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Ideas & Insights Newsletter

Malaysia Budget 2022 Highlights

Malaysia Budget 2022 Highlights: Strengthening Recovery, Building Resilience and Driving Reforms

Key Takeaway

  • Effective from 1 January 2022, income derived from foreign sources and received in Malaysia by Malaysian tax residents will be subject to income tax
  • For YA 2022, Cukai Makmur, a special one-off tax to be imposed on companies with taxable income of more than 100 million ringgit
  • Unutilised business losses to be carried forward for 10 consecutive YAs
  • Additional Reinvestment Allowance will be extended for 2 years until YA 2024
  • Effective from 1 January 2022, RPGT rate of an individual citizen, permanent resident and other than a company for disposal in the 6th year and onwards be reduced from 5% to 0%.
On 29 October 2021, our Finance Minister, YB Senator Tengku Datuk Seri Utama Zafrul Tengku Abdul Aziz tabled the 2022 National Budget with the theme, ‘Keluarga Malaysia, Makmur Sejahtera’ as Malaysia enters the recovery phase of COVID-19 and makes preparation to revitalise its economy.

Numerous tax measures were introduced revolving around the three key pillars of the 2022 National Budget, namely Strengthening Recovery, Building Resilience and Driving Reforms.

This edition of our Tax Alert is prepared based on the 2022 National Budget speech and a follow-up edition will be issued to cover key tax proposals and updates, after the Finance Bill is issued.

Key Tax Proposals

Affecting Individuals

  • Tax relief on costs associated with the adoption of self-funded booster vaccines.
  • The scope for individual income tax relief for full medical check-up expenses is expanded to cover the cost of check-up or consultation service related to mental health from registered psychiatrist, clinical psychologist and counsellor.
  • In line with the new norm and work from home practices, the special individual income tax relief of up to RM2,500 on the purchase of mobile phone, computer and tablet be extended until 31 December 2022.
  • The limit of individual income tax relief for up-skilling and self-enhancement course fees will be increased from RM1,000 to RM2,000 and extended to year of assessment 2023. In addition, those who undertake courses with any professional bodies will be eligible for a tax relief of up to RM7,000. Approved courses include professional courses in accounting, finance and environmental, social and governance (ESG)-related.
  • Tax relief of up to RM4,000 for Employees’ Provident Fund (EPF) contributors is expanded to include voluntary contributions, such as those who are self-employed in the gig economy including pensionable civil servants.
  • Tax relief limit will be increased from RM250 to RM350 and the scope of relief for Social Security Organisation (SOCSO) contributions will also be expanded to cover employee contributions through the Employment Insurance Scheme (EIS).
  • Tax relief of up to RM3,000 for fees paid to registered child care centre or kindergarten is extended until the year of assessment 2023.
  • Income tax exemption on recognised e-sports tournament prize money.
  • Special individual income tax relief for domestic tourism expenses up to RM1,000 be extended until year of assessment 2022.
  • Tax relief up to RM2,500 on expenses related to cost of installation, rental, purchasing including hire-purchase equipment or subscription fees for EV charging facilities.
  • Income tax is imposed to residents in Malaysia on income derived from foreign sources and received in Malaysia from 1 January 2022.
  • Tax relief for deferred annuity premium payment be extended until the year of assessment 2025 (to be in line with the extension of the income tax relief for contribution in Private Retirement Scheme (PRS)).

