Change of revenue stamps

The Stamp Office has recently informed that beginning from 31 July 2009, the old revenue stamps cannot be used.  Members of the public may exchange the old revenue stamps with the new ones from 1 August 2009 till 31 December 2009 at Stamp Offices or service centres in the branches of Inland Revenue Board

Stamp duty on construction contract instruments

With effect from 1 January 2009, service agreement instruments including construction contracts are subject to stamp duty at the ad valorem rate of RM5 for every RM1,000 or part thereof.  In view that construction projects generally involve multiple tiers multiple levels of stamp duty at ad valorem rate are levied on the same project.  The Ministry of Finance (MOF) has reviewed the situation and in exercising his powers under Section 80(2) of the Stamp Act 1949 has agreed and issued the following guideline:

i)      For contracts awarded by the Government where the agreement is signed between the Government and the principal contractor, the contract is exempted from stamp duty.  Stamp duty at ad valorem rate will be levied on second level contracts (i.e. contracts between the principal contractor and the sub-contractors).  Stamp duty for contracts at the third and subsequent levels will be fixed at RM50.00, and any stamp duty paid in excess will be remitted.

ii)     For contracts awarded by any party other than the Government; stamp duty at ad valorem rate will be levied on the contract between such party and principal contractor.  Stamp duty for contracts at the second and subsequent levels will be fixed at RM50.00, and any stamp duty paid in excess will be remitted.

iii)      For projects that are cancelled by the parties who had offered the contracts, and stamp duty for all such contract had been paid, only the stamp duty at the ad valorem rate  will be refunded.  Stamp duty at the fixed rate of RM50.00 will not be refunded.

The remission of stamp duty is effective from 15 July 2009.  In view that the remission order cannot be gazetted immediately, approval of remission stamp duty meanwhile will be given under Section 80(1A) of Stamp Act 1949 on a case by case basis. 

Members may view the guidelines at the Institute’s website or at the MOF’s website at http://www.treasury.gov.my/index.php?option=com_content&view=category&id=83&Itemid=196&lang=my <http://pull.xmr3.com/p/21562-494044-8BDB/81865455/clickto2_gory-id=83-Itemid=196-lang=my.html>

Guidelines on refund of bad and doubtful debts under Service Tax Act 1975 and Sales Tax Act 1972

Section 31C of Sales Tax Act 1972 stipulates that a person may claim a refund of the sales tax paid in respect of taxable goods if the sales tax has been paid by him on or after 1 January 2003 and the sales tax payable to him has been provided in his accounts as doubtful debt or has been written off in his accounts as bad debt.  In addition, the Director General of RMC must be satisfied that all reasonable efforts have been made by such person to recover the sales tax.  The refund must be claimed within 6 years from the year in which the sales tax was paid. 

The Act defines “bad debts” as the outstanding amount of the payment in respect of the sale of taxable goods including the sales tax which is due to the person but has not been paid to, and is irrecoverable by the person; and “doubtful debts” as a provision made with respect to the outstanding amount in the person’s accounts consistent with the generally accepted accounting principles.

Regulation 19D of the Sales Tax Regulations 1972 further stipulates that a payment is deemed to be irrecoverable if the whole or any part of it has been written off in the seller’s accounts as bad debt and the purchaser

a)       has been filed for bankruptcy or is an adjudged bankrupt,

b)       has been placed under receivership,

c)       has voluntarily wound up or has been ordered by the court to wound up,

d)       has been filed a claim in court by the seller to recover the payment, or

e)       has not paid for the whole or any part of the payment after 6 months from the date such sales tax was paid.

Section 21B of the Service Tax Act 1975 and Regulation 16A of the Service Tax Regulations 1975 have similar provisions as the above.

The guidelines clarify the following:

i)              Refund is available to person who has ceased to be a taxable person under the following circumstances: 

a)    that the person has ceased to manufacture taxable goods/provide taxable services, or the person has been granted exemption from licensing or the annual sales turnover is below the threshold,

b)    that the person has manufactured taxable goods/provided taxable services without licence and has paid the tax but was unable to claim back from his clients,

ii)             Proof of reasonable efforts taken to recover the debts:

a)            For tax owed below RM500, at least 2 registered reminder letters were sent to the debtors;

b)            For tax owed between RM500 – RM10,000, notice of claims was sent to debtor through a law firm;

c)            For tax owed above RM10,000, statement of claims against the debtor was filed in the court

iii)            Documents required to facilitate the claim of refund:

a)            Letter of application for refund,

b)            Prescribed form for claim of service tax/sales tax refund (Form JKED 2),

c)            Statement of claims,

d)            Copy of sales invoices

e)            Form CJP 1 and any documentary evidence that the applicant has paid the relevant tax, such as copy of ledgers, bank statements, receipts, etc.

