Members are informed that Consumption Tax Trends 2012, an OECD publication written by Stephane Buydens of the OECD Centre for Tax Policy and Administration (CPTA), is available at the Institute’s Resource Centre.
This publication presents information relative to consumption taxes in OECD countries, as at 1 January 2012. It illustrates the evolution of consumption taxes as revenue instruments. It identifies the large number of differences that exist in respect of consumption tax base, rates and implementation rules while highlighting the features underlying their development. It also notes recent developments in the Value Added Tax/Goods and Services Tax area, including international issues on taxation of services and intangibles, and in particular, describes the systems in Canada, India and Brazil.
This publication provides an update of the OECD work on the OECD International VAT/GST Guidelines, which is being developed with the input of businesses, academics and non-OECD economies.
Tuesday, 19 February 2013
Friday, 15 February 2013
IRB Announcement on New Payment Receipts
The Inland Revenue Board (IRB) has informed that from 18 February 2013 new payment receipts will be issued at all IRB payment counters.
Members may view the Announcement on New Payment Receipts at www.hasil.gov.my
Members may view the Announcement on New Payment Receipts at www.hasil.gov.my
Friday, 8 February 2013
Special Dialogue on Tax Audit and Investigation with IRB
A Special Dialogue on Tax Audit and Investigation with Inland Revenue Board (IRB) initiated by CTIM was held on 29 January 2013 (refer to our e-CTIM No.178/2012 dated 13 December 2012).
The purpose of the Dialogue is to seek clarification from the IRB on the procedure and practice of criminal investigation and investigation under Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (Act 613) (AMLA). CTIM is pleased to inform members of the following based on our understanding:
1) The IRB informed that there will be only one investigation process, i.e. all investigations will be carried out in accordance with the criminal investigation requirements. Whether a case will be prosecuted under criminal investigation depends on the strength of evidence gathered in the investigation. Where the evidence gathered does not warrant a criminal prosecution, the IRB will then seek for a civil settlement.
IRB has indicated that unless it is certain that some criminal activities are involved, it will not go ahead to prosecute a taxpayer under criminal investigation. It has also indicated that repeated late filing of Income Tax Return Form (ITRF) may trigger suspicion for criminal investigation or investigation under AMLA.
2) An investigation under AMLA usually involves proceeds arising from serious offences. When an investigation commences, taxpayers will be informed upfront as to whether the investigation is one under AMLA. The investigation will be handled by the same investigating officers for both IRB tax investigations and AMLA cases. A person will be prosecuted under AMLA if there is sufficient evidence as determined by the Attorney General.
3) The IRB has provided the following comments in answer to certain questions raised on current standard practices:
4) Members are advised by IRB to read the Tax Audit Framework and Tax Investigation Framework for the purpose of a tax agent licence interview as questions may be asked on these Frameworks. Currently the Tax Investigation Framework is being reviewed by the authority.
CTIM has requested the IRB to consider the following:
That the Revised Tax Investigation Framework (draft) be shared with the professional bodies for input before it is finalized.
That the statement recorded in a criminal investigation be shared with the tax agent and taxpayer.
The requests were received positively.
The purpose of the Dialogue is to seek clarification from the IRB on the procedure and practice of criminal investigation and investigation under Anti-Money Laundering and Anti-Terrorism Financing Act 2001 (Act 613) (AMLA). CTIM is pleased to inform members of the following based on our understanding:
1) The IRB informed that there will be only one investigation process, i.e. all investigations will be carried out in accordance with the criminal investigation requirements. Whether a case will be prosecuted under criminal investigation depends on the strength of evidence gathered in the investigation. Where the evidence gathered does not warrant a criminal prosecution, the IRB will then seek for a civil settlement.
IRB has indicated that unless it is certain that some criminal activities are involved, it will not go ahead to prosecute a taxpayer under criminal investigation. It has also indicated that repeated late filing of Income Tax Return Form (ITRF) may trigger suspicion for criminal investigation or investigation under AMLA.
