CLOSURE OF IRB OFFICES & COUNTERS DURING HARI RAYA FESTIVAL

All the offices (except for Kelantan and Terengganu) of the Inland Revenue Board (IRB) including Tax Consultation Counters, Tax Payment Counters, Stamp Duty Counters, Contact Centres, Revenue Service Centres [RSC], and Urban Transformation Centre [UTC] service counters will be closed for the Hari Raya Aidilfitri Celebration from 7 August 2013 (Wednesday) to 11 August 2013 (Sunday). The IRB offices and service counters will resume operations on 12 August 2013 (Monday).

For the IRB offices in Kelantan & Terengganu, the closure will be from 7 August 2013 (Wednesday) to 10 August 2013 (Saturday) and operations will resume on 11 August 2013 (Sunday).

During the closure, taxpayers may still conduct their tax affairs online through ezHASiL facilities at www.hasil.gov.my.

EXTENSION OF TIME FOR PAYMENT THROUGHOUT THE COUNTRY

In view that the closure coincides with the deadline for remission of Monthly Tax Deductions (MTD) (on the 10th day of each month), a concession is granted as follows: all tax payments that are due by 10 August 2013 (Saturday), including MTD, etc. are to be remitted to the IRB not later than 13 August 2013 (Tuesday).

Members may view the Media Release and Announcement at the websites of the Institute and the IRB.

Purchase of Personal Computer under Paragraph 46(1)(J) Income Tax Act 1967

Definition of Computer -- IRB Announcement

The IRB has uploaded on its website on 31 July 2013 that the personal deductions on expenses incurred in the purchase of personal computer under Section 46(1)(j) Income Tax Act 1967 shall be confined to the purchase of the following not used for the purpose of a business:

· Desktop computer;

· Laptop computer;

· Notebook; and

· Ultrabook.

The tax deduction will not cover expenses incurred in acquiring gadgets that may perform functions similar to a computer, for example, tablets, smartphones, etc.

The above treatment is effective from Year of Assessment (YA) 2013, As a concession, a claim for deduction for purchase of computer other than those indicated above, made prior to YA 2013 will not be withdrawn.

Members may view this Announcement at the websites of the Institute and the IRB.

Customs (Prohibition of Exports) (Amendment) (No.2) Order 2013 [P.U. (A) 235/2013]

Further to our e-CTIM No.12/2013 dated 21 January 2013, please be informed that the Customs (Prohibition of Exports) (Amendment) (No.2) Order 2013 [P.U. (A) 235/2013] was gazetted on 22 July 2013 and comes into operation on 23 July 2013.

Amendment – Part I of the Third Schedule of the Customs (Prohibition of Exports) Order 2012 [P.U. (A) 491/2012] is amended by inserting (after item 37) a new item “Rubber and rubber products”.

Members may view the Order from the Attorney-General’s Chambers website for details of the item.

Goods and Service Tax (GST) Guides

Further to our e-CTIM TECH 66/2013 dated 11 June 2013, please be informed that the Royal Malaysian Customs (RMC) has recently uploaded the following:-

1) GST Industry Guide on Money Lenders; and

2) GST Industry Guide on Pawn Broking.

You may write to the Institute at technical@ctim.org.my or secretariat@ctim.org.my in respect of any suggestions, concern or comments you may have on the Guides, so that we may raise it to the Customs.

Members may view the Guides on the Institute website or the official website of Malaysia Goods

and Service Tax (GST).

Provisional Anti-Dumping Duties on Tinplates from China and South Korea

Background

Following the petition by Perusahaan Sadur Timah Malaysia Bhd (Perstima) on behalf of the domestic industry producing tinplates, claiming that imports of electrolytic tinplate originating in or exported from China and South Korea are being imported into Malaysia at a much lower price than the price in the domestic market of the alleged countries, the government initiated an anti-dumping investigation on 20 February 2013 and has completed the preliminary investigation as provided under Section 23 of the Countervailing and Anti-Dumping Duties Act 1993.

