Further to our e-CTIM
21/2013 (e-CTIM TECH 17/2013) dated 8 February 2013, this e-CTIM highlights
the salient points to note on the Public Ruling.
Qualifying company and qualifying product/activity (paragraph 3)
The conditions that
qualify a company to claim a deduction for promotion of exports are:
- The
company must be resident in Malaysia and involved in manufacturing,
trading and agricultural activities for the basis year for a year of
assessment (paragraph 3.1);
- Expenses
incurred are primarily and principally for the purpose of seeking opportunities,
or creating/ increasing demand for the export of goods or agricultural
produce manufactured, produced, assembled, processed, packed and graded or
sorted in Malaysia (paragraph 3.2), and incurred on or after 1 January
1986 (paragraph 3.3).
Types of deduction (paragraphs 5 and 6)
The types of
deduction available are: (paragraph 5)
- Single
deduction;
- Further
deduction;
- Double
deduction.
The following is a summary of the types of deduction
available with legislative authority:
|
Type of Expenses
(Dealt with in Paragraph of
this PR)
|
Legislation
|
Deduction available
|
|
Paragraph 6.2.1
(a) Publicity
& advertisements outside Malaysia
(b) Provision
of samples
(c) Research
on export market
(d) Preparation
of tenders
(e) Expenses on representative
negotiating/concluding contracts for sale of goods*
(f) Travelling,
accommodation and sustenance expenses for the participation trade fair
/exhibitions* #
(g) Provision
of exhibits for the participation in approved trade fair or trade /industrial
exhibitions #
(h) Direct
expenses incurred for the participation in approved trade fair or trade
/industrial exhibitions [other than those in (e), (f) & (g)]#
(i) Provision
of technical information
(j) Public relations work
(k) Maintaining sales office*
|
Section 41, Promotion of
Investments Act 1986 (PIA), Schedule to PIA, Income Tax (Promotion of
Exports) Rules 1986. (ITR 1986)
|
Further deduction
|
|
(l) Professional fees on
packaging design.
|
Income Tax (Promotion of
Exports) (Amendment) Rules 2001 [P.U.(A) 170/2001]
|
Further deduction
|
|
Paragraph 6.2.2
(a) Participation in trade portal
(b) Participation in virtual trade show
(c) Maintain warehouses overseas
|
Income Tax (Promotion of
Exports) Rules 2002 [P.U.(A) 115/2002]
|
Further deduction
|
|
Paragraph 6.1.2.
Provision of hotel
accommodation and sustenance to bring in potential importers to Malaysia, as
a follow-up to the trade or investment missions organized by Government
agencies or industrial/trade associations as verified by MATRADE.*
|
Income Tax (Promotion of
Exports) Rules (No. 3) 2002 [P.U.(A) 117/2002]
|
Single deduction
with restriction
|
|
Paragraph 6.3.1.
Expenses directly incurred for
the registration of patents, trademarks or product licensing overseas,
including stamp duty, legal fees and consultancy fees.
|
Income Tax (Promotion of
Exports) Rules 2007 [P.U.(A) 14/2007]
|
Double deduction
|
|
* Restrictions:
(i) Return
air fare (economy class) for a representative of the company [or employees in
the case of Paragraph 6.2.1(k) above].
(ii) Ground transportation
(overseas)
(iii) Hotel accommodation
(maximum of RM300/day) and
(iv) Sustenance (maximum of
RM150/day).
# Participation in trade fair or trade/industrial exhibition has
to be approved by MATRADE
|
||
Restrictions on deductions (paragraph 7)
No deductions are
allowed for the following:
- Expenses
set out in section 39(1) of the ITA;
- Expenses
incurred by a company having a place overseas and subject to tax in that
country.
In addition, the
Director General of Inland Revenue is empowered to disallow any amount of
expenses which, in his opinion, is in excess of what would reasonably be
expected to be incurred in the ordinary course of business.
Claims procedure (paragraph 8)
The forms to be
completed are as follows:
(a) LHDN/BT/DD/POE/2003: Further deduction for promotion of exports
(b) LHDN/BT/DD/POE/PD/2003 – 1:
Further deduction for professional fees on packaging design;
(c) LHDN/BT/SD/POE/2003: Single
deduction for promotion of export.
Other matters
Other matters dealt
with in the PR are:
- Expenses
incurred during an overlapping period (paragraph 4);
- Special
provisions applicable to a pioneer company/ company exempt under Income
Tax Exemption Order (paragraph 6.5).
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