Wednesday 30 November 2011

Income Tax (Deduction for Payment of Premium to Malaysia Deposit Insurance Corporation) Rules 2011 [P.U. (A) 379/2011]

The Rules apply to member institutions of the Malaysia Deposit Insurance Corporation, and allow for the deduction of the first premium or annual premium paid, in arriving at the adjusted income of a member institution from its business for a basis period for a year of assessment, in the following manner:-
a)    In respect of a financial institution under the Malaysia Deposit Insurance Corporation Act 2005 [Act 642], for the years of assessment 2005 to 2010; or
b)    In respect of a financial institution, a takaful operator or an insurance company under the Malaysia Deposit Insurance Corporation Act 2011 [Act 720], for the year of assessment 2011 and subsequent years of assessment.

New Public Rulings issued on 16 November 2011


The Inland Revenue Board (IRB) has issued the above Public Rulings on 16 November 2011. The Public Rulings are effective from the year of assessment 2011.  Members are encouraged to review the Public Rulings and forward comments, if any, to the Institute as soon as possible for submission to the IRB.

Tuesday 22 November 2011

Pre-filling of Income Tax Returns, in Relation to e-filing

Further to the DESIRE Meeting held on 30 September 2011, the Inland Revenue Board (IRB) has provided the information format for participation in the pre-filling of Return Forms.  The pre-filling is only available for individual taxpayers who are under employment and who e-file their tax returns.  In this connection, CTIM has made some clarifications with the IRB as follows:
·                It is applicable to those resident individuals (Forms B and BE applicable) and non-resident “employed” individuals (Form M applicable), who use the e-filing system in connection with the filing of their annual income tax returns.
·                Participation in e-filling is voluntary.  The e-filing tax return forms will be pre-filled only if the participating employer has provided the information (such as total income, monthly tax deductions, EPF deductions, insurance premiums paid, and zakat) for the relevant year, in respect of the employee.  The employer will not be penalised if he chooses not to participate in the pre-filling programme, although his employee wishes to participate in the programme.
·                It is also applicable to employees who are not taxable, or who do not have income tax reference numbers.
·                Participating employers have to write to the Tax Operations Department, IRB to indicate their intention to participate.  The IRB will then communicate with the employer regarding the particulars to be forwarded, and the format to be used.  Such information, on compact discs, must be forwarded to the IRB at bantuan.praisi@hasil.gov.my  not later than 15 February 2012.
·                Although participating employers have provided the information required for purposes of e-filling, they are still required to submit the relevant Employer’s Return (Form E).  However, the information for pre-filling is acceptable as information for Form CP8D.
·                All the pre-filled information may be edited by the employee/taxpayer.  Hence, the question of a “penalty” on incorrect “prefilled” information does not arise.  It is the responsibility of the taxpayer to check the accuracy of the information in the return form before completing the e-filing process (signing and sending) of the relevant return form.
·                In the case of an individual who has participated in the “pre-filling” programme, and has chosen to have a combined assessment, he/she would be required to input the “total income transferred from husband/wife” in the pre-filled form.
·                Employers/taxpayers may contact the IRB at bantuan.praisi@hasil.org.my or the following persons for further information / clarification on the matter :-

1.           Cik Norhayati Mat Kassim
        Tel: 03-6209 1000  ext.33101
         E-mail: hayati@hasil.gov.my


2.         Cik Sharifah Ahmad
        Tel: 03-6209 1000  ext.33816

3.         Puan Haida Daud
Tel: 03-6209 1000  ext.31206

It has been announced in the 2012 Budget that this “pre-filling’ programme is to enhance tax system administration and compliance and it will be introduced from year of assessment 2012.  Members may refer to Appendix 21 to the 2012 Budget Speech for information.  CTIM would like to encourage members to take the opportunity to voluntarily participate in the pre-filling programme.

