S 4 (b) EMPLOYMENT INCOME

DEDUCTIBLE EXP
ENT
TRAVELLING
RENT
REPAIR MAINTENANCE
???

Employment -> have the relationship of master and servant, remuneration is payable
Employee -> is a servant, or the holder of the appointment / which constitutes the employment
Employer -> is a master, responsible for paying any remuneration

EMPLOYMENT (CONTRACT OF SERVICE) VS SELF-EMPLOYMENT (CONTRACT FOR SERVICE)

Advantages of income being assessed under S4(a) - business income

1 more flexible deduction of expenses/outgoings allowed in arriving to adjusted income
2 can claim CA of qualifying capital expenditures
3 current yr biz loss can be set-off against the taxpayer's aggregate statutory biz income

Advantages of income being assessed under S4(b) - employment income

1 non-taxability of EPF contributions made by the employer & can claim relief on their own EPF contributio
2 availability of tax exemptions (leave passages, medical and dental benefits, gratuities etc)
3 Para 21 Sch 6 , non-resident individual employment income will be exempted from tax

* Employer EPF min 12% max 19%, Employee EPF 11%

CASE LAW TO DETERMINE THE EXISTENCE OF AN EMPLOYMENT

1 The existence of a 'master and servant' relationship
2 No power to delegate
3 The extent of control in the way tasks are performed
4 Defined working hours
5 The master's right to suspend or dismiss the servant
6 The provision of necessary tools and equipment
7 No need to share any financial risk
8 The nature of remunerations - fixed salary, EPF
9 No freedom to contract with other parties

DERIVATION OF EMPLOYMENT INCOME

S3 of the Act -> only income accruing in or derived from Malaysia ; or received in Malaysia from outside Malaysia w

S13 (2)
 Gross income from an employment shall be deemed derived from Malaysia thus taxable if:

(a) any period which the employment is exercised in Malaysia

regardless of -----> the location of the employer

the source of the employment income
the place of receipt of the employment income
the employees' residence status

(b) any period of leave attributable to the exercise of employment in Malaysia (leave pay)

(c) any period which ee perforrms outside Malaysia duties incidental to Malaysia employment

factors to decide incidental --> ee must first be discharging his employment duties in Malaysia b4 being
overseas duties must be directly related and in the same nature as his d
overseas duties must be due to the requirements of his employment in

(d) remuneration received by director of a company and the company is resident in malaysia for the YA

(e) employment exercised aboard a ship or aircraft used in a biz operated by resident person

* the employment income of an ee of a sea or air transport operator is taxable if the operator is Malaysi

Para 34 Sch 6 -----> an exemption on individual employment income who exercises employment on bo
which is used in a biz and is owned by a Malaysian tax resident

* ship exclude ferry, barge, tugboat, supply vessel, crew boat, lighter, dredger, fish

S13(3)
Gross income from an employment in the public service (under govt) shall be deemed derived from Mala
a) any period which the employment is exercised outside Malaysia
b) any period of leave attributable to the exercise of employment outside Malaysia (leave pay)

EXEMPTION ON EMPLOYMENT INCOME (PARA 21 SCH 6)

* Exempts the employmentt income of a non-resident individual who exercise employment in Malaysia.

To qualify, NR must exercise employment in Malaysia :

1 for a period which together do not exceeds 60 days in the basis yr for a YA (same YA)
2 for a continuous period (not exceeding 60 days) which overlaps the basis yr for two successive
3 for a continuous period (not exceeding 60 days) which overlaps the basis yr for two successive
 for a period which together with that continuous period do not exceeds 60 days

NOT APPLY TO:

1 a non-resident ind holding the office of director of a resident company
2 a public entertainer whose income is not paid out of the public funds of the govt of a country
eg: artiste, host, model, circus performer, speaker, lecturer

Tax incentive for women returning to work after career break

* Income tax exemption is given on employment income for a female citizen (resident in malaysia)
maximum of 12 consecutive months resuming employment after a career break

Conditions:
1 Ceased employment and has not derived any employment income for at least 24 continuous months pri
2 full-time employment experience of at least 3 years prior to the abovementioned cessation of employme
3 signed a full-time employment contract in Malaysia (where the monthly gross income ≥ RM5,000) with a
4 worked for at least 12 consecutive months from the employment contract period referred to in (c) above
employment period is between 27 October 2017 and 31 December 2024;
5 made an application for exemption under the Order to the Minister through Talent Corporation Malaysia
31 December 2023 and the application must have been approved;
6 not exceeding 58 years in age at the time of application to TalentCorp.
ted income

biz income

ef on their own EPF contributions

, gratuities etc)
ted from tax

aysia from outside Malaysia will be subjected to tax in Malaysia.

a thus taxable if:

(leave pay)

sia employment

nt duties in Malaysia b4 being assigned to perform overseas duties.

nd in the same nature as his duties in Malaysia.
ements of his employment in Malaysia

ent in malaysia for the YA

esident person

able if the operator is Malaysian tax resident co.

o exercises employment on boar of a ship

ew boat, lighter, dredger, fishing boat etc

be deemed derived from Malaysia if the ee is CITIZEN:

laysia (leave pay)

oyment in Malaysia.

yr for a YA (same YA)

the basis yr for two successive YAs
the basis yr for two successive Yas AND (different YA)
 (different YA)
exceeds 60 days

funds of the govt of a country outside Malaysia

t in malaysia)

east 24 continuous months prior to, or as at 27 October 2017;

tioned cessation of employment;
oss income ≥ RM5,000) with a qualifying employer for at least 2 years;
period referred to in (c) above with the same qualifying employer, and the

h Talent Corporation Malaysia Berhad (TalentCorp) from 1 January 2018 to

S 4(a) BUSINESS INCOME

1 Profession (occupation required skills by the person)

2 Vocation (professional gambler)
3 Trade ---> activities of commerce (buying and selling)
a series of transaction with continuity and repetition
may include isolated transactions
4 Manufacture (a process where original material undergo transformation to a new and different product)
5 Adventure or concern in the nature of trade (sufficiently close to trading)
* IF GAINS FROM MERE REALISATION OF INVESTMENT, CONSIDER CAPITAL GAIN (NO TAX)
eg: RPGT if u sell property for good, if biz S4(a)

BADGES OF TRADE (IRB VS TAX AGENT)

1 Subject matter of transaction (intention)

eg: items for personal use / enjoyment
items for yield investment income
items that commonly subject to trading
2 Profit - seeking motive at time of acquisition
3 Manner of acquisition (how u get the asset?)
4 Period of ownership (how long u hold?)
5 Frequency of similar transactions (how often?)
6 Alterations or Modifications to subject matter (what have u done? Repackaging?)
7 Circumstances leading to realisation (why u sell?)
*a sell must be consensual ane of one's own free will
* FORCED SALE test doesn't apply in the case of trading stocks (cosider as biz income)
8 Methods employed to dispose the subject matter
*if special effort made to attract buyer, it is profit-making scheme
* not taxable if initial intention is to use rather than to sell
9 Financing arrangements
* if external financing is obtained, look at the term.
if short term loan or overdraft, has trading motive
10 Trading interest in the same or similar field (desire)
* if already have "a trading transaction", any connected transaction is a matter of trade
11 Accounting evidence

Para 28 Sch 6
The source or operatios oversea, the income you get is exempted.

DERIVATION OF BUSINESS INCOME (S12)

1 Universal derivation of income from any business [ S12(1)(a) ]

Serves as a 'residual section' --> any business income which is not attributable to any business
 2 Derivation of income for Businesses of Manufacturing, Plantation, and Mining [ S12(1)(b) ]
If the business consists wholly or partly of the manufacturing, growing, mining, producing or h
the gross income is deemed derived in Malaysia and assessable to tax either:
i sale value of the goods which are sold overseas
ii the market value of the goods (at the time of export) which are exported overseas

3 Business income attributable to place of business in Malaysia [S12(3) & (4)]

S12(3) Income from a business that attributable to a place of biz in Malaysia, income is deemed deriv
Place of biz:- a place of management
a branch
an office
a factory
a workshop
a warehouse
a building site
a farm or plantation
a mine, an oil or gas well, a quarry etc

and a person deemed to have a place of biz in Malaysia if:

i carried on supervisory activities
ii has another person acting on his behalf who--
A plays the principal role that are routinely concluded without m
B mantains a stock of goods
C regularly fills orders

GROSS INCOME FROM A BUSINESS

(Taxable under S4(a))

A Sale of goods
S24(1)(a) - debt arising from the sale of stock in trade
(assessed on accrual basis, even payment yet to be received)

B Rendering of Services and Use or Enjoyment of a Property in the course of carrying on a Business
S24(1)(b) - debt arising in respect of services rendered or to be rendered in the course of carrying on the

S24(1)(c) - debt arising from the use or enjoyment of any property dealt or to be dealt with in the course

S24(1A) - sum received in respect of services to be rendered or the use or enjoyment of any property to
(shall be assessed to tax in the basis period in which it was received)

* Security deposit, forfeit deposit, and return deposit received --> if meant to be returned , NOT BE INCLUDED AS IN

S24 (2) & (3) - market value of stock taken for private purposes by biz owner without payment / stock w
 S24(4) - dividend income earned by biz that deals in shares

S24(5) - interest income earned by biz that deals in investments or money - lending

S24(6) - market value of goods sold overseas (exports)

S30(1) - recovery of bad debt which was previously allowed for tax deduction

S30(4) - waiver of bad debt relating to any amount of expense previously allowed for tax deduction (con

S22(2) - include:
a) insurance, indemnity, recoupment, recovery, reimbursement or otherwise:
i in respect of the kind of outgoings and expenses which qualify for tax de
ii under a contract of indemnity

b) compensation for loss of income from that source.

COMPENSATION -> PRODUCT (CUSTOMER)

VAN (CAPITAL)
DRIVER (FAMILY)

RECEIVED -> TAXABLE

PAYMENT -> ALLOWABLE

GRANTS AND SUBSIDIES

* Financial sums or aids given by public body, corporation, trust or foundation to a grant-seeker, to fund a spesific p

Common purpose of grant: To construct, acquire or replace a strategic capital asset

To defray operating expenses or substitute a revenue loss
To encourage an activity such as research and development
To launch a new project from concept to commercialisation

* If purpose is capital in nature, the grant received sould, prima facie, be viewed as a capital receipt , NO

Grant and subsidies from the Federal or State Government

a) Grants received from Govt exempted at the gross income level

b) Revenue or operating expenditures financed by such grant not eligible for deduction for income tax purp
c) Acquisition of plant and machinery not eligible for capital allowances nor subject to balancing adjustmen
d) Excess revenue or operating expenditures over such grants received (financed by company profits) are d
e) Excess qualifying expenditures on acquisition of plant and machinery are eligible for capital allowances
f) Grants are exempted from income tax in basis period which grant is received OR relevant expenditure fin

* The recipient of the grant must keep separate records of grants received to ensure their usage was for
CASE LAW PRINCIPLES : CAPITAL RECEIPTS VS REVENUE RECEIPTS

• where a business sells its fixed assets such as machinery or land, the receipt would be of capital nature as it relate
where any of these items form part of the business’s stock in trade (e.g. where the company is dealing in land), rec
revenue income and thus, taxable under s 4(a).

• when the owner of an asset (where the asset comprises “know-how” or “trade_x0002_secret”) parts with the wh
asset is retained such that the value to the owner is substantially diminished or extinguished, then the consideratio
the transfer of the rights in such asset must be regarded as a capital receipt and not taxable.

• however, where part of such “know-how” or “trade-secret” is retained by the owner and the disposal does not re
substantially diminished (i.e. where the asset is sold but the owner is still able to make profits from the part retaine
revenue receipt, subject to tax. The fact that the consideration may be received as a lump sum payment does not a
taxable.

• any compensation received on the termination or cancellation of a business agreement would be regarded as a c
structure of the recipient is regulated by the cancelled agreement. Such cancellation would radically affect the fram
making apparatus as the agreement would have regulated the recipient’s business activities, defined what the busi
defined the whole conduct of the business

• where the cancellation of an agency contract results directly in the termination of the recipient’s business, then t
cancellation will be capital in nature as the whole profit making structure of the business has been destroyed by su

• where the cancellation of the agreement forces the recipient of compensation to significantly reduce or restrict it
branches, etc, the compensation would be capital in nature.

• compensation received in respect of the cancellation of ordinary trading contracts are generally taxable as tradin
adversely affect the structure of the business and the business operations can still be carried on with other contrac

• similarly, where the agreement or contract is an ordinary commercial contract which is incidental to and made in
then any compensation received for its termination would be taxable as it is normal for such a contract to be modifi

• however, compensation received for the termination of an ordinary commercial contract may be treated as a cap
significantly to the recipient’s business. For instance, if the business actually centered around the contract and the
it was terminated.

• where the amount received as compensation simply represents the profits which would have been made by the r
run until its expiry, it would also constitute a revenue receipt, subject to tax.

• amount received to compensate for a normal trading loss such as for late delivery of trading stocks or for loss of t
receipts and thus taxable as it represents compensation for loss of profits.

• compensation received for temporary disablement of a revenue-producing asset is a taxable receipt as it is to com
during the period the asset could not be used. The compensation was in respect of the loss of rights of the recipien
• however, compensation received in respect of permanent disablement of an asset or destruction of an asset wou
permanent deprivation of a capital asset.

• payment received in respect of a “restrictive covenant” will be capital in nature as it substantially restricts the acti
Such restriction may be in the form of:
(a) the recipient agreeing not to use or exploit (whether wholly or partially), his capital assets to generat
(b) the recipient agreeing not to pursue his trade or profession for a certain period of time.

• where a voluntary payment is received, and it is attributable to a specific work carried out by the recipient, it will

• similarly, where the voluntary payment is made to supplement the recipient’s income or to assist the recipient in
trading obligations, such voluntary payment will be taxable as a trading receipt.

• however, if such voluntary payment is made because the recipient deserves it or because of a special relationship
gift, not taxable, provided the following conditions can be fulfilled:
(a) the payment is not solicited and is unexpected to be received,
(b) the payment is not in respect of past services
(c) the payment does not represent compensation for loss of business or profits,
(d) the payment is not a form of retainer or advance payment for future services,
(e) if there existed a business relationship between the payer and the recipient, this relationship must no

COMMENCEMENT OF BUSINESS

* the commencement of activities undertaken in the course of biz or act that are part of the income producing proc

Tax implications impacted:

a) All revenue expenses incurres prior to the date of commencement of biz NOT BE TAX DEDUCTIBLE.
PERMANENT LOSS as incurred in order to create the source of biz income

b) Any 'qualifying capital expenditures' incurred prior commencement, entitled to CA in the first basis perio

c) Affect the selection of the co's yr end, which will affect co's basis period

commencement of biz eg:

1 the purchase of raw material (manufacturing biz)
2 purchase of goods for resale (retailing)
3 first planting of seedlings / buying of animal stocks (agriculture)

Irrelevant activities ro determine commencement date:

1 date of incorporation
2 minutes of board meeting
3 renovation work to premises and installation of P&M
4 recruitment and training of workers or employees
5 entering into agreements and signing of contracts
6 the official opening ceremony of a retailer
7 the date the first sale is made by a retailer
 8 the date of purchase of agricultural land

CESSATION OF BUSINESS

Temporary cessation
The assets are still under working conditions, subject to constant upkeep and maintenance, minimum nu
and intends to operate the biz when opportunity arises.

Tax implications:
1 revenue expenses incurred during the period continue to be deductible despite no biz income
2 if any current yr loss arises, it ican be set off against aggregate income of the taxpayer and un
3 CA can continue to be claimed, any unutilised CA will be carried forward to be set off against a

Permanent cessation
There have been disposals of all the plant and machinery

Tax implications:
1 any further revenue expenses incurred is permanently lost
2 any unutilised CA will be permanently lost
3 any distribution of assets (including undistributed profits) to the owners -> capital receipt of r

SINGLE OR SEPARATE BUSINESS SOURCE

Biz income must be separated into different sources if the natures of the biz are different and are not interdepende

Impact on CA:
1 CA from one biz sources can only be deducted against the adjusted income of that particular biz source
2 any excess of CA cannot be deducted against another biz's adjusted income. (c/f to following YA, same b
3 unabsorbed CA of a biz source that has ceased operations, will be permanently lost

New biz activity vs Extension of Existing Biz activity

New business
The new biz and the old biz must be treated as separate biz sources.
CA of the new can only be deducted against the adjusted income of new biz.

Extension of existing activity

Both the old biz and extended biz activities can be treated as a single biz source.
CA can be deducted from adjusted income of the combined biz operations.
o a new and different product)

ER CAPITAL GAIN (NO TAX)

cosider as biz income)

tion is a matter of trade

ot attributable to any business operations carried on outside Malaysia to be derived and taxed in Malaysia.
 ing [ S12(1)(b) ]
rowing, mining, producing or harvesting in Malaysia,
to tax either:

which are exported overseas (transaction between related parties)

aysia, income is deemed derived from Malaysia

routinely concluded without material modification

carrying on a Business
n the course of carrying on the business

to be dealt with in the course of carrying on a biz

enjoyment of any property to be dealt with

rned , NOT BE INCLUDED AS INCOME *

er without payment / stock withdrawn from biz as gifts or donations

llowed for tax deduction (consider drawings)

rsement or otherwise:
penses which qualify for tax deductions, or

ant-seeker, to fund a spesific project.

iewed as a capital receipt , NOT SUBJECT TO INCOME TAX *

deduction for income tax purposes

ubject to balancing adjustments for income tax purposes
ced by company profits) are deductible for income tax purposes
ligible for capital allowances
ed OR relevant expenditure financed by grant is incurred (if earlier)

to ensure their usage was for intended purpose *

 be of capital nature as it relates to the disposal of capital assets. However,
ompany is dealing in land), receipt from its disposal would constitute a

02_secret”) parts with the whole of the asset and where no part of the
guished, then the consideration received for the transfer of such asset or for
axable.

r and the disposal does not result in the value to the owner to be
e profits from the part retained), then the consideration received will be a
ump sum payment does not alter the character of the receipt i.e. it remains

ment would be regarded as a capital receipt if the whole profit making

would radically affect the framework and structure of the business’s profit
tivities, defined what the business could or could not do and basically

he recipient’s business, then the payment received in respect of the

ess has been destroyed by such cancellation.

gnificantly reduce or restrict its activities, retrench employees, close

are generally taxable as trading receipts as such cancellation would not

carried on with other contracts in hand

h is incidental to and made in the normal course of carrying on a business,

or such a contract to be modified, altered or discharged from time to time.

ntract may be treated as a capital receipt if the contract contributed

around the contract and the contract had a substantial period to run when

ould have been made by the recipient if the contract had been allowed to

f trading stocks or for loss of trading stocks are regarded as normal trading

a taxable receipt as it is to compensate for the trading profits which are lost
e loss of rights of the recipient to use a trading asset.
or destruction of an asset would be capital in nature as it relates to the

t substantially restricts the activities of the recipient.

), his capital assets to generate profits – this is described as a sterilization of capital assets.
n period of time.

ed out by the recipient, it will be taxable despite the fact that the payment is made voluntarily

me or to assist the recipient in the carrying on of his business or to meet his

cause of a special relationship, then such receipts will be considered as a

pient, this relationship must not be expected to continue and must have been adequately remunerated

of the income producing process (distinguish from preparatory act)

OT BE TAX DEDUCTIBLE.

ed to CA in the first basis period.

nd maintenance, minimum number of ee retained,

ductible despite no biz income

ncome of the taxpayer and unabsorbed losses will be carried forward
forward to be set off against adjusted income

owners -> capital receipt of recipients, not subject to tax

rent and are not interdependent.

e of that particular biz source

e. (c/f to following YA, same biz source)\
REAL PROPERTY GAINS TAX

- a form of capital gains tax imposed on gains arising from the disposal of 'real properties' (chargeable ass
- governed by the Real Property Gains Tax 1976 .
- Objectives:
Reduce speculation in land and propertied
To check the spiralling prices of lan and properties in Malaysia.

S3 of RPGT Act ---> RPGT is charged on a chargeable gain accruing on the dispo
S2 --> 'real property' is any land situated in Malaysia and any interest, option or other right in or over su

Land defined as:- the surface of the earth & all substances forming that surface
the earth below the surface and sustances therein
building or anything attached on land
standing timber, trees, crops, & other vegetation growing on land
land covered by water

* if already taxed under ITA , NOT be taxed under the RPGT

* will be taxed under Income Tax Act if the disposal of property is a trade (biz)

CHARGEABLE PERSONS

S6 of the RPGT Act 1976 ------> whether or not resident in Malaysia for YA will be chargeab
asset which give rise to chargeable gain during that year

Sch 1 of the RPGT Act

1 Body of persons and partnerships

- chargeable as a separate entity
- the precedent partner, the manager, the secretary or the treasurer as

2 Incapacitated persons
- the person assessable will be the receiver, trustee, guardian or commi
property on behalf of an incapacitated person.

3 Companies
* 'directors' of a co are jointly and severally liable for the amount of RPGT and penalty during the tenure

- director means any person who:-

a) occupying the position of director including any person that
b) either on his own or with one or more associates, the owne
means to control, not less than 20% of the ordinary share c

- Associate means, in relation a person :-

a) a person in any of the following relationships to that person
b) the trustee or trustees of a settlement in relation to which t
in para (a) of this definition is or was, a settlor;
 the trustee or trustees of a settlement in relation to which t
in para (a) of this definition is or was, a settlor;
c) where that person is interested in any shares or obligations
deceased person, any other person interested therein.

4 Non- residents
- A person who is absent from Malaysia is assessable to RPGT either dir
receiver or manager in Malaysia.

