The following statutory orders were recently gazetted:
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P.U.(A)
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Order
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Effective from
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420
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Income Tax (Exemption) (No.7) Order 2012
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8 October 2011
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421
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Income Tax (Exemption) (No.8) Order 2012
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8 October 2011
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422
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Income Tax Exemption) (No.9) Order 2012
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14 July 2010
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Background
Budget 2012 contained a proposal to grant the following tax incentives for profit-oriented private schools and international schools:
- Private schools:
(i) 70% income
tax exemption for a period of 5 years: or
(ii) Investment
tax allowance (ITA) of 100% on qualifying capital expenditure (QCE) incurred
within a period of 5 years to be set off against a maximum of 70% of statutory
income (SI).
- International schools
(i) 70% income
tax exemption for a period of 5 years
(Legislation (prior to issuance of above Orders)
allows such schools to enjoy ITA of 100% of QCE to be set off against a maximum
of 70% of SI for 5 years.)
The above orders give legal effect to these proposals.
The following are some salient features of the
respective Exemption Orders.
Exemption
The above orders grant exemption from payment of income tax in a basis
period for a year of assessment to a qualifying person (QP), on the statutory
income derived from a business of private school in Malaysia, in an amount
which is equivalent to 100% of QCE incurred in that basis period, subject to a
maximum of 70% of SI. The effect of the
exemption is similar to the granting of ITA, as proposed under Budget
2012.
The first Order (No.7) applies to private
schools and the latter (No. 9) applies to international schools. The exemption is granted for a period of 5
years commencing from a date to be determined by the Malaysian Investment
Development Authority under both Orders.
Qualifying person
The following table lists the conditions to be a QP under the respective
Orders.
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A 搎ualifying
person?means:
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(No.7) Order
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(No. 9) Order
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(a) A society established under the Societies
Act 1966 prior to 8 Oct 2011 or a
company incorporated under the Companies Act 1965.
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A society established under the Societies Act 1966
prior to 14 July 2010 or a company
incorporated under the Companies Act 1965.
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(b) Resident in Malaysia
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(c) Registered with the Ministry of Education
(MOE) and has complied with terms and regulations as determined by that
Ministry under the Education Act 1996 to carry on the business of private school;
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Registered with the MOE and has complied with terms
and regulations as determined by that Ministry under the Education Act 1996
to carry on the business of international
school;
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(d) Approved by the
Minister
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Definitions
?SPAN style="FONT:
7pt 'Times New Roman'"> The following terms are defined in each respective Order (please refer
to the full text for definitions).
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(No.7) Order
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(No 9) Order
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Qualifying capital expenditure
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Qualifying capital expenditure
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Private school
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International
School
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?SPAN style="FONT:
7pt 'Times New Roman'"> The terms 搃ncurred? 揗alaysian Industrial
Development Authority? 損re-school education?
and 搑elated company?are similarly defined in both Orders. (Please refer to
full text.)
Withdrawal of tax Exemption
Under both Orders, the exemption will be withdrawn if the QP disposes of
the asset within 2 years from the date of acquisition of the asset.
Application
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(No.7) Order
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(No 9) Order
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The Order applies to a QP who has made an
application to MIDA :
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between 8 October 2011 and 31 December 2015; and
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between 14 July 2010 and 31 December 2015; and
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has not commenced the business of private school
prior to the above application
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incurred QCE from the year of assessment 2010
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Non-application
It is provided under both Orders, that the respective Order would not apply for a year of assessment if the QP has, in that year of assessment:
?SPAN style="FONT:
7pt 'Times New Roman'"> Made any claims for Reinvestment allowance, or for any deductions under
any Rules made under section 154 of the
Income Tax Act 1967 (ITA) (except for Schedule 3 allowances);
?SPAN style="FONT:
7pt 'Times New Roman'"> Been granted any incentive under the Promotion of Investments Act 1986,
or any exemption under section 127 of the ITA; or
?SPAN style="FONT:
7pt 'Times New Roman'"> Fails to meet any conditions specified by the Minister of Finance in his
letter of approval.
Please read the full text of the Rules by clicking on the following link.
Exemption
This Order grants income tax exemption to a QP for a year of assessment on the statutory income derived from a business of private school or international school in Malaysia. The amount exempted is 70% of statutory income, which must be reduced:
(i) firstly, by current year adjusted loss
from a business/es other than the business of private or international school
in Malaysia; and
(ii)
next, by any unabsorbed loss or current year adjusted loss from the
business of private school or international school in Malaysia exempted under
this Order.
揚rivate school?and 搃nternational school?are among the terms which
are defined in the Order.
Exempt period
The exemption is granted for a period of 5 years, commencing from a date to be determined by MIDA.
Qualifying person
The conditions for a
qualifying person are the same as for Orders No. 7 and 9, except for item (c)
which should read:
搑egistered with the Ministry of Education
Malaysia and has complied with terms and regulations as determined by that
Ministry under the Education Act 1996 to carry on the business of a private
school or international school on or after 8 October 2011?
Adjusted losses
The Order sets out the rules
relating to adjusted loss (current year loss and unabsorbed loss brought
forward) in the computation of exempt statutory income of the business of
private schools or international schools.
Among these are the following:
?SPAN
style="FONT: 7pt 'Times New Roman'">
Any losses (current year and
brought forward) which are utilized to reduce the statutory income of the
business of private school or international school should not be taken into
account for the purpose of subsections 43(2) and 44(2) of the ITA
?SPAN
style="FONT: 7pt 'Times New Roman'">
Any current year loss or
unabsorbed loss from the business of private school or international school
that are not utilized to reduce the statutory income during the exempt period
is carried forward for utilization in the basis period following cessation of
the exempt period, in accordance with subsections 43(2) and 44(2) of the ITA,
and in subsequent basis periods.
Application
The Order applies to a QP
who has made an application to MIDA on or after 8 October 2011 but not later
than 31 December 2015, and who has not commenced the business of private school
or international school prior to the application.
Non-application
The circumstances listed in
this Order under which the Order is not applicable are the same as those listed
for Orders No. 7 and No.9. (Refer above.)
Please read the full text of the Rules by clicking on the following link.