The findings suggest that there is sufficient evidence to continue with further investigations on the importation of tinplates from the alleged countries. In its media release dated 19 July 2013, the Ministry of International Trade and Industry (MITI), announced that the government has decided to impose a provisional measure, which shall take the form of provisional anti-dumping duty duties ranging from Nil to 25 per cent on electrolytic tinplates imported, guaranteed by a security equal to the amount of the dumping margin determined through the preliminary investigation.

Pursuant to Section 24(2) of the Countervailing and Anti-Dumping Duties Act 1993 (Act 504) and Section 11(1) of the Customs Act 1967 (Act 235), the Minister made the Customs (Provisional Anti-Dumping Duties) Order 2013 [P.U. (A) 232/2013], which were gazetted on 19 July 2013. The Order shall have effect for the period from 20 July 2013 to 15 November 2013. The salient points to note are as follows:-

Provisional anti-dumping duties

Provisional anti-dumping duties shall be levied on and paid by the importers in respect of the goods specified in columns (2) and (3) of the Schedule exported from the countries specified in column (4) into Malaysia by the exporters or producers specified in column (5) at the rate specified in column (6).

Classification of goods

The classification of goods specified in the Schedule shall be governed by the Rules of Interpretation in the Customs Duties Order 2012 [P.U. (A) 275/2012].

Effect on import duties and sales tax

The imposition of provisional anti-dumping duties shall be without prejudice to the imposition and collection of –

(a) import duties under the Customs Act 1976; and

(b) sales tax under the Sales Tax Act 1972 [Act 64].

The legislation can be viewed from the Attorney-General’s Chambers website.

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 Order.

Qualifying Expenditure for Reinvestment Allowance Claim

Ketua Pengarah Hasil Dalam Negeri v Success Electronics & Transformer Manufacturing Sdn Bhd (Civil Appeal No.: W-01-429-11)

On 12 July 2013, the Court of Appeal unanimously dismissed the appeal by the Director General of Inland Revenue (“DGIR”) in Ketua Pengarah Hasil Dalam Negeri v Success Electronics & Transformer Manufacturing Sdn Bhd (Civil Appeal No. : W-01-429-11) (“the SETM case”). Reinvestment allowance is a tax incentive provided under Schedule 7A of the Income Tax Act 1967. The SETM case is the first case of its kind that has reached the Court of Appeal. The written grounds of the Court of Appeal are yet to be made available.

In its oral judgment, the Court of Appeal affirmed the concurrent decisions of the Special Commissioners of Income Tax and the High Court in ruling that there is no legal basis for the DGIR to restrict the availability of reinvestment allowance to “production areas” only. Accordingly, the taxpayer was allowed to claim reinvestment allowance on the capital expenditure incurred on:

(a) the construction of surau, lift lobby, research and development (“R&D”) room, warehouse, “void area” for the installation of cranes, staircase, meeting rooms, office spaces and toilets;

(b) the plant and machinery used in the R&D room and warehouse; and

(c) the installation of electrical, lighting, telephone and air conditioning wiring in the surau, meeting rooms, office spaces, warehouse and R&D room.

The taxpayer was also allowed to claim reinvestment allowance on the capitalised interest expenditure during the construction of the factory.

The above case note is made available to us, courtesy of the legal firm, Lee Hishammuddin Allen & Gledhill. The Institute would like to thank, Lee Hishammuddin Allen & Gledhill for the permission to reproduce this case note in e-CTIM for the benefit of the members. The views and opinions of this case note are not to be imputed to be those of the firm, Lee Hishammuddin Allen & Gledhill, or CTIM. Members are reminded that this case note is intended for purposes of general information and academic discussion only. It should not be construed as legal advice or legal opinion on any fact or circumstances.

Reinvestment allowance is the most widely claimed tax incentive in Malaysia. The above decision has wide implications on the claim of reinvestment allowance. Members interested in further details of the case may refer to the High Court judgment on Ketua Pengarah Hasil Dalam Negeri v Success Electronics & Transformer Manufacturer Sdn Bhd, [Civil Appeal No R1-14-14-09] [(2012) MSTC ¶30-039] in Malaysia and Singapore Tax Cases. You may also view the High Court judgment online at the Resource Centre of the Institute during working hours.

