TAX & INVESTMENT REVIEW

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1 CPA TAX & INVESTMENT REVIEW 2003

2 CPA TAX & INVESTMENT REVIEW 2003 The Malaysian Institute of Certified Public Accountants No. 15 Jalan Medan Tuanku, Kuala Lumpur, Malaysia. Tel: (603) Fax: (603)

3 CPA Tax & Investment Review 2003 Copyright 2003 by The Malaysian Institute of Certified Public Accountants All rights reserved. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrival system, or transmitted in any form or by any means, electronic, mechanical, photocopying or otherwise, without the prior written permission of the publisher. The Malaysian Institute of Certified Public Accountants (Institut Akauntan Awam Bertauliah Malaysia) (3246-U) Printed in Malaysia

Foreword By President The CPA Tax and Investment Review is intended to serve as a quick source of reference on the latest changes in tax laws and regulations as well as Government s policies and

4 Foreword By President The CPA Tax and Investment Review is intended to serve as a quick source of reference on the latest changes in tax laws and regulations as well as Government s policies and guidelines on investment and incentives. The publication contains updates on tax laws and regulations, an index of current amendments to the Income Tax Act and related legislation, and a summary of recent tax cases. It also contains quick information on doing business in Malaysia, including Malaysia s investment policies and incentives; the procedures for incorporation of companies; guidelines on foreign investment; list of promoted activities and products; immigration procedures and the contact numbers of the relevant Ministries, Government agencies and regulatory authorities. The Association hopes that the publication will not only assist members in their work as business professionals but also their clients and other business associates as a handy source of reference on the latest changes and developments in tax laws, investment policies, incentives and other relevant information on doing business in Malaysia. I would like to take this opportunity to thank the Association s Taxation Working Group for their technical input in the production of this publication. I would also like to thank the various Ministries and Government agencies, especially the Malaysian Industrial Development Authority (MIDA), for allowing us to extract relevant information from their guidelines and publications. Beh Tok Koay President MACPA v

5 Acknowledgements Special appreciation is expressed to the following Ministries, Government agencies and accounting firms for their significant contributions and technical input towards the production of the CPA Tax and Investment Review. Ministries and Government Agencies: 1. Kementerian Perdagangan Antarabangsa & Industri Ministry of International Trade and Industry (MITI) 2. Kementerian Perdagangan Dalam Negeri dan Hal Ehwal Pengguna Ministry of Domestic Trade and Consumer Affairs 3. Lembaga Hasil Dalam Negeri (LHDN) Inland Revenue Board (IRB) 4. Percetakan Nasional Malaysia Berhad Accounting Firms 1. Ernst & Young 2. Deloitte KassimChan Tax Services Sdn Bhd 3. Horwath KL Tax Sdn Bhd 4. KPMG 5. PriceWaterhouseCoopers vi

6 Contents Foreword By President Acknowledgements v vii Part I Tax Review 1. IRB (Inland Revenue Board) Guidelines and Rulings 3 A. Public Ruling No. 2/2002 Allowable Pre-operational & Pre-commencement of Business Expenses for Companies 4 B. Public Ruling No. 1/2002 Deduction for Bad & Doubtful Debts and Treatment of Recoveries 13 C. Public Ruling No. 1/2001 Ownership of Plant and Machinery for the Purpose of Claiming Capital Allowances 26 D. Public Ruling No. 2/2001 Computation of Initial & Annual Allowances in Respect of Plant & Machinery 32 E. Public Ruling No 3/2001 Appeal Against an Assessment 41 F. Public Ruling No 4/2001 Basis Period for a Non-Business Source (Individuals & Persons other than Companies) 49 G. Public Ruling No. 5/2001 Basis Period for a Business Source (Co-operatives) 51 H. Public Ruling No. 6/2001 Basis Period for a Business Source (Individuals & Persons other than Companies / Co-operatives) 61 I. Public Ruling No. 7/2001 Basis Period for Business & Non-Business Sources (Companies) 72 vii

7 2. Dialogues with IRB (Inland Revenue Board) 83 A. Extension of Time for Submission of Income Tax Returns by Companies (Borang C) under Section 77(1a) /Revision of Estimate of Tax Payable under Section 107c 84 B. Issuance of Notice of Instalment Payments (Form CP 205) For Year of Assessment C. Increase in Tax Under Section 107C / Format of Notice of Assessment 88 D. Dialogue with Technical Division of IRB 91 E. Minutes of Dialogue with Operations Division of IRB Indirect Taxes 133 A. Service Tax Act B. Sales Tax Act C. Customs Act D. Excise Act E. Service Tax Regulations F. Sales Tax Regulations G. Customs Regulations H. Excise Regulations Summary of Tax Cases 219 A. Malaysian Special Commissioners' Decisions 220 B. Malaysian Court Decisions Gazzette Notifications 253 Amendments to Income Tax Act 1967, Real Property Gains Tax Act 1976, Promotion of Investments Act 1986 and Stamp Act viii

8 Part II Investment Review 6. MIDA (Malaysian Industrial Development Authority) Investment Policy and Incentives 285 A. Approval of Industrial Projects & Incorporating a Company 286 B. Guidelines on Equity Policy 293 C. Incentives for Investment 297 D. Taxation 341 E. Banking, Financial and Exchange Control 384 F. Immigration Procedures 361 G. List of Promoted Activities and Products 367 H. Useful Addresses MIDA (Malaysian Industrial Development Authority) Guidelines 407 A. Guidelines for Approval on the Establishment of Representative Office/Regional Office for the Manufacturing and Trading Sectors 408 B. Guidelines for Applying for Tax Incentives for Regional Distribution Centre (RDC) 411 C. Guidelines for Applying for Status of Approved International Procurement Centre (IPC) 414 D. Guidelines for Applying for Incentives for Operational Headquarters (OHQ) 417 E. Guidelines on Tax Incentives for Integrated Logistics Services Ministry of Domestic Trade and Consumer Affairs Guidelines 407 A. Guidelines on Operation of Hypermarkets 428 ix

9 Appendix Appendix 429 Appendix Appendix Appendix Appendix Appendix Appendix Appendix Appendix Finance (No. 2) Act x

Tax controversy and Tax amnesty 2016

Tax Thought Leadership Series Tax controversy and Tax amnesty 2016 Tuesday, 27 September 2016 Hilton Kuching GST audit and investigation Speaker: Bernard Yap, Partner, Indirect Tax Ernst & Young Tax Consultants