Goods and Services Tax (GST) Guide

Please be informed that the Royal Malaysian Customs (RMC) has recently uploaded GST Industry Guide on Airline Industry.

You may write to the Institute at technical@ctim.org.my or secretariat@ctim.org.my in respect of any suggestions, concern or comments you may have on the Guide, so that we may raise it to the Customs.

Members may view the Guide on the Institute website or the official website of Malaysia Goods and Services Tax (GST).

PIONEER STATUS FOR SMALL COMPANIES -- MITI’s CLARIFICATION ON LAW

Background

The Investments (Criteria For The Grant Of Pioneer Status To A Small Company) Order 2013 [P.U.(A) 139] (the Order) had been gazetted on 15 April 2013. The salient points of the Order are summarised as follows:

Criteria /conditions for grant of pioneer status to small companies

The criteria in terms of quantum of shareholders’ funds and equity ownership are set out in paragraphs 2(1)(a)(i) and (ii) of the above Order. Other conditions are set out in paragraphs 2(1)(b), 2(1)(c) and 2(1)(d). They are briefly summarized in the table below:

Paragraph 2(1)
2(1) (a) (i)	2(1)(a)(ii)
Small companies with shareholders’ funds of up to RM500,000 with at least 60% Malaysian equity ownership;	Small companies with shareholders’ funds of above RM500,000 and not exceeding RM2.5 million with 100% Malaysian equity ownership.
Paragraph 2(1)(b): For small companies engaged in promoted products mentioned in the Promotion of Investments (Promoted Activities and Promoted Products for Small Scale Companies ) Order 2012 [P.U.(A)63/2012] and the Promotion of Investments (Promoted Activities and Promoted Products ) Order 2012 [P.U.(A)62/2012],	Paragraph 2(1)(c) For small companies engaged in promoted products mentioned in the Promotion of Investments (Promoted Activities and Promoted Products for Small Scale Companies ) Order 2012 [P.U.(A)63/2012],	Paragraph 2(1)(d) For small companies engaged in promoted products mentioned in the Promotion of Investments (Promoted Activities and Promoted Products ) Order 2012 [P.U.(A)62/2012] (i)    The prevailing rates on the value added index and on the managerial, technical and supervisory staff index as determined by the Minister with concurrence in writing of the Minister of Finance shall be applicable, and (ii)   Restriction of 20% of paid-up ordinary share capital. (Please refer to the Order for details.)
(i)        The company shall achieve at least 25% value added in its activity or product; (ii)       The company shall employ at least 20% of their workers at the managerial, technical and supervisory staff level; and (iii)      Restriction of 20% of paid-up ordinary share capital. (Please refer to the Order for details.)

 Effective dates

The dates on which the respective paragraphs are deemed to have come into operation are shown in the table below:

Paragraph	Deemed to have come into operation on:
2(1)(a)(i) and 2(1)(b)	2 March 2012
2(1)(a)(ii), 2(1)(c) and 2(1)(d)	3 July 2012

Subsequent to our e-CTIM TECH 53/2013, CTIM had sought clarification from the Ministry of International Trade and Industry (MITI) with regard to the wording/ meaning of Paragraphs 2(1)(b)(iii)(B), 2(1)(c)(iii)(B) and 2(1)(d)(iii)(B) of the Promotion of Investments (Criteria For The Grant Of Pioneer Status To A Small Company) Order 2013 [P.U.(A) 139]. The MITI has since replied to our enquiries in its response dated 23 July 2013.

MITI’s clarification

Briefly, MITI confirms:-

1. that CTIM’s comments relating to the above paragraphs are valid, and “necessary action” will be taken (which we assume to be the issue of an Amendment to the above Order at a later date.)

2. CTIM’s view that the intended effect of Paragraph 2(1)(b)(iii), [subparagraphs (A) and (B)] is that small companies (falling under paragraph 2(1)(a)(i)) which are granted pioneer status cannot own or be owned by a related company having shareholders’ funds of more than RM500.000.

3. that the same effect is intended to be achieved by paragraphs 2(1)(c)(iii) and 2(1)(d)(iii), [subparagraphs (A) and (B) of the respective paragraphs], i.e. small companies (falling under paragraph 2(1)(a)(ii)) which are granted pioneer status cannot own or be owned by a related company having shareholders’ funds of more than RM2.5 million.

The above Order can be viewed at the e-Federal Gazette website. The issues raised and MITI’s clarification is available at our website.

You may write to the Institute at technical@ctim.org.my or secretariat@ctim.org.my in respect of any concern or comments you may have.

Guideline on Claiming Accelerated Capital Allowance (ACA) for a Company in Post Reinvestment Allowance (RA) period

MIDA has recently issued the Guideline and Procedures on Application for Confirmation Letter by a Company Which Manufacturers Promoted Products under the Promotion of Investments Act, 1968 to Claim for Accelerated Capital Allowance (ACA) Under the Income Tax Act, 1967.The following are some salient points found in the guidelines:

· After the 15-year period of eligibility for reinvestment allowance (RA), a company that reinvests in the manufacture of promoted products is eligible to apply for Accelerated Capital Allowance (ACA).

· The ACA allows the capital expenditure to be recouped within three years; i.e. an initial allowance (IA) of 40% plus annual allowance (AA) of 20% for the first year and AA of 20% for each the following two years.

Application procedure

·         Applications should be submitted to the Inland Revenue Board (IRB), accompanied by a letter from MIDA certifying that the company is manufacturing promoted products under the Promotion of Investments Act, 1986.

