MIDA ONLINE APPLICATION FOR DUTY EXEMPTION USING DIGITAL CERTIFICATE

Please be informed that the Malaysian Investment Development Authority (MIDA) has its MIDA e-Services Portal to assist members of the public in applying for their manufacturing licences as well as duty exemptions.

The online applications available.

For further details, members may view the following user guides from MIDA website:


Software and Hardware Requirements
General User Guide
Application Form User Manual

INDIRECT TAX

1. Sales Tax (Rates of Tax No.1) Order 2012 [P.U. (A) 354/2012]

With effect from 31 October 2012, all goods (except goods exempt under Section 8 of the Sales Tax Act 1972 and goods imported on or with any person entering Malaysia or in the baggage of such person and intended for non-commercial use (excluding motor vehicles, alcoholic beverages, spirits, tobacco, cigarettes, tyres and tube)) shall be subject to sales tax at 10%.

The Sales Tax (Rates of Tax No.1) Order 2008 [P.U. (A) 92/2008] is revoked.

2. Sales Tax (Rates of Tax No.2) Order 2012 [P.U. (A) 355/2012

Notwithstanding the above (Sales Tax (Rates of Tax No.1) Order 2012 [P.U. (A) 354/2012], with effect from 31 October 2012, the goods appearing in

(a) The First Schedule shall not be subject to sales tax;

(b) The Second Schedule shall be subject to sales tax at 5%;

(c) The Third Schedule shall be subject to sales tax at 20%;

(d) The Fourth Schedule shall be subject to sales tax at the rate specified.

The Sales Tax (Rates of Tax No.2) Order 2008 [P.U. (A) 93/2008] is revoked.

INDIRECT TAX

I.          Sales Tax (Exemption) (Amendment) (No.4) Order 2012 [P.U.(A) 352/2012]

The Order, which is deemed to be effective from 1 January 2012, amends Schedule A of the Sales Tax (Exemption) Order 2008 [P.U. (A) 91/2008]. With effect from 1 January 2012, cash register (Point-of-sales (POS) terminal) (subheading 8470.50 000) is exempted from sales tax.

II.          Sales Tax (Exemption) (Amendment) (No.5) Order 2012 [P.U.(A) 353/2012]

The Order deletes Schedule A of the Sales Tax (Exemption) Order 2008 [P.U. (A) 91/2008] and amends paragraphs 2-4 of the Sales Tax (Exemption) Order 2008 as follows: 

Exemption from payment of sales tax

2.     Subject to paragraph 3 of this Order, the goods specified in Schedule A and the persons and goods specified in column (2) and column (3) of Schedule B or Schedule C are exempted from the payment of sales tax, subject to the conditions where applicable, as specified in Schedule B or Schedule C.

Extent of exemption

3.     The exemption referred to in paragraph 2 shall be granted in full in respect of the goods mentioned in column (3) of Schedule A and column (3) of Schedule B or Schedule C to this Order unless otherwise specified in the conditions.

Classification of goods

4.    (1)     The classification of goods specified in this Order shall comply with the Rules of Interpretation in the Customs Duties Order 2012 [P.U. (A) 275/2012].

(2)     For the purpose of Schedule A?o:p>

(a)     only goods described in column (3) shown against the tariff heading in column (2) shall be exempted. Other goods, though might be classified under the same tariff headings but which are not specified, shall not be exempted.

(b)     where the description of goods in column (3) are shown in general against the tariff headings in column (2), the exemption shall apply to all such goods as classified within that tariff headings.?o:p>

This Order came into operation on 31 October 2012.

The goods specified in Schedule A of the Sales Tax (Exemption) Order 2008 [P.U. (A) 91/2008] now appear in the First Schedule of the Sales Tax (Rates of Tax No.2) Order 2012 [P.U. (A) 355/2012].

JOINT MEMORANDUM ON ISSUES ARISING FROM 2013 BUDGET & FINANCE (NO.2) BILL 2012

Please be informed that the Chartered Tax Institute of Malaysia (CTIM) together with the Malaysian Institute of Accountants (MIA) and the Malaysian Institute of Certified Public Accountants (MICPA) have prepared and submitted a Joint Memorandum on Issues Arising From 2013 Budget and Finance (No.2) Bill 2012 to the Ministry of Finance (MOF) and the Inland Revenue Board (IRB) on 16 November 2012.

Members may view the memorandum at the Institute's website.

Thin Capitalisation Rules --- Deferment to 31 December 2015

Please be informed that the Tax Analysis Division of Ministry of Finance (MoF) has notified the Institute that the implementation of Thin Capitalisation Rules has been deferred to 31 December 2015.

A copy of the MoF letter on Deferment of Thin Capitalisation Rules dated 11 December 2012 has been uploaded to the Institute's website at Members Only > Recent Updates.

Thin Capitalisation Rules --- Deferment to 31 December 2015

Please be informed that the Tax Analysis Division of Ministry of Finance (MoF) has notified the Institute that the implementation of Thin Capitalisation Rules has been deferred to 31 December 2015.

A copy of the MoF letter on Deferment of Thin Capitalisation Rules dated 11 December 2012 has been uploaded to the Institute抯 website at Members Only > Recent Updates.

PUBLIC RULING NO. 9/2012 ?TAXATION OF REAL ESTATE INVESTMENT TRUSTS / PROPERTY TRUST FUNDS

The Inland Revenue Board (IRB) issued the above Public Ruling (PR) on 26 November 2012. This Ruling replaces the Guidelines on Real Estate Investment Trusts or Property Trust Funds (REITs/PTF) dated 29 June 2005 issued by the IRB.

