INDIRECT TAXES - MICPA

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3 • Royal Malaysian Customs Guideline and Minutes of Meetings

INDIRECT TAXES

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CPA Tax & Investment Review 2010

1.0 Customs (Prohibition of Imports) (Amendment) (No. 3) Order 2009

Comment:

The above Amendment seeks to introduce the requirement to obtain an approved permit for importation of certain alloy steel and high carbon steel products.

Effective date: 1 August 2009

2.0 Customs (Amendment) (No. 4) Regulations 2009

Comment:

The above Amendment seeks to introduce new value declaration form (i.e. Form K1A) where invoice value threshold for each consignment is being raised from RM10,000 to RM20,000.


3.0 Customs Duties (Goods of ASEAN Countries Origin) (ASEAN Harmonised Tariff Nomenclature and Common Effective Preferential Tariff) (Amendment) (No. 5) Order 2009

Comment:

The above Amendment seeks to introduce new definitions to Rules of Origin for the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN free trade area.



Comment:

The above Amendment seeks to impose certification requirement for importation of certain products and articles of iron and steel.

Effective date: 13 October 2009

A Amendments to Customs Legislation

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4 • Indirect Taxes


Comment:

The above Amendment seeks to introduce new ordinary hours for Johor Bahru Customs offices and warehouses and goods may be imported or exported by road via Johor Bahru to be at all times on any day.

Effective date: 15 November 2009


Comment:

The above Amendment seeks to:-

(i) Introduce new ordinary hours for Kota Putra, Durian Burung, Padang Terap, Kedah to be from 8.00 a.m. to 7.00 p.m. on any day.

(ii) Permit all goods to be imported and exported by road or railway via Padang Besar and Kota Putra, Durian Burung, Padang Terap, Kedah.

Effective date: 24 December 2009


Comment:

The above Amendment seeks to introduce:-

(i) Total prohibition for the importation of new pneumatic snow tyres and new retreaded snow tyres for all types of vehicles from all countries.

(ii) Requirement to obtain approved permit or certification for importation of used pneumatic tyres and used retreaded tyres from all countries.

Effective date: 1 January 2010


Comment:

The above Amendment seeks to introduce requirement of entry and exit declaration in Form Customs No. 22 for any person arriving or leaving Malaysia.


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9.0 Customs Duties (Agreement Establishing The ASEAN-Australia-New Zealand Free Trade Area) Order 2009

Comment:

The above Order seeks to introduce preferential tariff rate under the Agreement establishing the ASEAN-Australia-New Zealand Free Trade Area.


10.0 Customs (Import Licence Fee for Motor Vehicle) Regulations 2009

Comment:

The above Regulations seeks to impose an import licence fee of RM10,000 for each unit of motor vehicle (excluding motorcycle) imported by the import licence holder.

Effective date: 1 January 2010 to 31 December 2015

11.0 Customs Duties (Goods under Agreement on Comprehensive Economic Cooperation between Member States of the ASEAN and the Republic of India) Order 2009

Comment:

The above Order seeks to introduce preferential tariff rate under the Agreement on Comprehensive Economic Cooperation between Member States of the ASEAN and the Republic of India.


12.0 Customs Duties (Goods of ASEAN Countries Origin) (ASEAN Harmonised Tariff Nomenclature and Common Effective Preferential Tariff) (Amendment) (No. 8) Order 2009

Comment:

The above Amendment seeks to introduce new product originating criteria (i.e. product specific rules) under the Rules of Origin for the Agreement on the Common Effective Preferential Tariff Scheme for the ASEAN free trade area.


13.0 Customs Duties (Exemption) (Amendment) Order 2010

Comment:

The above Amendment seeks to revise the import duty exemption period for a Labuan/Langkawi registered motor vehicle / motor cycle entering Principal Customs Area and subsequently returned

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to Labuan/Langkawi from a period not exceeding 14 days per trip, subject to a maximum period of 30 days in any one year to a period not exceeding 30 days per trip and subject to a maximum period of 90 days in any one year.

Effective date: 11 February 2010

14.0 Customs Duties (Amendment) Order 2010

Comment:

The above Amendment seeks to eliminate the (50%) import duty imposed on golf cars, including golf buggies.

Effective date: 1 April 2010

15.0 Customs Duties (Goods of ASEAN Countries Origin) (ASEAN Harmonised Tariff Nomenclature and Common Effective Preferential Tariff) (Amendment) Order 2010

Comment:

The above Amendment seeks to eliminate the CEPT import duty imposed on golf cars, including golf buggies.

Effective date: 1 April 2010

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B Amendments to Excise Legislation

1.0 Excise Duties (Amendment) Order 2009

Comment:

The above Amendment seeks to increase the specific excise duty rate of:-

(i) cigars, cheroots and cigarillos falling under HS 2402.10 000 and 2402.90 100 from “RM180.00 per kg and 20%” to “RM190.00 per kg and 20%”; and

(ii) cigarettes falling under HS 2402.20 900 and 2402.90 200 from “RM0.18 per stick and 20%” to “RM 0.19 per stick and 20%”.

Effective date: 1 October 2009

2.0 Excise Duties (Exemption) (Amendment) Order 2010

Comment:

The above Amendment seeks to revise the excise duty exemption period for a Labuan/Langkawi registered motor vehicle / motor cycle entering Principal Customs Area and subsequently returned to Labuan/Langkawi from 14 days per trip, subject to a maximum period of 30 days in one year to 30 days per trip, subject to a maximum period of 90 days in one year.


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C Amendments to Sales Tax Legislation

1.0 Sales Tax (Exemption) (Amendment) Order 2010

Comment:

The above Amendment seeks to revise the sales tax exemption period for a Labuan/Langkawi registered motor vehicle / motor cycle entering Principal Customs Area and subsequently returned to Labuan/Langkawi from for an aggregate of not more than 90 days in one year to 30 days per trip, subject to a maximum period of 90 days in one year.


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D Amendments to Service Tax Legislation

1.0 Service Tax (Amendment) (No. 2) Regulations 2009

Comment:

The above Amendment seeks to prescribe new category of taxable person and taxable service as follows:-

(a) Taxable person

Any person who is regulated by Bank Negara Malaysia and provides credit card or charge card services through the issuance of a credit card or a charge card

(b) Taxable service

Provision of credit card or charge card services through the issuance of a principal credit card, principal charge card, supplementary credit card or supplementary charge card, whether or not annual subscription or fee is imposed excluding

(i) provision of charge card services where the charge card is issued by any petroleum company to the Government of Malaysia or any person for the procurement of products and services supplied for the use of or in connection with vehicles owned by the Government of Malaysia or such person; or

(ii) provision of charge card services where the charge card is used as a payment instrument only within the premises of a workplace, an education institution or a golf or sports club by its workforce, students or members, as the case may be.


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2.0 Service Tax (Rate of Tax) Order 2009

Comment:

The above Order seeks to impose service tax at the rates specified as follows:-

• 5% of the price, charge or premium of the taxable serviceother than taxable service relating to credit card or charge card services

• Taxable service relating to credit card and charge cardservices:-

(i) RM 50.00 shall be chargeable for the issuance/renewal of each principal credit card and principal charge card on the date of issuance/renewal of the card and thereafter every subsequent twelve months or part thereof; and

(ii) RM 25.00 shall be chargeable for the issuance/renewal of each supplementary credit card and supplementary charge card on the date of issuance/renewal of the card and thereafter every subsequent twelve months or part thereof.

The Service Tax (Rate of Tax) Order 2000 is revoked.


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E Others

1.0 Free Zones (Declared Area) (Amendment) Notification 2009

Comment:

The free zone area under the state of Selangor is amended as follows:-

Effective date: 17 July 2009

2.0 Free Zones (Amendment) Notification 2009

Comment:

The above Amendment Notification seeks to amend the First Schedule to the Free Zones Act 1990 by substituting item 5 with the following item:

Effective date: 17 July 2009

(1) (2)

State Limits of Zones

Selangor All that land situated in the Mukim of Klang,District of Klang, Selangor bounded by the grey line as shown in the Gazette Plan 1174 and Lot No. 55709 and No. 55710 as shown in Gazette Plan 1452 deposited in the Office of the Director of Survey and Mapping, Selangor

(1)Name of Free Commercial Zone

(2)Activities

5. West Port, Pulau Indah, Mukim of Klang, District of Klang:

Commercial

All that land situated in the Commercial Mukim of Klang, District of Klang, Selangor bounded by the grey line as shown in the Gazette Plan 1174 and Lot No. 55709 and No. 55710 as shown in Gazette Plan 1452 deposited in the Office of the Director of Survey and Mapping, Selangor

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3.0 Free Zones (Declared Area) (Amendment) Notification 2010

Comment:

The free zone area under the state of Johor is amended as follows:-

i. Land occupied by Felda Johore Bulkers at Lot 66228 and 66229 as shown in Gazette Plan 2234;

ii. Land occupied by Petronas Dagang Berhad at Lot 66226 and 66227 as shown in Gazette Plan 2233;

iii. Land occupied by BP Malaysia Sdn. Bhd. at Lot 66221 and 66222 as shown in Gazette Plan 2233;

iv. Customs Inspection Bay in area of 0.459 hectare in Container Terminal at Lot 66208 as shown in Gazette Plan 2233;

v. Land (Lot A) in area of 1.909 hectares at Lot 66233 and land (Lot B) in area of 1.028 hectares at lot 83274 as shown in Gazette Plan 2282;

vi. A part of land at main entrance as shown in Gazette Plan 3067;

vii. Land occupied by Sime Sembawang Corp. Engineering Sdn. Bhd. at Lot 83288, 83289, 83290, 83291, 83292, 83293, 83287, 83284, 83281, 83282 and 83283 as shown in Gazette Plan 3068; and

viii. Land occupied by Aramijaya Sdn. Bhd. at Lot 83285 and 83286 as shown in Gazette Plan 3068.


(1)State

(2)Limits of Zones

Johor All that land situated in the Mukim of Plentong, in the District of Johor Bahru, Johor, bounded by the grey line as shown in Gazette Plans 2233, 2234, 2283, 3065 and 3066 deposited in the Office of the Director of Survey and Mapping, Johor, excluding the areas specified below:

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4.0 Free Zones (Amendment) Notification 2010

Comment:

The above Amendment Notification seeks to amend the First Schedule to the Free Zones Act 1990 by substituting item 1 with the following item:

(1)Name of Free Commercial Zone

(2)Activities

1. Pasir Gudang Port Free Zone, Mukim of Plentong, District of Johor Bahru, Johor:

All that land situated in the Mukim of Plentong, in the District of Johor Bahru, Johor, bounded by the grey line as shown in Gazette Plans 2233, 2234, 2283, 3065 and 3066 deposited in the Office of the Director of Survey and Mapping, Johor, excluding the areas specified below:

Commercial

i. Land occupied by Felda Johore Bulkers at Lot 66228 and 66229 as shown in Gazette Plan 2234;

ii. Land occupied by Petronas Dagang Berhad at Lot 66226 and 66227 as shown in Gazette Plan 2233;

iii. Land occupied by BP Malaysia Sdn. Bhd. at Lot 66221 and 66222 as shown in Gazette Plan 2233;

iv. Customs Inspection Bay in area of 0.459 hectare in Container Terminal at Lot 66208 as shown in Gazette Plan 2233;

v. Land (Lot A) in area of 1.909 hectares at Lot 66233 and land (Lot B) in area of 1.028 hectares at lot 83274 as shown in Gazette Plan 2282;

vi A part of land at main entrance as shown in Gazette Plan 3067;

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vii. Land occupied by Sime Sembawang Corp. Engineering Sdn. Bhd. at Lot 83288, 83289,83290, 83291, 83292, 83293, 83287, 83284, 83281, 83282 and 83283 as shown in Gazette Plan 3068; and

viii. Land occupied by Aramijaya Sdn. Bhd. at Lot 83285 and 83286 as shown in Gazette Plan 3068.


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5 • Summary of Tax Cases


SUMMARY OF TAX CASES

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A Malaysian Special Commissioners'Decisions

1.0 SS SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,862

Facts

The taxpayer was in the business of property development with financial year ended on 30 June. On 17 November 1997, it entered into a Sale and Purchase Agreement (SPA) to dispose of a piece of its development land held as stock-in-trade. The SPA was conditional and required approval from the Foreign Investment Committee (FIC). In the event that the stipulated conditions precedents were not fulfilled, the SPA would be deemed to have been terminated and the deposit would be refunded to the Vendor. The entire conditions precedent were fulfilled on 15 May 1999 and balance of the purchase price was paid to the taxpayer on 18 June 1999.

Issues

Whether profit from the sale of the land should be taxed in the year of assessment (YA) when the SPA was signed or when all the conditions of the SPA were satisfied.

Arguments

Taxpayer

The taxpayer contended that the disposal should be recognized by reference to the terms of the SPA and therefore the profit from the sale of the land was derived in YA 2000 (Preceding Year Basis). In accordance with the Income Tax (Amendment) Act, 1999, the profit earned or derived is not liable to tax.

DGIR

The Director General of Inland Revenue (DGIR) contended that the profit from the sale of the land should be taxed in YA 1999 as income is derived on the date the stock in trade was sold via the SPA dated 17 November 1997.

Decision

The Special Commissioners allowed the taxpayer’s appeal on the following grounds:

(i) Pursuant to section 3 of the Income Tax Act, 1967 (ITA),

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income tax shall be charged upon the income of any person for each year of assessment when it accrues or is derived from Malaysia or received in Malaysia. Income is said to accrue when there comes into existence an unconditional right of receiving it. Income is derived when there is a present right to receive a quantifiable amount that is not subject to any contingency or defeasibility.

(ii) The SPA is a contingent contract with condition precedents which must be complied with before it can be effective. The entire conditions precedents were fulfilled on 15 May 1999 i.e. in YA 2000 (PYB). Thus until and unless all the conditions precedent were fulfilled, the SPA was not enforceable and the purchase price only became a debt due when all the conditions were satisfied.

2.0 B DEVELOPMENT SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,869

Facts

The taxpayer is the parent company of BI Sdn Bhd (“BI”) and owned 100% of BI’s 5,000,000 shares. On 9 May 1995, BI executed a joint venture agreement with another company, MBNS (Incorporation) (MBNS) to develop a plot of land. The land had been alienated to MBNS by the state government, and MBNS was its registered proprietor. Consideration of RM2 million was paid by BI to acquire the contractual right to develop the said land as a clay-based development project and mixed development project. Expenditure incurred on this project was treated in BI’s audited accounts as development expenditure in the current assets category. The subject land was never treated as capital assets in BI’s accounts. BI did not enter into any caveat or register any right or interest over the land. On 1 December 2000, when the taxpayer sold its shares in BI to UH Berhad under a restructuring scheme, it was subjected to real property gains tax for the gains on the disposal of shares in a real property company under Paragraph 34A, Schedule 2 of the Real Property Gains Tax Act, 1976 (RPGTA).

Issues

Whether the gains made by the taxpayer from the disposal of shares falls within the ambit of the RPGTA.

Arguments

Taxpayer

The taxpayer contended that since BI did not own the land, BI could not be labeled as a real property company and so the

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taxpayer could not be said to have acquired and disposed of shares in a real property company resulting in real property gains tax under Paragraph 34A, Schedule 2 of the RPGTA.

DGIR

The Director General of Inland Revenue (DGIR) contended that the fact that BI was not the registered owner of the land did not exclude it from falling under the ambit of Paragraph 34A, Schedule 2 of the RPGTA as real property covers not only land, but also interest option or other right in or over such land.

Decision

The appeal was dismissed on the following grounds:

(i) The fact that BI was not the registered owner of the said land did not exclude it from falling under the ambit of Paragraph 34A, Schedule 2 of the RPGTA as real property covers not only land, but also interest option or other right in or over such land.

(ii) From the joint venture agreement executed with MBNS, the Special Commissioners concluded that the true intention of the parties and the real spirit of the agreement is BI had total control and exclusive right over the said land.

(iii) Hence, even though the said land was not registered under BI’s name, the fact that BI hads an interest over it made BI a real property company within the meaning of Paragraph 34A, Schedule 2 of the RPGTA.

(iv) On whether the said land is capital asset or stock-in-trade of BI, the joint venture agreement between MBNS and BI has spelt out the function of BI is to develop the said land.

(v) The said land has been left dormant without any development from the day the said land was alienated until the disposal of the shares. There was no plan submitted to the respective authority for the development of the said land and this shows that the land was kept as capital asset of BI and there is no evidence to support the contention that BI is carrying out any trading activity over the said land.

3.0 AT SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,875

Facts

The taxpayer was awarded certain contracts in year 1997. To secure financing for the contracts that were awarded to the taxpayer, the

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taxpayer seeks the support of its parent company to provide corporate guarantees to the banks as security for the financing facilities. In return for the corporate guarantees provided, the taxpayer paid its parent company guarantee commission fees at specified rates. The taxpayer claimed a tax deduction on the guarantee commission fees under Section 33(1) of the Income Tax Act, 1967 (ITA), which was disallowed by the Inland Revenue Board.

Issues

Whether the guarantee commission fee incurred qualified for deduction under Section 33(1) of the ITA.

Arguments

Taxpayer

(i) The taxpayer contended that the banking facilities were obtained to meet the funding requirement for the earning of the profits of the business, and not as an addition to capital. Since the banking facilities were used exclusively for financing the taxpayer’s contracts, the guarantee commission fee is an expense closely connected or incidental to the business of the taxpayer and should therefore be allowed as a tax deduction.

(ii) The taxpayer further contended that guarantee fees, like interest, were an integral part of a loan package and must come within the ambit of Section 33(1) of the ITA.

DGIR

(i) The Director General of Inland Revenue (DGIR) contended that the guarantee commission fees were capital in nature, having been incurred to secure funds which indirectly enhanced the taxpayer’s capital.

(ii) The Director General of Inland Revenue (DGIR) further contended that the purpose of the facilities obtained by the taxpayer was only to finance the business of the taxpayer, and not incurred to produce the income of the taxpayer. Hence, the expenditure incurred on the guarantee commission fees does not meet the criteria stipulated in Section 33(1) of the ITA i.e. not wholly and exclusively incurred in the production of the taxpayer’s income.

Decision

The appeal was dismissed on the following grounds :-

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(i) The taxpayer sought support from its parent company to provide corporate guarantee as normally required by financial institutions when there are no other forms of adequate security and in return, the taxpayer paid a guarantee commission fee to its parent company. The guarantee commission fees were incurred by the taxpayer in order to secure financing facilities and thus were not wholly and exclusively incurred in the production of income. In view of the above, the guarantee commission fees are not deductible expenditure under Section 33(1) of the ITA.

4.0 SPM SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,881

Facts

The taxpayer entered into a franchise agreement with S Corporation (S Corp), a company incorporated in the United States of America. The taxpayer was obliged to pay franchise fees equal to 8% of its gross turnover to S Corp on a monthly basis, in return for which, the taxpayer received the exclusive right to trade in Malaysia using the multi-level marketing system of S Corp and to receive continued support and assistance from S Corp during the term of the franchise agreement i.e. for a period of 3 years with an automatic option to renew. The taxpayer has also paid withholding tax on the franchise fees under Section 109B of the Income Tax Act, 1967 (ITA). The Inland Revenue Board (IRB) disallowed the deduction claim in respect of the franchise fees and also imposed penalties.

Issues

Whether the franchise fees paid to S Corp qualified for a tax deduction under Section 33(1) of the ITA.

Arguments

Taxpayer

The taxpayer contended that the fees were a necessary part of the taxpayer’s earning process, paid to obtain continuing services in order to meet the continuing needs of the business. The fees were also directly connected to the taxpayer’s business, incurred to generate sales income and did not give rise to the acquisition of any identifiable asset. Hence, the taxpayer contended that the franchise fees paid were wholly and exclusively incurred in the production income which qualifies for a deduction under Section 33(1) of the ITA.

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DGIR

The Director General of Inland Revenue (DGIR) contended that the franchise fees were not paid for acquiring trading stock of the taxpayer but were paid in order to obtain sole and exclusive right to market S Corp’s products in Malaysia. Hence, the franchise fees were considered to be capital expenditure and not deductible under Section 33(1) of the ITA.

Decision

The taxpayer’s appeal was allowed on the following grounds:

(i) The franchise fees paid for the services were a necessary part of the income generating process of the taxpayer and that the continuous services derived were necessary for the taxpayer to meet the continuous demand of its business.

(ii) The fees calculated at 8% of the gross sales were recurring payments which were not paid “once and for all”.

(iii) The franchise fees are not capital expenditure as it neither gave rise to an enduring benefit nor the acquisition of any identifiable assets.

(iv) The franchise fees were revenue expenditure incurred for the sole purpose of producing the gross income of the taxpayer, and thus allowable for tax deductions under Section 33(1) of the ITA.

5.0 ELM SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,887

Facts

The taxpayer was involved in the business of trading in the pharmaceutical and animal health products and from time to time, organized congresses for the dissemination of knowledge and information as well as promoting the taxpayer’s product. The taxpayer sponsored doctors or pharmacists to speak and attend such congresses as they are reputable authorities in their field, well abreast of technological advances in drugs and medicine and the topic of their papers were related to the diseases or medical conditions for which the appellant had drugs or medicines. The sponsorship was limited to the costs of travel, meals, accommodation and registration fees for the congress for which the taxpayer claimed tax deduction. The Director General of Inland Revenue (DGIR) disallowed the claim of the congress expenses on the basis that the expenses were “entertainment” and not deductible under Section 39(1)(l) of the Income Tax Act, 1967 (ITA)

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although these expenses had earlier been allowed as a deduction. Accordingly, the DGIR raised additional assessments and imposed penalty of 60% on the taxpayer.

Issues

(i) Whether the congress expenses that were allowable under Section 33(1) of the ITA should be disallowed as “entertainment” under Section 39(1)(l) of the ITA.

(ii) Whether the penalties imposed is justifiable.

Arguments

Taxpayer

(i) The taxpayer contended the congress expenses were wholly and exclusively incurred in the production income under Section 33(1) of the ITA and the said expenses did not fall under the definition of “entertainment” in Section 18 of the ITA.

(ii) The sponsored speakers and doctors having to present papers on the special fields were providing a service and invested time by attending the congress. In return, both the participants and the taxpayer derived practical advantage which is viewed to be consideration in law.

(iii) In respect of the penalty, the tax returns submitted by the taxpayer were based on the taxpayer’s interpretation of the tax laws and the claims were substantiated by full disclosure of all information. Moreover, the Director General of Inland Revenue (DGIR) had previously allowed a deduction for such costs.

DGIR

(i) The DGIR contended that the congress expenses were entertainment in nature as they fall under the definition of entertainment in Section 18 of the ITA, thus not deductible under Section 33 of the ITA.

(ii) The doctors and pharmacists attending the congress were not the taxpayer’s employees. Hence, the sponsorship cost were not related to the business of the taxpayer as well as not wholly and exclusively incurred in the production of the taxpayer’s gross income.

(iii) The penalty was imposed on the grounds that the taxpayer made an incorrect return in claiming tax deduction on certain expenses which were not supposed to be deducted.

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Decision

The taxpayer’s appeal was allowed on the following grounds:

(i) Citing the case KPHDN v. Aspac Lubricants (Malaysia) Sdn Bhd, it was held that where the dominant purpose of the expenditure is for promotion of the company’s business, the expenditure is not “entertainment” in nature.

(ii) The doctors attending the congresses gave up their time and potential of earning income, in exchange for knowledge of the latest products and developments in their fields, which are viewed to be consideration in law.

(iii) The doctors also obtained new and updated knowledge of the products which likely will result in an increase of sales or market share. This practical advantage could also be viewed as consideration.

(iv) The penalty imposed was not justified and the return was not incorrect on the basis that the deductions claimed were substantiated by the appropriate information and the DGIR had in the past allowed such deduction.

6.0 NVA SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,897

Facts

The taxpayer was in the business of marketing burial plots, urn compartments and funeral packages. The marketing functions of its business were carried out by appointed agents who were paid a commission. Apart from commissions, the agents who achieved targets were also being rewarded with goods or cash incentives.

The Inland Revenue Board (IRB) conducted a field audit in 2004 and focused on cash incentives and promotion expenses incurred by the taxpayer. The Director General of Inland Revenue (DGIR) found certain deductions to be incorrectly claimed and disallowed the incentive expenses as being entertainment under Section 18 of the Income Tax Act, 1967 (ITA) and restricted under Section 39(1)(l) of the ITA. Additional tax and penalties pursuant to Section 113(2) of the ITA were also imposed for the years of assessment concerned.

Issues

(i) Whether the incentive expenses were allowable under Section 33(1) and not restricted under Section 39(1)(l) of the ITA; and

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(ii) Whether the Director General of Inland Revenue (DGIR) was right in law to impose the penalty of 60% under Section 113(2) of the ITA.

Arguments

Taxpayer

(i) The taxpayer argued that the cash incentives paid to the agents were wholly and exclusively incurred in the production of their gross income and should be allowed as deduction under Section 33(1) and not restricted under Section 39(1)(l) of the ITA.

(ii) In addition, the taxpayer contended that the penalty imposed under Section 113(2) of the ITA were inappropriate as the expenses were claimed based on their interpretation in good faith and not deliberately providing incorrect information nor omitting or understating its income.

DGIR

(i) The DGIR recognised the fact that the expenses claimed were “incentive” and did fall under Section 33(1) of the ITA. However the DGIR argued that the expenses were in the form of entertainment as defined under Section 18 and hence, not allowable as deduction pursuant to Section 39(1)(l) of the ITA.

(ii) Since the taxpayer made an incorrect return or provided incorrect information in relation to its tax liability, the imposition of penalty under Section 113(2) of the ITA is thus appropriate.

Decision


(i) The incentive expenses do fall under Section 33(1) of the ITA as the expenses were incurred solely with the object of promoting the taxpayer’s business.

(ii) Incentive expenses (cash payouts forming part of incentive packages to motivate the agents to make greater sales) do not constitute entertainment defined under Section 18 of the ITA and not prohibited by Section 39(1)(l) . The expenses in fact relate to the performance of the taxpayer’s profit earning operations and would be revenue in nature.

(iii) The imposition of penalty under Section 113(2) was wrong in law since the claim for tax deduction was based on the taxpayer’s interpretation of the law in good faith.

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7.0 XS HOTEL SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,905

Facts

The taxpayer is a hotel operator of a 5-star hotel which has been registered with the Ministry of Culture, Arts and Tourism in accordance to Section 2(1) of the Promotion of Investments Act, 1986 (PIA). The taxpayer undertook expansion project for the hotel and its application for investment tax allowance was granted for a period of 5 years, effective from 31 January 1992. The taxpayer had incurred RM74,424,130 as qualifying capital expenditure in relation to its hotel business and claimed investment tax allowance and industrial building allowance (IBA) from the year of assessment (YA) 1993 to YA 1997, and the Director General of Inland Revenue (DGIR) had allowed the claims. Upon expiry of the investment tax allowance period on 30 January 1997, the taxpayer continued to claim IBA on the residual capital expenditure in its tax computations for YAs 1998 to 2000 (CYB).

Issues

Whether the taxpayer was entitled to continue claiming IBA on the residual value of the qualifying capital expenditure until it has been fully utilized subsequent to the expiry of the investment tax allowance period?

Arguments

Taxpayer

The taxpayer contended that it is entitled to continue claiming IBA for the YAs 1998 to 2000 (CYB) although the investment tax allowance period has expired on 30 January 1997 based on the following:

(i) The hotel is within the definition under the PIA and is of approved standard.

(ii) Section 30 of the PIA which allows the claim of IBA is silent as to whether IBA expires upon the cessation of investment tax allowance.

(iii) Applying purposive approach, the Parliament would not have intended to limit the grant of IBA for a hotel for a period of 5 years.

(iv) The general position under Schedule 3 of the Income Tax Act, 1967 (ITA) is that capital allowance and IBA shall be available until fully exhausted.

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(v) In the event there is a doubt on the interpretation of Section 30 of the PIA, it should be resolved in favour of the taxpayer.

DGIR

The DGIR contended that:

(i) The taxpayer is not entitled to continue claiming IBA since the investment tax allowance period had expired on 30 January 1997. The hotel building is deemed to be an industrial building for that period where investment tax allowance was granted.

(ii) Paragraph 65(3) Schedule 3 of the ITA had specially disqualified hotel to be treated as an industrial building.

(iii) The taxpayer had enjoyed notional allowance during the period in dispute (YA 1998 to 2001) as provided for under paragraph 68 Schedule 3 of the ITA.

Decision

The Special Commissioners dismissed the taxpayer’s appeal on the following grounds:

(i) Prior to Year of Assessment 2002, a hotel building was not an industrial building and therefore was not entitled to claim IBA.

(ii) Pursuant to Section 19 of PIA, a hotel building is deemed an industrial building when a hotel business is carried on by a pioneer company.

(iii) The purposive approach is not applicable as there is no ambiguity in section 30 of the PIA.

(iv) There is no provision in the PIA or the ITA to allow any person to enjoy claiming IBA where the period for it has clearly expired.

8.0 SE SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,912

Facts

The taxpayer is principally engaged in property development and investment. The taxpayer has been granted the right to construct a mixed development project which includes a shopping complex with a 20 storey hotel above and apartments. The shopping complex underneath the hotel development was held for investment. On the advice by Malayian Industrial Development Authority (MIDA),

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the taxpayer incorporated a wholly owned subsidiary, SHSB to carry on the business as a hotel keeper. Subsequently, the taxpayer transfer the right to build the hotel to SHSB for a consideration of RM7,000,000 satisfied by issuance of RM5,320,000 shares in SHSB and the balance was credited to the taxpayer’s current account with SHSB. The taxpayer applied for separate strata titles of the hotel and the cost for the application was reimbursed by the SHSB.

The Director General of Inland Revenue Board (DGIR) has assessed the income from the transfer of right under Section 24(2) of Income Tax Act, 1967 (ITA).

Issues

(i) Whether the right to build the hotel that was transferred formed part and parcel of the taxpayer’s stock in trade under section 35 of the ITA and the gain from the sale taxable under section 24(2) of the ITA, or

(ii) Whether the gain from the sale is a capital gain taxable under the Real Property Gains Tax Act, 1967 (RPGTA).

Arguments

Taxpayer

The taxpayer contended that the transfer of right to build the hotel to its subsidiary company does not constitute trading stock since the shopping complex underneath is not stock in trade but held as an investment for rental purposes. Therefore, since it is a disposal of a right, the receipts from the disposal are capital in nature and should be taxed under the RPGTA.

DGIR

The DGIR contended that the gain arising from the disposal of the projects and the hotel was not a sale of an investment but from trading stock and hence the taxable under section 24(2) of the ITA.

Decision


(i) The shopping complex and the proposed hotel remained as fixed assets of the taxpayer and was kept as investment for purpose of deriving rental income.

(ii) The subsequent transfer of right to its subsidiary was a

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transfer of its fixed asset. Any gain derived from this transfer should be taxed under RPGTA.

9.0 LFC SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI (2009) MSTC 3,917

Facts

The taxpayer is principally engaged in the business of providing sea transportation services for passengers, vehicles and vehicles with cargo between the Labuan jetty and Menumbuk jetty in Sabah. The taxpayer has leased 3 vessels from the State Government of Sabah for its business operations. These vessels were not registered as ships under the Merchant Shipping Ordinance, 1952 (the Ordinance). In year 2007, the taxpayer purchased the 3 vessels and was in the process of registering the vessels as ship under the Ordinance. Notwithstanding that, the taxpayer currently owned a ship which has already been registered under the Ordinance.

Issues

Whether the taxpayer was eligible for income tax exemption under section 54A of the Income Tax Act, 1967 (ITA)?

Arguments

Taxpayer

(i) The taxpayer contended that the vessels used in its business were ships and not ferries based on the definition under the Ordinance and description and usage of the vessels.

(ii) The vessels need not be registered under the Ordinance as they belonged to the Sabah State Government.

DGIR

(i) The DGIR contended that the vessels do not fall within the definition of a “Malaysian ship” under section 54A of the ITA since they were not registered under the Ordinance.

(ii) The vessels were ferries which were specifically excluded in the definition of “Malaysian Ship” under section 654A of the ITA.

Decision


(i) The vessels need not be registered under the Ordinance as they belonged to the Sabah State Government. They were

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still Malaysian ships as they belonged to the Sabah State Government.

(ii) Based on the size and usage, the vessels were “Malaysian ships” under s 54A of the ITA.

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B Malaysian Courts' Decisions

1.0 PRIMARY PROPERTIES SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI [(2009) MSTC 4,383] (HIGH COURT)

Facts

The taxpayer was a company in the logging business. As a sub-contractor, it entered into an extraction agreement with its main contractor to fell and extract timber logs in designated forest areas, where the main contractor’s rights over the licensed area came from an agreement with the timber license holder, Sarawak Timber Industry Development Corporation (STIDC). To extract timber from the forested areas, the taxpayer had to construct roads and build camps for its workers to stay. For the year of assessment (Y/A) 1991, YA 1992 and 1993, the costs of road construction were disallowed by IRB. The claim for forest allowance was also denied as the taxpayer neither had a concession nor a license to extract timber.

The Special Commissioners of Income Tax (SCIT) held that the costs of constructing temporary logging roads and workers’ camps were capital expenditures and therefore not deductible under section 33(1) of the Income Tax Act, 1967 (ITA). However the SCIT held further that these same costs were forest expenditure, which the taxpayer, as the beneficial owner, was entitled to claim forest allowances under Schedule 3, paragraph 8 of the ITA. Both the taxpayer and Director General of Inland Revenue (DGIR) being dissatisfied with the decision had appealed to the High Court.

Issue

Whether temporary road and camp building construction charges were deductible revenue expenditure or capital expenditure that qualifies for forest allowances?

Arguments

Taxpayer

The taxpayer argued that the charges it incurred were closely related to the conduct of its timber extraction business and formed part of the profit-earning process. They were recurrent revenue expenditures which were wholly and exclusively incurred in the production of its gross income from the extraction business and so, allowable under sec 33(1) of the ITA. Alternatively, if those

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expenses were capital in nature, the taxpayer contended that they fell under paragraph 8 of Schedule 3 of the Act and so, should be granted allowance under paragraph 30 of Schedule 3 of the ITA.

DGIR

The expenses constituted non-deductible capital expenditure as they were incurred once and for all and were essential to the start of an operation in the timber extraction business for without the road and the camp, the longing business would not even be viable.

The taxpayer is not entitled to claim forest allowance under Schedule 3 as under Paragraph 8(2) of the ITA, only the concession holder or a licensee would qualify.

Decision

The High Court upheld the decision of the SCIT and dismissed the appeal and the cross appeal. Construction of logging roads and workers’ camps are essential pre-requisites to any timber extraction business. The costs had the nature of being “once and for all” expenditure essential to the start of the operation of the timber extraction business, without which the business would not be viable. The treatment of such costs as being capital in nature was supported by Paragraph 8(1)(a) and (b) of Schedule 3 to the ITA, and by relevant case authorities. The Special Commissioners’ finding that these costs were capital expenditure was therefore reasonable and in accordance with the law.

Paragraph 8(2) of Schedule 3 to the ITA provides that in respect of forest expenditure the person who can claim it as allowance would be the one who ‘... has a concession or a licence to extract timber there from ....’ It is obvious that the taxpayer was neither a concession holder nor a licensee (that would be STIDC). Nevertheless the SCIT held, applying the purposive approach in interpreting the said sub-paragraph 2, that the taxpayer was the ’.... one who runs the business and incurred the expenses. If the allowance is only given to licensee, no one will get the benefit of this provision as in logging business, it is common that the licensee will not run the business but the licence is assigned to contractor to extract timber’. The High Court added that to strictly construe Paragraph 8(2) to just concession holders and timber licensees would be to deny those who have been assigned the rights and liabilities under the licence, such as the taxpayer, their legitimate expenses which they have expended to build roads and camps just like the concession holders and licensees would have done if they did the job themselves.

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Having contractually acquired the rights and liabilities of the licensee, the taxpayer was entitled to claim forest allowance for the capital expenditure incurred in constructing the roads and the worker’s camp.

2.0 ALLIED METALCRAFT CORPORATION SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI [(2009) MSTC 4,387 ] (HIGH COURT)

Facts

This was an appeal against the Special Commissioners of Income Tax's (SCIT) decision made on the 8 October 2002, which determined that the expenses incurred by the Appellant for providing the Appellant’s sales persons with free tickets for overseas trips were entertainment expenses and were prohibited under section 39(1)(l) of the Income Tax Act, 1967 (ITA).

The Appellant incurred expenses on the provision of free trips/tickets to overseas for individual sales agents who attained certain sales quota in the sales of kitchen utensils and water filters. The expenses were disallowed for years of assessment 1989 – 1997.

Issues

(i) Whether the appellant could withdraw an erroneous admission of law at the High Court?

(ii) If so, did the court have the jurisdiction to hear and determine the question of law which was not determined by the SCIT, namely whether free overseas tickets constituted entertainment expenses for the purposes of section 39(1)(l) of the ITA?

Arguments

Taxpayer

There is a distinction to be made between “entertainment” in the sense used in Section 18 of the ITA and the promotional items used as incentives for promotion of business citing United Detergent Industries Sdn Bhd v DGIR [1999] 1 AMR 462(H/C) and Aspac Lubricants (Malaysia) Sdn Bhd v KPHDN (2007) MSTC 4,271.

