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TaXavvy31 January 2019 | Issue 2-2019

In this issue

• Filing Programme for Year 2019

• Public Ruling 12/2018 - Income from Letting of Real Property

• Legislation for Principal Hub incentive

• Legislation for incentives for Green Technology Service Providers

• Legislation for Sabah Development Corridor

• Other gazettes recently issued

TaXavvy | Issue 2-2019 | 2PwC

Filing Programme for Year 2019

The Filing Programme for Year 2019 has been issued by the Inland Revenue Board (IRB) recently. Itoutlines the statutory due dates, grace period and method of submission for the various return forms.

The salient points in relation to the filing of income tax returns and payment of taxes are outlined below.

Grace period for submission of return forms and payment of balance of taxes

* Grace period for submission of relevant tax returns from the stipulated filing due date** Payment of balance of taxes under section 103(1) of the Income Tax Act 1967 (ITA) / section 48(1) of the PetroleumIncome Tax Act 1967, except for Forms E, P and CPE.

If submissions are not made within the grace period, the submission will be deemed to be late and penaltieswill be computed from the stipulated filing due date and not from the extended due date.

Returns by employers are only considered complete if both the Form E and CP 8D are submitted in the formatas stipulated by the IRB. The CP 8D has to be furnished on or before the due date for submission of the form.Further details on the requirements for submission of Form E and CP 8D can be found in the filingprogramme.

Category Forms Method ofsubmission

Grace period for submission* and payment ofbalance of tax**

Year of assessment(YA) 2019• Companies• Co-operative

Societies• Limited Liability

Partnerships• Trust bodies

e-C e-filing 1 month

C1/e-C1PT/e-PTTA/e-TATC/e-TC

e-Filing 1 month

Postal 3 working days

Hand delivery None

TRTN

Postal 3 working days

Hand delivery None

YA 2018• Individuals• Partnerships• Associations• Deceased persons’

estate• Hindu Joint

Families

BE/e-BE/m-BEB/e-BP/e-PBT/e-BTM/e-MMT/e-MTTF/e-TFTP/e-TP

e-filing 15 days

Postal 3 working days

Hand delivery None

TJ Postal 3 working days

Hand delivery None

Petroleum CPE/e-CPECPP/e-CPP2018

e-filing 1 month

Postal 3 working days

Hand delivery None

Employer (year 2018):• Company• Labuan company

Ee-E

e-filing 1 month

Employer (year 2018):• Non-company• Non-Labuan

company

Ee-E

e-filing 1 month

Postal 3 working days

Hand delivery None

TaXavvy | Issue 2-2019 | 3PwC

Entities which are dormant orhave not commenced business

Similar with prior years,companies, co-operative societies,limited liability partnerships andtrust bodies are not required tosubmit Form CP204 if they havenot commenced operations.“Dormant” is explained as follows:

• Never commenced operationssince the date it wasincorporated / established, or

• Had previously been inoperation or carried onbusiness but has now ceasedoperations or business.

A company which only ownsshares, real properties, fixeddeposits and other similarinvestments, is not considered as“dormant”.

For dormant companies, thefollowing are mandatory fields tobe completed in the return form:• Accounting period• Basis period• Business / Partnership

statutory income• Business code

Grace period for payment of tax/ balance of tax

For assessments raised undersections 91, 92, 96A, 90(3), 101(2)of the ITA, the tax or balance oftax must be paid within 30 daysfrom the date of assessment.However, there is a grace periodof 7 days.

Repayment cases

For the repayment cases, thefollowing appendices / workingsheets used for the taxcomputation have to be submittedtogether with the income taxreturn form:

• Appendix B2 / HK-6 [taxdeduction under section 110 ofthe ITA]

• Appendix B3 / HK-8 [claim fortax relief under section 132 ofthe ITA]

• Appendix B4 / HK-9 [claim fortax relief under section 133 ofthe ITA]

TaXavvy | Issue 2-2019 | 4PwC

Tax deduction forexpenses incurred in

periods after the rentalincome was received in

advance

Public Ruling 12/2018 - Income from Letting of Real Property

The IRB has issued Public Ruling 12/2018 - Income from Letting of Real Property (“PR 12/2018”). PR12/2018 replaces Public Ruling 4/2011 - Income from Letting of Real Property 4/2011 (“PR 4/2011”). PR12/2018 essentially updates PR 4/2011 to incorporate changes to the law since PR 4/2011 was issued and inparticular, the tax treatment of rental received in advance and the refund of such receipts, which take effectfrom YA 2016.

The key changes are:

Tax treatment of rentalreceived in advance

PR 12/2018Where rental income received in advance is from a business source, the rental isbrought to tax in the basis period in which the amount is received in accordancewith section 24(1A) of the ITA.

PR 4/2011No specific provision of the ITA was ascribed to the treatment for rental incomereceived in advance from a business source.