5 Estate of a deceased person / Trust

- the executor of the deceased person’s estate or the trustee of a trust w
from the disposal made by the executor or the trustee of any chargea
- Where there is more than one executor or trustee, they shall be joint

6 Rulers and Ruling Chief

- Any person who is nominated by a Ruler or Ruling Chief as the person
property will be the person assessable to RPGT on behalf of the Ruler

S16 of the RPGT Act

*The chargeable person may be the acquirer of real property than the
a) where the consideration on the disposal consists of anothe
b) where there is a failure by BOTH the disposer and the acqu
RPGT payable will also be imposed.
c) where the consideration on the disposal is deemed to be at

* The amount of RPGT assessed on the acquirer will be equal to the amount of RPGT payable by the disp
* acquirer is not allowed to deduct any relief arising from the allowable loss suffered by the disposer

BASIS OF ASSESSMENT
- In accordance with the current calendar year
ie: chargeable asset disposed on 2020, assessed to RPGT in YA 2020

COMPUTATION OF RPGT

RPGT PAYABLE = CHARGEABLE GAIN X RPGT RATE (AR)

Chargeable gain = Disposal price - Acquisition price

RPGT Rate (AR) = Graduated rate based on asset's holding period

Acquisition price
S2 of RPGT Act -----> 'acquire' include by the way of purchase, grant, exchange, gift, settlem
Formula set out in Para 4, Sch 2:

AP = CONSIDERATION PAID + INCIDENTAL COSTS - RECOVERIES

Consideration paid = purchase price paid wholly and exclusively for the acquisition of the real property b
Incidental costs = a) stamp duty and legal fees,(except fees on loan agreemen
b) advertising expenses incurred to seek a seller of required
c) tax agents fees
* interest expenses NOT qualify as an incidental cost
Recoveries = following types of capital receipts:-
a) Para 4(1)(a) - compensation received for damage, destructi
b) Para 4(1)(b) - money received under insurance policy for da
c) Para 4(1)(c) - deposit forfeited in connection with an intend

* Where an asset disposed of was acquired prior to 1January 2013, the (sum of) consideration and incide
at 1 January 2013. This is applicable for Malaysian citizens and permanent residents.

Disposal price
S2 of RPGT Act -----> 'dispose' is defined as sell, convey, transfer, assign, settle or alienate, w

Formula set out in Para 5, Sch 2:

DP = CONSIDERATION RECEIVED - PERMITTED EXPENSES - INCIDENTAL COSTS

Consideration received = selling price of the real property

Permitted expenses =
(TO UPGRADE ASSET) a) Para 5(1)(a) - all expenses wholly and exclusively incurred o
disposer for the purposes of enhancing or preserving the va
b) Para 5(1)(b) - all expenses wholly and exclusively incurred a
to the asset or to a right over the asset (eg legal expenses)
Incidental cost (Para 6 Sch 2) = expenses incurred in relation to sale transaction only
eg: a) professional fees, commission or remuneration
b) cost of transfer (including stamp duty)
c) cost of advertising to find a buyer and cost rea

Any expenses or outgoings which qualify as allowable expenses in computing the adjusted income for income tax p
RPGT purposes. This however excludes capital expenditures incurred which qualify for Schedule 3 deductions (e.g.
deductions are NOT treated as allowable expenses

Expenses incurred by the seller which have been or are going to be directly or indirectly reimbursed by any other pe
expenses and thus, excluded from the computation of Disposal Price.

Applicable RPGT rates (AR)

Determination of Disposal and Acquisition Date

HOLDING PERIOD = DISPOSAL DATE - ACQUISITION DATE

* Where there is a disposal, the disposal date of the seller would be deemed to coincide with the acquisition date o

a) With written agreement

would be the date of the agreement regardless of whether the conside

b) Without written agreement

it would be the date of completion of the disposal.
earlier of (i) date the ownership of the asset is transferred by the selle
or (ii) date the seller receives 100% of the consideration

CHARGEABLE GAIN VS ALLOWABLE LOSS

Chargeable Gain (CG) = DP > AP (RPGT imposed)

Allowable Loss (AL) = DP < AP (no RPGT but RPGT return must be submitted
(eligible for relief, ie set-off against any Charge

The Chargeable Gain or Allowable Loss is deemed to accrue or suffered by the disposer at the time of dis
not.

EXCESS RECOVERIES

AP = CONSIDERATION PAID + INCIDENTAL COSTS - RECOVERIES

Para 4(2), Schedule 2 states that, in the event that the amount of recoveries received exceed the total o
accruing to the owner at the time he receives such sum. This means that the owner will be liable to RPGT
received.

When the property is subsequently disposed, under Para 4(5), the Acquisition Price will be treated as n
disposal shall be equal to the Disposal Price of the asset.
 When the property is subsequently disposed, under Para 4(5), the Acquisition Price will be treated as n
disposal shall be equal to the Disposal Price of the asset.

Deductions against Chargeable Gain

The Chargeable Gain arising from the difference between the Disposal Price and the Acquisition Price o
exemptions before the actual Chargeable Gain which is sub

Schedule 4 Exemption [Para 2, Schedule 4]

* apply to individuals who need NOT be Malaysian citizens

The amount exempted is the GREATER of:

a) A/B*C
A is part of the area of the chargeable asset disposed;
B is the total area of the chargeable asset;
C is RM10,000;
OR
b) 10% OF THE CHARGEABLE GAIN

* The amount exempted would be deducted from the Chargeable Gain and NOT from the RPGT payabl

Allowable Loss

Any Allowable Loss arising from the disposal of a chargeable asset (where an otherwise gain is chargeab
from other disposals of chargeable assets in the same yea

Should there be no other disposals in that same year of assessment, the unutilised Allowable Loss can b
disposals in future years of assessm

The Allowable Loss, however, cannot be set off against any Chargeable Gain accruing in

EXEMPTIONS FROM RPGT

Para 3 Sch 4 Exemption

FULL EXEMPTION on any Chargeable Gains accruing to the Govt, State govt & local authority

Private Residence Exemption [ Section 8 Sch 3 ]

Conditions:
SOHO 1 the ind must be a citizen or permanent resident
SMALL 2 the real property must be a residential property / part of the building i
OFFICE 3 the residential building is occupied, rented or fit for occupation
HOME 4 never made any election for this exemption
OFFICE
 * an election for this exemption must be made in writing during the submission of return for RPGT to the

Disposal of real property in the sixth year of thereafter for not more than RM200,000 by a citizen
[Real Property Gains Tax (Exemption) Order 2018]

From 1 January2019, an individual who is a citizen is exempted from payment of tax on the disposal ma
chargeable asset (other than shares) for not more than RM200,000.

SPECIAL TREATMENTS

1 Disposal Deemed at Market Value [Para 9, Schedule 2]

the disposal will be deemed to be for a consideration equal to the market value of the chargeable asset a

a) where the asset is not acquired / disposed of at an ‘arm’s length tra

or where the asset is acquired / disposed of by way of gift,

b) where the asset is acquired / disposed of wholly or partly:

• for a consideration which cannot be valued, or
• in connection with a loss of office or employment or dimin
• in consideration for an employee’s services,

c) where the asset is acquired / transferred by a trustee for the credito

in full or part satisfaction of any debt due from that person,

d) where the asset is disposed of in a transaction for the transfer of a b

e) where Sect 25(2) applies i.e. where the DG has reason to believe tha

To the seller, the Consideration Received is deemed to be the ‘market value’ (if it is higher) of the asset o
Similarly, the acquirer is deemed to acquire the chargeable asset at the market value.

In addition, the DG is empowered, under Para 11 to determine the asset’s market value under the follow
a) where the parties to the disposal are not agreeable on the market v
b) where there is only one party to the disposal, or
c) where the DG is of the opinion that the market value as agreed by t

2 Exchanges of Assets [Para 13, Schedule 2]

Where a chargeable asset is disposed of by being exchanged for another asset (whether chargeable asse
the market value concept will be applicable.

To the disposer, the market value of asset received by him shall be deemed as the consideration receive
If the asset received does not have any market value (eg shares which are not traded), then his deemed
or disposed by him.
 If the asset received does not have any market value (eg shares which are not traded), then his deemed
or disposed by him.

3 Part Disposals [Para 21, Schedule 2]

Under Para 21(2), where there is a ‘disposal of part of an asset’, the Acquisition Price must be apportion
Similarly, any Permitted Expenses incurred on such asset must also be apportioned.
* the basis will normally depend on the circumstances of each disposa

With effect from 10 January2013 Schedule 4 exemption is also available on part disposals
according to the area disposed in proportion to the total area of the chargeable asset.

NO GAIN NO LOSS (NGNL) TRANSACTIONS

DP = AP , CHARGEABLE GAIN = NIL , NO RPGT

i Gift of Real Property [Para 12, Sch 2]

A chargeable gain is calculated by comparing the disposal price (consideration received deemed at mark
and remaining chargeable gain (after deduction of exemption and reliefs) will be subject to RPGT

ii Gift between husband and wife, parent and child, or grandparent and grandchild where the donor(give

No RPGT liability arises on the citizen donor.

From 1 January 2019, the acquisition price of the donee is determined as the original acquisition price pa
plus permitted expenses by the citizen donor (regardless of holding period by the citizen donor).

If the donee receives any form of recoveries after the asset is transferred to him,
the recoveries received shall be deducted in determining his final Acquisition Price.

Non-Application:
a) This provision shall NOT apply where the donor is a non-citizen
any gift by a non-citizen donor is a disposal deemed at market value.

b) This provision shall NOT apply if the transfer involved a nominal sum o
except for transfer between spouses which may still be regarded as a N

Para 3(1) Sch 2 prescribes the following as no gain no loss transactions

where the disposal price is deemed to be equal to acquisition price:-

(a) the devolution of the assets of a deceased person on his executor or legatee under a will or intestacy
of a trust created under his will;
(b) the transfer of assets between spouse
(c) acquisitions from or disposals to a nominee or trustee resident in Malaysia by an individual or his wife
absolutely entitled as against the nominee or trustee;
 (d) the conveyance or transfer of an asset by way of security, or the transfer of a subsisting interest or rig
security in or over an asset (including re_x0002_transfer on the redemption of the security);
(e) gifts made to the Government, a State Government, a local authority or a charity exempt from incom
income tax law;
(f) the disposal of an asset as a result of a compulsory acquisition under any law;

(g) the disposal of any chargeable asset pursuant to a scheme of financing approved by the Central Bank
Financial Services Authority, the Malaysia Co_x0002_operative Societies Commission or the Securities Co

TAX ADMINISTRATION

RETURNS
the seller has the responsibility to submit Form CKHT 1A to the IRB within 60 days from the date of disp
In the event of non_x0002_chargeability, the seller may submit Form CKHT 3 together with Form CKHT
(a) where the seller wants to elect for the Private Residence Exemptio
(b) where the transaction falls under Para 12, Sch 2
i.e. transfer of chargeable asset between husband and wife, parent an

The buyer, on the other hand, has the responsibility to submit Form CKHT 2A to the IRB within 60 days f
The RPGT returns can also be filed electronically.

* If the RPGT return is submitted late, it is subject to a 10% penalty.

RETENTION SUM
The buyer must withhold a sum equal to 3% of the total consideration or the whole of the
cash consideration received if the cash payment forms less than 3% of the total consideration.
payable to the IRB within 60 days from the date of disposal.

The sum that is required to be withheld where the disposal is by a non-citizen, non_x0002_permanent re
company not incorporated in Malaysia is 7% of the total consideration or the whole consideration consis
lower).

In the event the disposal is not subject to RPGT or is exempt, the disposer may furnish together with the
IRB, and serve the notification to the buyer within 60 days from the date of disposal.

If not remit within 60 days, a late payment penalty of 10%.

PAYMENT OF RPGT
A ‘notice of assessment’ will be issued to the disposer and the RPGT payable (after deducting the amoun
buyer) must be paid within 30 days from the notice of assessment, regardless of whether an appeal is m
attract a penalty of 10%.

Upon settlement of the RPGT payable by the seller, the IRB would issue a ‘certificate of clearance’ to bot
 Where the DG is satisfied that no Chargeable Gain has arisen in respect of any disposal of a chargeable a
chargeability’ in a prescribed form will be issued to the disposer.

If there is an ‘overpayment’ of RPGT, the excess will be refunded to the tax payer. However, if the tax pa
1967, the DG has the right to utilize this excess for the payment of tax liabilities under ITA 1967 before re

CIRCUMSTANCES WHERE BUYER MAY BE ASSESSED

An acquirer or buyer of real property asset may be the chargeable person assessed to RPGT IF:

(a) where the consideration consist of another asset (whether the othe
(b) where there is failure by both the disposer and acquirer to submit
(c) where the consideration of the disposal is deemed to be at market

eg: *INCREASE OUR AP, DECREASE OUR DP

AP (AD 2/2/2019)

CP 400000
ADD: INCIDENTAL COST
LEGAL FEES 2000
STAMP DUTY 3000
INTEREST ON LOAN 0
QUIT RENT 0
AR 0
5000
LESS: RECOVERIES
DEPOSIT FORFEITED 40000
COMPENSATION 20000
-60000
AP 345000

DP (6/6/2021)
CR 800000
LESS:PERMITTED EXP
RENOVATION 200000
LEGAL FEES (DEFENDING TITLE) 2000
-202000
LESS: INCIDENTAL COST
LEGAL FEES 4000
STAMP DUTY 2000
-6000
DP 592000
 DP 592000 FORM
AP -345000 DISPOSER CKHT 1A SUBMIT WITHIN 60 DA
CHARGEABLE GAIN 247000 EG: BY 4/7/2021
FOR IND ONLY LESS: SCH 4 EXEMPTION ACQUIRER CKHT2A SUBMIT WITHIN 60 DA
10000 OR 10% OF CG EG: BY 4/7/2021
[10%*247000] -24700 * DON'T PAY YET, JUST RETURN THE FORM
NET CHARGEABLE GAIN 222300 * GOVT WILL CALC THE RPGT ON THEIR OWN,
USUALLY HIGHER THAN WHAT U CALC
RPGT PAYABLE (WITHIN 3 YRS) 66690 *GOVT WILL ASK THE RECEIPT

EG: GOVT CALC GET RM120000, U NEED TO PA

IE BY 17/7/2021

IF DP< AP, = ALLOWABLE LOSS

CAN (-) IF HAVE ANY CHARGEABLE GAIN ON OTHER ASSET
DEDUCT AFTER DEDUCTING SCH 4 EXEMPTION
ALLOWABLE LOSS CAN BE CARRIED FORWARD UP TO 7 YRS
 DP > AP = CHARGEABLE GAIN
DP < AP = ALLOWABLE LOSS
perties' (chargeable assets) in Malaysia. DP = AP = NO GAIN NO LOSS
gifts to children (eg mom to son)
*if without consideration(money), NGNL
*if have consideration, (means demand for any money in retu
rties in Malaysia.

in accruing on the disposal/deemed disposal of any chargeable asset/property by a chargeable person in a YA.
other right in or over such land. Chargeable person: Individual
Company
ng that surface Partnership

on growing on land

a for YA will be chargeable with RPGT as there is a disposal of a chargeable

gain during that year

etary or the treasurer assessable with RPGT payable by the partnership or body of person

stee, guardian or committee having the direction, contol or management of any

enalty during the tenure of their apppointment. *

ncluding any person that concerned in the management of co's biz

ore associates, the owner of, or able to directly or through a medium of companies or by any other indirect
% of the ordinary share capital of the company

ationships to that person (ie husband, family, etc)

ent in relation to which that person is, or any such relative of his (living or death) as is mentioned
s, a settlor;
ent in relation to which that person is, or any such relative of his (living or death) as is mentioned
s, a settlor;
ny shares or obligations of a company which are subject to any trust or are part of the estate of a
interested therein.

sable to RPGT either directly under his name, or in the name of his attorney, factor, agent,

or the trustee of a trust who will be assessable to RPGT in respect of any chargeable gain arising
e trustee of any chargeable asset belonging to the estate of the deceased person.
ustee, they shall be jointly and severally liable for the RPGT payable.

ling Chief as the person executing the functions or administrator of the Ruler or Ruling Chief’s private
T on behalf of the Ruler or Ruling Chief.

of real property than the disposer:

posal consists of another asset (whether the other asset is chargeable or not),
e disposer and the acquirer to submit a return to the DG on the disposal in which case, a fine of 10% of the

posal is deemed to be at the asset’s market value for RPGT purposes.

RPGT payable by the disposer.*

ered by the disposer

t, exchange, gift, settlement etc

VERIES

on of the real property by the acquirer

t fees on loan agreement) survey and valuation fees (exclude interest on loan, quit rent , put 0)
seek a seller of required property

an incidental cost

ed for damage, destruction or depn of asset

r insurance policy for damage, loss, destruction or depn of asset
onnection with an intended transfer of the asset

consideration and incidental costs shall be substituted with market value of the asset
nts.

sign, settle or alienate, whether by agreementor by force of law.

CIDENTAL COSTS

nd exclusively incurred on the asset at any time after its acquisition by or on behalf of the
cing or preserving the value of the asset
nd exclusively incurred after acquiring the asset, in establishing, preserving or defending the title
sset (eg legal expenses)

mission or remuneration paid for the professional services

ing stamp duty)
find a buyer and cost reasonably incurred in making any valuation

income for income tax purposes must be excluded from the computation of Disposal Price for
edule 3 deductions (e.g. capital and other allowances) for income tax purposes as Schedule 3

mbursed by any other person or the Government shall not qualify to be treated as permitted
th the acquisition date of the buyer.

s of whether the consideration has been received or not

transferred by the seller

urn must be submitted by seller and buyer)

et-off against any Chargeable Gain arising from other disposals of chargeable assets made during YA)

sposer at the time of disposal, whether the consideration is payable by instalments or

VERIES

eived exceed the total of (CP + IC), the excess shall constitute a Chargeable Gain
ner will be liable to RPGT charge for such excess in the year the recovery sum is

rice will be treated as nil. Thus, the final Chargeable Gain arising on subsequent
rice will be treated as nil. Thus, the final Chargeable Gain arising on subsequent

d the Acquisition Price of the disposed chargeable asset will be reduced by the following types of
geable Gain which is subject to RPGT is ascertained.

sian citizens

ble asset disposed;

T from the RPGT payable.

herwise gain is chargeable to RPGT) shall be eligible for set-off against any Chargeable Gain arising
le assets in the same year of assessment provided.

sed Allowable Loss can be carried forward to be set off against any Chargeable Gains arising from
future years of assessment.

geable Gain accruing in any earlier YA.

al authority

ty / part of the building is used for residence

fit for occupation
of return for RPGT to the IRB.

00,000 by a citizen

f tax on the disposal made in the sixth year or thereafter of a

of the chargeable asset as at the date of transfer:

of at an ‘arm’s length transaction (eg transactions with related parties)

y way of gift,

holly or partly:
be valued, or
or employment or diminution of emoluments, or

a trustee for the creditor or any person

m that person,

on for the transfer of a business for a lump sum consideration, or

has reason to believe that any transaction is made under a scheme to avoid RPGT

t is higher) of the asset on the date of transfer.

et value under the following circumstances:

reeable on the market value,

ket value as agreed by the parties to the disposal is incorrect

whether chargeable asset or not) ,

he consideration received for the disposal.

aded), then his deemed consideration will be the market value of the asset exchanged
 aded), then his deemed consideration will be the market value of the asset exchanged

Price must be apportioned between the part disposed off and the part of asset being retained.

mstances of each disposal.

ceived deemed at market value) with acquisition price,

subject to RPGT

ld where the donor(giver) is a citizen

if spouse, wether have consideration or not,
still NGNL
ginal acquisition price paid by the citizen donor if grandparent to granchild or parent to chiled,
e citizen donor). if have consideration, take it as AP
if not, NGNL

r is a non-citizen
emed at market value.

nvolved a nominal sum of consideration

ay still be regarded as a NGNL transaction under Para 3(1)(b), Schedule 2.

under a will or intestacy or on the trustees

an individual or his wife or by both being

 subsisting interest or right by way of
he security);
arity exempt from income tax under the

ved by the Central Bank, the Labuan

ssion or the Securities Commission

ys from the date of disposal.

gether with Form CKHT 1A, inter alia :
ate Residence Exemption, or

and and wife, parent and child or grandparent and grandchild.

the IRB within 60 days from the date of disposal.

consideration.

on_x0002_permanent resident and a

ole consideration consisting of money (if

urnish together with the return a notification form to

osal.

er deducting the amount withheld and paid by the

whether an appeal is made. Any late payment would

cate of clearance’ to both the seller and the buyer.

sposal of a chargeable asset, a ‘certificate of non-

r. However, if the tax payer has unpaid tax liabilities under ITA
under ITA 1967 before refund can be made to the tax payer.

ed to RPGT IF:

asset (whether the other asset is chargeable or not);

and acquirer to submit a return on the disposal to the DG; and
deemed to be at market value for the purposes of the Act.
 SUBMIT WITHIN 60 DAYS FROM DATE OF DISPOSAL
BY 4/7/2021
SUBMIT WITHIN 60 DAYS FROM THE DATE OF ACQUISITION
BY 4/7/2021
T RETURN THE FORM
E RPGT ON THEIR OWN,
N WHAT U CALC

M120000, U NEED TO PAY TO THE IRB WITHIN 30 DAYS FROM BORANG

demand for any money in return, consider disposal under market value.

Partnership
BUSINESS INCOME

S33(1) --> Expense or outgoing must be wholly and exclusively incurred in the production of gross income
in order to qualify for a tax deduction.

REVEX

(a) Recurring in nature

(b) Does not give rise to enduring benefit.

(c) Incurred ‘in the production’ of income.

(d) Relates to circulating / working capital.

(e) Relates to the business process or income-earning activity.

(f) Incurred to maintain the business efficiency.

GENERAL DEDUCTION Rules - S33(1)

2.1 Interest Expense -S33(1)(a)

* allowed as tax deduction if :
a) employed in the production of gross income from that source
b) laid out on assets used or held in the production of gross income from that source

Interest restriction - S33(2)

the interest expense deductible restricted to the amount relating to the business portion only
non - business purpose include:
(i) investments in landed properties, shares, securities and Islamic securities (or Sukuk), placement in fixe
(ii) loans (including interest-free loans) given to some other persons.

