EY Tax Alert

Vol. 23 – Issue no. 1

13 January 2020

Malaysian developments
• Budget 2020 Bills gazetted (except
Malaysian developments
LBATA Bill)
• Extension of tax incentive for the
Budget 2020 Bills gazetted (except LBATA Bill)
repayment of PTPTN loans by
employers on behalf of employees
• Tax incentive for Structured
Internship Programme
The following Acts, incorporating the changes proposed in Budget
• Extension of tax exemption for angel 2020 (see Special Tax Alert: Highlights of Budget 2020, Tax Alert No.
investors 22/2019 and Tax Alert No. 23/2019) were gazetted on 31 December
• Stamp duty exemption on rent-to- 2019:
own (RTO) scheme
• Stamp duty remission for transfer of
• Finance Act 2019
property by way of love and affection
• Amendment to deduction from
• Income Tax (Amendment) Act 2019
remuneration rules • Petroleum (Income Tax) (Amendment) Act 2019
• 2020 Tax Investigation Framework
• 2020 income tax return filing The Acts adopt all the changes proposed in the respective Bills,
programme issued including the additional amendments made when the Finance Bill 2019
was passed by the Dewan Rakyat (see Tax Alert No. 23/2019).
Overseas developments
Please note that the Labuan Business Activity Tax (Amendment) Bill
• Swiss Tax Authority clarifies that
2019 has not yet been gazetted and hence the legislative changes
disclosure of worldwide turnover in
Swiss VAT returns by non-Swiss proposed therein are not yet effective.
entities is no longer required
• Hong Kong clarifies certain issues
regarding treaty benefits
 Extension of tax incentive for the Income Tax (Exemption) (No. 8) (Amendment)
Order 2019 [P.U.(A) 414]
repayment of PTPTN loans by
employers on behalf of employees
The Amendment Order provides that employees will
enjoy the income tax exemption on the loan
As highlighted in the earlier tax alert (see Tax Alert
repayment made on their behalf by their employers,
14/2019), to enhance the Perbadanan Tabung
from 1 January 2019 to 31 December 2021.
Pendidikan Tinggi Nasional (PTPTN) loan repayments
and ensure the sustainability of the PTPTN Program,
This Amendment Order is effective YA 2019 until YA
the following were gazetted on 24 July 2019:
2021.

• Income Tax (Exemption) (No. 8) Order 2019

[P.U.(A) 205] Income Tax (Deduction for Payment of
• Income Tax (Deduction for Payment of Educational Educational Loan of Perbadanan Tabung
Loan of Perbadanan Tabung Pendidikan Tinggi Pendidikan Tinggi Nasional by Employers on
Nasional by Employers on behalf of Employees) behalf of Employees) (Amendment) Rules 2019
Rules 2019 [P.U.(A) 206] [P.U.(A) 415]

The Order provides that in ascertaining his gross Similarly, the Amendment Rules provide that the tax
employment income, an employee is exempted from deduction period for employers on the repayment of
the payment of income tax in respect of the value of PTPTN loans on behalf of their employees is extended
the benefit (i.e. the amount of educational loan paid to 31 December 2021.
by the employer on behalf of the employee from 1
January 2019 to 31 December 2019) received as a The Amendment Rules are effective from YA 2019
gift from his employer. until YA 2022.

Conversely, the Rules stipulate that in ascertaining

the adjusted income of an employer from his business Tax incentive for Structured
for a year of assessment (YA), there shall be allowed
Internship Programme
a deduction under Section 33 of the Income Tax Act
1967 (ITA), equivalent to the amount of educational
loan paid by the employer on behalf of his employee In Budget 2015, certain proposals were made in
from 1 January 2019 to 31 December 2019. anticipation of an increase in future demand for
workers with vocational and diploma qualifications,
In Budget 2020, the Government proposed to extend and to encourage private companies to provide
the tax incentive period for the above. To legislate internship opportunities to full-time students
the proposal, the following were gazetted on 31 pursuing such courses. In this regard, the
December 2019. Government proposed that the double deduction on
expenses incurred by companies participating in
Structured Internship Programmes (SIPs) to recruit

