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2012/2013
Malaysian Tax and Business Booklet
PP 13148/07/2013
(032730)
2012/2013
MALAYSIAN
TAX AND BUSINESS BOOKLET
A quick reference guide outlining Malaysian
tax legislation and other business information
The information provided in this booklet is
based on taxation laws and other legislation,
as well as current practices, including
legislative proposals and measures contained
in the 2013 Malaysian Budget
announced on 28 September 2012
This booklet incorporates in
coloured italics the 2013 Malaysian Budget
proposals announced on 28 September 2012. These proposals will not
become law until their enactment which is expected to be in early 2013
and may be amended in the course of its passage through Parliament.
This booklet also incorporates in
coloured italics some other proposals
announced recently which have not been enacted to date.
This booklet is intended to provide a general guide to the subject matter
and should not be regarded as a basis for ascertaining the liability to tax
in specific circumstances. No responsibility for loss to any person acting
or refraining from acting as a result of any material in this publication can
be accepted by PricewaterhouseCoopers. Recipients should not act on
the basis of this publication without seeking professional advice.
© 2012 PricewaterhouseCoopers. All rights reserved.
"PricewaterhouseCoopers" and/or "PwC" refers to the individual members of
the PricewaterhouseCoopers organisation in Malaysia, each of which is a
separate and independent legal entity. Please see www.pwc.com/structure
for further details.
Printed in Malaysia by SP-Muda Printing Services Sdn. Bhd. Tel: 03-
62735893, 62742463
CONTENTS
TAX INFORMATION
AGRICULTURE ALLOWANCES 23
Qualifying expenditure and rates 23
INCOME TAX 1
Scope of taxation 1
DOUBLE TAX TREATIES AND 24
Basis of assessment 1
WITHHOLDING TAX RATES
PERSONAL INCOME TAX 2 TAX INCENTIVES 26
Tax residence status of individuals 2
A. Manufacturing / Services /
Self-assessment for individuals 2
Trading Sector
Rates of tax 3 Pioneer status 26
Personal reliefs 4 Investment tax allowance (ITA) 27
Tax rebates 6 Enhanced pioneer status and 27
ITA
EMPLOYMENT INCOME 6 Special incentives scheme 30
Derivation 6 Allowance for increased export 30
Exemption (short-term employees) 7 Approved services project (ASP) 31
Employees of regional operations 7 Food production 32
Types of employment income and 7 Reinvestment allowance 32
valuation
Benefits-in-kind (BIK) 8 B. Biotechnology Industry 33
Collection of tax 11
C. Financial Services Sector
CORPORATE INCOME TAX 11 Closed-end fund company 34
Residence status 11 Foreign fund management 34
Income tax rates 11
company
Self-assessment 12 Insurance and trading of sukuk 34
Profit distribution 14 Issuance of agro-sukuk, retail 35
Losses 14 sukuk and retail bonds
Group relief 15 Islamic Banking and Takaful 35
Business profits and deductions 15 Business
Transfer pricing 16 Islamic fund management 35
Thin capitalisation 16 Islamic securities 36
Islamic stock broking company 36
CAPITAL ALLOWANCES 17 Listing of foreign companies and 36
Industrial buildings 17 foreign products in Bursa
Plant and machinery 18 Malaysia
Accelerated capital allowances 20 Real Estate Investment Trust 36
Disposals 22 (REIT) / Property Trust Fund
Controlled transfers 22 (PTF)
Disposals within 2 years 22 Special purpose vehicle (SPV) 37
Unabsorbed capital allowances 22 for Islamic financing
Venture capital industry 37
CONTENTS
Treasury Management Centre 39
I. Research and Development
(TMC)
(R&D)
Tun Razak Exchange (TRX) 39 Income tax exemption and 48
Investment tax allowance
D. Green Incentives Double deduction 48
Conservation of the 40 Industrial building allowance 48
environment Commercialisation of R&D findings 49
Green Building Index (GBI) 41
Certification J. Shipping Industry 49
Reduction of greenhouse gas 41
emission K. Special Economic Corridors
Renewable energy source 41 Iskandar Malaysia (IM) 49
E. Healthcare L. Tourism, Hotels and Exhibitions
Private healthcare facilities 42 Conference promotion 50
Health tourism 43 Domestic tours 50
Group inclusive tours 50
F. Information and International trade exhibition 51
Communication Technology 4 and 5 star hotels 51
Cost of developing websites 43
Offshore trading via websites 43
M. Double Deduction 51
in Malaysia
INCOME EXEMPT FROM TAX 53
G. Other Incentives
Infrastructure allowance 43
REAL PROPERTY GAINS TAX 56
Infrastructure for public use 44
(RPGT)
Owners of Malaysian brands 44 Charge to tax 56
Proprietary rights 44 Real property company 56
Private higher education 44 Chargeable person 57
institutions (PHEIs) Withholding of RPGT 57
Private schools 45 Exemptions 57
Pre-School Education 45
Childcare centres 45
SERVICE TAX 58
Sponsorship of arts 46 Basis of taxation 58
Rate of tax 58
H. Regional Operations Taxable person / licensing 58
