OTHER TAX AND INVESTMENT
of Income for Investment Holding Companies for Year of Assessment 2000 (Current Year
of Interest Income Derived by Banks for Achieving Annual Loan Growth Target
Allowance Rates for Qualifying Capital Expenditure
Exemption on Income of a Non-Resident Individual / Non-Resident Company or Organisation
Provision of Lecturing Services
of Income Derived from Domestic Tours / Group Inclusive Tours
of Corporate Debt Restructuring Expenses
of Information Technology-Related Expenses
- Australia Tax Treaty ˇ Protocol
Malaysia - Japan Double Taxation Agreement
Concession in Self-Assessment System
In the early stages of implementation of the self-assessment system, the Inland Revenue
has granted the following concessions for year of assessment 2001 only where companies
can justify that the non-compliance with certain provisions under the Act was caused
by events beyond their control :-
of Estimated Tax Payable
Section 107C(2) provides that the estimate of tax payable must be furnished to the
DG not later than 30 days before the beginning of the basis period for a year of
assessment. However, no penalty for late submission of the estimated tax payable
would be imposed where companies submit valid grounds for being unable to meet the
stipulated deadline together with their Form CP 204.
of Estimated Tax Payable
Under the special provision to the Income Tax (Amendment) Act, 1999, the estimate
of tax payable to be furnished to the DG for year of assessment 2001 shall not be
less than the amount of tax payable for year of assessment 1999. However, the DG
will accept a lower estimate where companies can justify that the non-compliance
was caused by events beyond their control or where the companies have suffered losses
in the current year. A letter to support a lower estimate must be submitted together
with the prescribed Form CP 204 for consideration by the DG.
Estimate of Tax Payable
A revised estimate of tax payable may be made in the sixth month of the basis period
for a year of assessment using the prescribed Form CP 204. Companies are now allowed
another 2 opportunities in addition to the above to revise their tax payable, i.e.
in the 3rd, 9th or 12th month of the basis period. The applications must be accompanied
by valid reasons for consideration by the DG.
The DG has granted a concession to submit the return in the prescribed form for year
of assessment 2001 within 8 months from the date following the close of the accounting
period which constitutes the basis period for the year of assessment.
Public Ruling (PR)
In line with the shift to self-assessment and to assist taxpayers in the preparation
of their tax returns, PRs are issued by the Inland Revenue from time to time. To
date, the following PRs have been issued :-
a. PR 1/2000
ˇ Basis period for a non-business source
Currently, the basis period for non-business sources such as dividend and interest
is the calendar year coinciding with the year of assessment while the basis period
for the business source is generally the financial year.
Under this ruling, the DG gives concession to companies or co-operatives to elect
the basis period of the business source as the basis period for non-business source.
This has to be consistently applied after the election has been made.
b. PR 2/2000
ˇ Basis period for a business source
(companies & co-operatives)
c. PR 3/2000 ˇ Basis period for a business source
(individuals & persons other than companies/co-operatives)
Both rulings provide the basis for determining the basis periods of business income
for the following situations :-
i. commencing a new business;
ii. changing of accounting date of existing business; and
iii. joining a partnership.
d. PR 4/2000
ˇ Keeping sufficient records (companies & co-operatives)
e. PR 5/2000 ˇ Keeping sufficient records (individuals & partnerships)
f. PR 6/2000 ˇ Keeping sufficient records
(persons other than companies or individuals)
These rulings prescribe general guidelines on how proper records should be maintained
and the nature of such records. Receipts must be serially numbered if the annual
gross takings from sale of goods exceed RM150,000 or RM100,000 from performance of
g. PR 7/2000
ˇ Providing reasonable facilities and assistance
This ruling outlines the requirement of providing reasonable facilities and assistance
to the DG or its authorised officer and the application of the law (Section 80).
The ruling provides officers from the Inland Revenue access to all documents including
electronic data as and when requested. It also prescribes penalties for failure to
provide such reasonable facilities and assistance.
Return of Income for Investment Holding Companies for Year of Assessment 2000 (Current
It is the practice of the Inland Revenue to assess the income of an investment holding
company on a calendar year basis where the financial year ends on a date other than
31st December. The Inland Revenue has on 22nd August 2000 confirmed that the deadline
for filing of the tax return for the above assessment year in respect of such companies
would be 31st May 2001.