The deduction of interest expense payable on borrowed money used for purposes of business, investme
if the total amount of investments and loans is the same with or exceeds the amount of borrowed mone
if the total amount of investments and loans is less than the amount of borrowed money, INTEREST EXP

Interest Restricted = (Cost of Investments @ Loans Financed by Borrowings) / Outstanding Balance of Bo

PR 2/2011, in applying the above formula:

(i) total cost of investments and loans which are financed by borrowings does NOT exceed RM500,000, t
(ii) however, the computation must be strictly based on the monthly balances where:
a) the total cost of investments and loans which are financed by borrowings exceeds RM500,000, or
 b) there are no outstanding investments and loans at the end of the year due to either sale, transfer or r
(iii) in the event the monthly balances have to be applied, the interest expense incurred would be deeme
(iv) the interest restriction under s 33(2) will NOT apply where the interest on borrowed money charged
(i) RM6,000 per annum - for individuals,
(ii) RM10,000 per annum - for companies,
(v) where the money borrowed is given to related parties as ‘interest-free loans’, the interest expense in
totally disallowed, both against s 4(a) income as well as against s 4(c) income (i.e. it will be a permanent
Interest incurres for refinancing purposes:
deductible for tax purposes if the first loan was taken for the purpose of producing the business income.

Interest incurred on late payment of trading debt:

as the interest expense satisfies the s 33(1) ‘wholly and exclusively’ test and it is not prohibited by s 39 o

2.2 Rental Expense - S33(1)(b)

Rental expense will qualify for tax deduction if:

(a) it is payable in respect of any land or building or part thereof occupied by the taxpayer;
(b) for the purposes of producing gross income of that source; and
(c) the land or building is used in relation to that period.

* a capital cost to acquire an asset shall not be deductible.

* if rental expense is incurred in respect of any land or building which is not used for income-producing p

2.3 Repair and Renewal Expense - S33(1)(c)

d in the production of gross income

CAPEX

(a) Usually a one-off payment.

(b) Will give rise to enduring benefit, which may also involve the acquisition of an
intangible asset.
(c) Incurred either ‘in order’ to produce income or ‘after’ the production of
income
(d) Relates to fixed capital.

(e) Relates to the business structure or the profit-yielding structure

(f) Incurred to acquire, expand, modify or remove the business structure.

ncome from that source

ating to the business portion only

lamic securities (or Sukuk), placement in fixed deposits;

ney used for purposes of business, investments and loans is determined as follows:
h or exceeds the amount of borrowed money, WHOLE AMOUNT DISALLOW
amount of borrowed money, INTEREST EXP DISALLOW

by Borrowings) / Outstanding Balance of Borrowings x Average Interest Incurred

borrowings does NOT exceed RM500,000, the above computation is based on the year-end balances,
monthly balances where:
d by borrowings exceeds RM500,000, or
d of the year due to either sale, transfer or repayment made during the year.
e interest expense incurred would be deemed to accrue evenly every month,
re the interest on borrowed money charged to business accounts does not exceed:

‘interest-free loans’, the interest expense incurred on that portion of the borrowing will be
nst s 4(c) income (i.e. it will be a permanent loss).

purpose of producing the business income.

usively’ test and it is not prohibited by s 39 of the Act, tax deduction will be given.

eof occupied by the taxpayer;

ng which is not used for income-producing purposes, no deduction of such rental expense is allowed
SELF ASSESSMENT

The 'Old System'

- ie The 'official assessment system'
- Taxpayer must declare their income to IRB via submission of tax return
- IRB will compute tax liability for particular YA
- IRB notify taxpayer via issuance of a 'notice of assessment' (Form J) - how many tax u have to pay g
- Taxpayer must settle the tax liability within 30 days
- If taxpayer disagreed with the amount, appeal would need to be lodged to IRB

The 'New System'

- Starting YA 2001 (company) and YA 2004 (individual)
- Taxpayer will determine their own taxable income, compute tax liability and submit tax return
- IRB will accept the declaration of income but tax audit will be done on a 'post-assessment' basis
- There is penalty system if taxpayer under-declare their income'

PAYE = PAY AS YOU EARN (only pay tax the yr u received)

INDIVIDUAL SELF - ASSESSMENT SYSTEM

Public ruling - a law govt introduced

Taxpayer responsibilities:
1 Pay current year's tax by instalments based on Estimated tax payable by IRB
2 make application if wanted to revise the the ETP
3 Compute own tax payable and submit the tax return
4 Make final payment of income tax
5 Keep records for 7 years

Payment of Tax by Instalments

a) Individual with employment income

- Tax deducted at source
- Via Monthly Tax Deduction (MTD) System under S 107
- Employer will deduct a certain portion from ee monthly salary (can have tax refund or ta
- Ee will get Form EA / EC from er (stating all the things that have been deducted from ur s
- * If not paid by 30/4 following yr, balance unpaid + penalty 10% paid within 60 days, ie
* If still fail to pay all the amount, another 10% penalty paid within 30 days, ie
* If still not paid, action will be taken

b) Individual with business, rental or royalty income

- IRB will provide estimated tax payable for a YA via Form CP 500
- The ETP is based on actual tax payable for the immediate preceding YA (exclude employm
- Based on ETP, tax payment is done bi-monthly via Compulsory Instalment Scheme (CIS)
- Six bi-monthly nstallments, starting March current YA, ended January following yr.
- Instalment must be paid within 30 days from 'due date' ie 1st of the relevant month
- Late payment, penalty 10% under S 107B(3)
Variation of Installment Payments
- if ind want to revise tax amount, submit to IRB not later than 30 June of current yr
- If successful, revice notice of instalment via Form CP 503
- If not successful, issuance of Form CP 504
- If actual tax payable exceed the revised estimate by amount
exceeding 30% of actual tax payable, penalty of 10% on the excess under S107B(4).
* ONLY be imposed if taxpayer make a variation

Submission of Tax returns

- Ind required to submit tax return if:
a) ind who has chargeable income for the current YA or
b) ind with NO chargeable income for current YA, but:
(i) had chargeable income in the immediate preceding YA; or
(ii) had furnished a tax return in the immediate preceding YA; or
(iii) had been required to furnish a tax return (but failed to do so) in the immediate prece
Deadline:
1 30 April of the following year – for Form BE (those without business income).
2 30 June of the following year – for Form B (those with business income)

Settlement of the Final Tax Balance

- Any shortfall must be settled on the same day as submission of tax return.
- If has overpayment, IRB first utilize the amount to settle any other taxes owed,
the balance can be refunded or will be offset against tax liability in the following yr.
- Penalty for under-estimation [S107B(4)] must be settled on the same date (30/4 or 30/6)
- 10% penalty - if the balance of tax is unpaid by the due date of 30 April or 30 June – s 103(3),
- If want to make an appeal, the appeal must be lodged via Form Q within 30 days after submission o

Retention of records
- Under S 82, ind with a biz income must retain record for 7 yrs
- keep printed receipts with serial number for any sale of goods in excess of RM150,000
or for any provision of services exceeding RM100,000.
- Under S 82A, ind with employment or investment income also retain 7 yrs
- Field audit - IRB visit the taxpayer's premises to examine records to ensure compliance with law

COMPANIES SELF ASSESSMENT

They must have common basis period coinciding with their financial yr

Companies responsibilities:
* to provide an estimate of tax payable for a YA
* to pay monthly tax instalments of current YA’s tax
* to revise tax estimate (if necessary)
* to submit the actual tax return
* to settle the final tax balance
* to retain documents for a period of seven years from the end of the relevant year
Provision of an estimate of tax payable

- submit ETP in form (CP 204) not later than 30 days before the beginning of its next basis period – s
- The ETP shall NOT be less than 85% of the revised estimate (or original estimate if no revision is mad
of tax payable for the immediately preceding YA – s 107C(3).
* Starting YA 2016, submit electronically
- By virtue of S 107C(8), DG may issue a tax estimate via Form CP 205 if:
a) co failed to furnish ETP (Form CP204) 30 days b4 starting next basis period
b) co 's ETP less than 85% of its previous Ya's rebised or original tax estimate

* Starting YA2013, , the amount of tax estimate issued by the DG is deemed to be a revised estimate
which is to be used to determine the penalty arising from under-estimation of tax

Payment of tax via monthly installments

under Compulsory Installment Scheme (CIS) under S 107C

* Once Form CP 204 is received, IRB will issue notice of payment through Form CP 205
together with 12 payment slips (Form CP 207)
* 12 equal monthly installment payments (based on ETP)
* First installment in the 2nd month of basis period, due by 15th of each month
* Failure will attract 10% penalty on unpaid amount - S107C(9)

Revision of estimate

- Under S 107C(7), co can revise its ETP via Form CP 204A to avoid penalty on under-estimation of tax
- Can be done twice a year, in the 6th month or the 9th month of BP
- If a revision is made, the monthly tax instalments will also be revised accordingly

Revised instalment amount = Revised estimate - Amounts paid

No of instalments remaining

* Co submit tax return via Form C within 7 months from accounting year-end date
* If any shortfall arises, must be settled within 7 months too
* Failure to settle shortfall within due date : automatic penalty of 10%
* If overpayment occur, DG will settle any taxes co owed and the balance can be refunded (under S 111)

Penalty for under-estimation of tax

- Under S 107C (10), a penalty of 10% will be imposed if the actual tax payable exceeds
the revised (or original) estimate by more than 30% ( MARGIN OF ERROR)
- Must be settled latest by the last day of the 7th month after co year-end (together with Form C)

Effective from YA2013, where the DG has issued tax estimate to the company for any particular YA, the tax estimate
deemed to be the company’s revised estimate which is to be used in computing the penalty arising from the under-
FOR A NEWLY COMMENCED COMPANY

PAID UP CAPITAL RM2.5 MILLION AND BELOW

* Resident companies which first commences operation during particular YA is excluded from:
a) Providing ETP
b) Paying monthly tax monthly instalments

for the first two basis periods from commencement.

However they are required to:

a) Furnish a tax return in s prescribed form (Form C)
b) Make payment for the final tax payable for that YA

* within seven months after the close of its first two accounting periods.

Occasionally, a company that first commences operation or business and may not have a basis period for the first 2
commencement). For such company, an estimate of tax payable and monthly tax instalments is not required in the
provided its paid-up ordinary share capital on commencement and for the following two YA did not exceed RM2.5 m

This treatment will not apply to:

(a) if more than 50% of the paid up capital in respect of the company’s ordinary shares is directly or indirectly owne
(b) if more than 50% of the paid up capital in respect of the ‘related company’s’ ordinary shares is directly or indirec
(c) if more than 50% of the paid up capital in respect of the company’s and the ‘related company’s’ ordinary shares

‘Related company’ for this purpose refers to a company having a paid up capital in respect of its ordinary shares of
RM2.5 million at the beginning of the basis period.

PAID UP CAPITAL EXCEEDS 2.5 MILLION

They are required to:

(a) to furnish its ETP for its first YA (via Form CP 204) within 3 months from the date of commencem
basis period contains less than 6 months,no tax estimate needs to be provided.

(b) to pay its current YA’s tax via monthly instalments (based on the tax estimate).
according to the number of months that it has in its first basis period.

(c) the first monthly instalment will commence in the 6th month of the basis period
and the due date is 15th of every month

* only apply for the first YA

An overlap of two monthly tax instalments to be paid in respect of two separate YAs may arise in the initial years of

AMENDMENT OF RETURN

Starting YA 2009, taxpayer can make a self-amendment on tax return

The form shall be submitted not later than 6 months after the due date for filing the original tax return
Only allowed ONCE for each YA in respect of errors which results in additional tax to be paid
No amendment allowed if:
a) the tax return for a YA has been submitted and
b) the DG has made an aseesstment fot that YA under S 91

The amended return shall specify:

(a) the amount or additional amount of chargeable income and the amount of tax or additional tax
chargeable income,
(b) the amount of tax payable on the tax which has or would have been wrongly repaid to him
(c) the increased sum (i.e. penalty) resulting from the submission of amended return
(d) any other particulars as may be required by the DG.

Increased sum / penalty

amended return submitted within 6 months from the due date of filing the original tax return
– a penalty of 10% of the amount of tax or additional tax.
The single penalty of 10% is with effect from 1 January 2020.

*payable on the day the amended return is submitted

TAX AUDIT
an examination of a taxpayer’s business records and financial affairs to ascertain that the tax liabiliti
are in compliance with the tax laws and regulations

1 DESK AUDIT
The taxpayer may be called for an interview at the IRB’s office if further information is required.
The IRB officer ask for documents, u must submit until they satisfied

2 FIELD AUDIT
- takes place at the taxpayer’s premises.
- involves a more detailed review of the taxpayer’s business as well as non-business records.
- taxpayer will be given a prior notice (of 14 days) to a field audit through a letter of notification.

* a tax audit covers a period of one (1) to three (3) year(s) of assessment,
* tax audit may be extended to cover a period up to five (5) years of assessment,
pursuant to the issues uncovered during an audit.
* not applicable to cases involving fraud and tax evasion
 PENALTY
* If it is discovered of omission of income, a penalty will be imposed pursuant to s 113(2) of the Act
which may be for a maximum amount equals to 100% of the amount of tax undercharged.
* The DGIR may impose lower penalty of 45% on the tax undercharged (subsection 124(3))

If make voluntary disclosure after due date or furnish a return form on or before due date:
1 Within 6 months from due date = 10%
2 After 6 months = 35%

* IF DO THE UNDERSTATEMENT FOR 2ND TIME, 100% penalty

* Taxpayer must make full payment of taxes and penalties from an audit in full or predetermined peri
* Failure will attract late payment penalty

APPEAL
The appeal must be made directly to the Special Commissioners of Income Tax
within 30 days after the service of the notice of additional assessment.
If either party is dissatisfied with the decision of the Special Commissioners,
the aggrieved party may apply to have the case heard in the High Court and henceforth to the Cour

COMPANY -> SME ----> NEW The first 2 YA not required to submit ETP but pay final tax
EXISTING 3rd YA, falls under existing

SME: 1) Paid up capital not more than 2.5 million on the day of incorporation and n
2) Sales / Turnover not more than 50 million

NON SME ----------> NEW CO

(Big co) 1 First basis period less than 6 months (First yr)
eg: 1/8/2020 to 31/12/2020
> NO ETP must be submitted to IRB

Second YA - becomes existing company

2 Existing company

3 First basis period 6 months or more(First yr)

eg: 1/4/2020 to 31/12/2020
* must estimate the amount of ETP (ie 9000)
and submitted to IRB within 3 months of the basis beriod (eg: latest by 30/6/2
* no of installments = length of basis period (9000 / 9 = 1000 per month)
* first installment must be paid by 15th of the 6th month of the basis period (
*late payment penalty 10%

* close acc 31/12/2020, calculate final tax liability

 eg
Final tax 30000
Tax paid -9000
Shortfall 21000
(-) 30% margin of error
[30%*30000 ] -9000
Excess subject to penalty 12000

How to avoid paying penalty of under estimation?

1) Do revision of ETP by increasing the original ETP

2) Can have 2 revision, ie in the 6th months of the basis period or in the 9th month of the BP

Existing company eg: 1/3/2019 to 31/3/2020

1) Etp for YA 2020

2) ETP for YA 2020 must be at least 85% of ETP for YA 2019

ETP ya 2019 100000

ETP YA 2020 85000 at least

3) If company revised ETP for YA 2019, ETP for YA 2020 must be at least 85% of REVISED ETP for YA 2019.
4) ETP for YA 2020 must be furnished / submitted to IRB ( Form CP 204)
not later than 30 days before the beginning of the basis period for YA 2020.
ie YA 2020 : 1/4/2019 to 31/3/2020
Submit CP 204 not later than 1/3/2019

5) ETP = RM 120000
6) No of installments = 12 times
7) Amount per installments 10000
8) First installment must be paid by 15th of the second month of the basis period
ie by 15/5/2020

9) close account 31/3/2020 If revision ETP is done in 6th month

Final tax liability 150000 Revised ETP 90000

LESS TAX PAID -120000 Less tax paid (5 times) 50000
Shortfall 30000 Balance unpaid 40000
less 30% margin of error -45000 Installmemnt per month 5714
Excess 0
Close account 31/3/2020
Penalty 0
Final tax liability 150000
Tax paid based on revised -90000
 Shortfall 60000
Less 30% margin of error 45000
Excess 15000

Penalty 10% 1500

If no submission form CP 204 or estimation is less than 85%, IRB will estimate by CP 205

Monthly installment paid by Form CP207

w many tax u have to pay govt

and submit tax return

'post-assessment' basis

payable by IRB 1) Determine the chargeable income for the YA (80%)

2) Compute the tax payable
3) Submit the return form (BE (employment) B (business) C (company))
4) Pay balance of tax - If any
5) Keep the documents for 7 yrs

y (can have tax refund or tax payable at yr end)

ve been deducted from ur salary, ie EPF, MTD)
10% paid within 60 days, ie 29/6
nalty paid within 30 days, ie 29/7

ceding YA (exclude employment income)

ry Instalment Scheme (CIS) under S 107B.
January following yr.
t of the relevant month
o so) in the immediate preceding YA.

te (30/4 or 30/6)
or 30 June – s 103(3),
n 30 days after submission of Form B / Form BE

of RM150,000

ure compliance with law

d of the relevant year

g of its next basis period – s 107C (2)
stimate if no revision is made)

t basis period
tax estimate

med to be a revised estimate of tax payable

tion of tax

Form CP 205

y on under-estimation of tax

ed (under S 111)

yable exceeds
( MARGIN OF ERROR)
(together with Form C)

articular YA, the tax estimate issued by the DG is

alty arising from the under-estimation of tax.
YA is excluded from:

a basis period for the first 2 YAs (first accounts ends in the Third YA from
ments is not required in the First basis period (ending in the third YA),
o YA did not exceed RM2.5 million.

s directly or indirectly owned by a ‘related company’, or

y shares is directly or indirectly owned by the company, or
company’s’ ordinary shares is directly or indirectly owned by another co

ect of its ordinary shares of more than

om the date of commencement UNLESS the company’s first

rovided.

basis period
y arise in the initial years of commencing a new business.

For YA 2020:
ginal tax return (if ee, latest by 31/10/2021)
(sole p, 28/2/2022)

unt of tax or additional tax payable on that

wrongly repaid to him

nded return

the original tax return

scertain that the tax liabilities as reported and paid

information is required.

n-business records.
a letter of notification.
ant to s 113(2) of the Act
tax undercharged.
ubsection 124(3))

r before due date:

(subsection 113 (2)

n full or predetermined period

and henceforth to the Court of Appeal.

day of incorporation and not controlled by a big company

beriod (eg: latest by 30/6/2020)

/ 9 = 1000 per month)
month of the basis period (ie 15/9/2020)
 paid within 7 months, ie 31/7/2021

* 10% = 1200 penalty

ETP for YA 2019.

JOINT ASSESSMENT

If joint assessment, 4 things cannot claim (reliefs):

1 Parental care
2 Medical expenses (parents)
3 Breastfeeding
4 Education fees

* Husband cannot claim spouse reliefs if wife have overseas income more than 4000 (joint assessment)

Overseas income is exempted under Para 28

If wife disabled, regardless what amount of overseas income, can claim reliefs of 4000 + 3500

CAPITAL ALLOWANCES

Sch 3 Allowance ---> Plant and machinery

Industrial building
Annual allowance

P/M -----> Heavy machinery AA 20%

General machinery AA 14%
Motor vehicle (commercial, non - commercial(car + 4 wheel drive)) AA 20%
Fixtures and fitting AA 10%
Small value asset AA 100%

Initial allowance (IA)

Lump sum / Hire purchase, all asset (20%)
If buy using hire purchase, can claim every yr on the payment amount

Conditions to claim CA
1 Person must incur qualifying exenditure on the qualifying asset
2 Person must use the asset in business
3 Person must elect to claim CA (register the asset)
4 IA - on the date u purchase
AA - must be the owner for 12 months (basis period)

QPE - Qualifying plant expenditure

1 Cost of the P/M
2 Installation cost (no limitto claim)
3 Alteration of existing room to install the machine
 4 Cost of site preparation (land) </= 10% of total cost ,
Can included the cost as QPE

FOREX GAIN / LOSS INCURRED TO PURCHASE P/M

- If gain, (-), if loss (+) to the QPE
[ gain we pay less, loss we pay more ]

Installation by foreigner(S4(A)1) - subject to WHT

> u cannot add the cost to QPE (include WHT) if u not deduct WHT from the gross amount
and remit to IRB within the time given (7 monts co, 30 june sole proprietor)

Disposal (u are no longer owner of asset)

B/A (loss)- allowance

B/C (gain) - taxable (not more than CA claimed)
>if got B/C, compare with CA claim, whichever lower

Small value asset (NON-SME)

1 unit less than 2 000 / total cost less than 20 000

*if SME, 1 UNIT MUST LESS THAN 2000 BUT THE TOTAL COST CAN BE ANYTHING (UNLIMITED)

if asset's lifespan is too short ( < 2 yrs )

when first time bought, considered as capital exp but not qualify as QPE
eg: hotel -> towel, bedding
restaurant -> crockery

but, when u replace, the replacement are fully allowable (0)

MOTOR VEHICLE:
commercial = lorry, bus, taxi, aeroplane,van
no limit, cost/price paid = QPE

non- commercial = car + 4 wheel drive

if buy can claim CA, if lease ..........

1) cost of car (exclude road tax - revex) > 150 000 , QPE max 50 000
2) cost of car less than 150 000 (new) QPE max 100 000
3) cost of car less than 150 000 (used) QPE max 50 000
if the car disposed, find deemed sales proceed
(*if the QPE is not the cost of the car)

DSP =[selling price * QPE / original cost ]

HIRE PURCHASE
> INTEREST CANNOT BE INCLUDED

TAX AUDIT > self assessment

1) DESK AUDIT - IRB check the tax by asking taxpayer to sent the documents
2) FIELD AUDIT - IRB visit you

expenses = allowable / deductible

income = exempt / taxable

cost of acquiring propriety rights:

*if the ques deduct 100%, u add back 80%

*if the ques not deducted yet, minus 20%
the condition: 70% owned by Malaysian, allowable 20% per annum
(joint assessment)
WHT

Tax collected from non - resident

Payer (Resident) paid to Payee (NR)

Income subject to WHT : * NR will not need to pay anything

RATE (FINAL TAX) SECTION
1 Interest 15% S 109 *loan from NR
2 Royalties 10% S 109 * patent, copyright
3 Public Entertainers 15% S 109A * include lecturers, artist, comedian etc
4 Special classes - 4A 10% S 109B * only earned by NR
5 Contract payment 10% + 3% S 107A
6 Section 4 (f) income 10% S 109F *income earned not from
normal activities

FACTORS BEFORE APPLYING WHT

1 the recipient is non - resident

2 the income must fall within one of the six categories
3 the income is derived or deemed to be derived from MAS
4 the income is not attributable to a biz carried by the NR in Malaysia (except contract payment and specia

* WHT is not applicable to income that is exempted by virtue of Schedule 6

Payer must deduct the tax amount and remit to IRB.