Key Tax Proposals

Affecting Corporates and Businesses

  • Tax deduction to employers on costs associated with the adoption of self-funded booster vaccines.
  • Double tax deduction to companies that provide scholarships to students in institutions of higher learning:
    1. the scope of qualifying studies be expanded to all fields of study at the Technical and Vocational, Diploma, Degree including Master’s and Doctorate; and
    2. the tax incentive be extended for 4 years from the year of assessment 2022 to the year of assessment 2025.
  • Tax incentive for the Structured Internship Program is extended until the year of assessment 2025 and this incentive is also expanded for students in the Master’s Degree, Professional Certificate and Malaysian Skills Certificate Levels 1 and 2.
  • Tax deduction of up to RM300,000 on the cost of renovating and refurbishing business premises is extended until 31 December 2022.
  • For manufacturing and manufacturing-related service companies registered under Safe@Work, a further tax deduction of up to RM50,000 on rental expenses of employees’ accommodation premises will be extended until 31 December 2022.
  • Special tax deduction to the owners of buildings or business premises who provide rental reduction to tenants of at least 30% from the original rate be extended until June 2022.
  • Treatment of accumulated unabsorbed business losses:
    1. the current unabsorbed business losses that can be carried forward from year of assessment 2019 onwards be extended from a maximum period of 7 consecutive years of assessment to a maximum period of 10 consecutive years of assessment; and
    2. the accumulated unabsorbed losses up to the year of assessment 2018 that can be carried forward until the year of assessment 2025 be extended until the year of assessment 2028.
  • The Additional Reinvestment Allowance (RA) provided for the year of assessment 2020 to year of assessment 2022 be extended for 2 years until year of assessment 2024 for existing companies in Malaysia that have exhausted RA and Special RA eligibility. Such extension will make up the total period of Additional RA to 5 years.
  • Income tax exemption for organizers of arts and cultural activities as well as international sports and recreational competitions is extended for 3 years, ie. from the year of assessment 2023 until year of assessment 2025.
  • Income tax exemption on all income of Social Enterprises up to 3 years of assessment based on the validity period of accreditation approved by the Joint Accreditation Committee by the Ministry of Entrepreneur and Cooperative Development and Yayasan Hasanah.
  • One-off tax known as Cukai Makmur, companies with taxable income up to the first 100 million ringgit will be subject to income tax at the rate of 24 percent and the remaining taxable income will be subject to income tax at the rate of 33 percent for the year of assessment 2022.
  • Income tax is imposed to residents in Malaysia on income derived from foreign sources and received in Malaysia from 1 January 2022.
  • Micro, Small and Medium Enterprises (MSMEs) with a paid-up capital of RM2.5 million and below with annual sales turnover not exceeding RM50 million will enjoy income tax rebate of up to RM20,000 for each year of assessment, for the first 3 years of assessment. The establishment and operational period for new MSMEs including MSMEs that perform business activities through online platform be extended to 31 December 2022 .
  • Tax incentives for activities under Digital Ecosystem Acceleration Scheme (DESAC) is expanded as follows:
    1. Digital Technology Provider
      1. New company
        Income tax rate of 0% to 10% for up to 10 years.
      2. Existing company that diversifies in new service activities or new service segments
        Income tax rate of 10% for up to 10 years.
    2. Digital Infrastructure Provider
      Investment Tax Allowance (ITA) of 100% on capital expenditure for qualifying activities for up to 10 years which can be set-off against up to 100% of statutory income.
      (For application received by Malaysian Investment Development Authority (MIDA) from 30 October 2021 to 31 December 2025.)
  • Double tax deduction on operating expense of Anchor companies that developed local vendors under the Vendor Development Programme (VDP) and signed the Memorandum of Understanding (MoU) with the Ministry of International Trade and Industry (MITI) or the Ministry of Entrepreneur Development and Cooperatives (MEDAC) are reviewed as follows:
    1. deductions for qualifying operating expenses be increased up to RM500,000 per year of assessment;
    2. the tax incentive be extended for 5 years for anchor companies that have signed MoU with MEDAC; and
    3. deductions are given for 3 consecutive years of assessment. (For MoU signed between anchor companies and MEDAC from 1 January 2021 to 31 December 2025.)
  • The scope on the purchase of qualifying green assets and green services qualifying for Green Technology Tax Incentives be expanded to include Rainwater Harvesting System (RHS) projects, verified by the Malaysian Green Technology Corporation (MGTC). To be eligible for Green Investment Tax Allowance (GITA) or Green Investment Tax Exemption (GITE), applications must be received by MIDA from 1 January 2022 to 31 December 2023.
  • Tax incentive for individual income tax at a flat rate of 15% given to non-resident individuals holding key positions in companies investing in new strategic investments in Malaysia is extended for 1 year (for applications received by MIDA until 31 December 2022).

