Guidelines on the deduction of broadband subscription under Section 46(1)(m) of the ITA

For YAs 2010 to 2012, subscriptions, subject to a maximum of RM500 per annum, paid for broadband internet connection registered in the name of an individual is allowed a relief in arriving at the chargeable income, A connection through cable or Digital Subscriber Line (DSL) at a speed of 256kbps and above will be considered as a broadband connection and eligible for the relief. A dial-up service through a telephone line at a speed of 56kbps is not considered as a broadband connection.

There are two types of broadband, i.e., the high speed broadband (HSBB) and the Broadband to General Population (BBGP). The wired broadbands are ADSL, ADSL2+, SDSL, VDSL, VDSL2, FTTH and ETTH. Wireless broadband technology includes 3G/HDSPA, Iburst, EV-Do, WiMAX and Satellite.

Members may view the guidelines at the website of the Institute at Guidelines on the deduction of broadband subscription under Section 46(1)(m) of ITA

Revised Guidelines on Real Property Gains Tax

The IRB had issued the revised Guidelines on Real Property Gains Tax on 5 May 2011. The following are the revisions made:

Para 4 The error in Example 14 is rectified.

Para 5.3 A new Paragraph 5.3 is inserted to indicate the webpage where the guide notes for completion of the RPGT Forms can be found and downloaded.

Para 5.4 iii A new Example 16 is inserted to illustrate that disposals subject to income tax are not required file the RPGT Forms.

Para 6.2 vi Completion of Form CKHT for the circumstances where an acquirer is not required to withhold the money consideration or 2% of sale consideration, whichever is lower:

item (c) is amended to include disposals at a loss; and

item (d) is inserted for disposals to real estate investment trusts or property trust funds approved by the Securities Commission under P.U.(A) 451/2003 [Real Property Gains Tax (Exemption) (No. 4) Order 2003].

Para 9.1 ii New Paragraph 9.1(i)(c) is inserted to indicate the webpage where the guide notes for completion of Form 502 can be found and downloaded.

Para 9.3 Items ii (b) and iii are updated on the banking facilities and payment counters.

Para 10.3 A new Paragraph 10.3 is inserted requiring the acquirer to obtain the disposer’s approval for the refund of tax withheld and paid to the IRB in the case of the sale and purchase agreement being aborted.

Members may view the guidelines at the website of the Institute at Guidelines on Real Property Gains Tax

Updated list of certification bodies under Section 34(6)(ma) of ITA

The IRB has issued an updated list of certification bodies under section 34(6)(ma) for the purpose of claiming double deduction of expenses incurred on obtaining certification for recognised quality systems and standards and halal certification. The updated list increases the number of certification bodies for some categories and updates the accreditation period of relevant bodies.

Members may view the list at the website of the Institute at List of Certification Bodies under Section 34(6)(ma) of ITA

Guidelines on serious disease for the purpose of Section 46(1)(g) of Income Tax Act 1967

[Deduction of medical expenses for taxpayer, spouse and children suffering from a serious disease]

The Inland Revenue Board (IRB) has on 4 May 2011 issued Guidelines on serious disease for the purpose of claiming relief under Section 46(1)(g) of the ITA.

With effect from year of assessment 2001, a taxpayer may claim relief of not more than RM5,000 on medical expenses expended on himself, his spouse and children for serious diseases suffered.

Serious disease is defined in section 46(2) of ITA to include “acquired immunity deficiency syndrome, Parkinson’s disease, cancer, renal failure, leukaemia, and other similar diseases.” The Guidelines elaborate that serious diseases are acute and chronic illnesses that cannot be cured and require prolonged medical treatment. Some of the characteristics of serious illnesses include life threatening, continuous and high cost of medical treatment, acute medical illnesses that requiring hospitalisation, etc. Appendix A of the Guidelines provides a list of the types of serious diseases. This list is similar to the list of serious/chronic diseases for the purposes of Section 44(6) with additional diseases (items 14-19).

A claim of relief must be supported by a receipt and a letter of certification by a doctor registered with the Malaysian Medical Council. The name and income tax file reference number of the claimant must be indicated on the back of the receipt and kept for tax audit purposes. The IRB will review the final report of the diagnosis to verify the serious disease suffered. Provisional diagnosis from a registered medical practitioner will not be considered as the letter of certification. Symptoms stated in the medical report will not be considered.