2) An investigation under AMLA usually involves proceeds arising from serious offences. When an investigation commences, taxpayers will be informed upfront as to whether the investigation is one under AMLA. The investigation will be handled by the same investigating officers for both IRB tax investigations and AMLA cases. A person will be prosecuted under AMLA if there is sufficient evidence as determined by the Attorney General.
3) The IRB has provided the following comments in answer to certain questions raised on current standard practices:
- As to whether a tax agent can be present with a taxpayer at an interview in relation to a criminal tax investigation, the IRB confirmed that a tax agent will continue to be allowed to present and advise or represent the taxpayer when the investigation or interview is in progress;
- The IRB commented that, except for the case where Section 114(1A) applies, a tax agent will not be prosecuted on the statement or advice made on behalf of the taxpayer based on the information provided by the taxpayer;
- The IRB confirmed that a tax agent may be called upon by the IRB to be a witness for a criminal tax investigation case if he has knowledge of the tax matters of the taxpayer and is able to assist in providing information on possible tax evasion.
4) Members are advised by IRB to read the Tax Audit Framework and Tax Investigation Framework for the purpose of a tax agent licence interview as questions may be asked on these Frameworks. Currently the Tax Investigation Framework is being reviewed by the authority.
That the Revised Tax Investigation Framework (draft) be shared with the professional bodies for input before it is finalized.
That the statement recorded in a criminal investigation be shared with the tax agent and taxpayer.
The requests were received positively.
Thursday, 7 February 2013
List of Taxable and Non-taxable Items under Second Schedule to the Service Tax Regulations, 1975
Please be informed that the Royal Malaysian Customs (RMC) has recently updated the List of Taxable and Non-taxable Items under Second Schedule to the Service Tax Regulations 1975, with extensive changes for services under Group A, B1, B2, C, D, E, E1, F and G of the Second Schedule to the Service Tax Regulations, 1975.
Members are advised to study the updated list carefully which is available at RMC website.
Members are advised to study the updated list carefully which is available at RMC website.
Filing Programme For Income Tax Return Forms (ITRF) In The Year 2013
The Inland Revenue Board
(IRB) has issued the 2013 Filing Programme. The salient points to note are as
follows:
- Where the due date for filing of the Income
Tax Return Form (ITRF) falls during the calendar year 2013, a grace period
of 15 days is granted
for e-Filing. This grace period also applies for settlement of tax under subsections 103(1), of the
Income Tax Act 1967 (ITA).
- With regard to filing via post, a grace period
of 3 working days is
granted. However, there is NO
grace period for filing by hand.
- Any application for an extension of time for filing and for payment of the balance of tax payable must be made to IRB separately at least 15 days before the due date for the submission of the ITRF. The applications should be addressed to the Director of Policy and Operations Division, IRB at Cyberjaya. Where the approval is granted, the ITRF must be submitted by e-Filing, failing which, the approval will be withdrawn and penalty imposed under subsection 112(3) of the ITA.
- With regard to the Form E 2012, a grace period until 30 April 2013 is granted for e-Filing.
- For cases where penalty is imposed under
subsection 112(3)
of the ITA, a reduction of 5% from the rates fixed by the IRB will be
given for e-Filing cases.
- With regard to the assessment under sections 90(2A), 90(3), 91, 92, 96A and 101(2) of the ITA, the tax payable / balance of tax
payable must be settled within
30 days from the assessment date. However, a 7 days grace period is given.
For detailed information, members may view the 2013
Filing Programme at the IRB website.
The Inland Revenue Board (IRB) has issued the above
Schedule showing the date of general issue of ITRFs and the due date for
submission of these ITRFs.