However, the Inland Revenue has, in a letter dated 19th September 2000 to the professional
bodies, confirmed that investment holding companies which closed their accounts on
31st October, 30th November and 31st December are required to submit their tax returns
within 8 months from the date of closure of their accounts.
Exemption of Interest Income Derived by Banks for Achieving Annual Loan Growth Target
As announced in the 2000 Budget, the adjusted income in respect of interest derived
by a banking institution from loans or profits derived from financing in excess of
8% annual growth would be exempted from income tax. To qualify for the tax exemption,
the banking institution must have achieved at least 10% annual growth for the period
1st January 2000 to 31st December 2000. This has been gazetted via the Income Tax
(Exemption)(No. 5) Order 2000.
In addition, the banking institution needs to obtain a letter from Bank Negara Malaysia
a. that the banking institution has achieved at least 10% annual growth for the period
1st January 2000 to 31st December 2000; and
b. the amount of interest or profits which is in excess of 8% annual growth.
The above exemption applies to interest derived from loans or profit derived from
financing granted within the period 1st January 2000 until 31st December 2000.
Annual Allowance Rates for Qualifying Capital Expenditure
Pursuant to the Income Tax (Qualifying Plant Annual Allowances) Rules 2000, the rates
of annual allowances are simplified to 3 rates for qualifying capital expenditure
incurred from year of assessment 2000 (current year basis) onwards :-
|Type of Assets
||Annual Allowance %
|Motor vehicles, heavy machinery
|Plant and machinery
The rules also provide that expenditure on assets or parts of assets with a life
span not exceeding two years shall be allowed for deduction as a revenue expenditure
on a replacement basis.
The initial allowance of 20% is maintained.
With this new rule, the annual allowances rates ranging from 6% to 20% according
to the Income Tax (Qualifying Plant Annual Allowances) Rules 1968 are revoked.
The Inland Revenue had in a meeting between the professional bodies and the Technical
Division of the Inland Revenue on 28th January 2000, confirmed that the new annual
allowance rates will apply to the existing assets provided that the rate currently
claimed on the asset is lower than the new rate. Where the current rate claimed on
the asset is higher than the new rate, the Inland Revenue will allow the current
rate to continue to apply.
The accelerated depreciation allowance of 40% would continue to apply for qualifying
capital expenditure incurred for computers and information technology equipment,
control equipment and computer software.
50% Tax Exemption on Income of a Non-Resident Individual / Non-Resident Company or
Organisation Derived from
Provision of Lecturing Services
Pursuant to the Income Tax (Exemption)(No. 26) Order 2000, the Minister exempts a
non-resident individual from the payment of income tax on 50% of gross income derived
by that individual from undertaking an employment relating to teaching or lecturing
in any approved field at any approved institution.
Similarly, 50% of the adjusted income derived by a non-resident company or organisation
from a source consisting of the provision of lecturing services in any approved field
at any approved institution would be exempted from tax as provided under the Income
Tax (Exemption)(No. 27) Order 2000.
The term ýapproved fieldţ means any field as follows :-
a. Engineering (mechanical, electrical and electronic, aerospace, chemical, microelectronic,
computer and telecommunication system);
b. Computer science and information technology;
c. Medical science, dentistry and pharmacy;
e. Allied health;
f. Architecture, planning and survey;
g. Science and mathematics; and
h. Mass communication.
The term ýapproved institutionţ means any university, college or public institution
of higher learning or private institution of higher learning approved by Ministry
of Education Malaysia or any training institution approved by the Minister of Finance.
The Orders shall be deemed to have come into operation from year of assessment 1997
and are effective till year of assessment 2000 (current year basis).
Exemption of Income Derived from Domestic Tours / Group Inclusive Tours
As announced in the 2000 Budget, the Minister exempts a company from payment of tax
in respect of the statutory income derived from domestic tours. To be eligible for
the exemption, the total number of local tourists on domestic tours should not be
less than 1,200 in the basis period for a year of assessment. The proposal has been
gazetted vide the Income Tax (Exemption)(No. 6) Order 2000.
Similarly, the statutory income of a company derived from group inclusive tours would
also be exempted from tax if the total number of tourists from outside Malaysia on
group inclusive tour is not less than 500 in the basis period for a year of assessment
as gazetted under the Income Tax (Exemption)(No. 7) Order 2000.
