Tax & GST Practice e-law Alert

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Tamsyn Stafford
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1 HIGHLIGHTS OF FINANCE BILL (NO 2) 2013 Tax & GST Practice Finance Bill Issue November 2013 Income Tax Gains or profits arising from stock in trade parted with by way of compulsion including compulsory acquisition are treated as gains or profits from a business for the purposes of Section 4(a) of the Income Tax Act 1967 ( ITA ). Sections 4C and 24(1)(aa) will be inserted into the ITA to give effect to this. Amount withdrawn from a deferred annuity or a private retirement scheme is taxed at 8% if the withdrawal is made before the individual reaches the age of 55, unless the withdrawal is made by reason of permanent total disability, serious disease, mental disability, death or permanently leaving Malaysia. Sections 6(l) and 109G(1) of the ITA will be amended to give effect to this. Entertainment includes promotion of trade or business. Section 18 of the ITA will be amended to give effect to this. A person is deemed to be able to obtain interest on demand if the interest relates to a loan: (i) between persons one of whom has control over the other; or (ii) between persons who are controlled by some other person. Section 29(3) will be inserted into the ITA to give effect to this. For the purposes of Sections 33(1)(a) and 33(2) of the ITA, interest shall be deductible when it is due to be paid. Section 33(4) will be inserted into the ITA to give effect to this. If the Director General of Inland Revenue ( DGIR ) issues a notice for information under Section 81 of the ITA in relation to a deduction claimed, no deduction will be allowed if a taxpayer fails to provide the required information within the time specified in the notice. Section 39(1A) will be inserted into the ITA to give effect to this. 1

2 Management expenses incurred by a takaful business operator are deductible in determining the adjusted income of the general fund of the operator. Section 60AA(5)(b)(viii) will be inserted into the ITA to give effect to this. Commission payable and discounts allowed by a takaful business operator are deductible in determining the adjusted income of the shareholders fund of the operator. Section 60AA(9)(b)(iv) will be inserted into the ITA to give effect to this. A director for the purposes of director s liability in respect of taxes due and payable by a company means a person who, on his own or with one or more associates, is the owner of or is able to directly or indirectly control not less than 20% of the ordinary share capital of the company. Section 75A(2)(b) of the ITA will be amended to give effect to this. All companies are required to furnish their tax returns via e-filing. The returns must be based on accounts audited by a professional accountant. Sections 77A(1A) and (4) will be inserted into the ITA to give effect to this. A taxpayer whose income is subjected to monthly tax deductions may elect not to furnish his tax return. Section 77C will be inserted into the ITA to give effect to this. Appeal to the Special Commissioners of Income Tax is not available to an assessment made under Section 90(1) or Section 91(A) unless a taxpayer is aggrieved by such assessment by reason of a Public Ruling. Section 99(4) will be inserted into the ITA to give effect to this. No notice of appeal will be forwarded to the Special Commissioners of Income Tax if a taxpayer had made an application for mutual agreement procedure if the ground for the appeal is similar to the mutual agreement procedure. The said notice will only be forwarded upon the determination of the mutual agreement procedure if the taxpayer had made a request within 30 days from the determination. Section 102(1A) will be inserted into the ITA to give effect to this. Mutual administrative assistance arrangement is introduced. 2

3 Section 132B will be inserted into the ITA to give effect to this. Consequent to invoking Section 140(1), the DGIR may require any person by way of notice to pay the amount of tax that would have been deducted by that person under the ITA. Section 140(2A) will be inserted into the ITA to give effect to this. When a company makes any loan or advances from its internal funds to its director, the company is deemed to have a gross income consisting of interest from the said loan or advances. The formula for the deemed interest computation is also provided. Section 140B will be inserted into the ITA to give effect to this. Paragraphs 39 and 40 of Schedule 3 of the ITA shall apply to a limited liability partnership. Paragraph 38B will be inserted into Schedule 3 of the ITA to give effect to this. Stamp Duty Books, records and documents in respect of the instruments listed in Section 9(1)(a) to (c) of the Stamp Act 1949 ( the SA ) must be kept and retained for seven years. Section 9(7) of the SA will be amended to give effect to this. The Collector of Stamp Duties may reduce or remit any amount imposed vide Section 9(3) of the SA. Section 47A(2) of the SA will be amended to give effect to this. Real Property Gains Tax A director for the purposes of director s liability in respect of taxes due and payable by a company means a person who, on his own or with one or more associates, is the owner of or is able to directly or indirectly control not less than 20% of the ordinary share capital of the company. Paragraph 5(4)(b) of Schedule 1 of the Real Property Gains Tax Act 1976 ( RPGTA ) will be amended to give effect to this. 3