If not, penalty 10% will be imposed on the Payer.
Must paid to govt within 1 month afteR CREDITING OR PAYING TO NR.

Eg: Mr. A (Resident) borrow MR. B (NR) RM 1000000

Interest @ 5%

MR A paid MR B 50000
WHT @ 15% 7500 (to IRB) * If the payer paid 100% to NR,
Net @ 85% 42500 (MR B) is consider as setra expenses an

If paid to MR B at 17/5/2021, must remit to IRB within 1 months, ie 17/6/2021

If not remitted to IRB, penalty 10% 750

Year end 31/12/2021

Submit form B (business) 30/6/2022

Expenses can be treated as business expenses if the whole amount, (penalty and WHT)
if paid within 6 months (sole proprietor / partnership) or within 7 months (company)
If not, the gross amount need to be added back (not allowable) in arriving adjusted income
Third penalty, u owe govt so u cannot leave Malaysia. (if director,

Then, penalty on incorrect return (remit the wrong amount) under (S 113(2))
Can be 45% or 100% penalty (based on the exam question)

WHT ON CAPITAL ALLOWANCE

Bought machine from overseas and ask the overseas technician to install the machine

Cost of machine 100000

Installment 2000
QPE 102000

* can only capitalize the 2000 as QPE IF the WHT is paid to the IRB

Contract payment (cash) * take the service portion only, cost of materials are excluded for WHT

Want to build house, contract payment from architect in UK costing 2000000 (24%)

Pay progress payment after 10% completed the month (by phase)

10% employer
3% employee Under ITA (Monthly Tax Deduction)
This 3% can be waived by govt if ee is subject to MTD and the ee is not R

Eg : X Private Ltd (UK - NR)

to do project for MR A (Resident)
Cost of project RM 2 000 000
Year ended 30/9/2020
Chargeable income = RM 5 000 000 (paid 24% if not contracter)

The project completed on 30/9/2020

Ans:
Tax @ 24% (ITA) 1200000
Less: WHT @ 10% of 2000000 -200000
Tax liability 1000000 paid by 30/4/2021 (within 7 months)

3% for employees of the NR contracter, deducted from individual taxpayer

PUBLIC ENTERTAINERS

(host), model, circus performer, lecturer, speaker, an artiste or individual exercising any profession, voca
an individual who uses his intellectual, artistic, musical, personal or physical skill or character in,
 carrying out any activity in connection with any purpose through live, print, electronic, satellite, cable, fi
or other medium, for film or tape, or for television or radio broadcast, as the case may be.

The sixty (60) days exemption rule under Para 21 Sch 6 does not apply with regard to withholding tax u
public entertainer’s visit to Malaysia is supported by the public funds of the government of a country ou
Malaysia

if branch / franchise of foreign co, the co is NR (management and control not in Malaysia)
if subsidiary, it is on its own, can get their own Residence status

NR co
Business Income - Income Tax (24%)

S4(f) Income received not from regular activities, WHT 10%

Reimbursement Employee incurred for themselves , claimed from employer

Disbursement Employee incurred for client , claimed from employer

ROYALTY ( S 109 ) - 10%

Under s 15, royalty income shall be deemed to be derived from Malaysia if :

(a) the responsibility for payment of the royalty lies with the Government, a State Government or a local
(b) the responsibility for payment of the royalty lies with a person who is resident for that basis year; or
(c) the royalty is charged as an outgoing or expense against any income accruing in or derived from Mala

Exemption for Royalty income:

* Granted for 'approved industrial royalties' by virtue of S 127 of the Act

refer to royalties which have been approved and certified by the competent authority of Malaysia (i.e. M
for the purpose of promoting industrial development in Malaysia, and payable by an enterprise
which is engaged in activities in the sectors of :

(a) manufacturing, assembling or processing; or

(b) construction, civil engineering or shipbuilding; or
(c) electricity, hydraulic powers, gas or water supply.

* if a NR set up a branch in Malaysia and the royalty is payable to the Malaysian branch , no WHT is applicable

INTEREST (S 109) - 15%

Under s 15, interest income shall be deemed to be derived from Malaysia if :

(a) the responsibility for payment of the interest lies with the Government, a State Government or a loca
(b) the responsibility for payment of the interest lies with a person who is resident in Malaysia for that b
AND the interest is either:
 (i) payable in respect of money borrowed by that person and employed in or laid out on asset
or held for the production of any Malaysian derived gross income, OR
(ii) payable in respect of a debt which is secured by any property or asset situated in Malaysia
(c) the interest is charged as an outgoing or expense against any income accruing in or derived from Mal

Exemption on Interest income:

1 Interest Received from Banks or Finance Companies (Para 33 Sch 6)

this exemption does not apply to interest paid by a Malaysian branch of a foreign bank to
either its head office or to other branches located outside

2 Interest on Securities and Bonds (Para 35 Sch 6)

(a) securities or bonds issued or guaranteed by the Government, or
(b) debentures other than convertible loan stock, approved by the Securities Commission, or/
(c) Bon Simpanan Malaysia issued by the Central Bank of Malaysia.

3 Interest on Government/Islamic Securities (or Sukuk) (Para 33A Sch 6)

(a) securities issued by the Government, or
(b) Islamic securities (or Sukuk) or debenture issued in Ringgit Malaysia (RM),
other than convertible loan stock which is approved by the Securities Commission.
from YA2017, this exemption shall however not apply to interest paid or credited to a company in the

4 Interest on Islamic Securities (or Sukuk) (Para 33B Sch 6)

other than convertible loan stock will be exempted from tax provided
such Islamic securities (or Sukuk) is issued in any currency other than Ringgit Malaysia (RM)
and it is approved by the Securities Commission.

Effective from YA2017, this exemption shall however not apply to:
(a) interest paid or credited to a company in the same group; and
(b) interest paid or credited to_x0002_
i) a bank licensed under the Financial Services Act2013;
ii) an Islamic bank licensed under the Islamic Financial Services Act2013; or
iii) a development financial institution prescribed under the Development Financial Institution

5 Interest from Pengurusan Danaharta Nasional Berhad [Income Tax (Exemption) (No 5) Order 2001]

6 Income from Sukuk Kijang [Income tax (Exemption) No 10 Order2013]

issued by BNM Kijang Berhad

7 Income from Sukuk Wakala [Income tax (Exemption) No 3 Order2015]

Gains or profit, in lieu of interest, derived from Sukuk Wakala, other than convertible loan sto
Malaysia Sovereign Sukuk Berhad in accordance with the priciples of Wakala Bil Istithmar.

SPECIAL CLASS OF INCOME (S 109B) - 10%

 Scope of S 4A Income

S 4A (i)
Installation of asset (advisory or supervisory services, commissioning services
* sale of P&M no WHT since not in respect of services rendered

S 4A (ii)
Any advice, assistance or services in connection with the 'management' or 'administration'
of any scientific, industrial or commercial undertaking, venture, project or scheme.

Eg: provision of marketing, consultancy and legal services

supply of technical and software personnel
specially-tailored training course
management functions such as PCD, FM, FA etc
testing and calibration services

S 4A (iii)
Rent or other payments made for the use of any moveable property belongs to NR or
payments made for the use of:
oil rigs
boats and ships
cars
aircraft or
other equipment

* Freight charges paid to non-residents in respect of export of goods are not within the scope of s 4A(iii)
as they are fees for the shipment of goods and not payments made for the use of a moveable property.

Under s 15A , 4A income shall be deemed to be derived from Malaysia if :

(a) the responsibility for payment lies with the Government, a State Government or a local authority;
(b) the responsibility for the payment lies with a person who is a resident for that basis year; or
(c) the payment is charged as an outgoing or expense in the accounts of a business carried on in Malaysi

Income Tax (Exemption)(No. 9) Order 2017

Income under S4A (i) and (ii) received by NR for services performed outside Malaysia are exempted.

* shall apply even if the non-resident has a business presence in Malaysia (e.g. a branch) and the services are provide

Special Provision [Para 2D, Sch 3]

any payments made in relation to the installation or operation of any plant or machinery
are treated as capital expenditures which are not deductible as normal revenue expenses to the payer
However, they would qualify to be treated as part of the cost of the plant and machinery, thus eligible for capital al
the withholding tax and the penalty have been subsequently paid, then such installation and operation costs would
as part of the qualifying expenditure of the plant and machinery and would be eligible for capital allowances.

Reimbursement and disbursement

‘Reimbursements’ refer to disbursements or ‘out-of-pocket expenses’ incurred by the non_x0002_resident in the c

services to the payer (eg expenses incurred on air fares, travelling, accommodation etc) or those incurred in
relation to the use of any movable property, which are subsequently reimbursed by the payer.

‘Disbursements’ refer to any incidental expenses incurred in relation to services rendered or in relation to the use o

* consider as income thus subject to WHT under S4A - 10%

disbursements or reimbursements in respect of ‘hotel accommodation’ in Malaysia have been excluded from the c
technical fees’ payable to the non-resident, thus not subject to withholding tax.

* Deposit an advance payment also subject to WHT even if the services is yet to be performed

Exemption for S 4A income:

a) ‘Pooling Arrangements [Income Tax (Exemption) (No 25) Order 1995]

if engaged in the business of transporting passengers or cargo by sea

b) Income received from a Malaysian shipping company [Income Tax (Exemption) Order 2008]
any agreement or arrangement for the use of a ship
The income is in relation to the use of the ship on a voyage charter or time charter or bare bo

‘Malaysian shipping company’ refers to a resident company incorporated under the Companie
which owns a ‘Malaysian ship’ and carrying on the business of :

(a) transporting passengers or cargoes by sea on a ship, or

(b) letting out a ship.

c) Income derived from the rental of International Standard Organisation (ISO) containers by a Malaysian s
[Income Tax (Exemption) (No 24) Order 2002]
receiving income derived from the rental of ISO containers by a ‘Malaysian shipping company

CONTRACT PAYMENT (S 107A) - 10% + 3%

Any payment made to a NR or his agent for services under a contract in relation to a
contract project carried out or performed in Malaysia.

subject to WHT if:

 (a) the non-resident contractor has established a permanent establishment or has a business presence in
(b) the contract services are performed in Malaysia,
(c) the contract payment represents s 4(a) business income for the non-resident contractor.

WHT Rate

(a) 10% of the Malaysian service portion – for the non-resident contractor’s own tax liability,
(b) 3% of the Malaysian service portion – for the employees of the non-resident contractor.

Only the service portion will subject to WHT. Cost of materials EXCLUDED

If contract payment is made to partnerships, WHT only apply to NR

(a) if the joint venture is carried out via the formation of a company resident in Malaysia
NO WHT since the recipient is R

(b) if the joint venture is carried out by way of a partnership, withholding tax
shall apply to contract payments made to the non-resident partner only

Not a final tax

(a) The 10% portion

Contract payment earned by a non-resident contractor is chargeable to tax under s 4(a) business income in Malaysi
as they have business presence in Malaysia.

The WHT paid can be used to write off against final tax liability (reduce tax payable amount)

Tax liability > WHT portion = shortfall must payable

Tax liability < WHT portion = excess tax paid can be refunded

Can be waived (NR will get the gross amount from R) if:
(i) if the contract project is likely to incur substantial losses, or
(ii) if there are adequate unutilised capital allowances and unabsorbed losses to be set off against the pr
(iii) if provisions of DTA between Malaysia and the home treaty country expressly exempt such project.

(b) The 3% portion

The tax is in respect of employment income earned by ee of NR contractor in MAS.

The foreign ee must settle all tax liability b4 leaving MAS

Once their liability settled, the 3% WHT can be refunded to NR contractor.

However, the refund wont reduce the tax liability of NR contracter and not be shown in tax computation.

Can be waived if:

(i) if the employees are non-resident individuals;
 (ii) if the income of the non-resident employees are already subjected to the Monthly Tax Deduction sys

* If permanent establishment (existence of a fixed place of business ie office, branch, management)

then it is under contract payment (WHT)

PUBLIC ENTERTAINERS (S 109A) - 15%

Public entertainer is:

(a) a compere (host), model, circus performer, lecturer, speaker, an artiste or

individual exercising any profession, vocation or employment of a similar nature; or

(b) an individual who uses his intellectual, artistic, musical, personal or physical skill or character in,

carrying out any activity in connection with any purpose through live, print, electronic, satellite, cable, fibre optic or
for film or tape, or for television or radio broadcast, as the case may be.

Under s 13(2), gross income of a public entertainer deemed to be derived in Malaysia if:

(c) any period during which the employment is exercised in Malaysia;

(d) any period of leave attributable to the exercise of the employment in Malaysia;
(e) any period during which the employee performs duties outside Malaysia which are
incidental to the exercise of the employment in Malaysia

The sixty (60) days exemption rule under Para 21 Sch 6 does not apply
unless the public entertainer’s visit to Malaysia is supported by
the public funds of the government of a country outside Malaysia.

OTHER GAINS OR PROFIT (S 109F) - 10%

Such income will be derived or deemed derived from Malaysia under s 15B if:
(a) responsibility for payment lies with the Government, a State Government or a local authority, or
(b) responsibility for payment lies with a person who is a resident for that basis year, or
(c) the payment of such gains or profits is charged as an outgoing or expense in the
accounts of a business carried on in Malaysia.

Any non-resident receiving income in the form of other gains or profits falling under s 4(f) will be subject to withhol

EG: INCOME RECEIVED THAT IS NOT RELATED TO THEIR REGULAR JOB

lecturers, artist, comedian etc
S 4A (i) Installation
(ii) Consultancy
earned not from (iii) Leasing from overseas

cept contract payment and special class of income)

* If the payer paid 100% to NR, the 10% amount of WHT that borne by payer
is consider as setra expenses and cannot be deductible

enalty and WHT)

hs (company)
ing adjusted income
 under (S 113(2))

all the machine

terials are excluded for WHT

00000 (24%)

200000

ect to MTD and the ee is not R

0/4/2021 (within 7 months)

idual taxpayer

al exercising any profession, vocation or employment of a similar nature; or

ysical skill or character in,
print, electronic, satellite, cable, fibre optic
broadcast, as the case may be.

with regard to withholding tax unless the

of the government of a country outside

t and control not in Malaysia)

ent, a State Government or a local authority; or

is resident for that basis year; or
e accruing in or derived from Malaysia.

etent authority of Malaysia (i.e. Ministry of Finance)

payable by an enterprise

branch , no WHT is applicable

ent, a State Government or a local authority; or

o is resident in Malaysia for that basis year;
d employed in or laid out on assets used in

perty or asset situated in Malaysia; or

e accruing in or derived from Malaysia.

ian branch of a foreign bank to

located outside

by the Securities Commission, or/and

it Malaysia (RM),
Securities Commission.
d or credited to a company in the same group.

her than Ringgit Malaysia (RM)

es Act2013; or
Development Financial Institutions Act 2002.

xemption) (No 5) Order 2001]

a, other than convertible loan stock, issued by

ciples of Wakala Bil Istithmar.
 the scope of s 4A(iii)
a moveable property.

vernment or a local authority;

nt for that basis year; or
f a business carried on in Malaysia.

tside Malaysia are exempted.

anch) and the services are provided and invoiced by the Malaysian branch.

xpenses to the payer

chinery, thus eligible for capital allowances.
 llation and operation costs would be included
gible for capital allowances.

y the non_x0002_resident in the course of rendering

n etc) or those incurred in
by the payer.

endered or in relation to the use of any movable property.

ia have been excluded from the computation of ‘gross

subject to withholding tax.

e performed

mption) Order 2008]

charter or time charter or bare boat charter.

incorporated under the Companies Act 1965,

(ISO) containers by a Malaysian shipping company

by a ‘Malaysian shipping company’

ment or has a business presence in Malaysia

-resident contractor.

ident in Malaysia

s 4(a) business income in Malaysia

losses to be set off against the profits

y expressly exempt such project.

wn in tax computation.
to the Monthly Tax Deduction system.

nch, management)

ill or character in,

onic, satellite, cable, fibre optic or other medium,

n Malaysia;
aysia which are

nment or a local authority, or

hat basis year, or
pense in the

er s 4(f) will be subject to withholding tax in Malaysia

 SALES TAX (tax on expenses)

10% Sales Tax Act 1972 (YA 2014) (tax on sales goods) why changed to GST?
6% Service Tax 1975 (YA 2014) (tax on services ) > govt think not enough col

6% GST Act 2014 *after failing on the yr 2007

(Goods & service tax) - tax charged on ANY goods disposed (even if non - trade transaction)

SST ACT 2018

INPUT TAX - Tax when u buy (biz)
OUTPUT TAX - Tax when u sold (biz)
* biz must registered to claim input tax

SST => Indirect Tax(collect by enterprise) -> Royal Custom eg: Hotel (Sales & service)
(customer pay to seller, seller pay to govt) Professional fees (service ta

Tax on goods levied

(i) on importation of goods by importers and
(ii) sale of goods by manufacturers,
with the eventual taxes collected by or remitted to the tax authorities

* it is a single-stage tax (where such tax is imposed at the point of import or on sale of manufactured goods)
(only the end user pay)

Pursuant to the Section 8 of the Sales Tax Act 2018 , sales tax is charged on:
(a) manufactured and sold, used and disposed of in Malaysia by a registered manufacturer; or (R
(b) imported into Malaysia by any person. (IMPORTER)

* exported manufactured goods not be subject to sales tax

Manufacturer
Goods exempted from sales tax:
1 live animal and meat
2 vegetables, fruit
3 rice, flour, eggs, bread
4 medicines
5 Construction materials
6 printed matters (books, newspaper and periodicals)
7 baby napkins

For sales tax, Malaysia excludes Designated Area (DA) and Special Areas (SA)

DESIGNATED AREAS
Labuan, Langkawi, Pangkor and Tioman
* deemed to be outside Malaysia
AP = Approved Permit (to import luxury car, eg NAZA Co.(biz is importing car))

SPECIAL AREAS
any free zone, licensed warehouse, licensed manufacturing warehouse
and the Joint Development Areas.

Manu A (no tax) -> Manu B (no tax) -> Manu C (no tax) -> market (sales tax)

The Sales Tax Act 2018 shall not apply to any taxable goods:

(a) imported into the DA/SA or transported to the DA/SA from Malaysia;
(DA/SA are treated as if they are outside Malaysia for sales tax purposes.
Consequently, goods imported into or transported to SA/DA are treated as goods
‘exported’ from Malaysia to a place outside Malaysia – thus falling outside the scope
of charge to);

(b) transported between DAs;

(c) transported between SAs; or
(d) transported from the DA to SA or vice versa;

other than on taxable goods prescribed by the Minister published in the Gazette
(e.g. petroleum and petroleum product, wine, spirit, beer, malt liquor, tobacco and tobacco prod

* sales tax is applicable when taxable goods are transported from DA/SA to Malaysia.
(the goods were treated as if they were imported into Malaysia)

SALES TAX DUE = SALES VALUE * SALES TAX RATE

Sales value
differ between:
(i) goods manufactured and sold in Malaysia;
(b) goods imported into Malaysia;
(c) where a licensed sub-contract manufacturer adds value to goods to be returned to the main m

Goods Manufactured and Sold in Malaysia

Sales value = transaction value (price for which the taxable goods are sold to purchaser)

Goods sold to connected persons

Sales value = Market value
Transaction not at Arm's length - sales to related person
' Arm's Length'' = harga biasa yg dijual pada org lain (not related person)

Will be determined by:

 (I) Transaction value of identical goods

Where the transaction value of the taxable goods cannot be determined, the transaction of value
The identical goods are products that physically the same or the quality is the same
as the taxable goods and are manufactured by the same manufacturer or on his behalf.

(II) Transaction value of similar goods

Where the transaction value of the taxable goods or the identical goods is unable to be used,
transaction value of the similar goods shall be used.
The similar goods means goods closely resemble the taxable goods
in terms of material, components, quality and characteristics.

(III) Computed value of taxable goods

If (II) cannot be used, use the computed value:

RM
Material cost x
Manufacturing or processing cost including engineering, x
development work and royalties payments x
General expense (direct / indirect cost) x
profit mark up x
SALE VALUE (COMPUTED VALUE) xx

(IV) Deductive value of taxable goods

if any of the above cannot be used, then use the deductive value:

RM
Price per unit for identical / similar goods (of the purchaser) x
Less:
Marketing cost (of the purchaser) (x)
Transportation or insurance cost (of the purchaser) (x)
Tax and duties (of the purchaser) (x)
Packaging or futher processing cost (of the purchaser) (x)
Profit margin (of the purchaser) (x)
SALE VALUE (DEDUCTIVE VALUE) xx

Imported goods
RM
Customs valuation figure of the taxable goods
(Purchase cost + insurance + freight charges + others) x
Add : Custom duties (import duties or excise duties, if any)
paid or to be paid on such taxable goods x
 xx

Sub - contract manufacturing

A sub - contract manufacturer may process raw materials or semi-finished goods on behalf of another person,
and thereafter return the semi - finished or completed goods to other person

SALES VALUE = the amount charged for work performed, subject to approval of DG

SALES TAX RATE

10% on taxable goods

5% on goods listed in the First Schedule of the Sales Tax Order 2018
Spesific rate on petroleum (RM0.60 per liter)

SALES TAX DUE

Registered manufacturer ---> at the time the taxable goods are sold (sole p)
Taxable period is every 2 calendar months
* Must paid to govt within 1 month after taxable period

Importer ---> at the time of importation

Sole proprietor
eg: Taxable period 1/5/2020 to 30/6/2020
Total ST collected 18000
by 31/7/2020
If not paid by 31/7/2020,
PENALTY 10% [1/8/2020 TO 30/8/2020] (30days) 1800
PENALTY 15% [31/8/2020 TO 29/9/2020] (30 days) 2700
PENALTY 15% [30/9/2020 TO 29/10/2020] (30 days) 2700
7200

Company
(odd number) eg: Year end 31/7 annually
Taxable period: 1/8/2020 to 30/9/2020
Total ST collected 200000
must be paid by 31/10/2020
The co paid on 15/12/2020 = RM 150000,
Balance paid on 20/1/2021
 Due date by 31/10/2020 200000

Penalty 10% [1/11/2020 to 30/11/2020] 20000

Penalty 15% [1/12/2020 to 30/12/2020] (pay 150000) 30000
Penalty 15% [31/12/2020 to 29/1/2021] 7500
TOTAL PENALTY 57500

SALES TAX REGISTRATION

5.1 Mandatory registration for a manufacturer

* not later than the last day of the month following the month he is liable to be registered.

