Sales tax- Submission of tax Form CJ 3 Within 28 days after

return and payment end of each taxableof tax period.

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g) Service tax- Submission of tax Form CP 3 Within 28 days after

return and payment end of each taxableof tax period.

h) Social Security Organisation(SOCSO)- Submission of Form 8A Within 30 days after

remittance form month end.

i) Employees’ Provident Fund- Schedule of Monthly EPF 6 (Form A) Within 15 days after

contributions together month end.with cheque

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ACCOUNTINGINFORMATION

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FINANCIAL REPORTING STANDARDS

82

21 FINANCIAL REPORTING STANDARDS

21.1 New Standards

Standard Title Standard FormerlySuperseded Known As

FRS 101 Presentation of FRS 1012004 MASB 1Financial Statements

FRS 102 Inventories FRS 1022004 MASB 2FRS 108 Accounting Policies, FRS 1082004 MASB 3

Changes in AccountingEstimates and Errors

FRS 110 Events After the Balance FRS 1102004 MASB 19Sheet Date

FRS 116 Property, Plant and FRS 1162004 MASB 15Equipment

FRS 117 Leases FRS 1172004 MASB 10FRS 121 The Effects of Changes FRS 1212004 MASB 6

in Foreign Exchange RatesFRS 124 Related Party Disclosures FRS 1242004 MASB 8FRS 127 Consolidated and Separate FRS 1272004 MASB 11

Financial StatementsFRS 128 Investments in Associates FRS 1282004 MASB 12FRS 131 Interests in Joint Ventures FRS 1312004 MASB 16FRS 132 Financial Instruments: FRS 1322004 MASB 24

Disclosure andPresentation

FRS 133 Earnings Per Share FRS 1332004 MASB 13FRS 136 Impairment of Assets FRS 1362004 MASB 23FRS 138 Intangible Assets FRS 1092004 -FRS 139 Financial Instruments: - -

Recognition andMeasurement

FRS 140 Investment Property FRS 1252004 IAS 25

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FINANCIAL REPORTING STANDARDS

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Standard Title Standard FormerlySuperseded Known As

FRS 1 First-Time Adoption of - -Financial ReportingStandards

FRS 2 Shared-Based Payments - -FRS 3 Business Combinations FRS 1222004 MASB 21FRS 5 Non-Current Assets Held FRS 1352004 MASB 28

for Sale & DiscontinuedOperations

The above Standards have been approved in principle by the MalaysianAccounting Standards Board pending their official announcement in majornewspapers except FRS 2.

21.2 Existing Standards

Standard Title FormerlyKnown As

FRS 1042004 Depreciation Accounting MASB 14 FRS 1072004 Cash Flow Statements MASB 5FRS 1112004 Construction Contracts MASB 7FRS 1122004 Income Taxes MASB 25FRS 1142004 Segment Reporting MASB 22FRS 1182004 Revenue MASB 9FRS 1192004 Employee Benefits MASB 29FRS 1202004 Accounting for Government Grants MASB 30

and Disclosure of GovernmentAssistance

FRS 1232004 Borrowing Costs MASB 27FRS 1262004 Accounting and Reporting by MASB 30

Retirement Benefit PlansFRS 1342004 Interim Financial Reporting MASB 26

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FRS 2012004 Property Development Activities MASB 32FRS 2022004 General Insurance Business MASB 17FRS 2032004 Life Insurance Business MASB 18FRS i-12004 Presentation of Financial Statements MASB i-1

for Islamic Financial InstitutionsFRS 129 Financial Reporting in Hyperinflationary

Economics IAS 29FRS 204 Accounting for Aquaculture MAS 5

For latest developments on Financial Reporting Standards, please refer toMASB’s website: www.masb.org.my

22 MALAYSIAN APPROVED STANDARDS ON AUDITING

Standard Title ExistingStandard ToBe Replaced

Preface to Approved Standardson Auditing and Related ServicesPreface to ISAs and RSsGlossary of Terms

Introductory MattersAI 120 Framework of ISAs

ResponsibilityAI 200* Objective and General Principles AI 200

Governing an Audit of FinancialStatements

AI 210 Terms of Audit EngagementsAI 220 Quality Control for Audit Work

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AI 220 (Revised)* Quality Control of Audits of AI 220Historical Financial Information

AI 230 DocumentationAI 240 Fraud and ErrorAI 240 (Revised)* The Auditor’s Responsibility to AI 240

Consider Fraud in an Audit ofFinancial Statements

AI 250 Consideration of Laws andRegulations in an Audit of FinancialStatements

AI 260 Communication of Audit Matterswith Those Charged with Governance

AI 300 PlanningAI 310 Knowledge of the BusinessAI 315* Understanding the Entity and Its AI 310, AI 400,

Environment and Assessing the AI 401Risks of Material Misstatement

AI 320 Audit Materiality

Internal ControlAI 330* The Auditor’s Procedures in AI 400, AI 401

Response to Assessed RisksAI 400 Risk Assessments and Internal

ControlAI 401 Auditing in a Computer Information

Systems EnvironmentAI 402 Audit Considerations Relating to

Entities Using Service Organisations

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Audit EvidenceAI 500* Audit Evidence AI 500AI 501 Audit Evidence – Additional