EY Tax Alert | 13 January 2020 Page 2 of 12

students pursuing full-time degree programmes in (a) An approved internship programme from YA 2015
higher education institutions, be extended to include until YA 2016 for a student pursuing a diploma
full-time students pursuing courses at the vocational programme in a higher educational institution and
and diploma levels for YA 2015 and YA 2016. a student pursuing a qualified course being a
vocational programme (minimum Malaysian Skills
Thereafter, in Budget 2017, to encourage more Certificate Level 4); and
companies to participate in the SIP approved by (b) An approved internship programme for a student
Talent Corporation Malaysia Berhad (TalentCorp), the from YA 2017 until YA 2021
double deduction incentive that was effective up to
YA 2016 was proposed to be extended for another The following terms have also been defined in the
three YAs, that is, until YA 2019 (see Special Tax Rules:
Alert: Highlights of 2017 Budget – Part I).
i. Higher educational institution
In the recent Budget 2020, the double deduction ii. Qualified course
incentive was proposed to be extended for yet iii. Qualified person
another two YAs, that is, until YA 2021 (see Special iv. Student
Tax Alert: Highlights of 2020 Budget). v. Approved internship programme
vi. Talent Corporation Malaysia Berhad
To legislate the above proposals, the Income Tax
(Deduction for Expenditure Incurred for Provision of The qualified person claiming the deduction will also
Approved Internship Programme) Rules 2019 be required to provide a letter from TalentCorp
[P.U.(A) 398] were gazetted on 31 December 2019. confirming that the internship programme
conducted is an approved internship programme.
The Rules provide that in ascertaining the adjusted
income of a qualified person from his business for a
basis period for a YA, a double deduction shall be Extension of tax exemption for angel
given for expenses incurred by the qualified person to investors
conduct an approved internship programme.

The double deduction is given for the following In Budget 2020, it was proposed that the application
expenses: period for tax exemption for angel investors be
extended for another three years, until 31 December
(a) Monthly allowance paid to the students of not less 2023 (see Special Tax Alert: Highlights of 2020
than RM500 per student; Budget). To legislate this extension, the Income Tax
(b) Expenditure incurred for the provision of training; (Exemption) (No. 3) 2014 (Amendment) Order 2019
(c) Meals, travelling expenses and accommodation for [P.U.(A) 399] was gazetted on 31 December 2019.
the students during the internship programme

For items (b) and (c), the total deductions allowable Stamp duty exemption on rent-to-
for each student shall not exceed RM5,000. own (RTO) scheme

The Rules shall apply to a qualified person who

As highlighted in the earlier tax alert, rent-to-own
conducts or has conducted:
(RTO) is a scheme where a financial institution (FI)
will acquire a property (which has been identified by a
tenant) from a housing developer. Thereafter, the

EY Tax Alert | 13 January 2020 Page 3 of 12

tenant will rent the property from the FI, and will be by way of inheritance or gift, which is held either
given an option to acquire the property after a individually or jointly.
stipulated timeframe.
For the purpose of Point (b) above:
Currently, stamp duty at ad valorem rates of 1% to 4%
is imposed on each instrument of transfer, resulting • The period of rental under the RTO agreement
in stamp duty applying at the following two levels: must not exceed five years; and
• The tenant may opt to purchase the residential
i. Transfer of residential home from the housing property after a rental period of one year.
developer to the FI
ii. Transfer of residential home from the FI to the The application for the exemption will have to be
buyer (previously the tenant) accompanied by a declaration by the individual
confirming Point (e) above.
In Budget 2020, the Government proposed that full
stamp duty exemptions be given on the above- The following terms have also been defined in the
mentioned instruments, for the transfer of first Order:
residential homes priced up to RM500,000 (see
Special Tax Alert: Highlights of Budget 2020). i. Residential property
ii. Individual
To legislate this, the Stamp Duty (Exemption) (No. 4) iii. FI
Order 2019 [P.U.(A) 394] was gazetted on 31 iv. Property developer
December 2019. The Order provides a stamp duty v. RTO scheme
exemption for the above-mentioned instruments for
the transfer of a residential property which is valued The Order is effective 1 January 2020.
at RM500,000 or less.

