Malaysia commits to international tax standards

Malaysia commits to international tax standards

Malaysia, in principal, has committed to implement and adhere to Base Erosion and Profit Shifting (BEPS) Action Plan. It has officially joined the OECD Inclusive Framework on BEPS as Associate Members. The framework emphasises on four minimum standards:

• Action 5 – Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance

• Action 6 – Preventing the Granting of Treaty Benefits in Inappropriate Circumstances

• Action 13 – Guidance on Transfer Pricing Documentation and Country-by-Country Reporting

• Action 14 – Making Dispute Resolution Mechanisms More Effective

In addition, the Forum on Harmful Tax Practices (FHTP) has identified certain Malaysian incentives for evaluation on the basis that it provide preferential regimes for mobile geographical services activities related to intellectual property and non-intellectual property. The incentives are as follows:

Intellectual property incentives

Non-intellectual property incentives

Principal Hub
Pioneer Status (High Technology)
Biotechnology Industry (BioNexus)
MSC Malaysia

Biotechnology Industry (BioNexus)
MSC Malaysia
Principal Hub
Pioneer Status (Contract R&D)
Treasury Management Centre
Economic Development Regions [Iskandar Malaysia (IM), East Coast Economic Region (ECER), Sabah Development Corridor (SDC)]
Approved Services Project
Green Technology Services
Labuan Leasing Services
Foreign Fund Management
Inward re-insurance and offshore insurance
Malaysian International Trading Company

The Ministry of Finance (MoF) has released timelines where the above mentioned tax incentives shall be amended to meet the FHTP criteria. The Ministry of Finance is working with the Inland Revenue Board and related ministries/agencies to review the incentives in order to meet the criteria set under the FHTP.

Kindly visit the MoF website for further information.

Source: MoF website, 12 June 2018

RMCD releases notice on display prices

RMCD releases notice on display prices

 

The Royal Malaysian Customs Department (RMCD) has released a notice to clarify the display of price tags with effect from 1 June 2018.

The notice provides, among others, the following:

• GST-registered vendors are required to display a notice in an obvious area in their premises that the price tags that used to include the 6% GST has changed to 0% GST.

• GST-registered vendors are given until 1 July 2018 to update their price tags.

• Those who have obtained approval from the Director General to charge GST exclusively need not change their price tags. However, they are not allowed to collect GST since it has been zero-rated.

Kindly visit the RMCD website for further information.

 

Source: RMCD website, 30 May 2018

 

IRB goes after taxpayers who have not filed tax returns for more than three years, 20 July 2017

IRB goes after taxpayers who have not filed tax returns for more than three years, 20 July 2017

The Inland Revenue Board (IRB) has launched an operation to track down 3,445 taxpayers who did not file their tax returns for more than three YAs. According to the IRB Deputy Chief Executive Officer (Policy), they will be focusing on external and table audits on 1,687 companies and 1,758 individuals from 17 July to 21 July 2017.

Source: Malay Mail Online, 17 July 2017

Company director charged for wilful evasion

Company director charged for wilful evasion, 03 July 2017

The director of Ayam Wira Food Processing Sdn Bhd pleaded guilty to charges of wilful evasion under s 114(1)(b) of the Income Tax Act 1967 for making a false statement or entry in the corporate tax returns for YAs 2012 and 2013.

Based on the Inland Revenue Board (IRB)’s investigation, the company was found to have falsified purchase invoices from seven suppliers amounting to RM2,648,098 and RM374,448 for YAs 2012 and 2013 respectively. This led to an under-declaration of taxes amounting to RM662,024.50 and RM93,612.00 for YAs 2012 and 2013 respectively.

The court imposed a total fine of RM13,500 and penalty thrice the amount totalling RM2,266,909.50.

Source: IRB website, 14 June 2017

Director charged for sales tax evasion, 09 June 2017

Director charged for sales tax evasion, 09 June 2017

A logistics company director was charged for submitting false sales tax declaration on contact lenses worth RM2.88m two years ago. The director was charged for:

• submitting declarations amounting to RM29,494.03 when the actual tax should have been RM311,052.75, and

• falsely declaring 10,817 boxes of imported contact lenses when 129,818 were brought into the country.

He pleaded not guilty.

Source: Malay Mail Online, 7 June 2017

Income tax Payment Codes

Income tax Payment Code

While making tax payment through various tax payment options, taxpayers have to specify a few information such as Name of Taxpayer/Employer, Income tax number/Employer number, Identity number and Payment Code.

Payment code is referring to the type of tax that categorized by Inland Revenue Board (IRB) or Lembaga Hasil Dalam Negeri (LHDN) Malaysia. Details on Tax Payment Code are tabulated in the table below.