PR 12/2018With effect from YA 2016, expenses in relation to business sourced rentalincome are deductible in the YA in which they are incurred. The concessionarytreatment prior to YA 2016 (as stated below) for expenses in relation to passivesourced rental income is maintained.

PR 4/2011A concession was given to match the timing of deducting the expenses with thetaxing of the income received in advance. Taxpayers were allowed to amend theprior year tax computations to deduct the expenses incurred in later YAs againstthe rental received in advance. This concession applied to both business andpassive sourced rental income.

Tax treatment of refundof rental received in

advance

PR 12/2018Where rental income from a business source which has been brought to tax issubsequently refunded, the amount refunded is deductible in the basis period inwhich the refund is made in accordance with section 34(7A) of the ITA. This iseffective for refunds received from YA 2016.

PR 4/2011No specific provision of the ITA was ascribed to the treatment of refunds.

TaXavvy | Issue 2-2019 | 5PwC

Legislation for Principal Hub incentive

The recent developments in relation to the Principal Hub (PH) incentive include:1) The issuance of a revised PH guideline dated 31 December 2018. The revision was primarily made to

incorporate the requirements of the Base Erosion and Profit Shifting (BEPS) Action 5 – Forum onHarmful Tax Practices (FHTP).

2) Consequently, 3 new gazette orders have been issued on the incentives given. These gazette orders areeffective from YA 2018.

The gazette orders issued are:

a) Income Tax (Exemption) (No 6) Order 2018 (“Order 6”) – for companies which are already operating inMalaysia

b) Income Tax (Exemption)(No 7) Order 2018 (“Order 7”) – for new companies in Malaysiac) Income Tax (Exemption)(No 8) Order 2018 (“Order 8”) – for companies with an approved Operational

Headquarters (OHQ) / Regional Distribution Centre (RDC) / International Procurement Centre (IPC)status

The summarised key points from the above gazette orders and the revised PH guideline are set out below.

Gazette Orders Revised guideline

Effective date From YA 2018For applications made from 1 January 2018 to31 December 2020

For applications made from1 May 2015 to 30 April 2020

Minimumemployees

Conditions are the same as the revised guideline exceptfor the following:• Condition for minimum employees earning RM5,000

per month to be complied with beginning from thethird year of the exempt YAs, except for those withthe OHQ / RDC / IPC incentive where no time periodis specified.

• For OHQ / RDC / IPC without the OHQ / RDC / IPCincentive, there is a minimum of 18 employeesearning RM5,000 per month to be complied withbeginning from third year of the exempt YAs.

Conditions remain the same asprevious guideline, i.e. theconditions are to be fulfilled byend of year 3 of PH operations,except for those with the OHQ /RDC / IPC incentive.

Minimum annualoperatingexpenditure

Conditions are the same as the revised guideline exceptfor the following:• Condition to be complied with beginning from the

third year of the exempt YAs, except for those withthe OHQ / RDC / IPC incentive where no time periodwas specified.

Conditions remain the same asprevious guideline, i.e. theconditions are to be fulfilled byend of year 3 of PH operations,except for those with the OHQ /RDC / IPC incentive.

Budget 2019 had announced improvement to the existing PH incentive with aproposed concessionary income tax rate of 10% on the overall statutory incomerelating to PH's activities for 5 years. The proposal has yet to be legislated. Pleaserefer to our TaXavvy Budget 2019 Edition Part 1.

TaXavvy | Issue 2-2019 | 6PwC

Order 7 also provides an option for the company to surrender the exemption. Where the exemption issurrendered, it will take effect from the YA in which the application to surrender takes place.

Gazette Orders Revised guideline

Exclusion ofintellectualproperty (IP)

Where IP rights were acquired on or before 16 October2017, income tax exemption continues to be given onroyalties and income derived from those IP rights until30 June 2021.

Where IP rights were acquired after 16 October 2017,income tax exemption on royalties and income derivedfrom these IP rights ceased after 30 June 2018.

Royalties, new IP rights and IP rights are defined in thegazette orders.

Approvals granted on or before30 June 2018 for projects thathave IP income continue to enjoythe existing incentive until 30June 2021.

Any applications with elements ofincome from IP approved after 30June 2018 will be subject to theModified Nexus Approachguideline to be published.

Related company “Related company” is defined according to section 2(1)of the Promotion of Investments Act 1986, which takesinto account the following:• Control of operations, whether directly or indirectly,

and• Beneficial ownership of issued share capital, whether

directly or indirectly.

The previous guideline had stated“Related companies in Malaysiafor the PH will be determined byMIDA”. This statement has nowbeen removed.

Withdrawal Where the conditions are not met, the exemption will bewithdrawn from the first YA of the exemption.