Key Tax Proposals

Indirect Tax

  • 100% sales tax exemption on CKD passenger vehicles and 50% on CBU including SUV and MPV extended for six months until 30 June 2022.
  • 100% stamp duty exemption on restructuring or rescheduling of loan/financing agreement extended to 31 December 2022.
  • Exemption on entertainment duty for entertainment activities in all Federal Territories until 31 December 2022. State authorities are similarly advised to provide duty exemption on entertainment activities to support the recovery of this sector.
  • Full exemption on import duty, excise duty and sales tax exemptions on electric vehicles (EVs). Road tax exemptions of up to 100% will also be given to the vehicle owners.
  • The rate of stamp duty on contract notes is increased from 0.1% to 0.15% and the stamp duty limit of RM200 for each related contract note is abolished. At the same time, brokerage services related to the trading of shares listed on Bursa Malaysia be exempted from service tax.
  • Sales tax be imposed on goods not exceeding RM500 from abroad sold online by seller and sent to consumers in Malaysia via air courier service.
  • Service tax is levied on delivery services provided by service providers including e-Commerce platforms except food and beverage delivery services and logistics services.
  • The Special Voluntary Recognition Program of the Royal Malaysian Customs Department was introduced in phases with a penalty remission incentive of 100 per cent for the first phase and a penalty remission of 50 per cent for the second phase. Tax remission will also be considered in certain cases.
  • For P2P financing made through P2P financing platform registered and recognised by the Securities Commission (SC), 100% stamp duty exemption on P2P loan/financing agreement between MSMEs and investors for P2P loan/financing agreement executed from 1 January 2022 to 31 December 2026.
  • Extension of stamp duty exemption of one year for Micro, Small and Medium Enterprises (MSMEs) that carry out merger or acquisition scheme on instruments executed on the following documents:
      1. contracts or agreements for the sale or lease of property (land, buildings, machinery and equipment);
      2. instrument of transfer and memorandum of understanding;
      3. loan or financing agreements; and
      4. the first rental agreement.
    for application of merger or acquisition received by the Ministry of Entrepreneur Development and Cooperatives from 1 July 2021 to 30 June 2022 and instruments executed until 31 December 2022.
  • Tourism tax exemption be extended for 1 year, from 1 January 2022 to 31 December 2022.

Key Tax Proposals

Real Property Gains Tax (RPGT)

  • RPGT rate on gains from the disposal of real property and shares in real property company by an individual citizen, permanent resident and other than a company in the 6th year and onwards be reduced from 5% to 0%.

Tax Administration

  • Deferment of income tax instalment payments for MSMEs for six months until 30 June 2022.
  • All businesses are allowed to amend the estimated income tax payable on the 11th month before 31 October 2022.
  • The use of tax identification numbers (or TINs) will be implemented from 2022 to broaden the income tax base.
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Is Your Interest Tax Deductible?

Is Your Interest Tax Deductible?

Key Takeaway

  • Deduction rules on interest expenses incurred on loan or borrowings taken for business.
  1. Borrowing is very important for the businesses. However, the source of borrowing whether is local or overseas; the parties to whom we borrowed from; the purposes of and use for the borrowings will affect the deductibility of the interest.
  2. Therefore, the rules on interest deductions (borrowing which generate interest expenses) can be complex.

Is Your Interest Tax Deductible?

Interest Tax Graph
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Capital Statement: Does Your Declared Income Support Your Accumulated Assets?

Capital Statement: Does Your Declared Income Support Your Accumulated Assets?

Key Takeaway

  • Tool used by the IRB to detect under-declared income
  • Rationale of the capital statement approach
  • The importance of maintaining complete records

What Is A Capital Statement?