Consideration for Specific ItemsAI 505 External ConfirmationsAI 510 Initial Engagements –

Opening BalancesAI 520 Analytical ProceduresAI 530 Audit Sampling and Other Selective

Testing ProceduresAI 540 Audit of Accounting EstimatesAI 550 Related PartiesAI 560 Subsequent EventsAI 570 Going ConcernAI 580 Management Representations

Using the Work of OthersAI 600 Using the Work of Another AuditorAI 610 Considering the Work of Internal

AuditingAI 620 Using the Work of an Expert

Audit Conclusions and ReportingAI 700 The Auditor’s Report on Financial

StatementsAI 710 ComparativesAI 720 Other Information in Documents

Containing Audited FinancialStatements

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Specialised AreasAI 800 The Auditor’s Report on Special

Purpose Audit Engagements

International Auditing Practice StatementsAI 1000 Inter-bank Confirmation ProceduresAI 1001 IT Environments –

Stand-Alone Personal ComputersAI 1002 IT Environments –

On-Line Computer SystemsAI 1003 IT Environments –

Database SystemsAI 1004 The Relationship between Bank

Supervisors and External AuditorsAI 1005 Special Considerations in Audit

of Small BusinessesAI 1006 The Audit of International Commercial

BanksAI 1007 Communications with ManagementAI 1008 Risk Assessment and Internal

Controls – CIS Characteristics andConsiderations

AI 1009 Computer Assisted AuditingTechniques

AI 1010 The Consideration of EnvironmentalMatters in the Audit of FinancialStatements

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International Standard on Review Engagements (ISREs)AI 2400 Engagements to Review Financial AI 910

Statements

International Standards on Assurance Engagements (ISAEs)AI 3000 Assurance Engagements AI 100AI 3400 The Examination of Prospective AI 810

Financial Information

International Standards on Related ServicesAI 4400 Engagements to Perform Agreed Upon AI 920

Procedures Regarding FinancialInformation

AI 4410 Engagements to Compile Financial AI 930Information

International Standard on Quality ControlISQC 1* Quality Control for Firms that Perform Audits and

Reviews of Historical Financial Information, and OtherAssurance and Related Service Engagements

* The above Standards are to be effective for audit of financial statementsfor periods beginning on or after 1 January 2006 except for ISQC 1where the systems of quality control in compliance with the ISQC arerequired to be established by 1 July 2006

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RECOMMENDED PRACTICE GUIDES (RPG) • MIA BY-LAWS

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23 RECOMMENDED PRACTICE GUIDES (RPG)

RPG 1 Appointment and Change of Auditors – Companies Act 1965RPG 2 Solicitors’ Account ProgrammeRPG 3 Auditors’ Report – Companies Act 1965RPG 4 Reports and QualificationsRPG 5 Guidance for Auditors on the Review of Directors’ Statement of

Internal ControlRPG 6 Update on Auditor’s Report on Financial Statements

24 MIA BY-LAWS

24.1 Part A – Applicable to All Members

By-Law A-1 Fundamental PrinciplesBy-Law A-2 Integrity and ObjectivityBy-Law A-3 Professional Competence and Due CareBy-Law A-4 Continuing Professional EducationBy-Law A-5 ConfidentialityBy-Law A-6 Description and Designatory LettersBy-Law A-7 Attention to Correspondence and EnquiriesBy-Law A-8 Acts Discreditable to the ProfessionBy-Law A-9 Advertising, Publicity and SolicitationBy-Law A-10 Induction Course

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MIA BY-LAWS

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24.2 Part B – Applicable to Members in Public Practice

By-Law B-1 Professional IndependenceBy-Law B-2 Method of PracticeBy-Law B-3 Advertising, Publicity and SolicitationBy-Law B-4 Clients’ MoniesBy-Law B-5 Loans to and from ClientsBy-Law B-6 Fees and CommissionBy-Law B-7 ReferralsBy-Law B-8 Changes in Professional AppointmentsBy-Law B-9 Incapacity or Death of Sole PractitionerBy-Law B-10 Professional Indemnity InsuranceBy-Law B-11 Quality Assurance and Practice Review

24.3 Part C – Applicable to Members in Specific Type of Public Practice

By-Law C-1 Professional Conduct of Members in Specific Types of Public Practice

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ACCA (the Association of Chartered Certified Accountants) isthe largest and fastest-growing international accountancybody with 240,000 students and 105,000 members in 170countries. Our mission is to be the leading globalprofessional accountancy body by reputation, influence andsize, offering the first choice qualifications to people ofapplication, ability and ambition around the world who seek arewarding career in accountancy, finance and management.

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ACCA Malaysia Sdn Bhd (473007 P)27th Floor Wisma Denmark No 86 Jalan Ampang 50450 Kuala Lumpurtel: + (603) 2713 5051 fax: + (603) 2713 5052e-mail: [email protected] http://malaysia.accaglobal.com

Kuching BranchUnit #8.01 8th Floor Gateway KuchingNo 9 Jalan Bukit Mata 93100 Kuchingtel: + (6082) 42 5051 fax: + (6082) 42 6061

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Tax Booklet YA 2005

Documents

Transcript of Tax Booklet YA 2005