4 Effective 2014, the real property gains tax rate for gains arising from the disposal of real property and shares in real property company is: Disposal by: Company (%) Individual (citizens & PRs) (%) The first 3 years th year th year th year and onwards Schedule 5 of the RPGTA will be amended to give effect to this. Individual (non-citizens) (%) Petroleum Income Tax Entertainment includes promotion of trade or business. Section 2 of the Petroleum (Income Tax) Act 1967 ( PITA ) will be amended to give effect to this. All companies are required to furnish tax returns based on accounts audited by a professional accountant. Section 30(3) will be inserted into the PITA to give effect to this. No notice of appeal will be forwarded to the Special Commissioners of Income Tax if a taxpayer had made an application for mutual agreement procedure if the ground for the appeal is similar to the mutual agreement procedure. The said notice will only be forwarded upon the determination of the mutual agreement procedure if the taxpayer had made a request within 30 days from the determination. Section 46(1A) will be inserted into the PITA to give effect to this. Advance pricing arrangement is introduced. Section 71A will be inserted into the PITA to give effect to this. The Minister of Finance has the power to make rules on the scope and procedure of advance pricing arrangement. Section 83(1)(bb) will be inserted into the PITA to give effect to this. 4

5 Labuan business activity tax The Minister of Finance may make regulations to carry out or to give effect to the Labuan Business Activity Tax Act 1990 ( LBATA ). Section 21 of the LBATA will be amended to give effect to this. The DGIR may prescribe forms for the operation of the LBATA and may authorise suitable substitute for such prescribed forms. Section 21A will be inserted into the LBATA to give effect to this. The Tax & GST Practice is brought to you by the firm s Tax, GST & Private Clients Practice Group. The practice group consists of experienced lawyers who represent their clients in virtually all direct and indirect tax areas. Our tax lawyers frequently represent taxpayers before the Special Commissioners of Income Tax, High Court, Court of Appeal and Federal Court. They also represent taxpayers in discussions and negotiations with the Inland Revenue Board, Royal Malaysian Customs and Ministry of Finance. Particular areas of expertise include tax litigation, tax planning & advisory, transfer pricing, thin capitalisation, tax audit & investigation, cross-border transactions, withholding tax, real property gains tax, stamp duty, anti-dumping duty, GST, sales & service tax, customs duty and excise duty. If you have any queries, please do not hesitate to contact: Datuk D P Naban Partner DID : Fax : / tax@lh-ag.com S Saravana Kumar Partner DID : Fax : / tax@lh-ag.com Editorial team: Siti Fatimah Mohd Shahrom Ashley Lee Si Han Jason Tan Jia Xin Kho Chin Chau Kellie Alison Yap Chng Keng Lung Michelle Wong 5

6 Published by the Tax, GST & Private Clients Practice Group.. All rights reserved. The views and opinions attributable to the authors or editor of this publication are not to be imputed to the firm,. The contents of this publication are intended for purposes of general information and academic discussion only. It should not be construed as legal advice or legal opinion on any fact or circumstance. 6

GST is to be charged on goods and services at all levels starting from production, manufacture, wholesale and retail.

GST is to be charged on goods and services at all levels starting from production, manufacture, wholesale and retail. BUDGET 2014: TAX HIGHLIGHTS Tax & GST Practice Budget 2014 Issue October 2013 Goods and Services Tax ( GST ) GST shall be effective from 1 April 2015. Standard rate of GST shall be 6%. GST is to be charged