  • The personal ‘balance sheet’ of an individual
  • It puts together all the assets and liabilities of an individual, adjusted for non-taxable income/losses and the individual’s private and personal expenses
  • One of the most effective tools used by the Inland Revenue Board (‘IRB’) to ascertain whether an individual has under-declared income in the past

Assets Scrutinised By The IRB

  • Properties
  • Motor vehicles
  • Shares and other investments (listed AND private companies)
  • Bank accounts (local AND foreign bank accounts)
  • Credit card accounts,
  • Directors’ account balances

Period Covered During An Audit/Investigation

  • Normally covers a period of the past six years

Challenges Faced By The Taxpayer

  • Loss of documents
  • Unable to recall the transactions or flow of funds

Capital Equation

capital equation
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Ideas & Insights Newsletter

Automation Capital Allowances

Automation Capital Allowances

Key Takeaway

  • 200% Automation Capital Allowance on first 2 million to 4 million expenditure incurred within YA 2015 to 2023;
  • Effective date of application : 1 Jan 2015 until 31 Dec 2023;
  • High labour-intensive industries or industries adopt the automation process.
The Automation Capital Allowance (Automation CA) was introduced to encourage adoption of automation among manufacturing companies.

It is divided into two (2) categories:-
Categories
Incentives
High labour-intensive industries (rubber products, plastics, wood, furniture and textiles)
Automation CA of 200% on the first RM4 million expenditure incurred within year of assessment from 2015 to 2023.
Other industries
Automation CA of 200% on the first RM2 million expenditure incurred within year of assessment 2015 to 2023.

Eligibility Criteria

  • Manufacturing companies incorporated under Companies Act 1965 / 2016;
  • Resident in Malaysia;
  • Engaged in manufacturing activities at least 36 months;
  • Automation machine or equipment used directly in manufacturing activities.
Effective date of application:
Application received by Malaysian Investment Development Authority (MIDA) from 1 January 2015 until 31 December 2023 is eligible to be considered for this incentive.
Source: Malaysian Investment Development Authority
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Phase One Of Movement Control Under National Recovery Plan (NRP) Updates to the Inland Revenue Board’s Announcement (Updated 26 June 2021)

Phase One Of Movement Control Under National Recovery Plan (NRP) Updates to the Inland Revenue Board’s Announcement

(Updated 26 June 2021)

Key Takeaways

  • Extension of time for the submission of tax returns
  • Extension of time for tax payments
  • Submission of appeal to IRBM
  • Real Property Gain Tax (RPGT)
  • Stamp Duty
Following to the extension of Phase One of Movement Control under National Recovery Plan (NRP), the Inland Revenue Board of Malaysia (IRBM) has issued ‘Frequently Asked Questions (FAQ) On Tax Matters During The Movement Control Order Period’ (Updated on 26 June 2021).

This FAQs include extension of time for submission of forms/ returns/ documents, tax payments etc during the phase one (of NRP) period.

For the full FAQ, please visit: http://phl.hasil.gov.my/pdf/pdfam/faq_pkp3_2.pdf
 
Question
Remarks by IRB
No.
General
(a)
Extension of time to submit documents for audit or investigation within the MCO 3.0 period.
Application for extension of time must be submitted by letter/email to IRBM branch which handle the case.
(b)
Extension of time to provide feedback to IRB letters within the MCO 3.0 period.
Application for extension of time must be submitted by letter/email to IRBM branch which handle the case.
No.
Forms
(a)

Extension of time to submit documents for audit or investigation within the MCO 3.0 period.

Deadline for submission of return forms is stated in the 2021 Return Form Filing Programme:-
http://phl.hasil.gov.my/pdf/pdfam/ProgramMemfailBN_2021_Pin.3_ 2.pdf

  1. Return Form for Companies, Limited Liability Partnerships, Unit Trusts / Property Trusts, Co-operative Societies, Trust Bodies, Real Estate Investment Trusts / Property Trust Funds and Business Trusts:-
    1. For Year of Assessment (YA) 2020 (with accounting period ending 1 October 2020 until 31 December 2020):
      • Extension time of two (2) months will be given from the due date of submission.
    2. For Year of Assessment (YA) 2021 (with accounting period ending 1 January 2021 until 31 January 2021:
      • Extension time of two (2) months will be given from the due date of submission.
  2. Return Form for petroleum with accounting period ending 1 October 2020 until 31 December 2020:
    • Extension time of two (2) months will be given from the due date of submission.
  3. Return Form for petroleum with accounting period ending 1 January 2021 until 31 January 2021:
    • Extension time of two (2) months will be given from the due date of submission.
  4. Return Form for Year of Assessment 2020 for taxpayers CARRYING ON BUSINESS involving Individuals, Resident Individuals (Knowledge /Expert Workers), Non-Resident Individuals, Non-Resident Individuals (Knowledge / Expert Workers), Partnerships, Associations, Deceased Persons Estate and Hindu Joint Families:
    • Extension of time (EOT) granted until 31 August 2021.
(b)
Extension of time for the submission of revised CP500 and CP204 where the due date falls on June 2021.
Extension of time is given until 31 July 2021.

