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

Procedure for Receipt and Processing of ITRFs in Information Processing Department of the IRB

The IRB has on 15 April 2011 announced the introduction of new procedures for the receipt of ITRFs. The following are some of the salient points:

1. Acknowledgement of receipt will be given at the counter for not more than 10 ITRFs submitted. For more than 10 ITRFs submitted, the acknowledgement of receipt will be given later and tax agents will be notified when they are ready for collection.

2. With effect from the year of assessment 2010, the following ITRFs will be considered as incomplete:

i) No signature on the declaration section, taxpayer signed in the space for tax agents, taxpayer used the signature chop;

ii) Information of the taxpayer is incomplete, eg. name, IC. No./Police No./Army No./ Passport No. and designation

iii) Taxpayers did not use the ITRFs prescribed under Section 152 of ITA, eg. photostated ITRFs, ITRFs in pdf format not printed in accordance with specifications, ITRFs in pdf format printed by IRB branches without their rubber stamp; and

iv) Taxpayers not using the relevant ITRFs for the particular year of assessment

3. With effect from year of assessment 2011, the following ITRFs will be considered as incomplete:

i) Wrong computation of income tax payable/refundable, wrong splitting of chargeable income taxable at 20% rate or inserting the chargeable income without supporting computations;

ii) Inserting an incomplete or wrong accounting period;

iii) Differences in the information in the ITRFs and the information contained in the IRB’s system, e.g. name, company registration no./IC no. [Taxpayers are advised to submit Form 13 (Change of Company Name) / Form 9 (Change of Registration No.) / copy of I.C / any other document supporting the difference in information];

iv) Financial information not furnished, e.g. sales, purchases, net profit or loss, business code.

4. For Lampiran CP8D of Form E (Employer’s Return), only employees whose salary exceeds RM2,500 are required to be listed. Employers with more than 20 employees each earning a salary of more than RM2,500 are required to submit the Lampiran CP8D in softcopy (CD Rom/diskette).

Members may view the document (Procedure for Receipt of Income Tax Return Form) at the Institute’s website at http://www.ctim.org.my/cms/news.asp?menuid=14

FORMs B or BE for year 2010

Individuals who have not received their Income Tax Return Forms B or BE for the year 2010 by

15 March 2011 should contact the nearest LHDNM Branch Office for issuance of e-filing PIN for e-filing of these returns. They may also contact the Customer Service Centre of LHDNM at 1-300-88-3010 for assistance.

New taxpayers who are taxable but have not yet registered a tax file may register their tax files online at http://ekl.hasil.gov.my/ or visit the nearest LHDNM Branch Office. A new e-Filing PIN will be issued upon successful registration of the tax file.

Applications for e-filing PIN may be made by email to pin@hasil.gov.my indicating the NRIC number, latest address, telephone number and attach a photocopy of MyKad (front and back).

The last day for application of PIN for Forms BE (applicable to individuals without a business source of income) via email is 20 April 2011. Applications for PIN using a third party’s e-mail address will not be entertained.

Members may view the announcements on the LHDNM’s website at https://spsd.hasil.gov.my/Pki/

New Public Rulings issued on 10 March 2011

Public Ruling 03/2011 --- Investment Holding Company

Public Ruling 04/2011 --- Income from Letting of Real Property

The Inland Revenue Board (IRB) has issued the above Public Rulings on 10 March 2011. Public Ruling 03/2011 is effective from the year of assessment 2006 whilst Public Ruling 04/2011 is 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. Members may view the Public Rulings at the Institute’s website at: http://www.ctim.org.my/cms/news.asp?menuid=14.