This Order will only apply if: Stamp duty remission for transfer of
property by way of love and affection
(a) The sale and purchase agreement (SPA) between
the developer and the FI for the purchase of the
residential property is executed between 1 In Budget 2020, it was proposed that the stamp duty
January 2020 and 31 December 2022, and is remission of 50% given on the instrument of real
stamped at any branch of the IRB; property transferred between parents and children by
(b) The RTO agreement between the individual and way of love and affection be given to Malaysian
the FI for the rental of the residential property is citizens only (previously Malaysian citizens and non-
executed between 1 January 2020 and 31 citizens were eligible) (see Special Tax Alert:
December 2022; Highlights of Budget 2020).
(c) The SPA between the FI and the individual for the
purchase of the residential property is stamped at To legislate the above proposal, the Stamp Duty
any branch of the IRB: (Remission) (No. 2) Order 2019 [P.U.(A) 369] was
(d) The value of the residential property shall be gazetted on 26 December 2019. With this, the Stamp
based on the purchase price in the SPA between Duty (Remission) (No. 7) Order 2002 [P.U.(A) 434] is
the developer and the FI; and revoked.
(e) The individual has never owned any residential
property, including a residential property obtained The Order is effective 1 January 2020.

EY Tax Alert | 13 January 2020 Page 4 of 12

 1. Introduction
Amendment to deduction from 2. Legal provisions
remuneration rules 3. Investigation activity
4. Objectives of investigation
5. Period of investigation
The Income Tax (Deduction from Remuneration) 6. Selection of cases
(Amendment) Rules 2019 [P.U.(A) 387], gazetted on 7. Investigation procedures
31 December 2019, take effect from 1 January 2020 8. Rights and responsibilities
and amend the Income Tax (Deduction from 9. Confidentiality of information
Remuneration) Rules 1994 [P.U.(A) 507]. 10. Offences and penalties
11. Payment procedures
The Income Tax (Deduction from Remuneration) 12. Appeals
Rules 1994 provide that the employer must 13. Investigation under Anti-Money Laundering,
determine and make monthly tax deductions (MTD) Anti-Terrorism Financing and Proceeds of
from employees’ salaries based on either the Unlawful Activities Act 2001 (AMLATFPUAA)
Schedule of MTD or the computerized calculation 14. Effective date
method. The Schedule is issued for employers who do
not use a computerized payroll software. However, The contents of the new TIF are broadly similar to
employers using the Schedule are advised to use the those of the earlier framework; it outlines the IRB’s
computerized calculation method if the employee procedures and practices in conducting tax
receives a salary adjustment, elects for optional investigations, as well as the rights and
deductions or commences employment other than in responsibilities of the IRB, the taxpayer and the tax
January. agent in a tax investigation situation.

The amendments are to take into account the new tax Some of the important changes are as follows:
bracket with effect from YA 2020, where:
Paragraph 7.1 – Request for documents and
(i) Individual taxpayers with chargeable income information
exceeding RM2,000,000 will be subjected to tax
at 30%, an increase of two percentage points from The new TIF specifies that investigations can now be
28%; and carried out by issuing letters requesting for
(ii) The non-resident personal income tax rate will documents and information from the taxpayer, tax
also be increased to 30%. agent or third parties.