f)             Records or document that substantiate reasonable efforts have been taken to recover the debts

g)            Records to show that the uncollectable tax has been written off in the accounts,

h)            Declaration by a registered accountant that the amount has been debited as bad debt for claims of refund amounting to RM10,000 and below.  For claims of refunds above RM10,000, such a declaration should be made by a certified /chartered accountant.

i)              Other relevant documentary evidence that the debts are irrecoverable, such as court order that the debtor is declared bankrupt or is under receivership or liquidation, court paper for applicant who has filed a notice claim in the court, board of directors resolution for voluntary winding  up, etc.

iv)           An application for refund should be made for each debtor.  In view that the number of customers is huge for the telecommunications industry but the amount of each debt is small, the applicant may apply to the Director General of RMC for special treatment in respect of individual accounts. 

v)            Where the application for special treatment is approved, the following actions are considered as reasonable efforts taken to recover these debts:

a)            sending reminder letters

b)            reminding the customer through Interactive Voice Reminder,

c)            suspending the service to customer temporarily (Temporary Out-of-Service),

d)            calling or meeting  the customer to recover the debts,

e)            terminating the service to the customer and send the final bill.

Members who wish to know the detailed requirements may view the document at the Institute’s website or at the website of the RMC at

http://www.customs.gov.my/documents/Bahagian%20CD/garis%20panduan%20mengenai%20hutang%20lapuk%20dan%20hutang%20ragu%20di%20bawah%20akta%20cukai%20perkhidmatan%20dan%20akta%20cuk.pdf

Guidelines on refund of excise duty on returned damaged goods

Section 28 of the Excise Act 1976 stipulates that no dutiable goods shall be consumed or made use of in, or removed from, a place licensed under Section 20 or from a public excise warehouse or a licensed warehouse or excise control except upon payment of duty thereon or under bond for deposit in another public excise or licensed warehouse or for export to outside Malaysia. 

Where dutiable goods are damaged, destroyed or, by unavoidable accident, lost at any time before removal from excise control, the Director General may, pursuant to Section 14(1) of the EA, remit the whole or any part of the excise duty payable thereon.  

Locally manufactured goods on which excise duty has been fully settled and these goods have left the customs area cannot claim refund on excise duty paid when they are returned to the factory later due to damage or inferior quality.  Pursuant to Section 11(2)(b), the Minister is empowered to consider or approve a refund of excise duty levied on local manufactured goods and impose such conditions as he may deem fit.

The guidelines set out the procedures and conditions for application of such refund.  Applicants for refund should submit two sets of applications; one to the Tax Analysis Division of Treasury, and another to the Internal Tax Division of the RMC.  Members may view the document issued by the RMC containing the detailed requirements at the Institute’s website or at the website of the Royal Malaysian Customs at http://www.customs.gov.my/documents/Bahagian%20CD/garis%20panduan%20mengenai%20hutang%20lapuk%20dan%20hutang%20ragu%20di%20bawah%20akta%20cukai%20perkhidmatan%20dan%20akta%20cuk.pdf

Minutes of the Customs-Private Sector Consultative Panel Meeting No. 1/2009

The Royal Malaysian Customs (RMC) has recently released the minutes of the Customs-Private Sector Consultative Panel Meeting No.1/2009 held on 15 July 2009.  

Some of the issues discussed during the meeting were:

• criteria for the approval of public bonded warehouse licence (issue no. 6),
• proposal for on-line payment of service tax (issue no. 12),
• duty payment with the surety of bank guarantee (issue no. 19),
• delay in announcement of the ASEAN tariff reduction (issue no. 25),
• delay in issuance of Customs ruling – service tax (issue no. 26),
• refund of service tax on bad debts (issue no 28),
• review of definition of taxable services in the  Second Schedule of the Service Tax Regulations 1975 (issue 29),
• proposal to pay sales tax from the 10^th to the15th of every month (issue no. 30),
• payment of sales tax by telegraphic transfer (issue no. 31),
• proposal to increase the threshold from  RM100,000 to RM 200,000 for the imposition of sales tax (issue no. 35),  and
• abuse of licensed manufacturing warehouse (LMW) status (issue no.37).

Members can view the minutes at the Institute’s website.