(c)

Submission of Forms CP22 within the MCO 3.0 period.

Form CP22 can be submitted through Customer Feedback Form :-
https://maklumbalaspelanggan.hasil.gov.my/MaklumBalas/en-US/

(d)

Submission of application for tax clearance letter (TCL) within the MCO 3.0 period.
  1. Application can be submitted as follows:-
    1. e-SPC;
    2. Customer Feedback System:
      http://www.hasil.gov.my/bt_goindex.php?bt_kump=2&b t_skum=5&bt_posi=1&bt_unit=3&bt_sequ=1&bt_lgv=2
  2. By post or appointment only.

(e)

Submission of Notice of Appeal (Form Q) to the Special Commissioners of Income Tax (SCIT) where the due date falls within MCO 3.0 period.
Application for extension of time must be done in writing by completing Form N and submitting to IRBM branch. The appeal will be considered based on the merits of case. Taxpayer is required to file Form N and state that the delay is due to the implementation of MCO 3.0.

(f)

Submission of Country-by- Country Reporting (CbCR) where the due date falls within MCO 3.0 period.
Application for extension of time must be submitted in writing to Department of International Taxation and the appeal will be considered based on the merits of the case.

(g)

Submission of Form CP 204 and notification of change of accounting period (CP204B) which due date falls on June 2021.
Extension of time is given until 31 July 2021. CP204B needs to be submitted by post or courier.
(h)
Revision of tax estimate payment (CP204) in the 3rd month of 2021.
No revision is allowed for the 3rd month instalment. Taxpayers must submit the relevant CP204 revision in the 6th / 9th month in the basis period of the business through e-CP204A.
No.

Payments

(a)

Extension of time for tax estimate payments (CP204) due on June 2021.
No extension of time. Tax payer can make payment via online services at ByrHasil.

(b)

Extension of time for other tax instalment payments relating to audit and investigation due on June 2021.
No extension of time. Tax payer can make payment via online services at ByrHasil.

(b)

Extension of time for submission of MTD data and payment of Monthly Tax Deduction / CP38 for remuneration on employment due on 15 June 2021.
No extension of time. Taxpayer can make payment via online services at e- PCB, e-Data PCB dan e-CP39.

(d)

Deferment for compound and penalty payment which due within 1 June 2021 until 28 June 2021.
Extension of time is given up to 30 days from the initial due date for payment.

(e)

Re-scheduling of tax instalment payments.
Tax payer is required to submit the application with the relevant documents such as cash flow documents etc.

(f)

Extension of time for withholding tax payment which due within the MCO 3.0 period.
No extension of time is given. Withholding tax payment can be made via telegraphic transfer by furnishing complete payment details to IRBM via fax at 03-62019637 or e-mail to HelpTTpayment@hasil.gov.my.
No.
Appeal and Penalty Payment

(a)

Application for appeal on the penalty imposed by IRB.
Taxpayer may submit the application for appeal on tax penalty for the following cases:
  1. Unpaid penalties;
  2. Penalties that have been imposed and subject to instalment schedule

(b)

Application for appeal on the tax increase.

Application for appeal on tax increase can be submitted through Customer Feedback Form available at IRBM’s Official Portal:
https://maklumbalaspelanggan.hasil.gov.my/MaklumBalas/en-US/

(c)

Application for appeal on deferment of payment of outstanding penalty imposed to year 2022.

Application for deferment of payment can be submitted through Customer Feedback Form available at IRBM’s Official Portal:
https://maklumbalaspelanggan.hasil.gov.my/MaklumBalas/en-US/

No.
Real Property Gains Tax (RPGT)

(a)

Extension of time for the submission of RPGT return forms where the due date falls in June 2021.
Extension of time is given until 31 July 2021.