Paragraph 8.2.6 –Taxpayers’ rights and

2020 Tax Investigation Framework responsibilities

The new TIF provides that taxpayers are required to

The Inland Revenue Board (IRB) has issued on its
provide the IRB officers with access to (including
website the updated Tax Investigation Framework
passwords) and make copies or extractions of
(TIF), dated 1 January 2020. This 16-page TIF
documents in the custody of / under the control of /
replaces the previous TIF that was effective 15 May
belonging to the taxpayer without the IRB having to
2018 (see Tax Alert No. 11/2018), and comprises the
make any payments.
following paragraphs:

EY Tax Alert | 13 January 2020 Page 5 of 12

Paragraph 10.1 – Failure to furnish return or give period. The grace period also applies to the
notice of chargeability settlement of balance of tax payable under Section
103(1) of the ITA. Where the ITRF / balance of tax
The new TIF provides that under Section 112(1A) of payable is not furnished within the grace period, the
the ITA, where a taxpayer has failed to furnish his original due date will be taken for the purpose of
income tax return form (ITRF) in accordance with calculating penalties (note that all references to “due
Section 77(1) or 77A(1) in respect of any YA for two date” in the table below refer to the original due
years or more, the taxpayer shall, on conviction, be date).
liable to a fine of not less than RM1,000 and not more
than RM20,000 or to both. The taxpayer shall also The key change to note is that the 2020 filing
pay a special penalty of three (3) times the amount of programme stipulates that the C.P.8D [i.e. Statement
tax which has been undercharged (previously of Remuneration from Employment for the Year
“amount of tax charged”). ending 31 December 2019 and Particulars of Tax
Deduction under the Income Tax Rules (Deduction
Similarly, the new TIF stipulates that under Section from Remuneration) 1994] must be submitted via the
112(3) of the ITA, where no prosecution has been following methods:
instituted in respect of failure to furnish the ITRF or
give notice of chargeability, the Director General (DG) 1. Together with the Form e-E (e-Filing) [upload txt
may require the taxpayer to pay a penalty equal to file format / C.P.8D e-Filing format]
treble (3 times) the amount of tax which has been 2. Via e-Data Praisi [upload txt file format on or
undercharged (previously “amount of tax payable”). before 25 February 2020]
3. Compact disc (CD) / USB drive / external hard disk
Paragraph 11.2 – Payment procedures [txt file format or Microsoft Excel]

The new TIF no longer stipulates that in cases where a As such, the submission of C.P.8D by non-company
taxpayer applies to settle his taxes and penalties by employers together with the paper Form E (as
instalments, higher penalty rates will be imposed on provided under the 2019 Filing Programme) will no
longer instalment periods as compared to full longer be accepted.
payment or shorter instalment periods – this was
reflected in the previous TIF. Summary of the 2020 Filing Programme

ITRF Due date Mode of Grace

2020 income tax return filing submission period
programme issued Forms BE, 30 April a) e-Filing Within 15
BT, M, MT, 2020 days after
TF, TJ and N.B. e-Filing is the due
The IRB has recently made available on its website TP for YA not available date
the 2020 income tax return filing programme (2020 2019 for for Form TJ
filing programme) titled “Return Form (RF) Filing taxpayers
not b) Via postal Within 3
Programme For The Year 2020”. The 2020 filing delivery working
carrying on
programme is broadly similar to the position laid out days after
a business
in the 2019 filing programme (see Tax Alert No. the due
1/2019). Where a grace period is given, submissions date
shall be deemed to have been received by the
stipulated due date if received within the grace

EY Tax Alert | 13 January 2020 Page 6 of 12

ITRF Due date Mode of Grace ITRF Due date Mode of Grace
submission period submission period
c) Hand- No grace b) Via postal Within 3
delivery period delivery working
days after
Forms B, 30 June a) e-Filing Within 15 the due
BT, M, MT, 2020 days after date
P, TF, TJ N.B. e-Filing is the due c) Hand- No grace
and TP for not available date delivery period
YA 2019 for Form TJ
for b) Via postal Within 3 Form E 31 March e-Filing Within 1
taxpayers delivery working (Company / 2020 month after
carrying on days after Labuan the due
a business the due company date
date employers)

