Public Ruling No. 2/2010 - Allowable pre-operational and pre-commencement business expenses

The Inland Revenue Board (IRB) has issued Public Ruling No. 2/2010 (effective for year of assessment 2010 and subsequent years of assessment) on 3 June 2010. This Public Ruling supersedes the earlier Public Ruling No. 2/2002 issued on 8 July 2002.

Some of the changes observed are as follows:

-       The maximum authorised share capital requirement for companies eligible to claim a deduction for incorporation expenses has been increased from RM250,000 (for companies incorporated in Malaysia on or after 1.1.1973 but prior to 13.09.2003) to RM2,500,000 (for companies incorporated in Malaysia on or after 13.09.2003).

A sole proprietorship or partnership which converted to a private limited company, with an authorised share capital of not more than RM2,500,000, is also eligible for the above deduction.

-       Establishment expenditure of the following types of entities may also qualify for a deduction against the gross income in ascertaining the adjusted income of the business:

·         a Real Estate Investment Trust (REIT)

·         a Property Trust Fund (PTF), and

·         an Islamic stock broking company

-       With effect from the year of assessment 2009, a person may claim a deduction for expenses incurred in respect of recruitment of employees prior to the commencement of his business. The expenses must be incurred within 1 year prior to the commencement of its business.

The Public Ruling may be downloaded from the website of IRB at:

http://www.hasil.gov.my/lhdnv3e/documents/maklumat_terkini/Allowable%20pre-op%20%20business%20expenses%203%206%202010.pdf

Members can also view the information from the website of the Institute at http://www.ctim.org.my/technical_techdev_direct.asp