SIGNIFICANT DEVELOPMENTS
With effect from 2001, male and female taxpayers are accorded equal tax treatment by an amendment to legislation that allows a woman, whose husband has no income and elects to be assessed under her name, to claim a “husband relief.”
An exit levy is imposed on the repatriation of profits from investments in shares, bonds, and other financial instruments. As from February 1, 2001, no levy is imposed for profits repatriated after a period of one year from the month in which profits are realized.
TERRITORIALITY AND RESIDENCE
An individual resident in Malaysia is taxed on any income accruing in or derived from Malaysia or received in Malaysia from outside Malaysia; a nonresident is taxed only on income accruing in or derived from Malaysia.
The status of individuals as residents or nonresidents determines whether or not they can claim personal allowances and the benefit of graduated tax rates. Resident status is determined by reference to the number of days an individual is present in Malaysia. Generally, an individual who is in Malaysia for a period or periods amounting to 182 days or more
in a calendar year will be regarded as a tax resident.
Basis of assessment/As from year of assessment 2000, assessment of income is on a current-year basis. For year of assessment 2001, an individual will be taxed on income arising in the calendar year 2001.
GROSS INCOME
Employee gross income/An employee is taxed on employment income earned for work performed in Malaysia, regardless of where payment is made.
Employment income includes salary, allowances, perquisites,
benefits-in-kind, tax reimbursements, and rent-free accommodation provided by the employer.
Medical benefits, as well as childcare benefits provided by the employer, are not taxable. Leave passages, restricted to one overseas trip, up to a maximum amount of RM3,000 and three local trips per year, are also tax exempt in the hands of the employee. Cars or other household items provided for private use are valued at prescribed rates that are lower than the actual cost incurred by the employer. Rent-free accommodation
provided by the employer is valued at the lower of 30% of the employers are not deemed benefits-in-kind and hence not taxable.
Short-term visiting nonresident employees are not subject to tax on income from employment exercised in Malaysia if the period of employment does not exceed 60 days in a calendar year. If the period of employment straddles two calendar years, they are exempt if the total period of their employment over the two years does not exceed 60 days.
Area representatives of nonresident companies using Malaysia as a base for activities extending to other countries in the Far East are taxed on the remuneration relating to the time actually spent in Malaysia.
Capital gains and investment income/Capital gains on the disposal of real property (including shares in a real property company-RPC) situated in Malaysia are subject to real property gains tax. The tax is levied at rates ranging from a maximum rate of 30 (for assets held for less than two years) to 0% (for assets held for more than five years). Capital losses on the sale of real property (other than losses on the disposal of RPC shares) are allowed as offset against gains arising on the sale
of real property. (A real property company is a controlled company that owns real property or RPC shares with a defined value of not less than 75% of its total tangible assets.) Other capital gains are not subject to tax.
An individual who is not a citizen or permanent resident in Malaysia is subject to real property gains tax on gains arising from the disposal of real property or RPC shares on or after October 17,1997, at a rate of 30% on disposals within five years and at 5% on disposals after five years.
A resident is generally subject to income tax on all investment income accruing in or derived from Malaysia or received in Malaysia from outside Malaysia. A nonresident is not taxed on income derived outside Malaysia.
Interest received by a resident individual is subject to income tax at a flat rate of 5%. Interest received on deposits for a period of 12 months or more is tax exempt. Interest received from certain types of bonds or securities in also exempt from tax.
Interest paid to a nonresident individual by commercial or merchant banks or finance companies operating in Malaysia is exempt from tax.
DEDUCTIONS
Business deductions/Employees are allowed a deduction for any expenditure incurred wholly and exclusively in the performance of their duties, but no allowance is given for tax depreciation. Expenses of a private or domestic nature are expressly excluded from deduction; for example, the cost of traveling to and from a place of employment is not deductible.
Nonbusiness expenses/Nonbusiness expenses, for example, domestic or household expenses and taxes, are not deductible. Mortga
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