Tax Developments 1 October 2020 Tax Developments · 2020. 10. 1. · Federal Gazette Portal of the Attorney General’s Chambers . Deduction for Listing Expenses Incurred by a Technology-Based

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The KPMG name and logo are registered trademarks or trademarks of KPMG International.

1 Tax Developments 1 October 2020

Income Tax

1 Updated FAQ on International Tax Issues Due to Covid-19 Travel Restrictions

2 Guidelines on the Application for the Approval of

DGIR Under Section 44(6) of the ITA in Respect of Welfare and Education Funds and Funds for the Management of a House of Worship

3 Double Taxation Relief (Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting) Order 2020

4 Special Deductions for a Qualifying R&D Activity

5 Special Tax Treatment to Licensed Banks and

Financial Institutions on Moratorium Granted to Customers

6 Deduction for Listing Expenses Incurred by a Technology-Based Company

7 Exemption on Income Derived from the Export of Private Healthcare Services

8 Management and Control Requirements for

Labuan Entities Undertaking Pure Equity Holding Activities

9 Tax Deduction for Expenses Incurred on Industry4WRD Readiness Assessment

1 October 2020

Tax Developments – 3rd Quarter 2020



Income Tax (Cont’d)

10 Guidelines for Tax Deduction on Expenses Incurred in Relation to Secretarial and Tax Fees

11 Guidelines and Procedures for the Application of Special Tax Incentive Under PENJANA

Indirect Tax

12 New and Revised Guides

13 GST Guide



Income Tax



Income Tax The relevant authorities have issued the following:

Updated FAQ on International Tax Issues Due to Covid-19 Travel Restrictions The MIRB has issued an updated FAQ in relation to international taxation issues due to Covid-19 travel restrictions. The notable changes of the updated FAQ are as follows:

• Companies are no longer required to provide evidence that there are no changes to their economic circumstances in determining their tax residence.

• “Temporary presence in Malaysia due to Covid-19 travel restrictions” is defined as presence in

Malaysia during the Movement Control Order period. The Movement Control Order period is from 18 March 2020 until 31 August 2020.

• The MIRB’s criteria in determining whether there is a permanent establishment (Question 5 of the

FAQ) applies to all enterprises, including companies, partnerships and limited liability partnerships.

• More examples are provided to clarify the issue in relation to cross border employment income for a non-resident person who is currently working from Malaysia due to Covid-19 travel restrictions.

• More examples are provided for some of the questions in the FAQ in relation to the types of

documents / records to be kept as evidence if requested by the MIRB. Source for the FAQ: Official portal of MIRB

Guidelines on the Application for the Approval of DGIR Under Section 44(6) of the ITA in Respect of Welfare and Education Funds and Funds for the Management of a House of Worship

The MIRB has issued the following Guidelines (available in Malay language only) on applications for approval of setting up welfare and education funds as well as funds for the management of a house of worship: (1) Guidelines on the Application for the Approval of DGIR Under Section 44(6) of the ITA in Respect of

Welfare and Education Funds

(2) Guidelines on the Application for the Approval of DGIR Under Section 44(6) of the ITA in Respect of Funds for the Management of a House of Worship

Under Section 44(6) of the ITA, donations to an approved fund can generally be deducted up to 10% of the aggregate income of a company in the basis period for a YA. Amongst others, the above Guidelines explain the application procedures and conditions to obtain approval for the establishment of such funds. Source for the Guidelines: Official portal of MIRB

http://lampiran2.hasil.gov.my/pdf/pdfam/FAQ_on_International_Tax_Issues.pdf

http://www.hasil.gov.my/

http://lampiran2.hasil.gov.my/pdf/pdfam/GP_TKDP_15072020.pdf

http://lampiran2.hasil.gov.my/pdf/pdfam/GP_TKDP_15072020.pdf

http://lampiran2.hasil.gov.my/pdf/pdfam/GP_TPRI_15072020.pdf

http://lampiran2.hasil.gov.my/pdf/pdfam/GP_TPRI_15072020.pdf




Double Taxation Relief (Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting) Order 2020