(b)

Appeal on RPGT penalty.
Appeal will be considered based on merits of the case.
No.
Stamp Duty

(a)

Appeal on stamp duty penalty.
Appeal will be considered based on merits of the case.

(b)

Extension of time for stamping which cannot be done within the MCO 3.0 period.
Appeal will be considered based on the merits of the case.
Application for extension of time must be made within 30 days from the date of documents.
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Ideas & Insights Newsletter

Introduction to Withholding Tax and Imported Services Tax – Implications of Digital Services (PART 3)

Introduction to Withholding Tax and Imported Services Tax - Implications of Digital Services (PART 3)

Key Takeaway

  • Withholding Tax on Foreign Service Providers
  • Service Tax on Digital Services
Part 3 of this article will focus on digital service tax and service tax issues on imported services for e-Commerce transactions, under the Service Tax Act 2018.

What is Imported Service?

“Imported taxable service” means any taxable service acquired by any person in Malaysia from any person who is outside Malaysia (Section 2 of Service Tax Act 2018)

What is Digital Service?

“Digital service” means any service that is delivered or subscribed over the internet or other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated;”.
Digital Service
With effect from 1 January 2019, regardless if you are either a Service Tax-registered person or Non-Service Tax-registered person, you are required to file a return and pay the service tax in respect of all taxable services that you procure from overseas suppliers, if such taxable services fall under Group G and I of Service Tax Regulations 2018.

Types of Digital Service

  • Software, Application & Video Games
  • Music, e-book and film
  • Advertisement and online platform
  • Search engines and social networks
  • Database and hosting
  • Internet Based Telecommunication
  • Online Training
  • Others (such as subscriptions to online newpapers and journals etc.)
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Introduction to Withholding Tax and Imported Services Tax – Implications of Digital Services (PART 2)

Introduction to Withholding Tax and Imported Services Tax - Implications of Digital Services (PART 2)

Key Takeaway

  • Withholding Tax on Foreign Service Providers
  • Service Tax on Digital Services
Part 2 of this article will focus on withholding tax issues around ‘royalties’ (Section 109, Income Tax Act 1967) and ‘services’ (Section 109B, Income Tax Act 1967) for e-Commerce transactions.

What is e-Commerce?

Any commercial transactions conducted electronically including the provision of information, promotion, marketing, supply, order or delivery of goods and services (even though payment and delivery relating to such transactions may be conducted offline).

Withholding tax implications

To determine the nature for payment of e-commerce services (i.e Royalties or Services?)
e-commerce

Example of payments under e-commerce transactions

Online advertising on Facebook, online payment such as Paypal, payment for cloud computing service, payment for subscription to content aggregators etc.

Important

Payment made may fall under Sec 109 instead of Sec 109B and penalty will be imposed due to non- compliance with withholding tax rules.
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Introduction to Withholding Tax and Imported Services Tax – Implications of Digital Services (PART 1)

Introduction to Withholding Tax and Imported Services Tax - Implications of Digital Services (PART 1)

Key Takeaway

  • Withholding Tax on Foreign Service Providers
  • Service Tax on Digital Services
In this present age, business cannot avoid but to rely on digital services to reach out to their customers and suppliers in order to operate or enhance their business functions. The reliance on digital services to conducting a business is accelerated particularly so with the Movement Control Order (MCO) being implemented in Malaysia which limits the ability of businesses to continue doing business, the ‘traditional’ way. Some of the most common digital services relied on by businesses would include software applications, digital advertising, payment gateways and cloud storage, which are generally dominated by foreign service providers such as Google, Microsoft and Facebook.

Such digital services would obviously involve payments for the use of such digital services to the service providers and therefore, you have to be aware of the tax implications behind the use of digital service, namely:

  1. Withholding tax under the Income Tax Act 1967; and
  2. Digital service tax or imported services tax under the Service Tax Act 2018.

This series of short articles intend to provide some general guidance on the tax implications of payments for such services to service providers who are not residing in Malaysia.
You also need to take note that in some cases, both service tax and withholding tax can apply on the same service, as per the illustration as below:-
Payment Made to Non-Malaysian Resident Business
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Employers Responsibility under the Income Tax Act

Employers Responsibility under the Income Tax Act

Key Takeaway

  • To inform IRBM any new employee within 30 days.
  • To inform IRBM the cessation/retirement/death of an employee.
  • To inform IRBM within 30 days before the date of employee intending to leave Malaysia.