The court ought to adopt a purposive approach in interpreting Section 18 of the ITA premised on Palm Oil Research and Development Board Malaysia & Anor v Premium Vegetables Oils Sdn Bhd (2005) MSTC 4,098 in that the term “entertainment” does not include the provision of free tickets to sales persons who have achieved certain sales quota.

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The erroneous admission at the SCIT that the “free tickets for overseas trip were incentive payments in the form of entertainment” is to be withdrawn and an erroneous admission of law can be withdrawn at any time.

DGIR

Citing several authorities, the Respondent submitted that the Court cannot go beyond the dimension of the case stated and if the Court is to accede to the Appellant’s submission, the case stated would have come to naught. Both parties had conceded in their submissions that the free tickets for overseas trips given to the individuals who attain sales were incentive payments in the form of entertainment; therefore the question of whether the free tickets fall under the definition of “entertainment” was never an issue but centered on whether the free tickets in the form of entertainment fall under the provision (i) of Paragraph 39(1)(l) of the ITA and hence are entitled to be deducted as revenue expenditure under Section 33(1) of the ITA, ie, whether the individual salesman were employees or non-employees of the Appellant.

Decision

(i) In view of Sections 99 and 102 and Schedule 5 of the ITA, which regulated an appeal in a tax case and had therefore to be adhered to and given effect to, the High Court was only seised with jurisdiction when there was an appeal on a question of law against a deciding order to be decided by way of case stated. It could not allow the withdrawal of an erroneous admission of law, as to do so would be tantamount to the High Court usurping the powers of the SCIT.

(ii) Since the first question was decided in the negative, the second issue did not arise.

3.0 KERAJAAN MALAYSIA V MULTIPLE LAUNCH SDN BHD [(2009) MSTC 4,392] (HIGH COURT)

Facts

The respondent disposed of assets in Johor and real property gains tax of RM678,578.55 was imposed via a Notice of Assessment dated 26 November 2000 for the year of assessment 2000. The respondent disputed the amount assessed but made payment of RM186,816.15. The appellant’s claim was for the amount of tax plus 10% penalty thereon under Section 21(4) of the Real Property Gains Tax Act, 1976 (RPGTA), totaling RM555,620.25.

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Issue

Whether a stay of all proceedings can be granted pending appeal to the Special Commissioners of Income Tax (SCIT)?

Arguments

Taxpayer

Stay should granted as the defendant has submitted his appeal to the Plaintiff via a letter dated 18 December 2008. The plaintiff failed to forward the appeal to the SCIT. The failure is a breach of statutory duty and the right to natural justice.

DGIR

Real property gains tax is payable not withstanding any appeal as provided under Section 21 (1) of the RPGTA. Under Section 23(3) of the RPGTA the court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under Section 21(4) of the RPGTA. There is a dearth of authorities that supports the effect of the above said provision. The RPGTA also provides for an aggrieved taxpayer to appeal to the SCIT, which the taxpayer did not do.

Decision

The appeal was dismissed on the following grounds:

(i) Sections 21(1) and 23(3) of the RPGTA provide that tax shall be paid although the assessment raised is disputed; and that the court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased under section 21(4) of the RPGTA.

(ii) The letter dated 18 December 2002 was not an appeal to the SCIT, merely a request to reduce the sum assessed. There was no appeal made by the respondent to the SCIT within the prescribed time. On the expiry of the time for appeal against an assessment, the assessment becomes final and conclusive, pursuant to Section 20(1) of the RPGTA.

(iii) Even if the appeal had been forwarded to the SCIT on time, an appeal does not operate as a stay of execution or of proceedings under the decision appealed from unless the court so orders. The onus is on the applicants to demonstrate the existence of special or exceptional circumstances to justify the grant of a stay of execution. The respondent’s reasons forwarded did not amount to special circumstances.

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4.0 MENGAWATI SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI [(2009) MSTC 4,395] (HIGH COURT)

Facts

The taxpayer is in the business of housing development. The taxpayer applied to the Malacca State Government for 250 acres of land for housing development. On 1 February 1980, the application was approved. The taxpayer had to pay RM858,050 for the premium and other statutory charges. On 5 March 1980, the taxpayer entered into an agreement with Masa Merdeka Sdn Bhd (MM) to develop the land, where MM agreed to pay RM3.5 million to the taxpayer. On 31 December 1980, the taxpayer and MM varied the consideration from RM3.5 million to RM900,000. The RM900,000 was to be paid in 2 payments. On 8 July 1983, MM agreed to pay the taxpayer an additional 50sen per sq feet upon the completion of the project. The taxpayer was assessed to tax on the RM900,000 received from MM.

The Special Commissioners of Income Tax (SCIT) held that:

(i) the RM900,000 was “income”; and

(ii) the premium and other statutory charges should not be allowed as deductible expenses as there was no evidence of the payment being made to the State Government.

Before the High Court, the taxpayer conceded that the RM900,000 was its income. The issue that remained was whether the premium and other statutory charges (“expenses”) were deductible against the RM900,000? The SCIT's finding of fact that no payment was made to the State Government are unassailable. As there was no evidence of such payment being made, no deduction was allowed.

The taxpayer being dissatisfied appealed to the Court of Appeal.

Issue

Whether land alienation cost and other statutory payments made by a housing developer is a deductible expense against income received?

Arguments

Taxpayer

The taxpayer on the other hand argued that DGIR’s submission was incorrect as Chua Lip Kong makes a distinction between the findings of primary facts and inferences drawn from primary facts.

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DGIR

The Revenue contended that the findings of primary facts by the SCIT were unassailable and can neither be overruled nor supplemented by the High Court, citing Chua Lip Kong v Director General of Inland Revenue (1982) 1 MLJ 235.

Decision

The taxpayer’s appeal was dismissed. In applying established principles set out in Chua Lip Kong, the SCIT’s finding is unassailable; neither can it be overruled nor supplemented by the High Court. The SCIT had found no evidence at all of the existence of the payment of the land alienation costs by the taxpayer to the State Government, stating there was no evidence of the date and actual amount paid.The Court of Appeal affirmed the SCIT’s reasoning. Even if there was evidence that the taxpayer had paid the land alienation costs to the State Government in 1980, the High Court’s decision was correct in law as the land alienation costs were capital expenditure for acquiring the land, not revenue expenditure. The land alienation cost was not wholly and exclusively incurred in the production of the taxpayer’s gross income; nor was it incurred in the period when the taxpayer received the income. As such, it failed to fulfill the requirements of sec 33(1) of the Income Tax Act, 1967 (ITA).

5.0 KETUA PENGARAH HASIL DALAM NEGERI V PERBADANAN KEMAJUAN EKONOMI NEGERI JOHOR [(2009) MSTC 4,399] (COURT OF APPEAL)

Facts

The respondent (the taxpayer) is a statutory body incorporated under the Johor State Enactment No. 4 of 1968 with its principal activities being the development of land for industrial, agricultural, property, mining, logging and other activities. The taxpayer’s two principal sources of income was business and dividend income and had been granted exemption under Section 127 of the Income Tax Act, 1967 (ITA) for all income except dividend income and development tax for several years including years of assessment (YA) 1991 and 1992 which are the YAs subject to the appeal. In these two years, the taxpayer made gifts of money to the State Government and claimed deductions thereon from its non-exempt dividend income. The Director General of Inland Revenue (DGIR) allowed deductions under Section 44(6) of the ITA but apportioned the deductions between the taxpayer’s exempt business income and non-exempt income, subsequently raising assessments for YAs 1991 and 1992.

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It was decided in the taxpayer’s appeal to the Special Commissioners of Income Tax (SCIT) that the DGIR’s computations were wrong and two notices of assessment were ordered to be revised. The Inland Revenue appealed to the High Court, which affirmed the decision of the SCIT. Subsequently, the appeal was heard by the Court of Appeal.

Issues

(i) Does the word “income” in Section 127(5) of the ITA mean gross income or chargeable income?

(ii) Are the income tax exemptions to be given at the gross income level or chargeable income level?

(iii) Is the DGIR’s apportionment formula lawful and applicable?

Arguments

Appellant

(i) The word “income” means chargeable income and not gross income based on the cases of MCI Society Ltd v Ketua Pengarah Hasil Dalam Negeri [(1995) 2 MSTC 2,272], Ketua Pengarah Hasil Dalam Negeri v MCI Society Ltd [(2000) MSTC 3,792] and Lower Perak Co-operative Society v Ketua Pengarah Hasil Dalam Negeri [(1994) 2 MSTC 3,406].

(ii) The case of Daya Leasing Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri [(2005) MSTC 4,124] was relied upon to support the submission that because the exemption does not include dividend income, it is necessary for the DGIR to apportion the chargeable income between dividend and business income and apply the apportionment formula to the gifts of money between the non-exempt dividend income and exempt business income.

Respondent

(i) The word “income” means gross income and that in the MCI Society case, the relevant judgements were silent on the meaning of the word “income”. Further, the Lower Perak Co-operative Society case is distinguishable, as co-operative societies have to seek exemption under Schedule 6 to the ITA.

(ii) The facts of the Daya Leasing case are different as the company in that case ran two types of businesses that shared common expenses such as rental, staff salaries, etc,

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and because they are common expenses, the expenses deductible from the businesses are unidentifiable.

Decision

Appeal allowed. The Court of Appeal held that:

(i) Section 127(5) of the ITA allows for any income exempt from tax by virtue of Section 127 of the ITA to be disregarded for the purposes of the ITA and this includes business income. Section 2(2) of the ITA makes only a general reference to “income”. The submission presented for the DGIR is upheld and “income” means “chargeable income” as gross income per se may or may not be exigible to tax at all, and when no tax is exigible, there is no question or necessity for the taxpayer to claim/utilise the exemption.

(ii) The DGIR’s apportionment of the deduction for the gifts of money between the non-exempt dividend income and the exempt business income is justified, lawful, and in line with Section 5 of the ITA and the apportionment implied in Section 33(1) of the ITA. The total amount of the gifts could not be allowed against only one source of income when the aggregate income consists of both business source income and dividend income.

(iii) The deciding order and the High Court judgement are set aside. The DGIR’s apportionment formula and two notices of assessment are upheld.

6.0 KETUA PENGARAH HASIL DALAM NEGERI V STERUDA SDN BHD [(2009) MSTC 4,407] (COURT OF APPEAL)

Facts

The taxpayer, Steruda Sdn Bhd (Steruda), was a company that provided consultancy services in gynaecology, obstetrics and other branches of medicine. Steruda entered into an employment agreement on 12 July 1976 with Dr Ronald Stephen McCoy (Dr McCoy), who was also a shareholder and director of Steruda. He was to be paid remuneration of RM3,000 per month plus an annual 25% of the net profit of the business.

The Director General of Inland Revenue (DGIR) raised seven notices of assessment for the YAs 1978 to 1984 and treated the 25% net profit paid to Dr McCoy as a bonus, disallowing the excess over two-twelfths of his salary. Steruda appealed against the additional assessments and argued that the 25% net profit payment was part of his remuneration package and not a bonus and therefore fully

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deductible under Section 33(1) of the ITA.

The Special Commissioners of Income Tax (SCIT) viewed the amount to be tantamount to a bonus and dismissed the appeal. The case was then referred to the High Court, which found the 25% net profit payment as being a part of Dr McCoy’s salary and reversed the decision of the SCIT.

The DGIR subsequently appealed to the Court of Appeal.

Issues

Whether the 25% of the net profit of Steruda paid to Dr McCoy was a bonus payment or not.

Arguments

Appellant

Three cases were referred to, namely Saledy Sdn Bhd v Director General of Inland Revenue [(1995) 2 MSTC 3440], Director General of Inland Revenue v Harrisons & Crosfield (M) Sdn Bhd [(1988) 2 MLJ 223], and Director General of Inland Revenue v Highlands Malaya Plantation [(1988) 2 MLJ 99]. The DGIR in these cases contended that the payments made to staff were bonus and therefore, deductions for the payments in excess of two twelfths of salary were disallowed.

Respondent

The 25% of net profit paid to Dr McCoy at the end of the year merely formed part of his salary and was not a bonus.

Decision

Appeal dismissed with costs. The Court of Appeal held that:

(i) In the Harrisons & Crosfield case, the payment was compartmentalised under a separate and special heading and it had a discretionary quality unlike salary and correctly falls under the purview of Section 39(1)(h) of the ITA. In the Highlands Malaya Plantation case, the SCIT concluded that the payment could be gratuitous or contractual, but nevertheless, still a bonus (Note that the SCIT’s decision was overturned by the High Court). The Saledy Sdn Bhd case was not helpful as it never discussed how the conclusion regarding the additional remuneration being a bonus was arrived at.

(ii) There is no statutory definition of “bonus” in the ITA and several cases were looked at, namely Re Eddystone Marine Insurance Co. [(1984) W.N 30], Shelford v Morsey [191 1 KB 154],

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Sutton v A.G [(1923) 39 T.LR], and Great Western Garment Co. Ltd v Minister of National Revenue [(1948) 1 D.L.R 225]. From the definitions provided in these cases, bonus may have certain characteristics, such as being an amount in addition to the wages paid to an employee or something that is over and above the agreed remuneration. It may be in the nature of a gift, a temporary boon, or something freely given at the discretion of the giver as opposed to being agreed normal remuneration.

(iii) The presence of intention to make the deferred payment part of Dr McCoy’s remuneration, and not a bonus payment, is a forceful factor. His employment document is contractual in nature and the 25% payment is not at the discretion of anyone, being part and parcel of the salary agreement.

(iv) A comparison with the income of another medical practitioner, who earned a much higher monthly salary than Dr McCoy, leads one to realise that the RM3,000 per month base salary did not commensurate with Dr McCoy’s status and qualification as a senior obstetrician and gynaecologist.

7.0 MENGAWATI SDN BHD V KETUA PENGARAH HASIL DALAM NEGERI [(2009) MSTC 4,414] (COURT OF APPEAL)

Facts

The taxpayer, a housing developer, had applied to the State Government of Melaka for the alienation of 250 acres of leasehold land for the purpose of housing development. The application was approved vide notification dated 1 February 1980. The taxpayer had to pay a total land-alienation cost of RM831,340 within two months of receiving the notification.

On 5 March 1980, the taxpayer entered into another agreement with another housing developer, Masa Merdeka Sdn Bhd (Masa) to develop land at a consideration of RM3.5 million. A later agreement dated 31 December 1980 substituted the consideration for RM900,000 payable in two instalments consisting of RM831,340 payable within two weeks from the date of approval of the letter from the land administrator and RM68,660 to be paid upon completion of the housing estate. On 8 July 1983, an additional agreement was entered into between the taxpayer and Masa providing for the payment of an additional 50 sen per sq ft to the taxpayer upon completion and sale of the properties by Masa.

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The taxpayer was assessed to tax on the two installments and consequently appealed to the Special Commissioners of Income Tax (SCIT) arguing that the sum of RM831,340 expended in 1980 should be deducted from the income of RM900,000 received in YAs 1982 and 1984.

The SCIT found the sum of RM900,000 to be “income” and not an “advance” and hence assessable to tax under the Income Tax Act, 1967 (ITA). The land-alienation costs should not be allowed as deductible expenses against the RM900,000 (income) as there was no evidence of the date and actual amount paid to the State Government.

The taxpayer, before the High Court, accepted that the RM900,000 was “income”. However, it continued to assert that the land-alienation cost was deductible against the income. The High Court rejected the taxpayer’s assertion and held that the land-alienation costs were capital expenditure and not wholly and exclusively incurred in the production of income, nor incurred in the period when the taxpayer received the income.

The taxpayer subsequently appealed to the Court of Appeal.

Issues

Whether the land-alienation costs were allowable as deductions from the income.

Arguments

Appellant

The taxpayer contended that the Director General of Inland Revenue's (DGIR) submission is incorrect as Chua Lip Kong v Director of Inland Revenue makes a distinction between the findings of primary facts and inferences drawn from primary facts.

Respondent

The DGIR cited the case of Chua Lip Kong v Director General of Inland Revenue [(1982) 1 MLJ 235] and argued that the findings of primary facts by the SCIT are unassailable and can neither be overruled nor supplemented by the Court.

Decision

Appeal dismissed with costs. The Court of Appeal held that:

(i) The SCIT found no evidence at all of the existence of payment of the land alienation costs, and there was no evidence of the date and actual amount paid. The SCIT’s

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findings, being finders of facts was to be preferred and cannot be overruled or supplemented by the Court.

(ii) Even if the High Court had found evidence that the land alienation costs were paid to the State, its decision that the land alienation costs were capital expenditure for acquiring the land and not revenue expenditure, thus failing to fulfill the requirements of Section 33(1) of the ITA, was correct in law.

8.0 KERAJAAN MALAYSIA V HOLIDAY PLAZA SDN BHD (FORMERLY KNOWN AS GIB PROPERTY SDN BHD) [(2009) MSTC 4,419] (HIGH COURT)

Facts

The plaintiff applied for a summary judgment against the taxpayer for the sum of about RM5 million plus interest and costs. According to the plaintiff, the taxpayer had failed to settle the outstanding income tax liability for the years of assessment 2002-2004. The defendant claimed that it had obtained approval from the Ministry of Finance (MOF) to set-off excessive service tax paid against outstanding income tax and on that basis only paid RM600,000 towards the outstanding income tax liability.

Issue

Whether defendant has a triable issue in a summary judgment application on grounds that the plaintiff failed to offset excess service tax paid against income tax owed?

Arguments

Taxpayer

The taxpayer claimed that it had paid excessive service tax amounting to RM860,923 since the year 2005 and thus the MOF had given it permission to set off the excessive service tax paid against income tax payable. The taxpayer argued that the plaintiff failed to take into account the set-off, as both the agencies responsible for service tax and income tax are under the MOF. Therefore the plaintiff is estopped from increasing the taxes and the increased taxes are unreasonable and wrongly imposed.

DGIR

The plaintiff argued that income tax must be paid based on the amount stipulated in the tax return, and notwithstanding any appeal, the income tax must be paid first. Any dispute against an assessment must be made to the Special Commissioner of Income

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Tax (SCIT). Under Section 142(1) of the Income Tax Act, 1967 (ITA) any certificate issued stating the amount outstanding is sufficient evidence to show the amount owed of income tax owed.

Decision

The application was allowed. The issue of set-off of excess service tax has never been appealed to the SCIT under Section 99 of the ITA. Service tax comes under the purview of a totally different legislation and is administered by the Customs department. From the defendant’s affidavit in reply there is no written evidence on the claims of the defendant that the MOF has allowed the set-off of excess service tax against income tax owed. Pursuant to Section 103(1) of the ITA, tax is to be paid notwithstanding any appeal against the assessment. Pursuant to Section 106(3) of the ITA, the courts cannot entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased.

9.0 KERAJAAN MALAYSIA V UNITED AXIS SDN BHD [(2009) MSTC 4,425] (HIGH COURT )

Facts

The defendant is in the business of property development and filed tax returns for YAs 2001 and 2002 under the self-assessment system. The Plaintiff filed a summary judgement application for the said assessments when the amounts under the assessments were not paid.

Issue

Whether there exist triable issues in granting summary judgement for income tax claims owed to the Government of Malaysia in the case of a developer who argued that the income tax assessments raised were incorrect.

Arguments

Taxpayer

Relying on the Income Tax Rules (Property Development) Regulations, 2007, the defendant denied that the amounts were owed as the development project had yet to be completed. The defendant claimed that the suit was premature as actual losses upon completion of the project must first be determined.

DGIR

Since the notices of assessment were deemed served under the self-assessment system, the amount taxed therefore becomes

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due and payable under Section 103A(2) of the Income Tax Act, 1967 (ITA). The Supreme Court case of Chong Woo Yit v Government of Malaysia [1982] 2 CLJ 87 illustrates the point that upon service of notices of assessment, tax payable becomes due and payable whether or not a taxpayer appeals against the assessment and the amount would be recovered by civil proceedings as a debt due to the Government.

Decision

Summary judgement was allowed as under the ITA, tax shall be paid although the person assessed disputes the assessment. Under Section 106(3) of the ITA, the Court cannot entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased. As the taxpayer’s entire defence rested on allegations of inaccuracy of the assessment, the right forum for such a plea is at the Special Commissioners of Income Tax (SCIT).

The taxpayer cannot raise the issue of the tax amount being excessive or inaccurate at the summary judgement stage.

10.0 KERAJAAN MALAYSIA V KUMPULAN PINANG HARTANAH SDN BHD [(2009) MSTC 4,429] (HIGH COURT)

Facts

The notice of assessment for the year of assessment 2000 was served on the defendant by post to the last known address of the defendant.

Issue

Whether there exist triable issues in granting summary judgement to the Government of Malaysia in the case of a developer who argued that the real property gains tax assessments raised were incorrect.

Arguments

Taxpayer

The defendant argued that it did not meet the definition of “chargeable person” in relation to the disposal of a chargeable asset, and there was no chargeable gain on the said disposal. Instead, the defendant argued it had an allowable loss under Section 7(1)(b) of the Real Property Gains Tax Act, 1976 (RPGTA). The asset was acquired on 24 May 1995 at the value of RM12.6 million and it was disposed at the market value of only RM10.9 million on 26 August 2000. This shows the defendant incurred a loss of RM1.6 million.

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DGIR

The assessment was raised in accordance with the RPGTA. If the defendant was aggrieved with the assessment, an appeal should be pursued at the Special Commissioners of Income Tax (SCIT). Under the RPGTA, tax is payable notwithstanding any appeal.

Decision

Summary judgement was granted. Similar to income tax cases, the principle that tax is to be paid although the assessment is in dispute applies to real property gains tax. The question of whether the assessment itself was proper or otherwise is not for this court to determine. The court cannot entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased. Sections 21(1) and 23(3) of the RPGTA applies as the notice of assessment had been duly served on the defendant. The proper avenue was for the defendant to appeal to the SCIT.

11.0 WONG KUOK MING V GOVERNMENT OF MALAYSIA; GOVERNMENT OF MALAYSIA V WONG KUOK MING [(2009) MSTC 4,431] (HIGH COURT OF SABAH & SARAWAK)

Facts

The Inland Revenue Board (IRB) sought to claim outstanding income tax amounts raised for YAs 1996 and 1997 by way of summary judgement.

Issue

Whether there exist triable issues to deny a summary judgement on assessments raised by notice of assessments sent by ordinary post.

Arguments

Taxpayer

The taxpayer denied owing the sums claimed as he did not receive the notices of assessments sent by ordinary post. Alternatively he also contended that the claim was statute barred. A similar action filed in 1999 based on the same claim was dismissed by the Magistrates Court and there was no order to file the action afresh.

DGIR

The presumption of service under Section 145(2) of the Income Tax Act, 1967 (ITA) when read together with the provisions of Sections

382


12 and 66 of the Interpretations Acts, 1948 and 1967 clearly shows that the service is effective and good in nature.

The action before the Magistrates Court was withdrawn by the respondent, the Government of Malaysia, resulting in leave to discontinue with the case.

Decision

(i) In a summary judgement application, the plaintiff, the Government of Malaysia, has to satisfy the court that the taxpayer has no defence to the claim or the taxpayer should show that there is a serious conflict of material facts or there is otherwise a triable issue worthy of judicial investigation in a full trial. The summary judgement was denied as the respondent, the Government of Malaysia, failed to show evidence that the notices were indeed posted and they were addressed to the taxpayer at the taxpayer’s last known address and thus raised a triable issue. The Court relied on the decision in Kerajaan Malaysia v Suncity Development Sdn Bhd [2007] 1 AMR 589 that for the respondent to rely on the presumption or deeming provision under Section 145(2) of the ITA, there must be evidence in the affidavit of service to show that the notices were indeed posted and that they were addressed to the taxpayer’s last known address.

(ii) On the taxpayer’s contention that he was not liable for the tax assessed or penalties thereon, it was without merit as tax is payable notwithstanding any appeal and the taxpayer did not show evidence that he has appealed against the assessments.

(iii) On the issue of whether the respondent’s claim is statute-barred, the Court ruled that the discontinuance and withdrawal of a previous action against the taxpayer is no bar to the present action for the same cause of action. It could not be said that there is finality in the decision as the merits of the claim were never considered: Ramal Properties Sdn Bhd v East West Umi Insurance Sdn Bhd [1997] 3 CLJ 598.

(iv) In relation to the application of the doctrine of estoppel, the Court held that the doctrine of estoppel does not apply to Government on revenue matters.

383


12.0 KERAJAAN MALAYSIA V KENANGA WANGSA SDN BHD [(2009) MSTC 4,435] (HIGH COURT)

Facts

The plaintiff applied for a summary judgement against the defendant for unpaid taxes for year of assessment 2004 amounting to RM546,715.

Issue

Whether plaintiff ’s application for summary judgement amount was inaccurate and misleading.

Arguments

Taxpayer

The defendant challenged the application on the following grounds:

(i) the plaintiff ’s claim was inaccurate and misleading;

(ii) some payments had previously been made to the plaintiff; and

(iii) the notice of tax increase was never received by the defendant.

DGIR

The defendant made part payments after the summons was filed on 27 June 2007. As such when the action was filed, the amount claimed was accurate.

Decision

The application was partly granted with 8% interest per annum from the date of award until settlement, with costs. Upon part payment, the plaintiff was only entitled to RM165,397. The defendant had no defence against the sum of RM165, 397. The tax increase due to late payment can be made under Sections 103(2) and (4) of the Income Tax Act, 1967 (ITA) without giving notice to the defendant.

13.0 ANG LAY KIM @ ANG IMM V KETUA PENGARAH HASIL DALAM NEGERI [(2009) MSTC 4,436] (HIGH COURT)

Facts

The taxpayer was a Malaysian until 23 January 1988 when he accepted Singaporean citizenship. The taxpayer owned 1/8th of a property which he inherited from his late mother on 29 January

384


1987. The taxpayer also signed a declaration of trust stating that of the 1/8th (or 5/40th) of the property, he only held 1/40th for himself and the remaining 4/40th were held in trust for his four sisters who were Malaysian citizens. Via a sale and purchase agreement dated 6 June 1996, the taxpayer and 10 other owners sold the property for RM2,444,124.35. The taxpayer received RM305,515.53, of which he took RM61,103.10 for himself, and the remaining sum was distributed to his sisters. On 15 January 2007, the taxpayer filed Form CKHT 1. On 19 February 2007, the defendant raised a notice of assessment for the year 1996, imposing real property gains tax and penalties amounting to RM74,229.32.

The taxpayer challenged the notice of assessment, and among others, the taxpayer applied for the following orders: (1) a declaration that the notice of assessment issued by the defendant for the year of assessment 1996 for real property gains tax amounting to RM74,229.32 was invalid and must be revoked; and (2) a declaration or order that the taxpayer did not owe the Director General of Inland Revenue (DGIR) any real property gains tax and the taxpayer did not need to pay the sum of RM74,229.32 claimed by the defendant.

Issues

(i) Whether an originating summons is the appropriate procedure against a disputed assessment?

(ii) Is the taxpayer a ‘chargeable’ person and is the Real Property Gains Tax rate of 30% appropriate?

Arguments

Taxpayer

The taxpayer ought to be taxed based on the actual amount received i.e. RM61,103, based on his ownership of 1/40th share as 4/40th of the share was held in trust for four sisters and not based on the amount of RM305,515. As such, the imposition of the real property gains tax and penalty on the taxpayer is unfair. The asset was a gift from the late mother of the taxpayer on the basis of love and affection without any monetary consideration. The taxpayer is therefore not a chargeable person under the RPGTA.

RPGT should not be imposed on an asset held for more than 5 years from the date of acquisition. In this case, the taxpayer had acquired the asset on 21 September 1987 and the disposal was in 1996 (i.e. after more than 5 years).

385


The rate of 30% imposed on the taxpayer is incorrect as the taxpayer was a citizen at the time of acquisition.

The taxpayer did not appeal to the Special Commissioners of Income Tax (SCIT) as provided under Section 18 of the RPGTA.

DGIR

If the taxpayer is aggrieved with the RPGT assessment, he must first exhaust the avenue of the ‘domestic remedy’ available under the RPGTA, except where there are special circumstances such as the absence of jurisdiction, failure to adhere to statutory provisions or there is violation of the principles of natural justice. It is not denied that the taxpayer was a citizen at the time of acquisition of the asset but at the time of disposal, he was not a citizen. As such, based on Schedule 5, to the RPGTA and an amendment by the Finance Act, 1996 (Act 544) effective from 27 October 1995, a rate of 30% is applicable on the disposal. The argument that the acquisition was based on love and affection is of no issue as the tax is imposed based on disposal not on acquisition. In any case, a gift based on love and affection is still defined as an acquisition under the RPGTA.

Decision

The application was dismissed on the following grounds:

(i) The taxpayer’s application for declaration should not have been by way of an originating summons but instead, an application for judicial review.

(ii) If the taxpayer was aggrieved by the said notice, then the appropriate remedy was by way of an appeal to the Special Commissioners of Income Tax pursuant to Section 18 of the RPGTA.

(iii) The taxpayer was a “chargeable person” for the purposes of real property gains tax.

(iv) The real property gains tax at the rate of 30% was correctly imposed as the taxpayer was not a tax resident at the time the property was disposed of.

14.0 KERAJAAN MALAYSIA V KL DEVELOPMENT SDN BHD [(2009) MSTC 4,443] (HIGH COURT)

Facts

This was an application by the plaintiff against the defendant for summary judgement in respect of real property gains tax which is due and payable by the defendant for the YA 1993 inclusive of a

386


10% increase under Section 21(4) of the Real Property Gains Tax Act, 1976 (RPGTA) for the amount of RM810,660.45. The defendant in turn claimed that there were triable issues.

Issues

Is the plaintiff ’s application for summary judgement valid and do triable issues exist?

Arguments

Plaintiff

The application for a summary judgement is valid and a result of the failure to pay tax due and payable within 30 days after service of the notice of assessment (the Notice) for YA 1993.

Defendant

The defendant claimed the following as triable issues:

(i) The claim by the plaintiff is invalid, wrongly construed and cannot be sustained in law;

(ii) The defendant never received the Notice for YA 1993; and

(iii) The plaintiff ’s cause of action is restricted by the Limitation Act, 1953.

Decision

The application for summary judgement was allowed. The High Court held that:

(i) Based on the case of Chong Woo Yit v Government of Malaysia [(1989) 1 MLJ 473], the RM810,660.45 became due and payable on the service of the Notice on the defendant.

(ii) The Notice was sent to the defendant’s last known address (based on the information provided by the defendant through its Return of Disposal of Chargeable Assets) and is deemed served on the defendant. Furthermore, the Notice was never returned and the case of Kerajaan Malaysia v Rimo Jaya (M) Sdn Bhd [(2005) 8 CLJ 303] ruled that this averment is sufficient evidence that the service of the Notice is proper and in accordance with Section 53(2) of the RPGTA.

(iii) The plaintiff ’s cause of action is not time barred by virtue of the proviso of Section 33(1) of the Limitation Act, 1953 (the Proviso) as affirmed in the case of Chong Woo Yit v Government of Malaysia where it was held that by virtue of the Proviso, limitation does not apply to the commencement of any proceedings by the Government for the recovery of any tax or interest thereon.

387


(iv) The issues raised by the defendant are not pleas which the court should entertain as provided under Section 23(3) of the RPGTA. The certificate issued by the plaintiff under Section 48(1) of the RPGTA is sufficient enough for the plaintiff to be granted a summary judgement as the amount of tax due could no longer be questioned.

15.0 KERAJAAN MALAYSIA V SPONTANEOUS HOLDINGS SDN BHD [(2009) MSTC 4,446] (HIGH COURT)

Facts

The defendant was assessed to real property gains tax plus penalties of 10% amounting to RM1,848,000 for YA 1990. The plaintiff applied for a summary judgement against the defendant.

Issues

Is the plaintiff ’s application for a summary judgement valid and do triable issues exist?

Arguments

Plaintiff

The application for a summary judgement is valid and a result of the failure to pay tax due and payable inclusive of a 10% increase within 30 days after service of the notice of assessment (the Notice) for YA 1990.

Defendant

The defendant claimed the following as triable issues:

(i) The return was made for YA 1990 but the asset was not acquired at that time.

(ii) There was a loss of RM175,000 instead of a chargeable gain. Therefore, provisions of the Real Property Gains Tax Act, 1976 (RPGTA) do not apply.

(iii) The Notice did not fulfill Section 17 of the RPGTA.

(iv) The RM8.6 million chargeable gain stated in the Notice did not arise at all.

(v) A RM20,000 penalty was levied although there was no breach of Section 29(3)(a) of the RPGTA.

(vi) The plaintiff had not shown how the Notice was posted, when the Notice was posted, who posted the Notice and there is no acknowledgement of receipt of the Notice.

388


(vii) The tax rate for disposal was charged at 20% although the applicable rate at the time for disposal in the third year after acquisition was 15%.

Decision

Application for summary judgement allowed. The High Court held that:

(i) Issues (1), (2), (4) and (7) were pleas that could not be entertained by the court pursuant to Section 23(3) of the RPGTA and should have been raised with the Special Commissioners of Income Tax (SCIT). The cases of Teng Chua Huat v Government of Malaysia [(1999) 7 CLJ 358], Sun Man Tobacco Co. Ltd v Government of Malaysia [(1973) 2 MLJ 163] and Government of Malaysia v Dato’ Mahindar Singh [(1996) 5 MLJ 626] all support the fact that the defendant cannot raise the defence of the amount being excessive or inaccurate as triable issues. Moreover, it is trite law that in income tax cases, the order should be in favour of granting summary judgement.

(ii) The Notice have been duly shown to have been served to the defendant in accordance with the provision of Section 53(2)(a)(ii) of the RPGTA and the tax assessed shall be due and payable by the defendant and is a debt recoverable by civil proceedings by the Government.

(iii) The plaintiff had issued a certificate under Section 48(1) of the RPGTA which proves sufficient for the Court to grant a summary judgement as the amount of tax could no longer be questioned.

16.0 KERAJAAN MALAYSIA V MAXISEGAR CONSTRUCTION SDN BHD [(2009) MSTC 4,448] (HIGH COURT)

Facts

The plaintiff applied for summary judgement against the defendant claiming that income taxes amounting to RM2,687,425.75 for YA 2006 was due and payable under Section 103A of the Income Tax Act, 1967 (ITA).

Issues

Is the plaintiff ’s application for summary judgement valid?

389


Arguments

Plaintiff

(i) The tax was due and payable under Section 103A of the ITA and the notice of assessment (the Notice) had been duly served on the defendant.

(ii) The Notice was properly served on the defendant at its last known address based on the return Form C submitted by the defendant.

Defendant

(i) The amount claimed is incorrect and inaccurate and did not reflect the actual amount admitted and therefore, the defendant was not responsible for payment of said amount.

(ii) The defendant’s project was not classified as complete and the taxpayer could only determine actual losses after completion of the project. The defendant has the right to standardise the annual assessments. Therefore, actual assessments cannot be made.

(iii) The defendant has in no way given the impression of not settling the fair and just amount and is exercising his duties as a taxpayer.

Decision

Application for summary judgement allowed with costs. The High Court held that:

(i) Sections 21(1) and 23(3) of the Real Property Gains Tax Act, 1976 (RPGTA) provide that tax shall be paid although the person assessed disputes the assessment in the Notice. Section 21(4) of the RPGTA provides that the Court shall not entertain any plea that the amount of tax sought to be recovered is excessive, incorrectly assessed, under appeal or incorrectly increased.

(ii) The defendant’s contention is raised on allegations of inaccuracy of the assessment and this Court is not the right forum for such litigations. This is supported by the cases of Sun Man Tobacco Co. Ltd v Government of Malaysia [(1973) 2 MLJ 163], Government of Malaysia v Dato’ Mahindar Singh [(1996) MSTC 3,515]¸ Chong Woo Yit v Government of Malaysia [(1989) 1 CLJ (Rep) 9], and Government of Malaysia v Abdul Rahman [(1975) 1 MLJ 276] which provide that the appropriate forum

390


for such litigation should be the Special Commissioners of Income Tax (SCIT).

(iii) Moreover, it is trite law that the order should be in favour of granting summary judgement.

17.0 KERAJAAN MALAYSIA V NERACA UNTUNG SDN BHD [(2009) MSTC 4,452] (COURT OF APPEAL)

Facts

The appellant had issued the respondent with two notices of assessment (the Notice) for YA 1997, the Notice and another Additional Notice totalling RM12,734,276.40, including penalties.

Both notices were posted to the respondent’s tax agent’s address given in the Form C. The tax agent had acknowledged the receipt of the Notice but not the Additional Notice. The notices were never returned. The respondent did not respond to either of the notices.

The appellant made an application for summary judgement against the respondent and the application was allowed. On appeal by the respondent, the High Court held that there was a triable issue raised by the respondent in relation to the validity or the due service of the Additional Notice on the respondent. The Government appealed.

Issues

Was the Additional Notice served or deemed to have been received by the respondent?

Arguments

Appellant

The appellant contended that the Additional Notice was sent to the same address as the Notice and since the respondent admitted to receiving the Notice, the Additional Notice should have been received as well. Therefore, a summary judgement should be allowed and the High Court had erred in finding that there were triable issues.