Customs-Private Sector Consultative Panel (CPSCP) Meeting No.1-2013

Representatives from the Institute’s Technical Committee-Indirect Tax (TC-IT) attended the Customs-Private Sector Consultative Panel (CPSCP) Meeting No.1-2013 held recently. We are pleased to update members on some of the issues discussed during the meeting:-

1)    The Practice of Standard Procedures by Customs Officers

The meeting was informed that the practice of standard procedures of the Royal Malaysia Customs (RMC) varies from one customs station to another and sometimes among officers of the same Customs station. It was suggested the all procedures and compliance requirements be made transparent to the public and a special officer be assigned to attend to public enquiries on issues relating to the standard practice and procedures.

The RMC clarified that directions to all Customs officers have been issued through Customs Rulings, Administrative Circulars and Client Charter to ensure uniformity of implementation.

The Meeting decided that all compliance requirements and the format of form to be used in dealings with the RMC should be uniform in all Customs stations in the country and will be uploaded onto the RMC website. Standard Operating Procedure will be prepared for all Customs officers. The RMC will inform the coming Customs Directors Meeting No.72 of the issue and decision.

2)    Sales Tax and Service Tax Audit Framework

With the impending Goods and Services Tax (GST), the Customs has been stepping up the sales tax and service tax audits. The audit will generally cover a period of 3 years from the date of the audit and the licencees are normally given 14 days to submit their records and books of account.

CTIM has proposed that, to ease the audit process and avoid misunderstanding, an audit framework for sales tax and service tax audit should be drawn up by Customs with input from the practitioners and it should be made available to the public. Sales tax and service tax licencees need to know the areas that will be covered during the audits and how to prepare documentation and information that will be relevant to the audits.

The Customs has responded that, unlike for income tax where audit is separated from investigation, a sales tax and service tax audit is a hybrid of audit and investigation. There may be a situation when Customs may turn an audit into investigation without prior notice. Customs will prepare an Audit Framework for licencees’ reference and upload it to the Customs’ website in due course.

3)    Vendor applying for refund under Section 31 of Sales Tax Act, 1972

Generally, when a vendor purchases locally manufactured goods from a licensed manufacturer, he would have paid the sales tax. If he subsequently sells the goods to a licensed manufacturer who has the approval of the Director General through CJ5 to purchase the goods for manufacturing purpose, he may apply for a refund of the sales tax by submitting the relevant documents such as JKED2, licensed manufacturer CJ5, to prove that sales tax had previously been paid etc.

In practice, for reasons of confidentiality, the vendor is unable to produce the sales tax bimonthly return (CJP1) to prove that sales tax had previously been paid, as this document belongs to the licensed manufacturer who paid the sales tax.

CTIM has proposed that since the vendor has no authority over the bimonthly return (CJP1), it would be more appropriate for the Customs to verify the claims with the licensed manufacturer. It is suggested that perhaps the vendor needs to provide the customs with a copy of the invoice for further action by the Customs.

Customs is in agreement with CTIM’s view and informed that this might be an additional requirement requested by the state offices but not as instructed by the Customs’ head office. The vendor may write to the respective state Customs’ Director on the matter.

4)    Application for CJ5 under Sales Tax

Presently a Sales Tax-licensed manufacturer is required to apply for CJ5 on a yearly basis or upon the expiry of the amount approved. It was proposed that a “one-time approval” be granted in respect of CJ5 at the time of issuance of the Sales Tax licence as the manufacturer is required to submit the list of raw materials upon application for the licence.

The Customs has responded that the existing procedure of granting approval for a period of 1 year only, will continue to be practised. The proposal for the “one-time approval” may not be implemented for the time being due to the impending GST implementation.

5)    One Stop Centre for All Customs’ Declarations in Port Klang

Currently there are separate Customs Stations at Northport, Westport, South Point and Free Zone, posing a constraint on deployment of Customs personnel. In addition, there are different standards for Bank Guarantees at Northport and Westport. It is proposed that all Customs’ declaration (K1, K2, K3 and K8) be made at one single location (One Stop Centre) in Port Klang.

The Meeting agreed with the proposal and will discuss with the Selangor Customs Director on the relevant Standard Operating Procedure.

For more information, members may view the Minutes of CPSCP Meeting No.1/2013 at our website.