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EMPLOYMENT INCOME ACCA F6. T4.

Introduction
Taxes in Malaysia are divided into direct taxes and indirect taxes y re!erence to "#et#er t#ey are
i$%osed directly on t#e tax%ayer or indirectly via levies on certain &oods and services. 'irect taxes are
usually %aid directly to t#e tax aut#orities "#ereas t#e indirect taxes are collected y t#e vendors o! t#e
&oods and services( "#o t#en %ass on t#e tax to t#e relevant aut#orities.
Direct taxes include:
Inco$e Tax ) a%%lies to *%ersons+ and is levied on c#ar&eale inco$e.
,eal Pro%erty -ains Tax ) a%%lies to *%ersons+ and is levied c#ar&eale &ains $ade on t#e dis%osal o!
real %ro%erty in Malaysia.
*.OC.O+ ) a%%lies to *%ersons+ and is levied on e$%loy$ent inco$e to individuals.
Indirect taxes include:
.ales Tax ) levied on $ost &oods consu$ed in Malaysia.
.ervice Tax ) levied on $any services %rovided in Malaysia( e.&. !ood or drin/ %rovided in restaurants
or clus( stayin& in a #otel( teleco$s services( services at &ol! clus( car re%air centres and
%ro!essional services suc# as le&al( audit( tax advice( etc. in connection "it# &oods or land in
Malaysia.
.ta$% 'uty ) levied on %urc#ases and leases o! land and uildin&s( and trans!ers o! stoc/s and s#ares.
I$%ort0Excise 'uties ) levied on $ost &oods i$%orted into Malaysia.
1e "ill consider Inco$e Tax( ,eal Pro%erty -ains Tax( .ales Tax and .ervice Tax.
T2E MAIN .O3,CE. OF TA4 LA1 A,E5
Inco$e Tax Act 6768 9*ITA:68+;.
,eal Pro%erty -ains Tax Act 6786 9*,P-TA:86+;.
.ales Tax Act 678< 9*.TA:8<+;.
.ervice Tax Act 678= 9*.TA:8=+;.
T#e aove Acts are a$ended y suse>uent Finance Acts $ade !ollo"in& t#e annual ?ud&et.
PE,.ON. .3?@ECT TO TA4
Inco$e o! any %erson( ot#er t#an a ,esident Co$%any Carryin& on t#e usiness o! an/in&( Insurance or
sea and air trans%ort derived !ro$ source outside Malaysia and received Malaysia is exe$%t.
For ,esident co$%any( t#e exe$%ted !orei&n inco$e "ill e credited to an exe$%t account !ro$ "#ic#
exe$%t dividend can e %aid. I! t#e initial reci%ient o! dividend is cor%orate entity( t#en it can also %ay
second tier dividend to its o"n s#are#older. I.E A t"o tier tax exe$%tion.
A *%erson+ includes5 an individual(
a co$%any(
a ody o! %ersons( and 9A;
a cor%oration sole.
A ody o! %ersons is de!ined as an unincor%orated ody o! %ersons( includin&
a 2indu Boint !a$ily ut excludin& a %artners#i%. Exa$%les include clus( coC
o%erative societies( trade associations and trusts.
ACCA F6. T4. EMPLOYMENT INCOME
Classes o! c#ar&eale inco$e u%on "#ic# inco$e tax is due are %rovided !or in s.4 ITA:68 as5
a; -ains or %ro!its !ro$ a usiness( !or "#atever %eriod o! ti$e carried on(
; -ains or %ro!its !ro$ an e$%loy$ent(
c; 'ividends( interest or discounts(
d; ,ents( royalties or %re$iu$s(
e; Pensions( annuities or ot#er %eriodical %ay$ents not !allin& under t#e aove(
!; -ains or %ro!its not !allin& under t#e aove.
Eac# year o! assess$ent runs !ro$ 6 @anuary to D6 'ece$er.
..= ITA:68 %rovides $ore detail in t#e "ay inco$e is suBect to taxation y %rovidin& t#at inco$e tax is
%ayale on *c#ar&eale inco$e+( "#ic# is deter$ined as !ollo"s5
6. Gross income !ro$ all sources is deter$ined on a source y source asis.
<. Adjusted income is &ross inco$e less all out&oin&s and ex%enses o! a revenue nature "#olly and
exclusively incurred in t#e %roduction o! &ross inco$e.
D. Statutory income is adBusted inco$e less ca%ital allo"ances in res%ect o! >uali!yin& %lant and
$ac#inery ex%enditure( and >uali!yin& uildin&s ex%enditure.
4. Aggregate income is t#e su$ o! all usiness inco$e less adBusted losses rou&#t !or"ard( %lus all
nonCusiness inco$e( %lus recoveries o! aorted %ros%ectin& ex%enditure.
=. Total income is a&&re&ate inco$e less adBusted losses !or t#e asis %eriod( certain $iscellaneous
ex%enditures( donations and &rou% losses.
6. Chargeable income is total inco$e less any %ersonal relie!s availale !or individuals.
A'MINI.T,ATION OF TA4
Taxes on inco$e and &ains are ad$inistered and collected y t#e 'irector -eneral o! Inland ,evenue
9*'-I,+;( or si$%ly t#e 'irector -eneral 9*'-+;( or t#e Inland ,evenue 9*I,+;( under t#e aut#ority o!
t#e Ministry o! Finance. In %ractice( $ost o! t#e "or/ o! t#e 'irector -eneral is carried out y t#e Inland
,evenue ?oard 9*I,?+;. .ales and service taxes( and i$%ort duties are ad$inistered y t#e 'irector
-eneral o! Custo$s under t#e aut#ority o! t#e ,oyal Custo$s and Excise 'e%art$ent.
A%art !ro$ t#e indirect taxes( tax is calculated y instal$ents durin& t#e year accordin& to rules
a%%licale durin& a year o! assess$ent and u%on inco$e assessed !or t#at YA y re!erence to t#e basis
year !or t#at YA.
For individuals t#e asis year is t#e calendar year coincidin& "it# t#e YA.
For a co$%any( ody o! %ersons or a cor%oration sole( t#e asis year is t#e accountin& %eriod
t#at ends "it#in t#e YA.
EMPLOYMENT INCOME ACCA F6. T4.
,E.I'ENT O, NONC,E.I'ENT
.tatus ,esident Non ,esident
Tax ,ate EF C <6F Flat rate at <6F
6=F or 6EF
Personal 'eduction Entitle Not Entitle
,eate Entitle Not Entitle
E$%loy$ent Inco$e Taxale Para <6 .c# 6
,E.I'ENCE .TAT3. FO, IN'IGI'3AL.
..8 ITA:68 %rovides t#at an individual is resident in Malaysia !or a %articular YA 9*t#at YA+; i!5
s.896;9a; #e is in Malaysia !or a %eriod or %eriods "it#in t#e asis year !or t#at YA a$ountin& to 6H< days
or $ore.
s.896;9; #e is in Malaysia !or a %eriod o! less t#an 6H< days in t#e asis year !or t#at YA and t#e %eriod is
lin/ed to anot#er %eriod o! 6H< or $ore consecutive days t#rou&#out "#ic# #e is in Malaysia
!or t#e asis year !or t#e YA i$$ediately %recedin& or i$$ediately !ollo"in& t#at YA.
N.?. T"o %eriods are lin/ed even i! t#e individual is not %resent in Malaysia on D6 'ece$er
or 6 @anuary( suBect to t#e %eriod o! asence ein& treated as a te$%orary asence( so
lon& as t#e individual is in Malaysia i$$ediately %rior to and a!ter t#at te$%orary
asence.
T#e !ollo"in& *te$%orary asences+ are to e ta/en to !or$ %art o! eit#er %eriod5C
C Asences connected "it# #is service in Malaysia and o"in& to service $atters or
attendin& con!erences or se$inars or study aroad.
C Asences o"in& to illC#ealt# involvin& #i$sel! or a $e$er o! #is i$$ediate !a$ily
9a&reed as s%ouse( c#ildren and %arents;( and
C Asences in res%ect o! social visits not exceedin& 64 days in a&&re&ate.
s.896;9c; #e is in Malaysia !or a %eriod or %eriods "it#in t#e asis year !or t#at YA a$ountin& to 7E days
or $ore and I in any D o! t#e asis years !or t#e 4 YAs i$$ediately %recedin& t#at YA #e is5
eit#er5 resident in Malaysia(
or5 in Malaysia !or a %eriod or %eriods a$ountin& to 7E days or $ore.
s.896;9d; #e is resident in Malaysia 9"it#in t#e $eanin& o! t#e aove sections; in t#e asis year !or t#e YA
following t#at YA( #avin& een so resident !or t#e eac# o! t#e asis years !or t#e DYAs
i$$ediately preceding t#at YA.
C T#is %ara&ra%# $eans t#at so$eone "#o is not resident !or one year ut is resident t#e year
a!ter( and "#o "as resident !or t#e t#ree years %reviously( is nevert#eless dee$ed to e
resident durin& t#at one year.
Notes5 Any a$ount o! ti$e s%ent on Malaysian soil on any day $a/es t#at day count as a day:s
%resence in Malaysia.
CitiJens#i% or %er$anent residence status o! an individual is not relevant in deter$inin&
residence status !or tax %ur%oses.
ACCA F6. T4. EMPLOYMENT INCOME
Trading/Self-employed or Employed ?
E$%loy$ent inco$e ?ussiness inco$e
Loss relie! 4 relie! ,elie!
Ca%ex 4 ,elie! Ca%ital Allo"ance
N, derivin& E$% Y Para <6 .c# 6 4 exe$%ted
-uidelines to deter$ine "et#er t#e contract is E$%loy$ent inco$e or ?ussiness inco$e.
a) Master and servant relationship
b) Extent of control by the employer as to how the work is to be performed and the manner
is to be done.
c) Define work hour
d) Provision of own tools and equipment in the performance of wor
e) Restriction to contract with other parties
EMPLOYMENT INCOME
E$%loy$ent is de!ined in s.< ITA:68 to $ean5
a; e$%loy$ent in "#ic# t#e relations#i% o! $aster and servant susists( and
; any a%%oint$ent or o!!ice( "#et#er %ulic or not and "#et#er or not t#at relations#i% susists( !or
"#ic# re$uneration is %ayale.
C T#e servant or #older o! t#e a%%oint$ent or o!!ice is de!ined as t#e e$%loyee.
C T#e $aster or %erson res%onsile !or %ayin& t#e #older o! t#e a%%oint$ent or o!!ice is de!ined as t#e
e$%loyer.
EMPLOYMENT INCOME ACCA F6. T4.
Determination of Employment Income
3nder s.D ITA:68 c#ar&eale inco$e is only suBect to tax i! it accrues in or derives !ro$ Malaysia( or is
received in Malaysia !ro$ outside Malaysia. ..6D ITA:68 %rovides s%eci!ically !or e$%loy$ent inco$e(
"idenin& t#e sco%e o! inco$e suBect to tax y %rovidin& !or inco$e deemed derived !ro$ Malaysia.
..6D9<; ITA:68 %rovides t#at e$%loy$ent inco$e is deemed derived !ro$ Malaysia in t#e !ollo"in&
circu$stances5
a; !or any %eriod durin& "#ic# t#e e$%loy$ent is exercised in Malaysia(
; !or any %eriod o! leave attriutale to t#e exercise o! t#e e$%loy$ent in Malaysia(
c; !or any %eriod durin& "#ic# t#e e$%loyee %er!or$s outside Malaysia duties incidental to t#e
exercise o! t#e e$%loy$ent in Malaysia(
d; !or any %eriod durin& "#ic# a %erson is a director o! a co$%any and t#at co$%any is resident in
Malaysia !or t#e asis year !or a YA and "it#in t#at asis year t#at %eriod or %art o! t#at %eriod
!alls(
e; !or any %eriod durin& "#ic# t#e e$%loy$ent is exercised aoard a s#i% or aircra!t used in a
usiness o%erated y a %erson "#o is resident in Malaysia !or t#e asis year !or a YA and "it#in
t#at asis year t#at %eriod or %art t#at %eriod !allsK.
K ?ut e$%loy$ent inco$e earned on s#i%s re&istered under t#e Marine .#i%%in&
Ordinance 67=< and o"ned y a Malaysian tax resident is exe$%t !ro$ inco$e tax.
..6D9D; ITA:68 !urt#er extends t#e sco%e o! e$%loy$ent inco$e dee$ed derived in Malaysia !or
Malaysian citiJens "#o are %ulic servants( to include e$%loy$ent inco$e5
a; !or any %eriod durin& "#ic# t#e e$%loy$ent is exercised outside Malaysia( or
; !or any %eriod o! leave attriutale to t#e exercise o! t#e e$%loy$ent outside Malaysia.
N.?. %ara.<6 .c#.6. %rovides t#at t#e e$%loy$ent inco$e o! a nonCresident
K
is exe$%t !ro$ inco$e
tax i! t#at %erson exercised #is e$%loy$ent !or a %eriod or %eriods a$ountin& to not $ore t#an
6E days.
ACCA F6. T4. EMPLOYMENT INCOME
When is employment income taxable ?
..<= ITA:68 contains %rovisions t#at deal "it# "#ic# %articular YA e$%loy$ent inco$e !alls to e taxed.
..<=96; ITA:68 %rovides !or e$%loy$ent inco$e t#at is not attriutale to any %articular %eriod( "#ic#
is taxale "#en it eco$es receivale.
..<=9<; ITA:68 %rovides !or e$%loy$ent inco$e t#at is attriutale to a %articular %eriod( "#ic# is
taxale "#en it is received( as inco$e relatin& to t#at %articular %eriod. 2o"ever( !or onuses and
directors !ees received a!ter t#e end o! t#e YA to "#ic# t#ey relate( t#e onus and0or !ees "ill e
taxale as inco$e in t#e YA o! recei%t.
..<=9D; ITA:68 serves to counter tax avoidance y treatin& e$%loy$ent inco$e t#at is discovered
$ore t#an !ive years a!ter t#e end o! t#e %eriod to "#ic# it relates as inco$e in t#e YA !ive years
e!ore t#e YA o! its discovery.
..<=94; %rovides !or t#e a%%ortion$ent o! e$%loy$ent inco$e t#at overla%s t"o or $ore %eriods on a
day y day asis. 2o"ever( in t#e case o! a lu$% su$ receivale u%on cessation o! e$%loy$ent(
t#at is not %ension or co$%ensation inco$e( t#e lu$% su$ is a%%ortioned evenly over t#e %eriod o!
e$%loy$ent suBect to a $axi$u$ %eriod o! t#e current and !ive %revious YAs.
For inco$e t#at is discovered late5C
C i! t#e overla%%in& %eriod extends $ore t#an !ive years e!ore t#e discovery o! t#e inco$e t#en
t#e inco$e is a%%ortioned over t#at %art o! t#e overla%%in& %eriod t#at does not extend $ore
t#an !ive years a&o.
C i! t#e overla%%in& %eriod ended $ore t#an !ive years e!ore discovery o! t#e inco$e t#en t#e
"#ole a$ount is treated as inco$e in t#e YA !ive years e!ore t#e YA o! its discovery.
..<=9=; %rovides !or e$%loy$ent inco$e t#at is attriutale to !uture %eriods( "#ic# is taxale on a
recei%ts asis.
..<=96; %rovides !or e$%loyees leavin& Malaysia5C
i!5 an e$%loyee #as le!t or "ill leave Malaysia in one YA( and
"ill not e resident I
I nor "ill receive any %ension in t#e !ollo"in& YA( and
#is &ross inco$e "ill cease to e derived !ro$ Malaysia a!ter a %eriod o! leave !ollo"in&
de%arture(
C t#en inco$e receivale in t#e !ollo"in& YA "ill e treated as inco$e in t#e current YA unless t#e
e$%loyee re>uests ot#er"ise in "ritin&.
In all cases( s.<796; ITA:68 %rovides t#at inco$e s#all e dee$ed to #ave een received in a asis %eriod
i! a %erson5C
i; is entitled to inco$e accruin& in or derived !ro$ Malaysia( and
i; is ale to otain t#e recei%t t#ereo! on de$and.
EMPLOYMENT INCOME ACCA F6. T4.
What constitutes employment income is %rovided in s.6D96; ITA:68( "#ic# states t#at it includes5
a; any "a&es( salary( re$uneration( leave %ay( !ee( co$$ission( onus( &ratuity( %er>uisite or
allo"ance 9"#et#er in $oney or ot#er"ise; in res%ect o! #avin& or exercisin& t#e e$%loy$ent(
; an a$ount e>ual to t#e value o! t#e use or enBoy$ent y t#e e$%loyee o! any ene!it or a$enity
9not ein& a ene!it or a$enity convertile into $oney; %rovided !or t#e e$%loyee y or on
e#al! o! #is e$%loyer( excludin&C
i; a ene!it consistin& o! $edical or dental treat$ent or a ene!it !or c#ild care(
ii; a ene!it consistin& o!5
A; leave %assa&es includin& $eals and acco$$odation !or travel "it#in Malaysia not
exceedin& three times in any calendar year( or
?; one leave %assa&e !or travel et"een Malaysia and any %lace outside Malaysia in any
calendar year( li$ited to a $axi$u$ o! ,MD(EEE(
%rovided t#at t#e ene!it is con!ined only to t#e e$%loyee and $e$ers o! #is i$$ediate
!a$ily 9s%ouse and c#ildren;(
iii; a ene!it or a$enity used y t#e e$%loyee solely in connection "it# t#e %er!or$ance o! #is
duties( and
iv; a ene!it or a$enity !allin& under %ara. c;.
c; an a$ount in res%ect o! t#e use or enBoy$ent y t#e e$%loyee o! livin& acco$$odation in
Malaysia 9includin& livin& acco$$odation in %re$ises occu%ied y #is e$%loyer; %rovided !or
t#e e$%loyee y or on e#al! o! t#e e$%loyer rent !ree or ot#er"ise.
d; so $uc# o! any a$ount 9ot#er t#an a %ension( annuity or %eriodical %ay$ent !allin& under s.49e; ;
received y t#e e$%loyee( "#et#er e!ore or a!ter #is e$%loy$ent ceases( !ro$ a %ension or
%rovident !und( sc#e$e or society not a%%roved !or t#e %ur%ose o! t#is Act as "ould not #ave
een so received i! #is e$%loyer #ad not $ade contriutions in res%ect o! t#e e$%loyee to t#e
!und( sc#e$e or society or its trustees.
e; any a$ount received y t#e e$%loyee( "#et#er e!ore or a!ter #is e$%loy$ent ceases( y "ay o!
co$%ensation !or loss o! t#e e$%loy$ent( includin& any a$ount in res%ect o!5
i; a covenant entered into y t#e e$%loyee restrictin& #is ri&#t a!ter leavin& t#e e$%loy$ent to
en&a&e in e$%loy$ent o! a si$ilar /ind( or
ii; any a&ree$ent or arran&e$ent #avin& t#e li/e e!!ect.
T#e reason t#at e$%loy$ent inco$e is sudivided as aove is t#at t#e calculation o! any acco$$odation
ene!it is $ade y re!erence to s.6D96;9a; inco$e only.
ACCA F6. T4. EMPLOYMENT INCOME
S!"#!$#a$ IT%&'( covers e$%loy$ent inco$e t#at is( or is convertile into( $oney.
A onus need not e contractual.
-ratuity or &i!t A ) -ratuities do not include &i!ts. A &i!t is &iven !or t#e %ersonal >ualities o! a %erson in
#is %rivate ca%acity( "#ereas a &ratuity is &iven to a %erson !or services rendered. A &i!t is not
assessale as inco$e.
A &ratuity is exempt !ro$ inco$e tax i! it is received u%on retire$ent5
C 'ue to t#e illC#ealt#( or
C On or a!ter t#e a&e o! == or t#e nor$al retire$ent a&eK( a!ter ten years service "it# t#e sa$e
e$%loyer or "it# di!!erent e$%loyers under t#e sa$e e!!ective control.
