international tax summaries--MALAYSIA（1998）（二）
international tax summaries--MALAYSIA（1998）（二）
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COMPUTATION OF TAXABLE INCOME
26. Capital Gains
Taxable capital gains (see item 3) are calculated on the excess of the sales price over the acquisition price.
27. DepreCIAtion and Depletion
DepreCIAtion adopted in the accounts is ignored for taxation purposes.
Instead, there is a system of capital allowances for qualifying capital expenditure. These allowances are given as deductions in computing taxable income, as follows.
Plant. An initial allowance of 20% is given on all qualifying plant expenditure in the year of acquisition. An annual allowance, ranging from 6% to 20% of qualifying plant expenditure, is also given in the year of acquisition and subsequent years. Accelerated initial allowances are given for:
q Machinery or plant for getting tin ore or for extracting or dressing tin concentrates;
q Machinery or plant for extracting timber from a forest;
q Environmental protection equipment;
q Monogas buses used by transport companies;
q Equipment to provide natural gas used by petrol stations;
q Machinery or plant used directly in a construction business.
Buildings. No capital allowances are allowed on buildings except those used for the purposes of a business and used as a factory, dock, wharf, jetty, or warehouse. An initial allowance is allowed at 10% of the qualifying building expenditure and the annual allowance on a straight-line basis at an annual rate of 2%. Buildings used for the purposes of approved research or industrial training or for the storage of imported goods that are to be processed and reexported qualify for industrial building allowances. SpeCIAl building allowances are given
q Buildings to provide child care facilities for employees who are working mothers;
q Buildings for the accommodation of employees in connection with a manufacturing business, hotel and tourism business, timber extraction business, plantation business, and approved service projects;
q Buildings for approved industrial, technical, or vocational training;
q Building for industrial purposes for approved schools and institutions of higher learning;
q Buildings used for research by R&D companies or contract R&D companies;
q Private hospitals, maternity homes, and nursing homes;
q Buildings used for storage of goods for export or imported goods for reprocessing and re-export.
Mining. All expenditure incurred in connection with the working of a mine or in preparation for the working of a mine or the acquisition of the mine or rights in or over the mine, in very broad terms, is considered qualifying mining expenditure. Depletion allowances granted to persons incurring such expenditure are deductible over the life of the mine, by dividing the residue of capital expenditure at the beginning of the period by the residual life of the mine at the end of
Expenditures incurred with respect to exploration for minerals are allowed as a deduction from aggregate income as and when it is incurred. However, the entire exploration expenditure is then added to the aggregate income when the prospecting is successful and mining allowances are allowed instead. No mining allowances are allowed if the exploration expenditure is not added back to the aggregate income of the mine. The miner is given the option not to elect for this
Other Depletion Allowances. Other allowances are available for capital expenditure incurred by certain businesses. These include a forest allowance, an agricultural allowance, and an allowance for abortive prospecting expenditure.
28. Treatment of Dividends
Although no withholding tax is applied to dividends paid, credited, or distributed by Malaysian corporations, tax at the rate of 30% is deemed to have been deducted at source. Dividends are included gross in computing the income tax of the recipient. A tax credit of the notional tax deducted at source on the dividend (at 30%) is allowed in arriving at the net tax payable. Dividends received from overseas are also taxed on the gross amount. The tax credit allowable for the foreign tax
imposed on the dividends depends on whether Malaysia has a double tax agreement with the source country. A unilateral tax credit is also granted for the tax imposed on the dividends from countries with which Malaysia has no tax treaty.
29. Loss Carryovers
Trading losses of the basis year can be offset against income from other sources of that basis year. The balance of the unabsorbed trading losses may be carried forward indefinitely, but may only be offset against business income.
30. Transactions Between Related Parties
Transactions between related parties should be at arm length. The Revenue can disregard certain transactions between related parties and treat such transactions as if they had been on an arm-length basis.
Related corporations are deemed to take over capital assets at the net tax written down value of the assets.
31. Consolidation of Income
There is no provision for the filing of consolidated tax returns by related corporations. Each corporation files its own tax return and is taxed on all its income accruing in or derived from Malaysia or received in Malaysia from outside Malaysia.
32. Tax Periods
Tax is assessed on the preceding year basis; that is, for the year of assessment 1998, the basis year is 1997. The calendar year ending December 31 is the basis period for assessment, except in the case of businesses and corporations where a finanCIAl year other than December 31 may be allowed.
33. Other Matters
Deductions for Taxes Other than Income Taxes. In computing the
liability for income tax, businesses may deduct quit rent and
assessments of land and buildings used for business purposes. Import duty, sales tax, service tax, and stamp duty are treated as part of the cost of goods acquired. No deduction is available for real property gains tax.
Inventory Valuation. For tax purposes, inventories may be valued at cost or market value. The method of valuation adopted must be consistently followed in subsequent years.
Bad Debts. General provisions for doubtful debts are not
deductible. However, provisions for specific debts are allowable. Bad debts not provided for are deductible when they are actually written off. Any recovery after a debt has been written off is included in assessable income.