Service Tax Treatment for Free Zones, Tax-Free Islands and Joint Development Areas

The Ministry of Finance (MOF) has, in a letter to the Director General of the Customs and Excise, dated 14 November 2011, invoked Section 6 of the Service Tax Act, 1975 to exempt Service Tax under the following circumstances:
(a)      Exemption of Service Tax with effect from 1 January 2012
(i)        All taxable services provided by persons in Free Zones and supplied to persons in Free Zones
(ii)       All taxable services provided by persons in Free Zones and supplied to persons in Principal Customs Area
(iii)      All taxable services provided by persons in Principal Customs Area and supplied to persons in Free Zones
(iv)     All taxable services provided by persons in Principal Customs Area or Free Zones in relation to matters in Langkawi, Tioman, Labuan and Joint Development Areas.
(b)      Refund of Service Tax Paid
In connection with (a) above, where the tax charged has been paid before 1 January 2012, any application for service tax refund will not be approved.
(c)      Remission of Service Tax Uncollected
Any service tax, in respect of the services mentioned in (a) above, which has not been collected before 1 January 2012, is remitted under Section 22 of the Service Tax Act, 1975
(d)      Services Not Subject to Service Tax
(i)        All taxable services provided by persons in Free Zones and supplied to persons in Langkawi, Tioman, Labuan and Joint Development Areas, and
(ii)       All taxable services provided by persons in Principal Customs Area and supplied to persons in Langkawi, Tioman, Labuan and Joint Development Areas
(e)      Exemption Granted Until the Introduction of Goods and Services Tax.
Meanwhile, members view the MOF letter on our website.  You may also get further information on the matter from the Royal Malaysian Customs website soon.

Thursday 17 November 2011

CIRCULAR MF23/2011: CLARIFICATION IN RESPECT OF CIRCULAR MF21/2011 DATED 19 OCTOBER 2011

17 November 2011 Circular MF23/2011

ALL MEMBER FIRMS

CLARIFICATION IN RESPECT OF CIRCULAR MF21/2011 DATED 19 OCTOBER 2011


It has been observed that certain member firms are seeking clarification in respect of circular MF 21/2011 dated 19 October 2011 issued by the Institute in respect of delivery of the bank confirmation request.

The points raised are in respect of the implementation date and the proper process flow for the delivery of bank confirmation request.

The Institute has since met with representatives from the 23 commercial banks at a dialogue arranged by the Association of Banks in Malaysia (ABM) on 14 November 2011 to clarify on this issue in particular, and to further discuss on how auditors and banks can have a better working relationship moving forward.

In this regard, it was clarified that the list of designated contact persons from the 23 commercial banks is only for the purpose of following-up on overdue responses on bank confirmation requests, and not for the delivery of bank confirmation request at present. Auditors should still send their bank confirmation requests to the address to which previous requests have been addressed, until further notification by the Institute.

The Institute will be having on-going discussions in the near future with the ABM and the banks. The Institute will inform members on the agreed procedures to be followed by auditors when requesting confirmation from the banks on an entity being audited when an agreement has been reached with the ABM and the banks.

Please be guided accordingly.


Thank you.


HO FOONG MOI (MS)
Executive Director
On behalf of the Registrar

Tuesday 15 November 2011

Review of Stamp Act 1949

The Ministry of Finance is currently reviewing the Stamp Act 1949 and the Institute was invited to attend a briefing by the Inland Revenue Board on 2 November 2011.  The purpose of the briefing was to engage the stakeholders for input so that the updated legislation will be user friendly and remove any practical difficulties faced in the application of the legislation.   

The main objectives of the review are -
      i.    to revamp the legislation to be in line with the country’s current economic development;
     ii.    to simplify the Act for ease of understanding and application;
    iii.    to expedite the process to reduce costs; and
   iv.    to simplify the procedures to improve compliance

One of the proposed changes is to replace the current instrument-based assessment of stamp duty to a transaction-based assessment.  The other area of focus is the relief and exemption from stamp duty.  Some form of self-assessment is also being considered to improve compliance with the objective of enhancing revenue collection.

The Institute is setting up a Task Force to look into the matter.  Members are encouraged to provide their feedback, comments and suggestions in the following format to the Institute by 2 December 2011 for the deliberation of the Task Force: 

1.Title of proposal
2.Issues
3.Provision under the legislation
4.Proposal
5.Justification for the proposal

You may submit your proposals via email to Mr K. S. Lim or Ms Lim Gim Kim at kslim@ctim.org.my and kim@ctim.org.my respectively or fax 03 2162 8990 or 03 21613207.

e-Filing System Disruption

Please be informed that the e-Filing System (Production Environment and e-Training) will be inaccessible, due to the relocation of the IRB Headquarters to Cyberjaya, and some maintenance work on the system. The following are further details on the disruption:-

Duration                  :                               from 5.30p.m on 15/11/2011 (Tuesday)
                                                               till 8.00a.m on 20/11/2011 (Sunday)
Applications            :                               IRB’s website, e-Filing, TAeF, SPSD, HTHA, e-Lejar,
Inaccessible                                           Aduan (Complaints Management System) and all others related to its Computer Applications System.