Malaysia has signed the Multilateral Convention to Implement the Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“MLI”) on 24 January 2018. The MLI, in essence, allows jurisdictions to swiftly amend their double taxation agreements to implement tax treaty related Base Erosion and Profit Shifting recommendations without the need to renegotiate each double taxation agreement. The above Order has been gazetted as part of the ratification process in order for the MLI to be effective. Source for the Order: Federal Gazette Portal of the Attorney General’s Chambers

Special Deductions for a Qualifying R&D Activity

The MIRB has issued the following Public Rulings and Guidelines in relation to a claim for a special tax deduction in respect of a qualifying R&D activity: (1) Public Ruling No. 5/2020 – Tax Treatment on R&D Expenditure Part I - Qualifying R&D Activity; (2) Public Ruling No. 6/2020 – Tax Treatment on R&D Expenditure Part II - Special Deductions; and (3) Guidelines on the Application Procedure for a Special Deduction in Respect of a Qualifying R&D

Activity. A special tax deduction can be claimed on non-capital R&D expenditure under the following Sections of the ITA: • Section 34(7) – single deduction on R&D expenditure • Section 34A – double deduction on in-house R&D expenditure • Section 34B – double deduction on cash contributions to an approved research institute or payment

for the use of the services of an approved research institute / an approved research company / a R&D company / a contract R&D company

The above Public Rulings replace the Public Ruling No. 5/2004 and the Addendum to Public Ruling No. 5/2004 dated 30 December 2004 and 3 April 2008 respectively, and incorporates changes made to the legislation since the issuance of Public Ruling No. 5/2004. They should be read together with the above Guidelines. The Public Rulings explain the definition of R&D as well as the types of expenditure that qualify for special deductions and cover, amongst others, the qualifying criteria to be eligible for the special deduction, whether a single or double deduction can be claimed and provides detailed examples to illustrate whether an activity undertaken qualifies as an R&D activity for the purposes of the special deduction. In addition to explaining the application procedure for a special deduction in respect of a qualifying R&D company, the MIRB’s Guidelines also cover the application procedure, including the completion and submission dates of the relevant forms, where applicable. Examples are also provided to illustrate the submission dates of the said forms. Source for the Public Rulings and Guidelines: Official portal of MIRB

http://www.federalgazette.agc.gov.my/outputp/pua_20200804_P.U.%20(A)%20224.pdf

http://www.federalgazette.agc.gov.my/index.php

http://lampiran2.hasil.gov.my/pdf/pdfam/PR_05_2020.pdf

http://lampiran2.hasil.gov.my/pdf/pdfam/PR_06_2020.pdf

http://lampiran2.hasil.gov.my/pdf/pdfam/GP_RND_13082020_2.pdf

http://lampiran2.hasil.gov.my/pdf/pdfam/GP_RND_13082020_2.pdf




Special Tax Treatment to Licensed Banks and Financial Institutions on Moratorium Granted to Customers

To effect the proposal announced in the PRIHATIN Package on the special tax treatment extended to banks and financial institutions on the loan moratorium programme granted to customers, the Income Tax (Special Treatment for Interest on Loan) Regulations 2020 has been gazetted and are effective from YA 2020. The Regulations apply to interest which is due from an individual, SME or any company other than an SME. The above Regulations provide that where a moratorium has been granted by a licensed bank or financial institution in respect of interest due and payable from 1 April 2020 to 30 September 2020 on a loan excluding credit card facility, such interest shall not form the gross income of that bank or financial institution in the basis period for that YA. Notwithstanding this, any interest received from 1 April 2020 to 30 September 2020 or any interest that becomes receivable on or after 1 October 2020 by a licensed bank or financial institution in the basis period for a YA, shall be taxed in the basis period for that YA. In addition, no deduction will be allowed on the impairment of any loan involved in the period of the moratorium programme. The special tax treatment is applicable to the following: • The loan must be in Ringgit Malaysia; • There is no outstanding payment on the loan for more than 90 days as at 1 April 2020; and • The loan has been granted a moratorium from 1 April 2020 to 30 September 2020. Note to borrowers: For tax purposes, a tax deduction can only be claimed on interest expense payable in a YA when the interest expense is due to be paid or paid before the filing deadline for that YA. Where interest is accrued in the accounts but is not due to be paid or paid before the filing deadline for a YA, the accrued interest would only be tax deductible when the interest is due to be paid or paid. However, tax deduction would be given in the YA the interest is payable. Borrowers should review the impact of the loan moratorium on the interest expense deduction when preparing their tax returns. Source for the Regulations: Federal Gazette Portal of the Attorney General’s Chambers