Please note that the following new ITRFs will be
issued
·
BT --- Resident individual (Knowledge Worker/Expert Worker)
with business, employment and other income
·
MT --- Non-resident individual (Knowledge Workers) with business,
employment and other income
·
PT --- Limited
Liability Partnership
·
TN --- Business Trust
Members may view the schedule
at the IRB’s website.
Wednesday, 6 February 2013
TAX INCENTIVES FOR PRESCHOOL EDUCATION AND CHILD CARE CENTRES
1. Income Tax (Exemption) (No. 3) Order 2013 [P.U.(A)13/2013]
2. Income Tax (Deduction For The Provision Of Child Care Centre) Rules 2013 [P.U.(A)15/2013]
The above legislation (both dated 18 January 2013) give legal effect to the proposal in the 2013 Budget for granting tax incentives for preschool education and child care centres.
Income Tax (Exemption) (No. 3) Order 2013 [P.U. (A) 13/2013]
This Order is effective from the year of assessment (YA) 2013.
Application – The Order applies to a person in respect of a business of his for the provision and maintenance of a kindergarten registered with the Ministry of Education Malaysia.
Non-application – The Order is not applicable to a kindergarten which is integrated with a private primary school.
Exemption – Exemption from payment of income tax is granted to a person referred to above in respect of statutory income derived from the business referred to above for a period of five consecutive years of assessment (the exempt YA) commencing from –
a) YA 2013 for an existing child care centre; or
b) the first invoice issued by the child care centre that commences its business from YA 2013.
“Statutory income” is determined after deducting allowances under Schedule 3 of the Income Tax Act 1967 (ITA) notwithstanding that no claim for such allowances has been made.
Losses – Any adjusted loss incurred –
a) from the YA in the basis period in which the income that qualifies for exemption commenced until the YA immediately prior to the exempt YA; and
b) during the exempt YA;
must be carried forward to be deducted against statutory income from that source in the post-exempt years of assessment until fully utilized, and any losses utilized in this way will be disregarded for the purposes of subsection 43(2) and 44(2) of the ITA.
Separate sources and accounts – Where a person exempted under this Order carries on another business other than a child care centre, separate accounts must be maintained in respect of the business of provision and maintenance of a kindergarten, which is treated as a separate business source.
Income Tax (Deduction For The Provision Of Child Care Centre) Rules 2013 [P.U. (A) 15/2013]
The Rules are effective from YA 2013.
Application – These Rules apply to a child care centre registered with the Department of Social Welfare under the Child Care Centre Act 1984.
Deduction (Rule 3) – The following expenses are allowed to be deducted in ascertaining adjusted income for a basis period for a year of assessment from the business of a person who is resident in Malaysia:
a) expenditure on the provision and maintenance of a child care centre; and
b) child care allowance to persons employed by him in his business.
(“Person” refers to any person who, for the purpose of a business of his, provides a child care centre for the benefit of persons employed by him in his business.)
The deduction allowed under this rule is in addition to any deduction allowed under section 33 of the Income Tax Act 1967 (ITA). (In other words, a double deduction is allowed to be claimed.) However, where the Director General of Inland Revenue (DGIR) is of the opinion that the amount claimed exceeds what would reasonably be expected to be incurred in the ordinary course of business, the DGIR may disallow the amount of the excess as a deduction under these Rules.
Where the expense is claimed for a period which overlaps two basis periods, the period common to both periods is deemed to fall into the first basis period only.
The legislation can be viewed from the attorney general’s chambers website- www.federalgazette.agc.gov.my.
2. Income Tax (Deduction For The Provision Of Child Care Centre) Rules 2013 [P.U.(A)15/2013]
The above legislation (both dated 18 January 2013) give legal effect to the proposal in the 2013 Budget for granting tax incentives for preschool education and child care centres.
Income Tax (Exemption) (No. 3) Order 2013 [P.U. (A) 13/2013]
This Order is effective from the year of assessment (YA) 2013.
Application – The Order applies to a person in respect of a business of his for the provision and maintenance of a kindergarten registered with the Ministry of Education Malaysia.