Paragraph 4 of the Guidelines provides a list of other circumstances that may be considered for the claim for relief under Section 46(1)(g) of ITA

(i) Cost of medical treatment for accident victim with a serious injury that is life threatening;

(ii) Cost of surgery or amputation treatment for burns due to a serious accident which may result in death or loss of limbs,

(iii) As loss of limbs is given a relief on basic supporting equipment under section 46(1)(d) of ITA, it is not eligible for relief under section 46(1)(g) of the ITA. However, the cost of initial medical expenses resulting in the loss of limbs is eligible for relief under section 46(1)(g) of the ITA.

(iv) In specific cases, some serious diseases which are not listed in Appendix A can be considered for section 46(1)(g) relief upon recommendation of a registered medical expert, subject to the actual expenses incurred. Taxpayers may apply to the IRB Branch where his/her income tax returns are maintained to be eligible for the relief.

Members may view the guidelines at the website of the Institute at Guidelines on serious disease for the purposes of Section 46(1)(g)

Guidelines on the deduction of broadband subscription under Section 46(1)(m) of the ITA

For YAs 2010 to 2012, subscriptions, subject to a maximum of RM500 per annum, paid for broadband internet connection registered in the name of an individual is allowed a relief in arriving at the chargeable income, A connection through cable or Digital Subscriber Line (DSL) at a speed of 256kbps and above will be considered as a broadband connection and eligible for the relief. A dial-up service through a telephone line at a speed of 56kbps is not considered as a broadband connection.

There are two types of broadband, i.e., the high speed broadband (HSBB) and the Broadband to General Population (BBGP). The wired broadbands are ADSL, ADSL2+, SDSL, VDSL, VDSL2, FTTH and ETTH. Wireless broadband technology includes 3G/HDSPA, Iburst, EV-Do, WiMAX and Satellite.

Members may view the guidelines at the website of the Institute at Guidelines on the deduction of broadband subscription under Section 46(1)(m) of ITA

Revised Guidelines on Real Property Gains Tax

The IRB had issued the revised Guidelines on Real Property Gains Tax on 5 May 2011. The following are the revisions made:

Para 4 The error in Example 14 is rectified.

Para 5.3 A new Paragraph 5.3 is inserted to indicate the webpage where the guide notes for completion of the RPGT Forms can be found and downloaded.

Para 5.4 iii A new Example 16 is inserted to illustrate that disposals subject to income tax are not required file the RPGT Forms.

Para 6.2 vi Completion of Form CKHT for the circumstances where an acquirer is not required to withhold the money consideration or 2% of sale consideration, whichever is lower:

item (c) is amended to include disposals at a loss; and

item (d) is inserted for disposals to real estate investment trusts or property trust funds approved by the Securities Commission under P.U.(A) 451/2003 [Real Property Gains Tax (Exemption) (No. 4) Order 2003].

Para 9.1 ii New Paragraph 9.1(i)(c) is inserted to indicate the webpage where the guide notes for completion of Form 502 can be found and downloaded.

Para 9.3 Items ii (b) and iii are updated on the banking facilities and payment counters.

Para 10.3 A new Paragraph 10.3 is inserted requiring the acquirer to obtain the disposer’s approval for the refund of tax withheld and paid to the IRB in the case of the sale and purchase agreement being aborted.

Members may view the guidelines at the website of the Institute at Guidelines on Real Property Gains Tax

Updated list of certification bodies under Section 34(6)(ma) of ITA

The IRB has issued an updated list of certification bodies under section 34(6)(ma) for the purpose of claiming double deduction of expenses incurred on obtaining certification for recognised quality systems and standards and halal certification. The updated list increases the number of certification bodies for some categories and updates the accreditation period of relevant bodies.

Members may view the list at the website of the Institute at List of Certification Bodies under Section 34(6)(ma) of ITA

Guidelines on serious disease for the purpose of Section 46(1)(g) of Income Tax Act 1967

[Deduction of medical expenses for taxpayer, spouse and children suffering from a serious disease]

The Inland Revenue Board (IRB) has on 4 May 2011 issued Guidelines on serious disease for the purpose of claiming relief under Section 46(1)(g) of the ITA.

With effect from year of assessment 2001, a taxpayer may claim relief of not more than RM5,000 on medical expenses expended on himself, his spouse and children for serious diseases suffered.