A manufacturer of taxable goods is liable to be registered at the earlier of the following time:

* a) Historical method
At the end of any month, where the total sale value of all his taxable goods in that month and
the eleven months immediately preceding that month has exceeded RM500,000; or

Eg; close account 30/6/2020 on July = RM 100000

11 following month = June 2021 Forecast turnover = 380000
Total = RM480000, < 50000

11 preceeding month = 1/8/2019 Turnover RM 410000

On July RM 100000
Total RM 510 000 , >500000
(historical method)

* so must register by 31/8/2020 , taxable period starts 1/9/2020

b) Future method
At the end of any month, where the total sale value of all his taxable goods in that month and
the eleven months immediately succeeding that month will exceed RM500,000.

Turnover > RM 500000 - Register (existing co)

New co: 1/2/2020 to 31/1/2021

* should forecast the turnover , eg at 30/9/2020 forecast turnover = RM530000

* must register by 31/10/2020

 1/11/2020 to 30/11/2020 ----> pay by 31/12/2020
1/12/2020 to 31/1/2021 ----> pay by 28/2/2021

5.1.1 Mandatory registration for a sub-contract manufacturer

- liable to register if his turnover exceeds RM500,000 per year.

- shall be a registered manufacturer upon registration

5.2 Effective registration date

on the first day of the following month of application for registration

(or any earlier date agreed by the DG, but not earlier than the date he becomes liable to register)

as a registered manufacturer, is liable to charge sales tax from this effective registration date.

5.3 Voluntary registration

CLAIM REFUND

1) Claim refund of sales tax in relation to Bad debt

* within 6 years from the date taxable goods are sold in condition:
a) sales tax has been paid
b) the whole or any part of the sales tax payable has been written off in his account as bad debt,
c) All reasonable efforts have been made by him to recover the sales tax

Sales - Invoice
Service - payment
Imports -> payment & invoice

DRAWBACK

eg:
Value of goods manufactured 600000
Sales tax @ 10% 60000
Total 660000

70% - export (no sales tax imposed)

30% - local
Sales tax Drawback (70% * 60000) 42000

Conditions for drawback

1 * latest to re- exported ie 30/6/2020 (within 3 months of the imported goods date)
2 eg: export on 1/6/2020, so need to made applicattion within 3 months after re - export. Ie 31/8/2

3 3) the claim must be declared and proved to the satisfaction of a senior custom officer
4 The taxable goods has not been prohibited by regulations
5 The goods not been used after importation or after payment of sales tax
6 The goods not to be relanded or detrained at any place in Malaysia

REMISSION
* the sst have been collected but we don’t want to pay to RMCD
* application must be made to Minister of Finance in writing (no spesific form)
* provide all the supporting evidence and documents

Example of supporting document:

a) An appeal letter
b) Account audit report (if applicable)
c) Police report (theft/fire/natural disaster/ etc)
d) Fire report (in case of fire)
e) A copy of insurance policy (if applicable)
f) Other related documents (if applicable)
 why changed to GST?
> govt think not enough collection is made

*after failing on the yr 2007, 2019, 2011,2013

eg: Hotel (Sales & service)

Professional fees (service tax only)

manufactured goods)

gistered manufacturer; or (REGISTERED MANUFACTURER)

Manufacturer
ted as goods
utside the scope

the Gazette
r, tobacco and tobacco product).

ATE

to be returned to the main manufacturer.

e sold to purchaser) Calculation eg: RM

Cost of good 90000
(+) profit mark up (20 18000
Value for sales tax 108000

(+) SST 10% 10800

Selling price 118800
ned, the transaction of value of identical goods shall be used.
lity is the same
er or on his behalf.

ods is unable to be used,

eg:
Price of goods 40000
+ Insurance 1000
+ Freight (transportation) 3000 300% - import duty on luxury car
Value for import duty 44000
+ Import duty / Custom duty
 eg 20% 8800 (pay to Royal Custom)
Value for sales tax 52800
+ sales tax 10% 5280 (pay to Royal Custom)
Selling price 58080

ehalf of another person,

TAXABLE PERIOD
y/e 31/12 every yr 1/1/2020 to 28/2/2020
(even number) 1/3/2020 to 30/4/2020
1/5/2020 to 30/6/2020
1/7/2020 to 31/8/2020
1/9/2020 to 31/10/2020

1/11/2020 to 31/12/2020

by 31/7/2020

*if not paid by 29/10/2020, action will be taken

(40% penalty)

must be paid by 31/10/2020

 goods in that month and
RM500,000; or

on July = RM 100000
Forecast turnover = 380000
Total = RM480000, < 500000 (future method), not registered

Turnover RM 410000
On July RM 100000
Total RM 510 000 , >500000 so must register
(historical method)

goods in that month and

RM500,000.

RM530000
e becomes liable to register).
ff in his account as bad debt,

4/1/2020

ed goods date)
hs after re - export. Ie 31/8/2020

ior custom officer

on luxury car
CHAPTER 24

Chargeable individual must give notice to DG before 15th April following the end of the relevant year of assessme

Ind arrive in MAS:

S77(3) - ind arrive in MAS, taxable on the YA or following YA , must inform IRB within 2 months of arrival date

Change of address - inform IRB within 3 months from date of change

EMPLOYERS RESPONSIBILITIES

1) Submission of Form CP8A / CP8C - S83(1A)

CP8C (for govt ee)
- must duplicate, for ee and IRB on or before the last day of February (immediately following yr)
info - ee relevant info, full amount of gross income, S4(e), MTD deducted, EPF, payment arrears, tax exempt allowa

2) MTD
- tax deducted on particular month must be done latest by the 15th of following month
info in Form CP 159:
- gross remuneration paid
- gross remune paid subjected to MTD
- amount of tax deducted
- amount of tax deducted and remitted
- receipt number of deductions remitted

3) Form E - S83(1)
- not later than 31st March in the following yr
info - no of ee employed, no of ee subject to MTD, no of new ee employed, no of ee resigned / resigned and left MA

FORM E SHOULD BE SUBMITTED WITH FORM CP159

4) Notice of commencement of employment - S83(2)

- inform IRB not later than 1 month after the commencement date of employment (Form CP 22)

5) Notice of Cessation of Employment - S 83(3)

- inform IRB not later than 1 month before the date of cessation of employment (Form CP 22A)
not required to submit the form if the ee is not retiring from any employment permanently provided:
- ee has been subjected to MTD
- ee total monthly remune is below the min amount subject to MTD

5) Notice of ee leaving MAS for a period exceeding 3 months - S83(4)

- inform IRB not less than 1 month before the expected date of departure ( Form CP 21 )
not apply if frequent intervals in course of work

6) Retention of Money - S83(5)

- if er have any payable to ee that has ceased employment or leaving MAS more than 3 months with no intention o
 cannot pay the ee without DG permission until 90 days after the DG has received form CP22A and CP21
If DG ask er to pay ee tax payable, er must pay.
the relevant year of assessment (prior to YA2004)

2 months of arrival date

ent arrears, tax exempt allowances, etc

esigned / resigned and left MAS, etc

Form CP 22)

nently provided:

3 months with no intention of returning :-

form CP22A and CP21
Chap 25 - Collection & Recovery

Compulsory Instalment Scheme (CIS) - S107B

Taxpayer (exclude co, trust body, cooperative society) having taxable income other than employment income:
---> Form CP500 that is provided from IRB for 6 bimonthly instalments accompanied by postal remittance slip CP5

If have deducted MTD from employment, tax payable will be calculated:

Tax payable for the YA X A - ST. INCOME FROM EMP

Less: MTD [ A / B *C ] (Y) B - TOTAL INCOME
Tax payable on non- employ inc subject to CIS Z C - TAX PAYABLE

Bimonthly installment must be paid within 30 days from due date stated in the notice of payment (eg due date 1/
Failure will attract 10% penalty - S107B(3)

Taxpayer can apply to revise tax estimate latest by 30th June of relevant YA (already paid 2 times, balance 4 paym
If actual tax payable exceeds revised estimate more than 30%, penalty for under estimation of tax (10%) - S107B(4
*not applicable if NO REVISION

If IRB agrees to revise, CP 503 will be issued.

If reject, letter of denial in Form CP504 will be served.

S103(3) Late payment of final tax

- if fail to settle on due date (same as return Form date), penalty 10%

If taxpayer received additional assessment from IRB (via Form JA), must settle the additional tax within 30 days fro

Refund for overpayment of tax - S111

other tax payable owed to IRB will be settled first before can be refunded.

Compensation for Late refund of tax by DG - S111D

---> 2% per annum will be payable
1) electronic filing -> refund from DG made after 90 days from filing due date
2) manual filing -> refund from DG made after 120 days from filing due date

Compensation formula :-
A * B / C * 2%

A - the amount refunded under S111

B - from first day after 90 or 120 days until the day the amount is refunded to taxpayer
C - number of days in a year
MTD SYSTEM - S107
All gross income in monetary form exclude any reimbursement paid to ee for exp incurres on behalf of er
Include BIK (S13(1)(b)) and VOLA (S13(1)(c))
S4(e) - pensions, annuity or periodical payment will be included if DG directs.

Factor considered to deduct monthly tax:-

a) monthly remune
b) marital status and spouse's working status
c) number of qualifying children
d) EPF
e) zakat made by ee

MTD must be submitted to IRB via Form CP 39 by the 15th of the following month

RECOVERY FROM HUSBAND OR WIFE - S103(8) & S103(9)

Tax recoverable (from spouse making the election) = Total income of spouse making election / total income
han employment income:
by postal remittance slip CP501 payment starting 1/3 current yr to 1/1 of following year

COME FROM EMP

e of payment (eg due date 1/3)

paid 2 times, balance 4 payments)

mation of tax (10%) - S107B(4)

ditional tax within 30 days from the date of notice, fail 10% penalty.
urres on behalf of er

aking election / total income of husband and wife * total tax payable
CHAPTER 26 - APPEAL

Right of appeal - S 99
Send a written notice to DG via Form Q within 30 days after the service of the notice of assessment / after submitti
If not, consider final tax.

S 100(1)- if want to appeal but cannot comply 30 days deadline, apply using Form N for extension of time, within
If extension granted, DG give written notice via Form CP 15A

If DG rejects, the application will be forwarded to Special Commissioner and DG notified by writing.
Taxpayer may make written representation directly to SC within 21 days following the noti. Decision by SC (grante

Notwithstanding to the appeal, tax payable as stated in the deemed assessment will still be payable on the due dat

Other appeal :-
a) Additional assessment - appeal made within 30 days after the date of add assessment
b) Advance assessment - appeal made within 3 months of the YA following the YA which the adv ass was made
c) Amount refunded under S111 - if taxpayer not satiesfied of IRB refunded amount,, submit an appeal to SC within
d) Best judgement assessment under subsection 90(3)
- if taxpayer not satiesfied with IRB best judgement ass, submit income tax return with Form Q within 3

REVIEW OF APPEAL BY THE DG

S101 - Where an agreement is reached,

a) S 101(2) - DG gives a written agreement to appellant as to the amount of chargeable inc (CI) and tax payable. The
b) S 101(3) - DG comes to an oral agreement on the amount of CI and ATP. DG will write a written confirmation.
if appellant not repudiate in writing within 21 days, the written confirmation deemed as agreement writi
c) S 101(4) - DG makes a written proposal regarding to confirmation, reduction, etc of original assessment.
If apellant not reject the proposal in writing within 30 days, the proposal is deemed accepted and deeme

if deemed agreement, the appellant can apply to SC within 30 days from the deemed agreement
If SC thinks it is unbiased to do so, he may set aside the deemed agreement ( S 101(5) )
[ if appellant not repudiate the oral agreement within 21 days or reject the written proposal within 30 days due t
SC decisions is final

S102 - Where no agreement is reached,

--> appeal will be submitted to SC

If DG fails to compete his review within 12 months from the date of appeal received, he can apply extension from M
Application must be made not later than 30 days before the expiry of the 12 months period.
S 101(1B) --> Minister grant another 6 months
If DG can't settle, the case will be forwarded to SC.
after forwarded, if appellant wants to withdraw the appeal, the proceedings befor SC will cease and the ass under a

SC will issue a deciding order either to confirm, amend or discharge the original ass.
SC don't have to give reasons for his decision unless they need to state a case for the High Court.
If apellant do not makes further appeal to Court, SC desicion is final.

Special Commissioners (SC)

--> ind appointed by YDPA holding full-time posts and being paid monthly salary

APPEAL TO THE COURTS

If appellant or DG dissatisfied with SC decisions', can make further appeals to the High Court, Court of Appeal and F
The appeals must be on points of law or mixtures of law and fact.

can put aside SC decisions if:-

a) if has been an error in law or a misconception of the law
b) where the decision made not consistent with evidence found in the case
c) if conclusion is unreasonable

DG can reopen the ass after appeal if he found new documents or info which were not available when the ass was d

ONUS OF PROOF
Appellant must proved that the ass is wrong and how to correct it
If the case involving fraud, IRB should prove that the taxpayer has actually committed fraud or wilful default 'beyon
If IRB succeeds to prove, then taxpayer should prove that the ass is excessive.

RELIEF IN RESPECT OF ERROR OR MISTAKE

S 131 - The claim of relief is allowable if :-

a) the ass has not become final & conclusive
b) the claim must be filed within 5 yrs after the end of the relevant YA
c) the application of relief must be made in writing

Cannot be applicable if :-
a) the error results from a change in tax treatment
b) the error results from prevailing practice

S 131)(1) same as a notice of appeal under S99

RELIEF OTHER THAN IN RESPECT OF ERROR OR MISTAKE

S 131A(1) - if taxpayer found that tax paid is excessive by reason of :-

a) any exemption, relief, etc granted for that YA or any other written law published in the Gazette after the YA in wh
b) the approval of any exemption, etc after the YA which the return is furnished;
c) a deduction amount due to NR has not been claimed bcs the payment to NR has not been made and WHT is not
the person may write application to DG.

The application shall be made:

i) for (a) and (b), within 5 yrs after the end of the yr of exemption etc is published in the Gazette or the approval is g
ii) for (c), within one yr after the end of the yr the payment is made.
of assessment / after submitting their tax return / amended return.

for extension of time, within 7 yrs after the expiration of the stipulated date to the Form Q.

fied by writing.
e noti. Decision by SC (granted or not) is final.

still be payable on the due date - S 103(1)

which the adv ass was made

submit an appeal to SC within 30 days of being notified about the refund amount

x return with Form Q within 30 days after the date of the best judgement ass.

le inc (CI) and tax payable. The results is final and conclusive.
ite a written confirmation.
on deemed as agreement writing.
original assessment.
deemed accepted and deemed as an agreement in writing.

agreement

proposal within 30 days due to illness, absence from MAS, etc ]

he can apply extension from Minister of Finance.

 will cease and the ass under appeal is final - S 102(8)

High Court.

h Court, Court of Appeal and Federal Court.

ot available when the ass was determined on appeal.

fraud or wilful default 'beyond reasonable doubt'

 the Gazette after the YA in which return is furnished;

ot been made and WHT is not paid to IRB ;

he Gazette or the approval is granted, whichever later ;

CHAPTER 27 - PENALTIES AND OFFENCES

Types of offences

1.1 Failure to furnish Return or Give notice of Chargeability - S 112

S 112(1) - if a person fails to give notice of chargeability without reasonable excuse:

a) a fine not less than RM200 & not more than RM20 000 ; or
b) imprisonment not exceeding 6 months ; or
c) both

S 112 (1A) - a person without reasonable excuse that failed to furnished a return ( in accordance with S 77(1) or S77
a) a fine not less than RM1000 & not more than RM20 000 ; or
b) imprisonment not exceeding 6 months ; or
c) both

And
d) a special penalty equal to 3x the amount which DG may determine as the tax charged on the Chargeable inc for t

Any prosecution under S112(1) the burden of proving that a return has been made or a notice given shall be upon t
Thus, the taxpayer must prove that a return has been made.
If the taxpayer is guilty under S 112(1) , the DG may settle it out-of-court.
Instead, the taxpayer must pay a penalty ewual to 3 times the amount of tax payable by him for that YA - S112(3).
After he paid the penalty, he can't be charges with same offence.
S 112(4) - DG may require any person pay additional amount of penalty in accordance with S 112(3).

IRB guidelines on imposition of penalties:

a) For failure to notify chargeability to tax - A 10% penalty on total income tax payable, min of RM300 and max RM5
b) For these offences:
i) late submission of return form
ii) taxpayer's spouse failing to declare their source of income after making a declaration in return form
----> box on page 418 and 419 textbook

1.2 Incorrect returns - S 113

An offence is committed if :
a) makes an incorrect return by omitting / understating any income on himself or others
b) gives any incorrect info affecting his/others chargeability of tax

A penalty under S 113(2) for submission of incorrect return where a taxpayer deduct WHT and/or pays the WHT an
after the due date of tax return submission BUT claim tax deduction on gross payment.
He will liable to :-
a) a fine not less than RM1000 & not more than RM10 000
b) a special penalty of 2x the amount of tax undercharged
Alternatively, under S113(2), DG may exercise out-of-court settlement, which tha person are required to pay a pena

S 121(1) --> no offence under S113 can be instituted if discovered more than 12 yrs after it was committed.
S 121(2) --> any person who helps another person to commit an offence under S 113 deemed to have committed th

1.3 Willful Evasion - S 114

Any person who wilfully & intentionally evade or assist any other person to evade tax by:
a) omitting any income from a return
b) making false statement/entry in a return
c) giving false ans to any info asked
d) preparing false books of acc
e) falsifying records
f) making use of any fraud, art or contrivance,

will be guilty and liable to;

a) a fine not less than RM1000 , not more than RM20 000 or
b) imprisonment not exceeding 3 yrs or
c) both; AND
d) a special penalty of 3x the amount of tax undercharged

S 91(3) --> once any form of fraud has been proved, DG can raise ass beyond 5 yrs time limit.
Cannot make out-of-court settlement
Guidelines:-

--> Offences involving omissions in return form not supported by acc due to negligence = 60% penalty
--> Offences involving omissions in return form supported by acc due to wilful default = 75% penalty
--> Fraud offences involving understatements either in return form or acc of a deliberate nature = 100% penalty
--> Deliberate and persistent understatements = Not less than 100% penalty

1.4 Assistance or Advice Resulting in Understatement of Tax Liability - S114(1A)

Any person assist in preparation of understatement of tax for another person, and cannot satisfy the court that the
a) a fine not lesss than RM2000 and not more than RM20 000 or
b) imprisonment not exceeding 3 yrs or
c) both

This fault will result in a High Court trial. Tax authorities should prove that :
a) the advice provided had resulted in an understatement of another person's tax and
b) the advice is given without reasonable care.

1.5 Leaving MAS without settling tax - S 115

Any person leaving MAS without paying all tax will liable to:
a) a fine not lesss than RM200 and not more than RM20 000 or
b) imprisonment not exceeding 6 months or
c) both

S 121(1) - the DG cannot prosecute taxpayer if the offence discovered more than 12 yrs after it was committed.
S 121(2) - any person who helps taxpayer commit S 115 offence deemed to committed the same offence and liable
S 115(2) - police or immigration officer may arrest any person without warrant if the person is suspected to commit

1.6 Obstructing Officers - S 116

A person who :
a) refuses to allow the DG to enter into any land, building or place; or
b) obstructs the DG in the exercise of his functions under the Act; or
c) refuses to give documents when neing asked by DG for the Act purposes; or
d) fails to provide reasonable facilities or assistance or both to DG in the exercise of his power under the Act; or
e) refuses to answer any question relating to any purpses lawfully asked by DG;

If convicted, the person will liable to :-

a) a fine not lesss than RM1000 and not more than RM10 000 or
b) imprisonment not exceeding 1 yr or
c) both

DG have time bar of 12 yrs and any person who helps taxpayer commit S 115 offence deemed to committed the sam

1.7 Breach of Confidence - S 117

Any 'classified person' who, in contra of S138;

a) communicates 'classified materials' to another person, or
b) allows another person to access the classified materials,(document)

will be guilty and liable to

i) a fine not exceeding RM4000 or
ii) imprisonment not exceeding 1 yr or
iii) both.

'Classified person' :
person having an 'official' duty under the Act
the Auditor General and public officers under his direction and control
any person who advises/acts for a person who have access to classified materials or
any ee of IRB

1.8 Failure to Keep Records - S119A

Any person withour reasonable excuse:

a) fails to keep documents for a period of 7 yrs; or
b)fails to make entry in the books of record within 60 days of each transaction,

shall be guilty and liable to;

i) a fine not less than RM300 and not more than RM10 000 or
ii) imprisonment not exceeding 1 yr; or
iii) both

1.9 Other offences - S 120

Any person:
a) fails to provide documents requested by DG
b) fails to give notice on change of address within time limit
c) er fails to furnish annual return to DG & ee, notice of commence,cessation, and ee leaving MAS > 3 months withi
d) co fails to furnish ETP within time limit
e) fails to correct their return as required by DG

is guilty and liable to:

i) a fine not less than RM200 and not more than RM20 000 or
ii) imprisonment not exceeding 6 months or
iii) both

2.0 Compounding an offence - S 124

Any person committed any offence under this Act, the DG may, any time before conviction, compound the offence
not exceeding max fineand any special penalty which he is liable if he had been convicted the offence.

However, the DG shall only exercise this power if :

a) if the person admit that he did the offence and
b) request the DG to deal under S124.

