OTHER ISSUES

Guidelines on Application for Double Deduction for Research and Development (R&D) Expenditure under Section 34A of the Income Tax Act, 1967
Guidelines for Application of Approval under Section 44(6) of the Income Tax Act, 1967
Abolishment of 10% Exit Levy
Purchase of Malaysian Property - Restrictions Relaxed and Lifted
Employee Share Option Scheme (ESOS)
Employees Provident Fund (EPF)
Double Taxation Agreement (DTA)
 




1. Guidelines on Application for Double Deduction for Research and Development (R&D) Expenditure under Section 34A of the Income Tax Act, 1967

The guidelines provide an explanation on the conditions required for eligibility, allowable expenditure and non-allowable expenditure for double deduction and general procedure in applying for double deduction incentive on R&D.

Failure to furnish correct information will result in the DG withdrawing the approval and in appropriate cases take legal action under Sections 113 and 114 of the Act.
The guidelines provide an explanation on the conditions required for eligibility, allowable expenditure and non-allowable expenditure for double deduction and general procedure in applying for double deduction incentive on R&D.

Failure to furnish correct information will result in the DG withdrawing the approval and in appropriate cases take legal action under Sections 113 and 114 of the Act.

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2. Guidelines for Application of Approval under Section 44(6) of the Income Tax Act, 1967

These guidelines explain the types of institution, organisation or fund which may be considered for approval under Section 44(6) of the Act and also the conditions, requirements and procedures involved in the submission of application for approval.

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3. Abolishment of 10% Exit Levy

The 10% exit levy on portfolio investment profits repatriated within one year has been abolished effective 2nd May, 2001.

With this announcement by the Central Bank of Malaysia, all capital controls introduced in September 1998 have now been removed.

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4. Purchase of Malaysian Property - Restrictions Relaxed and Lifted

The Foreign Investment Committee announced the following changes :-
  •  
Foreign individuals may now purchase all types of Malaysian property, costing more than RM250,000, without the need to form a Malaysian company and involve a Malaysian partner. Further, they may also borrow from a Malaysian bank to finance the purchase. Previously, they were allowed to purchase only certain types of property and domestic financing was prohibited. (The RM250,000 limit is reduced to RM150,000 in respect of foreign retirees under the "Silver-Haired Programme").
   
  •  
ASEAN companies wishing to carry on business in Malaysia and other foreign companies wishing to establish headquarters or regional offices here, may now acquire Malaysian property costing more than RM250,000 without the need to involve a Malaysian partner.
   
  •  
Malaysian citizens and companies no longer require approval to purchase property costing less than RM20,000,000. However, they are still required to notify the Foreign Investment Committee of such purchases. Approval is also no longer required in respect of purchases of industrial properties by manufacturing companies that are not required to be licensed by the Ministry of International Trade and Industry.


The revised rules are effective from 25th April, 2001.

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Employee Share Option Scheme (ESOS)

All employers are required to notify the Technical Division of the DG within 30 days of the launching of any ESOS to enable the DG to review and confirm the value of benefit, if any, attributable to the employees. To facilitate the notification requirement, the DG has issued a prescribed form (BT/ESOS/2000) for this purpose. Among the particulars required to be furnished are :-

a.   copy of the ESOS plan document;
     
b.   sample letter of offer / grant of option to the employee;
     
c.   copy of the approval letter from the SC (if relevant);
     
d.   sample share certificate to be issued to the employee; and
     
e.   official daily list issued by the KLSE or other stock exchanges or newspaper cuttings or any documents showing the market price of the share as at the date of grant of the option.

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Employees Provident Fund (EPF)

a.   2% Reduction in EPF Contribution by Employees

The employees' portion of EPF contribution was reduced from 11% to 9% commencing from April 2001. The new rate is effective for a one year period up to March 2002. However, the employers' portion of the monthly contribution remains at 12%.

Voluntary excess contribution may be made and for this, the employee and employer must notify the EPF Board using Form EPF 17 and Form EPF 17A respectively.
       
b.   Cancellation of Foreign Workers' Contributions

The EPF Board has announced that foreign workers are not required to contribute to EPF from August 2001 (i.e. for the July 2001 wages) unless they volunteer to continue with their EPF contributions.

It was compulsory (effective from 1st August, 1998) for the foreign workers to contribute EPF at 11% of their wages whilst the employer contributes RM5 per month for each employee. The following categories of foreign workers need not contribute to EPF :-
    i. workers holding Employment Pass or expatriates holding Visit Pass (Temporary Employment) whose monthly wages are not less than RM2,500;
    ii. Thai workers entering Malaysia with a Territorial Pass; and
    iii. seamen.
    The employeesí portion of EPF contribution from their April 2001 wages was reduced from 11% to 9%. The employersí portion remains at RM5.

The EPF Board is processing applications for refund in stages and will inform the employers once the refund is available for collection by the foreign workers.
       
c.   Change in Payment Date for Monthly Contribution

With effect from January 2002, the monthly EPF contributions must be paid on or before the 15th of each month instead of the 21st of each month. This would mean that the EPF contribution for January 2002 (i.e. in respect of December 2001 wages) must be paid and received by the EPF Board on or before 15th January, 2002.

An employer who fails to pay the EPF contribution within the stipulated period shall be guilty of an offence and shall, on conviction, be liable to imprisonment for a term not exceeding 3 years or to a fine not exceeding RM10,000 or to both.

If payments of EPF contributions are made later than the end of the month, the employers will be liable to pay dividends which would have been accrued to the employees on the EPF contributions if such contributions had been paid on time in addition to the late payment interest imposed by the EPF Board for the delay.

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Double Taxation Agreement (DTA)

Malaysia has signed 61 DTAs with the following countries :-
   
Albania* Myanmar*
Argentina Morocco*
Australia Namibia*
Austria Netherlands
Bahrain* New Zealand
Bangladesh Norway
Belgium Oman*
Brunei* Pakistan
Canada Papua New Guinea
Czech Republic Peopleís Republic of China
Denmark Philippines
Egypt* Poland
Federal Republic of Germany Romania
Fiji Russia
Finland Saudi Arabia
France Singapore
Hungary South Africa*
India South Korea
Indonesia Sri Lanka
Ireland Sudan*
Islamic Republic of Iran* Sweden
Italy Switzerland
Japan Thailand
Jordan Turkey
Kazakstan* United Arab Emirates
Kuwait* United Kingdom
Kyrgyzstan* United States of America
Luxembourg* Uzbekistan
Malta Vietnam
Mauritius Zimbabwe*
Mongolia  


* DTAs pending ratification

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© October 2001