Non-application – The Order is not applicable to a kindergarten which is integrated with a private primary school.
Exemption – Exemption from payment of income tax is granted to a person referred to above in respect of statutory income derived from the business referred to above for a period of five consecutive years of assessment (the exempt YA) commencing from –
a) YA 2013 for an existing child care centre; or
b) the first invoice issued by the child care centre that commences its business from YA 2013.
“Statutory income” is determined after deducting allowances under Schedule 3 of the Income Tax Act 1967 (ITA) notwithstanding that no claim for such allowances has been made.
Losses – Any adjusted loss incurred –
a) from the YA in the basis period in which the income that qualifies for exemption commenced until the YA immediately prior to the exempt YA; and
b) during the exempt YA;
must be carried forward to be deducted against statutory income from that source in the post-exempt years of assessment until fully utilized, and any losses utilized in this way will be disregarded for the purposes of subsection 43(2) and 44(2) of the ITA.
Separate sources and accounts – Where a person exempted under this Order carries on another business other than a child care centre, separate accounts must be maintained in respect of the business of provision and maintenance of a kindergarten, which is treated as a separate business source.
Income Tax (Deduction For The Provision Of Child Care Centre) Rules 2013 [P.U. (A) 15/2013]
The Rules are effective from YA 2013.
Application – These Rules apply to a child care centre registered with the Department of Social Welfare under the Child Care Centre Act 1984.
Deduction (Rule 3) – The following expenses are allowed to be deducted in ascertaining adjusted income for a basis period for a year of assessment from the business of a person who is resident in Malaysia:
a) expenditure on the provision and maintenance of a child care centre; and
b) child care allowance to persons employed by him in his business.
(“Person” refers to any person who, for the purpose of a business of his, provides a child care centre for the benefit of persons employed by him in his business.)
The deduction allowed under this rule is in addition to any deduction allowed under section 33 of the Income Tax Act 1967 (ITA). (In other words, a double deduction is allowed to be claimed.) However, where the Director General of Inland Revenue (DGIR) is of the opinion that the amount claimed exceeds what would reasonably be expected to be incurred in the ordinary course of business, the DGIR may disallow the amount of the excess as a deduction under these Rules.
Where the expense is claimed for a period which overlaps two basis periods, the period common to both periods is deemed to fall into the first basis period only.
The legislation can be viewed from the attorney general’s chambers website- www.federalgazette.agc.gov.my.
TAX INCENTIVES FOR CHILD CARE CENTRES AND PRESCHOOL EDUCATION (2013 BUDGET PROPOSALS)
1. Income Tax (Exemption) Order 2013 [P.U. (A) 3/2013]
2. Income Tax (Industrial Building Allowance) (Child Care Centre) Rules 2013 [P.U. (A) 2/2013]
3. Income Tax (Industrial Building Allowance) (Kindergarten) Rules 2013 [P.U. (A) 1/2013]
The above Exemption Order and Rules, all dated 2 January 2013, have been issued to give legal effect to tax incentives for child care centres and preschool education proposed in the 2013 Budget.
Income Tax (Exemption) Order 2013 [P.U. (A) 3/2013]
This Order is effective from the year of assessment (YA) 2013.
Application – The Order applies to a person in respect of a business of his for the provision and maintenance of a child care centre registered with the Department of Social Welfare under the Child Care Centre Act 1984.
Exemption – Exemption from payment of income tax is granted to a person referred to above in respect of statutory income derived from the business referred to above for a period of five consecutive years of assessment (the exempt YA) commencing from –
a) YA 2013 for an existing child care centre; or
b) the first invoice issued by the child care centre that commences its business from YA 2013.
“Statutory income” is determined after deducting allowances under Schedule 3 of the Income Tax Act 1967 (ITA) notwithstanding that no claim for such allowances has been made.