If DG agrees, taxpayer only need to pay a sum of money that is less than fines .
Taxpayer can avoid court preceedings.
Taxpayer shall not liable to any prosecution once he prove that the offence has been compounded under S124.
accordance with S 77(1) or S77A(1) ) in respect of 2 or more yrs of ass shall be guilty and be liable to :-

ed on the Chargeable inc for those YA

a notice given shall be upon the accused person.

by him for that YA - S112(3).

e with S 112(3).

e, min of RM300 and max RM5000

on in return form

WHT and/or pays the WHT and penalty of late payment to IRB
son are required to pay a penalty equal to amount undercharged.

fter it was committed.

deemed to have committed the same offence and bear same penalty

ce = 60% penalty
= 75% penalty
ate nature = 100% penalty

nnot satisfy the court that the advice was given with reasonable care, is guilty and liable to :-
 rs after it was committed.
d the same offence and liable to same penalty.
person is suspected to commit this offence.

is power under the Act; or

deemed to committed the same offence and liable to same penalty.

leaving MAS > 3 months within time limit

ction, compound the offence and ask person to pay a sum of money,
cted the offence.

compounded under S124.

DIVIDEND INCOME

Dividend --> distribution of profits made by a co to its shareholders

Single - tier system :-
tax on co's profit is final tax
divd received by shareholders are exempted from tax under Para 12B Sch 6
shareholder no need to declare divd inc in tax return but disallowed to deduct any exp incurred in production of su

Dividend in specie (money in form of coins)

--> The MV of the asset distributed as divd at the time of distribution is deemed to be net divd.
--> Under single-tier system, this divd also exempted from tax if paid from 1/1/2008 onwards.

Foreign dividend

From YA 2004, Para 28 Sch 6 :-

Any foreign income of any person that sources from outside MAS and received in MAS will be exempted from tax (e

Other tax-exempt dividends

a) Para 12A Sch 6 --> divd paid to any member by a co-operative society
b) divd received by R ind from approved unit trust where min 90% of the investment is in govt securities and the re
c) divd paid out of the exemot income of:
i) share and property unit trusts
ii) venture capital companie
d) divd paid out of the tax exempt acc arising from tax incentives enjoyed by a co under:
i) ITA 1967
ii) Promotion of Investments Act 1986
e) divd paid out of the tax exempt inc acc arising from foreign inc received in MAS by R co (other than BISA) or a un
f) divd paid out by Labuan Companies [ Para 5 & 6 of Schedule 7A ]
p incurred in production of such exempted divd

S will be exempted from tax (exept Banking, Insurance, Shipping, Airlines) (BISA)

s in govt securities and the remainders is commercial papers

R co (other than BISA) or a unit trust

INTEREST INCOME

Interest --> compensation for delayed payment

Assessed as Business Income (S 4(a)) where:-

a) derived from a source which form part of the stock in trade of a biz of a person; and where
b) int is receivable from a biz of money-lending & that biz is licensed under any written law (Banking, Insurance & m

Most of other int income will be assessed under S 4(c) as investment income

Derivation of Interest Income (S15)

Gross int inc is deemed derived from MAS if:

a) if responsibilty for payment lies with the Govt, State Govt or local authority; or
b) i) if responsibility for payment lies with a person who is R for that basis yr AND
ii) it is payable in respect of money borrowed by that person & employed in or laid out on assets used in or held fo
c) if the int is charged as an outgoing or exp against any income accruing in or derived from MAS''

To clarify, S15(b) deems int inc to be derived from MAS if the int is payable by a R person AND either:
a) the int is in respect of money borrowed by that person for the purpose of being employed in or laid out on assets
b) the borrowing is secured against any property or asset situated in MAS.

BASIS OF ASSESSTMENT (S 27)

Interest Income First Becomes Receivable in a Basis Period - S27(1)

S 27(1) -> where the int inc first becomes receivable in the relevant period, once it received, it shall be treated as gr

S 29(1) -> 'received' means include circumstances where a relevant person is able to 'obtain on demand' the receip
'receivable' refers to situation where the inc accrues but is not payable until a spesific later due date as pre- determ

Interest Income Relating to Past Period(s) - S 27(2)

This Sec covers int inc that relates to past periods i.e.:
a) where such int inc overlaps two or more BP, it shall be apportioned to the relevant periods and is deemed to acc
Int inc is assessable only when it is received.
If the int is only received and known to the DG more than 4 yrs from the time it became receivable, IRB can't issue a

These situations are dealt with (b) and (c) of S 27(2):

b) Situation where part of an overlapping period in respect of which int is receivable elapsed more than 4 yrs before

c) Situation where the whole of the overlapping period has elapsed more than 4 yrs before the day the DG first kne

Interest Income Received in Advance - S 27(3)

Where the int inc is treated as coming from an investment source and assessed under S4(c), if the int is received in
NOT apply to int inc under S4(a) bcs biz inc will be taxed on accrual basis

EXEMPTIONS ON INTEREST INCOME

For Individuals

Para 34A Sch 6 - exempts int received by any ind in respect of Merdeka Bonds issued by Bank Negara.

Para 35 Sch 6 - exempts int or disc received by any ind, unit trust and listed closed-end fund in resoect of :
a) securities/bonds issued by Govt
b) debentures, other than convertible loan stock, approved by the Securities Commissions; or
c) Bon Simpanan Malaysia issued by Bank Negara

ITEO No 13 - exempts int received by any ind, unit trust and listed closed-end fund co from non-convertible loan sto

ITEO No 7, 2008 - exempts int, bonus, gains or profits received by a R ind from money deposited in the forms of sav
a) a bank or finance co licensed under the Banking and Financial Institutions Act 1989,
b) a bank licensed under the Islamic Banking Act 1983
c) a development financial institution prescribed under the Development Financial Institutions Act 2002,
d) the Lembaga Tabung Haji
e) the Malaysian Building Society Berhad
f) the Borneo Housing Mortgage Finance Berhad , or
g) a co-operative society registered under the Co-operative Societies Act 1993.

ITEO No 7, 2008 - exempts int received by a R ind from the following types of financial instruments:
a) negotiable certificate of deposit, or
b) rediscounting of banker's acceptance on repurchase agreement or any similar instrument of trade financing whic

For any person

Para 19 Sch 6 - exempts int received by any person in respect of any savings certificate issued by the Govt.

Para 33B Sch 6 - exempts int received by any person in respect of non-convertible Islamic securities (or Sukuk) whic

From YA 2017, this exemption NOT apply to:

a) Int paid or credited to a co in the same gp; and
b) interest paid or credited to:
i) a bank licensed under the Financial Services Act 2013;
ii) an Islamic bank licensed under the Islamic Financial Services Act 2013; or
iii) a development financial institution prescribed under the Development Financial Institution Act 2002.

ITEO No 5 - exempts int received by any person in respect of bonds and securities issued by Pengurusan Danaharta

ITEO No 36 - exempts divd inc received by any person in respect of investment in premium savings certificate (an Is

ITEO No 10, 2018 - exempts inc derived from Sukuk Kijang issued by BNM Kijang Berhad.
ITEO No 3, 2019 - exempts gains or profit, in lieu of int, derived from Sukuk Wakala, other than convertible loan sto

For NR Persons

Para 33 Sch 6 - exempts int inc received by any NR person which are credited by banks, finance or other approved i

Para 33A Sch 6 - exempts int received by a NR co in respect of:

a) Securities issued by the Govt
b) non-convertible Islamic Securities (or Sukuk) or debentures issued in Ringgit and approved by the Securities Com

From YA 2017, this NOT apply to int paid or credited to a co in the same gp.

ITEO No 7, 2008 - exempts int received by a NR person from Bank Kerjasama Rakyat Berhad.
 n law (Banking, Insurance & money lending co) - S24(5)

out on assets used in or held for the production of any gross inc of that person derived from MAS or the debt in respect of which the int is
d from MAS''

son AND either:

mployed in or laid out on assets used in or held for the production of Malaysian derived gross inc ; or

ceived, it shall be treated as gross inc of the relevant person for that relevant period.

obtain on demand' the receipt of such inc.

later due date as pre- determined under an agreement or contract.

periods and is deemed to accrue evenly.

me receivable, IRB can't issue an additional ass.

elapsed more than 4 yrs before the day the receipt of int inc known by DG. In this case, the int is deemed to have accrued over the period

efore the day the DG first knew about the receipt of int inc. In this case, the whole int will be taxable in the YA which began 4 yrs before th
r S4(c), if the int is received in advance in respect of more than 1 BP, the int inc will be subject to tax in full in the yr it received. No apporti

by Bank Negara.

d fund in resoect of :

from non-convertible loan stocks which are paid or credited by any co listed in Malaysian Exchange of Securities Dealing and Automated Q

deposited in the forms of savings deposit, current deposits, fixed deposit or investment deposit, including those deposits under the Islam

stitutions Act 2002,

l instruments:

ument of trade financing which is traded in money market fund.

e issued by the Govt.

mic securities (or Sukuk) which originate from MAS, issued in non Ringgit and approved by the Securities Commission.

Institution Act 2002.

ued by Pengurusan Danaharta Nasional Berhad within and outside MAS.

mium savings certificate (an Islamic savings scheme) under the scheme of Bank Simpanan Nasional.
ther than convertible loan stock, issued by MAS Sovereign Sukuk Berhad in accordance with the principles of Wakala Bil Istithmar.

s, finance or other approved institutions provided such NR does not have a place of biz in MAS.

pproved by the Securities Commission.

t in respect of which the int is paid is secured by any property or asset situated in MAS; or

have accrued over the period which has not elapsed.

YA which began 4 yrs before the beginning of the YA in which the receipt of int became known.
 the yr it received. No apportionment to the future periods should be done.

rities Dealing and Automated Quotation Berhad (MESDAQ).

hose deposits under the Islamic banking scheme from the following institution:
f Wakala Bil Istithmar.
RENTAL INCOME

--> Any amount received for the use or occupation of any real property or part thereof
--> Taxed under S4(d) UNLESS maintenance and support services are comprehensively and actively provided = S4(a

Rental as S 4(a) Business Income

Public Ruling 4/2011 --> a person (ind/co) comprehensively and actively provides 'maintenance and support service

Comprehensively provided :-
a) doing generally all things necessary (e.g cleaning or repairs) for the maintenance & management of the real prop
b) doing generally all things necessary for the maintenance and management of the exterior parts of the real prope

Actively providing:- must be provided by the person owns or let out by himself or person hired by the owner of the

If letting between related parties, if MSS is provided, treated as biz source. But, if not at arm's length basis, IRB wou
'Related parties' refers to:
a) ind who are related
b) co which are related (ie one co holds not less than 20% of the ordinary shares or preference shares of the other)
c) a co & an ind where one of them can control or be controlled by other one.

Rental as S 4(d) Investment Income

--> Lets out real property without providing MSS

--> if MSS are passively derived from the owner of the real property ( ie apartment with swimming pool)

DERIVATION OF RENTAL INCOME

Rental from Immovable Properties

If the landed property is situated in Malaysia, the inc is derived from MAS notwithstanding that:
a) the owner is outside MAS
b) the tenancy agreement is concluded outside MAS

Rental from Movable Property

include P&M, the rental source of which would depend on where the property is put to use or where the lessor car
Lessor carries on biz in MAS --> the rental inc is accrued in MAS and assessed under S4(a)
Lessor carries biz outside MAS --> plus lessor is a NR, the inc received by the foreign lessor may subject to WHT as it

TAX TREATMENT - AS INVESTMENT SOURCE

Basis of Assessment

S 27(1) - subject to tax only when it is 'received', but will be assessed in the BP which it first becomes receivable

S29(1) - 'received' means owner is entitled to the inc and can obtain the receipt on demand.
S 27(3) - any rental inc received in advance will be assessed in the yr of receipt, regardless if subject to refund
deposit will not be subject to tax at the time of receipt, but would be taxable at the time it is converted into rental

Commencement of Rental source

--> on the date the property is first let out for the first time
--> REVEX which are 'wholly and exclusively incurred' in the production of rental inc can only start to be deducted o

Number of sources

If have rental inc from a few properties and all is taxed under S4(d), all can be grouped as one single non-biz inc sou
All inc & deductible exp can be aggregated and combined in arriving ST Rental Income
BUT, can only be done if each of the property has started to generate inc in a particular YA.
If rental inc is generated half-way through BP, the deductible must be rime- apportioned.

TAX TREATMENT - AS BIZ SOURCE

Basis of Assessment

Assessed on an accrual or receivable basis

PR 12/2018 -> any rental inc received in advance willl be assessed in the period of receipt

Commencement of rental Source

Commenced on the date the real property is made available for letting
REVEX can start to be deductible earlier, even before a tenant moves in

Number of Sources

If has a few real properties treated as biz source, all rental inc derived from all properties shall be aggregated & trea
BUT can only be grouped as single source if each of them has started to generate inc.
The qualifying exp will be given a full year's deduction whenever the inc is generated, as long as the rental source fr

Letting of Part of a Building used in the biz

--> If a building (owned or rented) is used for biz purposes and part of it is let out, the rental inc arising from the letti

Mixture of Properties

If has a few rental properties and some treated as biz source nut some is not,, they must be assessed seperately. (S

DEDUCTION OF EXPENSES

If under S4(a), all REVEX that are wholly and exclusively incurred in the production of rental inc under S33(1) & not
Under S4(d), only DIRECT exp which are wholly & exclusively incurred in the production of inc under S33(1) will qua
a) assessment and quit rent
b) int incurred on loan taken to finance the purchase of the property
c) fire insurance premiums paid agains fire
d) rent allocation fee
e) legal exp incurred to enforce rent collection
f) exp incurred to renew tenancy agreement or to change tenant
g) ordinary repair exp to mantain the real property in its existing state.

Initial Expenditures

Under S4(a) and S4(c), any initial exp incurred prior to commencement of rental source not allowed as deductions a
Ex: cost to obtain the first tenant -> advertising, agency fees, agreement's legal cost, stamp duty etc

Exp incurred During Temporary Non- Occupation Period

Under S4(a) and S4(c), once rental source is existed, any exp incurred during temporary non-occupation will continu
Same treatment applies if the temporarily ceases is caused of the following, provided that the property is mantaine
a) repair/renovation of the building,
b) absence of tenants for a period max 2 yrs
c) legal injunction or other official sanction
d) other circumstances beyond the owner's control

Expenses Relating to Rental Received in Advance

Rental taxed as S4(a)

-> Rental received in advance will be taxed in the yr of receipt
-> Exp related to advance rental will be deductible when it is incurred
-> taxability of inc & deductibility not in same YA

Rental taxed as S4(d)

-> The exp related to the part of the advance rental is deductible in the SAME YA the adv rental is taxed.

Mixture of S4(a) and S4(d)

same treatment as above

EXCESS OF EXP OVER INC

S4(a) - adjusted loss can be set off against aggregate inc as 'current yr biz loss'. Any unabsobed loss can be carried f
S4(d) - it will be a permanent loss - inc nil

CAPITAL ALLOWANCE
-only available for S4(a), deduction from adj biz inc

Change in treatment

If tax treatment change from S4(a) to S4(d) during a particular BP, he will have 2 sources of income following the tim
The co cannot claim CA that yr bcs not used P&M for biz until yr end. BUT, the RE of machine will still be reduced by
If change from S4(d) to S4(a), CA can be claimed. The QPE will be their respective MV on the first daythey are used

INDUSTRIAL BUILDING ALLOWANCE

IBA can be claimed if the building let out is used as industrial building even though under S4(d)

Paragraph 16B Sch 3 - owners of following building cannot claim IBA:-

a) private hospital, maternity home, nursing home
b) use for research by R&D co
c) storage of goods to export or imported goods to be re-exported
d) used for provision of services & modernisation of operation related to approved service project
e) use for hotel registered with Ministry of Tourism
f) airport
g) motor racing circuit
h) manufacturing, hotel or tourism biz or an approved service project for ee living accomm
i) Child care facilities for ee
j) school or educational institution approved by Minister of Education or any relevant authority
k) for industrial, technical or vocational training approved by Minister

--> only applicable from YA2016 onwards

--> owners who let out not more than one-tenth of the floor area such industrial building can claim IBA on the who

ASSET REPLACEMENT COST

Under S4(d), tax deductions on replacement basis are allowed

Not deductible if the assets were initially purchased
y and actively provided = S4(a)

intenance and support services' to tenants (S 4(a))

management of the real property;

xterior parts of the real property

son hired by the owner of the property to provide those services.

at arm's length basis, IRB would adkust the amount.

eference shares of the other), or

th swimming pool)

to use or where the lessor carries on his biz

essor may subject to WHT as it falls under S 4A(iii), if the inc is deemed to be derived from MAS pursuant to S15A

it first becomes receivable

dless if subject to refund
me it is converted into rental

an only start to be deducted once a tenant has moved in.

d as one single non-biz inc source

ties shall be aggregated & treated as 1 single biz source

as long as the rental source from the other properties has existed from the beginning of that particular BP.

rental inc arising from the letting is treated as part of the inc from the existing biz source.

ust be assessed seperately. (S4(a) and S4(d))

rental inc under S33(1) & not prohibited under S39 are allowed to be deducted from gross rental inc.
on of inc under S33(1) will qualify deduction. Eg:
ce not allowed as deductions as they are capital in nature and not incurred in the production of inc.
stamp duty etc

ry non-occupation will continue to be deducted (S33 and not prohibited under S39)
that the property is mantained in good condition & is ready to be let out:

adv rental is taxed.

nabsobed loss can be carried forward up to 7 consecutive YAs, set off against agg st biz inc.

ces of income following the time - apportionment.

machine will still be reduced by notional allowances
on the first daythey are used in rental biz. BUT, no IA.
rvice project

ding can claim IBA on the whole industrial building

ROYALTY INCOME

Under S 2 of the Act, royalty include:

a) The use or the right to use any copyrights, software, artistic or scientific works, patents, designs or models, plans
b) The use or the right to use tapes for radio or tv broadcasting, motion picture films, films or video tapes or other m
c) The use or right to use know- how or info concerning technical, industrial, commercial or scientific knowledge, ex
d) The reception of, or the right to receive, visual images or sounds, transmitted to the public by -
i) satellite;
ii) cable, fire optic or similar technology;
e) The use or right to use visual images or sounds, in connection with tv broadcasting or radio broadcasting, transm
i) satellite;
ii) cable, fire optic or similar technology;
f) The use or right to use some or all part of the radiofrequency spectrum specified in a relevant license;
g) A total or partial forbearance in respect of (a), (b), (c), (d), (e) and (f) ;
h) The alienation of property, know-how or info in (a), (b), (c) of this definition''.

Lump-sum payment received for the things stated above is taxable under S4(d)

DERIVATION OF ROYALTY INCOME (S 15)

S 15 -> royalty income is derived or deemed derived from Mas if :-

a) responsibility for payment lies with Govt, State Govt or local authority;
b) responsibility for payment in the YA lies with a R person for that basis yr;
c) the royalty payment is charged as an outgoing or expense against any inc accruing in or derived from MAS.

BASIS OF ASSESSMENT ( S 27 )

Same as S27(1) to S27(3) and S29(1) under int and rental inc.
Royalty inc received by co will be taxed in accordance with their financial periods
Ind ar taxed based on calendar yr

DEDUCTION OF EXPENSES

Any REVEX that wholly and exclusively incurred in production of royalty inc that satisfy S33 and not prohibited unde
Excess exp will be permanently loss

EXEMPTIONS

Para 32 Sch 6 Exemption

In respect of:
a) the publication of, or the right to use any artistic work (other than any original painting); and
b) recording discs or tapes.

Max exemption of RM10 000

Paragraph 32A Sch 6 Exemption

Any translation of books or literary work done at the spesific request by Ministry

Max exemption RM12 0000

Not apply if payment arises as part of the R's ind official duties

Paragraph 32B Sch 6 Exemption

Payment relating to the publication of, or the use of or the right to use, any literary work or any original painting

Max exemption of RM20 000

Paragraph 32C Sch 6 Exemption

Royalty inc of a R ind for cultural performances approved by Minister

Full amount exemption in the YA

Not apply if payment arises as part of ind's official duties

Paragraph 32D Sch 6 Exemption

Any musical composition

Max exemption RM20 000

Not apply if payment arises as part of the R's ind official duties

Paragraph 32E Sch 6 Exemption (Apply to Any Ind)

Royalty inc in form of fee or honorarium payment in respect of services provided for the purposes of validation, mo

Full amount exemption in the YA

Not apply if payment arises as part of ind's official duties

ITEO No 6 Exemption (Apply to Any Ind)

Income related to a scientific research which has been commercialised and verified by the Minister of Science, Tech

An exemption of 50% of st inc for 5 yrs

ITEO No 16 Exemption - Royalty Income of NR franchisor in relation to education programs

Royalties received by NR franchisors from registered private higher educational institutions for approved franchised
No WHT applicable
ents, designs or models, plans, secret processes or formulae, trademarks or other like property or rights;
films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in MAS, or othe
cial or scientific knowledge, experience or skill;
e public by -

or radio broadcasting, transmitted by -

a relevant license;

n or derived from MAS.

y S33 and not prohibited under S39 is deductible against gross royalty inc ( in arriving adjusted inc)
ork or any original painting

the purposes of validation, moderation or accreditation of franchised educational programmes in higher educational institutions, verified b

y the Minister of Science, Technology and Environment carried out by an ind

utions for approved franchised educational programmes is exempted.

or reproduced in MAS, or other like property or rights;
cational institutions, verified by Lembaga Akreditasi Negara
PENSIONS, ANNUITIES & OTHER PERIODICAL PAYMENTS

PENSIONS

A periodical or recurring payment made to an ind who has retired or ceased employment.
Can be paid to the person, the person's widow or widower, child, relative or dependant.
Represent an income to recipient
Assessable under S4(e)
If converted from series of payments to a lump sum, the lump sum amount is a capital receipt and NOT subject to t

Derivation of Pension Income (S 17)

S 17 - pension inc will be derived from MAS :-

a) pension paid by Govt or a State Govt
b) pension from a pension fund, a pension scheme or by virtue of a membership of a pension society and the fund,
c) pension paid by a R person.

Basis of Assessment

Assessed to tax on a calendar yr basis

Apply S27(1), S27(3), S29(1)

Exemption on Pension Income

Para 30 Sch 6 --> apply if the pensions derived from Mas and paid to a person reaching the age 55 (or compulsory r

a) in repect of services rendered in exercising a former employment in MAS; and

b) where the pension is paid other than any written law, from a pension or provident fund, scheme or society which

provided that, where a person is paid more than one pension, this para shall apply to the highest pension paid.''