C On or a!ter t#e a&e o! =E 9ut e!ore ==; on reac#in& t#e co$%ulsory a&e o! retire$ent %ursuant to a
contract o! e$%loy$ent or collective a&ree$ent 9"it# unions; a!ter ten years service "it# t#e sa$e
e$%loyer or "it# di!!erent e$%loyers under t#e sa$e e!!ective control
KNor$al retire$ent a&e 9*N,A+; is as de!ined y statute !or t#e %ro!ession concerned.
For YA <EEH to YA <E6E t#e !ollo"in& ite$s &iven to e$%loyees are treated as &i!ts( not &ratuities5
C One ne" %ersonal co$%uter.
C ?roadand suscri%tion !ees re&istered in t#e na$e o! t#e e$%loyer.
A %er>uisite( or perk( is an incidental ene!it over and aove re&ular %ay t#at is o!ten custo$ary in a
%articular !ield o! "or/.
Para. <=C .c#.6 ITA:68 %rovides !or an exe$%tion !ro$ tax !or a %er>uisite u% to ,M<(EEE in cas# or
/ind in res%ect o! innovation or %roductivity a"ards( %ast ac#ieve$ent( service excellence or lon&
service o! $ore t#an ten years.
For YA <EEH to YA <E6E t#e !ollo"in& %er>uisites are exe$%t !ro$ tax5
C E$%loyer:s o"n &oods %rovided !ree or at a discount( so lon& as t#e discount does not exceed
,M6(EEE.
C E$%loyer:s o"n services %rovided !ree or at a discount( so lon& as t#e ene!its are not trans!erale.
?ut t#e aove exe$%tions do not a%%ly to directors o! controlled co$%anies( sole %ro%rietors and
%artners#i%s.
Allo"ances 9!or entertain$ent or ot#er ex%enses; are assessed in !ull even i! t#e e$%loyee does not
clai$0receive t#e !ull a$ount o! t#e allo"ance. T#e entertain$ent or ot#er ex%enses incurred y t#e
e$%loyee "ould e &iven a deduction as allo"ale ex%enses( ut entertain$ent ex%enses cannot
exceed t#e a$ount o! t#e allo"ance &iven.
For YA <EEH to YA <E6E t#e !ollo"in& allo"ances are exe$%t !ro$ tax5
C Petrol card or %etrol or travel allo"ance et"een #o$e and "or/( u% to ,M<(4EE.
C Petrol card or %etrol or travel allo"ance and toll card !or o!!icial duties( u% to ,M6(EEE.
C Par/in& !ees or allo"ance.
C Meal allo"ance.
C Allo"ances or susidies !or c#ild care( u% to ,M<(4EE.
?ut t#e aove exe$%tions do not a%%ly to directors o! controlled co$%anies( sole %ro%rietors and
%artners#i%s.
Allowance vs. Reimbursement
An allo"ance is usually &iven in advance o! t#e ex%enses to e incurred( "#ereas a rei$urse$ent is
&iven a!ter t#e e$%loyee #as s%ent t#e $oney. ,ei$urse$ents o! ex%enses %aid y t#e e$%loyee on
e#al! o! t#e !ir$ need not e declared as inco$e( nor s#ould t#e ex%enses e clai$ed as a deduction.
EMPLOYMENT INCOME ACCA F6. T4.
.#are o%tions and s#are incentive sc#e$es ) t#e value t#at is assessed as inco$e is t#e excess o! t#e
$ar/et %rice u%on issue o! t#e o%tions or u%on exercise( "#ic#ever is lo"er( less t#e
exercise0allot$ent %rice( less any a$ount %aid y t#e e$%loyee !or t#e o%tion. 9For nonClisted
co$%anies( t#e $ar/et %rice is dee$ed to e t#e net asset value %er s#are.;
Interest ene!it on loans to e$%loyees5C
C Loans $ade out o! internal !unds do not carry an assessale interest ene!it.
C Loans $ade %ossile y external orro"in& carry an assessale interest ene!it at an a$ount e>ual to
t#e interest %aid y t#e co$%any less any a$ount %aid y t#e e$%loyee.
C .usidised loans carry an assessale interest ene!it at t#e a$ount o! t#e susidy.
C Loans "aived y t#e e$%loyer are assessale in !ull.
For YA <EEH to YA <E6E( susidised loans u% to ,MDEE(EEE !or #ousin&( %assen&er $otor ve#icles
and education are exe$%t. ?ut t#is exe$%tion does not a%%ly to directors o! controlled co$%anies(
sole %ro%rietors and %artners#i%s.
Course !ees !or t#e %ur%ose o! en#ancin& t#e education and s/ills o! t#e e$%loyee in relation to t#e
%er!or$ance o! duties are not assessale.
Insurance %re$iu$s on %ersonal accident %olicies ta/en out y t#e e$%loyer !or t#e ene!it o! e$%loyees
are not assessale. Li!e %olicies %rovided y t#e e$%loyer on t#e li!e o! t#e e$%loyee are assessale
only i! t#e e$%loyee and0or $e$ers o! t#e e$%loyee:s !a$ily( or t#eir a%%ointed re%resentatives( are
ene!iciaries.
T#e %ay$ent y t#e e$%loyer o! suscri%tion !ees to a %ro!essional ody is not assessale so lon& as t#e
$e$ers#i% is directly related to t#e usiness o! t#e e$%loyer.
Credit cards %rovided y e$%loyers ) i! t#e card is %art used !or %rivate %ur%oses t#en t#e annual
$e$ers#i% !ees are assessale as inco$e 9as is t#e a$ount o! any %rivate %urc#ases not rei$ursed
y t#e e$%loyee;.
.c#olars#i%s %rovided y t#e e$%loyer are not assessale.
ACCA F6. T4. EMPLOYMENT INCOME
S!"#!$#b$ IT%&'( covers e$%loy$ent inco$e t#at is not convertile into $oney or does not #ave an
exact $onetary value( exce%t livin& acco$$odation. E$%loy$ent inco$e !allin& under t#is
%ara&ra%# is /no"n as benefits-in-kind 9*?IL+;.
Certain ?ILs are not assessaleM t#ese include5
C T#ose %rovided !or in s.6D.96;9; ) $edical or dental treat$ent !or t#e e$%loyee( or c#ild care ene!it(
u% to t#ree leave %assa&es !or t#e e$%loyee and $e$ers o! #is i$$ediate !a$ily 9s%ouse and
c#ildren; and one overseas leave %assa&e li$ited to ,MD(EEE.
C Free trans%ortation to and !ro$ "or/ y us0coac# %rovided y t#e e$%loyer.
C Food and drin/ %rovided !ree o! c#ar&e or susidised y t#e e$%loyer.
For YA <EEH to YA <E6E t#e %rovision o! a tele%#one( $oile %#one( %a&er( P'A and internet
suscri%tion( as "ell as t#e %ay$ent o! tele%#one ills( are exe$%t. ?ut t#is exe$%tion does not a%%ly
to directors o! controlled co$%anies( sole %ro%rietors and %artners#i%s.
T#e value o! any ene!itCinC/ind is t#e a$ount %aid y( or t#e cost to( t#e e$%loyer. A co$$on exa$%le
is "#ere !uel 9only; is %rovided !or an e$%loyee:s %rivate use o! #is o"n car ) t#e !uel ene!it is assessed
at t#e actual cost o! t#e !uel %rovided !or %rivate use.
Any contriution y t#e e$%loyee to"ards t#e cost o! a ene!it assessed at actual cost is deducted !ro$
t#e value o! t#e ene!it assessale to tax.
Certain ?ILs are assessed at %rescried values( and "#ere %rescried values are used( any contriution y
t#e e$%loyee to"ards t#e cost o! t#e ene!it is not allo"ale. T#e ene!its assessed at %rescried values
are as !ollo"s5
Cor%orate clu $e$ers#i% ) only t#e suscri%tion !ees are assessed as inco$e. 1#ere $ore t#an one
cor%orate clu $e$ers#i% is %rovided( only t#e lo"er9est; suscri%tion !ee is assessed.
-ardener ) ,MD(6EE %.a. 9or ,MDEE %.c.$.;.
'o$estic servant ) ,M4(HEE %.a. 9or ,M4EE %.c.$.;.
'river ) ,M8(<EE %.a. 9or ,M6EE %.c.$.;. 'rivers %rovided !ro$ a %ool used y ot#er e$%loyers
solely !or usiness %ur%oses are not assessale.
EMPLOYMENT INCOME ACCA F6. T4.
Certain ?ILs are assessed under a !or$ula $et#od( "it# a concession allo"in& assess$ent on a
%rescried value asis. T#ese include5
Motor Cars %lus any !uel
T#e prescribed value is calculated y re!erence to t#e cost o! t#e car "#en ne" 9includin&
accessories;( as !ollo"s5
Cost o! car
9,M;
Prescried annual value o!
%rivate usa&e o! car 9,M;
Prescried annual
value o! !uel 9,M;
3% to =E(EEE 6(<EE 6EE
=E(EE6 ) 8=(EEE <(4EE 7EE
8=(EE6 ) 6EE(EEE D(6EE 6(<EE
6EE(EE6 ) 6=E(EEE =(EEE 6(=EE
6=E(EE6 ) <EE(EEE 8(EEE 6(HEE
<EE(EE6 ) <=E(EEE 7(EEE <(6EE
<=E(EE6 ) D=E(EEE 6=(EEE <(4EE
D=E(EE6 ) =EE(EEE <6(<=E <(8EE
=EE(EEE and aove <=(EEE D(EEE
N
T#is a$ount is #alved i! t#e car is over =
years old as at 6 @anuary in t#e YA.
Note5 T#e ?IL is scaled i! t#e ene!it is %rovided !or %art o! a year.
T#e ?IL is not reduced y a$ounts contriuted y t#e e$%loyee.
T#e formula method is to calculate t#e value o! t#e ?IL as !ollo"s5
Motor Car5C
F HE
li!es%an avera&e Prescried
car t#e o! Cost
ene!it car t#e o! value Annual =
Fuel5C Annual value o! t#e !uel is t#e actual cost o! t#e !uel %rovided !or %rivate use.
Notes5 Cost is t#e actual cost incurred or t#e $ar/et value.
A $otor car is &iven a %rescried avera&e li!es%an o! H years.
T#e ?IL is assessed accordin& to t#e %ro%ortion o! t#e total use t#at is %rivate use.
T#e ?IL is scaled i! t#e ene!it is %rovided !or %art o! a year.
T#e ?IL is reduced y any a$ount contriuted y t#e e$%loyee.
2ouse#old !urniture and a%%liances
T#e prescribed values are as !ollo"s5
.e$iC!urnis#ed "it# !urniture in t#e loun&e(
dinin& roo$ or edroo$s
,M8E %.c.$.
.e$iC!urnis#ed as aove %lus one or $ore o!5
airCconditioner( curtains and car%ets
,M64E %.c.$.
Fully !urnis#ed ,M<HE %.c.$.
C Fans and "ater #eaters are treated as !or$in& %art o! t#e %re$ises.
ACCA F6. T4. EMPLOYMENT INCOME
T#e formula method is to calculate t#e value o! t#e ?IL as !ollo"s5
li!es%an avera&e Prescried
enity ene!it0a$ t#e %rovidin& asset t#e o! Cost
ene!it o! value Annual =
T#e %rescried avera&e li!es%an o! assets is %rovided as !ollo"s5C
Asset Prescried Avera&e
Li!es%an 9yrs;
Furniture O !ittin&s
Curtains( car%ets =
Furniture( se"in& $ac#ine 6=
AirCconditioner H
,e!ri&erator 6E
Litc#en e>ui%$ent 6
Entertain$ent O recreation
Piano <E
Or&an 6E
TG( Gideo( C'0'G' %layer( stereo set 8
."i$$in& %ool 9detac#ale;( sauna 6=
Miscellaneous =
Notes5 T#e ?IL is scaled i! t#e ene!it is %rovided !or %art o! a year.
T#e ?IL is reduced y any a$ount contriuted y t#e e$%loyee.
EMPLOYMENT INCOME ACCA F6. T4.
S!"#!$#c$ IT%&'( covers e$%loy$ent inco$e t#at is livin& acco$$odation
..D<9<; ITA:68 %rovides t#at t#e value o! t#e ?IL in res%ect o! livin& acco$$odation is assessed as t#e
lo"erK o!5
T#e de!ined value o! t#e livin& acco$$odation( and
DEF o! t#e e$%loyee:s s.6D96;9a; &ross inco$e.
K T#e co$%arison is done ased on t#e %eriod o! e$%loy$ent( not"it#standin& t#at t#e
acco$$odation $i&#t not #ave een %rovided !or a !ull year.
C T#e defined value o! a %ro%erty is t#e econo$ic rent t#at "ould e collected in an ar$:s len&t#
transaction( i! t#e %ro%erty "as un!urnis#ed. 2o"ever( in t#e case o! %ro%erties suBect to
controlled rents( t#e de!ined value is t#e rateale value o! t#e %ro%erty.
Notes5 I! t#e acco$$odation is %rovided !or %art o! a year( t#e value o! t#e ?IL is %roCrated
accordin&ly.
I! t#e acco$$odation is s#ared t#en t#e de!ined value is %roCrated accordin&ly e!ore
co$%arison "it# t#e DEF &ross inco$e.
I! t#e e$%loyee is re>uired y t#e e$%loyer to live in t#e acco$$odation t#en t#e de!ined value
is a%%ortioned so as to arrive at a !air a$ount in t#e circu$stances( e!ore co$%arison "it# t#e
DEF o! &ross inco$e.
I! t#e e$%loyee is re>uired y t#e e$%loyer to use %art o! t#e acco$$odation !or entertainin&
clients and !or t#at reason t#e acco$$odation is lar&er t#an "ould ot#er"ise e needed t#en
t#e de!ined value is a%%ortioned so as to arrive at a !air a$ount in t#e circu$stances( e!ore
co$%arison "it# t#e DEF o! &ross inco$e.
I! t#e %ro%erty is a #otel or #ostel( or any %re$ises on a %lantation or in a !orest( or any %re$ises
in a rateale area ut not suBect to rates( t#en t#e value o! t#e ?IL is DF o! t#e e$%loyee:s
s.6D96;9a; &ross inco$e.
..DD9<; ITA:68 %rovides t#at acco$$odation %rovided to directors( not ein& service directors( o! a
controlled co$%any s#all e assessed to a ?IL at t#e de!ined value o! t#e livin& acco$$odation.
C A controlled company is one not #avin& $ore t#an !i!ty $e$ers and controlled y not $ore t#an
!ive %ersons.
C A service director is a director "#o is e$%loyed in a $ana&erial or tec#nical ca%acity and is not t#e
ene!icial o"ner o! $ore t#an !ive %er cent. o! t#e ordinary s#are ca%ital o! t#e co$%any.
C A director is de!ined to include a $ana&er "#o is t#e ene!icial o"ner o! t"enty %er cent or $ore o!
t#e ordinary s#are ca%ital o! t#e co$%any.
Notes5 I! t#e acco$$odation is %rovided !or %art o! a year( t#e value o! t#e ?IL is %roCrated
accordin&ly.
I! t#e %ro%erty is a #otel or #ostel( or any %re$ises on a %lantation or in a !orest( or any %re$ises
in a rateale area ut not suBect to rates( t#en t#e value o! t#e ?IL is t#e !ull de!ined value.
S!"#!$#d$ IT%&'( covers e$%loy$ent inco$e t#at consists o! recei%ts !ro$ an una%%roved %ension !und
t#at accrue to contriutions $ade y t#e e$%loyer.
Notes5 ,ecei%ts received y t#e e$%loyee as a result o! #is o"n contriutions and interest earned
t#ereu%on are not taxale.
,ecei%ts are taxale in t#e year t#e $oney is received.
T#e status o! t#e !und at t#e ti$e t#e e$%loyer:s contriutions "ere $ade is not relevantM it is
t#e status o! t#e !und at t#e ti$e o! t#e recei%ts t#at counts.
ACCA F6. T4. EMPLOYMENT INCOME
S!"#!$#e$ IT%&'( covers e$%loy$ent inco$e t#at consists o! co$%ensation !or loss o! e$%loy$ent(
includin& %ay$ents in connection "it# arran&e$ents restrictin& t#e ri&#t o! t#e e$%loyee to en&a&e in
e$%loy$ent "it# anyone else.
Notes5 T#e co$%ensation %ay$ent need not e contractual.
A %ay$ent $ade as co$%ensation !or loss o! e$%loy$ent is entirely di!!erent to a %ay$ent
$ade in res%ect o! e$%loy$ent or in res%ect o! #avin& or exercisin& e$%loy$entM t#e
circu$stances are $utually exclusive. T#e !or$er is treated under s.6D96;9e; "#ereas t#e
latter is treated under s.6D96;9a;. T#e distin&uis#in& test is "#et#er or not t#e %erson #as een
de%rived o! so$et#in& to "#ic# #e "as entitled( !or "#ic# de%rivation t#e %ay$ent re%resents
co$%ensation. In cases o! e$%loyees #ired under several !ixed %eriod contracts( one a!ter t#e
ot#er( case la" #as %rovided t#at in deter$inin& "#et#er or not t#e %erson "as entitled to
e$%loy$ent( t#e test is "#et#er or not t#e e$%loy$ent "as likely to continue.
An exemptionK is availale !or %ay$ents $ade as co$%ensation !or loss o! e$%loy$ent i! t#e
loss o! e$%loy$ent is due to illC#ealt#( i.e. t#e illC#ealt# renders t#e e$%loyee un!it !or "or/.
A partial exemptionK is availale !or %ay$ents $ade as co$%ensation !or loss o! e$%loy$ent(
u% to ,M6E(EEE !or eac# co$%lete year o! service "it# t#e sa$e e$%loyer or "it# di!!erent
e$%loyers under t#e sa$e e!!ective control.
KT#ese exe$%tions are not availale !or %ay$ents $ade y a controlled co$%any
to its directors( not ein& service directors.
'E'3CTI?LE E4PEN.E. ACCA F6. T=.
A'@3.TE' INCOME
AdBusted inco$e is de!ined in s.DD96; ITA:68 as &ross inco$e less all out&oin&s and ex%enses "#olly and
exclusively incurred in t#e %roduction o! &ross inco$e.
T#e "ord "#olly $eans si$%ly t#e "#ole a$ount o! t#e $oney involved.
T#e "ord exclusively re!ers to t#e $otive or %ur%ose e#ind incurrin& t#e ex%ense( "#ic# $ust e o!
direct ene!it !or t#e usiness. An ex%ense servin& a dual %ur%ose can e deducted in !ull i! t#e
%rivate0do$estic %ur%ose is incidental to t#e usiness0e$%loy$ent %ur%ose( ot#er"ise only an
a%%ortion$ent "ould e deductile.
T#e "ord incurred re!ers to t#e %oint in ti$e at "#ic# a le&al liaility to %ay #as arisen( i.e. t#e date o!
invoices received( or "#en an out&oin& or ex%ense is de!initely co$$itted.
T#e %#rase in t#e %roduction o! &ross inco$e is inter%reted to allo" t#e deduction o! out&oin&s and
ex%enses incurred !or t#e %ur%ose o! earnin& inco$e ut "#ic# $ay not yet #ave caused any inco$e
to e earned. 2o"ever( it does not allo" %reCco$$ence$ent ex%enditure ecause t#ese are out&oin&s
and ex%enses incurred in order to earn inco$e. 2o"ever( t#e !ollo"in& exce%tions to t#is rule are
%rovided !or5
C Incor%oration ex%enses are deductile !or co$%anies "it# aut#orised s#are ca%ital not $ore t#an
,M<.=$.
C PreCco$$ence$ent sta!! recruit$ent costs are deductile.
.i$ilarly( retrenc#$ent !ees %aid u%on li>uidation are not incurred in t#e %roduction o! &ross inco$e
and are not deductile.