Respondent

The non-service of the Additional Notice was a triable issue and summary judgement was rightly refused by the High Court.

Decision

Appeal allowed with costs. The Court of Appeal held that:

391


(i) The Additional Notice was sent to the respondent’s last known address provided by its tax agent in a letter, which was also the same address which was given in the respondent’s return Form C. Based on the evidence, the Additional Notice was properly sent to and served on the respondent in accordance with Sections 145(1) and (2) of the Income Tax Act, 1967 (ITA).

(ii) Tax due and payable may be recovered by the appellant by civil proceedings as debt due under Section 106 of the ITA. The production of a certificate signed by the Director-General of Income Tax giving the name and address of the respondent and the amount of tax due from them shall be sufficient evidence of the amount so due and would be sufficient authority for the Court to give judgement for that amount.

(iii) The Court was satisfied and held that the Additional Notice was properly sent and served on the respondent and that it was a proper case to grant summary judgement.

18.0 GOVERNMENT OF MALAYSIA V KAMAWANG ENTERPRISE SDN BHD [(2009) MSTC 4,455] (HIGH COURT)

Facts

The taxpayer was assessed to tax amounting to RM603,372.15 plus penalties for late payment imposed under Sections 103(4) and 103(5A) of the Income Tax Act, 1967 (ITA) for the year of assessment 1999. The plaintiff applied for summary judgement against the taxpayer for this amount and the taxpayer contended that the notice of assessment (the Notice) had not been properly served and the application by the plaintiff was premature.

Issues

Does the defendant have a defence in light of Section 103(1) of the ITA in respect of an assessment issued by the plaintiff to the defendant?

Arguments

Plaintiff

(i) The plaintiff relied on Sections 103(1) and 106(1) of the ITA and contended that since the defendant has been assessed by virtue of the Notice on 1 December 2003, the tax payable becomes a debt due and payable.

392


(ii) A certificate under Section 142(1) of the ITA was produced which entitled it to the judgement.

Defendant

(i) The defendant was not properly served with the Notice.

(ii) That the assessment was wrong.

Decision

Application granted. The High Court held that relying on past cases and the fact that the plaintiff had produced a certificate under Section 142(1) of the ITA, the court found no issues to adjudicate and granted judgement to the plaintiff.

19.0 KERAJAAN MALAYSIA V AMALAN TEPAT SDN BHD [(2009) MSTC 4,456] (HIGH COURT)

Facts

The defendant was assessed to tax plus penalties of 10% and 5% chargeable under Sections 103(4) and 103(5A) of the Income Tax Act, 1967 (ITA) amounting to RM1,749, 883.97 for YAs 1997 and 1998. The plaintiff applied for summary judgement against the defendant for recovery of said amount.

Issues

Is the plaintiff ’s application for a summary judgement valid and do triable issues exist?

Arguments

Plaintiff

The notice of assessment was served on the defendant accordingly and a certificate was issued under Section 142(1) of the ITA.

Defendant

(i) The assessment was erroneously based on incomplete draft accounts submitted by the defendant’s tax agent. Instead, subsequent audited accounts submitted showing great financial losses for the year 1997 should have been the basis for the tax assessment raised.

(ii) The defendant was unaware of the right to appeal as well as the deadline for appeal and was not duly notified by the plaintiff.

393


Decision

Application allowed with costs. The High Court held that:

(i) The fact that the proper accounts were the audited accounts submitted by the tax agent which showed that the defendant suffered great financial losses for the year 1997 and that the tax assessed was on the high side was irrelevant. In disputing the amount of tax assessed, the defendant should pursue the issue before the Special Commissioners of Income Tax. Section 106(3) of the ITA provides that where taxes are being recovered by civil proceedings, the court shall not entertain any plea that the amount is excessive, incorrectly assessed, under appeal or incorrectly increased.

(ii) In regards to the defendant being unaware that they have the right to appeal against the amount assessed within 30 days, ignorance of the law is no defence. Additionally, in the notice of assessments, the service of which was not disputed by the defendant, it clearly states the right to appeal and the time period.

(iii) The defendant’s claim that Sections 103(4) and 103(5A) of the ITA should not be invoked to increase the amount of tax due and payable is not a triable issue as provided by Section 106(3) of the ITA as the Court has no power to entertain any plea that the amount sought to be recovered is excessive, incorrectly assessed, under appeal, or incorrectly increased.

394



395



GAzETTE NOTiFiCATiONSAMENDMENTS TO :

iNCOME TAX ACT, 1967PROMOTiON OF

iNvESTMENT ACT, 1986STAMP ACT, 1949

396

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ent Review 2010

NO TITLEREFER P.U.(A)

DATE OF GAZETTE NOTIFI- CATION

SUBJECTEFFECTIVE

DATE/PERIOD

1 Income Tax (Returns by Employers) Order 2009

5 7 Jan 2009 Employer to prepare and submit to:

(i) The IRB a return in Form E for year ended 31 December 2008

(ii) The employee a salary statement in Form CP 8A/ 8C on or before 30 March 2009

–

2 Stamp Duty (Remission) (No. 2) (Revocation) Order 2009

12 12 Jan 2009 Revocation of the Stamp Duty (Remission) (No. 2) Order 2006 [PU (A) 148/2006]

–

3 Income Tax (Special Treatment on Interest on Housing Loan) Regulations 2009

109 10 Mar 2009 Special treatment applicable to approved banks or financial institution in respect of repayment of interest on a housing loan of retrenched individual borrowers.

YA 2009

Gazette Notification in 2009 (Jan 2009 to Dec 2009)- Income Tax Act, 1967 (all gazette orders)- Promotion of Investment Act, 1986 (only general gazette orders)- Stamp Act, 1949 (only general gazette orders)- Real Property Gains Tax Act, 1976 (only general gazette orders)

397

6 • G

azette Notifications – A

mendm

ents to : Income Tax A

ct 1967 …



SUBJECTEFFECTIVE

DATE/PERIOD

4 Income Tax (Deduction for Expenses relating to Remuneration of Employee) Rules 2009

110 10 Mar 2009 A double deduction shall be allowed for remuneration paid for employment of workers who were previously terminated from employment. Applicable for employment of full time employees from 10 March 2009 to 31 December 2010.

YA 2009

5 Income Tax (Accelerated Capital Allowance) (Plant and Machinery) Rules 2009

111 10 Mar 2009 Accelerated capital allowance in respect of expenditure incurred from 10 March 2009 – 31 December 2010 on qualifying plant expenditure

YA 2009

6 Income Tax (Exemption) Order 2009

152 16 Apr 2009 Income tax exemption on benefits or gifts (as specified in the Exemption Order) received by an employee from its employer

YA 2008

7 Income Tax (Deduction for Benefit and Gift from Employer to Employee) Rules 2009

153 16 Apr 2009 A deduction shall be allowed for an employer on a benefits and gifts (as specified in the Exemption Order) given to its employee

YA 2008

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SUBJECTEFFECTIVE

DATE/PERIOD

8 Income Tax (Exemption)(No. 2) Order 2009

156 23 Apr 2009 10 year income tax exemption for a Bionexus status company on statutory income derived from an approved business.

2 Sept 2006

9 Income Tax (Exemption)(Amendment) Order 2009

159 23 Apr 2009 Amendment to the Income Tax (Exemption) (No.11) Order 2005 [PU (A) 75/2005] in respect of Venture Capital Companies.

YA 2008

10 Income Tax (Exemption)(No.7) (Amendment) Order 2009

211 8 June 2009 Amendment to the Income Tax (Exemption) (No. 7) Order 2008 [PU (A)351/2008] in respect of interest income

30 Aug 2008

11 Double Taxation Relief (The Government of Turkmenistan) Order 2009

218 18 June 2009 Agreement between the Government of Turkmenistan and the Government of Malaysia for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.

–

399

6 • G


mendm


ct 1967 …



SUBJECTEFFECTIVE

DATE/PERIOD

12 Income Tax (Deduction for Benefit and Gift from Employer to Employee)(Amendment) Rules 2009

226 29 June 2009 Amendment made to the national language text in rule 2 of the Income Tax (Deduction for Benefit and Gift from Employer to Employee) Rules 2009 [PU(A)153/2009] in relation to the word “telefon”

YA 2008

13 Income Tax (Deduction for Cost of Training for Employees) Rules 2009

261 16 July 2009 A deduction shall be allowed in respect of training cost incurred for the purposes of upgrading and developing technical skills of its employees.

YA 2009 – YA 2012


262 16 July 2009 Income tax exemption in respect of income under Section 4A(ii) received by a non-resident in relation to technical training conducted for the purpose of upgrading and developing the technical skills of any employee of a person resident in Malaysia. Withholding tax requirement under Section 109B shall not apply to the abovementioned income.

30 Aug 2008 –31 Dec 2012

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31 December 2012EFFECTIVE

DATE/PERIOD

15 Promotion of Investment (Promoted Activities and Promoted Products) (Amendment) Order 2009

295 13 Aug 2009 Amendments to the Promotion of Investments (Promoted Activities and Promoted Products) Order 1995 [PU (A) 31/1995] by inserting additional promoted activities and product as set out in the First Schedule of the Order.

Different effective dates for different

promoted activities and products

16 Income Tax (Request for Information) Rules 2009

311 26 Aug 2009 A competent authority may request from the Director General for information of a person to whom the double taxation arrangement entered into by the government of the competent authority with the Government of Malaysia relates.

26 Aug 2009

17 Real Property Gains Tax (Exemption) Order 2009

376 27 Oct 2009 Real property gains tax exemption on the chargeable gains for disposal of asset on or after 1 January 2010 subject to the formula as prescribed in the Exemption Order. This Order also revokes the Real Property Gains Tax (Exemption) (No.2) Order 2007 [PU (A) 146/2007].

1 Jan 2010

401

6 • G


mendm


ct 1967 …



SUBJECTEFFECTIVE

DATE/PERIOD


389 5 Nov 2009 Income tax exemption for a non-resident in relation to gains or profits under Section 4(f) of the Income Tax Act 1967 received from an offshore company.

1 Jan 2009

19 Stamp Duty (Remission) Order 2009

391 5 Nov 2009 Remission of stamp duty which is chargeable under Item 22(1)(b) of the First Schedule of the Stamp Act 1949 which is in excess of RM50 in relation to any instrument of service agreement executed between 15 September 2009 until 31 December 2010.

15 Sept 2009

20 Income Tax (Deduction on Expenditure for Establishment of an Islamic Stock Broking Business)(Amendment) Rules 2009

401 12 Nov 2009 Amendment to the Income Tax (Deduction on Expenditure for Establishment of an Islamic Stock Broking Business) Rules 2007 [PU (A) 65/2007] in respect of the deadline for submission of application to Bursa Malaysia.

1 Jan 2010

21 Stamp Duty (Remission)(No. 2) Order 2009

409 25 Nov 2009 Remission of 20% of the stamp duty payable and chargeable on approved principal or primary instrument of financing made according to Syariah principles in accordance with paragraph 22(1)(a) or 27(a) of the First Schedule of the Stamp Act 1949.

1 Jan 2010 –31 Dec 2015

402

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ent Review 2010

402



SUBJECTEFFECTIVE

DATE/PERIOD

22 Stamp Duty (Exemption) Order 2009

410 25 Nov 2009 Stamp duty exemption on any instrument of transfer on the cost to design and construct the property to obtain GBI certificate and other cost.

24 Oct 2009


411 25 Nov 2009 5 year income tax exemption for insurance and takaful operator on statutory income derived from an overseas branch or investee company.

24 Oct 2009 and subject to the

application deadline


412 25 Nov 2009 Income tax exemption in relation to income derived from a healthcare services business given to a foreign client.

YA 2010 – YA 2014


413 25 Nov 2009 5 year income tax exemption in relation to income derived from branch or investee company which carries on/ will carry on banking, Islamic banking or any part of banking or Islamic banking business overseas.

24 Oct 2009 and subject to the


403

6 • G


mendm


ct 1967 …



SUBJECTEFFECTIVE

DATE/PERIOD


414 25 Nov 2009 Income tax exemption equal to amount of qualifying expenditure incurred for purpose of obtaining green building index certificate between 24 October 2009 until 31 December 2014 issued by the Board of Architects Malaysia.

YA 2009


415 25 Nov 2009 Income tax exemption in relation to statutory income derived from consolidation of management of smallholding and idle land projects.

YA 2003 and subject to the application

deadline

28 Income Tax (Deduction for Promotion of Malaysia International Islamic Finance Centre) Rules 2009

416 25 Nov 2009 A deduction shall be allowed for any outgoings and expenses incurred by a person resident in Malaysia in relation to the business for promoting Malaysia as an international Islamic finance centre.

YA 2011 – YA 2015

29 Income Tax (Deduction for Investment in an Approved Consolidation of Management of Smallholding and Idle Land Project) Rules 2009

417 25 Nov 2009 A deduction shall be allowed in relation to investment in an approved consolidation management of smallholding and idle land project.

YA 2002 and subject to the application

deadline

404

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404



SUBJECTEFFECTIVE

DATE/PERIOD

30 Income Tax (Deduction for Expenditure on Registration of Patent and Trade Mark) Rules 2009

418 25 Nov 2009 A deduction shall be allowed in relation to an amount equal to qualifying expenditure incurred by the qualifying person on the registration of patent or trade mark in Malaysia

YA 2010 – 2014

31 Income Tax (Deduction for Cost of Preparation of Corporate Knowledge-Based Master Plan) Rules 2009

419 25 Nov 2009 A deduction shall be allowed in relation to cost incurred by a company for the preparation of the corporate knowledge-based master plan which shall be the corporate strategic knowledge plan used for the business of a company.

YA 2003

32 Income Tax (Deduction for Expenditure on Issuance of Islamic Securities) Rules 2009

420 25 Nov 2009 A deduction shall be allowed for a resident company and company incorporated under Offshore Companies Act 1990 in relation to an amount equal to the expenditure incurred on the issuance of approved Islamic securities.

YA 2011 – YA 2015(issuance of Islamic securities approved

by Securities Commission);

YA 2010 – YA 2015 (issuance of Islamic securities approved

by the Labuan Offshore Financial Services Authority)

405

6 • G


mendm


ct 1967 …



SUBJECTEFFECTIVE

DATE/PERIOD

33 Income Tax (Exemption) (No. 10) Order 2009

473 30 Dec 2009 10 year income tax exemption in respect of statutory income derived from the new forest plantation project; or 5 year income tax exemption in respect of statutory income derived from its existing approved project and expansion project.

21 May 2003 and subject to the


34 Income Tax (Exemption) (No. 11) Order 2009

474 30 Dec 2009 10 year income tax exemption in respect of statutory income derived from the forest plantation project. This applies to a company incorporated and resident in Malaysia which undertakes a forest plantation project, where it has surrendered its adjusted loss in respect of a forest plantation project to one or more of its related resident companies ("i.e. claimant company"). The amount of adjusted loss surrendered can be deducted against aggregate income of the claimant company.



406

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SUBJECTEFFECTIVE

DATE/PERIOD

35 Income Tax (Deduction for Investment in an Approved Forest Plantation Project) Rules 2009

475 30 Dec 2009 A deduction shall be allowed in respect of an amount equivalent to the value of investment in a forest plantation project on the date the investment is made in the related company.



36 Income Tax (Deduction from Remuneration) (Amendment) Rules 2009

485 31 Dec 2009 Amendment to the Income Tax (Deduction from Remuneration) Rules 1994 [PU (A) 507/1994] by substituting the Schedule.

1 Jan 2010

37 Real Property Gains Tax (Exemption) (No. 2) Order 2009

486 31 Dec 2009 Real property gains tax exemption on chargeable gains in relation to any disposal of a chargeable asset made after 5 years from the acquisition date.

1 Jan 2010

407

6 • Gazette Notifications – Amendments to : Income Tax Act 1967 …

GUIDELINES from mINIStry of INtErNAtIoNAL

trADE & INDUStry, thE SEcUrItIES commISSIoN of

mALAySIA AND mALAySIAN INDUStrIAL DEvELopmENt

AUthorIty

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408408 Summary of Guidelines from Ministry of International Trade & Industry, the Securities Commission of Malaysia and Malaysian Industrial Development Authority.

No Subject Issue dateIssued

by*Objective

Application Forms

EffectiveDate

1 Guidelines to Apply for Import License for Controlled Commercial Products under Customs Orders

April 2010 MITI To explain the conditions and procedures that need to be complied with for companies that wish to apply for Import Permit License (AP) of commercial products controlled under the Customs Orders 1998 (Prohibition of Import), Customs Act 1967.

Products listed under the Customs Orders are food products, heavy machineries and photocopy machines, compact disc makers, magnetic tapes, toner, iron steel, chemical, safety helmets, cable and plastic scrap.

Customs Form JK 69

-

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1 • IRB (Inland Revenue Board) G

uidelines and Rulings

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No Issue dateIssued

by*Objective

Application Forms

EffectiveDate

2 Guidelines to Apply for Import License for Personal Motor Vehicles of Malaysian Citizens Working or Studying Overseas

April 2010 MITI To explain the conditions and procedures that need to be complied with for the issuance of import license on personal motor vehicles for Malaysian citizens working or studying overseas.

Customs Form JK 69

-

3 Guidelines to Apply for Import License for Motor Vehicles

April 2010 MITI To explain the conditions and procedures that need to be complied with by companies that apply for an Import License (AP) to import motor vehicles.

Customs Form JK 69

-

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by*Objective

Application Forms

EffectiveDate

4 Guidelines to Apply for Export License for Controlled Commercial Products under Customs Orders

April 2010 MITI To explain the conditions and procedures that need to be complied with by companies that wish to apply for Export License of commercial products controlled under the Customs Orders 1998 (Prohibition of Export), Customs Act 1967.

Products listed under the Customs Orders are cement, roofing tiles, gravel stone, mining product, chemical product under the Chemical Weapon Convention (CWC), iron steel and food products.

Customs Form K2

-

5 Guidelines for Application of Import License (AP) on Plastic Wastes under Tariff Code 39.15

April 2010 MITI To explain the procedures and conditions that need to be complied with for the issuance of Import License (AP) on plastic wastes under the tariff code 39.15.

Customs Form JK 69

-

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No SubjectIssued

by*Objective

Application Forms

EffectiveDate

6 Guidelines to Import Personal Vehicle under the Program to Encourage Malaysian Citizens with Expertise Residing Overseas to Return to Malaysia

March 2010

MITI To explain the conditions and procedures that need to be complied with for the issuance of Import License (AP) for personal vehicle under the program to encourage Malaysian citizens with expertise residing overseas to return to Malaysia.

Customs Form JK 69

-

7 Guidelines for Application of Import License (AP) on Used Tyres

January 2010

MITI To provide the procedures and conditions that need to be complied with for the issuance of Import License (AP) for used tyre.

Customs Form JK 69

-

8 Guidelines on the Acquisition of Properties (This supersedes the earlier Guidelines dated 30 June 2009)

January 2010

EPU Property acquisitions (except for residential units) falling under the following categories require the approval of the Economic Planning Unit (EPU), Prime Minister’s Department:

Form UPE H/2009Form Proforma I/2009 Form Proforma II/2009

1 January 2010

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by*Objective

Application Forms

EffectiveDate

8 i. direct acquisition of property valued at RM20 million and above, resulting in the dilution in the ownership of property held by Bumiputera interest and/or government agency; and

ii. indirect acquisition of property by other than Bumiputera interest through acquisition of shares, resulting in a change of control of the company owned by Bumiputera interest and/or government agency, having property more than 50 percent of its total assets, and the said property is valued more than RM20 million.

The EPU shall impose the following conditions on the acquirer :

i. Companies to have at least 30% Bumiputra shareholding;

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by*Objective

Application Forms

EffectiveDate

8 ii. Local company owned by local interest to have at least RM100,000 paid-up capital; and

iii. Local company owned by foreign interest to have at least RM250,000 paid-up capital.

The Guidelines should also apply to all property acquisitions by foreign interest which fall under the purview of the relevant Ministries and/or Government Departments as follows:

i. acquisition of commercial unit valued at RM500,000 and above;

ii. acquisition of agricultural land valued at RM500,000 and above or at least five (5) acres in area for the following purposes:

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by*Objective

Application Forms

EffectiveDate

8 (a) to undertake agricultural activities on a commercial scale using modern or high technology; or

(b) to undertake agro-tourism projects; or

(c) to undertake agricultural or agro-based industrial activities for the production of goods for export.

iii. acquisition of industrial land valued at RM500,000 and above; and

iv. transfer of property to a foreigner based on family ties is only allowed among immediate family members.

The properties must be acquired and registered under a locally incorporated company and the acquisition must be notified to the EPU before the property is transferred.

Acquisition of residential unit by foreign interest valued at RM500,000 and above do not require the approval of the EPU but falls under the purview of the State Authorities.

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by*Objective

Application Forms

EffectiveDate

9 Guidelines on Application for Incentives for Wellness Zone in Port Dickson, Negeri Sembilan

May 2009 MIDA Companies approved by the Ministry of Health providing services in medicine and wellness which set up business in the Wellness Zone in Port Dickson, Negeri Sembilan are given the following incentives:

i. 70% of income generated by companies through services rendered to foreign tourists is exempted from tax for a period of 10 years for companies providing healthcare and wellness services under the following clinical disciplines:

- geriatric - obstetrics and gynaecology - dermatology - ophthalmology

- Applications received from the year of assessment 2008 to 31 December 2010

- aesthetic medicines

- plastic reconstruction and cosmetic surgery services

- cosmetic dental services

- wellness treatments

- traditional medicine

- terminal and chronic disease treatments

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by*Objective

Application Forms

EffectiveDate

9

10 Guidelines for Applying for International Integrated Logistics Services (IILS) Status

April 2009 MIDA An International Integrated Logistics Services (IILS) provider is a company that provides integrated and seamless logistics services (door-to-door) along the logistics supply chain as a single entity on a regional or global scale.

A logistic service provider (whether a new or an existing company) will be eligible to apply for the IILS Status which upon approval by the MIDA, will be issued the Customs Forwarding Agent approval by the Royal Customs Department. However, this status is not a guarantee for the consideration of the tax incentives under the Promotion of Investments Act, 1986.

Form IILS -

- clinical support services

ii. Import duty and sales tax exemption on machinery and equipment directly used in rendering healthcare services.

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by*Objective

Application Forms

EffectiveDate

11 Guidelines for Venture Capital Tax Incentives

September 2009

SC Applications may be made to the SC for certification by the SC in respect of the following players in the venture capital industry:

i. Venture capital company (VCC) [in order to obtain tax exemption under the Income Tax (Exemption) (No. 11) Order 2005 as amended by Income Tax (Exemption) (Amendment) (No. 2) Order 2006 and Income Tax (Exemption) (Amendment) Order 2009].

ii. Individual or a company (including a VCC) investing in a venture company [in order to be allowed tax deduction for an amount equivalent to the value of investment in a venture company under the Income Tax (Deduction for Investment in a Venture Company) Rules 2005].

Application Form for Certification of Tax Exemption for the Venture Capital Industry

Application Form for Certification of Tax Deduction for the Venture Capital Industry

Appl icat ions received from 30 August 2008 to 31 December 2013

* MITI - Ministry of International Trade & Industry EPU - Economic Planning Unit MIDA - Malaysian Industrial Development Authority SC - Securities Commission Malaysia

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419

8 • MIDA (Malaysian Industrial Development Authority) Investment Policy and Incentives


420



421



MIDA (MAlAysIAN INDUsTRIAl

DevelopMeNT AUThoRITy) INvesTMeNT polICy AND

INCeNTIves

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1.0 ApprovAl of MANUfACTUrING projeCTs

1.1 The Industrial Co-ordination Act 1975

The Industrial Co-ordination Act 1975 (ICA) was introduced with the aim to maintain an orderly development and growth in the country’s manufacturing sector.

The ICA requires manufacturing companies with shareholders’ funds of RM2.5 million and above or engaging 75 or more full-time employees to apply for a manufacturing licence for approval by the Ministry of International Trade and Industry (MITI).

Applications for manufacturing licences are to be submitted to the Malaysian Industrial Development Authority (MIDA), an agency under MITI in charge of the promotion and coordination of industrial development in Malaysia.

The ICA defines:

• “Manufacturingactivity” as themaking, altering,blending,ornamenting, finishing or otherwise treating or adapting any article or substance with a view to its use, sale, transport, delivery or disposal; and includes the assembly of parts and ship repairing but shall not include any activity normally associated with retail or wholesale trade.

• “Shareholders’ funds” as the aggregate amountof a company’s paid-up capital, reserves, balance of share premium account and balance of profit and loss appropriation account, where:

- Paid-up capital shall be in respect of preference shares and ordinary shares and not including any amount in respect of bonus shares to the extent they were issued out of capital reserve created by revaluation of fixed assets.

- Reserves shall be reserves other than any capital reserve created by revaluation of fixed assets and provisions for depreciation, renewals or replacements and diminution in value of assets.

- Balance of share premium account shall not include

AApproval of Manufacturing projects & Incorporating a Company

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any amount credited therein at the instance of issuing bonus shares at premium out of capital reserve by revaluation of fixed assets.

• “Full-timepaidemployees”asallpersonsnormallyworkingin the establishment for at least six hours a day and at least 20 days a month for 12 months during the year and who receive a salary.

This includes travelling sales, engineering, maintenance and repair personnel who are paid by and are under the control of the establishment.

It also includes directors of incorporated enterprises except those paid solely for their attendance at board of directors meetings. The definitionencompassesfamilyworkerswhoreceiveregularsalariesor allowances and who contribute to the Employees Provident Fund (EPF) or other superannuation funds.

1.2 Guidelines for Approval of Industrial Projects

The government’s guidelines for approval of industrial projects in Malaysia are based on the Capital Investment Per Employee (C/E) Ratio. Projects with a C/E Ratio of less than RM55,000 are categorised as labour-intensive and thus will not qualify for a manufacturing licence or for tax incentives. Nevertheless, a project will be exempted from the above guidelines if it fulfils one of the following criteria:

• Thevalue-addedis20%ormore

• TheManagerial, Technical and Supervisory (MTS) Index is15%ormore

• Theprojectundertakespromotedactivitiesormanufactureproducts as listed in the List of Promoted Activities and Products for High Technology Companies

• Itislocatedinthepromotedareasi.e.theStatesofPerlis,Sabah and Sarawak and the designated Eastern Corridorof Peninsular Malaysia (the states of Kelantan, Terengganu, Pahang and the district of Mersing in the State of Johor)

• Existing companies (formerly exempted) applying for amanufacturing licence.

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1.3 Expansion of Production Capacity and Product Diversification

A licensed company which desires to expand its production capacity or to diversify its product range by manufacturing additional products will need to apply to MIDA.

2.0 INCorporATING A CoMpANY

2.1 Methods of Conducting Business in Malaysia

In Malaysia, a business may be conducted:

i. By an individual operating as a sole proprietor, or

ii. By two or more (but not more than 20) persons in part ner-ship, or

iii. By a locally incorporated company or by a foreign company registered under the provisions of the Companies Act 1965.

All sole proprietorships and partnerships must be registered with the Companies Commission of Malaysia (SSM) under the Registration of Businesses Ordinance 1956. In the case of partnerships, partners are both jointly and severally liable for the debts and obligations of the partnership should its assets be insufficient. Formal partnership deeds may be drawn up governing the rights and obligations of each partner but this is not obligatory.

2.1.1 Company Structure

The Companies Act 1965 governs all companies in Malaysia. The Act stipulates that a person must register a company with the SSM in order to engage in any business activity. It provides for three types of companies:

i. A company limited by shares where the personal liability of its members is limited to the par value of their shares and the number of shares taken oragreedtobetakenbythem.

ii. A company limited by guarantee where the members guarantee to meet liability up to an amount nominated in the Memorandum and Articles of Association in event of the company is being wound up.

iii. An unlimited company where there is no limit to the members’ liability.

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2.1.2 Company Limited by Shares

The most common company structure in Malaysia is a company limited by shares. Such limited companies may be incorporated either as a Private Limited Company ( identified through the words "Sendirian Berhad" or "Sdn Bhd" as part of the company's name) or a Public Limited Company ( identified through the words "Berhad" or "Bhd" as part of the company's name)

A company having a share capital may be incorporated as a private company if its Memorandum and Articles of Association:

i. Restricts the right to transfer its shares;

ii. Limits the number of its members to 50, excluding employees and some former employees;

iii. Prohibits any invitation to the public to subscribe for its shares and debentures;

iv. Prohibits any invitation to the public to deposit money with the company.

A public company can be formed or, alternatively, a company can be converted to a public company subject to Section 26 of the Companies Act 1965. Such a company can offer shares to the public provided:

i. It has registered a prospectus with the Securities Commission

ii. It has lodged a copy of the prospectus with the SSM on or before the date its issue.

A public company can apply to have its shares quoted on the Bursa Malaysia subject to compliance with the requirements laid down by the exchange. Any subsequent issue of securities (e.g. issue by way of a rights or bonus, or issue arising from an acquisition, etc.) requires the approval of the Securities Commission.

2.2 Procedure for Incorporation

To incorporate a company, a person must apply to the SSM using Form 13A together with a payment of RM30 in order to determine if the proposed name of the intended company is available. If it is, the application will be approved and the proposed name reserved for the applicant for three months.

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The following documents are to be submitted to the SSM within the three months to secure the use of the proposed name:

i. Memorandum and Articles of Association

ii. Declaration of Compliance (Form 6)

iii. Statutory declaration by a person before appointment as a director, or by a promoter before incorporation of a company (Form 48A)

iv. Additional documents which would include:

• TheoriginalForm13A

• AcopyoftheletterfromSSMapprovingthenameofthecompany

• A copy of the identity card of each director andcompany secretary or a copy of the passport where a foreign director is appointed.

The Memorandum of Association documents the company’s name, the objects, the amount of authorised capital (if any) proposed for registration and its division into shares of a fixed amount.

The Articles of Association describes the regulations governing the internal management of the affairs of the company and the conduct of its business.

Once the Certificate of Incorporation is issued, the company shall be a body corporate, capable of exercising the functions of an incorporated company and of suing and being sued. It has a perpetual succession under common seal with power to hold land but with such liability on the part of the members to contribute to the assets of the company in the event of it being wound up, as is provided for in the Companies Act 1965.

2.2.1 Requirements of a Locally Incorporated Company

A company must maintain a registered office in Malaysia where all books and documents required under theprovisionsof theActarekept.Thenameof thecompanyshall appear in legible romanised letters, together with the company number, on its seal and documents.

A company cannot deal with its own shares or hold shares in its holding company. Each equity share of a public company carries only one vote at a poll at any general meeting of the company. A private company may, however, provide for varying voting rights for its shareholders.

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The secretary of a company must be a natural person of full age who has his principal or only place of residence in Malaysia. He must be a member of a prescribed body or is licensed by the Registrar of Companies. The company must also appoint an approved company auditor to be the company auditor in Malaysia.

In addition, the company shall have a least two directors who each has his principal or only place of residence within Malaysia. Directors of public companies or subsidiaries of public companies must not normally be over 70 years of age. A director of the company need not necessarily be a shareholder of the company.

2.3 Registration of Foreign Companies

A foreign company may carry on business in Malaysia by either:

i. incorporating a local company; or

ii. registering a branch in Malaysia.

Foreign company is defined under the CA 1965 as:

i. a company, corporation, society, association or other body incorporated outside Malaysia; or

ii. an unincorporated society, association, or other body which under the law of its place of origin may sue or be sued, or hold property in the name of the secretary or other officer of the body or association duly appointed for that purpose and which does not have its head office or principal place of business in Malaysia.

2.3.1 Registration Procedures

i. Applicant must first conduct a name search in order to determine if the proposed name for the intended company is available. The name to be used to register the foreign company should be the same as registered in its country of origin.

Applications should be submitted to the SSM using Form 13A with a payment of RM30 for each name applied. When the proposed company’s name is approved by SSM, it shall be valid for three months from the date of approval.

ii. Upon approval, applicants must submit the following registration documents to the SSM within three months from the date of approval:

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a. A certified copy of the certificate of incorporation or registration of the foreign company;

b. A certified copy of the foreign company’s charter, statute or Memorandum and Articles of Association or other instrument defining its constitution;

c. Form 79 (Return by Foreign Company Giving Particulars of Directors and Change of Particulars)

If the list includes directors residing in Malaysia who are members of the local board of directors of the foreign company, a memorandum stating their powers that are executed by or on behalf of the foreign company, should be submitted to SSM.

d. A memorandum of appointment or power of attorney authorising the person(s) residing in Malaysia, to accept on behalf of the foreign company any notices required to be served on such foreign company;

e. Form 80 (Statutory Declaration by Agent of Foreign Company); and additional documents consisting of the original Form 13A as well as a copy of the letter from SSM approving the name of the foreign company.

Note: If any of the described registration documents are in languages other than Bahasa Malaysia or English, a certified translation of such documents in Bahasa Malaysia or English shall be required.

iii. Registration fees shall be made to the SSM as per the following schedule:

Authorised share Capital (rM) fees payable (rM)

Up to 100,000 1,000

100,001 - 500,000 3,000

500,001 - 1,000,000 5,000

1,000,001 - 5,000,000 8,000

5,000,001 - 10,000,000 10,000

10,000,001 - 25,000,000 20,000

25,000,001 - 50,000,000 40,000

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In determining the amount of registration fees, the nominal share capital of the foreign company should first be converted to the Malaysian currency (Ringgit Malaysia) at the prevailing exchange rate.

In the event a foreign company does not prescribe any share capital, a flat rate of RM1,000 shall be paid to SSM.

iv. A Certificate of Registration will be issued by SSM upon compliance with the registration procedures and submission of duly completed registration documents.

v. Upon approval, the company or its agent is responsible for ensuring compliance of the Companies Act 1965. Any change in the particulars of the company or in the company’s name or authorised capital must be filed with SSM within one month from the date of change together with the appropriate fees. Every company is required to keep proper accounting records. Annual return must belodged with SSM once in every calendar year.

Note: Foreigners are advised to seek the services of anadvocate and solicitor, an accountant or a practising company secretary for further assistance.

2.4 E-Services

E-Services were introduced as an alternative to the traditional method of conducting business with SSM i.e. via counter services. It allows for the lodgement of documents (e-Lodgment Service) and the procurement of corporate and business information (e-Info Service). Payments can be made via credit card, direct debit or prepaid accounts.

E-lodgment or also known as e-filing would enable companies,business or their authorised personnel to lodge selected statutory required documents over the Internet through the myGovernment portal/Public Service Portal (PSP). Whereas e-Info service enables for the online purchase of corporate and business information.

For further information please visit the SSM website at www.ssm.com.my or www.ssm-einfo.com.my

Authorised share Capital (rM) fees payable (rM) 50,000,001 - 100,000,000 50,000

100,000,001 and above 70,000

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1.0 eqUITY polICY IN The MANUfACTUrING seCTor

Malaysia has always welcomed investments in its manufacturing sector. Desirous of increasing local participation in this activity, the government encourages joint-ventures between Malaysian and foreign investors.

1.1 Equity Policy for New, Expansion or Diversification Projects

SinceJune2003,foreigninvestorscouldhold100%oftheequityinall investments in new projects, as well as investments in expansion/diversification projects by existing companies, irrespective of the level of exports and without excluding any product or activity.

The equity policy also applies to:

i. Companies previously exempted from obtaining a manufacturing licence but whose shareholders' funds have now reached RM2.5 million or have now engaged 75 or more full-time employees and are thus required to be licensed.

ii. Existing licensed companies previously exempted from complying with equity conditions, but are now required to comply due to their shareholders' funds having reached RM2.5 million.

1.2 Equity Policy Applicable to Existing Companies

Equity and export conditions imposed on companies prior to 17 June 2003 will be maintained.

However, companies can request for these conditions to be removed and approval will be given based on the merits of each case.

2.0 proTeCTIoN of foreIGN INvesTMeNT

Malaysia’s commitment in creating a safe investment environ ment has persuaded more than 4,000 international companies from over 50countriestomakeMalaysiatheiroffshorebase.

2.1 Equity Ownership

A company whose equity participation has been approved will not be required to restructure its equity at any time as long as the company continues to comply with the original approval and retains the original features of the project.

B Guidelines on equity policy

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2.2 Investment Guarantee Agreements

Malaysia’s readiness to conclude Investment Guarantee Agreements (IGAs) is a testimony of the government’s desire to increase foreign investor confidence in Malaysia, IGAs will:

• Protectagainstnationalisationandexpropriation.

• Ensurepromptandadequatecompensationintheeventofnationalisation or expropriation.

• Providefreetransferofprofits,capitalandotherfees.

• Ensure settlement of investment disputes under theConvention on the Settlement of Investment Disputes of which Malaysia has been a member since 1966.