No change from the previousguideline, i.e. withdrawal ofexemption from Year 1

Legislation for incentives for Green Technology Service Providers

The types of incentives offered for the green technology industry are:1) Project based (qualifying companies undertaking qualifying activities for own consumption)2) Service based (qualifying companies undertaking qualifying activities as a service provider)3) Purchase of green technology assets listed on the MyHijau Directory

The Income Tax (Exemption) (No 9) Order 2018 in relation to tax exemption for green technology serviceproviders (item 2) was recently issued.

The Income Tax (Exemption) (No 9) Order 2018 (“Order 9”) only specifies the incentive applicable to greentechnology services. The gazette orders for green technology projects and purchase of green technology assetsare expected to be issued in due course.

Order 9 essentially legislates the incentive offered including conditions which have already been set out in theguidelines for green technology. The incentive and conditions (including the substantive requirements incompliance with FHTP) are generally in line with the said guidelines.

TaXavvy | Issue 2-2019 | 7PwC

Legislation for Sabah Development Corridor

New gazette orders for the Sabah Development Corridor (SDC) were recently issued. The incentives grantedunder the gazette orders are essentially the same as the following existing incentives stated in the SDC’swebsite:1) Income tax exemption based on qualifying statutory income2) Income tax exemption based on qualifying capital expenditure3) Stamp duty exemption on instrument of transfer of real property used for qualifying tourism project

The gazette orders in relation to income tax exemption are:

a) Income Tax (Exemption) (No 11) Order 2018 (“Order 11”) – Exemption of statutory income equivalent toan allowance on qualifying capital expenditure incurred

b) Income Tax (Exemption) (No 12) Order 2018 (“Order 12”) – Exemption of statutory income derived fromqualifying activity

The salient points from the above gazette orders are set out below.

The requirements to comply with FHTP have also been included.

Order 11 Order 12

Effective date For applications made through the Sabah Economic Development and Investment Authorityon or after 20 November 2012* but not later than 31 December 2020.

* The guideline in SDC’s website states 1 January 2013.

Incentive given Income tax exemption on statutory incomeequivalent to 100% of qualifying capitalexpenditure (QCE) incurred for 5 or 10years, depending on the qualifying activity,commencing from the date the first QCE isincurred but not earlier than 3 years fromdate of application or 20 November 2012.

Where the QCE is disposed within 2 yearsof acquisition, the exemption granted inrespect of the statutory income will bewithdrawn.

Income tax exemption on statutory income for 5or 10 years of assessments depending on thequalifying activity

Related company Where a qualifying company is granted the incentive, any related company is not entitled tothe same incentive for the same qualifying activity.

Qualifying activity Remains the same as those listed onSDC’s website except that qualifyingmarine downstream activities are nowgrouped and described as “manufacturingof aquatic products.”

For qualifying activities in the hotel & resortsector, and production of halal product, theincentive applies to the operator.

Remains the same as those listed on SDC’swebsite except that qualifying marinedownstream activities are now grouped anddescribed as “manufacturing of aquaticproducts.”

For qualifying activities in the creative and hotel& resort sectors, the incentive applies to theoperator.

TaXavvy | Issue 2-2019 | 8PwC

Stamp duty exemption on instrument of transferof real property used for qualifying tourismproject in the SDC

The Stamp Duty (Exemption)(No 8) Order 2018provides stamp duty exemption for the transfer ofreal property used for purposes of carrying on aqualifying project in relation to hotel or resort in theSDC, for instruments executed on or after 20November 2012* but not later than 31 December2020.

* The guideline in SDC’s website states 1 January2013.

Other gazettes recently issued

The following orders were gazetted on 28 December2018.

Stamp Duty (Exemption) (No 5) Order 2018provides stamp duty exemption for insurancepolicies / takaful certificates for PerlindunganTenang products as announced in Budget 2019. Itapplies for policies / certificates issued on or after 1January 2019 but not later than 31 December 2020.

Income Tax (Exemption) (No 5) Order 2018provides tax exemption for business of providingfund management services for Sustainable andResponsible Investment Fund in Malaysia asannounced in Budget 2018. The order is effectivefrom YA 2018 to YA 2020.

TaXavvy is a newsletter issued by PricewaterhouseCoopers Taxation Services Sdn Bhd. Whilst every care has been taken in compiling this newsletter, wemake no representations or warranty (expressed or implied) about the accuracy, suitability, reliability or completeness of the information for any purpose.PricewaterhouseCoopers Taxation Services Sdn Bhd, its employees and agents accept no liability, and disclaim all responsibility, for the consequences ofanyone acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. Recipients should not act upon itwithout seeking specific professional advice tailored to your circumstances, requirements or needs.

© 2019 PricewaterhouseCoopers Taxation Services Sdn Bhd. All rights reserved. "PricewaterhouseCoopers" and/or "PwC" refers to the individual membersof the PricewaterhouseCoopers organisation in Malaysia, each of which is a separate and independent legal entity. Please see www.pwc.com/structure forfurther details.

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