.ections DD and D4 ITA:68 see/ to %rovide &uidance on "#at is deductile y %rovidin& t#at5C
Interest %ayale on $oney orro"ed and used in t#e %roduction o! inco$e is deductile. Any
interest %aid on nonCusiness loans is disallo"ed 9on a %roCrata asis to t#e a$ounts o! t#e loans;.
,ental ex%ense on land and uildin&s is deductile.
,e%airs to or re%lace$ents o! susidiary %arts o! ite$s o! ca%ital ex%enditure are deductile( ut
i$%rove$ents to ite$s o! ca%ital ex%enditure are disallo"ed.
.%eci!ic %rovisions are deductile.
E$%loyer:s contriutions to a%%roved %ension sc#e$es are deductile u% to a li$it o! 67F o! eac#
e$%loyee:s re$uneration 9"it# re$uneration ein& de!ined to include "a&es( allo"ances(
co$$issions and onus only;.
..D496; %rovides !or various s%ecial deductions( "#ic# are exce%tions to t#e rule t#at deductile ex%enses
e revenue in nature and "#olly and exclusively incurred in t#e %roduction o! inco$e( as !ollo"s5C
%ayroll tax !or e$%loyees(
turnover tax %aid(
$inin& ex%enditure(
re%lantin& ex%enditure(
ex%enditure incurred on t#e %rovision o! e>ui%$ent( or on t#e alteration0renovation o! %re$ises !or
t#e ene!it o! disaled e$%loyees(
translation into or %ulication in ?a#asa Melayu o! oo/s a%%roved y t#e 'e"an ?a#asa dan
Pusta/a(
contriutions to %ulic liraries or liraries o! sc#ools( colle&es or universities ) restricted to
,M6EE(EEE(
contriutions to a%%roved c#arities or co$$unity %roBects %ertainin& to education( #ealt#( #ousin&(
in!rastructure( in!or$ation and co$$unication tec#nolo&y a%%roved y t#e Ministry(
ex%enditure !or t#e %rovision or $aintenance o! c#ild care centres(
ex%enditure !or estalis#in& and $ana&in& $usical or cultural &rou%s(
s%onsorin& local or !orei&n arts( cultural or #erita&e activities a%%roved y t#e Ministry o! Culture(
Arts and 2erita&e ) restricted to ,M=EE(EEE( ut only ,M<EE(EEE !or s%onsors#i% o! !orei&n
a!!airs(
ACCA F6. T=. 'E'3CTI?LE E4PEN.E.
sc#olars#i%s %rovided y co$%anies !or !ullCti$e students ta/in& any di%lo$a( de&ree or e>uivalent
at a re&istered educational institution( so lon& as t#e student #as no $eans o! #is o"n and t#e total
$ont#ly salary o! #is %arents does not exceed ,M=(EEE.
ex%enses incurred y co$%anies in otainin& accreditation !or a laoratory or as a certi!ication
ody( as certi!ied y t#e 'e%art$ent o! .tandards( Malaysia(
%ractical trainin& ex%enses !or resident nonCe$%loyees(
ex%enses incurred y co$%anies in %artici%atin& in international standardisation activities a%%roved
y t#e 'e%art$ent o! .tandards( Malaysia.
T#e cost o! a %ersonal co$%uter &iven to e$%loyees.
T#e cost o! a roadand suscri%tion %rovided to e$%loyees( re&istered in t#e na$e o! t#e
e$%loyer.
T#e cost o! a &i!t to sta!! u%on $arria&e.
Certain revenue ex%enses are eli&ile !or double deduction( suc# as t#e !ollo"in&5C
%ro$otion o! ex%ort(
a%%roved trainin& !or t#e %ur%oses o! u%&radin& and develo%in& t#e tec#nical s/ills o! e$%loyees(
researc# and develo%$ent( cas# contriutions to a%%roved researc# institutes(
advertisin& ex%enses on Malaysian rand na$es(
!rei&#t c#ar&es incurred y $anu!acturers to s#i% &oods !ro$ .aa# and .ara"a/ via %orts in
Peninsular Malaysia(
insurance %re$iu$s %aid !or i$%ort0ex%ort o! car&o insured "it# local insurance co$%anies(
e$%loy$ent o! #andica%%ed sta!!(
ex%enses incurred y co$%anies in otainin& certi!ication !or reco&nised >uality sc#e$es and
standards( and #alal certi!ication.
Certain ex%enses are &iven a special deduction( suc# as t#e !ollo"in&5
T#e cost o! develo%in& a "esite t#at is electronic co$$erce enaled is deductile y "ay o! a
<EF deduction in t#e year incurred and in t#e !ollo"in& !our years.
T#e cost o! ac>uirin& %atents( industrial desi&ns and trade$ar/s !or use in a $anu!acturin& %rocess
is deductile !or a $anu!acturin& co$%any t#at is at least 8EF Malaysian o"ned( y "ay o! a <EF
deduction in t#e year incurred and in t#e !ollo"in& !our years.
T#e re%lace$ent cost o! s#ortCli!e assets is &iven a 6EEF deduction.
s.D796; ITA:68 %rovides !urt#er clari!ication on "#at /ind o! out&oin&s and ex%enses are deductile y
%rovidin& t#at certain ex%enses are disallo"ed( as !ollo"s5C
do$estic or %rivate ex%enses(
disurse$ent o! ex%enses t#at are o! dual %ur%ose(
ca%ital "it#dra"n or any su$ e$%loyed or intended to e e$%loyed as ca%ital(
contriutions to una%%roved %ension sc#e$es(
contriutions to a%%roved %ension sc#e$es exceedin& 67F o! e$%loyee:s re$uneration(
>uali!yin& $inin&( a&riculture( !orest( %ros%ectin&( and !ar$ ex%enditure(
interest and royalty ex%enses "#ere a%%licale "it##oldin& tax #as not een deducted and %aid(
%ay$ent !or t#e use o! licences or %er$its to extract ti$er !ro$ a !orest in Malaysia ot#er t#an to
-overn$ent or statutory odies(
contract %ay$ents to nonCresidents "#ere a%%licale "it##oldin& tax #as not een deducted and
%aid(
tec#nical0consultancy and installation !ees %aid to nonCresidents "#ere "it##oldin& tax #as not
een deducted and %aid(
lease rental !or $otor ve#icles in excess o! ,M6EE(EEE %er ve#icle 9li$ited to ,M=E(EEE %er
ve#icle "#ere t#e car costs $ore t#an ,M6=E(EEE;( co$%uted on an a&&re&ate asis( i.e. total
rental to date(
a su$ e>ual to =EF o! any entertain$ent ex%enses ) ut sta!! entertain$ent is allo"ale( as is
entertain$ent related "#olly to sales( ut note t#at entertain$ent allowances %aid to sta!! are only
=EF deductile.
leave %assa&e !or e$%loyees "it#in and outside Malaysia( exce%t leave %assa&e to !acilitate a
yearly event "it#in Malaysia "#ic# involves t#e e$%loyer( t#e e$%loyee and t#e e$%loyee:s
i$$ediate !a$ily.
'E'3CTI?LE E4PEN.E. ACCA F6. T=.
Incidental expenses ) t#e treat$ent o! any incidental ex%enses !ollo"s t#at o! t#e underlyin& ite$.
Expenses allowed by concession include statutory audit !ees 9ut not !ees incurred in su$ittin& a tax
return or any returns re>uired under co$%any la";.
I! t#e adBusted inco$e is ne&ative( i.e. t#ere is an adBusted loss( t#en adBusted inco$e is dee$ed to e
Jero. AdBusted losses !ro$ usiness sources can e set o!! else"#ere and0or carried !or"ard !or !uture
setCo!!. AdBusted losses !ro$ nonCusiness sources are %er$anently lost.
ACCA F6. T=. 'E'3CTI?LE E4PEN.E.
?lan/ %a&e
CAPITAL ALLO1ANCE. ACCA F6. T6.
.TAT3TO,Y INCOME
.tatutory inco$e is adBusted inco$e less ca%ital allo"ances in res%ect o! >uali!yin& %lant and $ac#inery
ex%enditure( >uali!yin& uildin&s ex%enditure( >uali!yin& a&ricultural ex%enditure and >uali!yin& !oreest
ex%enditure.
3nasored ca%ital allo"ances $ay e carried !or"ard !or setCo!! a&ainst adBusted inco$e !ro$ t#e sa$e
usiness.
CAPITAL ALLO1ANCE.
In deter$inin& c#ar&eale inco$e( ex%enditure on ite$s o! a ca%ital nature ) ca%ital ex%enditure ) is
disallo"ed. Li/e"ise( t#e allocation o! t#e cost o! ca%ital ite$s ) de%reciation ) is disallo"ed as a
deductile ex%ense. Instead( t#e ITA:68 %rovides t#at ca%ital allo"ances $ay e deducted a&ainst
adBusted inco$e in deter$inin& statutory inco$e.
'eductions in connection "it# ca%ital ex%enditure are /no"n &enerally as ca%ital allo"ances( and are
e!!ectively t#e tax $an:s version o! de%reciation t#at is &iven a deduction in calculatin& c#ar&eale
inco$e. In order !or ca%ital allo"ances to e clai$ed( .c#.D %rovides t#at t#e conditions to e $et are
t#at5
C t#e %erson "as carryin& on a usiness durin& t#e asis %eriod(
C t#e %erson incurred qualifying ex%enditure( and
C t#e %erson used t#e assets in t#e usiness.
Ca%ital allo"ances are &iven only !or certain ty%es o! ca%ital ex%enditure( s%eci!ically %lant and
$ac#inery( industrial uildin&s( a&ricultural ex%enditure and !orest ex%enditure.
)apital allo*ances for +ualifying ,lant Expenditure
'e!initions
Qualifying plant expenditure 9*PPE+; is de!ined in .c#.D as *ca%ital ex%enditure incurred on t#e
%rovision o! $ac#inery or %lant used !or t#e %ur%oses o! a usiness( includin&5
9a; Ex%enditure incurred on uildin& alterations necessary !or t#e installation o! %lant and
$ac#inery( and any ot#er incidental installation ex%enses.
9; Ex%enditure incurred on %re%arin&( cuttin&( tunnellin& or levellin& land in order to %re%are a
site !or t#e installation o! %lant and $ac#inery
Note 6
.
9c; Ex%enditure incurred on !is# %onds( ani$al %ens( c#ic/en #ouses( ca&es( uildin&s
Note <
and
ot#er structural i$%rove$ents on land used !or t#e %ur%oses o! %oultry !ar$s( ani$al !ar$s(
inland !is#in& or ot#er a&ricultural or %astoral %ursuits.
Note 6. I! t#e ex%enditure on t#e site %re%aration costs exceeds 6EF o! t#e total ex%enditure
on t#e asset and t#e site %re%aration costs( t#en t#e site %re%aration costs are
disallo"ed. 2o"ever( i! t#e ex%enditure on t#e site %re%aration costs exceeds 8=F
o! t#e total ex%enditure on t#e asset and t#e site %re%aration costs( t#en t#e total
ex%enditure !alls to e treated as >uali!yin& uildin& ex%enditure 9see later;.
Note <. Ex%enditure on uildin&s used !or acco$$odation %ur%oses is disallo"ed unless t#e
uildin& is used solely !or t#e acco$$odation t#at is %rovided as a necessary %art o!
t#e duties o! sta!!.
Puali!yin& %lant ex%enditure includes ex%enditure on $ac#inery or %lant used !or a%%roved
researc# %ur%oses.
ACCA F6. T6. CAPITAL ALLO1ANCE.
.c#.D does not %rovide !urt#er &uidance on t#e de!inition o! %lant and $ac#inery ut t#e usual test
is "#et#er t#e asset %er!or$s an active or passive !unction in t#e carryin& on o! usiness( i.e. is t#e
asset a %iece o! a%%aratus with which t#e usiness is carried on or rat#er a settin& in which t#e
usiness is carried on. T#e !or$er is %lant and $ac#inery and t#e latter is uildin&s. Case la" #as
deter$ined t#at ordinary !ittin&s to a uildin&( e.&. ceilin& li&#ts and "all %anellin&( !or$ %art o!
t#e uildin& and are disallo"ed. Only !ittin&s t#at serve a s%eci!ic %ur%ose in t#e usiness are
allo"ed.
)apital %llo*ance
Ca%ital allo"ances !or *PPE+ are &iven as t"o distinct ty%es and at t#e !ollo"in& rates5C
Initial alloance ) &iven in t#e year o! ac>uisition so lon& as t#e %erson o"ns
Q
t#e asset at t#e end o!
t#e asis %eriod !or a YAK( at a rate o! <EF
R
.
K assets ou&#t and sold "it#in a year are still &iven t#e initial allo"ance.
Annual alloance ) &iven in t#e year o! ac>uisition and suse>uent years so lon& as t#e %erson o"ns
Q
t#e asset at t#e end o! t#e asis %eriod !or a YA( at t#e !ollo"in& rates5
O!!ice e>ui%$ent( !urniture and !ittin&s 6EF %.a.
Plant and $ac#inery 64F %.a.
2eavy $ac#inery and $otor ve#icles <EF %.a.
R
Q ?ene!icial o"ners#i% "ill su!!ice( le&al o"ners#i% is not necessary.
R ?ut i$%orted #eavy $ac#inery !or use in t#e uildin& and construction( %lantation(
$inin& and ti$er industries is &iven allo"ances 9ot# initial and annual; at t#e rate o!
6EF.
Accelerated allo"ances are availale !or certain s%eci!ied PPE( e.&. in!or$ation and
co$$unication tec#nolo&y e>ui%$ent( includin& so!t"are ) HEF annual allo"ance( and all %lant
and $ac#inery %urc#ased y co$%anies "it# %aidCu% ca%ital not $ore t#an ,M<.=$ ) HEF annual
allo"ance. Lno"led&e o! ot#er accelerated allo"ances is eyond t#e sco%e o! t#e syllaus.
Additional %oints
T#e initial allo"ance and !irst year:s annual allo"ance are &iven in !ull re&ardless o! t#e %oint
durin& t#e year at "#ic# t#e ex%enditure "as incurred.
Ex%enditure incurred %rior to t#e co$$ence$ent o! usiness is eli&ile !or allo"ances !ro$ t#e
!irst year o! use in t#e usiness.
Total ca%ital allo"ances clai$ed cannot exceed t#e ori&inal PPE.
Assets in te$%orary disuse( even !or a "#ole year( are dee$ed to e in use so lon& as t#e asset
stands ready to e rou&#t ac/ into use( and t#e %eriod o! disuse is te$%orary.
I! a %erson does not "is# to clai$ ca%ital allo"ances 9!or so$e tax %lannin& %ur%ose; t#en t#e
I, "ill a%%ly a notional allo"ance 9"#ic# serves to reduce t#e residual ex%enditure and to restrict t#e
total allo"ances clai$ed;.
Certain secondC#and assets do not >uali!y !or an initial allo"ance( only t#e annual allo"ance.
T#ese are5C
C Plant and $ac#inery rou&#t into usiness use a!ter use !or a nonCusiness %ur%ose( "#ere t#e
a$ount o! t#e PPE is t#e $ar/et value u%on trans!er into usiness use.
C Plant and $ac#inery rou&#t into usiness use a!ter use !or a usiness %ur%ose outside Malaysia(
"#ere t#e a$ount o! t#e PPE is t#e lo"er o! t#e $ar/et value or net oo/ value u%on trans!er into
usiness use in Malaysia.
CAPITAL ALLO1ANCE. ACCA F6. T6.
.#ortCli!e assets
Ex%enditure on ite$s o! %lant t#at #ave a nor$al "or/in& li!e o! less t#an t"o years is disallo"ed !or
ca%ital allo"ance %ur%oses. .use>uent ex%enditure on t#e re%lace$ent o! s#ortCli!e %lant is allo"ed as a
deductile ex%ense in t#e year t#e ite$s are re%laced.
Motor Ge#icles
Puali!yin& %lant ex%enditure on co$$ercial $otor ve#icles( suc# as a taxi( us( lorry or van( carries no
restrictions on t#e a$ount o! t#e ex%enditure. PPE on ot#er $otor ve#icles is suBect to a li$it y
re!erence to t#e total cost o! t#e car( as !ollo"s5
C Ne" cars costin& not $ore t#an ,M6=E(EEE ) t#e lo"er o! t#e cost and ,M6EE(EEE.
C Ne" cars costin& $ore t#an ,M6=E(EEE ) ,M=E(EEE.
C .econdC#and cars are suBect to a ,M=E(EEE li$it on PPE.
Assets ac>uired on 2ire Purc#ase
Only t#e ca%ital ele$ent o! t#e instal$ents %ayale under a #ire %urc#ase a&ree$ent is eli&ile !or
allo"ances( as usual !or t#e asset concerned.
Assets sold "it#in t"o years
I! an asset is sold "it#in t"o years o! %urc#ase t#en t#e I, "ill cla" ac/ all allo"ances ta/en to date
unless t#e asset "as dis%osed o! !or co$$ercial reasons or y "ay o! !ire or t#e!t.
.$all value ite$s
.$all value ite$s are &iven a 6EEF ca%ital allo"ance in t#e year o! ac>uisition so lon& as t#e cost o!
eac# ite$ is not $ore t#at ,M6(EEE( suBect to an overall li$it on t#e allo"ance !or s$all value ite$s o!
,M6E(EEE %.a.
K
K ?ut t#is li$it does not a%%ly to co$%anies "it# %aidCu% ca%ital o! not $ore t#an ,M<.=$.
Treatment on Disposal
No annual allo"ance is &iven in t#e year o! dis%osal and instead a alancin& allo"ance or c#ar&e is
a%%lied y re!erence to t#e dis%osal %roceeds and t#e taxC"rittenCdo"n value o! t#e asset( t#e latter ein&
/no"n as t#e *residual ex%enditure+5C
C i! t#e dis%osal %roceeds exceed t#e residual ex%enditure( t#e excess is a alancin& c#ar&e(
C i! t#e dis%osal %roceeds are less t#an t#e residual ex%enditure( t#e s#ort!all is a alancin& allo"ance.
i.e. ?alancin& allo"ance 0 9c#ar&e; S ,esidual ex%enditure ) 'is%osal %roceeds
Additional %oints
Any alancin& c#ar&e cannot exceed t#e actual allo"ances clai$ed to date. 9Notional
allo"ances are i&nored.;
For $otor cars suBect to a restriction on PPE( t#e sale %roceeds are %roCrated in t#e sa$e
!raction as t#e restriction ears to t#e initial cost o! t#e car.
ACCA F6. T6. CAPITAL ALLO1ANCE.
In cases o! insurance recoveries( t#e dis%osal %roceeds are t#e a$ount recovered( suBect to t#e
aove restriction.
I!( %ursuant to so$e la" or a&ree$ent( an ite$ o! PPE is re>uired to e dis$antled and
re$oved a!ter so$e %eriod and t#e site on "#ic# t#e asset stood is re>uired to e restored t#en t#e
ex%enditure incurred can e added to t#e residual ex%enditure( e!ore co$%arison "it# t#e dis%osal
%roceeds.
!isposals subject to Control
A dis%osal o! an ite$ o! >uali!yin& ex%enditure estalis#es a ne" level o! ex%enditure !or t#e uyer and i!
t#is is #i&#er t#an t#e residual ex%enditure !or t#e seller( t#e seller is suBect to a alancin& c#ar&e. T#e
increased ca%ital allo"ances &iven to t#e uyer are cla"ed ac/ via t#e alancin& c#ar&e on t#e seller.
2o"ever( i! t#e ite$ is sold at a %rice t#at is #i&#er t#an its ori&inal cost to t#e seller( t#e alancin& c#ar&e
on t#e seller is restricted to t#e allo"ances already &iven. 1#ilst t#is scenario is unli/ely in ar$:s len&t#
transactions( dis%osals et"een connected %arties at nonC$ar/et %rices could result in excessive
allo"ances ein& clai$ed.
T#e controlled trans!er %rovisions %rovide t#at dis%osals suBect to t#e %rovisions are trans%arent !or
ca%ital allo"ance %ur%oses5C
T#e dis%osal %roceeds are dee$ed to e t#e residual ex%enditure o! t#e dis%oser and t#ere is no
alancin& c#ar&e or allo"ance.