c) Hand- No grace
Form E 31 March a) e-Filing Within 1
delivery period
(Non- 2020 month after
company / the due
Form e-C Last day of e-Filing Within 1
Non- date
for the 7th month after Labuan
YA 2020 month from the due
company b) Via postal Within 3
the date employers) delivery working
financial
days after
year-end
the due
date
Form C1 Last day of a) e-Filing Within 1
for the 7th month after c) Hand- No grace
YA 2020 month from the due delivery period
the date Form CPE Within 7 a) e-Filing Within 1
financial months month after
year-end b) Via postal Within 3 from the the due
delivery working date date
days after following
the due the end of b) Via postal Within 3
date the delivery working
exploration days after
c) Hand- No grace period the due
delivery period date

Forms PT, Last day of a) e-Filing Within 1 c) Hand- No grace

TA, TC, TN the 7th month after delivery period
and TR for month from N.B. e-Filing is the due
YA 2020 the not available date
financial for Forms TN
year-end and TR Form CPP Within 7 a) e-Filing Within 1
months month after
from the the due
date date

EY Tax Alert | 13 January 2020 Page 7 of 12

ITRF Due date Mode of Grace initially intended to be levied on all VAT-registered
submission period persons in Switzerland. The fee is calculated based on
following global turnover and was initially intended to be
the end of assessed on both Swiss as well as foreign businesses.
the basis The scope of the RTV was however reviewed in
period August 2019, resulting in an exclusion of non-Swiss
b) Via postal Within 3
delivery working businesses.
days after
the due Implications
date

The withdrawal of this compliance requirement does

c) Hand- No grace
not mean that all turnover generated from business
delivery period
activities outside of the Swiss territory can be
excluded from the Swiss VAT return. For instance,
taxable services rendered to Swiss-established
recipients that fall under the default place of supply
Overseas developments rule are to be declared with Swiss VAT by all suppliers
that are registered for VAT in Switzerland.

Swiss Tax Authority clarifies that It is also important to note that in the event of a VAT
disclosure of worldwide turnover in audit, foreign businesses have an obligation to
Swiss VAT returns by non-Swiss provide evidence supporting that all supplies of goods
and services with a place of supply in the Swiss
entities is no longer required
Customs territory (Switzerland, Liechtenstein,
Büsingen) have been appropriately reported in the
After months of uncertainty, the Swiss Federal Tax VAT returns. This can be achieved by preparing
Administration has clarified its position regarding internal year-end audit readiness reports, retracing
reporting requirements for foreign entities registered differences between worldwide and Swiss turnover,
for Swiss value-added tax (VAT) purposes. It has been and documenting that no Swiss supplies have been
clarified that foreign businesses are no longer booked under foreign accounting entries and vice
required to declare their global turnover in their versa. If the distinction between turnover generated
Swiss VAT returns. in the Swiss territory and abroad is not appropriately
documented, the Swiss authorities can determine
As a result of this change of practice, non-Swiss that some of the foreign revenues should actually
entities no longer have to report non-Swiss revenues have been subject to Swiss VAT.
in their Swiss VAT return and can thus limit the
reporting in box 200 of the return to turnover The outlined documentation exercise is part of the
generated in the Swiss territory. Foreign-established mandatory turnover reconciliation and is to be
taxable persons should however continue to report prepared by VAT-registered businesses at the end of
their VAT exempt without credit revenues, as well as the financial year. The turnover reconciliation is
subsidies, as this might have an impact on their Swiss typically subjected to a thorough review by the
input VAT recovery rate. authorities during the course of a VAT audit.

The long-anticipated news is linked to the revision of

the Radio and Television Fee (RTV), which was

EY Tax Alert | 13 January 2020 Page 8 of 12

 Hong Kong clarifies certain issues
regarding treaty benefits

In its 2019 annual meeting, the Hong Kong Tax

Authority (HKTA) clarified the following matters:

“Foreign tax minimization steps” must be taken if

taxpayers are to maximize claims for tax credits in
Hong Kong

The tax law provides that the amount of tax credit

granted must not exceed the amount that would be
granted had all foreign tax minimization steps been
taken. For example, if a Hong Kong company did not
apply for a Hong Kong certificate of residence (CoR)
and accordingly could not claim a treaty benefit, the
tax credit granted is limited to the reduced treaty rate.