Serious disease is defined in section 46(2) of ITA to include “acquired immunity deficiency syndrome, Parkinson’s disease, cancer, renal failure, leukaemia, and other similar diseases.” The Guidelines elaborate that serious diseases are acute and chronic illnesses that cannot be cured and require prolonged medical treatment. Some of the characteristics of serious illnesses include life threatening, continuous and high cost of medical treatment, acute medical illnesses that requiring hospitalisation, etc. Appendix A of the Guidelines provides a list of the types of serious diseases. This list is similar to the list of serious/chronic diseases for the purposes of Section 44(6) with additional diseases (items 14-19).

A claim of relief must be supported by a receipt and a letter of certification by a doctor registered with the Malaysian Medical Council. The name and income tax file reference number of the claimant must be indicated on the back of the receipt and kept for tax audit purposes. The IRB will review the final report of the diagnosis to verify the serious disease suffered. Provisional diagnosis from a registered medical practitioner will not be considered as the letter of certification. Symptoms stated in the medical report will not be considered.

Paragraph 4 of the Guidelines provides a list of other circumstances that may be considered for the claim for relief under Section 46(1)(g) of ITA

(i) Cost of medical treatment for accident victim with a serious injury that is life threatening;

(ii) Cost of surgery or amputation treatment for burns due to a serious accident which may result in death or loss of limbs,

(iii) As loss of limbs is given a relief on basic supporting equipment under section 46(1)(d) of ITA, it is not eligible for relief under section 46(1)(g) of the ITA. However, the cost of initial medical expenses resulting in the loss of limbs is eligible for relief under section 46(1)(g) of the ITA.

(iv) In specific cases, some serious diseases which are not listed in Appendix A can be considered for section 46(1)(g) relief upon recommendation of a registered medical expert, subject to the actual expenses incurred. Taxpayers may apply to the IRB Branch where his/her income tax returns are maintained to be eligible for the relief.

Members may view the guidelines at the website of the Institute at Guidelines on serious disease for the purposes of Section 46(1)(g)

Income Tax (Exemption) (No.2) Order [P.U.(A) 160/2011]

For the period from year of assessment (YA) 2007 to YA 2009, an individual, unit trust or listed close-end fund is exempted from payment of income tax in respect of any gains or profits received from the investment in Islamic securities, other than convertible loan stock, which are issued in accordance with the principles of Mudharabah, Musyarakah, Ijarah, Istisna’ or any other principle approved by the Shariah Advisory Council established by the Securities Commission.

Withholding tax under Section 109 of the Income Tax Act 1967 (ITA) will not apply to any gains or profits derived by a non-resident individual, unit trust or listed close-end fund.

Income Tax (Deduction for Contribution to Universal Service Provision Fund) Rules 2011 [P.U. (A) 158/2011]

The Rules provide that an amount equivalent to the contribution made to the Universal Service Provision Fund is allowed a deduction in arriving at the adjusted income of a licensee resident in Malaysia from its business of providing designated services for the basis period for a year of assessment. The licensee is required to obtain verification from the Malaysian Communications and Multimedia Commission specifying the amount of contribution to be made and the date the contribution is due.

Designated service is listed in Table C of the Schedule of Communications and Multimedia (Universal Service Provision) Regulations 2002 [P.U.(A) 419/2002] and defined in Regulation 2. It includes the following services:

Local call,

National call

International call

Call termination service provided to foreign network facilities provider, foreign network services provider and/or foreign applications service provider

Freephone service

Operator assisted call

ISDN

Audiotext hosting service

Cellular mobile service

International roaming service

IP telephony

Leased lines

15% Flat Income Tax for Knowledge Workers must obtain approval from Minister

The Inland Revenue Board (IRB) has on 27 April 2011 issued a press release that taxpayers who wish to claim the 15% tax rate as knowledge worker in their income tax return must first obtain the approval of the Minister of Finance. The IRB clarified that a knowledge worker will benefit from the 15% flat rate if his annual chargeable income is more than RM106,200. Chargeable income below RM106,200 for a year of assessment will benefit using the normal individual scheduler tax rate which is lower.