No initial allo"ance
Note 6.
is cla$ed y t#e ac>uirer( only annual allo"ances y re!erence to t#e
>uali!yin& ex%enditure o! t#e dis%oser.
T#e total allo"ances clai$ed y t#e ac>uirer cannot exceed t#e residual ex%enditure in#erited !ro$ t#e
dis%oser.
All allo"ances clai$ed y t#e dis%oser are dee$ed to #ave een clai$ed y t#e ac>uirer.
T#e conditions t#at tri&&er t#e controlled trans!er %rovisions are t#at5
A %erson dis%oses o! an asset t#at is eli&ile !or allo"ances under .c#.D.
At t#e ti$e o! dis%osal( one o! t#e !ollo"in& conditions is $et5C
C t#e dis%oser or t#e ac>uirer controls t#e ot#er(
C ot# t#e dis%oser and t#e ac>uirer are under co$$on control(
C t#e dis%osal is as a result o! a sc#e$e o! reconstruction or a$al&a$ation o! co$%anies(
C t#e dis%osal is y "ay o! a settle$ent or &i!t or y in#eritance.
Control $eans t#e %o"er to secure t#at t#e a!!airs o! t#e controlled %arty are conducted in accordance
"it# t#e "is#es o! t#e controllin& %arty. For a %artners#i%( a ri&#t to a s#are o! $ore t#an one #al!
o! t#e assets or divisile %ro!its constitutes control.
T#e date on "#ic# t#e dis%osal is dee$ed to #ave ta/en %lace is t#e !irst day in t#e dis%oser:s asis %eriod
!or t#e YA t#at coCincides "it# t#e YA in "#ic# t#e ac>uirer can !irst clai$ allo"ances. TT#is serves to
%revent t#e douleCta/in& o! allo"ances in t#e dis%osal year.U
I! t#e actual dis%osal date is earlier t#an t#e dee$ed dis%osal date( i.e. in t#e %eriod e!ore t#e dis%oser:s
!inal %eriod( t#en t#e dis%oser is dee$ed still to o"n t#e asset at t#e end o! t#at %recedin& year( so #e can
clai$ t#e allo"ance !or t#at year.
Note 6. ?ut any ex%enditure incurred y t#e dis%oser on or a!ter t#e
!irst day o! t#e dis%oser:s !inal %eriod is dee$ed incurred y
t#e ac>uirer and t#e latter can clai$ an initial allo"ance.
CAPITAL ALLO1ANCE. ACCA F6. T6.
)apital allo*ances for +ualifying -uilding Expenditure
'e!initions
Qualifying building expenditure 9*P?E+; is de!ined in .c#.D as *ca%ital ex%enditure incurred on t#e
construction or %urc#ase o! a uildin& "#ic# is used at any ti$e a!ter its construction or %urc#ase
as an industrial uildin&.
An industrial building is de!ined to include5C
a !actory(
a doc/( "#ar!( Betty or ot#er si$ilar uildin&(
a "are#ouse !or t#e #ire o! stora&e s%ace to t#e %ulic(
uildin&s used in t#e utilities or teleco$$unications industries(
uildin&s used in t#e "or/in& o! a !ar$ or $ine( and
A factory is de!ined to include5C
a $ill( "or/s#o%K or ot#er uildin& !or t#e #ousin& o! %lant or $ac#inery !or t#e $anu!acture o!
any %roduct or t#e suBection o! &oods or $aterials to any %rocess or t#e &eneratin& o! %o"er !or
t#e $anu!acturin& %rocess.
A uildin& used !or t#e stora&e o! any ra" $aterial( !uel or stores necessary !or t#e $anu!acturin&
%rocess or !or t#e stora&e o! "or/CinC%ro&ress or !inis#ed &oods( so lon& as t#e uildin& is "it#in
t#e sa$e curtila&e T$eanin&5 on t#e sa$e siteU as t#e uildin& used !or $anu!acture.
K T#is does not include a "or/s#o% used !or t#e re%air or servicin& o!
&oods( i! t#e re%air or servicin& is carried out in conBunction "it# or
incidentally to t#e usiness o! sellin& t#ose &oods( e.&. a car re%air s#o%.
Incidental costs treated as >uali!yin& uildin& ex%enditure include5C
arc#itect:s !ees(
t#e cost o! %re%arin& %lans and %lannin& a%%lications(
t#e cost o! clearin& t#e site
t#e cost o! construction( includin& laour( $aterials( #aula&e( $ana&e$ent su%ervision and ot#er
over#eads(
incidental site ex%enditure necessary to t#e uildin&(
t#e cost o! installin& !ittin&s( and
le&al c#ar&es( sta$% duty etc. relatin& to t#e uildin&.
Any costs associated "it# t#e land do not >uali!y as P?E.
For purchased buildings t#e P?E is t#e %urc#ase %rice %lus any ex%enditure re>uired to rin& t#e
uildin& into industrial use( e.&. renovation costs.
Qualifying renovation or refurbishment expenditure ) suc# ex%enditure is ca%ital in nature and is not a
deductile ex%ense. 2o"ever( suc# ex%enditure on uildin&s t#at are industrial uildin&s does
>uali!y !or ca%ital allo"ances. Furt#er$ore( renovation or re!uris#$ent ex%enditure incurred
!ro$ 6E Marc# <EE7 until D6 'ece$er <E6E on uildin&s t#at are not industrial uildin&s does
>uali!y !or ca%ital allo"ances o! =EF %.a.( suBect to an overall li$it o! ,M6EE(EEE.
Ot#er uildin&s are treated as industrial uildin&s( includin&5C
Licensed %rivate #os%itals( $aternity #o$es and nursin& #o$es.
?uildin&s used !or a%%roved researc# or trainin&.
1are#ouses used !or t#e stora&e o! &oods !or ex%ort or !or t#e stora&e o! i$%orted &oods "#ic#
are to e %rocessed attract a 6EF annual allo"ance( ut no initial allo"ance.
2otels re&istered "it# t#e Ministry o! Culture( Arts and Touris$.
Air%orts
A%%roved $otor racin& circuits.
ACCA F6. T6. CAPITAL ALLO1ANCE.
Additional uildin&s constructed and used !or t#e acco$$odation o! "or/ers attract a 4EF initial
allo"ance.
?uildin&s used !or t#e acco$$odation o! "or/ers in t#e $anu!acturin&( #otel or touris$ usiness
attract a 6EF annual allo"ance( ut no initial allo"ance.
?uildin&s !or c#ildCcare !acilities attract a 6EF annual allo"ance( ut no initial allo"ance.
A%%roved sc#ools or educational institutions attract a 6EF annual allo"ance( ut no initial
allo"ance.
Additional uildin&s used !or a sta!! canteen and ot#er sta!! "el!are.
Pulic toll roads and ancillary structures.
Plant or $ac#inery( "#ere t#e cost incurred in %re%arin&( cuttin&( tunnellin& o! levellin& land in
order to %re%are a site !or t#e installation o! t#e %lant or $ac#inery exceeds 8=F o! t#e total
ex%enditure on t#e asset and t#e site %re%aration costs.
?uildin&s t#at do not >uali!y as industrial uildin&s are t#ose t#at serve no $anu!acturin& %ur%ose( e.&.
retail %re$ises( s#o"roo$s( #otels and o!!ices.
)apital %llo*ances
Ca%ital allo"ances !or P?E are &iven as t"o distinct ty%es and at t#e !ollo"in& rates5C
Initial alloance ) &iven in t#e year o! ac>uisition so lon& as t#e uildin& "as in use or aout to e
used as an industrial uildin& and t#e %erson o"ns
Q
t#e asset at t#e end o! t#e asis %eriod !or a
YAK( at a rate o! 6EF.
K assets ou&#t and sold "it#in a year are still &iven t#e initial allo"ance.
Annual alloance ) &iven in t#e year o! ac>uisition and suse>uent years so lon& as t#e %erson o"ns
Q
t#e asset at t#e end o! t#e asis %eriod !or a YA( at a rate o! DF %.a.5
Q ?ene!icial o"ners#i% "ill su!!ice( le&al o"ners#i% is not necessary.
Additional %oints
T#e initial allo"ance and !irst year:s annual allo"ance are &iven in !ull re&ardless o! t#e %oint
durin& t#e year at "#ic# t#e ex%enditure "as incurred.
Total ca%ital allo"ances clai$ed cannot exceed t#e ori&inal P?E.
A uildin& t#at is %artially used as an industrial uildin& "ill >uali!y in !ull so lon& as t#e nonC
industrial use is less t#an 6EF o! t#e "#ole uildin&. Once t#e nonCindustrial use is 6EF or $ore( t#e
P?E is t#at %ortion o! t#e total ex%enditure relatin& to industrial use.
Assets in te$%orary disuse( even !or a "#ole year( are dee$ed to e in use so lon& as t#e asset
stands ready to e rou&#t ac/ into use( and t#e %eriod o! disuse is te$%orary.
I! a %erson does not "is# to clai$ ca%ital allo"ances 9!or so$e tax %lannin& %ur%ose; t#en t#e
I, "ill a%%ly a notional allo"ance 9"#ic# serves to reduce t#e residual ex%enditure and to restrict t#e
total allo"ances clai$ed;.
'is%osals ) t#e usual dis%osal rules a%%ly.
CAPITAL ALLO1ANCE. ACCA F6. T6.
)apital allo*ances for +ualifying %griculture Expenditure
Certain ca%ital ex%enditure incurred !or a&ricultural %ur%oses >uali!ies !or ca%ital allo"ances.
'e!initions
Qualifying agricultural expenditure 9*PAE+; is de!ined in .c#.D as *ca%ital ex%enditure incurred y
a %erson on5
9a; t#e clearin& and %re%aration o! land !or t#e %ur%oses o! a&ricultureM
9; t#e %lantin& 9ut not re%lantin&K; o! cro%s on land cleared !or %lantin&M
9c; t#e construction on a !ar$ o! a road or rid&eM
9d; t#e construction on a !ar$ o! a uildin& used !or t#e %ur%oses o! a usiness o! t#at %erson
"#ic# consists "#olly or %artly o! t#e "or/in& o! t#e !ar$( or t#e construction on t#at !ar$ o!
a uildin& "#ic# is %rovided y t#at %erson !or t#e "el!are o! %ersons( or as livin&
acco$$odation !or a %erson e$%loyed or in connection "it# t#e "or/in& o! t#at !ar$ and
"#ic#( i! t#e !ar$ creases to e "or/ed( is li/ely to e o! little or no value to any %erson
exce%t in connection "it# t#e "or/in& o! anot#er !ar$+.
K ,e%lantin& ex%enditure is deductile a&ainst &ross inco$e under ..D496;9d;.
Agriculture is de!ined in s.6H ITA:68 as *any !or$ o! cultivation o! cro%s( ani$al !ar$in&(
a>uaculture( inland !is#in& and any ot#er a&ricultural or %astoral %ursuit+( and !or ca%ital
allo"ances( .c#.D adds t#at *a&riculture includes t#e rea!!orestation o! ti$er+.
%gricultural allo*ance
A&ricultural allo"ances !or PAE are &iven as annual allo"ances only 9t#ere is no initial allo"ance; so
lon& as t#e %erson o"ns t#e asset at t#e endK o! t#e asis %eriod and t#e asset is in use !or t#e %ur%ose o!
t#e usiness.
K An asset t#at is dis%osed o! in any year is still &iven a %roCrated
allo"ance 9y days; so lon& as t#e asset "as in use !or t#e
%ur%ose o! t#e usiness "it#in t#e $ont# e!ore t#e dis%osal
date.
T#e rates o! annual allo"ance are as !ollo"s5
Land clearin& and %re%aration =EF
Plantin& =EF
,oad and rid&e construction =EF
?uildin&s !or t#e "el!are or acco$$odation o! "or/ers <EF
Far$ uildin& 6EF
Additional %oints
T#e !irst year:s annual allo"ance is &iven in !ull re&ardless o! t#e %oint durin& t#e year at "#ic#
t#e ex%enditure "as incurred.
Total ca%ital allo"ances clai$ed cannot exceed t#e ori&inal PAE.
?uildin&s used !or acco$$odation o! "or/ers can e t#e suBect o! an election to e treated as
an industrial uildin&( eli&ile !or t#e 4EF initial allo"ance and DF annual allo"ance.
'is%osals
ACCA F6. T6. CAPITAL ALLO1ANCE.
1#ere an ite$ o! PAE is dis%osed( t#e uyer assu$es t#e tax "ritten do"n values o! t#e assetM t#e
%urc#ase consideration is i&nored.
1#ere an ite$ o! PAE is dis%osed o! less t#an six years !ro$ t#e date t#e ex%enditure "as incurred(
all %revious a&ricultural allo"ances are reversed as an *a&ricultural c#ar&e+K( assessed in t#e year o!
dis%osal. An election can e $ade "it#in t#ree $ont#s o! t#e e&innin& o! t#e relevant YA
Q
to s%read
ac/ t#e c#ar&e to t#e years in "#ic# t#e allo"ances "ere ori&inally &iven( s%read evenly.
K A si$ilar c#ar&e is $ade to reverse all %revious allo"ances i! a &rant in res%ect o! t#e PAE is
suse>uently a"arded y t#e -overn$ent( .tate -overn$ent or statutory aut#ority.
Q A dis%osal a!ter t#e cessation o! usiness is dee$ed to #ave ta/en %lace in t#e !inal asis %eriod
and t#e ti$e li$it !or any election is extended to t#e next YA( !ollo"in& t#at in "#ic# t#e
usiness ceased.
)apital allo*ances for +ualifying .orest Expenditure
T#is is excluded !ro$ t#e ACCA F6 syllaus.
COMP3TATION OF A--,E-ATE( TOTAL O C2A,-EA?LE INCOME ACCA F6. T8.
A--,E-ATE INCOME
A&&re&ate inco$e is t#e su$ o! all usiness inco$e less adBusted losses rou&#t !or"ard( %lus all nonC
usiness inco$e( %lus recoveries o! aorted %ros%ectin& ex%enditure.
TOTAL INCOME
Total inco$e is a&&re&ate inco$e less5 C adBusted losses !or t#e asis %eriod 9C *current year losses+;(
C %ros%ectin& ex%enditure !or sites declared aorted(
C >uali!yin&K %reCo%erational usiness ex%enditure(
C a%%roved donations
Q
(
C &rou% loss relie!
R
.
K t#ese are !easiility studies and $ar/et researc# 9%lus
incidental ex%enses; in certain overseas countries.
Q A%%roved donations are %rovided !or in s.4496; ITA:68 and are t#ose in cash only 9unless
ot#er"ise s%eci!ied; and include5
C 'onations to &overn$ental odies( a%%roved institutions or a%%roved or&anisations ) donations
to a%%roved institutions0or&anisations are li$ited to 6EF
K
o! a&&re&ate inco$e.
C 'onations o! arte!acts( $anuscri%ts or %aintin&s to t#e -overn$ent.
C 'onations to %ulic liraries and liraries o! sc#ools and institutions o! #i&#er education )
li$ited to ,M<E(EEE Tt#is deduction does not a%%ly in addition to t#at allo"ed under s.D496;U.
C 'onations in cas# or in /ind y individuals !or %ulic !acilities !or disaled %ersons.
C 'onations in cas# or in /ind y individuals !or a%%roved #ealt#care !acilities( li$ited to
,M<E(EEE.
C 'onations o! %aintin&s to t#e National Art -allery or t#e .tate Art -allery.
C Va/at %ernia&aan %aid y nonCindividuals ) li$ited to <.=F o! a&&re&ate inco$e.
C 'onations in cas# or in /ind to a%%roved s%orts activities( li$ited to 6EF
K
o! a&&re&ate inco$e.
C 'onations in cas# or in /ind to %roBects o! national interest a%%roved y t#e Minister( li$ited to
6EF
K
o! a&&re&ate inco$e.
K C 6EF is t#e li$it t#at a%%lies to co$%anies. A li$it o! 8F a%%lies to all ot#er %ersons.
R ,elated co$%anies $ay surrender u% to 8EF o! t#eir adBusted losses so lon& as5
C t#e co$%anies are tax resident and incor%orated in Malaysia(
C t#e co$%anies #ave %aid u% s#are ca%ital o! $ore t#at ,M<.=$ at t#e e&innin& o! t#e YA(
C t#e co$%anies are related 98EF o"ners#i%; t#rou&#out t#e YA and t#e t"elve $ont#s %rior to
t#at YA(
C t#e co$%anies #ave a co$$on t"elve $ont# accountin& %eriod(
C t#e co$%anies are suBect to inco$e tax at t#e usual rate(
C t#e clai$ant co$%any #as de!ined a&&re&ate inco$e !or t#e t#at YA(
C t#e co$%anies $a/e an irrevocale election to surrender0clai$ losses on tax return For$ C.
ACCA F6. T8. COMP3TATION OF A--,E-ATE( TOTAL O C2A,-EA?LE INCOME
C2A,-EA?LE INCOME
C#ar&eale inco$e is total inco$e less any %ersonal relie!s availale !or individuals. For co$%anies(
c#ar&eale inco$e is t#e sa$e as total inco$e. T#e relie!s availale are deductile u% to t#e a$ount o!
total inco$e 9c#ar&eale inco$e cannot e less t#an Jero;. ,elie!s not utilised cannot e carried !or"ard.
T#e relie!s availale to individuals are %rovided !or in s.4696; ITA:68. T#e $ain relie!s are as !ollo"s5C
,M
.el! or 2indu Boint !a$ily H(EEE
'isaled sel! ) additional 6(EEE
Medical ex%enses !or o"n %arents u% to =(EEE
Medical ex%enses !or sel!( s%ouse( or c#ild "it# serious disease(
includin& u% to ,M=EE !or $edical exa$ination u% to =(EEE
?asic su%%ortin& e>ui%$ent !or disaled sel!( s%ouse( c#ild or ot# sets o! %arents u% to =(EEE
Fees !or s/ills or >uali!ications !or onesel! %rovided y Malaysian institutions u% to =(EEE
Ex%enses on oo/s !or o"n use( s%ouse or c#ild( in order to en#ance /no"led&e u% to 6(EEE
.%ouse relie! 9Boint assess$ent;( so lon& #usand and "i!e are livin& to&et#erK D(EEE
'isaled s%ouse ) additional D(=EE
C#ild 9un$arried and under 6H years o! a&e;
QR
6(EEE eac#
'isaled c#ild 9) no a&e li$it;
QR
=(EEE eac#
C#ild:s #i&#er education 9incl. service under articles or indentures;
R
4(EEE eac#
Li!e insurance %re$iu$s !or sel! and s%ouse( and
contriutions to a%%roved %rovident !unds( e.&. EPF u% to 6(EEE
Medical or education insurance %re$iu$s !or sel!( s%ouse or c#ild u% to D(EEE
..PN account 9National Education .avin&s .c#e$e; u% to D(EEE
Purc#ase o! a %ersonal co$%uter 9once in every t#ree years; u% to D(EEE
.%orts e>ui%$ent u% to DEE
?roadand suscri%tion !ees u% to =EE
,eates &iven a&ainst tax due.
Tax reate !or c#ar&eale inco$e not exceedin& ,MD=(EEE 4EE
Va/at( !itra# or any ot#er Isla$ic reli&ious dues
KAli$ony %ay$ents are allo"ed relie!( ut t#e total deduction !or
s%ouse relie! and ali$ony %ay$ents $ust not exceed ,MD(EEE.
QIn t#e case o! divorced %arents ot# $aintainin& a c#ild( t#e c#ild
relie! is s%lit e>ually et"een t#e$.
R?ut t#e relie! is lost i! t#e c#ild:s inco$e exceeds t#e a$ount o!
t#e relie!.
COMP3TATION OF A--,E-ATE( TOTAL O C2A,-EA?LE INCOME ACCA F6. T8.
