Malaysia Taxation

Business leaders appreciate that there are taxation implications that flow on from most business decisions. A sound knowledge of Malaysian taxation law is essential to ensure quality input into the strategic decision-making process by an individual, partnership or company.

The Malaysia Taxation segment is offered as an elective segment in the CPA Program professional level. This is a local variant of the taxation segment in the CPA Program. The segment will enable you to acquire country-specific knowledge of the Malaysian taxation system.

Exam structure

The Malaysia Taxation exam generally consists of 100 per cent written-response questions. Check the information sent with your exam notification letter for the most up-to-date and detailed information about the exam structure.

Segment aims

The aims of this segment are to provide you with an:

• overview of the Malaysian taxation system, a sound foundation of the principles of taxation of income and a good appreciation of how these principles and the provisions of the Income Tax Act 1967 are applied in the taxation of individuals, unincorporated businesses and corporations
• understanding of the investment incentives in Malaysia as well as the provisions of the Real Property Gains Tax Act 1976
• understanding of the indirect taxation system

General objectives

On completion of this segment, you should be able to:

• apply the principles and concepts of taxation and the relevant provisions of the tax legislation to situations you will encounter
• correctly compute the chargeable income tax payable in certain situations

Segment content

The Malaysia Taxation segment comprises 10 modules. A brief outline of each module is provided below.

Note: The relevant year of assessment for this edition of the study guide is YA 2012.

Module 1: Overview of the Malaysian tax regime

Module 1 provides an overview of the Malaysian taxation system. It introduces you to the key features of the Malaysian taxation system and the legislative provisions that govern the administration of taxation within this jurisdiction.

Contents:

• Taxation and public finance
• Taxation in Malaysia: History and policy
• Introduction to various taxes
• Self-assessment system of taxation
• Sources of authority and information

Module 2: General knowledge of income tax

The module consists of various sections related to the scope and basis of taxation, the principles of deductions, an overview of capital allowances and deductions in respect of business losses and donations, the treatment of unabsorbed capital allowances and business losses, and aspects of tax administration.

Contents:

• Scope of taxation
• General principles of deduction of expenses
• Capital allowances on plant and machinery
• Industrial building allowances
• Donations
• Unabsorbed current year capital allowances and business losses
• Tax administration

Module 3: Income tax (Corporate)

This module focuses on the parts of the Income Tax Act 1967 that apply to companies. It introduces the scope of Malaysian taxation that a company is subject to. It focuses on the topics covered in Module 2 in their application to a company, tax computations and the obligations of a company in relation to its tax affairs.

Contents:

• Taxation of companies
• Income chargeable to tax
• Exemptions
• Expenses
• Capital allowances
• Industrial building allowances
• Unabsorbed losses
• Donations
• Group relief
• Tax reliefs
• Tax computation
• Filing obligations of a company
• Transfer pricing

Module 4: Income tax (Business) 

Module 2 outlines the basis of assessment, the charging sections, badges of trade, outgoings and deductions. Module 4 elaborates on this with a discussion about the tax treatment and rules that are specific to both sole proprietorships or self-employed persons and partnerships.

Contents:

• Who is a sole proprietor or self-employed person?
• Deductibility or non-deductibility of expenses incurred by a sole proprietor
• Capital allowances
• Business losses
• Treatment of unabsorbed business losses and capital allowances
• Filing returns
• Payment of tax
• Partnerships

Module 5: Income tax (Individuals)

This module elaborates on the tax treatment of income derived by individuals from income other than the carrying on of a trade, business, profession or vocation. In particular, it focuses on employment income and tax exemptions or concessions given to individuals for other types of income. It also discusses the conditions for claiming personal reliefs or rebates. It rounds off with the preparation of tax computations for an individual by applying the information presented in the module.

Contents:

• Residency status and the resulting tax implications
• Employment income
• Taxation of other types of non-business income
• Reliefs
• Tax rates and tax computations
• Filing obligations

Module 6: Income tax (Others)

This module examines the taxation of specialised activities or industries, such as: banks, insurance, shipping and airline operations, leasing, cooperative societies, investment holding companies, unit trusts, trade associations, clubs or similar institutions, trust bodies, deceased persons’ estates and charitable organisations under the Income Tax Act 1967.

Contents:

• Principle of mutuality
• Tax treatment of specialised activities
• Clubs or similar institutions
• Trade association
• Deceased persons’ estates, trusts and settlements
• Charitable organisations

Module 7: Cross-border activities

This module provides an overview of the general rules relating to the various withholding taxes on payments made to non-residents and the international aspects of income taxation including double tax agreements.

Contents:

• Types of income subject to withholding tax
• Withholding tax rules
• International aspects of income taxation

Module 8: Investment incentives

This module elaborates on the special schemes and tax incentives granted to attract investments under the Promotion of Investments Act 1986 and the Income Tax Act 1967.

This includes: pioneer status, investment tax allowance , reinvestment allowance , approved service sector incentives , double deductions , operational headquarters , international procurement centres , regional distribution centres, and sectoral and export incentives. The module also covers the incentives available for Islamic transactions and the tax regime in Labuan.

Contents:

• Incentives under the Promotion of Investments Act 1986
• Incentives under the Income Tax Act 1967
• Labuan

Module 9: Real property gains tax

This module provides an overview of Real Property Gains Tax Act 1976 in relation to real property transactions and transactions involving shares in real property companies.

Contents:

• Chargeable assets, chargeable persons and chargeable gains
• Disposals and disposal price
• Acquisitions and acquisition price
• Special treatment
• Tax rates
• Real property companies
• Tax returns and administrative provisions

Module 10: Indirect taxation

Module 10 gives an overview of the major provisions of the Customs Act 1967, Excise Act 1976, Sales Tax Act 1972 and Service Tax Act 1975. The focus is more on sales tax and service tax which are taxes on selected goods and services respectively.

Contents:

• Custom duties
• Excise duty
• Sales tax
• Service tax
• Customs rulings and Customs Appeal Tribunal