Members may email their enquiries to helpitef@hasil.gov.my on or before 15 November 2011 (Tuesday) (by 5.30 p.m.) 

IRB Headquarters


Please be informed that the IRB headquarters currently located at Block 9, Government Buildings Complex at Jalan Duta will be relocated, and will be fully operational at Wisma Hasil, Persiaran Rimba Permai, Cyber 8, 63000 Cyberjaya, Selangor on 22 December 2011.
In conjuction with this move, the IRB Data Centre will be upgraded.  However, during the interim period, taxpayers and customers may face disruptions to their computerized application systems.

In addition, the Payment Counter services at all IRB Branches will also be affected, and only limited services will be available. Temporarily, payment receipts will be issued manually to all taxpayers who make income tax payment transactions during this upgrading period.

The following, which are not involved in the relocation, will continue to be at Jalan Duta:-

1)    IRB Tax Payment Counters (Block 8A)
2)    IRB, Jalan Duta Branch (Block 8A)
3)    IRB Kuala Lumpur Collections Branch (Block 8A)
4)    IRB, Non-Resident Branch (Block 11)
5)    IRB, Corporate Tax Department (Block 11)

Taxpayers can obtain a list of the new addresses and telephone numbers of the departments involved in the relocation through the IRB website at www.hasil.gov.my.  

REJECTION ON TAX LICENCE RENEWAL

We have received information from our CPD participants that CPD points awarded by CTIM to those who attended the recent CTIM’s budget seminars were not recognised by MOF for the renewal of their tax licences. The reason being these seminars did not have substantial IRB input.

On being notified of this matter, our President, Mr SM Thanneermalai immediately spoke to the Head, Tax Analysis Division of the Ministry of Finance (MOF) on Saturday 12 November 2011 to appeal against these rejections on the basis that the Guidelines issued by MOF did not specify any such a requirement. CTIM has formally written to the Head , Tax Analysis Division on this matter on 14 November 2011. The Head has assured our President that she will try and resolve this matter as soon as possible  after she returns from her overseas trip.

We will be pursue this matter on an urgent basis and try and get a positive result for all our members since we believe very strongly that we have good legitimate grounds for appeal. We will keep our members informed as the matter progresses

Service tax -- Customs Positive and Negative List for service tax

The Royal Malaysian Customs (RMC) has recently issued a revised “Positive and Negative List” for the purpose of service tax.  Members may view the revised list at the website of the Institute at http://www.ctim.org.my/technical_techdev_indirect.asp or at the website of the RMC at http://www.customs.gov.my/index.php/bm/component/content/article/193

Thursday 3 November 2011

IRB Headquarters Will Move To Cyberjaya

Please be informed that the IRB headquarters at Jalan Duta will begin to move its operations (in stages) to Cyberjaya, Selangor on 16 November 2011.  Although no further details on the addresses and telephone numbers are currently available, such information is expected to be available on IRB’s website soon. 

Deduction Relating to Transaction With Non-Members for Club

Income Tax (Deduction Relating to Transaction With Non-Members for Club, Association or Similar Institution) Rules 2011 [P.U. (A) 360-2011]

The Rules, effective from the year of assessment 2009, provide the details of the formulas to be used to determine the amount of deduction for outgoings or expenses, capital allowances and gift of money under Section 44(6) in arriving at the adjusted income, statutory income and total income respectively of a person, relating to transaction with non-members:-

1)      Deduction for outgoings or expenses in arriving at adjusted income
A    x    B
            C
Where    A -    is the amount of outgoings expenses incurred by the person in the basis period for a year of assessment;
B –    is the gross income from transaction with non-members of the person in the basis period for year of assessment; and
C – is the gross income from transaction with both members and non-members of the person in the basis period for year of assessment.
         2)      Deduction for capital allowances in arriving at statutory income
D   x    E
            F
Where    D -    is the capital allowances made by the person for the basis period for a year of assessment
E –    is the gross income from transaction with non-members of the person in the basis period for year of assessment; and
F –    is the gross income from transaction with both members and non-members of the person in the basis period for a year of assessment.