International Procurement 46 Taxable persons and taxable 58
Centre (IPC) services
International trading company 46 Payment of service tax / taxable 61
Operational Headquarters 47 period
(OHQ) company Refund of service tax on 61
Regional Distribution Centre 47 doubtful debts or “bad debts”
(RDC)
CONTENTS
SALES TAX 62 Stamping 69
Basis of taxation 62 Penalty 69
Value of goods 62 Relief / Exemption / Remission 69
Rates of tax 62 from stamp duty
Class of goods 62
Taxable goods 62
OTHER BUSINESS INFORMATION
Goods exempted 63
Licensing 63
ECONOMIC INDICATORS AND 73
Exemption from licensing 63
DIRECTIONS
Tax-free raw material 64
Drawback 64 FINANCIAL REPORTING 78
Payment of sales tax / taxable 64
period EMPLOYEES’ PROVIDENT FUND 79
Refund of sales tax on doubtful 64 Scope of EPF 79
debts or “bad debts” Rates of contributions 79
Members' accounts 80
IMPORT DUTIES 64 Withdrawals 80
Rates of duties 64
Tariff rate quota 65 EMPLOYMENT GUIDELINES 81
Value of goods 65 Guidelines for employment of 81
Exemptions 65 expatriates
Prohibition of imports 65 Employment of foreign workers 83
LICENSED MANUFACTURING 66 EMPLOYEES’ SOCIAL SECURITY 84
WAREHOUSE FUND
Scope of SOCSO 84
FREE ZONE 66 Rates of contributions 84
FREE TRADE AGREEMENTS 66 HUMAN RESOURCE 85
DEVELOPMENT FUND (HRDF)
EXPORT DUTIES 66 Scope of HRDF 85
Rate of contribution 86
EXCISE DUTIES 67 Financial assistance 86
Basis of taxation 67
Rates of duties 67 FOREIGN EQUITY GUIDELINES 86
Excise licensing 67 Manufacturing sector 86
Payment of duty 67 Other sectors 87
Exports 67 Liberalisation measures 87
STAMP DUTY 68 EXCHANGE CONTROL 88
Basis of taxation 68 Remittances abroad 88
Rates of duty 68 Non-resident controlled 90
companies
CONTENTS
Purchase of immoveable 91
properties by non-residents
Borrowings in foreign currency 91
by a resident
Borrowings in ringgit by a 91
resident
Foreign currency accounts 92
Non-resident accounts 92
Exports from Malaysia 93
MSC Malaysia companies 93
Approved Operational 94
Headquarters (OHQ)
IMPORTANT 94
FILING / FURNISHING
DATES
INCOME TAX
1
INCOME TAX
Scope of taxation
Income tax in Malaysia is imposed on income accruing in or derived from
Malaysia with the following exception:
• A resident company carrying on a business of air/sea transport,
banking or insurance is assessable on a world income scope.
However with effect from (w.e.f) 1 January 2003, income attributable
to a Labuan business activity of the branch or subsidiary of a
Malaysian bank in Labuan is not subject to tax under the Income Tax
Act 1967 but is subject to the provisions of the Labuan Business
Activity Tax Act 1990. W.e.f year of assessment (YA) 2008 (under
the Income Tax Act 1967), a Labuan company can make an
irrevocable election to be taxed under the Income Tax Act 1967 in
respect of its Labuan business activity.
• In respect of Malaysian owned banks, insurance companies and
takaful companies, the profits of newly established overseas
branches or remittances of new overseas subsidiaries are tax
exempt for 5 years, for applications received by Bank Negara
Malaysia not later than 31 December 2015.
Basis of assessment
Income is assessed on a current year basis from YA 2000. The year of
assessment is the year coinciding with the calendar year, for example,
the YA 2013 is the year ending 31 December 2013. The basis period for
a business source is normally the financial year ending in that particular
YA. For example the basis period for the YA 2013 for a business which
closes its accounts on 30 June 2013 is the financial year ending 30 June
2013. From YA 2001, all non-business sources of income of a company
are also assessed on the basis of the financial year.
W.e.f YA 2004, all income of persons other than a company, co-
operative or trust body, are assessed on a calendar year basis. Also,
from that year of assessment, cooperative societies and trust bodies are
assessed in the same way as companies, i.e. on the basis of the
financial year ending in that particular YA.
PERSONAL INCOME TAX
2
PERSONAL INCOME TAX
Tax residence status of individuals
• An individual is regarded as tax resident if he meets any of the
following conditions, i.e. if he is
in Malaysia for at least 182 days in a calendar year;
in Malaysia for a period of less than 182 days during the year
(“shorter period”) but that period is linked to a period of physical
presence of 182 or more “consecutive” days in the following or
preceding year (“longer period”). Temporary absences from
Malaysia for certain specified reasons during the shorter or
longer period are counted as part of the consecutive days,
provided that the individual is in Malaysia before and after each
temporary absence;
in Malaysia for 90 days or more during the year and, in any 3 of
the 4 immediately preceding years, he was in Malaysia for at
least 90 days or was resident in Malaysia;
resident for the year immediately following that year and for each
of the 3 immediately preceding years.