To apply for the letter of confirmation from MIDA, 2 sets of the application forms, ACA-Application for Confirmation Letter for a Company which Manufactures Promoted Products under the Promotion of Investments Act, 1986 to claim the Accelerated Capital Allowance (ACA) under the Income Tax Act, 1967 should be submitted together with a copy each of the following documents:

(i) Memorandum and Articles of Association;

(ii) Certificate of Incorporation (Form 9); and

(iii) Registered Address (Form 44).

·         The application should be submitted to:

Chief Executive Officer
Malaysian Investment Development Authority (MIDA)
MIDA Sentral
No. 5, Jalan Sentral 5
50470 Kuala Lumpur
P.O. Box 10618
50720 Kuala Lumpur

Members can read the full text of the guideline and download the form from the MIDA website.

TECHNICAL ROUND TABLE DISCUSSION FOR MEMBERS - CALL FOR ISSUES

Due to popular demand from members, CTIM is considering to organize a round table discussion for members on technical matters in early October 2013 (tentatively scheduled for 8th October). The format of the discussion is informal and members are able to pose technical questions for comment by the panel of commentators drawn from the CTIM Technical Committee. Members will also have an opportunity to share their concerns on specific issues, while seeking clarification on matters that have been on their minds. However, issues or clarifications of an advisory or hypothetical nature will not be entertained.

Besides raising questions at the round table discussion, members are encouraged to raise issues for discussion in writing beforehand. These questions will be reviewed and, where appropriate, included for discussion.

Your issues, via email to technical@ctim.org.my should reach us not later than 26 August 2013. Alternatively you may fax to the Institute at 03-2162 8990 or 2161 3207.

INCOME TAX (DEDUCTION FOR TRAINING COSTS UNDER SKIM LATIHAN 1MALAYSIA FOR UNEMPLOYED GRADUATES) RULES 2013 [P.U.(A) 260/2013] (The Rules)

The above Rules were gazetted on 5 August 2013 and are deemed to have come into operation on 1 June 2012.

Deduction and amount

In ascertaining adjusted income from a business of a qualifying company for the basis period for a year of assessment, a deduction is allowed for qualifying expenses incurred [as specified in Rule 3(2)] during that period for conducting a training scheme [Rule 3(1)]. The amount of deduction is twice the amount of expenses allowed under the Rules [Rule 3(4)]

Qualifying expenses

The specified expenses allowed are expenditure incurred for each training scheme on –

1. monthly training allowance (of not less than RM1000 paid to trainees for a maximum period of 12 months); 
2. training provided to trainees; 
3. food, travelling and accommodation allowances for trainees under the scheme; 
4. fees paid to trainer engaged to conduct soft-skills training.

The amount allowable for items (b), (c) and (d) for each trainee must not exceed RM5,000 for each training scheme.

Definitions (Rule 2)

Words	Meanings
trainee	An unemployed graduate of (sic) Malaysian citizen who undergoes a training scheme.
training scheme	The Skim Latihan 1Malaysia programme of 8 to 12 continuous months for the unemployed graduates approved by the Economic Planning Unit (EPU) under the Prime Minister’s Department of Malaysia
qualifying company	A company – incorporated in Malaysia under the Companies Act 1965 [Act 125]; and approved by the EPU to participate in the training scheme.

Application (Rule 5)
To claim for deduction under the Rules, the qualifying company shall produce a letter from the EPU specifying that -

1. the training scheme has been approved by EPU where the date of approval begins from 1 June 2012 until 31 December 2016; and 
2. the implementation of the training scheme shall commence within 12 months from the date of approval by EPU.

The Rules can be viewed from the Attorney General’s Chambers website.

You may write to the Institute at technical@ctim.org.my or secretariat@ctim.org.my in respect of any concern or comments you may have on the Rules.

CLOSURE OF IRB OFFICES & COUNTERS DURING HARI RAYA FESTIVAL

All the offices (except for Kelantan and Terengganu) of the Inland Revenue Board (IRB) including Tax Consultation Counters, Tax Payment Counters, Stamp Duty Counters, Contact Centres, Revenue Service Centres [RSC], and Urban Transformation Centre [UTC] service counters will be closed for the Hari Raya Aidilfitri Celebration from 7 August 2013 (Wednesday) to 11 August 2013 (Sunday). The IRB offices and service counters will resume operations on 12 August 2013 (Monday).

For the IRB offices in Kelantan & Terengganu, the closure will be from 7 August 2013 (Wednesday) to 10 August 2013 (Saturday) and operations will resume on 11 August 2013 (Sunday).

During the closure, taxpayers may still conduct their tax affairs online through ezHASiL facilities at www.hasil.gov.my.

EXTENSION OF TIME FOR PAYMENT THROUGHOUT THE COUNTRY

In view that the closure coincides with the deadline for remission of Monthly Tax Deductions (MTD) (on the 10th day of each month), a concession is granted as follows: all tax payments that are due by 10 August 2013 (Saturday), including MTD, etc. are to be remitted to the IRB not later than 13 August 2013 (Tuesday).

Members may view the Media Release and Announcement at the websites of the Institute and the IRB.

Purchase of Personal Computer under Paragraph 46(1)(J) Income Tax Act 1967

Definition of Computer -- IRB Announcement

The IRB has uploaded on its website on 31 July 2013 that the personal deductions on expenses incurred in the purchase of personal computer under Section 46(1)(j) Income Tax Act 1967 shall be confined to the purchase of the following not used for the purpose of a business:

· Desktop computer;

· Laptop computer;

· Notebook; and

· Ultrabook.

The tax deduction will not cover expenses incurred in acquiring gadgets that may perform functions similar to a computer, for example, tablets, smartphones, etc.

The above treatment is effective from Year of Assessment (YA) 2013, As a concession, a claim for deduction for purchase of computer other than those indicated above, made prior to YA 2013 will not be withdrawn.

Members may view this Announcement at the websites of the Institute and the IRB.