Deduction for Listing Expenses Incurred by a Technology-Based Company

The Income Tax (Deduction for Expenses in Relation to Listing on ACE Market or LEAP Market of Bursa Malaysia Securities Berhad) Rules 2020 provide for a tax deduction on specified listing expenses incurred by an approved technology-based company which applies for listing in the ACE Market or LEAP Market. The Rules are effective from YA 2020 until YA 2022. Source for the Rules: Federal Gazette Portal of the Attorney General’s Chambers

Exemption on Income Derived from the Export of Private Healthcare Services

The Income Tax (Exemption) (No. 9) 2002 (Amendment) Order 2020 has been gazetted to give effect to the 2018 Budget proposal and effectively increases the exemption on income derived from the export of private healthcare services from 50% of the value of increased exports to 100% of the value of increased exports.

http://www.federalgazette.agc.gov.my/outputp/pua_20200827_PUA2372020.pdf









The above Amendment Order is effective from YA 2018 to YA 2020 and the said exemption is subject to the qualified person meeting following conditions: • At least 10% of its total patients consist of foreign clients who have obtained private healthcare

services in each YA; and

• At least 10% of its gross income is derived from foreign clients who have obtained private healthcare services in each YA.

Source for the Order: Federal Gazette Portal of the Attorney General’s Chambers

Management and Control Requirements for Labuan Entities Undertaking Pure Equity Holding Activities

The LFSA has issued the following in respect of management and control requirements for Labuan entities undertaking pure equity holding activities for the purposes of complying with the substantial activity requirements: (1) Directive on Management and Control Requirements for Labuan Entities That Undertake Pure Equity

Holding Activities (2) Circular on Board Meeting Requirements The above documents detail the requirements that need to be observed in order to comply with the management and control requirements in Labuan. Source for the Directive / Circular: Official portal of LFSA

Tax Deduction for Expenses Incurred on Industry4WRD Readiness Assessment

The Income Tax (Deduction for Expenditure on Industry4WRD Readiness Assessment) Rules 2020 has been gazetted and is effective from YA 2019 to YA 2021. The above Rules allow for a tax deduction of up to RM27,000 to be claimed by a qualified company on the fee incurred on the Industry4WRD Readiness Assessment from 2 January 2019 to 31 December 2020. To claim the deduction, an application should be made to the Minister of Finance through the Malaysia Productivity Corporation from 2 January 2019 to 31 December 2021. Source for the Rules: Federal Gazette Portal of the Attorney General’s Chambers

Guidelines for Tax Deduction on Expenses Incurred in Relation to Secretarial and Tax Fees

The MIRB has issued the above Guidelines in relation to tax deduction claim on secretarial and tax fees from YA 2020 onwards. The Guidelines serve to further explain the tax deduction allowed on secretarial and tax fees as provided under the Income Tax (Deduction for Expenses in Relation to Secretarial Fee and Tax Filing Fee) Rules 2020. There are no notable changes from the current practice. Under the above Rules which are effective from YA 2020, the tax deduction limit on expenses incurred on secretarial and tax fees are combined and allowed up to RM15,000 for each YA (previously, the tax deduction limit for secretarial and tax fees was RM5,000 and RM10,000 respectively for each YA). Source for the Guidelines: Official portal of MIRB