         3.      Deduction for gift of money under Section 44(6)
G   x    H
              I
Where    G -    is the gift of money made by the person for the basis period for a year of assessment
H –   is the aggregate income from transaction with non-members of the person in the basis period for year of assessment; and
I –     is the aggregate income from transaction with both members and non-members of the person in the basis period for a year of assessment.
Provided that the amount to be deducted under Section 44(6) shall not exceed 7% of the aggregate income. 

“Non-member” is defined as that person who is not entitled to vote at a general meeting of the body at which effective control is exercised over its affairs.

Deduction for Expenditure on Issuance of Islamic Securities

Income Tax (Deduction for Expenditure on Issuance of Islamic Securities Pursuant to Principles of Murabahah and Bai’ Bithaman Ajil) Rules 2011 [P.U. (A) 355-2011]

The Rules prescribe that expenditure incurred for the issuance of Islamic Securities approved by the Securities Commission or the Labuan Financial Services Authority shall be allowed a deduction in arriving at the adjusted income of the business of a Malaysian resident company.  These rules are effective from the year of assessment 2011 until the year of assessment 2015

MOF 2012 Budget Hotline

Pleased be informed that the Ministry of Finance (MOF) has begun operating a 2012 Budget Hotline service, effective from 17 October 2011, to answer queries and provide clarification on the implementation of the 2012 Budget.  The details of the hotline service are as follows:-
        Hotline number               :           1-800-88-2012 (toll free)
        Hours of operation          :           9.00a.m till 5.00p.m (working days)
        Email                               :           belanjawan2012@treasury.gov.my

Tuesday 1 November 2011

Practising Certificate

The Chartered Tax Institute of Malaysia (CTIM) would be issuing Practising Certificates for existing Tax Practitioners as provided for in the Memorandum and Articles with effect from 1st of January 2012 and would also be implementing a 1 day Public Practise Course for new Public Tax Practioners. Those members who are currently in practise are encouraged to apply for the Practising Certificate but are not required to attend the 1 day Public Practise Course. The applications must be received by CTIM on or before 31st March 2012. Practising Certificates will be issued annually and will expire on the same date as the S153 license.
Those who commence their Tax Practice after 1st of January 2012 are required to attend the 1 day Public Practise Course and fulfil the required conditions in order to be eligible to apply for the Practising Certificate.

Attached below are the criteria and the rules governing the issue of the practising certificates.


Eligibility Criteria for Practising Certificate

To be eligible for a Practising Certificate, members must adhere to the following requirements.

  • A member must possess a valid tax licence issued by the Ministry of Finance under Section 153 of the Income Tax Act 1967.

  • A member must have attended and completed the one day Public Practice Course. Members who are currently in practise are not required to attend this Course.

·         A new member must commence tax practise within 6 months as a sole proprietor, partner or director of the tax practice. A member issued with a practising certificate but unable to commence practice within 6 months is required to surrender the practising certificate to the Institute immediately upon the expiry of the period.

  • The certificate can be issued for a period of one to three years whereupon the annual practising certificate fee shall become due and payable. However, the issuance is subject to adherence of the member’s conduct as governed by the Rules and Regulations on Professional Conduct and Ethics of the Institute.

  • A member shall cease to be entitled to a practising certificate if he fails to pay the renewal fee before expiry of the licence when it becomes due and payable.

  • A member must provide evidence of existence of office and contact address (es).

  • A member must provide proof of full payment of membership subscription and practising licence fees.

  • A member should possess valid professional indemnity insurance within 6 months from the date the Practising Certificate is issued. The Institute will assist the member to apply for such insurance if required.

  • All eligible members are encouraged to apply for a Practising Certificate to conform with the Articles of Association.

Practising Certificate Fee

The Committee proposes that an annual fee of RM100 or part thereof be imposed on the application and issuance of a practising certificate. This is to run concurrently with section 153 licence

Condition attached to the Practising Certificate

The Practising Certificate however remains the property of the Institute and must be returned to the Institute at anytime the holder ceases to be entitled to thereon under the Institute’s regulations and the Professional Conduct & Ethical Behaviour.

Proposed Implementation Date

The implementation date of the Practising Certificate will be from January 2012.

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