Malaysia has concluded Investment Guarantee Agreements with the following groupings and countries (in alphabetical order):

Groupings:

• AssociationofSouth-EastAsianNations(ASEAN)

• OrganisationofIslamicCountries(OIC)

Countries: AlgeriaArgentina AustriaBelgo-Luxembourg Chile, Republic of ChinaCuba Czech Republic DenmarkEgypt Finland France GermanyGhana GuineaIndia Indonesia IranItaly Jordan Korea, NorthKorea, South

KuwaitLebanon MongoliaNamibiaNorway PakistanPeru Poland RomaniaSaudi Arabia Spain SriLankaSudan Sweden Switzerland TurkeyUnited Arab Emirates United Kingdom Uruguay VietnamYemen

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2.3 Convention on the Settlement of Investment Disputes

In the interest of promoting and protecting foreign investment, the Malaysian government ratified the provisions of the Convention on the Settlement of Investment Disputes in 1966. The Convention, established under the auspices of the International Bank forReconstruction and Development (IBRD), provides for international conciliation or arbitration through the International Centre for Settlement of Investment Disputes located at IBRD’s principal office in Washington.

2.4 Kuala Lumpur Regional Centre for Arbitration

The Kuala Lumpur Regional Centre for Arbitration was established in 1978 under the auspices of the Asian-African Legal Consultative Organisation (ALCO) - an inter-governmental organisation in cooperation with and assisted by the Malaysian government.

A non-profit organisation, the Centre serves the Asia Pacific region. It aims to provide a system to settle disputes for the benefit of parties engaged in trade and commerce and investments with and within the region.

Any dispute, controversy or claim arising out of or relating to a contract, or the breach, termination or invalidity shall be decided by arbitration in accordance with the Rules for Arbitration of the Kuala Lumpur Regional Centre for Arbitration.

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In Malaysia, tax incentives, both direct and indirect, are provided for in the Promotion of Investments Act 1986, Income Tax Act 1967, Customs Act 1967, Sales Tax Act 1972, Excise Act 1976 and Free Zones Act 1990. These Acts cover investments in the manufacturing, agriculture, tourism (including hotel) and approved services sectors as well as R&D, training and environmental protection activities.

The direct tax incentives grant partial or total relief from income tax payment for a specified period, while indirect tax incentives come in the form of exemptions from import duty, sales tax and excise duty.

1.0 INCeNTIves for The MANUfACTUrING seCTor

1.1 Main Incentives for Manufacturing Companies

The major tax incentives for companies investing in the manufacturing sector are the Pioneer Status or Investment Tax Allowance.

Eligibility for Pioneer Status or Investment Tax Allowance is based on certain priorities, including the levels of value-added, technologyusedandindustriallinkages.Sucheligibleprojectsaretermed as “promoted activities” or “promotedproducts” (Pleaserefer to the List of Promoted Activities and Products -General)

1.1.1 Pioneer Status

A company granted Pioneer Status enjoys a 5-year partial exemption from the payment of income tax. It pays tax on 30% of its statutory income*, with the exemption period commencing from its Production Day (defined as the day its productionlevelreaches30%ofitscapacity).

Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company.

C Incentives for Investment

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To encourage investments in the promoted areas i.e. the States of Perlis**, States of Sabah and Sarawak andthe designated "Eastern Corridor"+ of Peninsula Malaysia, applications received from companies located in these areas will enjoy a 100% tax exemption on the statutoryincome during their 5-year exemption period. Applications received by 31 December 2010 will be eligible for this incentive.

Applications for Pioneer Status should be submitted to the Malaysian Industrial Development Authority (MIDA).

1.1.2 Investment Tax Allowance (ITA)

As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted ITA getsanallowanceof60%ofqualifyingcapitalexpenditure(such as factory, plant, machinery or other equipment used for the approved project) incurred within five years from the date on which the first qualifying capital expenditure is incurred.

The company can offset this allowance against 70% ofits statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised. The remaining 30% of statutoryincome will be taxed at the prevailing company tax rate.

Forthepromotedareas i.e.theStatesofSabah,Sarawak,Perlisandthedesignated“EasternCorridor”+ of Peninsula Malaysia, applications received from companies located in these areas will enjoy an allowance of 100% on thequalifying capital expenditure incurred within a period of five year.Theallowancecanbeutilisedtooffsetagainst100%of the statutory income for each 5-year of assessment. Applications received by 31 December 2010 are eligible for this incentive.

Applications should be submitted to MIDA.

* Statutory Income is derived after deducting revenue expenditure and capital allowances from the gross income.+ The “Eastern Corridor” of Peninsular Malaysia cover the States of Kelantan, Terengganu and Pahang, and the district of Mersing in the State of Johor.

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1.2 Incentives for Relocating Manufacturing Activities to Promoted Areas

In order to reduce the costs of doing business and to provide a competitive business environment, existing companies which relocate their manufacturing activities to the promoted areas, are eligible for a second round of the following incentives:

i. Pioneer Status with income tax exemption of 100% ofstatutory income for a period of 5 years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. InvestmentTaxAllowanceof100%ofthequalifyingcapitalexpenditure incurred within a period of 5 years. The allowance can be utilised to offset against 100% of thestatutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.


1.3 Incentives for High Technology Companies

A high technology company is a company engaged in promoted activities or in the production of promoted products in areas of new and emerging technologies (Please refer to the List of Promoted Activities and Products - High Technology Companies). A high technology company qualifies for:

i. Pioneer Status with income tax exemption of 100% ofstatutory income for a period of 5 years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred. The allowance can be utilised to offsetagainst100%of thestatutory incomeforeachyearof assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


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The high technology company must fulfil the following criteria:

i. The percentage of local R&D expenditure to gross sales should be at least 1% on an annual basis. The company has three years from its date of operation or commencement of business to comply with this requirement.

ii. Scientific and technical staff with degrees/diplomas and a minimum of five years experience in related fields should compriseatleast7%ofthecompany’stotalworkforce.

1.4 Incentives For Strategic Projects

Strategic projects involve products or activities of national importance. They generally involve heavy capital investments with long gestation periods, have high levels of technology, and are integrated, generate extensive linkages, and have significantimpact on the economy. Such projects qualify for:

i. PioneerStatuswith incometaxexemptionof100%of thestatutory income for a period of 10 years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. InvestmentTaxAllowanceof100%onthequalifyingcapitalexpenditure incurred within five years from the date the first qualifying capital expenditure is incurred. This allowance can be offset against 100% of the statutory income foreach year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


1.5 Incentives for Small and Medium-Scale Companies

Small and medium-scale companies with a paid-up capital of RM2.5 million and below are eligible for a reduced corporate tax of 20%onthechargeableincomeofuptoRM500,000.Thetaxrateontheremainingchargeableincomeismaintainedat26%.

Small-scale manufacturing companies incorporated in Malaysia with shareholders' funds not exceeding RM500,000 and having at least 60% Malaysian equity are eligible for the followingincentives:

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i. PioneerStatuswith incometaxexemptionof100%of thestatutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within five years. This allowance can be offset against 100% ofthe statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

A sole proprietorship or partnership is eligible to apply for this incentive provided a new private limited/limited company is formedtotakeovertheexistingproduction/activities.

To qualify for the incentive, a small-scale company has to comply with any one of the following criteria:

i. Thevalueaddedmustbeatleast15%;or

ii. The project contributes towards the socio-economic development of the rural population.

The company shall carry out the manufacturing of products or participate in activities listed as promoted products and activities for small-scale companies (Please refer to the list of Promoted Activities and Products - Small Scale Companies).


Effective from the year assessment of 2009, for the purpose of imposition of income tax and tax incentives, the definition of SMEs is reviewed as a company resident in Malaysia with a paid up capital of ordinary shares of RM2.5 million or less at the beginning of the basis period of a year of assessment whereby such company cannot be controlled by another company with a paid up capital exceeding RM2.5 million.

1.6 IncentivestoStrengthenIndustrialLinkages

To encourage large companies to participate in an Industrial Linkage Programme (ILP), expenditure incurred in the training ofemployees, product development and testing, and factory auditing to ensure the quality of vendors’ products, will be allowed as a deduction in the computation of income tax.

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Vendors, including small and medium-scale companies that propose to manufacture promoted products or participate in promoted activities in an ILP (Please refer to the List of Promoted Activities andProducts - Industrial LinkageProgramme (ILP)) areeligible for the following incentives:


ii Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within five years. This allowance can offset against 100% ofits statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

To encourage vendors to manufacture promoted products or participateinactivitiesfortheinternationalmarket,vendorsinanapproved ILP who are capable of achieving world-class standards in terms of price, quality and capacity, will be eligible for the following incentives:

i. PioneerStatuswith incometaxexemptionof100%of thestatutory income for a period of 10 years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of five years which the company can offset against 100% of the statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

Applications received by 31 December 2010 are eligible for these incentives.


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1.7 Incentives for the Machinery and Equipment Industry

1.7.1 Incentives for the Production of Specialised Machinery and Equipment

Companies undertaking activites in the production ofspecialised machinery and equipment, namely, machine tools, plastic injection machines, plastic extrusion machinery, material handling equipment, packaging machinery,robotics and factory automation equipment, specialised / process machinery or equipment for specific industries, and parts and components of the mentioned machinery and equipment are eligible for:

i. Pioneer Status with income tax exemption of 100% of the statutory income for a period of tenyears. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. InvestmentTaxAllowanceof100%onthequalifyingcapital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred.Thisallowancecanbeoffsetagainst100%of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


1.7.2 Additional Incentives for the Production of Heavy Machinery

Existing locally-owned companies that reinvest in the production of heavy machinery such as cranes, quarry machinery, batching plant and port material handling equipment, are eligible for the following incentives:

i. Pioneer Status with income tax exemption of 70%(100%forpromotedareas)ontheincreasedstatutoryincome arising from the reinvestment for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

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ii. Investment Tax Allowance of 60% (100% for promoted areas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

1.7.3 Additional Incentives for the Production of Machinery and Equipment

Existing locally-owned companies that reinvest in the production of machinery and equipment, including specialised machinery and equipment and machine tools, are eligible for the following incentives:

i. Pioneer Status with income tax exemption of 70%(100%forpromotedareas)ontheincreasedstatutoryincome arising from the reinvestment projects for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. Investment Tax Allowance of 60% (100% for promoted areas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

1.8 Incentives for Automotive Component Modules or Systems

New and existing companies that undertake design, R&D andproduction of qualifying automotive component modules or systems are eligible for:


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ii. Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within five years from the date the first capital expenditure is incurred. The allowance can be offset against 100% ofthe statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

The qualifying modules or systems are front corner modules, rear corner modules, instrument panel modules, struts and absorber and spring assembly modules, bumper modules, front cross member modules, function integrated door modules, fuel tankmodules, seatmodules,pedalmodules,doortrim modules, floor console modules, tyre and wheel modules, brake systems, wiper systems, exhaust systems, audio systems,heater ventilation air-conditioning systems, air bag systems, power and signal distribution systems, alarm systems, seat belt systems, exterior lighting systems, body in white modules, engine management systems, safety systems, telematics, navigational systems, engine fuel injection systems, and vehicle intelligence systems.

1.8.1 Incentives for the Manufacture of Critical and High Value-added Parts and Components for the Automotive Industry

Companiesundertakingthemanufactureofselectedcriticaland high value-added parts and components for the automotive industry are eligible for:

i. Pioneer Status with income tax exemption of 100% of the statutory income for a period of tenyears. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. InvestmentTaxAllowanceof100%onthequalifyingcapital expenditure incurred within five years from the date the first qualifying capital expenditure is incurred.Thisallowancecanbeoffsetagainst100%of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until they are fully utilised.

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The qualifying parts and components for the automotive industry are as follows:

•tranmissionsystems;

•brakesystems;

•airbagsystems;and

•steeringsystems.

The qualifying critical parts and components supporting the manufacturing of hybrid and electric vehicles are:

•electricmotors;

•electricbatteries;

•BatteryManagementSystem;

•inverters;

•electricairconditioning;and

•aircompressors.

Applications recived by 31 December 2014 are eligible fo these incentives.


1.9 Enhanced Incentives for the Utilisation of Oil Palm Biomass

Companies that utilise oil palm biomass to produce value-added products such as particleboard, medium density fibreboard, plywood, pulp and paper are eligible for the following incentives:

i. New Companies

a. Pioneer Status with income tax exemption of 100% of the statutory income for a period of 10years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. InvestmentTaxAllowanceof100%onthequalifyingcapital expenditure incurred within a period of five years. The allowance can be used to offset against 100% of the statutory income for each year ofassessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

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ii. Existing Companies that Reinvest

a. PioneerStatuswith incometaxexemptionof100%on the increased statutory income arising from the reinvestment for a period of 10 years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. InvestmentTaxAllowanceof100%ontheadditionalqualifying capital expenditure incurred within a period of five years. The allowance can be used to offsetagainst100%ofthestatutoryincomeforeachyear of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

1.10 Additional Incentives for the Manufacturing Sector

1.10.1 Reinvestment Allowance (RA).

Generally, Reinvestment Allowance (RA) is given to companies engaged in manufacturing*, and selected agricultural activities that reinvest for the purposes of expansion, automation. modernisation or diversification of its existing business into any related products within the same industry on condition that such companies have been in operation for at least 12 months. This condition has been revised to at least 36 months, effective from the year of assessment 2009.

The RA is given at the rate of 60% on the qualifying capital expenditure incurred by the company, and can be offset against 70% of its statutory income for the year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

AcompanycanoffsettheRAagainst100%ofitsstatutoryincome for the year of assessment if:

– The company undertakes reinvestment projects in the promoted areas, i.e the states of Sabah, Sarawak,Perlisandthedesignated“EasternCorridor” of Peninsular Malaysia; or

* With effect from year of assessment 2009, manufacturing activities will be given a more specific and clear definition under Schedule 7A, Income Tax Act 1967.

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– The company attains a productivity level exceeding the level determined by the Ministry of Finance. For further details on the prescribed productivity level for each sub-sector, please contact the Inland Revenue Board. (see Useful Addresses - Relevant Organisations)

The RA will be given for a period of 15 consecutive years beginning from the year the first reinvestment is made. Companies can only claim upon completion of the qualifying project, ie. after the building is completed or when the plant/machinery is put to operational use. With effect from the year of assessment 2009, company purchasing an asset from a related company within the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset.

Assets acquired for the reinvestment cannot be disposed of within a period of five years from the time of the reinvestment effective from the year of assessment 2009.

Companies that intend to reinvest before the expiry of its tax relief period, can surrender its Pioneer Status or Pioneer Certificate for purpose of cancellation and be eligible for RA.

Applications for RA should be submitted to the Inland Revenue Board (IRB), while applications for the surrender of Pioneer Status or Pioneer Certificate for RA should be submitted to MIDA.

1.10.2 Accelerated Capital Allowance (ACA)

After the 15-year period of eligibility for Reinvestment Allowance (RA), companies that reinvest in the manufacture of promoted products are eligible to apply for Accelerated Capital Allowance (ACA). The ACA provides a special allowance, where the capital expenditure is to be utilised within three years, i.e. an initial allowanceof 40%andanannualallowanceof20%.

Applications should be submitted to the IRB accompanied by a letter from MIDA certifying that the companies are manufacturing promoted products.

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SMEs are eligible for the following incentives:

• ACA on expenses incurred on plant and machineryacquired in the year of assessment 2009 and 2010. This allowance is to be claimed within one year, that is, in the year of assessment the asset is fully acquired. This incentive is effective for the year of assessment 2009 and 2010; and

• SMEsarenotsubjecttothemaximumlimitofRM10,000for capital allowance on small value assets. This incentive is effective from the year of assessment 2009.

Applications for ACA should be submitted to the Inland Revenue Board (IRB).

1.10.3 Accelerated Capital Allowance on Equipment to Maintain Quality of Power Supply

In order to reduce the cost of doing business caused by interruptions in the power supply, companies which incur capital expenses on equipment to ensure the quality of power supply, are eligible for Accelerated Capital Allowance (ACA) for a period of 2 years which allows the companies to write off the capital expenditure within two years, i.e. an initialallowanceof20%andanannualallowanceof80%.

Only equipment determined by the Ministry of Finance is eligible for the ACA.

Applications should be submitted to the IRB.

1.10.4 Accelerated Capital Allowance on Security Control Equipment

Accelerated Capital Allowance (ACA) is given on security control equipment installed in the factory premises of companies licensed under the Industrial Coordination Act 1975. This allowance is eligible to be claimed within one year. However, effective from the year of assessment 2009, this allowance is extended to all business premises. Security control equipment which are eligible for the allowance are:

• Anti-theftalarmsystem; • Infra-redmotiondetectionsystem; • Siren; • Accesscontrolsystem;

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• Closedcircuittelevision; • Videosurveillancesystem; • Securitycamera; • Wirelesscameratransmitter;and • Timelapserecordingandvideomotiondetection equipment.

Applications submitted to the IRB from the year of assessment 2009 to 2012 are eligible for this allowance.

1.10.5 Incentive for Industrialised Building System

Industrial Building System (IBS) will enhance the quality of construction, create a safer and cleaner workingenvironment as well as reduce the dependence on foreign workers.Companieswhichincurexpensesonthepurchaseof moulds used in the production of IBS components are eligible for Accelerated Capital Allowances (ACA) for a period of 3 years.

Applications should be submitted to IRB.

1.10.6 Tax Exemption on the Value of Increased Exports

To promote exports, manufacturing companies in Malaysia qualify for:

– A tax exemption on statutory income equivalent to 10%ofthevalueofincreasedexports,providedthatthegoodsexportedattainatleast30%valueadded;or

– A tax exemption on statutory income equivalent to15%of the valueof increasedexports,providedthat the goods exported attain at least 50%valueadded.

To further encourage the export of Malaysian goods, a locally-owned manufacturing company with Malaysian equityofatleast60%iseligiblefor:

– A tax exemption on statutory income equivalent to 30%ofthevalueofincreasedexports,providedthecompany achieves a significant increase in exports;

– A tax exemption on statutory income equivalent to 50%ofthevalueofincreasedexports,providedthecompanysucceedsinpenetratingnewmarkets;

– A full tax exemption on the value of increased

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exports, provided the company achieves the highest increase in export in its category.

Claims should be submitted to the IRB.

1.10.7 Group Relief

Group relief is provided under the Income Tax Act 1967 to all locally incorporated resident companies. Effective from the year of assessment 2009, group relief is increased from 50% to 70% of the current year's unabsorbed losses tobe offset against the income of another company within the same group (including new companies undertakingactivities in approved food production, forest plantation, biotechnology, nanotechnology, optics and photonics) subject to the following conditions:

a. The claimant and the surrendering companies each has a paid-up capital of ordinary shares exceeding RM2.5 million;

b. Both the claimant and the surrendering companies must have the same accounting period;

c. The shareholding, whether direct or indirect, of the claimant and the surrendering companies in the groupmustnotbelessthan70%;

d. The70%shareholdingmustbeonacontinuousbasisduring the preceding year and the relevant year;

e. Losses resulting from the acquisition of proprietary rights or a foreign-owned company should be disregarded for the purpose of group relief; and

f. Companies currently enjoying the following incentives are not eligible for group relief:

- Pioneer Status

- Investment Tax Allowance/Investment Allowance

- Reinvestment Allowance

- Exemption of shipping profits

- Exemption of income tax under section 127 of the Income Tax Act 1967; and

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- Incentive Investment Company

With the introduction of the above incentive, the existing group relief incentive for approved food production, forest plantation, biotechnology, nanotechnology, optics and photonics will be discontinued. However, companies granted group relief incentive for the above activities shall continuetooffsettheirincomeagainst100%ofthelossesincurred by their subsidiaries.


2.0 INCeNTIves for The AGrICUlTUre seCTor

The Promotion of Investments Act 1986 states that the term “company”inrelationtoagricultureincludes:

• Agro-basedcooperativesocietiesandassociations

• Sole proprietorships and partnerships engaged in agriculture.

Companies producing promoted products or engaged in promoted activities (Please refer to the List of Promoted Activities and Products - General) in the agricultural sector qualify for the following incentives.

2.1 Main Incentives for the Agricultural Sector


As in the manufacturing sector, companies producing promoted products or engaged in promoted activities are eligible for Pioneer Status.

A Pioneer Status company enjoys a partial exemption from incometax.Itpaystaxon30%of itsstatutoryincomeforfive years, commencing from its Production Day (defined as the day of first sale of the agriculture produce).

Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company.

Applications received from companies located in the promoted areas i.e. the States of Sabah and Sarawak,Perlis and the designated "Eastern Corridor" of Peninsular Malaysia,willenjoya100%taxexemptionontheirstatutory

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income during their 5-year exemption period.

Applications received by 31 December 2010 will be eligible for this incentive.


2.1.2 Investment Tax Allowance (ITA)

As an alternative to Pioneer Status, companies producing promoted products or engaged in promoted activities can apply for ITA. A company granted ITA gets an allowance of 60%ofqualifying capital expenditure incurredwithin fiveyears from the date on which the first qualifying capital expenditure is incurred.

Companies canoffset this allowance against 70%of theirstatutory income in the year of assessment. Any unutilised allowance can be carried forward to subsequent years until fullyutilised.Theremaining30%ofstatutoryincomewillbetaxed at the prevailing company tax rate.

Applications received from companies located in the promoted areas i.e. the states of Sabah and Sarawak,Perlisand thedesignated “EasternCorridor”ofPeninsularMalaysia,willenjoyanallowanceof100%onthequalifyingcapital expenditure incurred within a period five years. Theallowancecanbeoffsetagainst100%ofthestatutoryincome for each year of assessment.

Applications received by 31 December 2010 are eligible for this incentive.


To increase the benefits to agricultural projects, qualifying capital expenditure is defined to include expenditure incurred on:

– Clearing and preparation of land

– Planting of crops

– Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing and other agricultural or pastoral pursuits

– Construction of access roads including bridges, constructing or purchase of buildings (including

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those provided for the welfare of people or as living accommodation) and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.

Such roads, bridges, buildings structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.

In view of the time lag between start-up and processing of the produce, integrated agricultural projects qualify for ITA for an additional five years for expenditure incurred for processing or manufacturing operations.


2.1.3 Incentives for Food Production

a. Incentives for New Projects

To encourage food production, a company which invests in a subsidiary company engaged in food production, together with the subsidiary company qualifyforoneofthefollowingincentivepackages:

Incentive package A:

i. A company which takes up a 70% equity inanother subsidiary company engaged in food production receives tax deduction equivalent to the amount of investment made in that subsidiary; and

ii. The subsidiary company enjoys full income tax exemption on its statutory income for 10 years commencing from the first year the company enjoys profits, in which:

- losses incurred before and during the exemption period can be brought forward after the exemption period of 10 years;

- dividends paid from the exempt income is exempted in the hands of the shareholders.

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Incentive package B:

i. A company which takes up 70% equity ina subsidiary company engaged in food production will be given group relief for the losses incurred by the subsidiary company before it records any profit, and

ii. The subsidiary company enjoys full income tax exemption on its statutory income for 10 years commencing from the first year the company enjoys profits, in which:

- losses incurred during the exemption period can be carried forward after the exemption period of 10 years; and

- dividends paid from the exempt income is exempted in the hands of the shareholders.

The eligible food products are as approved by Minister of Finance. These include kenaf, deep-seafishing, vegetables, fruits, herbs, spices, aquaculture and the rearing of cattle, goats and sheep.

Companies should commence food production within a period of one year from the date the incentive is approved.


Applications should be submitted to the Ministry of Agriculture and Agro-based Industry.

b. Incentives for Existing Companies which Reinvest

An existing company which that reinvests in the production of the above food products also qualifies for the same incentives for a period of five years.

The food production project for both new and existing companies should commence within a year from the date the incentive is approved. Applications should be submitted to the Ministry of Agriculture and Agro-based Industry by 31 December 2010.

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c. Tax Incentives for ‘Halal’ Food Production

To encourage new investments in ‘halal’ food production for the export market and to increasethe use of modern and state of the art machinery and equipment in producing high quality ‘halal’ food that comply with the international standards, companies which invest in ‘halal’ food productions and have already obtained ‘halal’ certification from the Department of Islamic Development Malaysia (JAKIM) are eligible for the Investment Tax Allowance of 100% of qualifying capital expenditure incurredwithin a period of 5 years.

This allowance can be offset against 100% of thestatutory income in the year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


For further information, please visit JAKIM's website at http://www.halal.gov.my

2.1.4 Incentives for Reinvestment in Food Processing Activities

A locally-owned manufacturing company with Malaysian equity of at least 60% that reinvests in promoted foodprocessing activities is eligible for:

a. Pioneer Status with income tax exemption of 70%(100%forpromotedareas)ofstatutoryincomeforaperiod of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. InvestmentTaxAllowanceof60%(100%forpromotedareas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance canbeoffsetagainst70%(100%forpromotedareas)of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

2.2 Additional Incentives for the Agricultural Sector

2.2.1 Reinvestment Allowance

Persons or companies engaged for at least 36 months in the production of essential food such as rice, maize,

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vegetables, tubers, livestock, aquatic products, and anyother activities approved by the Minister of Finance enjoy the Reinvestment Allowance (RA).

The RA is in the form of an allowance of 60% of thequalifying capital expenditure incurred within a period of 15 years beginning from the year the first reinvestment ismade. The allowance can be offset against 70% of thestatutory income in the year of assessment. Unutilised allowances can be carried forward to the following years untilfullyutilised.Companiesthatundertakereinvestmentprojects in the promoted areas i.e. the States of Sabah, Sarawak, Perlis and the designated "Eastern Corridor" ofPeninsular Malaysia, can offset the allowance fully against their statutory income for that year of assessment.

The qualifying capital expenditure includes expenditure incurred on:

- Clearing and preparation of land

- Planting of crops

- Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits

- Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of person or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits


2.2.2 Incentives for Reinvestment in Resource-Based Industries

These incentive are offered to companies that are at least 51%Malaysian-ownedandare in the rubber,oilpalmandwood-based industries producing products which have

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export potential. Companies in these industries reinvesting for expansion purposes are eligible for:

a. Pioneer Status with income tax exemption of 70%(100%forpromotedareas)ofstatutoryincomeforaperiod of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or


Applications should be submitted to MIDA

2.2.3 IncentivesforModernisingChickenandDuckRearing

To promote modernisation and the usage of environment-friendly practices in the agricultural sector, chicken andduckrearerswhoreinvestforthepurposeofshiftingfromthe opened house system to the closed house system will be eligible for Reinvestment Allowance for a period of 15 consecutive years commencing from the first year the reinvestment is made. This incentive is effective until the year of assessment 2010.

This incentive is given on condition the minimum rearing capacity of the closed house system is as follows:

- 20,000broilerchickens/broilerduckspercycle;or

- 50,000layerchickens/layerduckspercycle.

- 20,000 parent or grandparent stock of chicken/duckspercycle

Effective from the year of assessment 2009 to the year of assessmentof2010,chickenandduckrearerswhoreinvestto expand the closed house system in existing or new locations will also be eligible for RA as follows:

a. Companies located in the promoted areas will be eligible for RA of 60% on qualifying capitalexpenditurewhichcanbeset-offagainst100%ofthestatutory income.

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b. Companies located outside the promoted areas will be eligible for RA of 60% on qualifying capitalexpenditurewhichcanbeset-offagainst70%ofthestatutory income.

All projects must be approved by the Ministry of Agriculture and Agro-based Industry.


2.2.4 Accelerated Capital Allowance (ACA)

Upon the expiry of Reinvestment Allowance (RA) companies that reinvest in promoted agricultural activities and food products are eligible to apply for Accelerated Capital Allowance (ACA). These activities include cultivation of rice, maize, vegetables, tubers, livestock,aquaticproductsandany other activities approved by the Minister of Finance.

The ACA on the capital expenditure is to be utilised within twoyears, i.e.,an initialallowanceof20%inthefirstyearandanannualallowanceof40%.

Claims should be submitted to the IRB, accompanied by a letter from MIDA certifying that the companies are undertaking promoted agricultural activities or producingpromoted food products.

2.2.5 Agricultural Allowance

A person or a company carrying on an agricultural activity can claim Capital Allowances and special Industrial Building Allowances under the Income Tax Act 1967 for certain capital expenditure. Capital expenditure which qualifies includes expenditure incurred on:.


- Planting of crops

- Provision of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and other agricultural or pastoral pursuits

- Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of person or as living accommodation), and structural improvements on land or other structures which

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are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits.

A company continues to get the allowance for as long as it incurs the expenditure, regardless of whether it already enjoys Pioneer Status or ITA.


2.2.6 Accelerated Agriculture Allowance for the Planting of Rubberwood Trees

To ensure a regular supply of rubberwood for the furniture industry, a non-rubber plantation company that plants at least 10% of its plantation with rubberwood trees iseligible for the Accelerated Agriculture Allowance whereby the write-off period on the capital expenditure incurred for land preparation, planting and maintenance of rubberwood cultivation is accelerated from two years to one year. This incentives is effective until the year of assessment 2010.

Applications should be submitted to the Ministry of Plantation Industries and Commodities.


2.2.7 100% Allowance on Capital Expenditure for ApprovedAgricultural Projects

Schedule4AoftheIncomeTaxAct1967providesa100%allowance on capital expenditure for Approved Agricultural Projects as approved by the Minister of Finance. This covers qualifying capital expenditure incurred within a specific time frame for a farm that cultivates and utilises a specified minimum acreage as stipulated by the Minister of Finance.

Approved agricultural projects are those for the cultivation of vegetables, fruits (papaya, banana, passion fruit, star fruit, guava and mangosteen), tubers, roots, herbs, spices, crops for animal feed and hydroponic-based products, ornamental fish culture; fish and prawn rearing (pond

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culture,tankculture,marinecageculture,off-shoremarinecage culture); cockles, oysters, mussels and seaweedculture; and shrimp, prawn and fish hatchery; and certain species of forest plantations.

The incentive enables a person carrying on such a project to elect to deduct the qualifying capital expenditure incurred in respect of that project from his aggregate income, including income from other sources. Where there is insufficient aggregate income, the unabsorbed expenditure can be carried forward to subsequent years of assessment. Where he so elects, he will not be entitled to any capital allowance or agricultural allowance on the same capital expenditure.

The qualifying capital expenditure eligible for deduction includes expenditure incurred on:


- Planting of crops

- Providing of plant and machinery used in Malaysia for the purpose of crop cultivation, animal farming, aquaculture, inland fishing or deep-sea fishing, and others agricultural or pastoral pursuits

- Construction of access roads including bridges, construction or purchase of buildings (including those provided for the welfare of person or as living accommodation), and structural improvements on land or other structures which are used for crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits. Such roads, bridges, buildings, structural improvements on land and other structures should be on land forming part of the land used for the purpose of such crop cultivation, animal farming, aquaculture, inland fishing and other agricultural or pastoral pursuits

This incentive is not available to companies which have been granted incentives under the Promotion of Investments Act 1986 and whose tax relief period have not started or have not expired.


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A company which exports fresh and dried fruits, fresh and dried flowers, ornamental plants and ornamental fish enjoys ataxexemptionofitsstatutoryincomeequivalentto10%of the value of its increased exports.


2.2.9 Incentives for Companies providing Cold Chain Facilities and Services for Food Products

Companies providing cold room and refrigerated truckfacilities, and related services such as collection and treatment of locally produced perishable food products qualify for Pioneer Status or Investment Tax Allowance.

New Companies

New companies that provide cold chain facilities and services for perishable agricultural produce are eligible for:

a. Pioneer Status with income tax exemption of 70%(100%forpromotedareas)ofthestatutoryincomefora period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or


existing Companies that reinvest

Existing locally owned companies to reinvest in cold chain facilities and services for perishable agricultural produce are eligible for the following incentives:

a. Pioneer Status with income tax exemption of 70%(100%forpromotedareas)ontheincreasedstatutoryincome arising from the reinvestment for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. InvestmentTaxAllowanceof60%(100%forpromoted

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areas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance canbeoffsetagainst70%(100%forpromotedareas)of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


2.2.10DoubleDeductionforExpensestoobtain“Halal”Certificationand Quality Systems and Standards Certification

To enhance the competitiveness of Malaysian companies intheglobalmarketfor“halal”products(productssuitablefor consumption by Muslims) including “halal” food,double deduction will be given for the purpose of income tax computation to companies which incur expenses in obtaining:

a. quality system and standards certification as well as ‘halal’ certification from the Department of Islamic Development Malaysia (JAKIM)

b. international quality systems and standards certification

Claims should be submitted to IRB.

2.2.11 Double Deduction on Freight Charges for Export of Rattan and Wood-based Products

Manufacturers who export rattan and wood-based products (excluding sawn timber and veneer) qualify for double deduction on freight charges.

3.0 INCeNTIves for The AerospACe INDUsTrY

Aerospace industry development was one of the strategic and high technology areas identified by the Government. It include activities that directly and indirectly contribute to the design & development, construction, operation, maintenance and disposal ofaerospacerelatedproducts(spacecraft,aircraft,missile/rocket/launcher, and communication, navigation and surveillance systems (CNS)).

Effective January 2010, the industry is eligible for a comprehensive taxincentivewiththeobjectivetomakeMalaysiaaglobalcentreforaerospace industry inAsiaPacific.The incentivepackagewillbe focusing on design, manufacturing and assembling, operator group, support and monitoring group.

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i. Design, manufacturing and assembling group of activities consisting of research, design and development and system integration are eligible for:

• Income tax exemption for a period of 5 to 15 yearsdepending on the investment level, value-added, technology and other criteria.

ii. Operator group consisting of general aviation such as helicopter operation, charter, business jet operation to air recreational (e.g. Flying School, Flying Club and Hornbill SkywayHelicopter)areeligiblefor:

• InvestmentTaxAllowance(ITA)of100%onthequalifyingcapital expenditure within a period of 10 years subject to the investment in fixed assets exceeding RM150 million within 5 years.

iii. Support group consisting of maintenance, repair and overhaul activities (MRO) and training in aerospace, certification and maintenance are eligible for:

• Income tax exemption of 100% of statutory incomefor a period up to 10 years for companies which offer MRO services and services related to the production of aerospace finished products;

• Income tax exemption of 100% of statutory incomefor a period up to 15 years for companies involved in conversion, upgrading and refurbishment or remanufacture of aerospace finished products;

• ITAof60%onthequalifyingcapitalexpenditureincurredwithin a period of 5 years for MRO companies operating inMalaysiawhichundertakeexpansion,modernisationor automation of current business or diversification of current business for related products in the same industry; or

• Doubledeductionon expenses incurredby employersproviding pilot conversion and pilot instructor training

iv. Pilot conversion and instructor pilot courses are eligible for double deduction on expenses incurred by the employers in training their employees.

v. Regulatory group consisting of companies undertakingaerospace related certification, standard development, testing and evaluation and licensing activities are eligible for:

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• PioneerStatuswith income taxexemptionof100%ofstatutory income for 5 years; or

• ITA of 60% on qualifying capital expenditure incurredwithin 5 years

These incentives are effective for applications received by MIDA from 1 January 2010 until 31 December 2014.

4.0 INCeNTIves for The BIoTeChNoloGY INDUsTrY

4.1 Main Incentives for the Biotechnology Industry

A company undertaking biotechnology activity and has beenapproved with BioNexus Status by the Malaysian Biotechnology Corporation Sdn Bhd is eligible for the following incentives:

a. Anexemptionfromtaxon100%statutoryincome:

• for a period of ten (10) consecutive years ofassessment from the first year the company derived statutory income from the new business; or

• foraperiodoffive(5)consecutiveyearsofassessmentfrom the first year the company derived statutory income from the existing business and expansion project; or

b. Anexemptionof100%statutoryincomederivedfromanewbusiness or an expansion project that is equivalent to an allowanceof100%ofqualifyingcapitalexpenditureincurredfor a period of five (5) years

c. A BioNexus Status company is entitled to a concessionary tax rate of 20% on statutory income from qualifyingactivities for ten (10) years upon the expiry of the tax exemption period

d. Tax exemption on dividends distributed by a BioNexus status company

e. Exemption of import duty and sales tax on raw materials/components and machinery and equipment

f. Double deduction on expenditure incurred for R&D

g. Double deduction on expenditure incurred for the promotion of exports

h. Buildings used solely for the purpose of biotechnology activities will be eligible for Industrial Building Allowance to be claimed over a period of 10 years

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4.2 Incentives for Investment in a BioNexus Status Company

4.2.1 Investment by a Company or Individual in a BioNexus Status Company

A company or an individual (that carry on business) investing in a BioNexus status company is eligible for a tax deduction equivalent to the total investment made in seed capital and early stage financing.

4.2.2 Tax Incentives for Mergers and Acquisitions with a Biotechnology Company

A BioNexus status company undertaking merger andacquisition with a biotechnology company is eligible for exemption of stamp duty and real property gain tax within a period of 5 years until 31 December 2011.

Applications should be submitted to the Malaysian Biotechnology Corporation (BiotechCorp).

4.3 Biotechnology Funding for Bionexus Status Companies

BiotechCorp provides funding to BioNexus Status companies under its Biotechnology Commercialisation Grant (BCG).

Three components of the Commercialisation Grant are as follows:

4.3.1 Seed Fund

a. Up to RM2.5 million per company

b. Purpose: To fund seed or start-up costs in setting up biotech companies and to assist towards the development and commercialisation of biotechnology projects and R&D findings of priority and core areas.

4.3.2 Research & Development Matching Fund

a. Maximum of RM1.0 million per project

b. Purpose: To provide matching fund for R&D projects which can develop new or improved products and/or processes and/or technologies and lead to further development and commercialisation within the Malaysia's Biotechnology Focus Areas.