Objective

The objective of this Ruling is to explain the tax treatment accorded to approved REITs/PTF in Malaysia.

Some of the salient points made in the Ruling are highlighted below:

Basis of assessment

The basis period of a REIT/PTF is determined in accordance with provisions of section 21A of the Income Tax Act 1967 (ITA), [except for subsection 21A(5)]. The basis year for a year of assessment (YA) or the financial accounting period ending on a day other than 31 December is the basis period of the REIT/PTF for that year of assessment.

Special tax treatment

Prior to YA 2005, REITs/PTF are taxed in accordance with provisions of the ITA applicable to unit trusts (sections 61(1), 63A and 63B). 

With effect from YA 2005, section 63C is applicable. Under this section ?

• Rental income received by the REIT/PTF from investments in real property is treated as business income.
• Notwithstanding the above, the amount of deductible expenses is restricted to the gross income from the rental source.  Any excess expenditure is not allowed against other sources of income, or to be carried forward for deduction in subsequent years of assessment.  No deduction of expenses is allowed if a source does not produce any income. (Refer Example 8 and 9 in the PR.)
• Capital allowance (under Schedule 3 of the ITA) is allowed to be deducted in ascertaining statutory income from rental but the amount is restricted to adjusted income of the rental source for that YA, and any excess capital allowance is not allowed to be carried forward to the following YA. (Refer Example 7 in the PR.)

The following points pertaining to taxation of income of REITs/PTF are to be noted:

• Rental income from all rental properties is treated as a single source of income.
• Section 33(1) of the ITA is applicable in determining allowable expenses. An expense which is deductible under that section is manager抯 remuneration, but trustee抯 fee is not regarded as deductible.
• A special deduction from the rental source is allowed under the Income Tax (Deduction for Establishment Expenditure of Real Estate Investment Trust or Property Trust Fund) Rules 2006, in respect of legal, valuation and consultancy fees for establishing REITs/PTF which were incurred prior to approval by the Securities Commission.
• A REIT/PTF deriving rental income from a building that is used (by the tenant) as an industrial building may claim industrial building allowance (IBA) against adjusted income from that rental source.
• From YA 2008, a company which disposes of an industrial building on which it has claimed (or should have claimed) IBA, to a REIT/PTF, is deemed to have disposed of that building for a sum equal to the residual expenditure of the building on the first day of the company抯 final period, which amount is deemed to be the qualifying expenditure (QE) of the acquirer.  As such, the disposer is not subject to any balancing charge or allowance, while the acquirer (REITs/PTF) is eligible to claim IBA on the deemed QE. (Refer Example 3 in the PR.)
• Under transitional provisions, unabsorbed losses and capital allowances ascertained prior to YA 2005 are allowable against income for YA 2005 and subsequent years of assessment. (Refer Example 6 in the PR.)

Exemption of income of REITs/PTF

Prior to YA 2007 ?REITs/PTF are tax-exempt on their total income for a YA on an amount equal to the amount distributed to unit holders in the basis period for a YA. The amount not distributed is subject to tax at the prevailing corporate tax rate.

From YA 2007 ?REITs/PTF are fully exempt from tax for a YA if they distribute to their unit holders 90% or more of their total income in the basis period for that YA. [Section 61A(1)]

(Refer Examples 11 to 13 of the PR.)

Interest, dividends and other exempt income received by REITs/PTF

A list of the types of interest received by REITs/PTF which are tax-exempt is given in paragraph 9.3 of the PR. 

Taxable dividend income forms part of the total income of REITs/PTF.  When the total income of the REIT/PTF is distributed to the unit holder, the distribution is subject to tax at the unit holder level. 

Exempt income received by REITs/PTF (e.g. capital gains and exempt interest) is not included in computing the total income of REITs/PTF.

(Refer to Examples 14 to 17 for illustrations of the tax treatment on various types of income received by REITs/PTF.)

Distribution of REITs/PTF income to unit holders

Grace period ?If the REIT/PTF intends to distribute at least 90% of its total income but falls short of that percentage at the end of the basis period, a grace period of 2 months from the closing of its accounts is given for the REIT/PTF to distribute the balance so as to qualify for tax exemption at the REITs/PTF level.

Withholding tax ?Withholding tax must be deducted under section 109D when distribution of income is made to unit holders by REITs/PTF which are exempt under section 61A of the ITA. The rates of withholding tax that are applicable to various classes of unit holders are found in paragraph 11.4 of the PR.

Information to be provided ?Details that must be provided on the distribution voucher are listed in paragraph 11.6 of the PR.  The REITs/PTF must also provide information relating to unit holders to the IRB.  The list of required information is given in paragraph 11.7.

Payment of withholding tax and penalty for failure to pay

The rules relating to payment of withholding tax and administrative procedures for making payment are explained in paragraph 12 of the PR.

Paragraph 13 states that the penalty for failure to pay the amount of withholding tax due under subsection 109D(2) of the ITA is an increase of 10% of the amount which the payer had failed to pay, which amount, together with the amount which the payer had failed to pay,  becomes payable immediately to the Director General of Inland Revenue.

A specimen sample of a REITs/PTF distribution voucher is found in Appendix 1.

Members may refer to the full text of PR 9/2012 at the CTIM website or the IRB website.