A company is not entitled to a tax credit in Hong

Kong if the HKTA rejected its CoR application

If the HKTA rejected the CoR application of a Hong

Kong company, such Hong Kong company will not be
regarded as a Hong Kong tax resident and thus will
not be entitled to a tax credit in Hong Kong under the
treaty, despite the income being subject to tax in
Hong Kong.

Hong Kong applicants for the “same-treaty-benefit”

rule under PN 9 are required to demonstrate
sufficient economic nexus with Hong Kong

The HKTA’s position is that even if a Hong Kong

applicant is deemed as a beneficial owner (BO) in
respect of dividends received from mainland China
under the “same treaty benefit” rule as prescribed in
PN 9, such Hong Kong applicant is required to have
sufficient business activities in Hong Kong before the
HKTA will issue a CoR for the purpose of PN 9.

EY Tax Alert | 13 January 2020 Page 9 of 12

 Contact details

Principal Tax Global Compliance and Reporting

Yeo Eng Ping (EY Asia-Pacific Tax Leader) Farah Rosley
[email protected] [email protected]
+603 7495 8288 +603 7495 8254

Amarjeet Singh (EY Asean and Malaysia Tax Leader) Janice Wong
[email protected] [email protected]
+603 7495 8383 +603 7495 8223

Julian Wong
People Advisory Services [email protected]
+603 7495 8347
Tan Lay Keng
[email protected]
Julie Thong
+603 7495 8283
[email protected]
+603 7495 8415
Christopher Lim
[email protected]
Liew Ai Leng
+603 7495 8378
[email protected]
+603 7495 8308
Irene Ang
[email protected]
Simon Yeoh
+603 7495 8306
[email protected]
+603 7495 8247
Business Tax Services
Datuk Goh Chee San
Robert Yoon (based in Sabah)
[email protected] [email protected]
+603 7495 8332 +6088 532 000

Wong Chow Yang Lee Li Ming

[email protected] (based in Johor)
+603 7495 8349 [email protected]
+607 288 3299

Linda Kuang
(based in Kuching)
[email protected]
+6082 752 660

Mark Liow
(based in Penang)
[email protected]
+604 263 6260

EY Tax Alert | 13 January 2020 Page 10 of 12

 Contact details

International Tax and Transaction Services Indirect Tax

Yeo Eng Ping Yeoh Cheng Guan
[email protected] [email protected]
+603 7495 8288 +603 7495 8408

Amarjeet Singh Aaron Bromley

[email protected] [email protected]
+603 7495 8383 +603 7495 8314

Sockalingam Murugesan (EY Malaysia and ASEAN Jalbir Singh Riar

Transfer Pricing Leader) [email protected]
[email protected] +603 7495 8329
+603 7495 8224
Shanmuganathan Govinda Konal
Anil Kumar Puri (based in Penang)
[email protected] [email protected]
+603 7495 8413 +604 6881801

Asaithamby Perumal
Financial Services
[email protected]
+603 7495 8248 Bernard Yap
[email protected]
Sharon Yong +603 7495 8291
[email protected]
+603 7495 8478 Koh Leh Kien
[email protected]
Hisham Halim (Transfer Pricing) +603 7495 8221
[email protected]
+603 7495 8536 Chen Keng Haw
[email protected]
Vinay Nichani (Transfer Pricing) +603 7495 8385
[email protected]
+603 7495 8433

EY Tax Alert | 13 January 2020 Page 11 of 12

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29 February 2020 9th month revision of tax estimates All Rights Reserved.
for companies with May year-end
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EY Tax Alert | 13 January 2020 Page 12 of 12