Pursuant to Part XIV, Schedule 1 of Income Tax Act 1967 (ITA) as amended by Finance Act 2010 (Act 702), with effect from year of assessment 2010, the chargeable income of a knowledge worker residing in a specified region, in respect of having or exercising employment with a person who is carrying on a qualified activity in a specified region, will be assessed at a flat rate of 15%. Where the qualified knowledge worker has income from a source other than the employment income referred to in the above, the portion of chargeable income of the knowledge worker shall be determined by the Minister by gazetted rules made under the ITA.

The Income Tax (Determination of Knowledge Worker, Qualified Activity and Specified Region) Rules 2010 [P.U.(A) 344/2010], gazetted on 7 October 2010 (and reported in e-CTIM No.49/2010 dated 18 October 2011) set out the following criteria:

1. The Rules apply to qualified individual who has made application to the Minister of Finance between 24 October 2009 and 31 December 2015 via Iskandar Region Development Authority (IRDA) for approval to be subject to tax under Paragraph 1, Part XIV of Schedule I of ITA and whose application has been approved, and to income received by the qualified individual from an employment with a designated company beginning from 1 January 2010;

2. A qualified individual is a knowledge worker who has not derived any employment income in Malaysia for at least three years, or such other period as the Minister may determine, prior to the date of application and is employed in a qualified activity by a designated company commencing on or after 24 October 2009 but not later than 31 December 2015. The qualified individual must reside within the Iskandar Development Region (IDR) for the respective year of assessment;

3. A knowledge worker is a holder of a degree or master degree in any professional or technical field from an institution recognised by the Government of Malaysia and has at least 10 years, or 5 years in the case of holder of doctoral degree, working experience in any of the qualified activity and any other criteria as may be determined by the Minister.

4. Qualified activities are specified in the Schedule of the Rules and include some sub-sectors in biotechnology. Green technology, educational services, healthcare services, creative industries and related services, financial advisory and consulting services, logistic services and tourism.

5. A designated company is a company which undertakes a qualified activity in the specified region within IDR and is either granted the IDR status, BioNexus status or MSC status; or is incorporated and resident in Malaysia.

6. Specified regions are Nusajaya, Western Gate Development, Johor Bahru Central Business District, Eastern Gate Development and Skudai-Senai within the IDR.

7. Where a qualified individual has income in respect of employment with a designated company in the basis period for a year of assessment , the chargeable income which is subject to tax under Paragraph 1, Part XIV of Schedule I of ITA shall be ascertained in accordance with the formula (A/B) x C where

A is the gross income from employment with the designated company

B is the total of gross income from all sources, and in the case of combined assessment under Section 45(2) of ITA, include the income from spouse

C is the chargeable income from all sources

Further clarification can be obtained from the official website of the IRDA at http://iskandarmalaysia.com.my. The IRB’s press release can be viewed at their website at http://www.hasil.gov.my/pdf/pdfam/KnowledgeWorker2011.pdf.

List of taxable and non-taxable services for service tax purposes

The Royal Malaysian Customs (RMC) has issued a list of taxable and non-taxable services for service tax purposes. The list only serves as a guide and is not exhaustive because the types of services rendered may be different between different types of businesses.

For further details or enquiries, members may contact the RMC as follows:-

Tel: 03 - 8882 2100, Fax: 03 – 8889 5869

Email: cd@customs.gov.my

Website: www.customs.gov.my and click at ePertanyaan

Members may view the detailed list of taxable and non-taxable services at the RMC’s website at: http://www.customs.gov.my/index.php/bm/component/content/article/183-pengumuman/613-senarai-perkhidmatan-bercukai-dan-tidak-bercukai

Notification of The Demise of Taxpayer

Pursuant to the amendment of Section 74(3) of Income Tax Act 1967 and Section 14(4) of Real Property Gains Tax Act 1976, as introduced by the Finance Act 2011 (Act 719), the Inland Revenue Board has issued a prescribed Form CP57 (Notification of the Demise of Taxpayer). With effect from 27 January 2011, assessments and additional assessments must be issued by the Inland Revenue Board (IRB) within 3 years after the end of the year of assessment in which the Director General of Inland Revenue is informed in writing by the executor of the death of a taxpayer using the Form CP57. The Form is be submitted to the IRB Branch where the taxpayer’s income tax returns are filed.

Members may view the Form CP57 at the website of the Institute or at IRB’s website at http://www.hasil.gov.my/pdf/pdfborang/Borang_CP57_1.pdf