The pension can be exempted if satisfy:-

a) pension derived from MAS;
b) recipient attained the age of 55 / reached the compulsory retirement age or is due to ill health;
c) the pension is in respect of services rendered in exercising a former employment in MAS; and
d) the pension is paid from an approved fund, scheme or society; and
e) where more than one pension is received, the exemption will be given to the one with the highest value.

ANNUITIES

A definite sum of money payable on a regular basis either for a fixed term or in perpetuity pursuant to a contract, w

Taxable under S4(e).

Can arise from:-

an annuity policy taken with an insurance co,
sums received as consideration for the sale of an asset or the surrender of a right, or
sums bequeathed by way of a gift or legacy.

Basis of assessment

- co : financial yr
- ind : calendar yr
Provision under S27(1) to S27(3) ans S29(1) is apply

Exemption of Annuity Income

Para 36 Sch 6 --> sums received by way of annuities granted under annuity contracts issued by Malaysian life insure

'Malaysian life insurers' -> life insurers and takaful operators whose ownership or memberships are held in major b

ALIMONY

A determinable sum of money payable by a husband to his former wife as an allowance for the means of living as d

Taxed on the wife (recipient) under S4(e).

OTHER GAINS OR PROFITS

Any types of gains or inc that are revenue in nature but not fall under other section.

S4(f) -> any inc received on ad-hoc basis or any casual profit received by a person.

It may include:-
commission received for assisting other parties in buying or selling properties
amount received for the provision of occasional consultation, advice or assisstance of any kind,
amount received in respect of occasional tv appearances, broadcasting, lectures etc.
amount received for introducing clients or customers to biz ppl

However, receipts that are capital in nature (ie lottery, voluntary gifts etc) not within S4(f) scope, thus NOT TAXABL

Income Tax (Exemption)(No 17) Order 1999 - Income derived from NR from filming activities

NR film co, actors and film crews who are in MAS are exempted from the income tax payment in respect of income
--> approved by Jawatankuasa Filem Asing, Ministry of Home Affairs, Malaysia.
al receipt and NOT subject to tax as it is regarded as representing the purchase price of an annuity.

pension society and the fund, scheme or society is administered in MAS at any time in the YA;

g the age 55 (or compulsory retiring age under any written law) or DG satisfied that the retirement was due to ill health.

fund, scheme or society which is an approved scheme,

the highest pension paid.''

e to ill health;

with the highest value.

tuity pursuant to a contract, will or settlement.

ssued by Malaysian life insurers --> tax exemption granted

mberships are held in major by Malaysian citizens (ie the shares must >50% owned by M'sian)

ce for the means of living as directed by the court following a divorce or legal separation.

S4(f) scope, thus NOT TAXABLE.

payment in respect of income derived from filming activities

CAPITAL ALLOWANCE

Only can be claimed under S4(a)

CA of qualifying asset only can be set off against adjusted inc of the same biz
Any unutilised CA can be carried forward and set off against same biz source
If biz permanently ceased operations, any unutilised CA is permanently lost

Criteria to claim CA
a) The person who incurs the capex is carrying on biz
b) the capex incurred by the person is in respect of 'qualifying plant exp'
c) such assets are used for the purposes of his biz
d) the person is the owner (legal or beneficial owner) of the asset at the end of the BP

Legal ownership VS Beneficial ownership

Beneficial owner -> the person who incurred the qualifying plant expenditure
Legal/registered owner -> the person whose name the asset is registered

If NOT the same person, following rules shall apply:

a) where the beneficial owner use the asset in biz, he is entitled to claim CA although the asset registered under oth
The legal owner cannot claim.
b) where the asset registered under a person but have many beneficial owners who each used in their biz, then eac
c) where the qualifying exp is incurred by a person but the asset is registered & used in the biz of another person, th
Thus, who wish to claim CA must satisfy BOTH conditions:
-> he must incurred the qualifying exp, and
-> he must use the particular asset for his biz

QUALIFYING PLANT EXP - PARA 2 SCH 3

QPE is capital expenditure incurred:

a) on the provision of 'machinery or plant' used for biz purposes
b) on alteration of an existing building for the purposes of installing P&M and other exp incurred incidentally to the
c) on preparation, cutting, tunnelling or levelling the land (prepare the site for machine installation), provided not e
d) on fish ponds, animal pens, chicken houses, cages, buildings (other than directors, management ee's living accom

Included as part of the QPE would be:

i) Para 45 - capex incurred on the reconstruction of that P&M
ii) forex loss incurred on the purchase of P&M from a foreign seller (if gain,reduce QPE)
iii) capex incurred to move P&M from one location to another

QPE shall not include any amount paid to NR person in consideration for installation services if the WHT provisions
Once the WHT + any penalty settled to IRB, then installation cost will qualify as QPE.
QPE not include capex incurred on assets which have a lifespan not exceeding 2 yrs.
These assets allowed for tax deductions under 'replacement basis'.

The 10% Rule - Para 2(1)(b)

The following is QPE and qualify for CA:
a) cost of purchasing the plant or machinery - [i]
b) cost of alteration of an existing building to install the plant or machinery - [ii]
c) cost of preparing, tunnelling or levelling land in order to prepare a site for installation of that plant or machinery
provided [iii] does NOT exceed 10% of [i+ii+iii]

Qualifying Expenditure on 'Non-Commercial Vehicles' - Para 2(2)

--> motor vehicles which is not commercial transportation of goods or passengers, such as lorries, trucks, buses, van
The QPE is restricted to an amount of RM50 000 per vehicle.

Max QPE is RM100 000 per vehicle if:

a) new
b) total cost not exceed RM150 000
c) purchased on or after 28/10/2000

Qualifying Exp for Used Plant and Machinery

Para 2A :
Circumstances - P&M was in use for a non-biz purpose b4 used for biz
QPE - Market value of P&M on the day it was brought into use for biz purposes

Para 2C:
Circumstances - P&M is brought into use for the purposes of a biz in Mas where it was previously used for a biz out
QPE - Market value or net book value, whichever is lower, on the day it was brought into use in Mas.

NO IA is available. Only entitled AA

Meaning of ''Machinery or Plant'' (Case Law)

Horse (or living creature) treated as 'plant'

Books (including set of law reports and law journals) treated as 'plant'
Floating restaurant is not a 'plant'
Moveable partitions treated as 'plant'
Small items treated as 'plant'
Human is not regarded as a 'plant'
Lights and fittings are not treated as 'plant'
Articles to provide special effects are treated as 'plant'

INITIAL ALLOWANCE

A one-off allowance claimable in the yr of exp on the qualifying asset is incurred.

General rate is 20%
Claimable at the end of the BP and NOT applying time-apportionmentt

Para 13(a) Sch 3 - Conditions to claim IA:

a) the person incurred qpe during the BP
b) asset must be use for biz purposes
c) the person must be the owner of the asset at the end of BP; or
if disposes during the BP, the asset had been owned by him and used for biz prior to its disposal.

If bought and sold during same BP, IA will still be granted.

Basis Period
Pre-Commencement of Business
Para 55 Sch 3 - a person who incurs qpe prior to biz commencement of biz shall be deemed to have incurred the ex
IA can start to be claimed in first BP of biz

After Commencement of Business Prior to Use

QPE incurred after biz commencement shall be deemed incurred on the day which P&M is capable of being used fo

Small Value Assets (Para 19A Sch 3)

100% special allowance is granted in the yr they are incurred satisfy the following criteria:
a) the value of each asset does not exceed RM2000
b) total claimed not exceed RM20 000 per YA
c) the person claiming it is the owner of such assets
d) assets are in use in his biz
If exceeding RM20 000 in the YA, the excess amount of qualifying exp will be eligible for normal CA rate.
100% special allowances NOT apply to small value assets acquired under Hire Purchase.

Non-application of the RM20 000 Limit

The limit of RM20000 NOT apply to SME co, fulfils the following criteria:
i) the co is R and incorporated in MAS, and
ii) the co has paid up capital not exceeding RM2.5m, gross inc not exceeding RM50m
iii) the company:
a) does not own more than 50% of the shares of another co which has a paid up capital of more than RM2.5m at t
b) is not owned more than 50% by another co which has a paid up capital of more than RM2.5m at the beginning o
c) both the co and the other co which has a paid up capital more than RM2.5m at the beginning of the BP are not

ANNUAL ALLOWANCE

claimable for each BP for a YA, starting from the yr the qualifying exp is incurred as long as the asset is still in use at
No AA in the BP which asset is disposed.

Conditions to claim AA:

a) the person has incurred qpe,
b) the asset must be used for biz purposes at the end of the BP,
c) the person is the owner of the asset at the end of the BP.

If bought and sold in same BP, no AA claimable.

Rates of CA
Motor vehicles and heavy machinery - 20% 20%
Plant and machinery - 20% 14%
Office equipment, furniture and fittings - 20% 10%
Computers - 20% 20%
Total CA will be deducted from adj biz inc

Income Tax (CA) (Development cost for Customised Computer Software Rules 2019)

From YA 2018, development cost for customised computer software is eligible for CA.
It refers to the exp incurred in the production of new software or in the improvement of the existing software to be

Qualifying exp consists of:

Consultation fee
spesifically for the purpose of developing a new software system, modification or modernisation of the existing soft

Payments for the rights of software ownership

Payment for the right to use the software exclusively

Incidental fee
Payments incurred which enables the use of software in a biz and being capitalized such as change of requirement
(If paid to NR, may apply WHT)

The CA claimed is only allowed for a person who qualifies as R in the YA. (IA 20% AA 20%)

Can be claimed from YA the customised computer software is capable of being used in a biz.

NOT be granted to eligible person that has claimed:

a) any incentive under the Promotion of Investments Act 1986 [Act 327]
b) any deduction under S 33
c) any deduction under S 34A
d) reinvestment allowance under Sch 7A
e) investment allowance for service sector under S 7B
f) accelerated CA under any rules made under S 154
g) tax exemption under Para 127(3)(b) or subsection 127(3A) in respect of his st inc which is equivalent to any part

ACCELERATED CA RATES

Imported heavy machinery - 10% 10%

( used in plantation, mining, timber, building & construction industries)

Plant and machinery :

a) tin mining - 60% 14%
b) timber - 60% 14%
c) building & construction - 30% 14%
P&M other than imported heavy machinery acquired for:
- getting tin ore;
- extracting or dressing tin concentrates;
- extracting timber from a forest; and
- construction of any works, roads, structures and buildings;
qualify for higher rate of IA unless election 20% is made.

Industrialised building system (IBS) - 40% 20%

(applicable to co involved in manufacturing and construction)
Applicable to QPE incurred on the purchase of mould (pre-cast concrete mould) used in production of industrialised
IBS - building system means which structural components are manufactured in a controlled situation (ie in a factory

Public transport companies and natural gas refuelling - 40% 20%

Apply to - a) public transport co on the provision of buses using natural gas for public transportation biz
b) a person on the provision of natural gas refuelling equipment used at natural gas refuelling outlet.

Environment protecting equipment - 40% 20%

QPE incurred in provision of control equipment used for biz purposes.
(includes equipment and facility used for collecting waste, limiting environment pollution, indicating / recording / w

Recycling of waste - 40% 20%

(apply to co with manufacturing biz)
QPE incurred on provision of P&M used for recycling of waste or for the further processing of wastes into a finished
NOT apply to co enjoying pioneer status, investment tax allowance or reinvestment allowance.

Power quality equipment - 20% 40%

(apply to co)
QPE incurred by co to control the quality of electric power for its biz.
The plant must be certified by the Ministry of Energy, Water and Communications.
NOT granted if co enjoys:
- incentives under Promotion Investment Act 1986
- reinvestment allowance

Plant & machinery(agricultural sector)-20% 40%

QPE incurred on P&M used for agri biz (other than forest plantation).
The machinery must be determined by Minister of Finance.
NOT granted if co enjoys:
- incentives under Promotion Investment Act 1986
- reinvestment allowance

Information and communication technology equipment - 20% 20%

QPE incurred on the purchase and installation of any ICT equipment, (including equipment financed by hire purchas
Eg: - access control system
- banking system
- barcode equipment
- bursters / decollators
- cables and connectors
- computer assisted design (CAD)
- computer assisted manufacturing (CAM)
- computer assisted engineering (CAE)
- card readers
- computers and components
- central processing unit (CPU)
- storages, screens, printers, scanners/readers, accessories
- communications and network
- software system or software package.

NOT granted if a person has claimed:

a) investment tax allowance under the Promotion of Investment Act 1986,
b) reinvestment allowance under Sch 7A,
c) investment allowance for service sector under Sch 7B
d) accelerated CA under any rules made under S 154
e) tax exemption under any order made under S27 (which is equivalent to any part or the whole of rhe amount of q

NOTIONAL ALLOWANCE (NA)

An asset which is temporarily disused in relation to a biz of a person shall be deemed to be in use for biz if:
a) it was in use for the biz purposes immediately before becoming disused,
b) during the period of disuse, it is constantly maintained in readiness to be brought back into use;
c) the period of disuse is temporary.

the AA will continue to be claimed on the asset that satisfy above conditions as it is deemed to be in use.
However, if asset is not used in biz and not fulfil above conditions, a NA will be deducted in order to reduce its resid

RESIDUAL EXPENDITURE (RE)

Also known as 'tas written down value (TWDV)
it is the unutilised portion of the qpe
Arrived by deducting IA, AA and NA from QPE
Once RE is nil, no further allowance can be claimed

HIRE PURCHASE TRANSACTION(PARA 46 SCH 3)

When a person incurs capex on acqisition of P&M for biz under hire purchase, he is deemed as owner.
Hire purchase involving:
- deposit
- monthly instalments comprising of the capital portion and the int portion.

Only deposit & monthly instalments qualify for CA

Int portion not included as it is deductible from biz gross inc (S33(1)(a))
The IA computed on the deposit and each new instalments paid (capital portion) during BP
AA computed by the accumulated amounts paid to deposit (ie deposit+ instalments)
Restrictions for non-commercial vehicle is applicable under hire purchase

DISPOSAL OF QUALIFYING ASSETS

Para 61 Sch 3 - What Constitues 'Disposal'
-if it is sold, discarded, destroyed, scrapped, exchanged or ceases to be used for biz or the biz itself is ceased.

Balancing Adjustments
Disposal value (DV) need to be compared with its RE as at the beginning of BP which the disposal took place.

Balancing charge (BC)

DV > RE = BC (profit on disposal)
BC will be taxable, added to adjusted inc of the YA
BC is restricted to total allowances claimed (IA+AA), excluded notional allowances

Balancing Allowance (BA)

DV < RE = BA
BA is deducted from adj inc in YA of disposal
No restriction applies

Disposal Value - Para 62

- DV should be taken to ne an amount equal to its market value at the date of its disposal.

Disposal by Way of Sale, Transfer or Assignment

- DV would be the greater of:
a) its market value ; or
b) the net proceeds

'Disposal' due to Asset being destroyed / stolen

-if insurance or compensation moneys are received, its DV shall be the greater of:
a) its market value at the date of its disposal; or
b) the insurance proceeds received.

Disposal of motor vehicles

- If the QPE is restricted (non-commercial vehicles), the sale proceeds will also be restricted (deemed sale proceeds

DV =Max QPE / Total cost of vehicle * Sale proceeds

ASSETS HELD FOR SALE

- deemed ceases to be used in that YA and the DV shall be higher of:

a) market value at the date it was classified as assets held for sale; or
b) net proceeds of the sale.
Balancing adjustments also calculated in that YA
If the asset hold for sale is not sold in the BP it was classified as held for sale, notional allowance is computed at the

ASSETS USED FOR DUAL PURPOSE (PARA 73, SCH 3)

If qualifying asset is used both for biz and private purposes (usually motor car), the CA claimable have to be apporti
In computing CA, the full amount (biz+private) must be deducted from QPE to arrive at RE. BUT, only biz portions o
When disposed, both biz + private portions of balancing adj must be added to adj inc. BUT, amount of BC to be add
COST OF DISMANTLING AND REMOVING ASSETS (PARA 67C, SCH 3)

From YA 2009, when qualifying asset is disposed and pursuant to any written law or agreement, the owner is requir
Higher RE, Higher BA
BUT, not applicable if the dismantled is subsequently used for another biz belonging to the taxpayer or used by any
the amount to be added to RE shall NOT include any amount paid to NR in relation to the installation or operation o
the asset registered under other person's name.

ach used in their biz, then each of them can claim CA, in proportion to amount of exp incurred by each person.
n the biz of another person, then both parties will lose their entitlement to claim CA.

xp incurred incidentally to the installation

e installation), provided not exceeding 10% of agg cost
management ee's living accommodation) and other structural improvements on land used for purposes of poultry farms, animal farms, inl

ervices if the WHT provisions under S109B have not been complied with.
on of that plant or machinery - [iii]

ch as lorries, trucks, buses, vans, taxi cabs or cars for hire,

s previously used for a biz outside Mas.

nto use in Mas.
 emed to have incurred the exp when the biz commences.

&M is capable of being used for the purposes of the biz.

or normal CA rate.

ital of more than RM2.5m at the beginning of the BP, or

han RM2.5m at the beginning of BP, or
e beginning of the BP are not owned more than 50% by another co.

ng as the asset is still in use at the end of the BP.

 of the existing software to be used for biz purposes.

dernisation of the existing software EXCLUDE consultancy fees related to initial procedure or planning stage (ie feasibility study or prelimin

uch as change of requirement of the software.

hich is equivalent to any part or the whole amount of the development cost for customised computer software incurred by the person.
 in production of industrialised building system component.
rolled situation (ie in a factory / a site, transported and assembled into a structure with minimal site works).

transportation biz
efuelling outlet.

tion, indicating / recording / warning of excessive pollution and for securing more efficient use of the equipment).

essing of wastes into a finished product.

ment financed by hire purchase) by a R person.

 the whole of rhe amount of qualifying capital exp incurred).

to be in use for biz if:

back into use;

eemed to be in use.
ted in order to reduce its residual expenditure. (but not reducing adjusted biz inc)

eemed as owner.
r the biz itself is ceased.

he disposal took place.

ricted (deemed sale proceeds)

allowance is computed at the end of BP for that YA and RE is further reduced.

A claimable have to be apportioned.

at RE. BUT, only biz portions of CA is deductible against adj inc.
BUT, amount of BC to be added should not exceed the total allowances previously claimed.
greement, the owner is required to dismantle and remove the asset and to restore the site which the asset is located, the amount incurre

o the taxpayer or used by any other person.

the installation or operation of the dismantled IF WHT not been complied.
oultry farms, animal farms, inland fishing industry or other agricultural/pastoral pursuits.
(ie feasibility study or preliminary study)

are incurred by the person.

s located, the amount incurred on those shall be added to the asset's RE in yr of disposal.
INDUSTRIAL BUILDING ALLOWANCE (IBA)

QBE - capex incurred on the construction or purchase of a building for biz purposes at any time after its constructio

Meaning of Industrial Building (Para 63 Sch 3)

If used for biz purposes such as buildings used as:

a) a factory
b) a dock, wharf, jetty of other similar building
c) a warehouse ( for biz consists of letting out storage space to public)
d) in biz of supplying water or electricity for public consumption, or biz providing telecommunication services to pu
e) in connection with the working of a farm / a mine

Para 63 - 'factory' include:

a) mill
b) workshop ( except the workshop is used for the repair and servicing of goods and is incidental to the biz of sellin
c) building for housing or storage (warehouse, storeroom) of P&M used in the:
i) manufacture of any product, or
ii) subjection of goods / materials to any process, or
iii) generating of power to be used for the purposes of that manufaacture or process
d) building (within the same curtilage/fence as factory) used for storage of raw materials, fuel or anything necessar

Within same curtilage - attached to, adjacent to or within the same enclosure.

Treatment of Warehouse
If used in manufacturing biz for storage of raw materials and fg, must be within the same curtilage as the factory =
If retail biz, not industrial building UNLESS carrying on biz of letting out storage space to the public.

Other Buildings Deemed to be Industrial Building

a) buildings provided for staff welfare (ie canteen)provided an industrial building already exist and the facilities prov
b) building used as living accommodation to ee include:
i) constructed living accom (or living quarters) for ee where an industrial building already exist and use for biz - Para
ii) constructed or purchased living acc provided to ee who are employed in the manufacturing sector, hotel or touri

Ee include factory worker EXCLUDE director, ind controls biz, member of management of biz

iii) constructed or purchase building used as a child care facility for the benefit of ee - Para 42A(2) Sch 3
c) constructed or purchase building used as a school or educational institution, approved by Minister Education - Pa
d) '' or '' '' used for industrial, technical or vocational training approved by Minister - Para 42C Sch 3
e) constructed private hospital, maternity home and nursing home licensed / approved by the DG - Para 37A Sch 3
If building is rented and used for above purposes, exp incurred on alterations and renovation eligible for IBA.
f) building used for:
i) R&D approved by Minister;
ii) R&D undertaken by a R&D co or a contract R&D co - Para 37B Sch 3
g) building used solely for storage of goods for export or for the storage of imported good to be processed and distr
No IBA if do renovation to rented building

h) building used for the provision of services and modernisation of operations in relation to an approved service pro
i) building used for hotel registered with Ministry of Tourism - Para 37F Sch 3
ii) building as an airport - Para 37G Sch 3
Exp qualifying = incurred on the construction, reconsruction, extension, improvement, or purchase of any building,
k) motor racing circuit approved by Minister - Para 37H Sch 3
Same as note on j
l) public roads and ancillary structures recoverable through toll collection - Para 67A Sch 3
Same as note j and k

m) constructed building approved and is on a 'build-lease-transfer' basis pursuant to an agreement with the Govt -
ie jalan raya, private sector to Govt
n) constructed or purchase building as an old folks care centre (for rich ppl) approved by Social Welfare Departmen
o) '' or '' '' located in Cyberjaya Flagship Zone, used for biz purposes of an approved MSC status co or is rented out t
p) '' or '' '' used by Msian R co approved by Minister as a Bionexus status co (ie co engaged in life science: biology, m
q) building construction under a privatisation project and private financing initiatives (PFI) approved by the Privatisa
r) constructed or purchase commercial building by a Tun Razak Exchange Marquee Status Co for the purpose of qua
s) '' or '' '' used for biz relating to the provision and maintenance of a kindergarten registered with Ministry of Educa
t) '' or '' '' used for biz relating to child care centre registered with the Department of Social Welfare.