Notification of Commencement / Cessation of Employment of an Employee

Pursuant to Section 83 of the Income Tax Act 1967 (ITA 1967), we wish to remind all employers of their responsibility to inform the Inland Revenue Board of Malaysia (IRBM), via prescribed forms (as below), on the following:

Table 1:

Employer’s responsibilities
Subsection

Penalty/Fine

Form
To inform IRBM if there is a new employee.
Subsection 83(2) ITA 1967
Failure to notify will result in the employer being charged under paragraph 120(1) (c) and / or subsection 107(4)
To inform IRBM if there are any cessation/retirement/death of an employee*
Subsection 83(3) ITA 1967
Failure to notify will result in the employer being charged under paragraph 120(1) (c) and / or subsection 107(4)
To inform to IRBM not more than 30 days before the date of an employee intending to leave Malaysia
Subsection 83(4) ITA 1967
Failure to notify will result in the employer being charged under paragraph 120(1) (c) and / or subsection 107(4)
Please take note that while Section 83 of the ITA 1967 provides that the law applies in the situation where the employer commences, or about to cease to employ an individual who is or is likely to be chargeable to tax in respect of income in respect of gains or profits from the employment, the IRBM has recently adopted the practise of applying such requirements to ALL employees who have commenced employment, or cease to be employed by the employer.

All applications should be made by the employer to IRBM by the following methods:
  1. e-SPC at IRBM official website; or
  2. Form which can be downloaded from IRBM official website (please refer to TABLE 1 above).

Failure to comply with the above may result in, upon conviction of an offence under Section 120 of the ITA 1967, the employers being liable to a fine of not less than RM200 and not more than RM20,000 or to imprisonment for a term not exceeding six months or to both.
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Special Deduction For Renovation And Refurbishment Expenses

Special Deduction For Renovation And Refurbishment Expenses

Key Takeaway

  • Special tax deduction for costs of renovation and refurbishment of business premise.
The Income Tax (Costs of Renovation and Refurbishment of Business Premise) Rules 2020 P.U (A) 381-2020 has been gazetted on 15 December 2020.

With effective from Year of Assessment 2020, a special tax deduction is given for the costs of renovation and refurbishment of business premise incurred by a person from 1 March 2020 until 31 December 2021, which is certified by the external auditor.

The total amount of deduction allowed is subject to a maximum amount of RM300,000.

“Costs of renovation and refurbishment of business premise” means the costs of renovation and refurbishment of business premise incurred for the purposes specified in the First Schedule of the Rules as below:
  1. General electrical installation
  2. Lighting
  3. Gas System
  4. Water System
  5. Kitchen fittings
  6. Sanitary fittings
  7. Door, gate, window, grill and roller shutter
  8. Fixed partitions
  9. Flooring (including carpets)
  10. Wall covering (including paint work)
  11. False ceiling and cornices
  12. Ornamental features or decorations excluding fine art
  13. Canopy or awning
  14. Fitting room or changing room
  15. Recreational room for employee
  16. Air-conditional system
  17. Children play area
  18. Reception area
  19. Surau
However, the above deduction shall not include the following cost:-
  1. Designer fee
  2. Professional fee
  3. Purchase of antique (purchase of an object or work of art which, represents a previous era in human society, is collectable item due to its age, rarity, craftsmanship or other unique features and appreciates in value over time).
Take note that these Rules shall not apply to a person who has made a claim in relation to the costs of renovation and refurbishment of business premise under:-
  1. any allowable expenses under subsection 33(1) of the Income Tax Act 1967 (ITA 1967);
  2. any capital allowance under Schedule 2 of the ITA 1967; or
  3. any capital allowance under Schedule 3 of the Act.

Our comments

  • Businesses can take this opportunity to renovate or refurbish their business premises during the incentive period.
  • Businesses that have already renovated or refurbished their business premises may need to review their tax position for Year of Assessment (YA) 2020 and also to review the tax estimation for YA 2021.