/oint %ssessment
T#e inco$e o! a #usand and "i!e can e Bointly assessed to tax as t#e inco$e o! only one s%ouse( ut
only at t#e total inco$e level. T#e %ersonal relie!s o! one s%ouse are lost and instead t#e s%ouse relie! o!
,MD(EEE is availale a&ainst t#e Boint inco$e. In addition( i! Boint c#ar&eale inco$e is less t#an
,MD=(EEE( t#en t"o reates o! ,M4EE are availale.
In order !or #usand and "i!e to #ave t#eir inco$e Bointly assessed( eit#er s%ouse $ust elect !or Boint
assess$ent !or any %articular YA. T#e conditions !or Boint assess$ent are t#at5
C t#e #usand and "i!e $ust e livin& to&et#er t#rou&#out t#e year(
C t#e %erson electin& is resident or is a citiJen( and
C t#e election is $ade in "ritin& e!ore 6
st
A%ril !ollo"in& t#e YA.
,ATE. OF INCOME TA4 PAYA?LE
For resident indi"iduals( trade associations and clus( t#e rate o! inco$e tax is on a slidin& scale(
%ro&ressively increasin& as inco$e increases. T#e inco$e ands and tax rates are as !ollo"s5
C#ar&eale inco$e Tax rate Tax %ayale Cu$. Tax %ayale
W <(=EE E E E
X <(=EE W =(EEE 6 <= <=
X =(EEE W <E(EEE D 4=E 48=
X <E(EEE W D=(EEE 8 6(E=E 6(=<=
X D=(EEE W =E(EEE 6< 6(HEE D(D<=
X =E(EEE W 8E(EEE 67 D(HEE 8(6<=
X 8E(EEE W 6EE(EEE <4 8(<EE 64(D<=
X 6EE(EEE <6
For non-resident indi"iduals t#e rate o! tax is a !lat <6F re&ardless o! t#e level o! c#ar&eale inco$e.
NonCresident individuals are suBect to t#e "it##oldin& tax rates on sources o! interest inco$e 96=F;(
rental inco$e 96EF;( royalty inco$e 96EF; and tec#nical0$ana&e$ent !ees 96EF;.
Companies ith paid up capital less than #$%&'m at t#e e&innin& o! t#e YA are suBect to inco$e tax
at <EF on c#ar&eale inco$e not exceedin& ,M=EE(EEE( and <6F on all c#ar&eale inco$e in excess o!
,M=EE(EEE.
Companies "it# %aid u% ca%ital o! ,M<.=$ or $ore are suBect to inco$e tax at a !lat rate o! <6F on all
c#ar&eale inco$e.
ACCA F6. T8. COMP3TATION OF A--,E-ATE( TOTAL O C2A,-EA?LE INCOME
?lan/ %a&e
'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME ACCA F6. TH.
'IGI'EN' INCOME
T#e "ord *dividend+ is not de!ined in t#e Act ut co$%any la" #as deter$ined t#at a dividend is any
distriution o! %ro!it( "#et#er in $oney or in s%ecie T$eanin&5 in /indU. Not"it#standin& t#at a onus
issue re%resents an allocation o! %ro!its to"ards s#are ca%ital( a onus issue does not constitute inco$e in
t#e #ands o! s#are#olders. T#is is ecause "#at "ould ot#er"ise #ave ee inco$e "ent to increase t#e
ca%ital e$%loyed y t#e co$%any.
Determination of Di0idend Income
..64 ITA:68 deals "it# t#e derivation o! dividend inco$e. ..6496; %rovides t#at dividends %aid( credited
or distriuted y a resident co$%any constitute dividend inco$e dee$ed derived !ro$ Malaysia.
.ections 649<; and 649D; %rovide !or situations "#ere a co$%any:s $ana&e$ent and control e&in or
cease to e exercised in Malaysia5C
C "#ere a co$%any:s $ana&e$ent and control is !irst exercised in Malaysia durin& a YA( only dividends
%aid( credited or distriuted !ro$ t#at date are dee$ed derived !ro$ Malaysia.
C "#ere a co$%any:s $ana&e$ent and control ceases to e exercised in Malaysia durin& a YA(
dividends %aid( credited or distriuted a!ter t#at date are not dee$ed derived !ro$ Malaysia so lon&
as t#e co$%any does not eco$e resident a&ain in t#e next YA.
..<696; %rovides t#at dividend inco$e is assessed to tax on t#e earlier o! t#e dividend ein& %aid( or
distriuted in t#e case o! dividends in s%ecie( and ein& %rovided !or in t#e co$%any:s oo/s o! account.
T#e date o! %ay$ent0distriution is t#e date on "#ic# t#e dividend is %osted0delivered y t#e co$%any.
Deduction of tax
..6EH96; %rovides t#at co$%anies $ust deduct tax !ro$ dividends dee$ed derived !ro$ Malaysia( at t#e
cor%orate tax rate a%%licale to t#e co$%any !or t#at YA. T#e a$ount received y t#e s#are#older is t#e
net dividend( ut t#e dividend inco$e o! t#e s#are#older is t#e &ross dividend.
..66E96; %rovides t#at t#e tax deducted y t#e co$%any is availale !or set o!! a&ainst t#e tax c#ar&ed on
t#e s#are#older:s c#ar&eale inco$e. T#is syste$ o! creditin& t#e s#are#older "it# t#e tax %aid y t#e
co$%any is called t#e imputation system( and serves to avoid t#e doule taxation o! dividend inco$e.
..66E !urt#er %rovides t#at t#e tax deducted y t#e co$%any on dividends %aid is availale !or o!!set
a&ainst t#e inco$e tax %ayale y t#e co$%any on its c#ar&eale inco$e 9see later;.
..6EH9<; %rovides t#at i! t#e co$%any !or so$e reason does not deduct tax !ro$ dividends t#en t#e
a$ount received y t#e s#are#older is still a net dividend. T#e &ross dividend inco$e o! t#e s#are#older
is t#e a$ount received as &rossed u% !or t#e tax t#at "ould #ave een deducted( and as !ar as t#e
s#are#older is concerned( t#e tax t#at "ould #ave een deducted is dee$ed to #ave een deducted.
Single-tier di"idends
Fro$ <EEH co$%anies $ay elect to %ay dividends under a *sin&leCtier+ syste$( "#ic# treats t#e tax %aid
y co$%anies as a !inal tax and t#e dividend inco$e !or s#are#olders is t#ere!ore exe$%t !ro$ tax. T#e
co$%any is not re>uired to deduct any tax !ro$ t#e %ay$ent o! dividends. T#e sin&leCtier syste$ "ill
eco$e $andatory !or all co$%anies !ro$ <E64.
Deductible expenses
Any ex%enses incurred in t#e %roduction o! dividend inco$e are allo"ale( e.&. t#e interest ex%ense on a
loan ta/en out to !inance t#e ac>uisition o! t#e s#ares %roducin& t#e inco$e.
ACCA F6. TH. 'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME
Exempt Di0idend Income
Certain sources o! dividend inco$e are exe$%t !ro$ tax( t#ese include5C
C dividends %aid( credited or distriuted to a $e$er o! a coCo%erative society(
C dividends %aid out o! t#e exe$%t inco$e o! unit trusts( %ro%erty trusts and venture ca%ital co$%anies(
C dividends %aid out o! an exe$%t inco$e account arisin& !ro$ tax incentives !or resident co$%anies
under various statutes.
C dividends %aid o! a tax exe$%t account arisin& !ro$ !orei&n inco$e received in Malaysia y a resident
co$%any or unit trust.
The tax imputation system ( the s&)*+ account
T#e inco$e tax %aid y a co$%any is credited to a *s.6EH+ account( "#ic# is $erely a $e$orandu$
account( and is availale !or o!!set a&ainst t#e tax %ayale on dividends to s#are#olders. T#e tax credit on
any dividends received y t#e co$%any is also credited to t#e s.6EH account( u% to t#e a$ount o! tax
%ayale y t#e co$%any.
Any exe$%t dividend inco$e received y a co$%any does not carry a tax credit and co$%anies $ay %ay
tax exe$%t dividends to s#are#olders !ro$ t#is tax exe$%t account 9t#at also do not carry a tax credit;.
Co$%anies can t#ere!ore %ay dividends at t"o levels( or tiers( one t#at is tax exe$%t and one t#at is
taxale( ut carryin& a tax credit.
In t#e event t#at t#e alance on t#e s.6EH account is not enou&# to cover t#e tax %ayale on dividends to
s#are#olders( t#e I,? "ill raise a s.6EH96; c#ar&e on t#e co$%any !or t#e di!!erence.
1it# t#e introduction o! t#e sel! assess$ent syste$ !or co$%anies !ro$ YAE6( t#e existin& s.6EH account
"as !roJen Tno $ore tax creditedU "it# e!!ect !ro$ D606<0EE 9suBect to one last %ay$ent !or YAEE !or
co$%anies "it# a calendar yearCend( in @anuary <EE6;. Fro$ YAE6 a *ne"+ s.6EH account "as
$aintained in conBunction "it# t#e *old+ account.
1it# t#e introduction o! t#e sin&le tier dividend syste$ !ro$ YAEH( t#e existin& *ne"+ s.6EH account "as
!roJen Tno $ore tax creditedU "it# e!!ect !ro$ D606<0E8 9suBect to one last %ay$ent !or YAE8 !or
co$%anies "it# a calendar yearCend( in @anuary <EE6;. Any credit on t#e s.6EH accounts is no" le!t to e
run do"n y usin& it to %rovide tax credits !or dividends( ut only until t#e credit runs out or D606<06D(
"#ic#ever is t#e earlier. Fro$ t#at date( all co$%anies "ill %ay dividends under t#e sin&le tier dividend
syste$. Co$%anies $ay elect 9irrevocaly;( e!ore#and( to $ove on t#e sin&le tier dividend syste$.
T#e sin&le tier dividend syste$ is t#ere!ore a syste$ t#at deCcou%les t#e tax %aid y t#e co$%any and t#e
tax credit i$%uted to s#are#olders. 'ividends %aid under t#e sin&le tier syste$ are taxCexe$%t inco$e in
t#e #ands o! s#are#olders and t#e tax %aid y t#e co$%any is a !inal tax. T#us( t#e need to /ee% a s.6EH
account and an exe$%t dividend account "ill no lon&er arise.
'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME ACCA F6. TH.
INTE,E.T INCOME
T#e "ord *interest+ is not de!ined in ITA:68 ut case la" #as deter$ined t#at it is any su$ calculated y
re!erence to ti$e !or t#e use o! $oney.
In t#e case o! a loan re%ayale at a %re$iu$ to !ace value( t#e treat$ent o! t#e %re$iu$ as interest
inco$e or ca%ital in nature "ould lar&ely e deter$ined y "#et#er or not a co$$ercial rate o! interest
#ad een c#ar&ed on t#e loan. In t#e case o! loans issued at a discount to !ace value( t#e treat$ent o! t#e
discount is alon& si$ilar lines. A less t#an co$$ercial rate o! interest "ould render t#e %re$iu$ or
discount to e treated as interest inco$e.
Interest inco$e is treated as invest$ent interest inco$e under s.49c; ITA:68( exce%t !or t#e !ollo"in&
sources "#ic# are treated as usiness interest inco$e5
interest received !ro$ tradin& dets(
interest received in t#e ordinary course o! usiness( and
interest earned y certain usinesses( e.&. an/s( insurers( etc.
Determination of Interest Income
Interest inco$e is only suBect to tax under ITA:68 i! it derives !ro$ or is dee$ed to derive !ro$
Malaysia. ..6= ITA:68 %rovides t#at interest inco$e s#all e dee$ed to e derived !ro$ Malaysia i!5C
a; res%onsiility !or %ay$ent o! t#e interest lies "it# t#e -overn$ent or a .tate -overn$ent( or
; res%onsiility !or %ay$ent o! t#e interest lies "it# a resident %erson and t#e $oney orro"ed is5
C e$%loyed in( or laid out on assets used in or #eld !or( t#e %roduction o! &ross inco$e derived
!ro$ Malaysia( or
C secured on any %ro%erty situated in Malaysia( or
c; t#e interest is c#ar&ed as an ex%ense a&ainst any inco$e accruin& in or derived !ro$ Malaysia.
..<89<; ITA:68 %rovides t#at interest inco$e is assessed to tax at t#e earlier o! t#e inco$e eco$in&
receivale 9C $eanin&5 recei%t can e otained on de$and; and t#e recei%t o! t#e inco$e.
..<89<; ITA:68 %rovides t#at interest relatin& to t"o or $ore YAs( ut not !uture YAs( s#all e
a%%ortioned accordin& to t#e interest rate9s; at t#e ti$e.
..<89<; ITA:68 %rovides t#at interest received in res%ect o! a %eriod t#at extends $ore t#an !ive years
e!ore t#e discovery o! t#e inco$e s#all e a%%ortioned over t#at %art o! t#e %eriod t#at does not
extend $ore t#an !ive years a&o.
..<89<; ITA:68 %rovides t#at interest received in res%ect o! a %eriod t#at ended $ore t#an !ive years
e!ore discovery o! t#e inco$e s#all e treated "#olly as inco$e in t#e YA !ive years e!ore t#e YA o!
its discovery.
Exempt Interest Income
Certain sources o! interest inco$e are exe$%t !ro$ taxM t#ese are5C
Interest %aid in res%ect o! any savin&s certi!icates issued y t#e -overn$ent.
Interest %aid on onds and securities issued y Pen&urusan 'ana#arta Nasional ?#d.
Interest %aid to individuals on Merde/a ?onds issued y ?an/ Ne&ara Malaysia.
Interest %aid to individuals( unit trusts and listed closedCend !unds in res%ect o!5
C .ecurities or onds issued or &uaranteed y t#e -overn$ent(
C NonCconvertile deentures a%%roved y t#e .ecurities Co$$ission or listed on ME.'AP( and
C ?on .i$%anan Malaysia issued y ?an/ Ne&ara Malaysia.
ACCA F6. TH. 'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME
Interest accruin& to resident individuals on alances "it#5
C ?an/s or !inance co$%anies licensed or dee$ed licensed under t#e ?an/in& and Financial
Institutions Act 67H7
C ?an/s licensed under t#e Isla$ic ?an/in& Act 67HD
C 'evelo%$ent !inancial institutions %rescried under t#e 'evelo%$ent Financial Institutions Act
<EE<.
C T#e Le$a&a dan Taun& 2aBi estalis#ed unde t#e Taun& 2aBi Act 677=.
C T#e Malaysia ?uildin& .ociety ?#d incor%orated under t#e Co$%anies Act 676=.
C T#e ?orneo 2ousin& Finance ?#d incor%orated under t#e Co$%anies Act 676=.
Interest inco$e credited to nonCresidents y an/s( !inance or ot#er institutions a%%roved y t#e
Minister( %rovided t#at %erson does not #ave a %lace o! usiness in Malaysia.
Interest inco$e %aid0credited to nonCresident co$%anies on -overn$ent securities or nonC
convertile Isla$ic securities a%%roved y t#e .ecurities Co$$ission.
'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME ACCA F6. TH.
,ENTAL INCOME
,ental inco$e is de!ined in s.< ITA:68 to include *any su$ %aid !or t#e use or occu%ation o! any %re$ises
or %art t#ereo! or !or t#e #irin& o! any t#in&+.
,ental inco$e can !all to e treated as usiness inco$e under s.496; ITA:68 or invest$ent inco$e under
s.49d;. T#e $ain di!!erences et"een t#e treat$ent o! rental inco$e as usiness inco$e and invest$ent
inco$e are t#at5C
i. ca%ital allo"ances are only availale to %ersons carryin& on a usinessK( and
ii. only rental losses !ro$ a usiness can e set o!! a&ainst %ro!its !ro$ ot#er usiness sources.
K2o"ever( industrial uildin&s allo"ance can e clai$ed a&ainst
invest$ent rental inco$e derived !ro$ industrial uildin&s.
T#e I,? #as issued a Pulic ,ulin& ) P,60<EE4 ) t#at %rovides &uidance re&ardin& t#e treat$ent o!
rental inco$e.
For co$%anies( rental inco$e is usiness inco$e i! t#e co$%any o"ns a $ini$u$ nu$er o! %ro%erties(
as !ollo"s5
Pro%erty
Min. no. to e treated
as usiness inco$e
Factory 6
1are#ouse 6
O!!ice or s#o%%in& co$%lex 6
.tandard lot in a co$%lex 4
.#o%#ouse 4 !loors
,esidential 4
Any $ix o! lots( s#o%#ouses O residential 4
For %ersons 9includin& co$%anies;( rental inco$e is usiness inco$e i! t#e %erson actively en&a&es in t#e
%rovision o! ancillary or su%%ort services0!acilities !or t#e %ro%erties( suc# as5C
C .ecurity &uards.
C AirCconditionin& syste$s.
C 2ot "ater( li!ts( or escalators.
C ,ecreational !acilities.
C Cleanin& or #ouseC/ee%in&.
C Maintenance o! co$$on areas.
Not"it#standin& t#e se%arate cate&ories o! %ro%erty $entioned in P,60<EE4( all usiness rental inco$e
and all invest$ent rental inco$e are ot# treated as sin&le sources. TP,60<EE4 &uidance does actually
state t#at invest$ent rental inco$e s#ould e assessed as t#ree se%arate sources ) residential( co$$ercial
and vacant land ) ut case la" #as deter$ined t#at t#e ITA:68 does not %rovide !or t#is.U
Determination of 1ental Income
In &eneral( rent !ro$ any %ro%erty located in Malaysia is inco$e derived !ro$ Malaysia. For $oveale
%ro%erty( i! t#e o"ner carries on a usiness in Malaysia t#en t#e rental inco$e( "#erever receivale( is
dee$ed derived !ro$ MalaysiaM ot#er"ise rental inco$e is only derived !ro$ Malaysia i! t#e %ro%erty is
used in Malaysia.
Invest$ent rental inco$e is assessed to tax at t#e earlier o! t#e inco$e eco$in& receivale 9C $eanin&5
recei%t can e otained on de$and; and t#e recei%t o! t#e inco$e. ?usiness rental inco$e is assessed on
t#e usual accruals asis.
ACCA F6. TH. 'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME
-enerally( t#e deter$ination o! &ross rental inco$e and t#e allo"ale deductions !ollo"s t#e usual rules
re&ardin& inco$e ein& o! a revenue nature and deductile ex%enses ein& o! a revenue nature incurred
"#olly and exclusively in t#e %roduction o! t#e inco$e.
Notes5 Costs involved in otainin& t#e !irst tenant are not deductile since t#ey are incurred in order to
%roduce inco$e( not in t#e %roduction o! inco$e.
Inco$e and ex%enses are !irst assessed "#en t#e %ro%erty is $ade availale !or occu%ation y
tenants.
Te$%orary void %eriods 9o! nonCoccu%ation; do not %revent t#e deduction o! ex%enses incurred
durin& t#ose %eriods.
Ex%enses relatin& to %eriods "#ere rent "as collected in advance $ust e related to t#e YA in
"#ic# t#e advance rental "as assessed. 9T#is $ay cause a %rior YA to e reassessed.;
'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME ACCA F6. TH.
,OYALTY INCOME
A royalty can e su$$arised as any su$ o! $oney %ayale !or t#e use o!( or t#e ri&#t to use( any
intellectual %ro%erty. A royalty is de!ined in ..<.ITA:68 to include *any su$ %ayale as consideration !or
t#e use o!( or t#e ri&#t to use5C
i; co%yri&#ts( artistic or scienti!ic "or/s( %atents( desi&ns or $odels( %lans( secret %rocesses or
!or$ulae( trade$ar/s( or ta%es( !il$s or video ta%es "#ere suc# ta%es or !il$s #ave een or are to
e used or re%roduced in Malaysia( or ot#er li/e %ro%erty or ri&#tsM
ii; /no"C#o" or in!or$ation concernin& tec#nical( industrial( co$$ercial or scienti!ic /no"led&e(
ex%erience or s/ill+.