https://www.labuanfsa.gov.my/clients/asset_120A5FB8-61B6-45E8-93F0-3F79F86455C8/contentms/img/documents/Legislation_and_Guidelines/Guidelines/general/2020/Directive%20Mgmt%20&%20Control%20Requirements%20Lbn%20Entities%20PureEquityHldg%20Acts_13082020.pdf

https://www.labuanfsa.gov.my/clients/asset_120A5FB8-61B6-45E8-93F0-3F79F86455C8/contentms/img/documents/Legislation_and_Guidelines/Guidelines/general/2020/Directive%20Mgmt%20&%20Control%20Requirements%20Lbn%20Entities%20PureEquityHldg%20Acts_13082020.pdf

https://www.labuanfsa.gov.my/clients/asset_120A5FB8-61B6-45E8-93F0-3F79F86455C8/contentms/img/documents/Legislation_and_Guidelines/Guidelines/general/2020/Circular%20on%20clarification%20of%20board%20meeting%20requirements_10092020.pdf

https://www.labuanfsa.gov.my/default.aspx

http://www.federalgazette.agc.gov.my/outputp/pua_20200921_pua272.pdf


http://www.hasil.gov.my/pdf/pdfam/GARIS_PANDUAN_YURAN_KESETIAUSAHAAN_DAN_YURAN_PEMFAILAN_CUKAI_23092020.pdf






Guidelines and Procedures for the Application of Special Tax Incentive Under PENJANA

Following the proposal announced under PENJANA or the National Economic Recovery Plan to offer a 0% tax rate for new investment and the investment tax allowance for existing companies that relocate their overseas operations into Malaysia, MIDA has issued the above Guidelines to explain further on the eligibility criteria, application procedure and a list of activities which would not qualify for the incentive. The notable points of the Guidelines are set out below.

Type of incentive

For new companies

• 0% tax rate for 10 years for new investment in manufacturing sector with capital investment between RM300 million to RM500 million.

• 0% tax rate for 15 years for new investment in manufacturing sector with capital investment above RM500 million.

For existing companies

• 100% investment tax allowance for 5 years for an existing company in Malaysia relocating its overseas facilities into Malaysia with capital investment above RM300 million. The allowance is offset against 100% of statutory income for each YA.

Companies approved for the above incentives must comply with conditions as specified by the Minister of Finance.

Eligibility Criteria

• A new company must meet the following criteria: - Relocating its manufacturing facility for eligible activities from any country

to Malaysia; or - Establishing new operations in Malaysia; and - Does not have existing manufacturing operations in Malaysia.

• An existing company must be a foreign or locally owned company that has

existing manufacturing operations in Malaysia and is relocating its manufacturing operations from outside Malaysia for a new business segment. The products from the new business segment should not be an expansion project for existing products.

• The Company needs to incur the first capital expenditure within 1 year from the approval date and remaining capital expenditure within 3 years from the date of the first capital expenditure incurred.

Application Date

Only applications received by MIDA from 1 July 2020 until 31 December 2021 will be considered for this incentive.

Non-Qualifying Activities

Please refer to Appendix A of the Guidelines for the list of activities that do not qualify for this incentive.

Source for the Guidelines: Official portal of MIDA

https://www.mida.gov.my/home/administrator/system_files/modules/photo/uploads/20200923113443_GDSpecialTaxIncentivePENJANA17092020.pdf

https://www.mida.gov.my/home/



Indirect Tax



Indirect Tax New and Revised Guides

The following Guides were issued during the third quarter of 2020: - Guide on Transmission and Distribution of Electricity Services (as at 1 July 2020) Guides on Information Technology Services (revised as at 13 July 2020) Guide on Refund on The Acquisition of Services by Foreign Missions and International Organizations

(as at 13 July 2020) Guide on Digital Services by Foreign Service Provider (FSP) (revised as at 1 August 2020) The above Guides are available at the RMCD’s official portal – MySST (click here)

GST Guide

While GST has been abolished since 1 September 2018, subject to meeting conditions, taxpayers can make certain adjustments to their final GST Return. The RMCD has issued a revised GST Guide on Declaration and Adjustment after 1st September 2018.