4.3.3 International Business Development Matching Fund

a. Maximum of RM1.25 million per project

b. Purpose: To promote the expansion of BioNexus StatusCompaniesintotheglobalmarket.

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5.0 INCeNTIves for ToUrIsM INDUsTrY

Tourism projects, including eco-tourism and agro-tourism enjoy tax incentives. These include hotel businesses, construction of holiday camps, recreational projects including summer camps, and construction of convention centres with a capacity to accommodate at least 3,000 participants.

Hotel businesses refer to the following:

• Constructionofmediumandlow-costhotels(uptoathreestar category hotel as certified by the Ministry of Culture, Arts and Tourism); and

• Expansion/modernisationofexistinghotels.

5.1 Incentives for the Hotel and Tourism Industry


A company granted Pioneer Status enjoys a 5-year partial exemption from the payment of income tax. It will only have to pay tax on 30% of its statutory income, commencingfrom its Production Day which is determined by the Minister of International Trade and Industry.

Applications received from companies located in the promoted areas i.e. the States of Perlis, Sabah, Sarawak,the Federal Territory of Labuan and the designated "Eastern Corridor" of Peninsular Malaysia will enjoy a 100% taxexemption of their statutory income during the 5-year exemption period.

Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company.



5.1.2 Investment Tax Allowance

As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted the ITA gets an allowance of 60% (100% for promoted areas)on the qualifying capital expenditure incurred within five years from the date on which the first qualifying capital expenditure is incurred.

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Companies can offset this allowance against 70% (100%for promoted areas) of their statutory income in the year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.



5.1.3 EnhancedIncentivesforUndertakingNewInvestments

Companies undertaking new investments in 4 and 5 starhotels inSabahandSarawakareeligible for the followingincentives:

a. Pioneer Status, with income tax exemption of 100% of the statutory income for a period of fiveyears. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. InvestmentTaxAllowanceof100%onthequalifyingcapital expenditure incurred within a period of five years.Theallowancecanbeoffsetagainst100%ofthe statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.



5.1.4 Incentives for Reinvestment in Hotels and Tourism Projects

Companies that reinvest in the expansion, modernisation and renovation of hotels and tourism projects are eligible for another round of Pioneer Status or Investment Tax Allowance as follows:

a. Pioneer Status, with income tax exemption of 70%(100%forpromotedareas)ofthestatutoryincomefora period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

b. InvestmentTaxAllowanceof60%(100%forpromotedareas) on the qualifying capital expenditure within a period of five years. The allowance can be offset

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against 70% (100% for promoted areas) of thestatutory income in each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

Companies are eligible to apply for PS or ITA for the first two rounds of reinvestments. For the third round of reinvestment, companies are only eligible to apply for ITA.



5.1.5 Incentive for Healthcare Travel

Private hospitals that invest in expansion, modernisation, renovation, refurbishment of existing hospitals or in the construction of new private hospital, or setting up of the International Patients Unit, are eligible for:

• InvestmentTaxAllowanceof100%onthequalifyingcapital expenditure incurred within a period of five years.Theallowancecanbeoffsetagainst100%ofthe statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

These hospitals must be registered with the Ministry of Health to qualify for the incentive.

Applications received by 31 December 2014 are eligible for the incentive.


5.1.6 Additional Incentives for Healthcare Travel

a. Double Deduction for Expenses Incur in Obtaining Recognise Accreditation

Private hospitals which incur expenses in obtaining domestic or international recognised accreditation such as from the Malaysian Society for Quality in Health (MSQH) or Joint Commission International (JCI) qualify for double deduction for the purpose of income tax computation.


b. Automatic Employment/Professional Pass Approval for Medical Specialists

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Employment/professional pass will be offered automatically to the following qualified medical specialist who return or come from abroad to serve in Malaysian hospitals:

• Malaysianornon-Malaysianmedicalspecialists;and

• Non-Malaysianspouseswhoqualifyasaprofessionalas per stipulated in the Malaysian Classification of Occupation (MASCO).

However, this is subject to registration with the relevant professional bodies.

5.1.7 Incentives for the Luxury Yacht Industry

The luxury yacht industry is promoted as part of tourism products and are eligible for the following incentives:

- Companies that construct luxury yachts are eligible for Pioneer Status incentive.


- Companies that carry out repair and maintenance activitiesforluxuryyachtsintheislandsofLangkawi,Malaysia are eligible for income tax exemption of 100%forfiveyears.

Applications should be submitted to the Ministry of Finance.

- Companies that provide chartering services of luxury yatchs in the country are eligible for income tax exemptionof100%foraperiodoffiveyears.


5.2 Additional Incentives for the Tourism Industry

5.2.1 Double Deduction on Overseas Promotion

Hotels and tour operators qualify for double deduction on the expenditure incurred for promotional activities overseas. The qualifying expenditure are:

- Expenditure on publicity and advertisements in any mass media outside Malaysia

- Expenditure on the publication of brochures, magazinesandguidebooks,includingdeliverycoststhat are not charged to the overseas customers

- Expenditure on market research into new marketsoverseas, subject to the prior approval of the Minister of Tourism

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- Expenditure that includes fares to any country outside Malaysia to negotiate or secure a contract for advertising or participate in trade fairs, conferences or forums approved by the Minister of Tourism. Such expenses are subject to a maximum of RM300 per day for lodging and RM150 per day for food for the duration of the stay overseas.

- Expenditure in organising trade fairs, conferences of forums approved by the Minister of Tourism; and

- Expenditure on the maintenance of sales offices overseas for purposes of promoting tourism to Malaysia.


5.2.2 Double Deduction on Approved Trade Fairs

Companies also enjoy double deduction for expenditure incurred in participating in an approved international trade fair in Malaysia.


5.2.3 Tax Exemption for Tour Operators

i. Foreign Tourists

Tour operators who bring in at least 500 foreign tourists a year through groups, inclusive of tours that enter and exit the country by air, sea or land transportation, will be exempted from tax in respect of income derived from the business of operating such tours. This incentive applies to tour operators licensed by the Ministry of Tourism.

ii. Local Tourists

Companies that organise domestic tour packagesfor at least 1,200 local tourists per year get a tax exemption on the income earned. A domestic tour meansanytourpackagewithinMalaysiaparticipatedby local tourists (excluding inbound tourists) by air, land or sea transportation involving at least one night's accommodation.

This incentive is available until the year of assessment 2011.


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5.2.4 Tax Exemption for Promoting International Conferences and Trade Exhibitions

i. Local companies which promote international conferences in Malaysia qualify for tax exemption on income earned from bringing at least 500 foreign participants into the country

ii. Income earned from the organising international trade exhibitions in Malaysia qualifies for tax exemption as long as the exhibitions are approved by MATRADE and the organisers brings in at least 500 foreign visitors per year.


5.2.5 Deduction on Cultural Performance

Expenditure incurred by companies promoting and managing a musical or cultural group and sponsoring local and/or foreign cultural performances as approved by the Ministry of Tourism, qualifies for a single deduction.

To further encourage the private sector to sponsor local arts, cultural and heritage performances and shows, expenditure incurred in sponsoring such performances and shows be increased from RM300,000 to RM500,000. However, the ceiling for deductions allowed on foreign performances and shows remains at RM200,000 per year.


5.2.6 Incentives for Car Rental Operators

Operators of car rental services for tourists are eligible for full excise duty exemption on the purchase of national cars. With effect from 2 September 2006, to enable tourists to explore challenging destinations, tour operators are also eligible for a 50% excise duty exemption on locallyassembled 4WD vehicles.


5.2.7 Tax Exemptions on the Value of Increased Exports

Healthcare services offered to foreign clients are qualified fortaxexemptionof50%onthevalueofincreasedexportsincome subject to 70% of the statutory income for eachyear of assessment. Foreign clients are defined as:

• Acompany,partnership,organisationorcooperativesociety which is incorporated or registered outside Malaysia;

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• A non-Malaysian citizen who does not hold aMalaysianworkingpermit;or

• Anon-residentMalaysianlivingabroad.

Effective from the year of assessment 2010 until the year of assessment 2014, this tax exemption rate has been enhancedto100%andforthepurposeofthisincentivethefollowing foreign clients are excluded:

• anon-MalaysiancitizenthatparticipatesinMalaysiaMy Second Home Program and his dependants;

• anon-MalaysiancitizenholdingaMalaysianstudentpass and his dependants;

• a non-Malaysian citizen holding a Malaysian workpermit and his dependants; or

• Malaysian citizens who are non-residents livingabroad and his dependants.

However, healthcare services offered to such foreign clients as mentioned above continue to enjoy existing tax exemptionon statutory income to the amount of 50%ofthe value of increased exports.


6.0 INCeNTIves for The eNvIroNMeNTAl MANAGeMeNT

6.1 Incentives for Forest Plantation Projects

a. Companies that undertake forest plantation projects areeligible for the following incentives under the Promotion of Investments Acts, 1986:

i. PioneerStatuswithincometaxexemptionof100%ofthe statutory income for 10 years. Unabsorbed capital allowances as well ass accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

ii. InvestmentTaxAllowance(ITA)of100%onthequalifyingcapital expenditure incurred within five years. The allowancecanbeoffsetagainst100%ofthestatutoryincome for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

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b. Alternatively, companies that undertake forest plantationprojects can apply for the following incentives under Section 127, Income Tax Act 1967:

i. Company which invest in the related company is eligible for tax deduction equivalent to the amount invested; and

ii. CompanythatundertakesanapprovedForestPlantationProject is eligible for:

• Taxexemptionof100%onstatutoryincomefortenyears commencing from the first year the company enjoys statutory income.

• Losses incurredbeforeandduringtheexemptionperiod are allowed to be brought forward after the exemption period of ten years.

Applications should be submitted to Ministry of Plantation Industries and Commodities.

6.2 Incentives for the Storage, Treatment and Disposal of Toxic and Hazardous Wastes

Incentives are offered to encourage the setting up of proper facilities to store, treat and dispose of toxic and hazardous wastes. Companies that are directly involved in these three activities in an integrated manner qualify for:

i. Pioneer Status with income tax exemption of 70% (100%for promoted areas) of the statutory income for a period of five years. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

ii. Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within aperiodfiveyears.Theallowancecanbeoffsetagainst70%of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


6.3 Incentives for Waste Recycling Activities

Companies undertaking waste recycling activities that are highvalue-added and use high technology are eligible for Pioneer Status

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or ITA. These activities which include the recycling of agricultural wastes or agricultural by-products, recycling of chemicals and the production of reconstituted wood-based panel boards or products are eligible for:

i. Pioneer Status with income tax exemption of 70% (100%for promoted areas) of the statutory income for a period of five years. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

ii. Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within aperiodfiveyears.Theallowancecanbeoffsetagainst70%of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


6.4 Incentives for Energy Conservation

a. Companies Providing Energy Conservation Services

In order to reduce operation costs as well as to promote environmental preservation, companies providing energy conservation services are eligible for the following incentives:

i. PioneerStatuswith incometaxexemptionof100%of the statutory income for a period of ten years. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

ii. Investment Tax Allowance (ITA) of 100% on thequalifying capital expenditure incurred within five years.Theallowancecanbeoffsetagainst100%ofthe statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

The companies must implement their projects within one year from the date of approval.


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b. Companies Undertaking Conservation of Energy for OwnConsumption

CompanieswhichundertakeconservationofenergyforownconsumptionareeligibleforITAof100%onthequalifying capital expenditure incurred within five years. The allowance can be offset against 100% of the statutory income foreach year of assessment. Any unutilised allowances can be carried forward until fully utilised.


Applications should be submitted to MIDA

6.5 Incentives for Energy Generation Activities Using Renewable Energy Resources

Companies undertaking generation of energy using biomass,hydropower (not exceeding 10 megawatts) and solar power that are renewable and environmentally friendly are eligible for the following incentives:

i. Pioneer Status with income tax exemption of 100% ofstatutory income for ten years. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

ii. InvestmentTaxAllowanceof100%onthequalifyingcapitalexpenditure incurred within a period of 5 years. This allowancecanbeoffsetagainst100%ofthestatutoryincomefor each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Companies must implement their projects within one year from the date of approval.

With effect from 8 September 2007, other companies in the same group are eligible for the same incentives as above even though one company in the same group has been granted the incentive. Applications received by 31 December 2010 are eligible for this incentive.

For the purpose of this incentive, 'biomass sources' refer to palm oil mill/estate waste, rice mill waste, sugar cane mill waste, timber/sawmill waste, paper recycling mill waste, municipal waste and biogas (from landfill, palm oil mill effluent (POME), animal waste and others), while energy forms refer to electricity, steam, chilled water, and heat.


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6.6 Incentives for Generation of Renewable Energy for Own Consumption

Companies which generate energy from renewable resources for its own consumption are eligible for the Investment Tax Allowance of100%onqualifyingcapitalexpenditureincurredwithinaperiodof five years. This allowance can be offset against 100% of thestatutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


6.7 Tax Incentive for Building Obtaining Green Building Index Certificate

In order to widen the usage of green technology, the Government has launched the green building index (GBI) on 21 May 2009. GBI is a green rating index on environment-friendly buildings. The index is based on certain criteria amongst which are:

• energyandwaterefficiency;

• indoorenvironmentalquality;

• sustainablemanagementandplanningofbuilding sites inrespectofpollutioncontrolandfacilitiesforworkers;

• usageofrecyclableandenvironmentfriendlymaterialsandresources; and

• adoptionofnewtechnology.

As a measure to encourage the construction of buildings using green technology:

i. Owners of buildings awarded the GBI certificate, are eligible for tax exemption equivalent to 100% of the additionalcapital expenditure incurred to obtain the GBI certificate. The exemption is allowed to set-off against 100% of thestatutory income for each year of assessment. The incentive is applicable for new buildings and upgrading of existing buildings.

The incentive is given only for the first GBI certificate issued in respect of the building.

This incentive is effective for buildings awarded with GBI certificates from 24 October 2009 until 31 December 2014.

ii. Buyers of buildings and residential properties awarded GBI certificate bought from real property developers are eligible

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for stamp duty exemption on instruments of transfer of ownership of such buildings. The amount of stamp duty exemption is on the additional cost incurred to obtain the GBI certificate. The incentive is given only once to the first owner of the building.

This incentive is effective for sales and purchase agreement executed from 24 October 2009 until 31 December 2014.

6.8 Accelerated Capital Allowance for Environmental Management

Companies using environmental protection equipment are eligible foraninitialallowanceof40%andanannualallowanceof20%onthe qualifying capital expenditure. Thus, the full amount can be written off within three years.

These companies are:

• Waste generators andwish to establish facilities to store,treat and dispose off their wastes, either on-site or off-site; and

• Undertakewasterecyclingactivities.

Applications should be submitted to IRB.

In the case of companies that incur capital expenditure for conserving their own energy for consumption, the write-off period is accelerated by another one year.

Applications should be submitted to the IRB with a letter from the Ministry of Energy, Water and Communications Malaysia certifying that the related equipment is used exclusively for the purpose of energy conservation.

7.0 INCeNTIves for reseArCh AND DevelopMeNT

The Promotion of Investments Act 1986 defines research and development (R&D)as“anysystematicor intensivestudycarriedout in the field of science or technology with the object of using the results of the study for the production or improvement of materials, devices, products, produce or processes but does not include:

• qualitycontrolofproductsor routinetestingofmaterials,devices, products or produce

• researchinthesocialsciencesorhumanities

• routinedatacollection

• efficiencysurveyormanagementstudies

• marketresearchorsalespromotion.”

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To further strengthen Malaysia’s foundation for a more integrated R&D, companies which carry out designing or prototyping as independent activities are eligible for incentives.

7.1 Main Incentives for Research and Development

7.1.1 Contract R&D Company

A contract R&D company, i.e., a company that provides R&D services in Malaysia to a company other than its related company, is eligible for:

- PioneerStatuswith incometaxexemptionof100%of the statutory income for five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

- Investment Tax Allowance (ITA) of 100% on thequalifying capital expenditure incurred within 10 years.Theallowancecanbeoffsetagainst70%ofthestatutory income for each year of assessment. Any unutilised capital allowance can be carried forward until fully utilised.


7.1.2 R&D Company

An R&D company, i.e., a company that provides R&D services in Malaysia to its related company or to any other company, is eligible for an ITA of 100% on the qualifyingcapital expenditure incurred within 10 years. The allowance canbeoffsetagainst70%ofthestatutoryincomeforeachyear of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Should the R&D company opt not to avail itself of the allowance, its related companies can enjoy double deduction for payments made to the R&D company for services rendered.


eligibility

Contract R&D and R&D companies that fulfil the following criteria can apply for the various incentives:

- Researchundertaken shouldbe in accordancewiththe needs of the country and bring benefit to the economy

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- At least70%ofthe incomeofthecompanyshouldbe derived from R&D activities

- Formanufacturing-based R&D, at least 50% of theworkforce of the company must be appropriatelyqualified personnel performing research and technical functions; and

- For agriculture-based R&D, at least 5% of theworkforce of the company must be appropriatelyqualified personnel performing research and technical functions.

7.1.3 In-house Research

A company that undertakes in-house R&D to further itsbusiness can apply for an ITA of 50% of the qualifyingcapital expenditure incurred within 10 years. The company canoffset the ITAagainst70%of thestatutory income inthe year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.


7.1.4 Second Round Incentives

R&D companies/activities mentioned in categories 7.1.1 - 7.1.3 are eligible for a second round of Pioneer Status for another five years, or ITA for a further 10 years, where applicable.

7.1.5 Incentives for Commercialisation of Public Sector R&D

To encourage commercialisation of resource-based R&D findings by the public research institutes, the following incentives are given:

a. A company that invests in its subsidiary company engaged in the commercialisation of the R&D findings is eligible for a tax deduction equivalent to the amount investment made in the subsidiary company; and

b. The subsidiary company that undertakes thecommercialisation of the R&D findings is eligible for PioneerStatuswith incometaxexemptionof100%of statutory income for 10 years.

The incentive is provided on the following conditions:

a. At least 70% of the investing company (holdingcompany) and the company undertaking thecommercialisation projects is owned by Malaysians;

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b. Thecompanywhichinvestsshouldownatleast70%of the equity of the company that commercialises the R&D findings

c. The commercialisation of the R&D findings should be implemented within one year from the date of approval of the incentive.

7.2 Additional Incentives for Research and Development

7.2.1 Double Deduction for Research & Development

A company can enjoy a double deduction on its revenue (non-capital) expenditure for research which is directly undertakenandapprovedbytheMinisterofFinance.

Double deduction can also be claimed for cash contributions or donations to approved research institutes, approved research companies, R&D companies or contract R&D companies.

Approved R & D expenditure incurred during the tax relief period for companies granted Pioneer Status can be accumulated and deducted after the tax relief period.

Expenditure on R&D activities undertaken overseas,including the training of Malaysian staff, will be considered for double deduction on a case-by-case basis.


7.2.2 Incentives for Researchers to Commercialise Research Findings

Researchers who undertake research focused on valuecreationwillbegivena50%taxexemptionforfiveyearsonthe income that they receive from the commercialisation of their research findings.Theundertakinghas tobeverifiedby the Ministry of Science, Technology and Innovation.


8.0 INCeNTIves for MeDICAl DevICes INDUsTrY

8.1 Incentives for Medical Devices Testing Laboratories

Medical devices testing laboratories have been identified as an important support service in ensuring that locally manufactured medical devices are of high quality and of international standards.

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8.1.1 Companies Investing in New Testing Laboratories for Testing Medical Devices

With effect from 8 September 2007, companies investing in setting up new laboratories are eligible for the following incentives:

a. PioneerStatuswith incometaxexemptionof100%of the statutory income for five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. Investment Tax Allowance (ITA) of 60% (100% forpromoted areas) on the qualifying capital expenditure incurred within five years. The allowance can be offset against100%ofthestatutory incomeforeachyearof assessment. Any unutilised capital allowances can be carried forward to subsequent years until fully utilised.


8.1.2 Companies Upgrading Existing Testing Laboratories for Testing Medical Devices

Companies investing in upgrading existing laboratories are eligibleforanInvestmentTaxAllowance(ITA)of60%(100%for promoted areas) on the qualifying capital expenditure incurred within five years. This allowance can be offset against 100% of the statutory income for each year ofassessment. Any unutilised capital allowances can be carried forward to subsequent years until fully utilised.



9.0 INCeNTIves for TrAINING

To encourage human resource development, the following incentives are available:

9.1 Investment Tax Allowance

Companies that establish technical or vocational training institutionsareeligibleforanInvestmentTaxAllowanceof100%for 10 years. This allowance can be offset against 70% of thestatutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

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Existing companies providing technical or vocational training that undertakenewinvestmentstoupgradetheirtrainingequipmentorexpand their training capacities also qualify for this incentive.

The incentive also applies to:

- Private Higher Education Institutions (PHEIs) in the field of science; and

- Existing Private Higher Education Institutions (PHEIs) in the field of science that undertake new investments toupgrade their training equipment or expand their training capacities.

The qualifying science courses are as follows:

i. Biotechnology - Medical and health biotechnology - Plant biotechnology - Food biotechnology - Industrial and environment biotechnology - Pharmaceutical biotechnology - Bioinformatics biotechnology

ii. Medical and Health Science - Medical science in gerontology - Medical science in clinical research - Medical biosciences - Biochemical genetics - Environmental health - Community health

iii. Molecular Biology- Immunology- Immunogenetics- Immunobiology

iv. Material sciences and technologyv. Food science and technology


9.2 Additional Incentives for Training

9.2.1 DeductionforCostofRecruitmentofWorkers

Costofrecruitmentofworkersisallowedasadeductionforthe purpose of tax computation.

Cost includes expenses incurred in participation in job fairs, payment to employment agencies and head-hunters.

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9.2.2 Deduction for Pre-Employment Training

Training expenses incurred before the commencement of business qualify for a single deduction. Nevertheless, companies must prove that they will employ the trainees.


9.2.3 Deduction for Non-Employee Training

Expenses incurred in providing practical training to residents who are not employees of the company can be considered for single deduction.


9.2.4 Deduction for Cash Contributions

Contributions in cash to technical or vocational training institutions that are not operating primarily for profit and those established and maintained by a statutory body qualify for single deduction.


9.2.5 Special Industrial Building Allowance

Companies that incur expenditure on buildings used for approved industrial, technical or vocational training can claim a special annual Industrial Building Allowance (IBA) of 10% for10yearsonqualifyingcapitalexpenditure for theconstruction or purchase of a building.


9.2.6 Tax Exemption on Educational Equipment

Approved training institutes, in-house training projects and all private institutions of higher learning are eligible for import duty, sales tax and excise duty exemptions on all educational equipment including laboratory equipment for workshops,studiosandlanguagelaboratories.


9.2.7 Tax Exemption on Royalty Payments

Royalty payments made by educational institutions to non-residents (franchisors) for franchised education scheme programmes that are approved by the Ministry of Education are eligible for tax exemption.


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9.2.8 Double Deduction for Approved Training

Manufacturing and non-manufacturing companies that do not contribute to the Human Resource Development Fund (HRDF) qualify for double deduction on expenses incurred for approved training.

For the manufacturing sector, the training could be undertaken in-house or at approved training institutions.However, for the non-manufacturing sector, the training should be held only at approved training institutions. Approval is automatic when the training is at approved institutions.

For the hotel and tour operation business, training programmes, in-house or at approved training institutions, to upgrade the level of skills and professionalism in thetourism industry, should be approved by the Ministry of Tourism.

Effective from the year of assessment 2009 to year of assessment 2012, employers who incur expenses for training theiremployeesinthefollowingskillsareeligiblefordoublededuction:

- Post graduate courses in information communication and technology (ICT), electronics and life sciences;

- Post basic courses in nursing and allied heath care; and

- Aircraft maintenance engineering courses.


9.2.9 Human Resource Development Fund (HRDF)

Please refer to Manpower for Industry.


10.0 INCeNTIves for ApproveD servICe projeCTs (Asps)

Approved Service Projects (ASPs) or projects in the transportation, communications and utilities sub-sectors approved by the Minister of Finance qualifying for the following tax incentives:

10.1 Main Incentives for ASPs

10.1.1 Exemption Under Section 127 of the Income Tax Act 1967

Generally, under Section 127 of the Income Tax Act 1967, companies undertaking ASPs can apply for taxexemptionof70%oftheirstatutory incomefor fiveyears.CompaniesundertakingASPsinPerlis,Sabah,Sarawakand

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the designated “Eastern Corridor” of Peninsular Malaysiaare eligible for tax exemption of 85% of their statutoryincomeforfiveyears,whilecompaniesundertakingASPsofnationalandstrategicimportanceareeligiblefor100%taxexemption of their statutory income for 10 years.


10.1.2 Investment Allowance (IA) Under Schedule 7B of the Income Tax Act 1967

The Investment Allowance (1A) under Schedule 7B of the Income Tax Act 1967 is an alternative to the incentive offered underSection127.Under1A,companiesundertakingASPsare eligible for an allowance amounting to 60% on thequalifying capital expenditure incurred within five years from the date the first capital expenditure is incurred. The allowancecanbeoffsetagainst70%ofthestatutoryincomeand any unutilised allowance can be carried forward to subsequent years until fully utilised.

CompaniesundertakingASPsinPerlis,Sabah,Sarawakandthe designated “Eastern Corridor” of PeninsularMalaysia,are eligible for an allowance of 80% on the qualifyingexpenditure which can be offset against 85% of thestatutory income.

Companies undertaking ASPs of national and strategicimportance will be granted an allowance of 100% on thequalifying capital expenditure incurred within five years. Thisallowancecanbeoffsetagainst100%ofthestatutoryincome.


10.2 Additional Incentives for ASPs

10.2.1 Exemption from Import Duty and Sales Tax and Excise Duty on Raw Materials, Components, Machinery, Equipment, Spares and Consumables

Imports of raw materials and components not available locally and used directly to implement ASPs are eligible for exemption from import duty and sales tax, while locally purchased machinery or equipment are eligible for exemption from sales tax and excise duty.

Companies providing services in the transportation and telecommunications sectors, power plants and port operators can apply for import duty and sales tax exemption on spares and consumables that are not produced locally.

The above applications should be submitted to MIDA.

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11.0 INCeNTIves for The shIppING AND TrANsporTATIoN INDUsTrY

11.1 Tax Exemption for Shipping Operation

The income of a shipping company derived from the operation of Malaysian ships is exempted from tax. This incentive only applies toresidents.A“MalaysianShip”isasea-goingshipregisteredassuch under the Merchant Shipping Ordinance 1952 (Amended), other than a ferry, barge, tugboat, supply vessel, crew boat, lighter, dredger, fishing boat or other similar vessels.

The income of any person derived from exercising an employment onboarda“MalaysianShip”isexemptedfromtax.Incomereceivedby non-residents from the rental of ISO containers to Malaysian shipping companies is also exempted from income tax.


11.2 Sales Tax Exemption on Prime Movers and Trailers

Container hauliers qualify for import duty and sales tax exemptions on prime movers and trailers that are not produced locally.


12.0 INCeNTIves for MsC MAlAYsIA

The MSC Malaysia is modeled to be a world-class hub for the development and nuturing of the nation's information and communications technology (ICT) industry. It provides a perfect environment for companies wanting to create, distribute and employ multimedia products and services.

MSC Malaysia Status is the recognition by the Government of Malaysia through the Multimedia Development Corporation (MDeC)tocompaniesthatparticipateandundertakeICTactivitiesin the MSC Malaysia. Companies with MSC Malaysia status enjoy asetofincentivesandbenefitsthatisbackedbytheGovernmentof Malaysia's Bill of Guarantees.

12.1 Main Incentives from MSC Malaysia Status Company

MSC Malaysia status multimedia companies operating in Malaysia MSC Cybercities/Cybercentres are eligible for the following incentives and facilities:

i. PioneerStatuswith incometaxexemptionof100%of thestatutory income for a period of 10 years or Investment Tax Allowance of 100% on the qualifying capital expenditureincurredwithinaperiodof5yearstobeoffsetagainst100%of statutory income for each year of assessment.

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ii. Eligibility for R&D grants (for majority Malaysian-owned MSC Status companies)

Applications for MSC Status should be submitted to MDeC.

Other Benefits

- Duty-free import of multimedia equipment

- Intellectual property protection and a comprehensive frameworkofcyberlaws

- No censorship of the Internet

- World-class physical and IT infrastructure

- Globally competitive telecommunication tariffs and services

- Consultancy and assistance by the Multimedia Development Corporation to companies within the MSC

- High quality, planned urban development

- Excellent R&D facilities

- Green and protected environment

- Import duty, excise duty and sales tax exemption on machinery, equipment and materials.

13.0 INCeNTIves for INforMATIoN AND CoMMUNICATIoN TeChNoloGY (ICT)

13.1 Incentives for the Use of Information and Technology (ICT)

13.1.1 Accelerated Capital Allowance

Companies are eligible for Accelerated Capital Allowance (ACA) that provides an initial allowance of 20% and anannual allowance of 40% for expenditure incurred inacquiring computers and information technology assets, including software. Effective for the year of assessment 2009 to the year of assessment 2013, the period to claim ACA on expenses incurred on ICT equipment including computer and software is accelerated from two years to one year.

The cost of developing websites is allowed as an annual deductionof20%foraperiodoffiveyears.


13.1.2 Deduction of Operating Expenditure

Companies enjoy a single deduction of operating expenditure including payments to consultants related to IT usage for

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improving management and production processes.



Companies in the ICT sector can apply for a tax exemption ontheirstatutoryincomeequivalentto50%ofthevalueofincreased exports.


14.0 INCeNTIves for A KNowleDGe-BAseD eCoNoMY

Malaysia is in the process of transforming itself from a production-based to a knowledge-based economy. To further encouragecompaniestoinvestinknowledge-intensiveactivities,companiesthat qualify will be granted “Strategic Knowledge-based Status”.These companies must have the following characteristics:

- thepotentialtogenerateknowledgecontent

- high value-added operations

- usage of high technology

- alargenumberofknowledgeworkers

- possessacorporateknowledge-basedmasterplan

Companiesgranted“StrategicKnowledge-basedStatus”areeligiblefor the following incentives:

i. PioneerStatuswith incometaxexemptionof100%of thestatutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company; or

ii. Investment Tax Allowance of 60% (100% for promotedareas) on the qualifying capital expenditure incurred within fiveyears.Theallowancecanbeoffsetagainst100%ofthestatutory income in the year of assessment. Any unutilised allowances can be carried forward until fully utilised.

The expenditure incurred by a company for drafting its corporate knowledge-based master plan is eligible for deduction in thecomputation of income tax. The deduction can be claimed when thecompanybeginstoimplementitscorporateknowledge-basedmaster plan.


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15.0 INCeNTIves for The MANUfACTUrING relATeD servICes

Companies providing the following value-added manufacturing related services are eligible for the Pioneer Status or Investment Tax Allowance:

- Integrated logistics services which comprise activities along the logistics supply chain i.e freight forwarding, warehousing, transportation and other related value-added services such as distribution, palletising, product assembly/installation, bulk breaking, consolidation, packaging/re-packaging,procurement, quality control, labeling/relabeling, testing and supply chain management.

- Integrated market support services which comprise theactivities of brand development, consumer development, packagingdesign,advertisingandpromotion.(Applicationsreceived by 31 December 2011 are eligible for this incentive)

- Integrated central utility facilities which provide services such as the supply of steam, demineralised water and industrial gas

- Cold chain facilities that provide a wide range of services including cold room, refrigerated truck and other relatedservices such as the collection, storage and distribution of perishable locally produced food products

15.1 Pioneer Status

Companiesundertaking thesemanufacturing relatedservicesareeligible for Pioneer Status with income tax exemption on 70%(100%forpromotedareas)ofthestatutoryincomeforaperiodoffive years. Unabsorbed capital allowance as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post-pioneer income of the company.


15.2 Investment Tax Allowance

As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted the ITA gets anallowanceof60%(100%forpromotedareas)onthequalifyingcapital expenditure incurred within five years from the date on which the first qualifying capital expenditure is incurred.

Companies can offset this allowance against 70% (100% forpromoted areas) of their statutory income in the year of assessment.

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Any unutilised allowances can be carried forward to subsequent yearsuntilfullyutilised.Theremaining30%ofthestatutoryincomewill be taxed at the prevailing tax rate.


16.0 INCeNTIves for operATIoNAl heADqUArTers

An approved operational headquarters (OHQ) generally refers to a company that provides qualifying services to its offices or related companies regionally and globally.

A company that establishes an OHQ in Malaysia can be considered for tax incentives and facilities under the OHQ incentive programme. A company is granted OHQ status and tax incentives under Section 127 of the Income Tax Act 1967 for the provision of qualifying services to its offices or related companies within and outside Malaysia.

16.1 Approvals for OHQ Status, Incentives and Other Facilities

Companies that meet the following criteria can apply for OHQ status and incentives:

- Locally incorporated under the Companies Act 1965

- A minimum paid-up capital of RM0.5 million

- A minimum total business spending (operating expenditure) of RM1.5 million per year

- Appoint at least three senior professional/management personnel

- Serve at least three related companies outside Malaysia

- Have a sizeable network of companies outside Malaysiawhich includes the parent company or headquarters, and other related companies

- Haveawell-establishednetworkofcompaniesthatemployasignificant and substantial number of qualified professionals, technical and supporting personnel

- Carry out a minimum of three qualifying services:

The qualifying services are as follows:

- General management and administration

- Business planning and coordination

- Coordination of procurement of raw materials, components and finished products

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- Technical support and maintenance

- Marketingcontrolandsalespromotionplanning

- Data/ information management and processing

- Researchanddevelopment(R&D)workcarriedoutinMalaysia on behalf of its offices or related companies within or outside Malaysia

- Training and personnel management for its offices or related companies within or outside Malaysia

- Treasury and fund management services to its offices or related companies outside Malaysia which include:

• Providing credit facilities to related companiesoutside Malaysia in currencies other than ringgit

• Transacting or investing in stocks, shares andsecurities (including bonds, notes, certificates of deposits and treasury bills) in foreign currencies that are issued in or outside Malaysia

• Investing in foreign currency deposits withonshore banks, licensed International IslamicBanksinMalaysiaoroverseasbanks

• Foreign exchange transactions and interestrate/ currency swaps for hedging purposes that are made in a foreign currency and conducted through onshore banks and licensed banks inLabuan

• Transactionsinfinancialderivativeswithonshorebanks and in USD denominated crude palm oilfutures contracts on Bursa Malaysia for hedging purposes

• Transactions in foreign-currency denominatedderivatives on overseas specified exchanges made only through resident futures brokers forhedging and investment purposes

The funds for carrying out the treasury and fund management activities are to be obtained only through borrowings made fromauthorisedbanks inMalaysia andoffshore banks inLabuan; or from the OHQ company's paid-up capital, its accumulated profits derived from qualifying activities, or the accumulated profits of its offices or from borrowings sourced from outside Malaysia.

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An OHQ set up by a financial institution is prohibited from providing treasury and fund management services to their related companies in Malaysia unless the related companies are institutions licensed under the Banking and FinancialInstitution Act 1989 (BAFIA).

- Corporate financial advisory services to its offices and related companies outside Malaysia which include:

• Provision of credit administration denominatedin currencies other than the Ringgit for related companies

• Arrangement of credit facilities denominatedin currencies other than the Ringgit for related companies

• Arrangementofinterestrateorcurrencyswapsincurrencies other than the Ringgit

• An OHQ company may take over claimsheld by related companies and/or from third parties outside Malaysia at a discounted price (factoring)

• Allproductsandserviceswhichrelatedcompaniesinvoice to each other can be re-invoiced by the OHQ (re-invoicing)

• Netting of payments, other than the exportproceed for goods exported from Malaysia, among related companies vis-à-vis the OHQ, is freely allowed

• An OHQ company may purchase machinery,equipment or real estate with a view to lease them to its related companies (leasing)

• An OHQ company may purchase machinery,equipment or real estate belonging to related companieswithaviewtoleasethembacktothesame related companies (sales and lease backarrangements).

16.2 Equity Requirements

A company granted OHQ status and incentives under Section 127of the IncomeTaxAct1967, is allowed100% foreignequityownership.

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16.3 Incentives

An approved OHQ company is eligible for 100% income taxexemption for a period of 10 years under Section 127, Income Tax Act 1967 for income derived from the following sources:

- Business Income

Income arising from services rendered by an OHQ company to its offices or related companies outside Malaysia

- Interest

Income derived from interest on foreign currency loans extended by an OHQ company to its offices or related companies outside Malaysia

- Royalties

Royalties received fromR&Dwork carriedout inMalaysiaby an OHQ company on behalf of its offices or related companies outside Malaysia .

The income generated by an OHQ company in providing qualifying services to its offices and related companies in Malaysia will not be taxed during its tax-exempt period, provided such income does not exceed20%of itsoverall incomederivedbyprovidingqualifyingservices.Anyexcessof the20% limitwillnotbeexempted fromtax.

An existing OHQ company will be given a 100% income taxexemption for its remaining exemption period.

Applications should be made to the Ministry of Finance.