Determination of 1oyalty Income
,oyalty inco$e is only suBect to tax under ITA:68 i! it derives !ro$ or is dee$ed to derive !ro$
Malaysia. ..6= ITA:68 %rovides t#at royalty inco$e s#all e dee$ed to e derived !ro$ Malaysia i!5C
a; res%onsiility !or %ay$ent o! t#e royalty lies "it# t#e -overn$ent or a .tate -overn$ent( or
; res%onsiility !or %ay$ent o! t#e royalty lies "it# a resident %erson( or
c; t#e royalty is c#ar&ed as an ex%ense a&ainst any inco$e accruin& in or derived !ro$ Malaysia.
Exempt 1oyalty Income
Certain sources o! royalty inco$e are exe$%t !ro$ taxM t#ese are5C
3% to ,M6E(EEE !or a resident individual in res%ect o!5
C t#e %ulication o!( use o!( or t#e ri&#t to use any artistic "or/( ot#er t#an an ori&inal %aintin&(
C recordin& discs or ta%es.
3% to ,M6<(EEE !or a resident individual in res%ect o! t#e translation o! oo/s or literary "or/ at
t#e s%eci!ic re>uest o! any a&ency o! t#e Ministry o! Education or t#e Attorney -eneral:s
C#a$ers.
3% to ,M<E(EEE !or a resident individual in res%ect o!5
C t#e %ulication o!( use o!( or ri&#t to use any literary "or/ or any ori&inal %ainin&(
C any $usical co$%osition.
ACCA F6. TH. 'IGI'EN'( INTE,E.T( ,ENTAL( ,OYALTY O OT2E, INCOME
OT2E, PE,IO'ICAL PAYMENT.
,ension Income
A %ension is de!erred co$%ensation in res%ect o! e$%loy$ent.
Pension %ay$ents are exe$%ted !ro$ tax i!5
C t#e %ensions is derived !ro$ Malaysia(
C t#e reci%ient #as reac#ed t#e a&e o! == or t#e nor$al retire$ent a&e( or #as retired due to illC#ealt#(
C t#e %ension is %aid y an a%%roved !und( and
C t#e %ension is %ayale in res%ect o! e$%loy$ent services rendered in Malaysia.
%nnuity Income
An annuity is a de!inite su$ o! $oney %ayale on a re&ular asis. 2o"ever( !or t#e annuity to e taxed as
annuity inco$e it $ust e $oney t#at is %ayale as a result o! t#e surrender o! ca%ital and not $erely t#e
return o! ca%ital.
Annuity inco$e is exe$%t !ro$ tax i! it is %aid under an annuity contract issued y a Malaysian li!e
insurer.
%limony Income
Pay$ents $ade to !or$er s%ouses under a se%aration a&ree$ent are /no"n as ali$ony %ay$ents and are
taxale in t#e #ands o! t#e reci%ient.
OT2E, -AIN. O, P,OFIT.
..49!; ITA:68 is a *s"ee%Cu%+ %rovision desi&ned to catc# casual inco$e received.
INCOME F,OM PA,TNE,.2IP. ACCA F6. T7.
PA,TNE,.2IP.
A partnership is de!ined in s.< ITA:68 as *an association o! any /ind et"een %arties "#o #ave a&reed to
co$ine any o! t#eir ri&#ts( %o"ers( %ro%erty( laour or s/ill( !or t#e %ur%ose o! carryin& on a usiness
and s#arin& t#e %ro!its t#ere!ro$ I+.
T#e asis %eriod !or any YA !or a %artners#i% $ust e a calendar year.
T#e %artners#i% itsel! is not a se%arate entity and tax is levied on t#e se%arate %artners( as usiness
inco$e. 2o"ever( in order !or inco$e to e treated as usiness %artners#i% inco$e t#ere #as to e an
ele$ent o! ris/ and re"ard !or eac# %artner and t#e asence o! any $asterCservant relations#i%( "#ic#
"ould ot#er"ise render t#at %erson:s inco$e to e treated as e$%loy$ent %artners#i% inco$e.
A %artners#i% is treated as a sole %ro%rietors#i% !or inco$e tax %ur%oses and t#e %artners#i%:s inco$e and
ex%enses are deter$ined accordin& to t#e usual rules. T#is $eans t#at any %artners#i% ex%enses t#at are
%aid to t#e %artners are %rivate ex%enses and are not allo"ale as deductions. T#e %artners#i%:s inco$e
net o! allo"ale ex%enses is called *pro"isional adjusted income+.
T#e se%arate %artners "ill #ave %artners#i% inco$e accordin& to t#e stated %ro!itCs#arin& ratio
K
( ased on
di"isible income( "#ic# is t#e %artners#i%:s %rovisional adBusted inco$e less t#e %artners#i%:s %rivate
ex%enses.
K Any c#an&e in t#e ratio is dealt "it# y a si$%le
ti$e a%%ortion$ent o! t#e divisile inco$e.
T#e adjusted income o! eac# %artner is t#e %artner:s s#are o! divisile inco$e %lus t#at %artner:s %rivate
ex%enses %aid y t#e %artners#i%. 9'ivisile inco$e "as deter$ined a!ter deductin& t#e %artners: %rivate
ex%enses( and so t#e ex%enses are no" added ac/ in.;
T#e statutory usiness %artners#i% income o! eac# %artner is deter$ined y deductin& ca%ital allo"ances
in t#e usual "ay.
Ca%ital allo"ances on PPE and P?E y t#e %artners#i% are availale to t#e se%arate %artners in
%ro%ortion to t#eir %ro!it s#arin& ratios.
N.?. CAs are clai$ed at t#e end o! eac# year( accordin& to %ro!it s#ares at t#at ti$e(
and so %artners leavin& a %artners#i% do not &et a CA !or t#at year and "#ile a
ne" %artner &ets a !ull year allo"ance.
T#e ca%ital allo"ance on any PPE and P?E incurred y a %artner on assets used solely y t#at
%artner is availale in !ull to t#at %artner.
.u$$ary ) t#e deter$ination o! eac# %artners: statutory inco$e is t#ere!ore as !ollo"s5C
.tart "it# accounting profits before tax
,everse any nonCusiness entries
,everse any disallo"ed ex%enses
*,ro"isional adjusted income+
'educt all ite$s !or t#e %artners
-!i"isible income.
Allocate t#e inco$e to t#e %artners
Add in all ite$s !or eac# %artner
-Adjusted income. !or eac# %artner
'educt eac# %artner:s ca%ital allo"ances
-Statutory income. !or eac# %artner
e.&. entries o! a ca%ital nature(
dividends( interest( etc.
C inlcudin& all ite$s !or t#e
%artners
ACCA F6. T7. INCOME F,OM PA,TNE,.2IP.
C#an&es in t#e Partners#i%
Fro$ a le&al %ers%ective( any c#an&e in t#e %artners#i% constitutes a cessation o! t#e %artners#i% and a
co$$ence$ent o! a ne" %artners#i%. Fro$ a taxation %ers%ective( so lon& as one o! t#e %artners in t#e
old %artners#i% is a %artner in t#e ne" %artners#i% and t#ere is no c#an&e o! accountin& date( t#en t#e
usiness o! t#e %artners#i% is treated as unro/en.
1IT22OL'IN- TA4 ACCA F6. T6E.
Introduction
1it##oldin& tax is due on certain ty%es o! inco$e derived !ro$ Malaysia and accruin& to nonCresidents
not
K
#avin& a usiness %resence in Malaysia. T#e "it##oldin& tax is deducted y t#e %erson $a/in& t#e
%ay$ents( on e#al! o! t#e I,( so t#at t#e I, is ensured o! receivin& so$e tax !ro$ nonCresidents e!ore
t#ey leave t#e country.
K ?ut inco$e accruin& to nonCresident contractors carryin&
on usiness in Malaysia is suBect to "it##oldin& tax.
Sources of Income sub2ect to Withholding Tax
T#e ty%es o! inco$e and t#e rates o! "it##oldin& tax are as !ollo"s5C
Inco$e Tax rate
..6E8A Contract %ay$ents 9service %ortion only; to contactor
"it# a usiness %resence in Malaysia
6EF Y DF
..6E7 Interest 6=F
R
..6E7 ,oyalty 6EF
..6E7A Pulic entertainers 6=F
..6E7? .%ecial classes o! inco$e 9installation or o%erational
adviceQ( tec#nical $ana&e$ent0ad$inistration adviceQ
or t#e rental o! $oveale %ro%erty;
6EF
QT#e service $ust e %er!or$ed in Malaysia.
R'oule taxation a&ree$ents "it# $any countries
reduce t#is rate to nil or 6EF.
Notes5 In t#e case o! s%ecial classes o! inco$e( t#e &ross a$ount o! t#e inco$e eco$es a
deductile ex%ense !or t#e %ayer only i! t#e "it##oldin& tax and any !ine #as een %aid.
For contractors( t#e contractor "ill su$it it o"n tax return and "ill clai$ credit !or t#e
6EF "it##oldin& tax %aid. T#e DF tax is re!unded "#en t#e contractor can s#o" t#at
all e$%loyees: are under t#e sc#edular tax deduction sc#e$e.
Special classes of income
..4A ITA:68 %rovides t#at nonCresidents are c#ar&eale to tax on inco$e derived !ro$ Malaysia
in res%ect o! 5
9i; a$ounts %aid in consideration o! services rendered y t#e %erson or #is e$%loyee in
connection "it# t#e use %ro%erty or ri&#ts elon&in& to( or t#e installation or o%eration o!
any %lant( $ac#inery or ot#er a%%aratus %urc#ased !ro$( suc# %ersonM
9ii; a$ounts %aid in consideration o! tec#nical advice( assistance or services rendered in
connection "it# tec#nical $ana&e$ent or ad$inistration o! any scienti!ic( industrial or
co$$ercial underta/in&( venture( %roBect or sc#e$eM or
9iii; rent or ot#er %ay$ents( not ein& %ay$ents o! !il$ rentals( $ade under any a&ree$ent or
arran&e$ent !or t#e use o! any $oveale %ro%erty.
C ut in t#e case o! suC%aras 9i; and 9ii;( t#e services $ust e rendered in Malaysia.
.6=.A ITA:68 %rovides t#at s.4A inco$e is dee$ed to e derived !ro$ Malaysia i!5
9i; res%onsiility !or %ay$ent lies "it# t#e -overn$ent or a .tate -overn$ent(
9ii; res%onsiility !or %ay$ent lies "it# a resident %erson( or
9iii; t#e %ay$ent is c#ar&ed as an ex%ense in t#e accounts o! a usiness carried on in Malaysia.
T#e %erson %ayin& t#e inco$e $ust deduct "it##oldin& tax and %ay t#e a$ount to t#e 'irector -eneral o!
Inland ,evenue "it#in one $ont# o! %ayin& or creditin& t#e inco$e to t#e nonCresident.
ACCA F6. T6E. 1IT22OL'IN- TA4
T#e "ord creditin& #as een #eld to $ean5 $a/in& availale to.
Failure to %ay t#e "it##oldin& tax "it# t#e oneC$ont# %eriod leads to a !ine o! 6EF o! t#e a$ount
outstandin&.
I! "it##oldin& tax #as not in !act een deducted t#en t#e %ay$ent to t#e nonCresident is dee$ed to #ave
een net o! "it##oldin& tax( and so t#e a$ount o! t#e %ay$ent !or "it##oldin& tax %ur%oses #as to e
&rossed u%. Nevert#eless( t#e a$ount t#at is deductile in t#e accounts o! t#e %ayer is t#e a$ount t#at
"as %aid to t#e nonCresident.
Exemptions
Interest
Interest on loans a%%roved y t#e Ministry o! Finance 9loans to t#e -overn$ent( .tate
-overn$ent( local aut#ority or statutory ody;
Interest %aid to nonCresidents y an/s or !inance co$%anies licensed under t#e ?an/in& O
Financial Institutions Act 67H7 or t#e Isla$ic ?an/in& Act 67HD.
Interest on securities and onds %aid0credited to individuals( unit trusts( listed closedCend !unds in
res%ect o!5
C .ecurities or onds issued or &uaranteed y t#e -overn$ent
C NonCcovertile deentures a%%roved y t#e .ecurities Co$$ission
C ?on .i$%anan Malaysia issued y ?an/ Ne&ara.
Interest %aid to a nonCresident co$%any in res%ect o!5
C .ecurities issued y t#e -overn$ent
C NonCconvertile Isla$ic securities or deentures deno$inated in ,in&&it Malaysia and
a%%roved y t#e .ecurities Co$$ission(
Interest inco$e in res%ect o! nonCconvertile Isla$ic securities issued in nonC,in&&it currency and
a%%roved y t#e .ecurities Co$$ission.
Interest inco$e in res%ect o! onds and securities issued y Pen&urusan 'ana#arta Nasional ?#d.
,oyalties
T#ose a%%roved y t#e Minister o! Finance.
T#ose t#at are A%%roved Industrial ,oyalties under various doule taxation treaties.
.ALE. O .E,GICE TA4 ACCA F6. T8.
.ALE. TA4 O .E,GICE TA4
Introduction
.ales Tax and .ervice Tax are levied on taxale &oods consu$ed in and taxale services %rovided in
Malaysia. T#e tax is collected at t#e %oint o! sale and is an indirect tax in t#e sense t#at t#e %rovider o!
t#e &oods and services is res%onsile !or its collection and %ay$ent to t#e ,oyal Malaysian Custo$s O
Excise 'e%art$ent. T#e taxes are /no"n as *ad valore$+ taxes ecause t#ey are levied as a %ercenta&e
o! t#e sales value. T#e relevant acts are t#e .ales Tax Act 678< 9*.TA:8<+; and t#e .ervice Tax Act 678=
9*.TA:8=+; and t#ese are ad$inistered y t#e 'irector -eneral o! Custo$s O Excise. I$%ortant
re&ulations are t#e .ales Tax ,e&ulations 678< 9*.T,e&s:8<+; and t#e .ervice Tax ,e&ulations 678=
9*.T,e&s:8=+;.
T#e &eneral rates o! tax are 6EF !or sales tax and 6F !or service tax( ut s%ecial sales tax rates a%%ly in
t#e !ollo"in& circu$stances5C
Food( !ruit O uildin& $aterials =F
Petroleu$ %roducts !ixed rates %er litre
e.&. =H.6< sen %er litre o! car %etrol
T#e idea e#ind t#e t"o ty%es o! tax is t#at t#ey are consu$%tion taxes levied on t#e !inal consu$er o!
t#e &oods or services( and so t#e tax is levied only once. For &oods( t#is $eans t#at %ersons "#o are
inter$ediaries in t#e c#ain o! su%%ly are eit#er exe$%ted !ro$ t#e tax or are ale to clai$ ac/ any sales
tax %aid on in%uts. For services rendered to inter$ediaries in t#e su%%ly c#ain( t#e costs o! t#ese services
9includin& t#e service tax; are se%arately identi!ied and si$%ly %assed on to t#e !inal consu$er.
%dministrati0e %rrangements
Many o! t#e %rovisions o! t#e t"o Acts are si$ilar and t#ese are dealt "it# elo".
Licensin&
..6D .TA:8< %rovides t#at every $anu!acturer o! taxale &oods s#all a%%ly !or a sales tax licence and t#at
no %erson s#all $anu!acture taxale &oods unless t#ey #ave a sales tax licence( "#ic# $ust also s%eci!y
t#e %lace9s; "#ere suc# usiness is underta/en. T#ere is no !ee %ayale u%on a%%lication !or a licence.
,e&.6 .T,e&s:8< %rovides t#at t#e licence $ust e dis%layed in a sa!e and cons%icuous %lace at t#e
licensed %lace o! usiness.
..H .TA:8= %rovides t#at every taxale %erson %rovidin& a taxale service s#all a%%ly !or a service tax
licence and t#at no taxale %erson s#all carry on suc# usiness unless t#ey #ave a service tax licence(
"#ic# $ust also s%eci!y t#e %lace9s; "#ere suc# usiness is underta/en. Para. 6 .T,e&s:8=%rovides t#at
t#e licence $ust e dis%layed in a sa!e and cons%icuous %lace at t#e licensed %lace o! usiness.
..HA. .TA:8= also %rovides t#at voluntary licensin& is %ossile !or t#ose %ersons %rovidin& taxale
services "#ose annual turnover !alls elo" t#e t#res#C#old !or co$%ulsory licensin&.
T#e a%%lication !or$ !or t#e licence is @LE'6 and no !ee is %ayale. T#e licence is !or$ C@< and is valid
until it is revo/ed. ..6DA .TA:8< and ..7 .TA:8= %rovide t#at t#e '- $ay revo/e a licence in t#e event
t#at t#e taxale %erson ceases to carry on usiness( dies or is dissolved( or t#e taxale %erson !ails to aide
y t#e re>uire$ents re&ardin& invoices( records and returns.
Exe$%tions !ro$ licensin& are availale in certain circu$stances and t#ese are dealt "it# in t#e se%arate
sections on .ales Tax and on .ervice Tax t#at !ollo".
ACCA F6. T8. .ALE. O .E,GICE TA4
..6DA .TA:8< and s.7 .TA:8= also %rovide t#at t#e licence $ust e surrendered i! t#e taxale %erson
ceases to carry on usiness. ,e&.8 .T,e&s:8< O :8= %rovide t#at t#e licence $ust e surrendered in t#e
!ollo"in& circu$stances5
C any c#an&e o! co$%any0usiness na$e
C any c#an&e in t#e address o! t#e usiness
C any c#an&e in t#e &oods or services o!!ered
,e&.8 .T,e&s:8= %rovides !or !urt#er circu$stances in "#ic# surrender o! a service tax licence is
re>uired5C
C any c#an&e involvin& a %artners#i%
C usiness ta/eover y anot#er %erson
Invoices and ,ecords
..68 .TA:8< O ..6E .TA:8= %rovide t#at all taxale %ersons $ust issue invoices t#at se%arately s%eci!y
t#e c#ar&es !or t#e taxale %roduct0service and t#e sales0service tax levied t#ereu%on.
..6H .TA:8< O .66 .TA:8= %rovide t#at oo/s o! account containin& !ull and true records o! all
transactions a!!ectin& one:s liaility to sales and service tax $ust e $aintained( !or at least six year !ro$
t#e date o! t#e last transaction.
,eturns( Collection O Pay$ent o! .ales Tax and .ervice Tax
..67 .TA:8< and ..6< .TA:8= %rovide t#at a return su$$arisin& taxale sales0services 9on !or$ C@P6;
$ust e sent y t#e %rovider o! t#e &oods0services to t#e ,oyal Custo$s O Excise 'e%art$ent "it#in <H
days o! t#e end o! t#e taxale %eriod in "#ic# t#e sales0service tax is due. ..< o! eac# Act %rovides t#at a
taxale %eriod is a %eriod o! t"o calendar $ont#s. T#e t"oC$ont# %eriods run !ro$ t#e e&innin& o!
@anuary to t#e end o! Feruary and so on.
..<< .TA:8< and ..64 .TA:8= %rovide !or t#e due dates and %ay$ent dates as !ollo"s5C
C ..<< .TA:8< %rovides t#at sales tax is due "#en t#e &oods are sold or ot#er"ise dis%osed o! )
&enerally t#e invoice date
C ..64 .TA:8= %rovides t#at service tax is due "#en %ay$ent !or t#e service #as een $ade( suBect to
a $axi$u$ o! t"elve $ont#s !ro$ t#e invoice date.
..<< .TA:8< O ..64 .TA:8= t#en &o on to %rovide t#at sales0service tax is %ayale "it#in <H days o! t#e
end o! t#e taxale %eriod
K
in "#ic# it eca$e due.
KAn exce%tion is !or sales tax on %etroleu$ %roducts( "#ic# is %ayale "it#in 6E days o! t#e calendar
$ont# in "#ic# t#e sales tax is due.