IRB’s Notice on Taxation of Benefits-In-Kind

The above Notice has been issued as a result of the dialogue between professional bodies and the IRB on 8 May 2009. The IRB has informed of the following:

a)Benefits of free petrol

Employees can elect the tax treatment of the benefit of free petrol to be as follows:

(i)Be taxed at prescribed values under Appendix 2 of the Public Ruling No. 2/2004,

OR

(ii)Claim an exemption of RM2,400 on petrol used from/to home to/from working place and RM6,000 for official travels.

Where the employer is unable to segregate between petrol used from/to home to/from working place and for official travels, then only an exemption of RM6,000 will be given.

b) Benefits of telephone and payment of telephone bills

A concession is given to employers who had reported in the Form EA for the year of assessment 2008 the value of benefit enjoyed by employees on telephone (hardware) at RM300 and telephone bills paid by employer at RM300 (based on Appendix 2 of the Public Ruling No.2/2004), i.e., they do not have to revise the Form EA.

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PENGUMUMAN

PENGECUALIAN CUKAI KE ATAS MANFAAT BERUPA BARANGAN

Lanjutan daripada dialog bersama persatuan akauntan yang telah diadakan pada 8 Mei

2009, Lembaga Hasil Dalam Negeri Malaysia telah memohon pengesahan daripada

Kementerian Kewangan berhubung pengecualian cukai ke atas manfaat petrol

percuma, telefon dan bayaran bil telefon yang diterima oleh pekerja berkaitan dengan

penggajiannya. Kementerian Kewangan telah memberi persetujuan seperti berikut:

1. Manfaat petrol percuma

Sebelum tahun taksiran 2008, pekerja yang melaporkan manfaat petrol mengikut

nilai yang ditetapkan untuk petrol seperti di Lampiran 2 dalam Ketetapan Umum

No. 2/2004 hanya dikenakan cukai atas amaun yang rendah dibandingkan

dengan penggunaan persendirian sebenar. Oleh itu pengecualian ke atas

penggunaan petrol persendirian telah pun dinikmati oleh pekerja. Berdasarkan

asas tersebut, Kementerian Kewangan telah bersetuju pekerja diberi pilihan

untuk:

a. menentukan amaun petrol percuma yang dikenakan cukai mengikut nilai

yang ditetapkan untuk petrol seperti di Lampiran 2 dalam Ketetapan Umum

No. 2/2004 tanpa pengecualian diberikan; atau

b. mendapat pengecualian bagi amaun petrol yang digunakan seperti berikut:

• perjalanan dari rumah ke tempat kerja/dari tempat kerja ke rumah terhad

RM2,400;

• perjalanan untuk tujuan tugas rasmi terhad RM6,000

Sekiranya majikan tidak dapat menentukan amaun petrol percuma bagi

perjalanan dari rumah ke tempat kerja/dari tempat kerja ke rumah dan perjalanan

untuk tujuan tugas rasmi, pengecualian hanya diberi sehingga RM6,000.

2. Manfaat telefon dan bayaran bil telefon

Konsesi diberi kepada majikan untuk melaporkan manfaat telefon dan bayaran

bil telefon mengikut nilai yang ditetapkan seperti di butiran 1, perenggan 3,

Lampiran 2 dalam Ketetapan Umum No. 2/2004 iaitu:

Telefon (perkakasan): RM300

Bil telefon: RM300

Oleh itu majikan yang telah mengeluarkan Borang EA bagi tahun taksiran 2008

dan melaporkan amaun dikecualikan cukai mengikut nilai seperti di atas tidak

perlu membuat pindaan ke atas borang tersebut.

Dikeluarkan oleh: Jabatan Dasar Percukaian

Lembaga Hasil Dalam Negeri Malaysia

Tarikh: 10 Julai 2009

Addendum to Public Ruling on Trade Association (PR No. 6/2005)

The Inland Revenue (IRB) has issued the above Addendum to Public Ruling No. 6/2005 on 1 July 2009. This Addendum is issued in accordance to the amendment to Section 53 of the Income Tax Act 1967, as introduced by the Finance Act 2009 (Act 693), to include professional bodies as trade association. The addendum also provides illustration on tax treatment of adjusted loss and unabsorbed capital allowance from the members’ subscription. The Addendum is effective from year of assessment 2009.

You may view the Addendum from the attachment or downloaded it from the Institute’s websites or from the IRB’s website at the following link: http://www.hasil.gov.my/english/pdf/Add_PR06_2005.pdf