16.4 Foreign Exchange Administration (FEA) Flexibilities Accorded to Resident Companies with Approved Operational Headquarters Status (OHQ)

i. Investment in foreign currency assets1

• Freetoinvestanyamountinforeigncurrencyassetstobe funded with:

- Own foreign currency funds; or

- Foreign currency borrowing.

ii. Foreign currency borrowing

• Free to borrow any amount of foreign currency fromonshore banks, licensed International Islamic Banks,other resident companies within the same corporate group2 in Malaysia and from any non-residents, provided the OHQ do not on-lend the funds:

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- To other residents; or

- Raise the funds on behalf of any resident

• Free to obtain any amount of foreign currency tradefinancing facilities from non-resident to finance import payments

iii. Payment Between Reident Companies

• Norestrictionforpaymentinringgit

16.5 Other FEA Flexibilities

As a resident company, an OHQ status company is also entitled to other FEA flexibilities applicable to residents. For more information, please visit http://www.bnm.gov.my/fxadmin

16.6 Other Facilities

Other facilities accorded to an approved OHQ are as follows:

- Use professional services of foreign firms, provided that such services are not available locally

- Acquire fixed assets as long as the fixed assets are used for the purpose of carrying out the operations of the OHQ

- Import duty, excise duty and sales tax exemption on machinery, equipment and materials.

- Expatriatesworking inOHQcompaniesare taxedonlyonthe portion of their chargeable income attributable to the numbers of days that they are in Malaysia.

16.7 Expatriate Employment

There are two stages in the employment of expatriates – application for an expatriate post and an endorsement of employment pass.

Companies applying for OHQ status can also apply for expatriate posts,includingkeyposts.Theapprovalwillbegrantedaccording

1 "Foreign currency assets" include: a. Foreign currency securities; b. Foreign currency loans; c. Foreign currency deposits; d. All approved foreign currency-denominated products offered by:

- onshore banks; - licensed International Islamic Banks; - Bursa Malaysia; and - any residents permitted by the Controller of Foreign Exchange.

e. Exchange traded foreign currency-denominated derivatives (other than currency contracts) transacted via resident futures brokers

2 Corporate group' refers to a group of companies with parent-subsidiary relationship in Malaysia

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to the companies' requirements subject to the condition that the company has a minimum paid-up capital of RM500,000. All applications should be submitted to MIDA.

Upon approval of the expatriate posts by MIDA, the company must submit an application to the Immigration Department for endorsement of the Employment Pass. Once the Employment Pass has been endorsed, the expatriate can be hired.

17.0 INCeNTIves for INTerNATIoNAl proCUreMeNT CeNTres / reGIoNAl DIsTrIBUTIoN CeNTres

International Procurement Centres

An international procurement centre (IPC) is a locally incorporated company, which carries on a business in Malaysia to undertakeprocurement and sale of raw materials, components and finished products for its group of related companies and unrelated companies in Malaysia and abroad. This would include procurement from, and sales made to, local sources and third countries.

Regional Distribution Centres

A regional distribution centre (RDC) is a collection and consolidation centre for finished goods, components and spare parts produced by its own group of companies for its own brand to be distributed to dealers, importers or its subsidiaries or other unrelated companies within or outside the country. Among the value-added activitiesinvolvedarebulkbreaking,repackagingandlabelling.

17.1 Approvals for IPC/RDC Status

Companies that meet the following criteria can apply for an IPC/RDC status:-

- Locally incorporated under the Companies Act 1965

- A minimum paid-up capital of RM0.5 million

- A minimum total business spending (operating expenditure) of RM1.5 million per year

- Utilisation of Malaysian ports and airports

- A minimum annual sales turnover of RM50 million by the third year of operation

- Domestic sales of notmore than 20%of its annual salesvalue. Notmore than 30% of its annual sales turnover isderived from the sourcing of goods from outside Malaysia to overseas destinations via drop shipment.

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A company granted IPC/RDC status and incentives under Section 127of the IncomeTaxAct1967, is allowed100% foreignequityownership.

17.3 Incentives

An approved IPC/RDC status company can be considered for:

- Full tax exemption of its statutory income for 10 years, under Section 127 of the Income Tax Act 1967

- Dividends paid from the exempt income will be exempted from tax in the hands of its shareholders

Eligibility Criteria

To qualify for the above incentives, an approved IPC/RDC status company must also fulfil the following additional criteria:

- Annual sales turnover of at least RM100 million.

- Salestothedomesticmarketincludingsalestofreezones(FZs) and licensed manufacturing warehouses (LMWs) are limitedto20%ofitssalesturnover.Ifsalestothedomesticmarket exceed 20%, the additional sales will not beexempted from tax.

17.4 Foreign Exchange Administration (FEA) Flexibilities Accorded to Resident Companies with International Procurement Centres (IPC) and Regional Distribution Centres (RDC) Status

i. Hedging of current account transactions

• Free to hedge with onshore banks and licensedInternational Islamic Banks for payments and receiptsfor import and export of goods and services:

- Based on firm underlying commitment; or

- On anticipatory basis

• Hedging involvingringgitshallonlybeundertakenwithonshorebanks

ii. Payment between resident companies

• Norestrictionforpaymentinringgit

• Freetopayotherresidentcompaniesinforeigncurrencyfor the settlement of goods and services sourced from its foreign currency account.

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17.5 Other FEA Flexibilities

As a resident company, an IPC and RDC status companies are also entitled to other FEA flexibilities applicable to residents. For more information please visit http://www.bnm.gov.my/fxadmin

17.6 Other Benefits

An approved IPC/RDC status company will enjoy the following benefits:

- Expatriate posts based on the requirements of the IPC/RDC

- Bring in raw materials, components or finished products with customs duty exemption into free industrial zones (FIZs), free commercial zones (FCZs), licensed manufacturing warehouses (LMWs) and bonded warehouses for re-packaging, cargo consolidation and integration beforedistribution to its final consumers

- Expatriates,working in IPC/RDCcompaniesare taxedonlyon the portion of their chargeable income attributable to the numbers of days that they are in Malaysia.


Companies applying for IPC/RDC status can also apply for expatriateposts,includingkeyposts.Theapprovalwillbegrantedaccording to the companies' requirements subject to the condition that the company has a minimum paid-up capital of RM500,000. All applications should be submitted to MIDA.

Upon approval of the expatriate posts by MIDA, the company must submit an application to the Immigration Department for endorsement of the Employment Pass. Once the Employment Pass has been endorsed, the expatriate can be hired.

18.0 represeNTATIve offICes AND reGIoNAl offICes

A Representative Office/Regional Office of a foreign company based in Malaysia performs permissible activities for its headquarters/principal. Such offices should be totally funded from sources outside Malaysia and are not required to be incorporated or be registered with the Companies Commission of Malaysia (SSM) under the Companies Act 1965.

Representative Office

An approved representative office collects relevant information regarding investment and business opportunities to develop bilateral trade relations and promote the export of Malaysian goods and products.

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Regional Office

An approved regional office serves as the coordination centre for its affiliates, subsidiaries and agents within the Asia Pacific region. It is responsible for conducting designated activities within the region it operates.

The approval for the establishment of representative/regional offices and expatriate employment is valid for a minimum period of two years and is renewable depending on the merits of each case.

18.1 Activities Allowed

An approved representative office/regional office is allowed to carry out the following activities:

- Plan or coordinate business activities- Gather and analyse information or undertaking feasibility

studies on investment and business opportunities in Malaysia and the region

- Identify sources of raw materials, components or other industrial products

- Undertakeresearchandproductdevelopment- Act as a coordination centre for the corporation's affiliates,

subsidiaries and agents in the region

18.2 Activities Not Allowed

An approved representative office/regional office is not allowed to carry out the following activities:

- Engage in any trading (including import and export), business or any form of commercial activity

- Lease warehousing facilities. Any shipment / transshipment or storage of goods must be carried out through a local agent or distributor

- Sign business contracts on behalf of the foreign corporation or provide services for a fee

- Participate in the daily management of any of its subsidiaries, affiliates or branches in Malaysia

- Conduct any business transaction or derive income from its operations


As representative/regional offices do not have issued capital in Malaysia , they are not subject to any equity condition.

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18.4 Incentive

Expatriates working in regional offices are taxed only on theportion of their chargeable income attributable to the number of days that they are in Malaysia.


An approved representative/regional office is allowed to employ expatriates at the managerial and technical level.

Applications for the establishment of representative/regional offices and expatriate posts should be submitted to MIDA.

Upon approval, companies should forward their applications for Employment Passes to the Immigration Department for endorsement.

19.0 oTher INCeNTIves

This section covers other incentives not mentioned else where and may be applicable to the following sectors: manufacturing, agriculture, tourism, environmental management, research and development, training, information and communication technology, Approved Service Projects and manufacturing related services.

19.1 Industrial Building Allowance

An Industrial Building Allowance (IBA) is granted to companies incurring capital expenditure on the construction or purchase of a building that is used for specific purposes, including manufacturing, agriculture, mining, infrastructure facilities, research, Approved Service Projects and hotels that are registered with the Ministry of Tourism. Such companies are eligible for an initial allowance of 10%andanannualallowanceof3%.Assuch,theexpenditurecanbe written off in 30 years.


19.2 Industrial Buiding Allowance for Buildings in MSC Malaysia

To encourage the construction of more buildings in Cyberjaya for use by MSC Malaysia status companies, IBA for a period of 10 years will be given to owners of new buildings occupied by MSC Malaysia status companies in Cyberjaya. Such new buildings include completed buildings but are yet to be occupied by MSC Malaysia status companies.


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19.3 Infrastructure Allowance

Companies in the States of Sabah, Sarawak, Perlis and thedesignated "Eastern Corridor" of Peninsular Malaysia are also eligibleforanInfrastructureAllowanceof100%.Companieseligibleare those engaged in manufacturing, agriculture, hotel, tourism or other industrial/commercial activities and which incur qualifying capital expenditure on infrastructure such as the reconstruction, extension and improvement of any permanent structure including bridges, jetties, ports and roads.

These companies can offset the allowance against 100% oftheir statutory income in the year of assessment. The remaining statutory income will be taxed at the prevailing company tax rate. Any unutilised allowances can be carried forward to subsequent years until fully utilised.



19.4 Deduction of Audit Fees

To reduce the cost of doing business and enhance corporate compliance, expenses incurred on audit fees by companies are deemed as allowable expenses for deduction in the computation of income tax.


19.5 Tax Incentives for Venture Capital Industry

Generally, venture capital companies (VCC) is eligible for income tax exemption for 10 years subject to the investment condition as follows:

i. at least50%offundsinvestedinventurecompaniesmustbe in seed capital; or

ii. at least70%offundsinvestedinventurecompaniesmustbe in start-up or early stage financing.

To stimulate and further promote the funding of venture companies, VCCsinvestinginventurecompanieswithatleast30%ofitsfundsin seed capital, start-up or early stage financing are eligible for income tax exemption for five years.

This incentive is effective for applications received by the Securities Commission from 30 August 2008 until 31 December 2013.


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19.6 Tax Incentive on Costs of Dismantling and Removing Assets

Costs of dismantling and removing assets including plant and machinery as well as restoring the site where the asset was located do not qualify for allowance under the Schedule 3, Income Tax Act 1967 since this expenditure is not deemed as cost of the asset. However, Financial Reporting Standards 116 (FRS 116) stipulates that the cost of an asset includes the estimated cost required to be incurred relating to the obligation to dismantle and remove the asset and to restore the site on which the asset was located.

Therefore, to streamline the tax treatment under the Income Tax Act 1967 and FRS 116, a special provision is introduced in Schedule 3, Income Tax Act 1967 to provide for balancing allowance* on the cost of dismantling and removing asset including plant and machinery as well as restoring the site where the asset was located, subject to the following conditions:

• The eligibility of such treatment only applies where theobligationtocarryoutworksondismantlingandremovingthe plant and machinery as well as restoring the site is provided under the written law or agreement; and

• Such plant andmachinery is not allowed to be used by thatperson in another business or the business of another person.

Applications are eligible for the incentive with effect from the year of assessment 2009.


19.7 Incentive for Acquiring Proprietary Rights

Capital expenditure incurred in acquiring patents, designs, models, plans, trade marks or brands and other similar rights fromforeigners qualify as a deduction in the computation of income tax. This deduction is given in the form of an annual deduction of 20%overaperiodoffiveyears.


19.8 Tax Incentives for Small and Medium Enterprises to Register PatentsandTrademarks

In line with the Government’s objective to promote innovation and intellectual property development among small and medium enterprises (SME), expenses incurred in the registration of patents andtrademarksinthecountrywillbeallowedasadeductionforthe purpose of income tax computation.

* The total balancing allowance is determined by adding the cost of dismantling and removing the plant and machinery as well as restoring the site to the balance of expenditure on plant and machinery at the time of the disposal of the asset.

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Such registration expenses include fees or payment made to patent and trademarks agents registered under the PatentsAct1983andtheTradeMarksAct1976.

The definitions for the purpose of this tax incentive are as follows:

i. Companies as defined under paragraph 2A and 2B, Schedule 1, Income Tax Act 1967

ii. Manufacturing industries, manufacturing related services industries and agro-based industries

• Enterprisewithfull-timeemployeesnotexceeding150persons; or with annual sales turnover not exceeding RM25 million

iii. Services industries, primary agriculture and information & communication technology (ICT)

• Enterprisewith full-timeemployeesnot exceeding50persons; or with annual sales turnover not exceeding RM5 million

This is effective from the year of assessment 2010 until the year of assessment 2014.

19.9 Tariff Related Incentives

19.9.1 Exemption from Import Duty on Raw Materials/ Components

Full exemption from import duty can be considered for raw materials/components, regardless of whether the finished products are meant for the export or domestic market.

Where the finished products for the export market,full exemption from import duty on raw materials/components is normally granted, provided the raw materials/components are not produced locally or, where they are produced locally, are not of acceptable quality and price.

Where the finished products for the domesticmarket,full exemption from import duty on raw materials/components that are not produced locally can be considered. Full exemption can also be considered if the finished product made from dutiable raw materials/components is not subject to any import duty.

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Hotel and tourism projects qualify for full exemption of import duty and sales tax on identified imported materials.


19.9.2 Exemption from Import Duty on Imported Medical Devices for Purpose of Kitting

To encourage local manufacturers of medical devices to kittheirproductstoaddvalueaswellastoenhancetheircompetitiveness, full import duty exemption is given on medical devices that are imported for the purpose of kittingorproducingcompleteproceduralsets,providedthese medical devices are not manufactured locally.


19.9.3 Exemption from Import Duty and Sales Tax on Machinery and Equipment

It is the policy of the government not to impose taxes on machinery and equipment used directly in the manufacturing process and not produced locally. Most categories of machinery and equipment. In cases where the imported machinery and equipment are taxable but are not available locally, full exemption is given on import duty and sales taxes. For locally purchased machinery and equipment, full exemption is given on sales tax.


19.9.4 Exemption from Import Duty and Sales Tax on Spares and Consumables

Manufacturing companies qualify for import duty and sales tax exemptions on spares and consumables that are not produced locally and which are directly in the manufacturing process.


19.9.5 Exemption from Import Duty and Sales Tax for Outsourcing Manufacturing Activities

To reduce the cost of doing business and enhance competitiveness, owners of Malaysian brands with at least 60% Malaysian equity ownership who outsourcemanufacturing activities are eligible for:

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a. Import duty and sales tax exemptions on raw materials and components used in the manufacturing of finished products by their contract manufacturers locally or abroad

b. Import duty and sales tax exemptions on semi-finished goods from their contract manufacturers abroad, to be used by their local contract manufacturer to manufacture the finished products.


19.9.6 Exemption from Import Duty and Sales Tax for Maintenance Repair and Overhaul (MRO) Activities

Aerospace companies undertaking maintenance, repairand overhaul activities qualify for import duty and sales tax exemption on raw materials, components, machinery, and equipments, spares and consumables. These are subject to each importation to be accompanied by certificates of parts and components issued by one of the following original equipment manufacturers (OEM) :

• FAA Form 8130-3 from the United States ofAmerica

• EASAForm1fromtheEuropeanUnion

• CertificateofCompliance

• CertificateofConformance

• Certificatefromvendors

• Distributorcertificate


19.9.7 Exemption from Import Duty and Sales Tax on Solar Photovoltaic System Equipment

To widen the usage of energy from renewable resources:

• import duty and sales tax exemption on solarphotovoltaic system equipment for the usage by third parties is given to importers including photovoltaic service providers approved by the Energy Commision; and

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• sales tax exemption is given on the purchaseof solar heating system equipment from local manufacturers.

Applications submitted to the Ministry of Finance by 31 December 2010 are eligible for these incentives.

19.9.8 Exemption from Import Duty and Sales Tax on Energy Efficiency Equipment

To widen the usage of energy efficiency equipment:

• importdutyandsalestaxexemptionisgivenonenergy efficiency (EE) equipment such as high efficiency motors and insulation materials to importers including authorised agents approved by the Energy Commision; and

• salestaxexemption isgivenonthepurchaseoflocally manufactured EE consumer goods such as refrigerator, air conditioner, lightings, fan and television


19.9.9 Exemption from Import Duty and Excise Duty on Hybrid Cars

Generally, the importation of completely built-up (CBU) cars including hybrid cars below 2000cc is subject to import duty, excise duty and sales tax that ranges from 10%to80%.

However, to promote Malaysia as a regional hub for hybrid cars and as an incentive for local car manufacturers and assemblers to prepare for assembly of such cars domestically, franchise holders of hybrid cars are given 100% exemption on import duty and 50% exemptionof excise duty on new CBU hybrid cars subject to the following criteria and conditions:

(a) Hybrid cars should comply with the United Nations definition - "A vehicle with at least two different energy convertors and two different energy storage system s (gasoline and electric) on-board the vehicle for the purpose of vehicle propulsion";

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(b) Limited to new CBU hybrid passenger cars with engine capacity below 2000cc;

(c) Engine specification of at least Euro 3 Technology;

(d) Hybrid cars certified by the Road Transport Department, obtaining Vehicle Type Approval and certified to have achieved not less than a 50%increase in the city-fuel economy or not less than a 25% increase in combined city-highway fueleconomy relative to a comparable vehicle that is an internal combustion gasoline fuel; and

(e) Emission of carbon monoxide of less than 2.3 gramperkilometre.


19.9.10 Sales Tax Exemption

Manufacturers licensed under the Sales Tax Act 1972 qualify for sales tax exemption on the inputs for their manufacturing operations. Manufacturers with an annual sales turnover of less than RM100,000 are exempted from licensing and are thus exempted from paying sales tax on their output. However, these manufacturers can opt to be licensed and obtain sales tax exemption on their inputs instead.

Certain categories of goods are exempted from sales tax at both the input and output stages. These include all goods (inclusive of packaging materials) used inthe manufacture of controlled articles, pharmaceutical products,milkproducts,batikfabrics,perfumes,beautyormake-uppreparations,photographiccameras,wrist-watches, pens, computers and computer peripherals, parts and accessories, carton boxes/cases, products in the printing industry, agricultural or horticultural sprayers, plywood, re-treaded tyres, uninterruptible power systems, machinery, and manufactured goods for export.

Applications can be made to the Royal Customs Department.

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19.9.11 DrawbackonImportDuty,SalesTaxandExciseDuty

Under Section 99 of the Customs Act 1967, Section 29 of the Sales Tax Act 1972 and Section 19 of the Excise Act 1976, a drawback on import duty, sales tax andexcise duty that have been paid may be claimed by a manufacturer if the parts, raw materials or packagingmaterials are used in the manufacture of goods for export within a year based on conditions stipulated in the Acts.

Excise duties are imposed on a selected range of goods manufactured in Malaysia . Goods which are subject to excise duties include intoxicating liquor, cigarettes containing tobacco, motor vehicles, playing cards and mahjong tiles.

The movement of goods from the principal customs area or licensed premises (for goods subject to excise duty) for use in the manufacture of other products by a factory in a Free Zone (FZ) or Licensed Manufacturing Warehouse (LMW) or the islands of Langkawi, Labuanand Tioman is considered as exports from Malaysia.

Applications should be made to the nearest Royal Customs Department office where its factory is located.

19.10 Incentives for Export

19.10.1 Single Deduction for the Promotion of Exports

Certain expenses incurred by resident companies in looking for opportunities to export Malaysianmanufactured and agricultural products and services qualify for single deduction. The eligible expenses are those incurred in:

- registrationofpatents,trademarksandproductlicensing overseas

- hotel accommodation for a maximum of three nights in providing hospitality to potential importers invited to Malaysia.

19.10.2 Double Deduction for the Promotion of Exports

Certain expenses incurred by resident companies in seekingopportunitiestoexportMalaysianmanufacturedand agricultural products and services, qualify for double deduction.

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The eligible expenses are those incurred in:

- overseas advertising, publicity and public relations work

- supplying samples abroad, including delivery costs

- undertakingexportmarketresearch

- preparing tenders for supply of goods overseas

- supplying of technical information abroad

- preparing exhibits and participation costs in trade/industrial exhibitions, virtual trade shows and trade portals and fares for overseas travel by company employees for business

- accommodation expenses up to RM300 per day and sustenance expenses up to RM150 per day for company representatives who travel overseas for business

- maintaining sales offices and warehouses overseas to promote exports

- hiring professional to design packaging forexports, subject to the company using local professional services

- undertaking feasibility studies for overseasprojects identified for the purpose of tenders

- preparing architectural and engineering models, perspective drawings and 3-D animations for participating in competitions at international level.

- participating in trade or industrial exhibitions in the country or overseas

- participating in exhibitions held in Malaysian Permanent Trade and Exhibition Centres overseas

Partnerships and sole proprietorships registered with the Companies Commission of Malaysia are also eligible for the above incentive. To qualify, they must provide the following professional services:

- legal

- accounting (including taxation and management consultancy)

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- architectural (including town planning and lanscaping)

- engineering and integrated engineering (including valuation and quantity surveying)

- medical and dental

For pioneer companies, the deduction is accumulated and allowed against the post pioneer income.

19.10.3 Double Deduction on Export Credit Insurance Premiums

Premium payments on export credit insurance qualify for double deduction.

19.10.4 Double Deduction on Freight Charges

Manufacturers who ship their goods from Sabah or Sarawak to any port in PeninsularMalaysia qualify fordouble deduction on freight charges.

19.10.5 Double Deduction for the Promotion of Malaysian Brand Names

To promote Malaysian brand names, a company who is a registered proprietor of a Malaysian brand, or a company within the same group is eligible for double deduction on expenditure incurred in advertising the brand, subject to the following conditions:

i. thecompanymustbeownedmorethan50%bythe registered proprietor of the Malaysian brand name

ii. the deduction can only be claimed by one company in a year of assessment.

iii. the product meets export quality standards.


19.10.6 Special Industrial Building Allowance for Warehouses

An annual allowance of 10% of qualifying capitalexpenditure is given for buildings used as warehouses for storing goods for export and re-export.

19.10.7 Incentive for the Implementation of RosettaNet

RosettaNet is an open Internet-based common business messagingstandardforsupplychainmanagementlink-ups with global suppliers.

To encourage local small and medium-scale companies to adopt RosettaNet in order to become more competitive

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intheglobalmarket,theexpenditureandcontributionsincurred by companies in the management and operation of RosettaNet Malaysia and in assisting local small and medium-scale companies to adopt RosettaNet are eligible for income tax deduction.

The eligible expenditure and contributions are those on equipment (computers and servers) and salaries for full-time employees seconded to RosettaNet Malaysia; contribution of software, sharing of software and programming, as well as the training of the staff of local small and medium-scale companies to use RosettaNet.


19.11 Incentive for the Use of Environmental Protection Equipment

Companies using environmental protection equipment receive an initialallowanceof40%andanannualallowanceof20%on thecapital expenditure incurred on such equipment. Thus, the full amount can be written off in three years.


19.12 Donations for Environmental Protection

Donations to an approved organisation exclusively for the protection and conservation of the environment qualify for single deduction.


19.13 Incentive for Employees' Accommodation

Buildings used for employees for the purpose of living accommodation in a manufacturing operation, an Approved Service Project, hotel or tourism business, a special Industrial Building Allowance of 10% of the expenditure incurred on theconstruction/purchase of the building is given for 10 years.


19.14 Incentive for Employees' Child Care Facilities

Expenditure incurred for the construction/purchase of buildings for the purpose of providing child care facilities for employees are eligible for a special Industrial BuildingAllowanceof 10% for 10years.

Asingledeductionalsoappliestogiftsinkindandcashtoprovideand maintain a child care centre for the benefit of employees.


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1.0 TAxATIoN IN MAlAYsIA

Income of any person including a company, accruing in or derived from Malaysia or received in Malaysia from outside Malaysia is subject to income tax.

However, with effect from the year of assessment 2004, income received in Malaysia by any person other than a resident company carryingonbusinessofbanking,insuranceorseaorairtransportfor a year of assessment derived from sources outside Malaysia is exempted from tax.

To modernise and streamline the tax administration system, the assessment of income tax was implemented for companies, sole proprietors, partnerships, cooperatives and salaried groups and the assessment of income tax is based on a current year basic.

2.0 soUrCes of INCoMe lIABle To TAx

The following sources of income are liable to tax:

• Gainsandprofitsfromtrade,professionandbusiness

• Gainsorprofitsfromanemployment(salaries,remunerationsetc.)

• Dividends,interestsordiscounts

• Rents,royaltiesorpremiums

• Pensions,annuitiesorotherperiodicpayments

• Othergainsorprofitsofanincomenature

Chargeable income is arrived at after adjusting for allowable expenses incurred in the production of the income, capital allowances and incentives where applicable. Section 34 of the Income Tax Act 1967 allows specific provisions for bad or doubtful debts. However, no deduction for book depreciation is allowed although capitalallowances are granted. Unabsorbed business losses may be carried forward indefinitely to offset against business income including companies with pioneer status, provided that the cessation of the period falls on or after 30 September 2005.

3.0 CoMpANY TAx

A company, whether resident or not, is assessable on income

D Taxation

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accrued in or derived from Malaysia. Income derived from sources outside Malaysia and remitted by a resident company is exempted fromtax,exceptinthecaseofthebankingandinsurancebusiness,andseaandairtransportundertakings.Acompanyisconsidereda resident in Malaysia if the control and management of its affairs are exercised in Malaysia.

Effective from the year assessment of 2009, the corporate tax rate isat25%.Thisrateisalsoapplicabletothefollowingentities:i. a trust bodyii. an executor of an estate of an individual who was domiciled

outside Malaysia at the time of his death; andiii. a receiver appointed by the court

A person carrying on petroleum upstream operations is subject to a Petroleum IncomeTaxof 38%.With effect from the yearofassessment 2010, the assessment system on income derived from upstream petroleum companies under the Petroleum (Income Tax) Act 1967 be changed to the current year assessment system; and self assessment system. Income tax for the year of assessment 2010 based on income received in 2009 shall be allowed to be paid by installments for five years.

The deduction for payment of zakat made by a company,cooperative society or trust body shall not exceed 2.5% of itsaggregate income in the relevant year of assessment.

Deductions are allowed for contributions made to:i. the Government, State Government, and local authorities;ii. institutions or organisations approved by the Director

General of Inland Revenue Board of Malaysia;iii. sports activities approved by the Minister of Finance or

Commissioner of Sports; andiv. project of national interest approved by the Minister of

Finance;

Thecontributionsinrespectofii,iii,andivshallnotexceed10%of the aggregate income of the company in the relevant year of assessment with effect from the year of assessment 2009.

4.0 persoNAl INCoMe TAx

All individuals are liable to tax on income accrued in and derived from Malaysia or received in Malaysia from outside Malaysia. Income remitted to Malaysia by a resident individual is exempted from tax. A non-resident individual will be taxed only on income earned in Malaysia. The rate of tax depends on the individual’s

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resident status, which is determined by the duration of his stay in the country as stipulated under Section 7 of the Income Tax Act 1967. Generally, an individual residing in Malaysia for more than 182 days in a calendar year is regarded as a tax resident.

4.1 Resident Individual

A resident individual is taxed on his chargeable income after deductingpersonalreliefsatagraduatedratefrom0%to26%witheffect from the year of assessment 2010.

4.1.1 Personal Relief

The chargeable income of a resident individuals is computed by deducting the personal reliefs from the total income. The types of reliefs available are:

relief rM

Self (with effect from year of assessment 2010)

RM9,000

Further self relief – disabled RM6,000

Wife/husband RM3,000

Further wife/husband relief – disabled RM3,500

Medical expenses for parents RM5,000

Medical expenses for taxpayer, spouse or children on serious diseases (include RM500 for medical examination)

RM5,000

Expenses on supporting equipment for disabled taxpayer, spouse, children or parent

RM5,000

Expenses on supporting unmarried children•Below18yearsofage;•Disabledchild•Over18yearsold(pursuingtertiary

education at university or college)

RM1,000RM5,000RM4,000

Life insurance premiums or approved fund contributions (with effect from year of assessment 2010)

RM7,000

Insurance premiums for education or medical benefit

RM3,000

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relief rM

Annuity premium on annuity purchased through EPF Annuity Scheme

RM1,000

Fee of acquiring law, accounting, Islamic finance, technical, vocational, industrial, scientificortechnologicalskillsorqualification.

RM5,000

Purchaseofbooks,journalsandmagazinesand other similar publication (excluding newspapers)

RM1,000

Purchase of computer once for every three years with effect from the year of assessment 2007

RM3,000

Broadband subscription fees applicable from the year of assessment 2010 until 2012

RM500

4.1.2 Tax rebate

The tax charged on a resident individual is reduced by way of the following rebates:

a. An individual with a chargeable income not exceeding RM35,000 enjoys a rebate of RM400 effective from year of assessment 2009. Where the wife is not working or the wife’s income isjointly assessed, she also enjoys a further rebate of RM400. Similarly, a wife who is assessed se pa rately will also enjoy a RM400 rebate, provided her chargeable income does not exceed RM35,000.

b. Any fee paid to the government for the issue of an employmentpass,visitpassorworkpermit.

4.2 Non-resident Individual

Effective year of assessment 2010, a non-resident individual is liabletotaxattherate26%withoutanypersonalrelief.However,he can claim rebates in respect of levy paid to the government for theissuanceofanemploymentworkpermit.

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5.0 wIThholDING TAx

Non-resident individuals are subject to a final withholding tax of 10%onspecialclassesofincomesuchas:

a. in consideration of services rendered by the person or his employee in connection with the use of property or rights, installation of or operation of any plant, machinery or other apparatus;

b. in consideration of technical advice, assistance or services rendered in connection with technical management or administration; or

c. rent or other payments made under any agreement or arrangement for the use of any moveable property

Withholding tax will not be applicable for income received in respect of the services (a) and (b) rendered or performed outside Malaysia.

Effective from 30 August 2008 until 31 December 2012, withholding tax exemption is given to non-residents experts on income received by providing technical training services in the following fields:

• Post graduate courses in information and communicationtechnology (ICT), electronics and life sciences;

• Postbasiccoursesinnursingandalliedheathcare;and

• Aircraftmaintenanceengineeringcourses.

Effective from 1 January 2009, to reduce the cost of technical services provided by non-residents, reimbursements relating to hotel accommodation in Malaysia will not be included in the computation of gross technical fees for the purpose of withholding tax.

Inrespectofwithholdingtaxnotpaid,apenaltyof10%isimposedonly on the amout of unpaid tax and not on the total payment made to a non-resident.

6.0 reAl properTY GAINs TAx

Capital gains are generally not subject to tax in Malaysia. Real property gains tax is charged on gains arising from the disposal of real property situated in Malaysia or of interest, options or other rights in or over such land as well as the disposal of shares in real property companies.

Effective from 1 January 2010, gains from the disposal of real propertyshallbetaxedatafixedrateof5%andbecollectedthroughawithholdingmechanism,wherebythepurchaserwithholds2%ofthe purchase value and pays to the Inland Revenue Board.

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The following exemptions are still applicable:

i. exemptionuptoRM10,000or10%ofthegainsorwhicheveris higher be given to individuals; and

ii. existing exemptions under the Real Property Gains Tax Act 1976 are retained:

a. gifts between parent and child, husband and wife, grandparent and grandchild; and

b. disposal of a residential property once in a lifetime for an individual who is a citizen or permanent resident of Malaysia.

For further information on company and individual tax, visit www.hasil.gov.my.

7.0 sAles TAx

Sales tax is a single stage tax imposed at the import or manufacturing levels. In Malaysia, manufacturers of taxable goods are required to be licensed under the Sales Tax Act 1972. Companies with a sales turnover of less than RM100,000 and companies with Licensed Manufacturing Warehouse (LMW) status are exempted from this licensing requirement. However, companies with a sales turnover of less than RM100,000 have to apply for a certificate of exemption from licensing.

Licensed manufacturers are taxed on their output while manufacturers that are not licensed or exempted from licensing need to pay tax on their inputs. To relieve small-scale manufacturers from paying sales tax upfront on their inputs, they can opt to be licensed under the Sales Tax Act 1972 in order to purchase tax-free inputs. With this, small-scale manufacturers can opt to pay sales tax only on their finished products.

Salestaxisgenerallyat10%.However,rawmaterialsandmachineryfor use in the manufacture of taxable goods are eligible for exemption from the tax, while inputs for selected non-taxable products are also exempted.

Certain non-essential foodstuffs and building materials are taxed at5%,generalgoodsat10%,liquorat20%andcigarettesat25%.Certain primary commodities, basic foodstuffs, basic building materials, certain agricultural implements and heavy machinery for use in the construction industry are exempted. Certain tourism and sports goods, books, newspapers and readingmaterials arealso exempted.

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8.0 servICe TAx

A service tax applies to certain prescribed goods and services in Malaysiaincludingfood,drinksandtobacco;provisionofroomsforlodging and premises for meetings, conventions, and cultural and fashion shows; health services, and provision of accommodation and food by private hospitals.

The tax also applies to professional and consultancy services provided by accountants, advocates and solicitors, engineers, architects, surveyors (including valuers, assessors and real estate agents), advertising agencies, consultancy firms, management service provider, insurance companies, motor vehicle service and repair centres, telecommunication services companies, security and guard services agencies, recreational clubs, estate agents, parkingspaceservicesoperatorsandcourierservicefirms.

Professional services provided by a company to companies within the same group will be exempted from the current service tax of 5%. Courier services provided from a point within Malaysia toa destination outside Malaysia will also be exempted from the servicetaxof5%.

Generally, the imposition of service tax is subject to a specific threshold based on an annual turnover ranging from RM150,000 to RM500,000 such as those;

i. car rental agencies licensed under the Commercial Vehicles Licensing Board Act 1987 having an annual sales turnover of RM150,000 and above;

ii. employment agencies having an annual sales turnover of RM150,000 and above;

iii. companies providing management services, including project management and coordination services, having an annual sales turnover of RM150,000 and above;

iv. hotels having more than 25 rooms and restaurants within such hotels.

Effective from 1 January 2010, service tax shall be imposed on credit cards and charge cards including those issued free of charge as follows:

i. RM50 per year on the principal card; and

ii. RM25 per year on the supplementary card

Service tax will be collected on the date the card is issued, on the completion of year or on the date of renewal.

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9.0 IMporT DUTY

In Malaysia, import duty is mostly imposed ad valorem although some specific duties are imposed on a number of items. Nevertheless, in line with trade liberalisation import duties on a wide range of raw materials, components and machinery have been abolished, reduced or exempted.

Furthermore, Malaysia is committed to the ASEAN Common Effective Preferential Tariffs (CEPT) scheme under which import of all industrial goods traded within ASEAN countries are imposed importdutiesof0%to5%.

Malaysia continues to participate in negotiations of free trade arrangements in areas of trade in goods, rules of origin, and investments. To date, Malaysia has concluded a bilateral free trade agreement with Japan under the Japan-Malaysia Economic Partnership Agreement, and the regional agreements under ASEAN-Republic of Korea FTA, and ASEAN-China FTA. Import duties between FTA partners are subject to specific reduction and elimination schedules under these agreements.

10.0 exCIse DUTY

Excise duties are levied on selected products manufactured in Malaysia namely cigarettes, tobacco products, alcoholic beverages, playing cards, mahjong tiles and motor vehicles.

11.0 CUsToMs AppeAl TrIBUNAl AND CUsToMs rUlING

Customs Appeal Tribunal (CAT) is an independent body, establish to decide on appeals against the decision of the Director General of Customs pertaining to matters under the Custom Act 1967, Sales Tax Act 1972, Service Tax Act 1975 and Excise Act 1976.

In addition, Customs Ruling is introduced under the Custom Act 1967, Sales Tax Act 1972, Service Tax Act 1975 and Excise Act 1976 to provide business sectors with the elements of certainty and predictability in planning their business activities.

The ruling issued by the Customs and agreed by the applicant shall be legally binding both parties for a specific period time. The main features of Customs Ruling are:

i. applications for Customs Ruling can be made with respect to classification of goods, determination of taxable services and the principles of determination of value of goods and services;

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ii. application should be made in writing together with sufficient facts and prescribed fee;

iii. applications may be made before the goods are imported or the services are provided upon which Customs will issue an advance ruling.

12.0 DoUBle TAxATIoN AGreeMeNT

Double Taxation Agreement (DTA) is an agreement between two countriesseekingtoavoiddoubletaxationbydefiningthetaxingrights of each country with regard to cross border flows of income and providing for tax credits or exemptions to eliminate double taxation.