Employee Benefit Provisions. Provisions for employee benefits are not deductible. Deductions for these expenses are allowable only when payments are made to the employee.
Expenses for air fares for leave passages, entertainment, and entertainment allowances are not deductible by the employer.
Entertainment Expenses and Entertainment Allowances. An employer may not claim a tax deduction for expenses incurred in providing entertainment, including entertainment allowances paid to employees.
This restriction does not, however, apply to:
q Entertainment to employees, except if it is incidental to the provision of entertainment to others;
q Entertainment to clients or customers for payment, if the person in question is carrying on the business of providing entertainment;
q Expenses incurred for promotional gifts at trade fairs or industrial exhibitions held outside of Malaysia for the promotion of exports;
q The provision of promotional gifts within Malaysia consisting of articles incorporating a conspicuous advertisement or logo of the business;
q Promotional samples of products of the business of that person;
q Entertainment expenses for public, cultural, or sporting events that are incurred wholly to promote the business of that person.
An employee deduction for entertainment expenses incurred is restricted to a maximum of any entertainment allowance he or she received as part of the employee gross employment income.
Patents and Design Costs. Purchases of intangible assets, such as patents, designs, models, plans, trademarks, or brands, are deductible expenses.
Research Expenses. A double deduction is given if expenses are incurred by the taxpayer on research approved by the Minister.
Buildings used for such research qualify for industrial building allowances. A double deduction also may be claimed from the gross business income for revenue expenses for:
q Cash contributions to an approved research institute;
q Payments for services of an approved research institute or an approved research company (in the case of payments by holding/affiliate/assoCIAte companies for research and development carried out by an approved research company, double deduction only if the research company opts not to claim the research allowance).
Interest Expenses. Interest paid on loans not used for business purposes is not deductible. If loans are taken for making investments, interest is allowed against investment income on a source-by-source basis.
Lease Rentals. Lease rentals are deductible unless paid on leases not deemed to be a lease in accordance with the Income Tax Leasing Regulations 1986. Lease rentals on certain motor vehicles in excess of RM50,000 in total per vehicle are not deductible.
34. Incentives and Grants
Tax Rebate on Loans to Small Businesses. A rebate against income tax charged is given to a person who gives any loan to a small business, where the loan conforms to specific guidelines and was approved before March 30, 1985. The rebate is calculated at 2% prorated annually on the outstanding balance, and before any offsets for tax deducted at source, double tax relief, and unilateral relief. Where the rebate exceeds the
tax charged, it must be carried forward to offset any income tax chargeable in future years of assessment.
Double Deduction of Expenses. Double deduction of expenses against the adjusted business income is available for:
q Export promotion expenses incurred by a resident corporation;
q Freight charges incurred by manufacturers in exporting rattan and wood-based products (excluding sawn timber and veneer);
q Insurance premiums on imported cargo paid to Malaysian insurance corporations;
q Interest paid under a speCIAl loan plan for small businesses;
q Export credit insurance;
q Approved research expenses;
q Revenue expenditure for the use of facilities and services of approved research companies or institutions;
q Cash contributions to approved research institutions;
q Remuneration payable to each physically or mentally disabled employee where the employee is not able to perform the work of a normal person;
q Expenses for the training of handicapped persons who are not employees to enhance their employment prospects;
q Approved training given by a manufacturing corporation (double deduction is not available to corporations that can claim reimbursements under the Human Resources Development Fund);
q Training expenses incurred by a nonmanufacturing corporation for workers under an approved training program or conducted by a specified training institution;
q Specified overseas promotion expenses incurred by hotel and tour operators;
q Expenses incurred on approved training for the tourist industry.
Investment Incentives. A comprehensive program of tax and
investment incentives is available to local and foreign investors in Malaysia. These include:
q Pioneer status (PS) for approved hotel, industrial, commerCIAl, and agricultural undertakings. However:
?Capital allowances must be utilized during the pioneer period. Capital allowances not utilized may not be carried forward.
?Losses unabsorbed during the pioneer period may not be carried forward to the post-pioneer period.
The PS period is fixed at five years from the commencement of production. During the PS period, 70% of the statutory income is exempt from income tax. Capital-intensive and high- or new-technology investments may be granted full tax exemption on a case-by-case basis.
Corporations participating in any activity or product that is of national and strategic importance to Malaysia will be granted PS and will enjoy complete exemption from income tax for a period of five years, extendable to ten years.
q SpeCIAl incentives, including PS for ten years or investment tax allowance (ITA) of 100% for approved corporations located in the Multimedia Super Corridor.
q PS or ITA for construction of medium and budget hotels, expansion or modernization of existing hotels, construction of holiday camps and recreational projects, and construction of convention halls.
q New corporations that are established by existing pioneer corporations are given PS or ITA to manufacture the same products, subject to certain conditions.
q For a non-pioneer corporation participating in a promoted activity or product, an ITA of up to 60% of qualifying capital expenses incurred within a specified five-year period is given as a deduction from adjusted income (limited to a maximum of 70% of the statutory income).
q Silicon chip fabrication is granted PS or ITA for ten years. SpeCIAl grants are give