Item Payment Code Description
1 084 Tax Instalment Payment – Individual
2 086 Tax Instalment Payment – Company
3 088 Investigation (Composite) Instalment Payment
4 090 Real Property Gain Tax Payment (RPGT)
5 095 Income Tax Payment (excluding instalment scheme)
6 150 Penalty Payment For Section 103A / 103 [tax not paid]
7 151 Payment Section 108
8 152 Penalty Payment For Section 108
9 153 Penalty Payment For Composite
10 154 Penalty Payment For Section 107C(9) [CP204 estimation not paid / 107B(3)
11 155 Penalty Payment For Section 107C(10) [CP204 under estimation by > 30%] / 107B(4)
12 156 Payment For Court Fee
13 157 Payment For Interest On Judgement Amounts
14 158 Instalment Payment Approved by Audit
15 159 Instalment Payment Approved by Collection Unit
16 160 Instalment Payment Approved by Civil SuitUnit
17 173 Payment For Legal Fee
18 178 Payment Section 108 (Sec 25)
19 181 Penalty Payment For Section 25
20 196 Tax Settlement
21 197 Tax Settlement – Employer
22 250 Penalty Payment For RPGT – Disposer
23 286 Penalty Payment For RPGT – Acquirer
24 092 Monthly Tax Deduction (MTD)

 

Foreign firms’ online income to be taxed

Foreign firms’ online income to be taxed

The Treasury Secretary-General has reiterated that foreign companies operating vide online platforms are not exempt from tax in Malaysia if the income is generated here. He informed that the Treasury’s online business and commerce decision task force is working on a mechanism to collect taxes from companies using online platforms.

Directors charged for not declaring income tax

Directors charged for not declaring income tax, 14 February 2017

The Inland Revenue Board (IRB) has charged two directors for failing to declare their income tax returns.

A contractor is facing eight charges under s 77(1)(a) and 112(1) of the Income Tax Act 1967 for failing to declare his income and submitting the Form B for YAs 2006 to 2013.

In another case, a director is facing three charges under s 77(1)(a) and 112(1) of the Income Tax Act 1967 for failing to declare the company’s income and the Form C for YAs 2011, 2013 and 2014.

If convicted, the two individuals may face a penalty between RM200 to RM2,000 or imprisonment not exceeding six months or both for each charge. The IRB has requested for an arrest warrant and the court has set a mention date of 13 March 2017.

Source: IRB website, 13 February 2017

Recent update dd 10/01/2017

Recent update dd 10/01/2017

 

The highlights of the recent update include the following:

Vietnam

  • The Finance Ministry has confirmed that the Government will not levy additional tax on those with more than one property in 2017.

Taiwan

  • On 28 December 2016, Taiwan’s President Tsai Ing-wen signed into law the amendment to the Value-Added and Non-Value-Added Business Tax Act to impose tax on foreign online sellers’ supplies to Taiwanese consumers.
  • The Government has decided to halve the existing transaction tax of 0.3% on day trading over through Taiwan Stock Exchange.

South Korea

  • Within its proposed policy framework for 2017, the Ministry of Strategy and Finance has announced various tax changes to counteract the continued economic uncertainties, including measures to create jobs and support new growth industries.

Hong Kong

  • The Financial Services Development Council released a report on 29 December 2016 on ways Hong Kong could improve the tax conditions for financial institutions.

India

  • Treaty Update: India–Singapore.

 

Malaysia Revenue Legislation, 10 January 2017

We are pleased to inform you that the following has been updated/inserted in CCH’s Malaysia Revenue Legislation and is available on IntelliConnect®:

Provident Fund

  • Employees Provident Fund (Amendment) Act 2016 [Act A1504]

 

The Employees Provident Fund Act 1991 has been amended by the Employees Provident Fund (Amendment) Act 2016 as follows:

– Amendment to s 50, 51A, 70C and 70E, and

– Insertion of new s 55B.

 

The amendments come into operation on 1 January 2017.

  • Employees Provident Fund (Amendment) (No 2) Rules 2016 [PU(A) 371/2016]

 

The Rules insert a new r 41A to the Employees Provident Fund Rules 1991. The Rules come into operation on 1 January 2017.

  • Employees Provident Fund (Addition and Modification to the Purposes for Withdrawal under Subsection 54(6)) Order 2016 [PU(A) 372/2016]

 

The Order amends s 54(6) of the Employees Provident Fund Act 1991. The Order comes into operation on 1 January 2017.

IRB issues public rulings on tax borne by employers and income from employment on board a ship, 16 December 2016

IRB issues public rulings on tax borne by employers and income from employment on board a ship, 16 December 2016

The Inland Revenue Board (IRB) has published the following public rulings (PRs):
• Tax Borne by Employers (Second Edition) (PR No 11/2016) dated 8 December 2016.
• Taxation of Income from Employment on Board a Ship (PR No 12/2016) dated 9 December 2016.

Tax Borne by Employers (Second Edition) (PR No 11/2016)
This PR rearranged, rewrote and updated the contents of PR No 2/2006. This PR replaces PR No 2/2016 dated 17 January 2006.

Taxation of Income from Employment on Board a Ship (PR No 12/2016)
The PR explains the tax treatment of income of an individual derived from an employment exercised on board a ship. The PR covers, among others, derivation of income, tax treatment, double taxation agreement provision, documents required for verification and responsibility of employer and seafarer.