The above exemptions are given to companies resident in Malaysia which are licensed
under the Tourism Industry Act, 1992 to carry on a tour operating business. A separate
account for the income derived from domestic tours/group inclusive tours has to be
maintained by the companies.
The income exempted shall be credited to an exempt account for payment of 2 tiers
of tax-exempt dividend. Where the first tier shareholder is a company, that company
is permitted to pay tax free dividends out of the tax-exempt dividends received.
For the purposes of the above Orders :-
ýdomestic tourţ means a tour package for travel within Malaysia, undertaken by local
tourists inclusive of transportation by air, land or sea and accommodation;
ýlocal touristsţ means individuals who are Malaysian citizens or residing in Malaysia;
ýgroup inclusive tourţ means a tour package to or of Malaysia or any place within
Malaysia undertaken by tourists from outside Malaysia, inclusive of transportation
by air, land or sea and accommodation;
ýtour operating businessţ means any business of providing all or any of the following
a. arranging for sale or commission any transportation, accommodation, tour services
or any other incidental services for tourists within or outside Malaysia;
b. organising or conducting for sale or commission;
c. providing conveyances for hire to tourists;
d. any other services incidental to any of the services enumerated above.
The Orders have effect for years of assessment 2000 (current year basis) and 2001.
Deduction of Corporate Debt Restructuring Expenses
As announced in the 2000 Budget, all corporate debt restructuring expenditure incurred
in respect of a corporate debt restructuring scheme completed between 30th October,
1999 and 31st December 2000 under the supervision of the Corporate Debt Restructuring
Committee, Bank Negara Malaysia or under Pengurusan Danaharta Nasional Berhad will
be allowed as a deduction for tax purposes. This has been gazetted under the Income
Tax (Deduction for Corporate Debt Restructuring Expenditure) Rules 2000 with effect
from 30th October 1999.
Deduction of Information Technology-Related Expenses
Under the Income Tax (Deduction for Information Technology-Related Expenditure) Rules
2000, effective from year of assessment 2000 (current year basis), operating expenditure
relating to the use of information technology for the improvement of management or
production processes will qualify for deduction in arriving at the adjusted income.
However, this does not apply to qualifying capital expenditure which relates to information
technology. This was proposed in the 2000 Budget.
Double Taxation Agreement
Malaysia has signed 60 double taxation agreements (DTA) with the following countries
||Papua New Guinea
||People's Republic of China
|Federal Republic of Germany
|Islamic Republic Of Iran*
||United Arab Emirates
||United States of America
* DTAs pending ratification.
Summary of the effective dates for various taxes relating to new DTAs which came
into force recently :-
Other Taxes (YA)
1st January 2000
1st January 1999
1st January 1999
1st January 2000
1st January 2000
1st January 2000
1st January 1997
1st January 1998
|Papua New Guinea
1st January 2000
1st January 2001
1st January 2002
The Malaysia - Australia Tax Treaty ˇ Protocol
The above protocol gazetted on 21st October 1999 came into force on 27th June 2000.
With regard to taxation of payment for services (including consultancy services)
provided to Malaysia by an Australian enterprise, Malaysian tax will not be applicable
unless such services are rendered in Malaysia and the services continue for a period
or periods aggregating more than 3 months within any 12-month period, thereby creating
a permanent establishment (PE) in Malaysia.
In the absence of a PE created under the above circumstances, withholding tax under
Section 109B of the Act on payment to an Australian enterprise for services is therefore
The New Malaysia - Japan Double Taxation Agreement
The new Malaysia ˇ Japan Double Taxation Agreement gazetted on 29th April, 1999 entered
into force on 31st December, 1999. In respect of Malaysian withholding tax, the new
treaty will apply to income derived on or after 1st January 2000 and for all other
Malaysian taxes to income, effective from year of assessment 2001 onwards. This new
double taxation agreement replaces the 1971 tax treaty in its entirety.
The rate of withholding tax on interest is 10% instead of 15% under the previous
The withholding tax of 10% on royalties remains unchanged. However, the definition
of ýroyaltiesţ has been expanded to include copyrights of literary, artistic or scientific
work including software, cinematograph films and films or tapes for radio or television
broadcasting. Included also are receipts from bare boat charter of ships or aircraft
unless dealt with under the shipping and air transport article.