Losses – Any adjusted loss incurred –
a) from the YA in the basis period in which the income that qualifies for exemption commenced until the YA immediately prior to the exempt YA; and
b) during the exempt YA;
must be carried forward to be deducted against statutory income from that source in the post-exempt years of assessment until fully utilized, and any losses utilized in this way will be disregarded for the purposes of subsection 43(2) and 44(2) of the ITA.
Separate sources and accounts – Where a person exempted under this Order carries on another business other than a child care centre, separate accounts must be maintained in respect of the business of a child care centre, which is treated as a separate business source.
Income Tax (Industrial Building Allowance) (Child Care Centre) Rules 2013 [P.U. (A) 2/2013]
Income Tax (Industrial Building Allowance) (Kindergarten) Rules 2013 [P.U. (A) 1/2013]
The above Rules take effect from YA 2013. Their objectives are similar in that they both grant industrial building allowance (IBA) in respect of buildings used for the purpose of the targeted businesses. The following are the meanings of ‘Industrial building’ (IB) as stated in the respective Rules:
Industrial building for the purpose of Schedule 3 to the ITA
Rule 3 of the Income Tax (Industrial Building Allowance) (Child Care Centre) Rules 2013, states that a building which is constructed or purchased by a person where –
a) that person is the owner of that building; and
b) that building is used by that person for the purpose of a business of childcare centre registered with the Department of Social Welfare
shall be treated as an IB for the purposes of Schedule 3 to the ITA.
Rule 3 of the Income Tax (Industrial Building Allowance) (Kindergarten) Rules 2013, states that a building which is constructed or purchased by a person where –
a) that person is the owner of that building; and
b) that building is used by that person for the purpose of a business relating to the provision and maintenance of a kindergarten approved by the Ministry of Education
shall be treated as an IB for the purposes of Schedule 3 to the ITA.
The Rules above apply to qualifying building expenditure incurred by the person for the purpose of his business relating to the purchase or construction of a building referred to in rule 3 of the respective Rules (above).
The following rules are similar under both the above Rules:
Rate of IBA – The rate is one-tenth or 10% of qualifying building expenditure for each YA for 10 years.
Building used partly as IB – Where only a part of the building is used as an IB, if the capital expenditure incurred on the construction of the part not used as an IB is not more than 10% of the expenditure incurred on the construction of the whole building, the building shall be treated as an IB.
Where expenditure incurred in construction of the part not used as an IB is not identifiable from expenditure incurred on the whole building, the part that is not identifiable shall be apportioned by reference to the respective floor areas of those respective parts or in such manner as directed by the Director General of Inland Revenue.
Building used for more than one business – Where an IB used for the purpose of the business referred to in rule 3 of the respective Rules (above), is also used for the purpose of another business, the allowances that fall to be made under Schedule 3 of the ITA shall be deducted as is reasonable, having regard to the extent to which the building is used for the purpose of the business referred to in rule 3 of the respective Rules.
Disposal of IB – Subrule 5(5) provides that if an IB is disposed of within 2 years from the date the qualifying building expenditure was incurred, any allowance which falls to be made but for subrule 5(5) shall not be made, and if such an allowance has been made, a balancing charge equal to the amount of such allowance will be made for the YA in the basis period in which the building was disposed of.
The legislation can be viewed from the website of Attorney General Chambers.
2. Income Tax (Industrial Building Allowance) (Child Care Centre) Rules 2013 [P.U. (A) 2/2013]
3. Income Tax (Industrial Building Allowance) (Kindergarten) Rules 2013 [P.U. (A) 1/2013]
The above Exemption Order and Rules, all dated 2 January 2013, have been issued to give legal effect to tax incentives for child care centres and preschool education proposed in the 2013 Budget.
Income Tax (Exemption) Order 2013 [P.U. (A) 3/2013]
This Order is effective from the year of assessment (YA) 2013.
