INCOME EXEMPT FROM TAX The following are incomes which are exempt from Malaysian income tax:

1. Interest income Interest for deposits of up to RM100,000 in any savings account or fixed deposit not exceeding 12 months derived from any approved financial institution. Interest for fixed deposit exceeding 12 months derived from any approved financial institution. Gains and profits under the interest-free banking from an investment account of up to RM100,000 for a period of less than 12 months or from an investment account of any amount for a period of more than 12 months derived from any approved financial institution. Interest or bonus from any savings account or from Save As You Earn" scheme with Bank Simpanan Nasional Interest or bonus from any savings account with Lembaga Tabung Haji Interest on Bon Simpanan Malaysia issued by Bank Negara Malaysia, Bon Simpanan Malaysia Siri Kedua issued by Bank Simpanan Nasional or any savings certificates, security or bonds issued or guaranteed by the Government Interest on corporate bonds issued by public listed companies on the KLSE, other than interest from loan stocks that can be converted into equity shares, approved by the Securities Commission Interest on Merdeka Bonds issued by Central Bank of Malaysia Interest from bond and securities issued by Pengurusan Danaharta Nasional Bhd (from YA 1999 onwards) Interest received by non-residents from any approved financial institution. Interest income paid or credited to non-resident individual in respect of Islamic securities other than convertible loan stock, approved by the Securities Commission, issued in any currency other than the Ringgit. (effective from YA 2008)

2.

Dividends Dividends paid out of exempt income of Malaysian companies enjoying tax incentives. Dividends distributed by co-operative societies to members. Dividends from closed-end funds. Dividends from domestic companies paid out of dividends from offshore companies. Dividend received by resident individuals from an approved unit trust where not less than 90% of its investment is in Government securities and the remainder is in commercial papers. Dividend distributed under the single tier system.

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Royalties in respect of:

Amount exempted (RM) publication of, or the use of or the right to use, any literary work or any original painting publication of, or the use of or the right to use, any artistic work recording discs or tapes 4. 20,000 10,000 10,000

Royalties received by non-residents from private institution of higher learning for franchised educational scheme. Income of up to RM20,000 for a year of assessment received by individual resident in Malaysia in respect of any musical compositions translation of books or literary work on the specific request of any agency of the Ministry of Education or the Attorney-General's Chamber. Pensions Pension derived from Malaysia and paid to a resident who retires at the age of 55 or on reaching the compulsory age of retirement under any law or if the retirement is due to ill-health. The pension must be in respect of employment services rendered in Malaysia and under an approved scheme. If an individual is in receipt of more than one pension, the exemption is limited to the highest pension received.

5.

6.

7.

Retirement Gratuity Retirement gratuities paid to employees are fully exempt where the retirement o o is due to ill-health, or takes place after reaching the age of 55 or other compulsory age of retirement from an employment which lasted at least 10 years with the same employer or with companies in the same group, or takes place upon reaching compulsory retirement age pursuant to an employment contract or collective agreement at the age of 50 and has lasted 10 years with the same employer or with companies in the same group (from YA 2007 onwards)

8.

Compensation for loss of employment Compensation paid to an employee for premature termination of an employment contract is not taxable if the termination is due to ill-health. In any other case, tax exemption granted is restricted to RM6,000 for each completed year of service with the same employer or with companies in the same group.

9.

Service Award Perquisite Perquisite for long service (more than 10 years of employment with the same employer), past achievement or service excellence award up to RM1,000 in cash or kind for each YA.

10. 11.

Annuities paid by Malaysian life insurers. Death gratuities or consolidated compensation for death or injuries.

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Leave Passage The Act specifically excludes from tax, benefits in the form of costs of leave passages (includes fares, meals and accommodation) within Malaysia not exceeding three times in a calendar year and once outside Malaysia not exceeding RM3,000 in a calendar year. The tax exempt benefit is confined to the employee and members of his immediate family.

13.

Gifts of new computer and payment of broadband subscription fees by companies to their employees will not be regarded as benefits-in-kind and hence, exempted from tax. With effect from Year of Assessment 2008 to YA 2010. Other benefits received medical and dental treatment goods and services offered at a lower price / discount free transport childcare facilities / benefits

14.

15. 16. 17.

Scholarships Income from a grant or subsidy given by Federal or State government. Foreign income of any person arising from sources outside Malaysia and remitted into Malaysia.

(Source: Budget Commentary & Tax Information 2008-2009, PWC Tax Booklet 2007/2008, www.lhdn.gov.my, www.kpmg.com.my)