CORPORATE TAXES
SIGNIFICANT DEVELOPMENTS
Assessment of corporate income tax will shift from a preceding-year to a current-year basis, effective from the calendar year 200.
Exit levies, authorized by 1953 legislation, now apply to repatriation of inward investors' principal and profits with regard to investments in shares, bonds and other financial instruments made on or after September 1,1998.
Food production projects approved by the government before the end of 1999 and beginning production within a year from the date of approval can benefit from the ability to pass losses along to related Malaysia-resident companies.
TAXES ON CORPORATE INCOME
Income tax/Income tax for resident and nonresident companies is imposed at the flat rate of 28%. The tax is levied on income accruing in and derived from Malaysia in a company's financial year ending in the preceding year of assessment. As from year of assessment 2000 this preceding-year basis of assessment will be changed to a current-year basis, so that a company will be taxed on income arising in its financial year ending in calendar year 2000. No tax will be levied on income arising in 1999.
Petroleum income tax/Petroleum income tax is imposed at the rate of 38% on profits from petroleum operation in Malaysia. No other taxes are imposed on income form petroleum operations.
CORPORATE RESIDENCE
A company is tax-resident in Malaysia in a basis year if at any time during the basis year the management and control of its affairs are exercised in Malaysia. Generally, management and control of a business are exercised at the place where the company's board meetings are held.
Therefore, a single board meeting held in Malaysia at which significant decisions are made is sufficient cause for a company to be regarded as tax-resident in Malaysia.
OTHER TAXES
Real property gains tax/Real property gains tax is imposed at scale rates from 5% to 30% on gains arising from the disposal of real property (which includes the disposal of shares in a real property ) situated in Malaysia (see “Capital gains” below ).
Sales tax/A single -stage ad Valorem tax at rates of 5%, 10% and 15% is imposed on all goods imported into or manufactured in Malaysia, unless specifically exempted.
Service tax/Service tax is imposed at the rail of 5% on the value of prescribed goods or services sold or provided by prescribed establishments or prescribed professional establishments.
Windfall profit levy/From January 1,1999 a levy is imposed on crude palm oil and crud palm kernel oil at a maximum of RM50 per ton where the price exceeds RM2,000 per ton.
Value-added tax/The government has announced its intention to integrate and restructure the existing sales and service taxes into a consolidated tax to be called the sales and service tax, with features similar to a value-added tax.
Contract levy/A levy of 0.25% on contract words having a contract sum above RM500,000 is imposed on every registered contractor by the Construction Industry Development Board (CIDB)
Exit levy/Under the Exchange Control Act 1953 an exit levy is imposed on the repatriation of capital and profits from investments in shares, bonds and other financial instruments. Dividends, rent and interest are not subject to this levy, nor are foreign direct investments.
For purposes of the levy, funds are divided into two categories(a) funds present in Malaysia before February 15, 1999 and (b)funds that entered the country on or after that date.
For funds in the first category the original capital may be repatriated, subject to imposition of the levy. The rate depends on the duration of the holding period, which commences from September 1,1998 or on a later date of entry into Malaysia, as follows.
%
Principal ---Holding period:
Up to 7 months. . . . . . . . . . . . . . . .30
More than 7, up to 9 months. . . . . . . . . . . .20
More than 9, up to 12 months. . . . . . .
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