..<4 .TA:8< and ..66 .TA:8= %rovide t#at !ailure to re$it sales tax and service tax "it#in t#e t"entyC
ei&#t day %eriod attracts a %enalty o! 6EF o! t#e a$ount un%aid !or eac# DE day %eriod( or %art t#ereo!(
t#at t#e a$ount re$ains un%aid( u% to a $axi$u$ %enalty o! =EF o! t#e tax un%aid.
..<6 .TA:8< O s.68 .TA:8= %rovide t#at "#ere a co$%any( !ir$( society or association is liale to %ay
any tax( %enalty or surc#ar&e( t#en t#e current and %ast directors( %artners or $e$ers are Bointly and
severally liale to %ay.
'out!ul O ?ad dets
..D6C .TA:8< O ..<6? .TA:8= %rovide t#at re!unds o! sales tax and service tax are %ossile in res%ect o!
dout!ul and ad dets( u%on a%%lication to t#e 'irector -eneral o! Custo$s O Excise( so lon& as all
.ALE. O .E,GICE TA4 ACCA F6. T8.
reasonale e!!orts #ave een $ade to recover t#e det and t#e clai$ is $ade "it#in six years o! t#e sales
tax #avin& een %aid y t#e retailer.
,e&.67' .T,e&s:8< O ,e&.66A .T,e&s:8= %rovide t#at t#e earliest suc# a clai$ can e $ade is six
$ont#s a!ter t#e tax #as een %aid( or u%on t#e !ilin& o! a clai$ !or %ay$ent "it# a court( t#e %etitionin&
!or an/ru%tcy( t#e %lacin& into receivers#i%( or t#e declaration o! an/ru%tcy in res%ect o! t#e detor.
,e!unds o! tax over%aid or erroneously %aid
..D< .TA:8< O s.<6 .TA:8= %rovide t#at tax over%aid or erroneously %aid can e re!unded so lon& as a
clai$ is $ade "it#in one year o! t#e %ay$ent concerned.
Po"er o! ins%ection( searc#( seiJure O arrest
..D4 .TA:8< O ..<D .TA:8= %rovide t#at %ersons #avin& relevant in!or$ation or docu$ents are ound to
%roduce suc# in!or$ation or docu$ents "#en re>uested to do so.
..D6 .TA:8< O ..<4 .TA:8= %rovide t#at a custo$s o!!icer $ay at any ti$e #ave access to all %laces
"#ere t#e taxale %erson carries on usiness and to all oo/s and docu$ents relatin& to t#e usiness.
..D8 .TA:8< O ..<= .TA:8= %rovide t#at a $a&istrate $ay issue a searc# "arrant u%on "ritten
in!or$ation u%on oat# concernin& oo/s( docu$ents and &oods( "#ic# $ay a!!ord evidence o! an o!!ence
under t#e Acts.
..DH .TA:8< O ..<= .TA:8= %rovide t#at a custo$s o!!icer $ay searc# "it#out a "arrant i! #e elieves
t#at any delay $ay result in any oo/s( docu$ents or &oods a!!ordin& evidence ein& re$oved.
..4E .TA:8< O ..<8 .TA:8= %rovide t#at i! a custo$s o!!icer elieves an o!!ence #as een co$$itted( #e
$ay seiJe any oo/s( docu$ents or &oods 9includin& any ve#icle( vessel or aircra!t used to trans%ort
t#e$; t#at "ould #ave a earin& in t#e case.
..4< .TA:8< O ..<H .TA:8= %rovide t#at a custo$s o!!icer $ay arrest "it#out "arrant( any %erson
co$$ittin& or atte$%tin& to co$$it an o!!ence 9includin& aidin& and aettin&;( and any %erson "#o$ #e
reasonaly sus%ects to #ave co$$itted an o!!ence.
O!!ences
..4D .TA:8< O ..<7 .TA:8= %rovide t#at any %erson "#o5
!ails or re!uses to5 C raise and0or %ay tax on ti$e
C a%%ly !or a licence
C issue %ro%er invoices or issues i$%ro%er invoices
C /ee% %ro%er records
C !urnis# returns
carries on usiness at any %lace not s%eci!ied in t#e licence
!ails or re!uses to %roduce any oo/ or docu$ent re>uested
!ails or re!uses to &ive correct in!or$ation or any in!or$ation
under%ays tax re>uired to e %aid
acts on e#al! o! a taxale %erson "it#out %roducin& a letter o! aut#orisation
ostructs any %ro%er o!!ice in t#e disc#ar&e o! #is !unctions
issues an invoice s#o"in& an a$ount "#ic# %ur%orts to e sales0service tax
is &uilty o! an o!!ence and is liale to i$%rison$ent !or not lon&er t#an 6< $ont#s 9sales tax; or < years
9service tax; and0or a !ine not exceedin& ,M=(EEE.
ACCA F6. T8. .ALE. O .E,GICE TA4
..4DA .TA:8< O ..D< .TA:8= %rovide t#at any %erson "#o "il!ully "it# intent to evade or to assist any
ot#er %erson to evade sales0service tax5C
o$its in!or$ation on a return a!!ectin& t#e c#ar&eaility to tax
$a/es any !alse state$ent or entry in any return( clai$ or a%%lication
&ives any !alse ans"er to any >uestion or re>uest !or in!or$ation
%re%ares( $aintains or aut#orises t#e %re%aration or $aintenance o! any !alse oo/s( invoices or
records( or !alsi!ies or aut#orises t#e !alsi!ication o! any oo/s( invoices or records
$a/es use or aut#orises t#e use o! any !raud( art or contrivance
is &uilty o! an o!!ence and is liale to i$%rison$ent !or not lon&er t#an D years and0or a !ine not
exceedin& ,M=E(EEE.
..4= .TA:8< O ..D= .TA:8= %rovide t#at "#ere an o!!ence #as een co$$itted y a co$%any or any
ot#er ody o! %ersons( any %erson "#o "as a director( $ana&er( secretary( %artner or ot#er si$ilar o!!icer
at t#e ti$e o! t#e o!!ence is dee$ed &uilty o! t#e o!!ence unless #e can %rove t#at t#e o!!ence "as
co$$itted "it#out #is consent or connivance and t#at #e exercised all suc# dili&ence to %revent t#e
o!!ence as #e ou&#t to #ave done.
A&ents
..6DA .TA:8< O ..48A .TA:8= %rovide t#at no %erson s#all transact usiness in relation to t#e Act on
e#al! o! any taxale %erson exce%t on $atters "it# re&ard to5
a re!und o! tax
a re$ission o! tax
an exe$%tion
and only t#en i! t#e %erson %roduces a letter o! aut#orisation !ro$ t#e taxale %erson.
..6D .TA:8< O ..48 .TA:8= %rovide t#at any cler/s or servants o! a taxale %erson $ay act on e#al! o!
t#at %erson.
Custo$s ,ulin&s
..66A .TA:8< O ..6A .TA:8= %rovide t#at a custo$s rulin& can e a%%lied !orK( u%on %ay$ent o! a !ee(
in res%ect o!5
t#e classi!ication o! &oods or t#e deter$ination o! a taxale service
t#e deter$ination o! a taxale %erson
t#e %rinci%les used !or deter$inin& t#e value o! &oods and services
any ot#er $atters %rescried y t#e '-
KT#e a%%lication s#ould e $ade e!ore t#e &oods are $anu!actured or i$%orted( or t#e service
%rovided( or later u%on t#e discretion o! t#e '-.
T#e '- $ay decline to $a/e a rulin& i!5
insu!!icient in!or$ation is %rovided(
t#e a%%lication concerns a #y%ot#etical situation(
an a%%eal under t#e Act concernin& t#e suBect $atter is currently %endin&.
Any rulin& $ade is indin& u%on t#e a%%licant.
Cessation o! usiness
..6DA .TA:8< O ..7 .TA:8= %rovide t#at "#en a trader ceases to carry on t#e $anu!acture o! taxale
&oods or t#e %rovision o! taxale services t#en t#e taxale %erson s#all surrender #is licence.
..<< .TA:8< !urt#er %rovides t#at i! a $anu!acturer %ossesses any taxale &oods u%on cessation o!
usiness t#en t#ese are dee$ed dis%osed o! and sales tax is due.
.ALE. O .E,GICE TA4 ACCA F6. T8.
.ALE. TA4
.ales tax is &overned y t#e .ales Tax Act 678< 9.TA:8<; and t#e .ales Tax ,e&ulations 678<
9*.T,e&s:8<+;. ..6 .TA:8< %rovides t#at sales tax s#all e c#ar&ed and levied on all taxale &oods5C
a; $anu!actured in Malaysia y a taxale %erson and sold( used or dis%osed y #i$( ot#er"ise t#an y
sale or dis%osal to a licensed $anu!acturerM
; i$%orted into Malaysia y any %erson !or #o$e consu$%tion.
..< .TA:8< %rovides t#at taxale &oods $eans all &oods not exe$%ted under various Orders.
Transactions t#at are dee$ed to e sales or dis%osals include5 -i!ts
'estruction
Exc#an&e or arter
3se y a $anu!acturer ot#er"ise
t#an in t#e $anu!acturin&
%rocess
-oods dis%osed "it# a ri&#t to reC
%urc#ase
-oods sold under #ire %urc#ase
.ales tax only a%%lies to &oods consu$ed in Malaysia and so it does not a%%ly to &oods ex%orted or
sales $ade in5
T#e @oint 'evelo%$ent Area 9s.6 .TA:8<;
A Free Trade Vone 9s.<A .TA:8<;
Lauan( Lan&/a"i and Tio$an 9exce%t !or %etroleu$ %roducts; 9s.8D( s.H4 O s.7E?
.TA:8<( res%ec.;
!raback ) ..<7 .TA:8< O ,e&.6H .T,e&s:8< %rovide t#at sales tax %aid on &oods %urc#ased y
a %erson "#o suse>uently ex%orts t#e$ can e clai$ed ac/ so lon& as t#e &oods are ex%orted
"it#in 6< $ont#s o! t#e date t#e sales tax "as %aid and t#e clai$ is $ade "it#in D $ont#s o!
t#e date o! ex%ort.
..<? .TA:8< %rovides t#at a licensed "are#ouse s#all e dee$ed to e a %lace outside Malaysia
and so &oods i$%orted and stored in a licensed "are#ouse are only c#ar&ed to sales tax at t#e ti$e
o! clearance !ro$ t#e "are#ouse.
..8 .TA:8< %rovides t#at t#e value o! t#e &oods is t#e ar$:s len&t# $ar/et value or t#e value !or
custo$s duty %ur%oses( %lus any custo$s duty and any excise duty %ayale. 9T#e transaction %rice
"ould e t#e startin& %oint in $ost cases.;
Exe$%tions !ro$ licensin& are availale under t#e .ales Tax 9Exe$%tion; Order 6778 !or
$anu!acturers and contractors "#ose annual turnover did not exceed ,M6EE(EEE and ,M<E(EEE(
res%ectively in t#e last t"elve $ont#s and is not ex%ected to do so in t#e next t"elve $ont#s.
Exe$%tions !ro$ licensin& are also availale !or $anu!acturers in a nu$er o! sectors(
includin&5
C 'evelo%in& and %rintin& o! %#oto&ra%#s
C Incor%oration o! &oods into uildin&s
C Pre%aration o! $eals
C P#otoco%yin&
C ,e%air o! secondC#and &oods
C Eyesi&#t testin& and %rescri%tion o! lenses
C Personal tailorin&
C Printin& on readyC$ade TCs#irts
C Traditional $anu!acture o! ati/ !arics
C @e"ellery
ACCA F6. T8. .ALE. O .E,GICE TA4
C Extractin&( recoverin& and re!inin& o! &old
.ales Tax is a Consu$er Tax
As already $entioned( t#e idea e#ind sales tax is t#at it is a tax on t#e !inal consu$er o! t#e &oods and
so t#e .TA:8< contains several %rovisions enalin& di!!erent $anu!acturers in a su%%ly c#ain to clai$
ac/ any in%ut tax %aid alon& t#e "ay. T#ese are as !ollo"s5C
The #ing System ) ..7 .TA:8< %rovides t#at a licensed $anu!acturer $ay ac>uire taxale &oods !ro$
anot#er licensed $anu!acturer or $ay i$%ort taxale &oods !ree !ro$ sales tax so lon& as #e is
aut#orised to do so y t#e '-. 9T#e aut#orisation is valid !or eit#er 6 $ont#s or 6 year.;
The #efund System ) ..D6 .TA:8< %rovides t#at "#ere a licensed $anu!acturer #as ac>uired taxale
&oods !ree o! sales tax under s.7 t#en t#e seller o! t#ose &oods can clai$ ac/ any in%ut sales tax %aid
on t#e initial ac>uisition o! taxale &oods $a/in& u% #is su%%ly( so lon& as t#e clai$ is $ade "it#in
one year o! t#e sale.
The Credit System ) ..D6A .TA:8< and ,e&.67A .T,e&s:8< %rovide t#at a licensed $anu!acturer $ay
clai$ ac/ any in%ut sales tax %aid y "ay o! deduction a&ainst out%ut ales tax %ayale !or t#e taxale
%eriod in "#ic# t#e %urc#ases "ere $ade( "it# any credit ein& carried !or"ard. 2o"ever( t#e sales
tax %aid ac/ is only 4F or HF o! t#e value o! t#e &oods includin& t#e sales tax. 9T#is $eans t#at
only H4F or HHF o! t#e ori&inal sales tax is re%aid. T#e idea e#ind t#is is to encoura&e traders to use
t#e ,in& .yste$.;
,eturned -oods
..D6? .TA:8< and ,e&.67C .T,e&s:8< %rovide t#at sales tax %aid on &oods suse>uently returned or in
res%ect o! Zlan/et: discounts suse>uently &iven $ay e reclai$ed
K
( ut only i! t#e $anu!acturer #as
issued a %ro%er credit note and %rovided t#e &oods #ave not suse>uently een sold or dis%osed o!.
KT#e clai$ is y "ay o! a deduction !ro$ t#e a$ount o! tax %aid "it# t#e return su$itted !or t#e
taxale %eriod in "#ic# t#e credit note "as issued( "it# any credit ein& carried !or"ard. 9T#e
&uidance notes !or !illin& in t#e tax return $ention t#at t#e &oods $ust #ave een returned "it#in D
$ont#s !ro$ t#e date o! sale.;
.ALE. O .E,GICE TA4 ACCA F6. T8.
.E,GICE TA4
.ervice Tax is &overned y t#e .ervice Tax Act 678= 9*.TA:8=+; and t#e .ervice Tax ,e&ulations 678=
9*.T,e&s:8=+;. ..D. .TA:8= %rovides t#at service tax s#all e levied on taxale services %rovided y
taxale %ersons in Malaysia.
,e&.D .T,e&s:8= %rovides !or a list o! taxale %ersons and taxale services 9contained in .c#.<
.T,e&s:8=;. T#ese !all into nine &rou%s5C
2otels "it# $ore t#an <= roo$s
K
,estaurants in #otels "it# $ore t#an <= roo$s
,estaurants in #otels "it# <= roo$s or less( "it# turnover $ore t#an ,MDEE(EEE
,estaurants located outside #otels( "it# turnover $ore t#an ,MDEE(EEE
Ni&#tCclus( dance #alls( caarets( #ealt# centres( $assa&e %arlours( %ulic #ouses and eer
#ouses
Private clus( "it# turnover $ore t#an ,MDEE(EEE.
-ol! courses and drivin& ran&es( "it# turnover $ore t#an ,MDEE(EEE.
Private #os%itals( "it# turnover $ore t#an ,MDEE(EEE
Ot#ers
Q
C Insurance co$%anies
C Teleco$$unication service %roviders
C For"ardin& a&ents
C Car %ar/ o%erators 9t0o X 6=E/;
C Couriers 9t0o X 6=E/;
C Car re%air centres 9t0o X 6=E/;
C .ecurity &uard service %roviders 9t0o X 6=E/;
C E$%loy$ent a&encies 9t0o X 6=E/;
C Pulic accountants
R
C Advocates and solicitors
R
C Pro!essional en&ineers
R
C Arc#itects
R
C .urveyors
R
C Consultancy service %roviders
R
C Mana&e$ent service %roviders
R
C Car #ire !ir$s 9t0o X DEE/;
C Fir$s %rovidin& advertisin& services 9t0o X DEE/;
C Credit0c#ar&e cards ) "#ere t#e rate is a !lat ,M=E on t#e %rinci%al card and ,M<=
on all su%%le$entary cards.
K?ut t#e %rovision o! roo$s !ree o! c#ar&e !or tour o%erators or ot#ers %ro$otin&
t#e #otel or touris$ industry in Malaysia is exe$%t !ro$ service tax.
QT#e taxale services %rovided y any one taxale %erson include all t#e services
%rovided y t#e ot#er taxale %ersons.
RT#ese service %roviders are ale to %rovide services to ot#er co$%anies "it#in
t#e sa$e &rou%
KK
!ree o! tax so lon& as t#e sa$e service is not also %rovided to
t#ird %arties.
KK A co$%any "it#in t#e sa$e &rou% is one in "#ic# $ore t#an a =EF
e>uity sta/e is #eld or "#ere at least a <EF e>uity sta/e is #eld and
t#ere is an aility to a%%oint a $aBority o! t#e oard o! directors.
T#e taxale services are t#e usual services %rovided in t#e industry( ut excludin& out o! %oc/et
ex%enses( suc# as %#otoco%yin&( travellin&( tele%#one( %rintin& O stationery( and %osta&e.
,e&.DA .T,e&s:8= %rovides t#at t#e annual turnover t#res#olds are assessed on a rollin&( t"elve
calendar $ont# %eriod %rior to t#e $ont# in >uestion. ..8A .TA:8= contains antiCavoidance
%rovisions enalin& t#e tax aut#orities to treat se%arate le&al entities run y one %erson or t"o or
$ore connected %ersons as one sin&le entity.
ACCA F6. T8. .ALE. O .E,GICE TA4
..6 .TA:8= %rovides t#at service tax only a%%lies to services %rovided in Malaysia and not to
services %rovided in5
T#e @oint 'evelo%$ent Area
Lauan( Lan&/a"i and Tio$an
.ervices %rovided in connection "it# &oods or land situated outside Malaysia is si$ilarly not
suBect to service tax.
..4 .TA:8= %rovides !or t#e deter$ination o! value o! t#e service liale to tax as !ollo"s5
C !or services %rovided to nonCrelated %arties ) t#e %rice c#ar&ed( or "#ere no %rice is c#ar&ed( t#e
ar$:s len&t# $ar/et value o! t#e services %rovided(
C !or related %arty transactions ) t#e ar$:s len&t# $ar/et value.
TA4 A'MINI.T,ATION ACCA F6. TH.
ACCA F6. TH. TA4 A'MINI.T,ATION
,EAL P,OPE,TY -AIN. TA4 ACCA F6. T7.
Introduction
Ca%ital -ains Tax in Malaysia is &overned y t#e ,eal Pro%erty -ains Tax Act 6786 9*,P-TA:86+;(
"#ic# ca$e into !orce on 8
t#
Nove$er 678=. T#e Act is ad$inistered y t#e 'irector -eneral o! Inland
,evenue.
..D. ,P-TA:86 %rovides !or a real %ro%erty &ains tax to e levied on c#ar&eale &ains accruin& to a
c#ar&eale %erson in a year o! assess$ent on t#e dis%osal o! a c#ar&eale asset.
.c#edule = o! t#e Act( to&et#er "it# t#e ,eal Pro%erty -ains Tax 9Exe$%tion; 9No. <; Order <EE7 result
in t#e rate o! real %ro%erty &ains tax currently ein& =F !or dis%osals "it#in !ive years !ro$ t#e date o!
ac>uisition. 'is%osals $ade a!ter !ive years !ro$ t#e date o! ac>uisition are exe$%t !ro$ %ay$ent o! t#e
tax.