The objectives of Malaysian DTA are as follows:

i. to create a favourable climate for both inbound and outbound investments;

ii. tomakeMalaysia'sspecialtax incentivesfullyeffectivefortaxpayers of capital exporting countries;

iii. to obtain a more effective relief from double taxation compared to relief gained under unilateral measures; and

iv. to prevent evasion and avoidance of tax

Like many other countries in the developed as well as thedeveloping world, Malaysia too cannot absolve herself from the need to facilitate her trade and investments with the outside world through international tax treaty network with other countries.The increased pace of industrialisation coupled with increased foreign direct investment in the country necessitated tax treaty arrangements with other countries to provide investors with certainty and guarantees in the area of taxation. As at 30 September 2009, the status of Malaysian DTAs are as follows:

AlbaniaArgentina*AustraliaAustriaBahrainBangladeshBelgiumCanadaChinaChileCroatia

Czech RepublicDenmarkEgyptFijiFinlandFranceGermanyHungaryIndiaIndonesiaIran

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IrelandItalyJapanJordanKorea, RepublicKuwaitKyrgyz, Republic LebanonLuxembourgMaltaMauritiusMongoliaMoroccoNamibia NetherlandsNew ZealandNorwayPakistanPapua New GuineaPhilippinesPoland

Qqtar RomaniaRussiaSaudi ArabiaSeychellesSingaporeSouth Africa Spain SriLankaSudan SwedenSwitzerlandSyria ThailandTurkeyUnited Arab EmiratesUnited KingdomUnited States of America*UzbekistanVietnam

In the case of Taiwan (represented by Taipei Economic and Cultural Office in Malaysia) double taxation relief is given by way of the following Income Tax Exemption Order namely:

i. P.U.(A) 201 (1998)

ii. P.U.(A) 202 (1998)

The withholding tax for interest, royalties and fees for technical servicesarereducedto10%,10%and7.5%respectively.

For more information on DTAs, please contact:

Department of International Tax Inland Revenue Board of Malaysia 3rdFloor,Block9GovernmentOfficeComplex Jalan Duta, 50600 Kuala Lumpur Malaysia Tel: (603) 6209 1000, or (603) 6203 2330/2540 (for outside Malaysia) Fax: (603)6201 9884 Email: [email protected]

* Limited Agreement.

Qatar : Income Tax/Withholding Taxes - for year of assessment beginning on or after 1 January 2010 and Petroleum Income Tax - for year of assessment beginning on or after 1 January 2011

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1.0 The BANKING sYsTeM IN MAlAYsIA

The banking system, comprising commercial banks, merchantbanks and Islamic banks, is the primarymobiliser of funds andthe main source of financing to support economic activities in Malaysia. The non-bank financial intermediaries, comprisingdevelopment financial institutions, provident and pension funds, insurance companies, takaful operators and saving institutions,complement the banking institutions in mobilising savings andmeeting the financial needs of the economy.

1.1 TheCentralBank

BankNegaraMalaysia(theBank),theCentralBankofMalaysia,isat the apex of the monetary and financial structure of the country. The principal objective of the Bank is to promote monetarystability and financial stability conducive to the sustainable growth of the Malaysian economy. Its primary functions as set out in the newlyenactedCentralBankofMalaysiaAct2009areto:

• formulateandconductmonetarypolicyinMalaysia;

• issuecurrencyinMalaysia;

• regulateandsupervisefinancialinstitutionswhicharesubjecttothelawsenforcedbytheBank;

• provideoversightovermoneyandforeignexchangemarkets;

• exerciseoversightoverpaymentsystems;

• promoteasound,progressiveandinclusivefinancialsystem;

• holdandmanagetheforeignreservesofMalaysia;

• promote an exchange rate regime consistent with thefundamentals of the economy; and

• act as financial adviser, banker and financial agent of theGovernment.

To achieve itsmandates, the Bank is vested with powers undervariouslawstoregulateandsupervisethebankinginstitutionsandothernon-bankfinancialintermediaries.TheBankalsoadministersthe country’s foreign exchange regulations.

1.2 Financial Institutions

The following table provides an overview of the number of financial institutions as at end-November 2009:

e Banking, Finance and Foreign exchange Administration

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Banks, including Islamic banks, operate through a network ofmore than 2,651 branches across the country. Six Malaysian bankinggroupshavepresencein19countriesthroughbranches,representative offices, subsidiaries and joint ventures. There are also 22 foreign banks which maintain representative officesin Malaysia. They do not conduct normal banking businessbut provide liaison services and facilitate information exchange between business interests in Malaysia and their counterparts.

Following the announcement in April 2009 of the liberalisation measures for the financial services sector which includes the issuances of new licences and increase of foreign equity limits, there has been great interest by international financial institutions to establish presence in Malaysia. The liberalisation measures aim to strengthen Malaysia's economic interlinkages with othereconomiesandenhancetheroleof the financialsectorasakeyenabler and catalyst of economic growth.

1.2.1IslamicBankingIndustry

IslamicbankingreferstoasystemofbankingthatcomplieswithIslamiclawalsoknownasShariahlaw.TheunderlyingprinciplesthatgovernIslamicbankingaremutualriskandprofit sharing between parties, the assurance of fairness for all and that transactions are based on an underlying business activity or asset.

Theseprinciples are supportedby Islamicbanking’s corevalues whereby activities that cultivate entrepreneurship,

TotalMalaysian-ControlledInstitutions

foreign-ControlledInstitution

Commercial Banks 22 9 13

Islamic Banks 17 11 6

International Islamic Banks 2 - 2

Investment Banks 15 15 -

Insurers 40 25 15

Islamic Insurers (Takaful operators)

8 8 –

International Takaful operators

1 – 1

reinsurers 7 3 4

Islamic reinsurers (retakaful operators)

4 1 3

Development financialInstitutions

13 13 –

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trade and commerce and bring societal development or benefit is encouraged. Activities that involve interest (riba), gambling (maisir) and speculative trading (gharar) are prohibited.

Malaysia has emerged at the forefront in the development of Islamic finance and has a comprehensive and vibrant Islamic financial system which includes Islamic Banking,IslamicCapitalMarket,TakafulandRetakaful,and IslamicInterbank Money Market. Presently, Malaysia’s Islamicbanking assets reachRM281.7 billion (USD82.9 billion atexchangerateof3.4)withanaveragegrowthrate18-20%annually.

In terms of product offering, more than 60 Islamic financial products and services are available in the market. Theemergence of new innovative products and financial instruments that incorporate globally accepted Shariah principles such as musyarakah mutanaqisah homefinancing, Ijarah sukuk, commodity murabahah depositsand Islamic profit rate swap in the industry have further elevated the domestic Islamic financial sector to the next stage of advancement.

1.2.2 Development Financial Institution

Malaysia has several development financial institutions (DFIs) that were set up with specific objectives to develop and promote strategic economic sectors, including the manufacturing, agriculture, infrastructure and maritime sectors, small and medium enterprises (SMEs), as well as sectors that are export oriented.

These DFIs complement the banking institutions byproviding a range of specialised financial and non-financial products and services to suit the needs of the targeted strategic sectors. These include the provision of medium to long-term loans, equity capital, guarantees for loans and a range of supplementary financial and business advisory services. Currently, six DFIs have been placed under the purview of the Development Financial Institutions Acts 2002 and regulated by the Bank to enhance the overallperformance, efficiency and effectiveness in delivering their mandated roles.

1.3 Malaysia International Islamic Financial Centre

In August 2006, the Malaysia International Islamic Financial Centre (MIFC) initiative was launched to promote Malaysia as a major hub for international Islamic finance.

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TheMIFC initiative comprises a community network of financialandmarketregulatorybodies,Governmentministriesandagencies,financial institutions, human capital development institutions and professional services companies that are participating in the field of Islamic finance.

This market vibrancy is reflected by the continual innovationin providing a wide range of Islamic financial instruments, and growth in the number of domestic and international financial institutions. It is further supported by thought leaders and a robust legal, supervisory and regulatory framework coupledwithstrong Government support, and global Shariah best practices to conduct Islamic finance activities such as Sukuk Origination,Islamic Fund and Wealth Management, International Islamic Banking, International Takaful andHuman Capital Development,while enjoying attractive incentives.

Theestablishmentof theMIFCasoneof thekey intermediationlinkages in the global market place, has an important role inaccelerating the bridging process and strengthening the relationship between international Islamic financial markets and therebyexpand the investment and trade relations between the Middle East, West Asia and North Africa with East Asia. Situated centrally in the Asian time zone, Malaysia presents itself as a meeting place for thosewith surplus funds and thosewho seek to raise fundsfrom any part of the world.

The MIFC initiatives aims to position Malaysia as the Islamic financial hub through five focus areas:

i. SukukOrigination

A platform for government agencies, multinational corporations andmultilateral developmentbanks and financial institutionsacross the world to originate sukuk out of Malaysia. Sukuk(pluralofsakk)orIslamicbondsisthemostpopularcomponentin Islamic Finance among Muslim and non-Muslim consumers alike.

Sukukreferstotrustcertificatesorparticipationsecuritiesthatgrant investors a share of the asset including the cash flow andrisksthatcommensuratefromsuchownership.Similartofinancialbondsintheconventionalfinancialindustry,sukukareproof of ownership title and are utilised by financial institutions to raise cash.

ii. Islamic Fund and Wealth Management

A destination for fund managers to establish Islamic fund

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management operations in Malaysia with a wide range of world classcapitalmarketandtreasuryinstruments.

Islamic fund and wealth management is the professional management of Shariah-compliant securities and assets based on Islamic principles to achieve set financial goals. The scope of activity involves financial analysis, asset and securities selection, investment planning and ongoing monitoring of investment funds. Both individuals and institutions may become Islamic wealth and fund managers through the provision of related services.

iii. InternationalIslamicBanking

Acentre for financial institutionstoestablish Islamicbankingoperations in Malaysia to conduct foreign currency business.

iv. InternationalTakaful

A centre for financial institutions to establish takaful (Islamicinsurance) operations in Malaysia to conduct foreign currency business.

Takaful isaconceptwherebyagroupofparticipantsmutuallyguarantee each other against loss or damage. Each participant fulfils his or her obligation by contributing a certain amount of donation (tabarru) into a fund, which is managed by a third party–thetakafuloperator.

v. Human Capital Developement

A centre of excellence and thought leadership in education, training, consultancy and research in Islamic finance to supply talent for the Islamic finance industry globally.

Major incentives introduced under the MIFC initiative include:

i. Issuance of International Islamic Banking (IIB) licences undertheIslamicBankingAct1983toqualifiedforeignandMalaysianfinancialinstitutionstoconductthefullrangeofIslamicbankingbusiness with residents and non-residents in international currencies either as a subsidiary or a branch. The entity will enjoy full income tax exemption for ten years up to year of assessment 2016 under the Income Tax Act 1967.

ii. Issuance of International Takaful Operator (ITO) licences toqualified foreign and Malaysian financial institutions to conduct fullrangeoftakafulbusinesswithnon-residentsandresidentsin international currencies, either as a subsidiary or a branch. The entity will enjoy similar income tax exemption as the IIB entity.

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iii. Islamic fund management companies (IFMC) are allowed to invest all their Shariah funds abroad. The entity will enjoy tax exemption on all fees for managing Islamic funds for foreign and Malaysian investors up to year of assessment 2016 under the Income Tax Act 1967. Provision of start-up fund by Employees Provident Fund (EPF) for the establishment of foreign IFMC.

iv. Upto100%foreignequityownershipisallowedforIIB,ITOandIFMC.

v. Tax deduction on expenses incurred in the issuance of Islamic securities approved by the Securities Commission until year of assessment 2015.

vi.Stampdutyexemptiononinstrumentsusedto issuesukuk inany currency until year of assessment 2015.

vii. Tax exemption and withholding tax exemption on interest or profits received by non-resident investors from investment in Islamic securities issued in any currency, other than convertible loanstock,approvedbytheSecuritiesCommission.

Islamic financial services are also available in the Labuan International Business and Financial Centre (Labuan IBFC).

For more information on the MIFC's initiative, please visit http://www.mifc.com

2.0 exporT CreDIT refINANCING

Export Credit Refinancing (ECR)scheme provides short-term pre- and post-shipment financing to direct or indirect exporters. It is available to manufacturer or trading company with ECR credit line dulyestablishedwithanyparticipatingcommercialbank.

A pre-shipment ECR facility facilitates purchases of materials and overhead expenses while post-shipment ECR provides financing to direct exporter upon shipment.

2.1 Method of Financing

Two methods of financing are available for exporters under the pre-shipment ECR i.e. the order-based method and certificate of performance method (CP).

Under the order-based method, the pre-shipment ECR financing is against the export or purchase orders received from overseas buyers or direct exporters. Whilst under CP method, the pre-shipmentfinancingisagainsttheCPissuedbyEXIMBank.

The post-shipment ECR facility uses the bills discounting method whereby the financing is against the export documents presented tothecommercialbanks.

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2.2 Period and Amount of Financing

The maximum period of financing under the pre-shipment ECR and post-Shipment ECR is four months and six months respectively.

Under the order-based method, exporters can obtain financing up to95%ofthevalueoftheirexportorderorECRDomesticLetterofCredit/ECR Domestic Purchase Order/Local Purchase Order. Whilst under the CP method, the amount of financing is subject to the CP issuedbyEXIMBank.

In post-shipment ECR, exporters can obtain financing up to a maximum100%of theexportbill value subject to availabilityofECRcreditlimitwiththecommercialbanksaswellasEXIMBank’sadministrative limit.

2.3 Repayment

Payment should be made upon receipt of export proceeds or in the case of post-shipment ECR, upon maturity of the post-shipment bill, whichever is earlier.

For more information on export credit financing, please visit http://www.exim.com.my

3.0 The seCUrITIes MArKeT IN MAlAYsIA

3.1 Securities Commission

The Securities Commission Malaysia (SC), is responsible for the regulation and development of capital markets in Malaysia.Established on 1 March 1993 under the Securities Commission Act 1993, it is a self-funding statutory body with investigative and enforcement powers. It reports to the Minister of Finance and its accounts are tabled in Parliament annually. The SC's many regulatory functions include:

a. Supervising exchanges, clearing houses and central depositories;

b. Registering authority for prospectuses of corporation other than unlisted recreational clubs;

c. Approving authority for corporate bond issues;d. Regulating all matters relating to securities and futures

contracts;e. Regulatingthetake-oversandmergersofcompanies;f. Regulating all matters relating to unit trust schemes;g. Licensing and supervising all licensed persons;h. Encouraging self-regulation; and

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i. Ensuringproperconductofmarketinstitutionsandlicensedpersons.

Underpinning all these functions is the SC's ultimate responsibility of protecting the investor. Apart from discharging its regulatory functions, the SC is also obliged by statute to encourage and promotethedevelopmentofthesecuritiesandfuturesmarketsinMalaysia.

Visit the SC website (www.sc.com.my) for more information.

3.2 Bursa Malaysia Berhad

Bursa Malaysia Berhad (Bursa Malaysia) is an exchange holding company, listed on the Main Board of Bursa Malaysia Securities on 18 March 2005. Bursa Malaysia operates a securities, derivatives and offshore exchanges, clearing houses for securities and derivatives and a central depository. The company also disseminates stock quotes and information related to securitieslisted on the exchange.

The securities exchange, established in 1973, provides a central market place for buyers and sellers to transact business inthe shares, warrants, fixed income securities and various other securities of listed companies. Diversity of products also includes options and futures derivatives contracts and multi-currency off-shore instruments, traded on the derivatives exchange and offshore exchange, respectively.

Bursa Malaysia today is one of the largest bourses in Asia with almost 1,000 listed companies offering a wide range of investment choices to the world. Companies are either listed on Bursa Malaysia MainMarket for larger capitalised companies andmedium sizedcompanies or the ACE Market for high growth and technologycompanies.

InassistingthedevelopmentoftheMalaysiancapitalmarketandenhancing global competitiveness, Bursa Malaysia is committed to maintaininganefficient,secureandactivetradingmarketforlocaland global investors.

3.2.1 MarketParticipants

a. StockbrokingCompanies

Currently, there are more than 30 stock brokingcompanies, of which 15 are categorised as Investment Banks. Investment banks hold merchant bankinglicence issued by Bank Negara Malaysia under theBankingandFinancial InstitutionsAct1989 (BAFIA)as well as Capital Markets Services licence issued

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by the Securities Commission under the Capital Markets & Services Act 2007. As such, investmentbanks are able to offer a full scope of integratedcapitalmarket and financial services which includecorporate finance, debt securities trading and dealing insecurities.Onestockbrokingcompanystillholdstheuniversalbrokerstatus.Auniversalbrokerisabletoofferintegratedcapitalmarketservices.

b. Trading Participants

A Trading Participant is a company which owns at least one Preference Share of Bursa Malaysia Derivativestoconductbusinessasa futuresbrokerlicensed by the Securities Commission under the Capital Markets and Services Act 2007 and carrieson trading in Contracts traded on the Bursa Malaysia Derivatives.

3.2.2 Investor Protection

In the interest of protecting investors, Bursa Malaysia currently maintains three compensation funds, namely Compensation Fund of Bursa Malaysia Securities, the Fidelity Fund of Bursa Malaysia Derivatives and the Compensation Fund of Bursa Malaysia Depository to compensate investors who have suffered losses falling within the circumstances specified under the relevant securities laws and rules. The funds are administered by the Compensation Committee.

3.2.3 RiskManagement

Bursa Malaysia's enterprise risk management framework,through the supervision of the Risk ManagementCommittee (RMC) is aimed at managing and controlling risks appropriately for the Group. Key risks are identifiedand ranked for likelihoodofoccurrenceandmagnitudeofimpact while the appropriate action plans are developed to managesignificantresidualrisks.

4.0 offshore fINANCIAl servICes

4.1 Labuan Offshore Financial Services Authority (LOFSA)

The Labuan Offshore Financial Services Authority (LOFSA) is a one-stop regulatory body that spearheads and coordinates the development and promotion of Labuan as an International Business and Financial Centre (IBFC).

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It streamlines government machinery for supervising the offshore financialservices industry,undertakes researchanddevelopmentwork, and improves operational efficiency, thus creating aconducive business environment for the IBFC. In addition, LOFSA has also developed Islamic finance as one of the core areas and Labuan IBFC is now recognised as a leading offshore centre for conventional and Islamic financial activities.

The incorporation and registration of companies to conduct business in Labuan can be done in LOFSA. LOFSA oversees and supervises offshore industries such as banking, insurance,securities, and trust and fund management.

The Labuan International Financial Exchange (LFX) is a web-based exchange and is an offshore financial exchange established to complement the offshore financial services available in Labuan. It is a one-stop financial exchange that offers full services from the submission of application to approval, listing, trading and settlement of the instrument listed.

Business activities undertaken by Labuan offshore companies aresegregated into trading and non-trading activities, both under conventional and Shariah principles. Labuan IBFC's trading activities include banking, insurance, fund management, leasing, moneybrokingandothertraderelatedactivities.LabuanIBFC'snon-tradingactivities refer to activities relating to holding of investments in securities,stocks,shares,loans,depositsandimmovablepropertiesby an offshore company on its own behalf.

The Labuan IBFC is not subject to the exchange control rules and regulations of Malaysia as the Labuan offshore company is declared as a non-resident for exchange control purposed under the Exchange Control Act of Malaysia. The nature of Labuan IBFC's business in Labuan is predominantly foreign currency-based and conducted with non-residents. However, certain business activities areallowedwithresidentssuchasbanking,insurance,leasingandinRinggitMalaysiasuchasinthereinsurancemarket.

4.2 Incentives for Offshore Financial Services

4.2.1 Competitive Tax

- An offshore company carrying on an offshore trading activity can elect to pay tax each year at the rate of 3% of its net audited profits or a fixed tax ofRM20,000 under the Labuan Offshore Business Activity Tax Act 1990 (LOBATA); and

- Alternatively, an offshore company can also opt to

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pay tax under the Income Tax Act 1967, in the event that they do not elect to be taxed under the LOBATA. This would not only give LOCs more flexibility to structure their business transactions efficiently, but also create a more favourable tax environment in Labuan IBFC for investors.

- AnoffshorecompanycanpayalsoBusinessZakatinlieu of tax.

- Offshore company conducting non-trading activities are not subject to tax.

4.2.2 Abatement of Tax for Professional Services

- Any person or his employee or a company rendering qualifying professional services to an offshore company in Labuan is exempted from income tax up to65%ofthestatutoryincome.Thisincludeslegal,accounting, financial and secretarial services.

4.2.3 Abatement of Tax For Employment

- Non-citizens employed in a managerial capacity in an offshore company in Labuan enjoy income tax exemption up to 50% of the gross employmentincome.

- Non-citizen trustofficersworking inaLabuan trustcompanyenjoyincometaxexemptionofupto50%of gross employment.

4.2.4 Exemption from Income Tax

The following exemptions are available for offshore companies under the Income Tax Act 1967:

- Dividends paid to a resident or a non-resident person by a Labuan offshore company

- Dividends received from a Malaysian Domestic Company which are paid out of dividends received from a Labuan offshore company.

- 100% tax exemption on Director’s fees paid to anon-citizen Director

- 50%taxexemptiononLabuanandhousingallowancespaid to Malaysian citizens working in an offshorecompany

Offshore Companies are exempted from withholding tax for the following :

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- Interest paid to a resident person or a non-resident who is not engaged in the business of banking,finance or insurance

- Interest paid to a non-resident person or another offshore company

- Lease rental paid to non-resident

- Technical or management fee paid to a non-resident or another offshore company

- Royalty to a non-resident person or another offshore company

- Distributions made by an offshore trust to non-resident beneficiaries

4.2.5 Stamp Duty Exemption

Offshore business transactions by an offshore company (including M&A of an offshore company and transfer of shares in an offshore company) are exempted from payment of stamp duty.

For more information on Labuan FSA, please visit www.lofsa.gov.my.

5.0 exChANGe CoNTrol prACTICe

Malaysia continues to maintain a liberal foreign exchange administration policy. The current foreign exchange administration rules are mainly prudential measures to support the overall macroeconomic objective of financial and economic stability.

For foreign exchange administration purposes, the definitions of the following terms are provided to facilitate investors:

Non-residents comprise:

i. Overseas branches, overseas subsidiaries, overseas regional offices, sales offices, representative offices of resident companies;

ii. Embassies, Consulates, High Commissions, supranational or international organisations recognised by the Government of Malaysia; or

iii. Malaysian citizens who have obtained permanent resident status of a territory outside Malaysia and are residing outside Malaysia.

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Residents comprise:

i. Citizens of Malaysia (excluding persons who have obtained permanent resident status of a territory outside Malaysia and are residing abroad);

ii. Non-citizens who have obtained permanent resident status in Malaysia and are residing permanently in Malaysia; or

iii. Persons, whether body corporate or unincorporated, registered or approved by any authority in Malaysia.

Ringgit assets include:

i. Ringgit-denominated securities including bills of exchange, private debt securities, Cagamas bonds or notes, Malaysian Government Securities, Treasury Bills, shares and warrants;

ii. Derivatives traded on Bursa Malaysia and OTC derivatives (excluding OTC derivatives and structured products which tantamount to lending or borrowing of ringgit between residents and non-residents);

iii. Fixed deposits and negotiable instruments of deposits denominated in ringgit;

iv. Immovable properties in Malaysia; and

v. Other fixed assets in Malaysia

Foreign currency assets include:

i. Equity/portfolio investment abroad;

ii. Loans to non-residents;

iii. Foreign currency deposits onshore and offshore; and

iv. Investmentinapprovedforeigncurrencyproductsmarketedby licensed onshore banks, licensed International IslamicBanks (licensed IIBs) and any residents permitted by theController of Foreign Exchange (the Controller).

Domestic ringgit borrowings refer to any ringgit advances, loans, trade financing facilities, hire purchase, factoring facilities with recourse, financial leasing facilities, guarantee for payment of goods, redeemable preference shares or similar facilities in whatever name or form, except:

i. Trade credit terms extended by a supplier for all types of goods and services;

ii. Forward foreign exchange contracts entered into with licensedonshorebanks;

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iii. Performance guarantees and financial guarantees;

iv. One personal housing loan and one vehicle loan obtained from residents;

v. Credit card and charge card facilities;

vi. Operational leasing facilities;

vii. Factoring facilities without recourse; and

viii. Inter company borrowing within a corporate group in Malaysia.

5.1 Investments and Financial Activities by Non-Residents

Non-residents are free to invest in Malaysia in any form. There are no restrictions on the repatriation of capital, profits and income earned from Malaysia, including salaries, wages, royalties, commissions, fees, rental, interest, profits or dividends.

To complement the non-residents' investment strategy, non-residentsmayobtainfinancingfromlicensedonshorebanksbothin ringgit and foreign currency and enter into foreign exchange contractswithlicensedonshorebankstoactivelymanagecurrencyrisksarisingfrominvestmentsinringgitassets.Non-residentsarealso free to convert foreign currency into ringgit and vice versa.

5.1.1 Foreign Direct and Portfolio Investments in Malaysia

The foreign exchange administration rules support and facilitate non-residents' investments into Malaysia.

a. Purchase of Ringgit Assets

A non-resident is free to purchase any ringgit assets includingringgitdenominatedbonds/sukukissuedbynon-residents in Malaysia.

b. Sourcing Ringgit for Settlement of Ringgit Assets

A non-resident can source ringgit for settlement of the investment from:

- non-residents' own External Accounts1;

- sale of foreign currency on spot or forward basis, withlicensedonshorebanks2 or overseas branches appointedbylicensedonshorebanks;or

- onshore borrowings

1 External Accounts are ringgit accounts maintained with licensed onshore banks by or for non-residents.

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c. Onshore Borrowings

A non resident is free to borrow any amount in foreign currencyfromlicensedonshorebanksandlicensedIIBs.

A non resident is free to borrow in ringgit of any amount fromlicensedonshorebanks,residentcompanies3 and individuals4 to finance activities in the real sector in Malaysia, including financing the purchase of ringgit assets.

A non-resident is free to borrow any amount for margin financingfromresidentstockbrokingcompanies.

d. Divestment/ Income from Investment

A non-resident is free to repatriate funds from divestment of ringgit assets or profits/dividends arising from the investments. Repatriation, however, must be made in foreign currency other than the currency of Israel.

e. Hedging

A non-resident is free to hedge the exposure arising from investment in ringgit assets made on or after 1 April2005withthelicensedonshorebanksoroverseasbranchesappointedbylicensedonshorebanks.

5.1.2 Investment in Immovable Properties by Non-Residents

a. Purchase of Immovable Property

A non-resident is free to purchase residential and commercial properties in Malaysia. Such purchases should comply with guidelines5 issued by the Foreign Investment Committee (FIC). The details can be obtained at www.epu.jpm.my

b. Onshore Borrowings

A non-resident is free to borrow any amount to finance or refinance the purchase of the residential and commercial properties in Malaysia, except for the purchase of land only.

2 Licensed onshore banks refer to licensed commercial banks, licensed Islamic banks and licensed investment banks.

3 Resident companies include limited partnerships and entities other than companies such as cooperatives and charitable organisations.

4 Resident individuals include sole proprietorships, general partnerships and partnerships with general and limited partners.

5 a) FIC's approval is not required for non-residents purchasing residential property exceeding RM250,000; and b) Non-residents under the 'Malaysia My Second Home' Programme are exempted from any approval requirement.

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5.1.3 Lending in Ringgit and Foreign Currency by Non-Residents to Residents

a. Ringgit lending by:

i. Non-residentnon-bankparentcompanies6

A non resident is free to lend any amount of ringgit to resident subsidiaries to finance activities in the real sector in Malaysia.

ii. Other non-resident non-bank companies orindividuals

A non resident is free to lend up to RM1 million in aggregate to resident companies and individuals for use in Malaysia.

b. Foreign currency lending by:

i. Non-residentnon-bankparentcompanies

A non resident is free to lend any amount in foreign currency to resident subsidiaries in Malaysia

ii. Other non-resident non-bank companies orindividuals

A non resident free to lend in foreign currency to a resident provided the resident borrower's total foreign currency borrowing does not exceed the following limits:

The onus is on the resident borrower to obtain the prior permission of the Controller of Foreign Exchange for borrowing exceeding the limits.

6 A non-resident non-bank parent company refers to:- a non-resident company with more than 50% shareholding in a resident company; or- the ultimate non-resident parent company of the resident company which is not a bank, an investment

holding company owned by a bank or a stockbroking company.

Resident Individual RM10 million equivalent in aggregate

Resident Company RM100 million equivalent in aggregate on a corporate group basis

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5.1.4 Borrowing by Non-residents from Residents

a. Foreign currency borrowing from:

i. LicensedonshorebanksandlicensedIIBs

A non-resident is free to borrow any amount of foreigncurrency from licensedonshorebanksandlicensed IIBs

ii. Residentnon-bankcompaniesorindividuals

A non-resident is free to obtain foreign currency borrowing fromresidentnon-bankcompaniesandindividuals as follows:

resident lender Amount

A resident with no domestic ringgit borrowing

No limit

A resident, with or without domestic ringgit borrowing, using own foreign currency funds maintained onshore or offshore

No limit

A resident with domestic ringgit borrowing provided the resident lender's total investment in foreign currency assets, including lending in foreign currency, does not exceed the limit:

Through conversion of ringgit up to:

- Resident Individual RM1 million in aggregate per calendar year

- Resident Company RM50 million in aggregate per calendar year on a corporate group basis

iii. Licensed onshore banks, resident non-bankcompanies and individuals

A non-resident is free to obtain ringgit borrowing from licensed onshore banks, resident non-bankcompanies and individuals as follows:

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Bynon-residents(otherthanstockbrokingcompaniesandbanks) from licensed onshore banks, resident non-bankcompanies and individuals to: - finance activities in the real sector in Malaysia; and - finance or refinance the purchase of residential and

commercial properties in Malaysia

Bynon-residentstockbrokingcompaniesandbanksfromlicensedonshorebanksforsettlementofringgitsecuritieson Bursa Malaysia and RENTAS* due to inadvertent delays on the receipt of funds.

* RENTAS or Real Time Electronic Transfer of Funds and Securities is an interbank payment system.

By non-residents (other than stockbroking companiesand banks) from licensed onshore banks and residentstockbrokingcompaniesformarginfinancing

By non-resident individuals from resident insurance companies up to the cash surrender value of the insurance policies purchased by the non-residents.

5.1.5 Issuance of Ringgit and Foreign Currency Denominated Bonds/SukukinMalaysiabyNon-Residents

a. Issuance of Ringgit or Foreign Currency Denominated Bonds/Sukuk

Multilateral Development Banks,Multilateral FinancialInstitutions, foreign sovereign, foreign quasi-sovereign agencies and foreign multinational companies may issue ringgit or foreign currency denominated bonds/sukukinMalaysia.

b. UtilisationofBond/SukukProceeds

Proceedsfromtheissuanceofbonds/sukukareallowedto be used onshore or offshore. Ringgit-denominated bond/sukuk proceeds to be used offshore have tobe converted into foreign currency with the licensed onshorebanks.

c. Hedging

Issuers are free to hedge exchange rate and interest/profit rate exposure arising from the issuance of ringgit-denominatedbonds/sukukandanysubsequentinterest/profit and coupon payments with the licensed onshore banks. Non-resident investors of the bonds/sukukarealsofreetohedgeexchangerateandinterest/profitrateexposurewithlicensedonshorebanks.

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d. Guidelines for Issuance

Specific details on guidelines as well as incentives for issuance of ringgit and foreign currency denominated bonds/sukukinMalaysiacanbeobtainedatanyofthefollowing websites addresses:

http://www.mifc.com

http://www.bnm.gov.my/fxadmin

http://www.sc.com.my

5.1.6 Hedging by Non-Residents

a. Hedging with ringgit assets

A non-resident is free to hedge with licensed onshore banks, exchange rate and interest rate exposuresarising from investments in ringgit assets purchased on or after 1 April 2005 as well as ringgit-denominated bonds/sukukissuedinMalaysiabynon-residents

5.1.7 Opening of Accounts in Ringgit and Foreign Currency in Malaysia by Non Residents

a. Opening of Ringgit and Foreign Currency Accounts

A non-resident is free to open Ringgit Accounts with licensedonshorebanksandforeigncurrencyaccountswithlicensedonshorebanksandlicensedIIBs.

The Ringgit accounts maintained by non-residents withlicensedonshorebanksinMalaysiaaretermedas‘External Accounts'.

b. Reptariation/Utilisation of Funds from the Ringgit or Foreign Currency Accounts

i. External Accounts

• Anon-resident is freetoconvertwith licensedonshorebanksforrepatriationabroad.

• Anon-residentisfreetopayaresidentforanypurpose, except for the following:

- Payment for the import of goods and services;

- Lending in ringgit to residents other than as permitted by the Controller; and

- Payment on behalf of a third party.

• Anon-resident is free to pay to another non-

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resident's External Account for settlement of purchase of ringgit assets.

ii. Foreign Currency Accounts

• Anon-residentisfreetorepatriate.

• Anon-residentisfreetopayaresidentforanypurpose including for settlement of goods and services.

5.1.8 Import and Export of Ringgit and Foreign Currency by Non-Resident Travellers

a) Import and export of ringgit notes

• Allowedtoimportorexportringgitnotesup to RM1,000

b) Import of foreign currency notes and traveller's cheques

•Nolimit

c) Export of foreign currency notes and traveller's cheques

• UptotheamountbroughtintoMalaysiaor USD10,000 whichever is higher

d) D e c l a r a t i o n for import and export of foreign currency

• To declare to the Immigration officer, ifthe total amount of foreign currency notes and traveller's cheques exceeds USD10,000 upon arrival at or departure from Malaysia

e) Import and export of ringgit and foreign currency e x c e e d i n g permitted limits

• Application can be made online, usingForm 13 which can be obtained at http://www.bnm.gov.my/fxadmin, or submitted via written application to the Foreign Exchange Administration Department, BankNegaraMalaysia

• Respone is given within one day fromreceipt of application with complete information

5.2 Investment and Financial Activities by Residents

To encourage better risk management activities, promote costcompetitiveness and the use of onshore service providers, residents are given the flexibility to manage their own funds onshore and offshore.ResidentsmayenterintoriskmanagementarrangementswithlicensedonshorebanksinMalaysia.

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5.2.1 Investment in Foreign Currency Assets by Residents

The current limits for investment in foreign currency assets are applicable only to residents that have domestic ringgit borrowing and are converting ringgit into foreign currency to invest in foreign currency assets.

a. Investment in Foreign Currency Assets

A resident without domestic ringgit borrowing is free to invest in any foreign currency assets.

Residents with domestic ringgit borrowing are allowed to invest as follows:

Resident individuals7

• No limit if funded by own foreign currency funds retained onshore or offshore;

• Up to full amount of foreign currency borrowing if funded by approved foreign currency borrowing; and

• Up to RM1 million in aggregate per calendar year if funded from conversion of ringgit.

Resident companies8

• No limit if funded by own foreign currency funds retained onshore or offshore;

• Any amount if funded from proceeds of listing through an initial public offering on: the Main Board of Bursa Malaysia; or foreignstockexchanges

• Up to RM 50 million equivalent in aggregate and on corporate group basis per calendar year if funded from conversion of ringgit; and

• Up to the full amount of approved foreign currency borrowing.

7 Resident individuals include sole proprietorships, general partnerships and partnerships with general and limited partners.

8 Resident companies include limited partnerships and entities other than companies such as co-operatives and charitable organisations.

b. Investment in Foreign Currency Assets by Resident Institutional Investors

Unit Trust Management Companies

i. Investment of Islamic funds

• Nolimit

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ii. Investment of conventional funds

• Foreigncurrencydenominatedfunds

- 100%ofthenetassetvalue(NAV)

• Ringgit-denominatedfunds

- 100% of NAV attributed to non-residentsand residents without domestic ringgit borrowing; and

- 50% of NAV attributed to residents withdomestic ringgit borrowing

Fund Management Companies

i. Fund mandated to be invested in Shariah-compliant assets

• Nolimit

ii. Fund mandated to be invested in non Shariah-compliant assets


- No limit

• Ringgit-denominatedfunds

- 100% of total funds managed for non-residents and residents without domestic ringgit borrowing; and

- 50% of total funds managed for residentswith domestic ringgit borrowing

InsurersandTakafulOperators

i. Insurers and takaful operators, includinginternational currency business unit of takafuloperatorsandinternationaltakafuloperators:


- 100%ofNAVofforeigncurrencyinvestment-linkedfundsmarketedtoresidentsandnon-residents

• Ringgitdenominatedfunds

- 100% of NAV of investment-linked fundsmarketed to residents and non-residentswithout domestic ringgit borrowing;

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- 50% of NAV of investment-linked fundsmarketedtoresidentswithdomesticringgitborrowing;

- 10%ofmarginofsolvencyforinsurers;and

- 5%oftotalassetsfortakafuloperators

c. Payment for Purchase of Foreign Currency Assets

i. Offshore foreign currency assets

• Paymentmustbemadeinforeigncurrencyotherthan the currency of Israel.

The foreign currency may be sourced from conversion of ringgit with licensed onshore banks9 or own foreign currency funds.

ii. Onshore foreign currency assets offered by licensed onshorebanks,licensedIIBsorentities10 approved by the Controller.