Part of Building Not used as Industrial Building

still can be treated as industrial building if the non-qualifying part is not more than 10% of the exp incurred on entir
if more than 10%, IBA only for industrial building portion.
Apportionment based on actual cost incurred, floor area or other manner DG approved.

QUALIFYING BUILDING EXPENDITURE (QBE)

For constructed Buildings

Capex incurred on construction of buildings include:

a) architect's fees
b) cost of drawing up plans
c) cost of clearing up the site (include demolition cost of any existing building which was not treated as industrial bu
d) cost of site preparation and laying foundation (include cost of preparing, cutting, excavating, tunnelling, or piling
e) cost of construction of the building
f) other exp incidental to the construction of the building (eg plumbing etc)
g) legal charges, stamp duties, etc provided they are not related to the land acquisition
h) cost of installation of fittings(eg electrical wiring)
i) capex incurres on additions to existing industrial building (eg build-in-cabinet)
j) exp incurred on renovations to an existing industrial building which are capital in nature

Any exp incurred on acquisition of the site (ie land) do not form part of the QBE.
Exp not qualify for QBE:
a) cost related to acquisition of site/land
b) cost of clearing/ demolishing previous structure which is industrial building
c) payment for compensation to obtain the right to occupy or own a property

QBE will be deemed incurred and IBA can start to be claimed on later of:
a) the date of completion of the building;
b) the date of commencement of biz.

75% Rule ( Para 67 Sch 3 )

Cost of purchasing P&M - [i]

Cost of alteration / installation of P&M - [ii]
Cost of preparing a site for the installation of P&M - [iii]
Agg Cost - E

If [iii] > 75% of E, then E = QBE -->IBA

If [iii] less than or equal to 75%, then [i]+[ii] = QPE --> CA
[iii] will not be given any relief UNLESS [iii] is less than 10% of E (in which case the agg, E, will be treated as QPE, elig

For purchased Industrial Building

the QBE will be the purchase price of that building (exclude any land-related cost) plus the legal fees, stamp duties

Rented or Leased building

A tenant/ lessee rented an industrial building and use for biz NOT entitled for IBA as he is not the owner and not inc
BUT if the lessee do renovation/ alteration where the lessee bear all the cost, he is deemed to have a 'relevant inte
The owner can claim IBA to the extent of the QBE incurred by him if lessee uses the building as an industrial buildin

Para 16B Sch 3 (From YA 2016)

owners that let out property for following biz not eligible for IBA:
i) private hospital, maternity home & nursing home
ii) building used for research undertaken by R&D co
iii) buildings as storage of goods for export or storage of imported goods to re-exported
iv) building used for the purpose of the provision of services and modernisation of operations related to approved s
v) building used for hotel registered with Ministry of Tourism
vi) airport
vii) motor racing circuit
viii) construction or purchase of a building for the purposes of the biz of manufacturing, hotel or tourism biz or an a
ix) a building for the provision of child care facilities for ind employed by him in that biz
x) a building used for a school or an educational institution approved by Minister of Education etc
xi) a building used for the purposes of industrial, technical, vocational training approved by Minister

Para 16B Sch 3 only apply to exp incurred on new industrial buildings (include renovation costs) acquired from YA 2
Plus, amendment to Para 16B Sch 3, awners that let out not more than one-tenth (1/10) of the floor area, such indu
If more than one-tenth, IBA can only be claimed on part not used for the purpose of letting of property.

INITIAL ALLOWANCE

IA of 10% is given for both constructed and purchased building, in the first YA, if:
a) the person has incurred QBE of industrial building
b) either:
i) the person is the owner of the industrial building at the end of the BP, OR
ii) the building must be in use or about to be used for biz purposes.
If disposed in BP of construction/purchase, IA will be available if prior to disposal, the building was in use as industr

ANNUAL ALLOWANCE

AA 3% is given every YA if:

a) taxpayer is the owner of the building at the end of BP; AND
b) the building is in use as an industrial building at the end of BP

If building temporarily disused, as industrial at the end of BP, and not maintain in readiness to be brought bact to u
NA will be deducted to reduce RE
Notwithstanding the above, from YA 2016, no allowance shall be available where the building is used by that perso

DISPOSAL

Same rule as CA
Para 62 Sch 3 - disposal value of an industrial building is an amount equal to its market value at the date of disposal
If disposed by way of sale, transfer or assignment, DV will be greater of:
- its market value or
- net proceeds of the sale.
if DV is insurance or compensation moneys are receive, take the greater of:
its market value or
the compensation money received.

Demolished building
Deemed to be disposed
If no insurance received, and the taxpayer incurs demolition cost that exceeds any amounts received from the sale
Negative DV can be aggregated with the RE, resulting in a higher balancing allowance.

BUILDINGS CONSTRUCTED ON A BUILD-LEASE-TRANSFER BASIS FOR GOVT USE

Para 67B Sch 3 -Building constructed by a person pursuant to an agreement entered into between that person and

IBA (IA 10% AA 6%) is given & can be deducted against lease rental inc received from Govt
If during lease period, the building owner receives any compensation from Govt, the balance of RE shall be reduced
When the building is transferred to the Govt upon expiry or termination of the lease, it would be treated as disposa
Para 67B - the DV of such building shall be deemed as zero (Nil)
The above also apply in the case of:
i) public road and ancillary structures
ii) building constructed under privatisation project and private financing initiatives.

KINDERGARTEN
From YA 2013, a person who incurred QBE for construction or purchase of a building related to a biz of provision an
If parts of the building not used for qualifying purpose is not more than 10% of total cost, can claim IBA for whole b
If disposed within 2 yrs from the date the QBE was incurred, a BC equal to the amount of actual allowance claimed

CHILD CARE CENTRE

From YA 2013, a person who incurred QBE for construction or purchase of a building related to a biz of a child care
If parts of the building not used for qualifying purpose is not more than 10% of total cost, can claim IBA for whole b
If disposed within 2 yrs from the date the QBE was incurred, a BC equal to the amount of actual allowance claimed

Summary page 267

 any time after its construction or purchase, as an 'industrial building'.

communication services to public;

s incidental to the biz of selling those goods) (to claim IBA, must not depending on factory, must stand on its own)

ials, fuel or anything necessary for manufacturing of goods, or storage finished goods prior to sale.

ame curtilage as the factory = qualifies as industrial building

to the public.

ady exist and the facilities provided to ee employed for which that industrial building is used - Para 65(1) Sch 3

ady exist and use for biz - Para 42(1) Sch 3

acturing sector, hotel or tourism biz, or approved service project - Para 42A(1) Sch 3

Para 42A(2) Sch 3

ved by Minister Education - Para 42B Sch 3
Para 42C Sch 3
ed by the DG - Para 37A Sch 3
ovation eligible for IBA.

good to be processed and distributes or re-exported - Para 37C Sch 3

tion to an approved service project (ie project in the service sector relating to transportation, communications, utilities etc) approved by M

, or purchase of any building, runway or ancillary structures.

an agreement with the Govt - Para 67B Sch 3

by Social Welfare Department - Income Tax (IBA)(Old Folks Care Centre) Rules 2003
MSC status co or is rented out to an approved MSC status co - Income Tax (IBA)(Approved MSC) Status Co Rules 2006 ;
aged in life science: biology, medicine, environment etc) solely for the purpose of its new biz or for expansion project - Income Tax (IBA)(B
(PFI) approved by the Privatisation/PFI Committee under Prime Minister's Department pursuant to an agreement entered into with the Go
atus Co for the purpose of qualifying activity (banking, insurance, Islamic banking, Takaful, financial services and fund management) used
gistered with Ministry of Education.
Social Welfare.

% of the exp incurred on entire building.

was not treated as industrial building)

xcavating, tunnelling, or piling on land)
 , E, will be treated as QPE, eligible for CA)

s the legal fees, stamp duties and other exp incidental to purchase.

he is not the owner and not incurred any exp

emed to have a 'relevant interest' therefore can claim IBA.
uilding as an industrial building .

erations related to approved service project.

ng, hotel or tourism biz or an approved service project for the provision of living accommodation for ind employed by him in that biz

ducation etc
ed by Minister

tion costs) acquired from YA 2016 onwards. --> if bought prior to YA 2016, shall eligible for IBA
10) of the floor area, such industrial building eligible for IBA on whole industrial building.
etting of property.
 building was in use as industrial building for biz purposes.

diness to be brought bact to use, NO IBA can be claimed.

building is used by that person for the purpose of letting of property, include biz of letting of such property except in certain cicumstances

et value at the date of disposal

mounts received from the sale of scrap, the industrial building will have negative DV.

nto between that person and the Govt on a build-lease-transfer basis, subject to approval of Minister of Finance, shall be treated as an ind

balance of RE shall be reduced by the amount of compensation received.

it would be treated as disposal (balancing adjustments might arise)

related to a biz of provision and maintenance of a kindergarten registered with Ministry of Education --> AA 10%
ost, can claim IBA for whole building.
t of actual allowance claimed shall be made in the YA of disposal.

related to a biz of a child care centre registered with the Department of Social Welfare --> AA 10%
ost, can claim IBA for whole building.
t of actual allowance claimed shall be made in the YA of disposal.
ns, utilities etc) approved by Ministry of Finance - Para 37E Sch 3

n project - Income Tax (IBA)(BioNexus Status Co) Rules 2007

ment entered into with the Govt or a st body on a 'build-lease-maintain-transfer' basis and for which no consideration has been paid by th
and fund management) used in Tun Razak Exchange (from YA 2014)
loyed by him in that biz
except in certain cicumstances. (relevant int)

ance, shall be treated as an industrial building for tthe purpose of this sch.
sideration has been paid by the Govt or st body - Income Tax (IBA)(Building under Privatisation project and PFI) Rules 2010
FI) Rules 2010
AGRICULTURE ALLOWANCE (AGA)

capital allowance granted to agri biz incurs QAE

S18 - 'Agri' means any form of cultivation of crops, animal farming, aquaculture, inland fishing and any other agricu

QUALIFYING AGRICULTURE EXP - PARA 7 SCH 3

QAE are capex incurred by a person on:

a) clearing an preparation of land for agri purpose -> 50% (PARA 23)
b) the planting of crops (not replanting) on land cleared for planting -> 50% (PARA 23)
c) construction on a farm of a road or bridge ->50% (PARA 23)
d) construction of a building on the farm which is used for agri biz (ie office, storeroom, mill) -> 10% (PARA 22(a))
e) '' '' '' '' '' '' '' '' '' provided for the welfare or as living accommodation of the ee (labourers) employed in the farmin
provided such buildings will have 'little or no value' to any person if the farm ceases to be worked

NOT QAE:
- capex on P&M -> claim CA
- the cost of land or farm

Cost of 'Replanting'
the replacement cost of a crop on an area under cultivation by a crop of same product will be deductible as normal

Cost of 'New Planting'

Representing new planting as part of QAE:

a) planting new crops on new area
b) replacing new crops on the same area but different products
c) planting the same crops but on a land which is acquired from another owner

Exp qualifying AGA includes:

- exp in felling trees of the old crop
- clearing of the land
- fertilising the land before planting the first crop
- construction of drainage and irrigation
- cost of seedlings
- other exp incurred to cultivate the land until it is fit for planting of new crop.
any other exp incurred from the point of planting seedlings is revex , deductible exp (from gross inc)

CLAIM FOR AGA (PARA 25 SCH 3)

Not entitled to AGA for BP if:

a) Para 25(b) - if he is not the owner and not use the asset for biz purposes at the end of BP
b) Para 25(a) - if the asset is transferred during the BP and it was not in use for the purposes of his biz within one m
NO IA on AGA

DISPOSAL / TRANSFER OF ASSET OR FARM (PARA 25 SCH 3)

Transferor (disposer)
Transferor can claim only part of the AGA available on that asset, in condition that, pursuant to Para 25(a), the asse
AGA will be apportioned on a time basis =
No. of days from beginning for BP to date of transfer / 365 days * AGA
--> can do in months if asked

Transferee
Para 24(b) states where the asset is:
a) a farm used by the recipient for his biz purposes consists wholly or partly of the working of the farm; or
b) a building which is used by the recipient for his biz purposes and is adjacent to or closely in the vicinity of that far

the recipient entitled for the balance of AGA available available for that yr. (shared with disposer)
purchase consideration is irrelevant to calc AGA
for subsequent YA's, only transferee can claim AGA. The amount claimable would be the allowances which would h
Thus, if the RE of a particular asset is already 'nil', the transferee cannot claim any further AGA.
'sharing' of AGA only applies if the transfer takes place in the same YA for both parties.

If different YA's, tax treatment is:

a) to the transferor - his position is unchaged (claim AGA up to the date of transfer)
b) to the transferee - he is not able to share and claim the balance of the AGA in the transferor's final YA. He can on

AGRICULTURE CHARGE (AC)

--> the withdarawal of AGA allowances previously claimed.

--> same as BC, it is taxable

Para 26 Sch 3 - Grant received from Govt, State Govt or St Authority

--> exempted and not taxable

Para 27 Sch 3 - Disposal within 5 yrs

If asset that have been granted with AGA is disposed of within 5 yrs from the date of exp on such asset was incurre
AC is equal to total AGA previously claimed.
If disposal occurs after the permanent cessation of biz, disposal is deemed to occurr in the BP which the biz ceased.
AC is deemed solely by reference to the AGA previously claimed on the disposed assets.

Election for Spread back

If disposed within 5 yrs, AC imposed in YA of disposal or YA of permanent cessation, whichever earlier.
Election under Para 27, taxpayer can 'spread back' the AC evenly over the YAs for which the allowances were grant
The election must be made in writing to the DG within 3 months from the beginning of the YA following the YA for B
Taxpayer can avoid to pay lump sum on the yr of disposal.

Demolition of a building

If building on a farm (eg smoke house, estate worker's quarters) was demolished or destroyed upon the permanent
Thus, no AGA will be granted and no AC being imposed in respect of demolished building.
Disposal after 5 yrs
no AC in the yr of disposal
d fishing and any other agricultural or pastoral pursuit. (tanaman, ternakan)

m, mill) -> 10% (PARA 22(a))

urers) employed in the farming biz (ie temple, quarters) -> 20% (Para 22(b))
o be worked

t will be deductible as normal revenue deductions under S34(6)(d). This include cost of clearing old trees.

from gross inc)

rposes of his biz within one month prior to the transfer.

ursuant to Para 25(a), the asset is being used in biz within one month prior to the date of disposal.

rking of the farm; or

losely in the vicinity of that farm or another farm of his forming part of that biz,

th disposer)

the allowances which would have been made available to the disposer if the asset is not disposed.

ransferor's final YA. He can only claim the allowances available in subsequent YAs.

exp on such asset was incurred, AC will be imposed.

n the BP which the biz ceased.

whichever earlier.
ch the allowances were granted (additional assessment for affected YA)
of the YA following the YA for BP which disposal takes place.

estroyed upon the permanent cessation of the biz, it will not constitute as disposal (as considered by the Special Commissioners in PKR 26
ecial Commissioners in PKR 264).
PARTNERSHIP

Partners must declare their own inc --> Form B latest by 30/6 next yr.
P'ship must have Profit Sharing Ratio
P'ship don't pay tax, the partners is taxable based on it
Precedent partner must sent Form P to IRB latest by 31/3
Precedent partner --> must be R in MAS & first name in agreement
If no R in the p'ship, they must hire tax agent to take care of the Form.

INTRODUCTION
P'ship --> an association of any kind between parties who have agreed to combine any of their rights, powers, prop
Piship comprises at least 2 persons, but not exceeding 20 persons. If professional firm, max 50 person.

Factors to determine p'ship existence

a) whether there is a formal agreement & registeres with the Registrar of Biz
b) whether there is biz carried on for profit-seeking purposes
c) where there is a basis for sharing the profits or losses of the biz
d) whether the sharing of income is done at the 'net inc' level rather than the 'gross inc' level (if net inc, p'ship exist
e) whether the biz maintains its own bank acc and who are the signatories of the cheques issued by the biz, etc (mu

Responsibility tofile a tax return lies to precedent partner, who can be either:
a) first named partner in the p'ship agreement or
b) partner who takes precedence over the other parties

If partner is NR, inc deemed derived from MAS shall be assessed to tax in the name of either:
a) the p'ship
b) any R partner
c) any agent of the p'ship in MAS
--> NR has same treatment, but no reliefs

TYPES OF PARTNERS

Full Partner @ Active partner

-partner who actively involved in the conduct of p'ship biz and shares profit & loss of the p'ship
- Taxable inc under S4(a) biz inc

Salaried partner
- partner who receives a fixed remune with or without commission or share of profit from the p'ship.
- not bear losses or risks, not have any title to the p'ship's goodwill or any right to direct p'ship
- Taxable under S4(b) employment inc

Sleeping partner
- who contributes capital and does not participate in the conduct of the p'ship biz
- receives a share of profit based on contributed capital (or return on Investment)
- Taxable under S4(a) biz inc
Limited Partner
- person who subscribes to a fixed amount of capital in the p'ship and not actively take part in the conduct of biz
- Taxable under S4(a) biz inc

Corporate Partner
- a company which becomes a full partner or a limited partner of a p'ship
- Taxable under S4(a) biz inc

ASCERTAINING DIVISIBLE INC FROM P'SHIP

Provisional Adjusted Income (PAI)

Like normal computation of adj inc, after adjusting from p'ship net profit:
a) add back all non-deductible exp
b) deduct non-taxable inc (S4(c), S4(d), any inc that is capital in nature)
c) deduct any expenses which:
i) may have been capitalised in the p'ship acc but are fully deductible for tax purposes, or
ii) may qualify for DD, and
d) add back partner's private or domestic exp (total)

Divisible Income (DI)

- income allocation to each partner, deduct the patners' private or domestic exp from PAI (spesific)
- allocation according to profit Sharing Ratio (PSR)
- DI deemed to accrue evenly over BP.
-if has any change in PSR, apportion on a time basis first, then allocate to the ind partners using PSR
- if Divisible Loss arise, use PSR too.

ASCERTAINING THE ST INC FROM THE P'SHIP

Adjusted Income from Partnership

- arrive after adding partners private exp and share of DI
- If Divisible loss, partner's private exp will be added to their share of divisible loss, give rise to:
a) Share of divisible loss < private exp
- result in Adjusted inc, can + BC, can - CA/BA
b) Share of Divisible Loss
- result in Adjusted Loss, (current yr biz Loss)
- adj inc will be 'nil' , CA/BA can be set off against BC, if any. If no BC, CA/BA will be carried forward
- Adj loss be set off against Agg Inc ( can carried forward up to 7 consecutive yrs)

Capital allowances
- share of capital allowances will be based on PSR at the end of BP (same goes to BC or BA)

Withdrawal and Admittance of New Partner

- since CA are only granted at the end of each BP, any partners withdraw B4 end of BP, not eligible for CA in the yr
- newly joins partner gets to enjoy full year's CA in the yr he joins p'ship provided he remains as a partner at the end

Qualifying Exp Incurred by Individual Partners

- If ind partner incurs qualifying capex for use in p'ship biz, the entire CA in respect of that asset will be given to tha
-if also used for private purposes, only CA in respect of biz portion can be claimed.

ASCERTAINING THE CHARGEABLE INC OF EACH PARTNER

Allocation of Investment Income

- any investment inc earned by the partnership will be assessed under S4(c) or S4(d) respectively
- Divd inc allocated to the ind based on PSR applicable at the date of payment, credit or distribution of the inc.
- under single tier system, Divd inc is tax exempt.
- int and rental inc, will be deemed to accrue evenly over the BP and allocation is the same way as DI
- Thus, any change of PSR, apportion on time basis
if earned by ind partner (not under p'ship), only that partner will be assessed of tax

Allocation of Approved Donation

- if made by p'ship, allocate to the partnersbased on PSR at the date such donations are made.
- no allocation if made by ind, not p'ship

CHANGES IN PARTNERSHIP

A p'ship is deemed to cease and a forming new p'ship when a change occurs in p'ship owing either:
a) the retirement or death of a partner; or
b) the admission of a new partner.

Tax implications:
a) deemed disposal of the old p'ship's assets
b) each partner is deemed to have ceased to derive inc from that old p'ship , any unabsorbed CA is permanently los
c) if the partner continue to be partner in new p'ship, he is deemed to have commenced a new source of inc from t

S56 - when there is change of p'ship, and:

a) there is at least one continuing partner in both old and new p'ship, and
b) the biz of old and new p'ship is substantially similar; and
c) the change of ownership occurs during the BP;
the continuing partner is deemed to have one continuing source of income.

--> so unabsorbed CA from old p'ship is not permanently loss and can still be utilised against adj biz inc of new p'shi
--> Inc apportionment on a time basis (determined by the date of change) is required to compute the adj inc of eac

If old p'ship ceases on the last day of normal 12 months acc period and new p'ship starts immediately, S56 will not

ADMISSION OF NEW PARTNER BY A SOLE PROPRIETOR

- if a sole prop admits new partner into the biz, the sole prop biz and the p'ship biz shall be treated as 1 continuing b

TAX ADMINISTRATION
- required to submit Form P for each YA for p'ship
- ind partners submit tax returns, Form b
y of their rights, powers, property, labour or skill for the purpose of carrying on a biz and sharing the profits.
, max 50 person.

nc' level (if net inc, p'ship exist)

ques issued by the biz, etc (must have bank acc under p'ship)

rom the p'ship.

e part in the conduct of biz

PAI (spesific)

ners using PSR

rried forward

P, not eligible for CA in the yr of withdrawal.

emains as a partner at the end of BP
that asset will be given to that partner ONLY.

or distribution of the inc.

same way as DI

owing either:

bsorbed CA is permanently loss. BUT, any unabsorbed biz loss will not be lost.
ced a new source of inc from the new p'ship

against adj biz inc of new p'ship, provided he remains as a partner at the end of BP.
to compute the adj inc of each partner for the relevant BP

arts immediately, S56 will not apply. So, the new p'ship is treated as new biz source, not continuing source

all be treated as 1 continuing biz if the p'ship adopts the same acc yr-end as sole prop biz.