Application – The Order applies to a person in respect of a business of his for the provision and maintenance of a child care centre registered with the Department of Social Welfare under the Child Care Centre Act 1984.
Exemption – Exemption from payment of income tax is granted to a person referred to above in respect of statutory income derived from the business referred to above for a period of five consecutive years of assessment (the exempt YA) commencing from –
a) YA 2013 for an existing child care centre; or
b) the first invoice issued by the child care centre that commences its business from YA 2013.
“Statutory income” is determined after deducting allowances under Schedule 3 of the Income Tax Act 1967 (ITA) notwithstanding that no claim for such allowances has been made.
Losses – Any adjusted loss incurred –
a) from the YA in the basis period in which the income that qualifies for exemption commenced until the YA immediately prior to the exempt YA; and
b) during the exempt YA;
must be carried forward to be deducted against statutory income from that source in the post-exempt years of assessment until fully utilized, and any losses utilized in this way will be disregarded for the purposes of subsection 43(2) and 44(2) of the ITA.
Separate sources and accounts – Where a person exempted under this Order carries on another business other than a child care centre, separate accounts must be maintained in respect of the business of a child care centre, which is treated as a separate business source.
Income Tax (Industrial Building Allowance) (Child Care Centre) Rules 2013 [P.U. (A) 2/2013]
Income Tax (Industrial Building Allowance) (Kindergarten) Rules 2013 [P.U. (A) 1/2013]
The above Rules take effect from YA 2013. Their objectives are similar in that they both grant industrial building allowance (IBA) in respect of buildings used for the purpose of the targeted businesses. The following are the meanings of ‘Industrial building’ (IB) as stated in the respective Rules:
Industrial building for the purpose of Schedule 3 to the ITA
Rule 3 of the Income Tax (Industrial Building Allowance) (Child Care Centre) Rules 2013, states that a building which is constructed or purchased by a person where –
a) that person is the owner of that building; and
b) that building is used by that person for the purpose of a business of childcare centre registered with the Department of Social Welfare
shall be treated as an IB for the purposes of Schedule 3 to the ITA.
Rule 3 of the Income Tax (Industrial Building Allowance) (Kindergarten) Rules 2013, states that a building which is constructed or purchased by a person where –
a) that person is the owner of that building; and
b) that building is used by that person for the purpose of a business relating to the provision and maintenance of a kindergarten approved by the Ministry of Education
shall be treated as an IB for the purposes of Schedule 3 to the ITA.
The Rules above apply to qualifying building expenditure incurred by the person for the purpose of his business relating to the purchase or construction of a building referred to in rule 3 of the respective Rules (above).
The following rules are similar under both the above Rules:
Rate of IBA – The rate is one-tenth or 10% of qualifying building expenditure for each YA for 10 years.
Building used partly as IB – Where only a part of the building is used as an IB, if the capital expenditure incurred on the construction of the part not used as an IB is not more than 10% of the expenditure incurred on the construction of the whole building, the building shall be treated as an IB.
Where expenditure incurred in construction of the part not used as an IB is not identifiable from expenditure incurred on the whole building, the part that is not identifiable shall be apportioned by reference to the respective floor areas of those respective parts or in such manner as directed by the Director General of Inland Revenue.
Building used for more than one business – Where an IB used for the purpose of the business referred to in rule 3 of the respective Rules (above), is also used for the purpose of another business, the allowances that fall to be made under Schedule 3 of the ITA shall be deducted as is reasonable, having regard to the extent to which the building is used for the purpose of the business referred to in rule 3 of the respective Rules.
Disposal of IB – Subrule 5(5) provides that if an IB is disposed of within 2 years from the date the qualifying building expenditure was incurred, any allowance which falls to be made but for subrule 5(5) shall not be made, and if such an allowance has been made, a balancing charge equal to the amount of such allowance will be made for the YA in the basis period in which the building was disposed of.
The legislation can be viewed from the website of Attorney General Chambers.
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