)hargeable %sset3 )hargeable ,erson 4 )hargeable 5ain
..<. ,P-TA:86 %rovides t#at a c#ar&eale asset is real %ro%erty( "#ic# is any land situated in Malaysia
and any interest( o%tion or ot#er ri&#t in or over suc# land. Land is also de!ined to include5
t#e land sur!ace(
t#e eart# elo" t#e sur!ace and sustances t#erein(
uildin&s aove or elo" t#e sur!ace(
trees( cro%s or ot#er ve&etation &ro"in& on land(
land covered y "ater.
C ut a c#ar&eale asset cannot e so$et#in& t#at !or$s %art o! t#e stoc/CinCtrade o! a usiness.
.c#edule < ,P-TA:86 %rovides t#at s#ares in a real %ro%erty co$%any 9*,PC+; are also c#ar&eale
assets. A real %ro%erty co$%any is a controlled co$%any 9 = directors( =E s#are#olders; t#at o"ns
real %ro%erty or s#ares in a real %ro%erty co$%any( t#e $ar/et value o! "#ic# is not less t#an 8=F o!
t#e value o! its total tan&ile assets
Q
.
QT#e co$%any need not #ave ,PC status at t#e date o! ac>uisition or t#e date o!
dis%osal !or its s#ares to e c#ar&eale assets( so lon& as at so$e %oint durin&
t#e %eriod o! o"ners#i% o! t#e s#ares t#e co$%any #as ,PC status.
..6. ,P-TA:86 %rovides t#at any %erson 9includin& individuals( ody o! %ersons
K
( %artners#i%( $ana&er
o! a 2indu Boint !a$ily( executors and trustees;( "#et#er or not resident in Malaysia( is assessale to real
%ro%erty &ains tax.
KFor co$%anies( t#e $ana&er( %rinci%al o!!icer( directors and secretary are Bointly
and severally assessale to any real %ro%erty &ains tax %ayale y t#e co$%any.
..8. ,P-TA:86 %rovides t#at a c#ar&eale &ain arises in res%ect o! a c#ar&eale asset i! t#e dis%osal %rice
exceeds t#e ac>uisition %rice.
s.6E. ,P-TA:86 %rovides t#at a year o! assess$ent is t#e calendar year 9!or all c#ar&eale %ersons;.
Determining the chargeable gain or allo*able loss
..8.96; ,P-TA:86 %rovides t#at a c#ar&eale &ain or allo"ale loss is t#e di!!erence et"een t#e
ac>uisition %rice and t#e dis%osal %rice. .c#edule < ,P-TA:86 %rovides !or t#e de!inition o! t#e
ac>uisition %rice and dis%osal %rice5C
Para.4. .c#.<. ,P-TA:86 %rovides t#at t#e ac/uisition price is t#e consideration %aid
Q
!or t#e asset plus
incidental costs o! ac>uisition( less5C
su$s received y "ay o! co$%ensation !or any da$a&e to t#e asset(
ACCA F6. T7. ,EAL P,OPE,TY -AIN. TA4
su$s received under any insurance %olicy coverin& t#e asset(
any de%osits lod&ed y a %ros%ective uyer t#at are !or!eited as a result o! t#e uyer %ullin& out.
QFor assets ac>uired e!ore 6 @anuary 678E( t#e ac>uisition %rice is t#e $ar/et
value o! t#e asset as at 6 @anuary 678E( and t#ere is no deduction !or t#e
incidental costs( and only su$s received !ro$ 6 @anuary 678E are deducted.
Notes. [ I! t#e ac>uisition %rice is ne&ative 9y reason o! t#e deductions allo"ed; t#e ne&ative a$ount
eco$es a c#ar&eale &ain at t#e ti$e t#e su$ is received.
[ For ,PC s#ares ac>uired "#en t#e co$%any did not #ave ,PC status( t#e ac>uisition %rice is
t#e $ar/et value o! t#e real %ro%erty o"ned y t#e co$%any as at t#e date o! ac>uisition %roC
rated accordin& to t#e nu$er o! s#ares ac>uired as a !raction o! t#e total nu$er o! s#ares
in issue as at t#e date o! ac>uisition.
[ 1#ere t#e assets o! a deceased %erson are dis%osed o! y executors or trustees( %ara.679D;
.c#.<. %rovides t#at t#ey are dee$ed to #ave ac>uired t#e assets at an ac>uisition %rice e>ual
to t#e $ar/et value o! t#e assets as at t#e date o! deat# o! t#e deceased %erson less any su$s
suse>uently received as co$%ensation( insurance or de%osits !or!eited.
Para.=. .c#.<. ,P-TA:86 %rovides t#at t#e disposal price is t#e consideration received !or t#e asset less5C
incidental costs o! dis%osal(
ex%enditure to en#ance or %reserve t#e value o! t#e asset(
ex%enditure incurred in estalis#in&( %reservin& or de!endin& title to( or to a ri&#t over( t#e asset
R
.
R1#ere t#e asset "as ac>uired e!ore 6 @anuary 678E( only ex%enditure incurred
!ro$ 6 @anuary 678E is deducted.
Para.6. .c#.<. ,P-TA:86 %rovides t#at incidental costs are t#ose incurred "#olly and exclusively !or
t#e %ur%oses o! t#e ac>uisition or dis%osal( ein&5C
Co$$ission or !ees !or any surveyor( valuer( accountant( a&ent or le&al adviser(
Costs o! trans!er 9includin& sta$% duty;(
Advertisin& costs to !ind a seller or uyer.
Allo"ale losses
I! t#e dis%osal %rice is less t#an t#e ac>uisition %rice t#en t#e loss is allo"ale y "ay o! a tax credit at
t#e a%%ro%riate rate a%%lied to t#e loss. T#e tax credit can e set a&ainst any real %ro%erty &ains tax due
!or t#at year o! assess$ent and any unasored tax credit can e carried !or"ard inde!initely. 2o"ever(
%ara.DD o! .c#.<. %rovides t#at t#e !ollo"in& losses are not allo"ed5
Losses on t#e dis%osal o! ,PC s#ares.
Losses "#ere #ad t#ere een a &ain( t#at &ain "ould e exe$%t under t#e Act. In %ractice( currently
&enerally t#is $eans t#at a loss on a dis%osal t#at is $ore t#an !ive years a!ter ac>uisition is
disallo"ed.
No &ain( no loss transactions
Para.D. .c#<. ,P-TA:86 %rovides t#at t#e dis%osal %rice is dee$ed e>ual to t#e ac>uisition %rice in t#e
!ollo"in& circu$stances5C
t#e devolution o! t#e assets o! a deceased %erson under a "ill
Note 6.
(
t#e trans!er o! assets et"een s%ouses or et"een a s%ouse and a co$%any controlled
K
y eit#er
s%ouse( or controlled
K
y eit#er s%ouse Bointly "it# connected %ersons
Q
( !or a consideration consistin&
o! at least 8=F in s#ares o! t#e co$%any
Note <.
(
t#e trans!er o! assets to0!ro$ a no$inee or trustee resident in Malaysia(
t#e trans!er o! assets y "ay o! security(
&i!ts to t#e -overn$ent a .tate -overn$ent( or local aut#ority( or a c#arity exe$%t !ro$ inco$e tax(
,EAL P,OPE,TY -AIN. TA4 ACCA F6. T7.
dis%osals as a result o! a co$%ulsory ac>uisition(
dis%osals in connection "it# .yaria#Cco$%liant !inancin& arran&e$ents a%%roved y t#e Central
?an/ or t#e .ecurities Co$$ission(
KControl $eans o"ners#i% o! $ore t#an =EF o! t#e ca%ital.
QA connected %erson is a c#ild( %arent or silin& o! eit#er s%ouse( and t#e s%ouse
o! suc# %erson.
Notes. 6. Para.679DA; .c#.<. ,P-TA:86 %rovides t#at t#e %erson ac>uirin& t#e asset does so at an
ac>uisition %rice e>ual to t#e $ar/et value at t#e date o! trans!er o! o"ners#i%( less any
su$s suse>uently received as co$%ensation( insurance or de%osits !or!eited.
<. Para.67 .c#.<. ,P-TA:86 %rovides t#at t#e %erson ac>uirin& t#e asset in#erits t#e
ac>uisition %rice and date o! t#e trans!eror.
Para.D4 .c#.<. ,P-TA:86 %rovides t#at t#e ac>uisition %rice !or t#e s#ares o! t#e
controlled co$%any s#all e t#e ac>uisition %rice o! t#e asset9s; trans!erred %lus any
%er$itted ex%enses 9ex%enditure y t#e trans!eror in en#ancin& t#e asset or in de!endin&
title to t#e asset; less any $oney %ay$ent received in t#e trans!er.
!isposals beteen companies in the same group ) Para.68. and %ara.67. .c#.<. ,P-TA:86 %rovide
t#at certain trans!ers o! assets are no &ain( no loss transactions "#ere t#e trans!eree co$%any in#erits
t#e ac>uisition %rice o! t#e trans!eror. T#e conditions are as !ollo"s5C
Prior a%%roval o! t#e '- $ust e otained
K
.
T#e trans!eree co$%any $ust e resident in Malaysia.
T#e trans!er is one o! t#e !ollo"in&5C
C et"een co$%anies in t#e sa$e &rou% to rin& aout &reater e!!iciency in o%erations !or a
consideration consistin& o! at least 8=F in s#ares( or
C %art o! a sc#e$e o! reor&anisation( reconstruction or a$al&a$ation( includin& t#e distriution
o! assets under li>uidation( "#ic# is in co$%liance "it# &overn$ent %olicy on ca%ital
%artici%ation in industry
Q
.
KT#e '- $ay "it#dra" t#e a%%roval u% to t#ree years later i!5C
C t#e trans!er a%%ears to #ave een $ade !or a reason ot#er t#an to i$%rove
o%erational e!!iciency or in connection "it# a sc#e$e o! reor&anisation(
reconstruction or a$al&a$ation( or
C t#e trans!eree co$%any ceases to e in t#e sa$e &rou% o! co$%anies as t#e
trans!eror co$%any( or
C t#e trans!eree co$%any ceases to e resident in Malaysia.
QIn t#is case( t#e trans!eree co$%any also in#erits t#e ac>uisition date o! t#e trans!eror
9$a/in& t#e transaction trans%arent !or real %ro%erty &ains tax %ur%oses;.
Transactions dee$ed at $ar/et value
Para.7. .c#.<. ,P-TA:86 %rovides t#at in t#e !ollo"in& circu$stances ac>uisitions and dis%osals are
dee$ed to e at $ar/et value5C
"#ere t#e transaction i! not $ade on ar$:s len&t# ter$s or y "ay o! &i!tK(
"#ere t#e consideration( or %art t#ereo!( cannot e valued(
"#ere t#e transaction is in connection "it# t#e loss o! e$%loy$ent or in connection "it# %ast
services in e$%loy$ent(
"#ere t#e transaction is in !ull or %art satis!action o! any det(
"#ere t#e transaction concerns t#e trans!er o! a usiness !or a lu$% su$ consideration(
"#ere t#e 'irector -eneral #as ta/en antiCavoidance action under s.<=9<;.
KPara.6<. .c#<. ,P-TA:86 %rovides t#at &i!ts et"een #usand and "i!e( %arent
and c#ild( or &rand%arent and &randc#ild are trans%arent !or real %ro%erty &ains
ACCA F6. T7. ,EAL P,OPE,TY -AIN. TA4
tax %ur%oses and t#e donee si$%ly in#erits t#e ac>uisition %rice and t#e
ac>uisition date o! t#e donor.
Note 1#ere t#e consideration consists o! anot#er asset( in an exchange( t#en t#e dis%osal %rice is t#e
$ar/et value o! t#e asset received. I! t#e asset received #as no $ar/et value t#e dis%osal %rice
is t#e $ar/et value o! t#e asset dis%osed o!.
Ac>uisition and 'is%osal 'ate
Para.6=. .c#.<. ,P-TA:86 %rovides !or t#e deter$ination o! t#e ac>uisition and dis%osal date( as
!ollo"s5C
1#ere t#ere is a "ritten a&ree$ent( t#e dis%osal and ac>uisition date is t#e date o! t#e a&ree$ent.
1#ere t#ere is no "ritten a&ree$ent( t#e dis%osal date is t#e earlier o!5C
C t#e date o! trans!er o! o"ners#i%(
C t#e date on "#ic# t#e "#ole a$ount o! t#e consideration #as een received y t#e dis%oser.
Ac>uisition and 'is%osal
An ac/uisition is de!ined in ..<. ,P-TA:86 to include an ac>uisition y "ay o! %urc#ase( &rant(
exc#an&e( &i!t( settle$ent or ot#er"ise.
A disposal is de!ined in ..<. ,P-TA:86 to $ean5 sell( convey( trans!er( assi&n( settle or alienate "#et#er
y a&ree$ent or y !orce o! la".
1ates of 1eal ,roperty 5ains Tax
.c#.= ,P-TA:86 %rovides !or t#e rates o! real %ro%erty &ains tax( "#ic# currently are as !ollo"s5C
For dis%osals "it#in t"o years o! ac>uisition DEF
For dis%osals in t#e t#ird year !ro$ ac>uisition <EF
For dis%osals in t#e !ourt# year !ro$ ac>uisition 6=F
For dis%osals a!ter !our year !ro$ ac>uisition =F
2o"ever( !or individuals "#o are not citiJens or %er$anent residents( t#e rate is DEF !or dis%osals "it#in
!ive years !ro$ ac>uisition( and =F t#erea!ter.
Exemptions
..H. O .c#.D. ,P-TA:86 %rovide !or an exe$%tion !ro$ real %ro%erty &ains tax in res%ect o! a %rivate
residence o! a citiJen o! or %er$anent resident in Malaysia( so lon& as5
t#e residence is o"ned
K
y an individual and occu%ied( or certi!ied !it !or occu%ation( as a %lace o!
residence(
t#e election0a%%lication is t#e only one a%%lied !or in t#e individual:s li!eti$e(
t#e election0a%%lication !or exe$%tion is in "ritin&.
KT#e individual $ust e re&istered as t#e %ro%rietor o!( or t#e #older o! a lease
over( t#e land.
..7 O .c#.4. ,P-TA:86 %rovide !or t#e !ollo"in& exe$%tions5C
Individuals are exe$%t !ro$ real %ro%erty &ains tax u% to t#e #i&#er o! 6EF o! t#e c#ar&eale &ain
and ,M6E(EEE %er c#ar&eale asset( so lon& as t#e asset is not %art o! a lar&er c#ar&eale asset.
T#e a$ount o! estate duty %ayale under a "ill is exe$%t( y "ay o! deduction !ro$ t#e c#ar&eale
&ain( so lon& as t#e dis%oser is co$%elled to dis%ose o! t#e asset in order to %ay t#e estate duty.
,EAL P,OPE,TY -AIN. TA4 ACCA F6. T7.
Any &ains accruin& to t#e -overn$ent( a .tate -overn$ent or local aut#ority are exe$%t.
T#e ,eal Pro%erty -ains Tax 9Exe$%tion; 9No. <; Order <EE7 %rovides !or t#e !ollo"in& exe$%tions5C
'is%osals $ade a!ter !ive years !ro$ t#e date o! ac>uisition are exe$%t !ro$ t#e %ay$ent o! ,P-T.
A !raction o! t#e c#ar&eale &ain is exe$%t( deter$ined as !ollo"s5
&ain C#ar&eale
rate A%%licale
=F C rate A%%licale
a$ount Exe$%t =
%dministration
,eturns
..6D. ,P-TA:86 %rovides t#at every c#ar&eale %erson( or t#eir no$inee( "#o dis%oses o! or ac>uires a
c#ar&eale asset s#all !ile a return "it# t#e 'irector -eneral "it#in 6E days o! t#e date o! dis%osal(
s%eci!yin& t#e ac>uisition %rice( dis%osal %rice and &ain or loss on dis%osal( and %rovidin& su%%ortin&
docu$entation includin& a valuation re%ort y a >uali!ied valuer i! t#e $ar/et value is to e a%%lied.
..<7. ,P-TA:86 %rovides t#at a %erson "#o !ails to $a/e a return is &uilty o! an o!!ence %unis#ale y a
!ine o! u% to ,M=(EEE and0or a ter$ o! i$%rison$ent o! u% to 6< $ont#s.
..<6?. ,P-TA:86 %rovides t#at t#e ac>uirer $ust "it##old t#e "#ole a$ount o! any $oney %ayale u%
to <F o! t#e total consideration %ayale and $ust %ay t#is a$ount to t#e '- 9"#et#er or not "it##eld;
"it#in 6E days o! t#e date o! dis%osal. Failure to %ay t#is a$ount results in a !ine o! 6EF o! t#e a$ount
outstandin& ein& i$%osed.
Assess$ent
..64. ,P-TA:86 %rovides t#at t#e '- is e$%o"ered to $a/e an assess$ent u%on recei%t o! t#e return or
at any ot#er ti$e i! it a%%ears to #i$ t#at a c#ar&eale %erson is c#ar&eale "it# real %ro%erty &ains tax.
T#e '- $ay acce%t t#e !i&ures in t#e return or $ay adBust t#e$ as considered necessary.
..<8. ,P-TA:86 %rovides t#at t#e '- $ay y "ritten notice re>uire any %erson to %rovide !urt#er
in!or$ation "it# re&ard to a return $ade or re>uired to e $ade under t#e Act( "it#in 64 days. In
addition( t#e '- $ay y "ritten notice re>uire any %erson to %rovide an/ state$ents and details o! ot#er
assets o"ned( "it#in DE days or $ore 9as s%eci!ied;. T#e '- $ay instread i$%ose a %enalty o! trele t#e
a$ount o! tax %ayale.
Incorrect ,eturns
..DE. ,P-TA:86 %rovides t#at any %erson $a/in& an incorrect return or %rovidin& incorrect in!or$ation
is &uilty o! an o!!ence %unis#ale y a !ine o! u% to ,M=(EEE and a %enalty o! doule t#e a$ount o! tax
%ayale.
1il!ul Evasion
..D6. ,P-TAM86 %rovides t#at any %erson "#o "il!ully and "it# intent to evade or assist any ot#er %erson
to evade tax is &uilty o! an o!!ence %unis#ale y a !ine o! u% to ,M6E(EEE and0or a ter$ o!
i$%rison$ent o! u% to D years and a %enalty o! trele t#e a$ount o! tax under%aid.
ACCA F6. T7. ,EAL P,OPE,TY -AIN. TA4
Pay$ent
..<6. ,P-TA:86 %rovides t#at on service o! t#e notice o! assess$ent !ro$ t#e '- t#e c#ar&eale %erson
#as DE days "it#in "#ic# to %ay t#e tax. Any a$ount o! t#e tax re$ainin& un%aid attracts a %enalty o!
6EF.
A%%eals
..6H. ,P-TA:86 %rovides !or a ri&#t o! a%%eal( $a/in& use o! t#e a%%eal %rovisions o! t#e Inco$e Tax
Act 6768.
An example of a real property gains tax calculation is as follos0-
Price received u%on dis%osal5 8EE(EEE
Less5 Incidental costs o! dis%osal5 98(EEE;
En#ance$ent0%reservation costs5 9=D(EEE;
'e!endin& title costs5 96E(EEE;
!isposal price5 6DE(EEE
Price %aid u%on ac>uisition5 <78(EEE
Plus5 Incidental costs o! ac>uisition5 <8(EEE
Less5 Co$%ensation received5 96=(EEE;
Insurance %roceeds5 9<=(EEE;
'e%osit !or!eited5 964(EEE;
Ac/uisition price5 9<8E(EEE;
Gain12loss35 D6E(EEE
.c#.4. Exe$%tion5C 9D6(EEE;
D<4(EEE
Exe$%tion Order <EE75 9<66(EEE;
Note 6.
-ain suBect to tax5 6EH(EEE
Tax at 6=F5 66(<EE
Note <.
Note 6. .u%%ose t#e dis%osal is "it#in !our years o! ac>uisition.
<66(EEE D<4(EEE
6=F
=F C 6=F
a$ount Exe$%t = =
Note <. A >uic/er calculation is =F o! D<4(EEE I S 66(<EE.

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