The Inland Revenue Board (IRB) issued the above Public Ruling on 3 July 2013. The salient points in the PR are summarized below:-
Subject
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Reference
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Features of a Business Trust (BT)
· Para 4 provides a brief
description of the legal form and the mode of operations of a BT. Among the important features are:
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It is a unit trust scheme
where the operation or management of the scheme and the asset or property of
the scheme is managed by a trustee, the trustee-manager (TM), who must be a
company other than an exempt private company;
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The TM holds legal
ownership of the assets of the underlying business and manages the business
of the trust as its operator;
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Unit holders of a BT have
a beneficial interest in the assets of the BT via their holdings of units of
the BT.
· The
Capital Markets and Services (Amendment) Act 2012 (Act A1437) (CMSA) [P.U.(B)
428/2012] and the Business
Trust Guidelines issued by the SC on 28.12.2012 provide a
legal framework for an offering of BT including Islamic BT in Malaysia.
· Pursuant to S.2(11)
of the Income Tax Act 1967 (ITA), any reference to shares, ordinary share
capital, shareholders and dividend in the ITA shall be read as including a
reference to units, derivatives of units, unit holders and distributions
respectively
· Para 5 shows the basic
structure of a BT diagrammatically and indicates the different functions of a
promoter/shareholder and a TM.
· Para 16 summarises the
distinction between a BT and a company in a table form.
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Para 4
Para 5
Para 16
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Taxation of a BT
· Residence status – a BT is resident in Malaysia for a YA if the TM is resident in
Malaysia. The TM is resident for the
basis year for a YA if –
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The TM (in its capacity
as such) carries on business of the BT in Malaysia; and
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The management and
control of the business of such BT is exercised in Malaysia.
· Basis period (bp) – The basis year for a YA or the financial accounting year ending
on a day other than 31 December is the bp of a BT for that YA as governed by S21A
of ITA.
-
Where there is a change
of accounting period of a BT, for the purposes of instalment payments of the
estimated tax payable under S.107C, ITA,
PR No.7/2011
(Notification of Change in Accounting Period of A Company, Trust Body and
Co-Operative Society) shall apply.
· For income tax purposes,
a BT is treated as a company [S.2(1)
of ITA as amended by the Finance Act 2013].
The amendment comes into operation on 28.12.2012, following the coming
into force of the corresponding provisions of the Capital Market and Services
(Amendment) Act 2012.
· Consequently, the
provisions of the ITA which apply to a company are also applicable to a
BT. The following matters are
specifically discussed:
a) Meaning of BT Group (Para 9)
b) Group relief (Para 10 with Examples 4 & 5))
c) Control transfer (Para 11)
d) Foreign sourced income and remittances (Para 12
with Example 6)
e) Tax incentives (Para 13)
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Para 6
See Examples 1 and 2.
Para 7 and Example 3
Para 8
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Preferential tax treatment specifically excluded to a BT
· Pursuant to S2(9),
ITA, the following preferential treatments accorded to a company with paid-up capital in respect of ordinary shares of
RM2.5 million and less at the beginning of the bp for a YA, are not applicable to a BT:
a) Exemption from submission of estimate of
tax payable for the first 2 YA in which it first commences operations [S107C(4A)
of ITA];
b) Preferential tax rate of 20% on the first
RM500,000 of chargeable income [Para 2A,
Sch. 1 of ITA];
c) Special allowance for small value assets [Para 19A,
Sch. 3 of ITA.]
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Para 14
Para14 (a)
Para 14 (b)
Para 14 (c)
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Real property gains tax (RPGT) and stamp duty (SD) on the transfer of
business and assets as well as income tax treatment on trade debts taken over
by a BT
· Chargeable gains accruing
on the disposal of any chargeable asset to a TM/BT in relation to the initial
offering (i.e. initial transfer of real property or shares in real property
company from the promoter to the BT) of the BT, which has been registered and
approved on or after 1.1.2013 but not later than 31.12.2017, are exempted
from RPGT pursuant to the Real
Property Gains Tax (Exemption) Order 2013. [P.U.(A) 128/2013]
· Similarly, all
instruments executed by a TM in relation to the transfer of any business,
assets, or real property to a BT for the purpose of initial offering of the
BT are exempted from SD pursuant to the Stamp
Duty (Exemption) (No.7) Order 2013 [P.U.(A) 127/2013]. The exemption is not applicable in the case
where loans are transferred to a BT.
· Trade debts taken over
are to be regarded as capital assets of the BT, and separate records must be
kept as no deduction is allowed when such debts are written off while
recoveries in respect of such debts are not taxable.
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Para 15.1 and
Example 7
Para 15.2
Para 15.3
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Filing of tax returns
· The TM is responsible for
filing the Income Tax Return Form (Form TN) for each YA, within 7 months from
the date following the close of the accounting period which constitutes the
bp for that YA.
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Para 17
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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 Public Ruling No.10/2013.
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