Click here for a copy of the GST revised Guide.

http://mysst.customs.gov.my/IndustryGuides

http://mysst.customs.gov.my/SpecificGuides



Insights on Earlier Tax Whiz Please refer below on our earlier Tax Whiz for more information.

No Subject Matter Date of Issue

1 Specific Indirect Tax Measures due to COVID-19 Impact - Updates (NERP FAQ) 02.07.2020

2 Amendment to the Final GST-03 Return by 31 August 2020 16.07.2020

3 Relooking at Labuan Entities 27.07.2020

4 Service Tax on Digital Services - Updated Guide 30.07.2020

5 Stamp Duty and Real Property Gains Tax Exemption Orders (Revised) 07.08.2020

6 Amendments to Service Tax Policies 27.08.2020

7 Guide on Disbursement and Reimbursement 23.09.2020

https://home.kpmg/my/en/home/insights/2020/07/specific-indirect-tax-measures-due-to-c-19-impact-updated-nerp-faq.html

https://home.kpmg/my/en/home/insights/2020/07/amendment-to-the-final-gst-03-return-by-31-august-2020.html

https://assets.kpmg/content/dam/kpmg/my/pdf/2020.07.27-kpmg-my-insights-relooking-at-labuan-entities.pdf

https://home.kpmg/my/en/home/insights/2020/08/guide-on-digital-services-by-foreign-service-provider-updated-guide.html

https://home.kpmg/my/en/home/insights/2020/08/stamp-duty-and-real-property-gains-tax-rpgt-exemption-orders.html

https://home.kpmg/my/en/home/insights/2020/08/amendments-to-service-tax-policies.html

https://home.kpmg/my/en/home/insights/2020/09/guide-on-disbursement-and-reimbursement.html



The table below sets out the various abbreviations and references used in this publication.

Abbreviation Reference

ACE Market Access, Certainty, Efficiency Market

DGIR Director General of Inland Revenue

FAQ Frequently Asked Questions

GST Goods and Services Tax

ITA Income Tax Act 1967

LEAP Market Leading Entrepreneur Accelerator Platform Market

LFSA Labuan Financial Services Authority

MIDA Malaysian Investment Development Authority

MIRB Malaysian Inland Revenue Board

PENJANA Pelan Jana Semula Ekonomi Negara

R&D Research and Development

SME Small and Medium Enterprise

YA Year of Assessment



Contact Us

Petaling Jaya Office

Tai Lai Kok Executive Director – Head of Tax and Head of Corporate Tax [email protected] +603 7721 7020

Long Yen Ping Executive Director – Head of Global Mobility Services [email protected] +603 7721 7018

Bob Kee Executive Director – Head of Transfer Pricing [email protected] +603 7721 7029

Ng Sue Lynn Executive Director – Head of Indirect Tax [email protected] +603 7721 7271

Soh Lian Seng Executive Director – Head of Tax Dispute Resolution [email protected] +603 7721 7019

Outstation Offices

Penang Office

Evelyn Lee Executive Director – Penang Tax [email protected] +604 238 2288 (ext. 312)

Kuching & Miri Offices

Regina Lau Executive Director – Kuching Tax [email protected] +6082 268 308 (ext. 2188)

Kota Kinabalu Office

Titus Tseu Executive Director – Kota Kinabalu Tax [email protected] +6088 363 020 (ext. 2822)

Johor Bahru Office

Ng Fie Lih Executive Director – Johor Bahru Tax [email protected] +607 266 2213 (ext. 2514)

Ipoh Office

Crystal Chuah Yoke Chin Tax Manager – Ipoh Tax [email protected] +605 253 1188 (ext. 320)

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.



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Documents

Tax Developments 1 October 2020 Tax Developments · 2020. 10. 1. · Federal Gazette Portal of the Attorney General’s Chambers . Deduction for Listing Expenses Incurred by a Technology-Based