Self-assessment for individuals
Self-assessment for individuals was implemented from YA 2004. Under
the Self Assessment System (SAS), the responsibility for correctly
assessing a person’s tax liability is transferred from the Inland Revenue
Board (IRB) to the taxpayer.
The prescribed Form B/BE/M for YA 2012 will be issued to individual
taxpayers in January 2013 or earlier and will be due for submission not
later than 30 April 2013 except for those who derive business income
such as sole proprietors and partnerships where the deadline for tax
filing is 30 June each year. The submission of the Form B/BE/M is
deemed to be a notice of assessment for which tax is due and payable
on the same date as the filing deadline.
Under the SAS, the IRB monitors taxpayers’ compliance with the law
through field audits.
[...]... withholding tax on dividends paid by Malaysian companies Fees for technical and management services rendered in Malaysia are liable to Malaysian income tax There is a restricted double tax treaty with Argentina and the United States of America which deals with the taxation of air and sea transport operations in international traffic TAX INCENTIVES Malaysia offers a wide range of tax incentives ranging from tax. .. companies are collected by means of withholding tax The withholding tax is payable within one month of crediting or paying the non-resident company OME Profit distribution From YA 2008, the imputation system of taxation was replaced by a single-tier system of taxation which came into effect from 1 January 2008 Under this system, tax on a company’s profits is a final tax and dividends are exempt in the hands... petrol usage 10 CORPORATE INCOME TAX Annual value of driver provided: RM7,200 Collection of tax Taxes are collected from employees through compulsory monthly deductions from salary under the Monthly Tax Deduction (MTD) system Individuals receiving non-employment income are required to pay by compulsory bi-monthly installments CORPORATE INCOME TAX Residence status A company is tax resident in Malaysia if... used as living accommodation or for welfare of a person employed in working a farm Any other building 23 Rates % 50 50 50 20 10 DOUBLE TAX TREATIES AND WITHHOLDING TAX RATES DOUBLE TAX TREATIES AND WITHHOLDING TAX RATES The following countries have concluded double tax treaties with Malaysia: Treaty countries Interest Albania Australia Austria Bahrain Bangladesh Belgium Bosnia & Herzegovina * Brunei... not eligible Business profits and deductions Business profits are computed on the basis of normal accounting principles as modified by certain tax adjustments Generally, deduction is allowed for all outgoings and expenses wholly and exclusively incurred in the production of income Deductions which are specifically disallowed include: Domestic or private expenses Income tax or similar taxes Preliminary... – Tax Treatment Co-operative Society Gratuity Bilateral Credit And Unilateral Credit 12 Date 16 Nov 2011 16 Nov 2011 5 Dec 2011 20 Dec 2011 CORPORATE INCOME TAX Ruling 12/2011 1/2012 2/2012 3/2012 * 4/2012 5/2012 Subject Tax Exemption On Employment Income Of Non-Citizen Individuals Working For Certain Companies In Malaysia Compensation For Loss Of Employment Foreign Nationals Working In Malaysia – Tax. .. furnish estimates of tax payable or make installment payments if the basis period for the year of assessment in which the company commences operations is less than 6 months The balance of tax payable by a company is due to be paid on the last day by which the return must be submitted (see “Submission of returns and assessment” above) In general, tax on all income other than income from a business or employment... Technical or management service fees Interest Dividends – single tier – franked Business Income other than the above 10 10 10* 15 Exempt 25 25 10 * Only fees for technical or management services rendered in Malaysia are liable to tax Where the recipient is resident in a country which has a double tax treaty with Malaysia, the tax rates for specific sources of income may be reduced Interest paid to a non-resident... allowances based on capital expenditure and enhanced tax deductions These tax incentives are generally available for tax resident companies A MANUFACTURING / SERVICES / TRADING SECTOR Pioneer status Eligibility: Companies intending to engage or commenced operations less than a year in a promoted activity or to produce a promoted product in the 26 TAX INCENTIVES manufacturing, food processing, agricultural,... shareholders Companies are no longer required to deduct tax at source from dividends distributed to shareholders A transition period of 6 years is provided for implementation of the single-tier system All companies will move to the single-tier tax system on 1 January 2014 even though they may still have unutilized franking-credits as at 31 December 2013 Losses Business losses can be set off against income from . 2012/2013
Malaysian Tax and Business Booklet
PP 13148/07/2013
(032730)
2012/2013
MALAYSIAN
TAX AND BUSINESS BOOKLET
. reference guide outlining Malaysian
tax legislation and other business information
The information provided in this booklet is
based on taxation laws and
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