• Paymentmaybeinforeigncurrencyorringgit.

d. Divestment/Income from Investment in Foreign Currency Assets

• A resident is free to repatriate and convertdivestment proceeds or income from investment in foreign currency assets into ringgit.

• free to retain the proceeds in foreign currencyaccounts.

e. Hedging

• Free to hedge with licensed onshore banks andlicensed IIBs for investment in foreign currency assets based on firm underlying commitment.

• Hedging involving ringgit shallonlybeundertakenwithlicensedonshorebanks.

9 Licensed onshore banks refer to licensed commercial banks, licensed Islamic banks and licensed investment

banks.

10 Example: (a) Unit trust companies offering foreign currency unit trust funds; (b) Bursa Malaysia for trading of foreign currency derivative products such as CPO futures

are examples of approved entities approved by the Controller.

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5.2.2 Borrowing in Foreign Currency and Ringgit by Residents

a. Foreign currency borrowing by:

• Residentindividuals

• Free to borrow in foreign currency up to the equivalent of RM10 million in aggregate from:-Licensedonshorebanks;- Licensed IIBs; and - Non-residents

• Trade financing involving export shall only beobtainedfromlicensedonshorebanks.

• Allowed to refinance outstanding approved foreign currency borrowing (principal and accrued interest).

• Residentcompanies

• Free to borrow any amount in foreign currency from: - Non-resident non-bank parent

companies11; - Other resident companies within the

same corporate group12 in Malaysia; - Licensedonshorebanks;and- Licensed IIBs

• Free to borrow in foreign currency up to the equivalent of RM100 million in aggregate on a corporate group basis: - From other non-residents (other

than non-resident non-bank parentcompanies); and

- Through the issuance of foreign currency denominated bonds onshore and offshore

• Free to borrow any amount of foreign currency supplier's credit for capital goods from non-resident suppliers

• Allowed to refinance outstanding approved foreign currency borrowing (principal and accrued interest)

11 Non-resident non-bank parent company refers to:a) a non-resident company with more than 50% shareholding in a resident company; orb) the ultimate parent company of the resident company, which is not a bank, an investment holding

company owned by a bank or a stockbroking company.12 Corporate group refers to a group of companies with parent-subsidiary relationship in Malaysia

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b. Proceeds from offshore listing

• Free to borrow from other resident companies within the same corporate group in Malaysia, the foreign currency proceeds fromthelistingonforeignstockexchanges.

c. Foreign currency trade financing facilities

• Free to obtain foreign currency trade financing facilities from licensed onshore banksandlicensedIIBs.

• Allowed to obtain foreign currency trade financing facilities from offshore up to the equivalent of RM5 million in aggregate. The trade financing facilities are part of the RM100 million limit on foreign currency borrowing from non-residents.

• Trade financing facilities for export of goods are to be obtained from licensed onshore banksonly.

d. Repayment and prepayment

• Free to repay or prepay approved foreign currency borrowing.

e. Hedging • Free to hedge drawdown and repayment of foreign currency borrowing with licensed onshorebanksandlicensedIIBs.

• Hedging involving ringgit shall only be undertakenwithlicensedonshorebanks.

f. Foreign currency borrowing by:

• Residentindividuals

• Free to borrow up to RM1 million in aggregate from non-resident non-bank companies orindividuals for use in Malaysia.

• Residentcompanies

• Free to borrow any amount in ringgit from their non-resident non-bank parentcompanies to finance activities in the real sector in Malaysia.

• Free to borrow up to RM1 million in aggregate from other non-resident non-bank companies or individuals for use inMalaysia.

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5.2.3 Lending in Ringgit by Residents

Ringgit lending by:

a. Resident non-bankcompanies and individuals

• Free to lend any amount in ringgit to non-resident non-bank companies andindividuals to:- finance activities in the real sector in

Malaysia; and - finance or refinance the purchase of

residential and commercial properties in Malaysia

b. Licensed onshore banks

• Free to lend any amount in ringgit to: i. non-residentnon-bankcompaniesandindividuals (other than stock brokingcompaniesandbanks):

- to finance activities in the real sector in Malaysia;

- for margin financing; and - to finance or refinance the purchase

of residential and commercial properties in Malaysia

ii. non-resident stockbroking companiesand banks for settlement of ringgitsecurities on Bursa Malaysia and RENTAS due to inadvertent delays on the receipt of funds

c. Resident stockbrokingcompanies

• Free to provide margin financing of any amount in ringgit to non-resident non-bankcompaniesandindividualsfor purchase of shares listed on Bursa Malaysia

d. Resident insurance companies

• Free to lend to non-resident individuals in ringgit up to the cash surrender value of the insurance policies purchased by the non-residents

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5.2.4 Issuance of Ringgit and Foreign Currency Denominated Securities by Residents

a. Issuance of securities to non residents

• Free to issue the following ringgit securities registered in Malaysia to non-residents:- Ordinary shares, including bonus and

right issues;- Irredeemable preference shares; and- Private debt securities

• Prior permission is required for issuance of securities to non-residents other than as stated above.

b. Issuance of bonds/sukuk

•Ringgitdenominated bonds/sukuk

• Foreigncurrency denominated bonds/sukuk

• Free to issue in Malaysia.

• Allowed as long as total foreign currency borrowing, including the bond/sukuk does not exceed RM100 millionequivalent.

c. Utilisation of bonds/sukukproceeds

•Ringgitdenominated bonds/sukuk

•

•

Free to use onshore

Free to use for investment in foreign currency assets provided the issuer's total investment does not exceed RM50 million equivalent in aggregate per calendar year.

• Foreigncurrency denominated bonds/sukuk

• Free to use onshore or offshore.

d. Guidelines for Issuance

• Guidelines for issuance can be obtained at:- http://www.mifc.com- http://www.bnm.gov.my/fxadmin- http://www.sc.com.my

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5.2.5 Export and Import of Goods and Services by Residents

a. Currency for payment of import and export

• Payment must be made in foreign currency, other than the currency of the State of Israel

b. Repatriation of export proceeds

• Must be repatriated to Malaysia in full as per the sales contract and not exceeding six months from the date of export

• Prior permission is required for residents to:- Offset export proceeds against other

payables due to non-residents; or- Receive the export proceeds exceeding

six months from the date of export

c. Retention of export proceeds

• Free to retain in foreign currency accounts or ringgit accounts with licensedonshorebanks

• Prior permission is required to retain export proceeds in foreign currency accounts maintained with licensed IIBs oroffshorebanks

d. Hedging • Free to hedge with licensed onshore banks and licensed IIBs, payments orreceipts for the import and export of goods and services:- based on firm underlying commitment;

or- on anticipatory basis up to the actual

total amount paid or received in the preceding 12 months

• Hedging involving ringgit shall only be undertakenwithlicensedonshorebanks

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5.2.6 Opening of Foreign Currency Accounts (FCA) by Residentsa. Opening of FCA

• FreetoopenFCAwithlicensedonshorebanks,licensedIIBs,licensedoffshorebanksinLabuanandoverseasbanks.

b. Source of funds

• FCAcanbecreditedwithforeigncurrencyfundssourced:i. From conversion of ringgit with licensed onshorebanks:

- No limit for residents without domestic ringgit borrowing;

- For residents with domestic ringgit borrowing, up to permitted limits for investment in foreign currency assets. Additional limits for overseas education and employment purposes:

- Up to USD150,000 with licensed onshore banksandlicensedIIBs;

- Up to USD150,000 with licensed offshorebanksinLabuan;and

- UptoUSD50,000withoverseasbanks.

ii. From other residents for permitted purposes; and

iii. From non-residents; Export proceeds, however, may be retained with licensed onshorebanksonly.

c. Opening of joint FCA

• Resident individualsare free toopen jointFCAwith other resident individuals for any purpose.

• Resident companies, however, require priorpermission to open joint FCA.

5.2.7 Payment between Residents

a. Payment in Ringgit

• Norestriction

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b. Payment in Foreign Currency

• Resident companies with export earnings arefree to pay other resident companies in foreign currency for settlement of goods and services.

5.2.8 Hedging by Residents

a. Hedging of Current Account Transactions

• Free to hedge with licensed onshore banksand licensed IIBs for payments and receipts for import and export of goods and services:- Based on firm underlying commitment; or- On anticipatory basis provided the amount

hedged does not exceed the total amount paid or received in the preceeding 12 months

• Hedginginvolvingringgitshallonlybeundertakenwithlicensedonshorebanks

b. Hedging of Capital Account Transactions

• Freetohedgewithlicensedonshorebanksandlicensed IIBs based on committed capital inflows or outflows.

• Residentsarealsoallowedtohedgetheirexistingholdings of foreign currency assets.

• Hedginginvolvingringgitshallonlybeundertakenwithlicensedonshorebanks

5.2.9 Import and Export of Ringgit and Foreign Currency by Resident Travellers

a. Import and Export of Ringgit Notes

• AllowedtoimportorexportringgitnotesuptoRM1,000

b. Import of Foreign Currency Notes and Traveller's Cheques.

• Nolimit

c. Export of Foreign Currency Notes and Traveller's Cheques.

• Allowed to export foreign currency notes andtraveller's cheques up to an equivalent of USD10,000.

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d. Import and Export of Ringgit and Foreign Currency Exceeding Permitted Limits

• Applicationcanbemadeonline,usingForm13which can be obtained at http://www.bnm.gov.my/fxadmin, or submitted via written application to Foreign Exchange Administration Department, BankNegaraMalaysia.

• Responseisgivenwithinonedayfromreceiptofapplication with complete information

5.3 Dealing with Specified Persons and in Restricted Currencies

Prior permission is required for residents to deal with the following Specified Persons:

i. The State of Israel or their residents;

ii. The authorities of the State of Israel;

iii. The agencies and instrumentalities of the State of Isreal or its residents;

iv. Any entity owned by or controlled, directly or indirectly, by the State of Israel or its resident; and

v. Individual or entity as listed pursuant to the United Nations Security Council Resolution (UNSCR) relating to:

• OsamabinLadenandtheTaliban

• Liberia

• SaddamHussein

Prior permission is also required for residents to deal in the currency of the State of Israel.

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a. MSC Malaysia Status Companies

• Company with MSC Malaysia status are exempted from foreign exchange administration requirements for transactions undertaken onown account

b. Approved Operational Headquarters

• Free to invest any amount in foreign currency assets to be funded with own foreign currency funds or borrowing

• Free to obtain any amount of foreign currency credit facilities from licensed onshore banks,licensed IIBs and from any non-residents, provided the operational headquarters do not on-lend to, or raise the funds on behalf of, any resident

• Free to utilise proceeds of any amount from the issuance of ordinary shares through initial public offering on the Main Market of BursaMalaysia for investment in foreign currency assets

• Free to lend foreign currency sourced from listing of shares on foreign stock exchangesto other resident companies within the same corporate group in Malaysia

c. Regional Distribution Centres and International Procurement Centres

• Regional Distribution Centre and International Procurement Centre are subject to rules applicable to residents companies

5.4 Resident Companies Accorded Special Status

For more information on the exchange regulations, please visit www.bnm.gov.my/fxadmin

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1.0 entry requirements into Malaysia

1.1 Passport or Travel Documents

All persons entering Malaysia must possess valid national passports or other internationally recognised Travel Document valid for travelling to Malaysia. These documents must be valid for at least six months from the date of entry into Malaysia.

Those with passports not recognised by Malaysia must apply for a Document in lieu of Passport as well as visa issued by the Malaysian Representative Office abroad. Applications for visas can be made at the nearest Malaysian Representative Office in the respective countries.

In countries where Malaysian Representative Office has not been established, applications can be made to the nearest British High Commission or Embassy.

1.2 Visa Requirements

A visa is an endorsement in a passport or other recognised travel document of a foreigner indicating that the holder has applied for permission to enter Malaysia and that permission has been granted.

Foreign nationals who require a visa to enter Malaysia must apply and obtain a visa in advance at any Malaysian Representative Office abroad before entering the country.

Visa requirement by countries are as follows:

F Immigration procedures

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Countries that require visa

•Afghanistan*•Angola•Bhutan•BurkinaFaso•Burundi•CentralAfricanRepublic•China•Colombia•Comoros•CongoDemocratic

Republic•CongoRepublic•CoteD’Ivoire•Djibouti•EquatorialGuinea•Eritrea•Ethiopia

•Guinea-Bissau•HongKong (Certificate of Identity or

Document of Identity)•India•Liberia•Mali•Myanmar (normal passport)•Nepal•Niger•Rwanda•RepublicofSerbia&

Republic of Montenegro•Taiwan•UnitedNations (Laissez Passer) •WesternSahara

Commonwealth countries that require visa

•Bangladesh•Cameroon•Ghana•Mozambique

•Nigeria•Pakistan•SriLanka

Countries that require visa for stay exceeding 3 monthss

•Albania•Algeria•Argentina•Australia•Austria(Vienna)•Bahrain•Belgium•Bosnia-Herzegovina•Brazil•Croatia•Cuba•CzechRepublic•Denmark•Egypt•Finland•France•Germany•Hungary•Iceland•Ireland•Italy•Japan•Jordan

•Lebanon•Liechtenstein•Luxembourg•Morocco•Netherlands•Norway•Oman•Peru•Poland•Qatar•Romania•St.Marino•SaudiArabia•Slovakia•SouthKorea•Spain•Sweden•Switzerland•Tunisia•Turkey•Turkmenistan•UnitedArabEmirates•UnitedKingdom

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•Kirgystan•Kuwait•KyrgyzRepublic

•Uruguay•Yemen

Countries that require visa for stay exceeding 1 month

•Armenia•Azerbaijan•Barbados•Belarus•Benin•Bolivia•Bulgaria•Cambodia•CapeVerde•Chad•Chile•CostaRica•Equador•ElSavador•Estonia•Gabon•Georgia•Greece•Guatemala•GuineaRepublic•Haiti•Honduras•HongKongSAR•Kazakhstan•Latvia•Lithuania•MacaoSAR•Macedonia

•Madagascar•Maldova•Mauritania•Mexico•Monaco•Mongolia•Nicaragua•NorthKorea•NorthYemen•Panama•Paraguay•Portugal•Russia•SaoTomeandPrincipe•Senegal•Slovenia•Sudan•Surinam•Tajikistan•Togo•Ukraine•UpperVolta•Uzbekistan•VaticanCity•Venezuela•Zaire•Zimbabwe

Countries that require visa for stay exceeding 14 days

•Iran•Iraq•Libya•Macao (Travel Permit/ Portugal

Certificate of Identity)

•Palestine•SierraLeone•Somalia•SouthYemen•Syria

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For nationals of United States of America, no visa is required for social, business or academic purposes visits (except for employment).

For nationals of Israel, visas are required and prior permission must be obtained from Malaysia’s Ministry of Home Affairs. However for nationals of Republic of Serbia and Republic of Montenegro, visas without permissions are required.

For nationals of ASEAN countries (except Myanmar), no visa is required for a stay less than one month. For a stay exceeding one month, a visa will be required (except from nationals of Brunei and Singapore).

Nationals from other countries other than those stated above (except Israel), are allowed to enter Malaysia without visa for social visits not exceeding one month.

* Visa with reference i.e. with the approval of Malaysia’s Immigration Department is required.

1.3 Passes Requirements

Other than application for entry for the purpose of social or business visits, application for visit passes must be made before the arrival in the country.

A pass is an endorsement in the passport constituting permission to stay for an approved duration. Foreigners who visit Malaysia must obtain the pass at the point of entry besides visa (where required) which allows him to stay temporarily in Malaysia.

All such applications must have sponsorship in Malaysia whereby the sponsors agree to be responsible for the maintenance and repatriation of the visitors from Malaysia if necessary.

Passes given to foreign visitors upon arrival are as follows:

i. Visit Pass (Social) Short Term

A Visit Pass is issued to foreigners for the purpose of a social or/and business visit, such as:

- Owners and company representatives entering Malaysia to attend a company meeting, conference or seminar, inspect the company's accounts or to ensure the smooth running of the company

- Investors or businessmen entering to explore business and investment opportunities or setting up manufacturing plant

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- Foreign representatives of companies entering to introduce goods for manufacture in Malaysia, but not to engage in direct selling or distribution

- Property owners entering to negotiate, sell or lease properties

- Foreign journalist or reporters from mass media agencies entering to cover any event in Malaysia

- Participants in sporting events

- Students sitting for examinations in local university or on goodwill mission

- Visitor entering on other activities than above as approved by the Director General of Immigration

These passes cannot be used for employment or for supervising the installation of new machinery or the construction of a factory.

ii. Visit Pass (Social) Long Term

Long term social visit pass may be issued to a foreigner for temporary stay in Malaysia for a period of not less than six months. Extension may be given based on visitors’ eligibility and upon fulfilling certain conditions.

Foreign spouses to Malaysians, holding a long term social visit pass are allowed to be engaged on any form of paid employment or in any business or professional occupation without converting their Social Visit Pass status to Employment Pass of Visit Pass (Temporary Employment)

iii. Visit Pass (Temporary Employment)

This is issuedto foreignerswhoenter thecountry to takeupemployment for less than 24 months.

iv. Employment Pass

This is issuedto foreignerswhoenter thecountry to takeupemployment for a minimum period of two years. Employment pass is issued after the applicant has obtained the approval for expatriate post from the relevant authorised agencies.

v. Visit Pass (Professional)

This is issued to foreigners for the purpose of engaging on short-term contract with any agency.

The categories of foreigners who are eligible are:

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The validity of the pass varies but it does not exceed twelve months at any one time.

Applications should be made by the agency concerned.

vi. Dependant Pass

This facility is accorded to families of expatriates officials. Dependant Pass is issued to spouse and children of the Employment Pass holders. This pass may be applied together with the application for an employment pass or after the employment pass is issued.

vii. Students Pass

This is issued to foreigners who wish to study in Malaysia in any educational institutions which courses have been approved by Malaysia’sMinistryofHigherEducationandtheintakeoftheforeign student has the approval from Malaysia’s Ministry of Home Affairs.

2.0 employment of expatriate personnel

The Malaysian government is desirous that Malaysians are eventually trained and employed at all levels of employment. Thus, companies are encouraged to train more Malaysians so that the employment pattern at all levels of the organisation reflects the multi-racial composition of the country.

Notwithstanding this, where there is a shortage of trained Malaysians, companies are allowed to bring in expatriate personnel i.e. ‘key post’ or ‘time post’. Key posts are posts that are

Profesionals /Volunteers

- researchers recognised by the Government of Malaysia;

- members of an international organisations;

- invitedlecturers/speakers;

- experts in the installation or maintenance of machines;

- those who provide technical trainings; etc

Artistes - those entering for filming or performance;

- those entering for promotion of albums or new products; etc

Missionaries (Islam or other religions)

- those entering for religious purposes

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permanently filled by foreigners whereby time post are position filled on specified time.

2.1 Types of Expatriate Posts

Expatriates are foreigners who are qualified to fulfil the following positions:

i. Key Post

These are high level managerial posts in foreign-owned private companies and firms operating in Malaysia. Key posts are posts essential for companies to safeguard their interest and investments. The expatriates are responsible in determining the company’s policies in achieving its goal and objectives.

ii. Time Post

a. Executive Post

These are intermediate level of managerial and professional posts. The post requires professional qualifications, practical experience, skills and expertise related to the respectivejobs. The expatriate are responsible in implementing the company’s policies and supervision of staff.

b. Non-Executive Post

These are posts for the performance of technical jobs that requirespecifictechnicalorpracticalskillsandexperience.

2.2 Guidelines on the Employment of Expatriate Personnel

There are two stages in the employment of expatriates:

i. Application for an expatriate post from relevant authorised bodies determined by the nature of the business.

ii. Upon approval of the expatriate posts by the approving bodies, the company must submit an application to the Immigration Department for endorsement of the employment pass.

The guidelines on the employment of expatriate personnel are as follows:

a. Manufacturing companies with foreign paid-up capital of US$2 million and above:

- Automatic approval is given for up to 10 expatriate posts,includingfivekeyposts.

- Expatriates can be employed for up to a maximum of 10 years for executive posts, and five years for non-executive posts

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b. Manufacturing companies with foreign paid-up capital of more than US$200,000 but less than US$2 million:

- Automatic approval is given for up to five expatriate posts,includingatleastonekeypost.

- Expatriates can be employed for up to a maximum 10 years for executive posts, and five years for non-executive posts

c. Manufacturing companies with foreign paid-up capital of lessthanUS$200,000willbeconsideredforbothkeypostsand time posts based on current guidelines. They are:

- Key posts can be considered where the foreign paid-up capital is at least RM500,000. This amount, however, is onlya guidelineand thenumberof keyposts alloweddepends on the merits of each case.

- Time posts can be considered for up to 10 years for executive posts that require professional qualifications and practical experience, and five years for non-executive posts that require technical skills and experience. Forthese posts, Malaysians must be trained to eventually takeovertheposts.

- The number of key posts and time posts alloweddepends on the merits of each case.

d. For Malaysian-owned manufacturing companies, approval for the employment of expatriates for technical posts, including R & D posts, will be given as requested.

An expatriate personnel employed in the manufacturing sector, excluding ICT related activities, should be at least 27 years old. For ICT related activities, an expatriate personnel employed should be at least 21 years old.

An expatriate personnel who is transferred from one post to another within the same company will be required to obtain a new employment pass. His original employment pass will be amended to reflect the change in post. A new expatriate personnel replacing another must also obtain a fresh employment pass.

All employment passes are valid for the period approved for the post.However, for key post holders, employmentpasses will be issued up to five-year renewable basis except in circumstances where:

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- the validity of the expatriate's passport is less than five years,

- the expatriate's employment contract is less than five years, or

- the employer requires the services of the expatriate for less than five years.

Holders of employment passes will be issued with multiple entry visas valid for the duration of the employment pass.

3.0 Applying for expatriate posts

All applications for expatriate posts from new and existing companies (including those not involving expansion or diversification) in the manufacturing and related service sectors should be submitted to MIDA. This includes companies required to obtain manufacturing licence as well as companies exempted from the manufacturing licence.

For further information on immigration procedures, please visit www.imi.gov.my

4.0 employment of foreign workers

InMalaysia,foreignworkerscanbeemployedinthemanufacturing,construction, plantation, agricultural, services and domestic help sector.

Services sector consists of eleven sub sectors: (restaurant, cleaning services, cargo handling, launderette, caddy in golf club, barber, wholesale/retail, textile, metal/scraps/recycle activities, welfare homes and hotel/resort island.

Only nationals from the specified countries below are allowed to workintheselectedsectors:

Approved sectors Nationals of:

All sectors

•manufacturing•plantation•agriculture•construction•servicessector

•Indonesia•Cambodia•Nepal•Myanmar•Laos•Vietnam•Philippines(maleonly)•Pakistan•SriLanka•Thailand

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Approval is based on the merits of each case and subject to conditions that will be determined from time to time. Applications toemployforeignworkerswillonlybeconsideredwheneffortstofind qualified local citizens and permanent residents have failed.

Anannuallevyonforeignworkersisimposedasfollows:

Approved sectors Annual levy

Manufacturing RM1,200

Construction RM1,200

Plantation RM 540

Agricultural RM 360

Domestic Help RM 360

Services- Welfare Home- Island Resort- Others

RM 600RM 1,200RM 1,800

AllapplicationsforforeignworkersshouldbesubmittedtotheOneStop Centre, Ministry of Home Affairs except for applications for foreign domestic helpers which should be submitted to Malaysia’s Immigration Department.

Forfurtherinformationonemploymentofforeignworkers,pleasevisit the Ministry of Home Affairs website at www.moha.gov.my.

•Turkmenistan•Uzbekistan•Kazakhstan

• Services(cooks,wholesale/ retail, gold smith, barber, metal / scraps / recycle, textile)

•Construction (fixing ofhigh voltage cable only)

•Agriculture

• Plantation

•India

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I GENERAL

List of Promoted Activities and Products which are Eligible for Consideration of Pioneer Status or Investment Tax Allowance under the Promotion of Investments Act 1986

1.0. AGRIcuLtuRAL pRoductIoN

(1) Cultivation of tea (2) Cultivation of fruits (3) Cultivation of vegetables, tubers or roots (4) Cultivation of rice or maize (5) Cultivation of herbs or spices (6) Cultivation of essential oil crops (7) Production of planting materials (8) Cultivation of crops for animal feed (9) Floriculture (10) Apiculture (11) Livestock farming (excluding rearing of chickens, ducks or

pigs) (12) Production of breeder stock (13) Spawning, breeding and culturing of aquatic products (14) Off-shore fishing (15) Cultivation of medicinal plants *(16) Sericulture *(17) Cultivation of cocoa *(18) Cultivation of coconut *(19) Cultivation of sago palm *(20) Rearing of chicken and ducks

2.0 pRocEssING of AGRIcuLtuRAL pRoducE

(1) Chocolate and chocolate confectionery (2) Fruits (3) Vegetables, tubers or roots (4) Essential oils (5) Livestock products (6) Aquatic products (7) Agricultural waste or agricultural by-products (8) Aquaculture feed

G List of Promoted Activities and Products

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(9) Plant extracts for pharmaceutical, perfumery, cosmetic or food industries

(10) High fructose syrup (11) Cocoa and cocoa products (12) Food supplements *(13) Illipe products *(14) Coconut products except copra or crude coconut oil *(15) Starch products

3.0 foREstRy ANd foREstRy pRoducts

(1) Cultivation of timber, bamboo or cane (2) Cane products (3) Bamboo products

4.0 MANufActuRE of RubbER pRoducts

(1) Earthmover tyres, agricultural tyres, industrial tyres, commercial vehicle tyres, motorcycle tyres, aircraft tyres or solid tyres

(2) Precured tread liners (3) Retreading of aircraft tyres (4) Latex products:

(a) Surgical gloves(b) Safety/special function gloves(c) Condoms(d) Catheters(e) Rubber (elastomeric) specialty coatings(f) Rubberised fabrics

* (g) Carpet underlay* (h) Swimming caps* (i) Balloons* (j) Finger cots* (k) Toys* (l) Latex thread

(5) Dry rubber products:(a) Beltings(b) Hoses, pipes and tubings(c) Rubber profiles(d) Inflatable rubber products(e) Industrial and office equipment rollers(f) Seals, gaskets, washers, packings and rings(g) Anti-vibration, damping and sound insulation

products(h) Rubber linings(i) Rubber floorings

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(j) Rubber moulds(k) Modified natural rubber

(6) Reclaimed rubber(7) Rubber support

5.0 MANufActuRE of oIL pALM pRoducts ANd thEIR dERIvAtIvEs

(1) Oleochemicals or oleochemical derivatives or preparations (2) Margarine, vanaspati, shortening or other manufactured fat

products (3) Fatty acid distillate derivatives (4) Cocoa butter replacers, cocoa butter substitutes, cocoa

butter equivalent, palm mid-fraction or special olein (5) Crude palm kernel oil and palm kernel cake/expeller (6) Palm-based nutraceuticals, constituents of palm oil/palm

kernel oil (7) Palm-based food products:

(a) Specialty animal fat replacer(b) Palm-based mayonnaise and salad dressing(c) Substituted coconut milk/powder(d) Red palm oil and its products(e) Palm-based food ingredient(f) Modified (interesterified) palm oil and palm

kernel oil products(g) Microencapsulated palm-based products

(8) Processed products from:(a) Palm fatty acid distillate/palm kernel fatty acid

distillate(b) Palm kernel cake/expeller(c) Palm oil mill effluent

(9) Products from palm biomass *(10) Refining of palm oil or palm kernel oil

6.0 MANufActuRE of chEMIcALs ANd pEtRochEMIcALs

(1) Chemical derivatives from organic or inorganic sources (2) Fine chemicals (3) Basic manufacture of pesticides (4) Petrochemical products (5) Epoxy encapsulation moulding compounds (6) Cable compounds (excluding PVC cable compound) (7) Titanium dioxide pigment (8) Barium sulphate pigment (9) Iron dioxide pigment

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(10) Metallic pigment (11) Recycling of chemicals (12) Anti-tack solutions (13) Inkjet inks *(14) Cleaning preparations, cosmetics or toilet preparations *(15) Wax products *(16) Specialised paints or coatings

7.0 MANufActuRE of phARMAcEutIcAL ANd RELAtEd pRoducts

(1) Pharmaceutical goods (2) Clinical diagnostic reagents (3) Gelatine or gelatine products (4) Intravenous, dialysis or irrigating solutions (5) Vaccines (6) Medicaments

8.0 MANufActuRE of wood ANd wood pRoducts

(1) Reconstituted wood-based panel boards or products (2) Wooden solid or other specialised function doors or wooden

solid windows (3) Multi-ply parquet (4) Design, development and production of wooden furniture (5) Insulation for cryogenic vessels *(6) All wooden products except sawn timber, veneer and plain

plywood

9.0 MANufActuRE of puLp, pApER ANd pApERboARd

(1) Pulp (2) Newsprint (3) Security paper (4) Resin impregnated paper and products thereof (5) Printing and writing paper (6) Corrugated medium paper, testliner or kraftliner (7) Kraft paper (8) Paperboard (9) Moulded paper (10) Specialty paper *(11) All types of paper and paper products from pulp

10.0 MANufActuRE of tExtILEs ANd tExtILE pRoducts

(1) Natural or man-made fibres (2) Yarn of natural or man-made fibres

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(3) Woven fabrics (4) Finished knitted fabrics (5) Finishing of fabrics such as bleaching, dyeing and printing (6) Knitwear (7) Skiwear or winter outerwear (8) Non-woven products (9) Elastic webbings (10) Textile hose piping

11.0 MANufActuRE of cLAy-bAsEd, sANd-bAsEd ANd othER NoN-MEtALLIc MINERAL pRoducts

(1) High alumina or basic refractories (2) Kiln furniture (3) Laboratory, chemical or industrial wares (4) Artware, ornaments or articles for adornment of ceramic or

glass (5) Glassware (6) High tension electrical glass insulators (7) Glass components or parts for electrical, electronic or

industrial use (8) Glass fibre in all forms produced from basic raw materials (9) Finished woven fabrics of glass fibre (10) Optical glass blanks (11) Alumino-silicate ceramic fibres (12) Ceramic components or parts for electrical, electronic or

industrial uses (13) Fritz, zirconium silicate powder, glaze or glaze stains (14) Silicon dioxide fillers (15) Rockwool (16) Synthetic industrial diamonds (17) Processed ball clay (18) Articles of pressed or moulded glass as bricks, tiles, slabs,

paving blocks, pellets and squares (19) Tableware (20) Coated glass (21) Integrated cement projects (22) Absorbent mineral clay (23) Marble and granite products (24) Gypsum plaster board (25) Panels, boards, tiles, blocks or similar articles of

vegetable fibre, wood fibre, straw, wood shavings or wood wastes, agglomerated with cement, plaster or other mineral binding substance

(26) Crystalised glass panel *(27) Processed kaolin *(28) Ceramic wall or floor tiles

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*(29) Vitrified clay pipes *(30) Calcium carbonate powder *(31) Coated or uncoated talc or barium sulphate powders

(average particle size less than 5 microns) *(32) High grade silica sand or powder *(33) Clay roofing tiles (34) Quicklime and hydrated lime

12.0 MANufActuRE of IRoN ANd stEEL

(1) Blooms or slabs of steel (2) Shapes or sections of steel of height more than 200 mm (3) Plates, sheets, coils, hoops or strips of steel

(a) Hot rolled plates, sheets, coils, hoops or strips(b) Cold rolled/cold reduced plates, sheets, coils, hoops or

strips (4) Seamless steel pipes (5) Seamless high pressure gas cylinders (6) Steel tyre cord and high pressure reinforced hose wire (7) Ferromanganese, silicon manganese or ferrosilicon (8) Electrolytic galvanised steel sheet in coil *(9) Welded steel pipes or pipe fittings *(10) Bars or wire rods (except those of mild steel), angles, shapes

or sections of all grades of steel either hot-rolled, cold-rolled or cold-finished

*(11) Wires or wire products of iron or steel *(12) Steel fabricated products

13.0 MANufActuRE of NoN-fERRous MEtALs ANd thEIR pRoducts

(1) Dressing and / or smelting of non-ferrous metals other than tin metals

(2) Primary ingots, billets or slabs of non-ferrous metals (3) Bars, rods, shapes or sections of non-ferrous metals except

EC copper rods (4) Plates, sheets, coils, hoops or strips of non-ferrous metals (5) Pipes or tubes of non-ferrous metals (6) Copper clad laminates and products from in-house

copper clad laminates (7) Powder, cream or paste of non-ferrous metals (8) Aluminium composite panel *(9) Wire or wire products of non-ferrous metals *(10) Fabricated products of non-ferrous metals

566


14.0 MANufActuRE of MAchINERy ANd MAchINERy coMpoNENts

(1) Specialised/process machinery or equipment associated with specific industry including:(a) Agricultural machinery or equipment (b) Mining or mineral extraction/processing machinery or

equipment(c) Construction machinery or equipment (d) Industrial sewing machines

(2) Supporting services machinery or equipment including power generating machinery or equipment

(3) Material handling machinery or equipment including elevators or escalators

(4) Hand tools or power tools (5) Machinery and industrial parts/components including:

(a) Printing rolls or embossing rolls(b) Dicing blades, accessories for silicon wafers or ceramic

substrates(c) Offset printing plates(d) Industrial seals or seal materials

(6) Machine tools (metalworking, woodworking and others) including welding/soldering equipment

(7) Packaging machinery (8) Machinery or equipment for the services sector including:

(a) Fire fighting equipment(b) Hand labellers

(9) Reconditioning of heavy machinery and equipment(a) Automobile air conditioning compressors

(10) Servicing and upgrading or reconditioning of machinery and equipment

(11) Waste water/sewage treatment equipment

15.0 MANufActuRE of tRANspoRt EquIpMENt, coMpoNENts ANd AccEssoRIEs

(1) Bicycles (2) Bicycles parts:

(a) Drive set (chain wheel and crank) (b) Brake set (c) Speed change set (d) Hub

(3) Speciality cars (4) Engines (5) Engine parts:

(a) Cylinder block, cylinder head, rocker cover, flywheel or pulley

567


(b) Crank shaft, connecting rod, cam shaft, rocker, rocker shaft, engine valve, sprocket, piston pin or piston

(c) Intake manifold or exhaust (d) Oil pan, oil pump, oil pump gear shaft, fuel pump,

water pump or oil seal (e) Timing belt, timing chain, carburettor, ignition coil or

distributor (f) Fuel injection mechanism (injector, pump, tubing,

valves, regulator, sensors, electronic control modules)(g) High tension cables (h) Engine bracket (i) Magneto(j) Capacitor discharge unit

(6) Transmissions (7) Transmission parts:

(a) Transmission shift lever and fork (b) Transmission control linkages (c) Speedometer pinion (d) Clutch (e) Torque converter (f) Drive shaft

(8) Axle, wheel, wheel hub or knuckle (9) Disc brake, drum brake, brake cylinder, brake master

cylinder, brake booster, anti-lock braking mechanism, clutch master cylinder or clutch operating cylinder

(10) Steering wheel, steering column, steering gear box, power steering pump, steering linkages, tie rod or constant velocity joints, rack tubes for hydraulic / electric power steering and feed pipes for hydraulic power steering

(11) Stabilizer bar, suspension arm or suspension arm shaft and member

(12) Body panels, chassis frame, fuel tank, window regulator, locks and keys or hinges

(13) Head lights, indicating/signalling lights, meters, gauges, switches or horns

(14) Weather strips, control cables, speedometer cables, metallic tubings or hoses

(15) Catalytic converter (16) Vehicle safety air bag (17) Navigational system (18) Automotive electronic module/component or sensor (19) Seat mechanism including seat adjuster or locking

mechanism or seat recliner (20) System integrator:

(a) Front corner module(b) Rear corner module

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(c) Instrument panel module(d) Strut and absorbers and spring assembly module(e) Bumper assembly(f) Front cross member module(g) Function integrated door module(h) Fuel tank module(i) Seat assembly(j) Pedal assembly(k) Door trim assembly(l) Floor console assembly(m) Tyre and wheel assembly(n) Brake system(o) Wiper system(p) Exhaust system(q) Audio system(r) HVAC (Heater Ventilation Air-conditioning system)(s) Airbag system(t) Power and signal distribution system(u) Alarm system(v) Seat belt system(w) Exterior lighting system(x) Body in white assembly

(21) Gear (22) Cooling equipment, air-inlet equipment or exhaust

equipment, compressor and expansion valve for automotive air-conditioning

(23) Aerospace industry:(a) Manufacture and assembly or aircraft(b) Manufacture of aircraft equipment, components,

accessories or parts thereof(c) Ground support equipment for aerospace industry

(24) Pleasure crafts, hydrofoils or hovercrafts (25) Maintenance, repair, overhaul or service of aircraft,

aircraft components or accessories or testing and repairing of avionics

(26) Manufacture of train and related equipment:(a) Construction of locomotive, rail car(b) Coach, wagon, bogie(c) Electric multiple unit and power generating car(d) Railway signalling and communication system

*(27) Electrical or electronics systems instrumentation *(28) Ship building *(29) Ship repair

569


16.0 suppoRtING pRoducts/ActIvItIEs

(1) Metal castings (2) Metal forgings (3) Metal surface treatment/finishing (4) Machining (5) Moulds, tools or dies (6) Powder metallurgical parts (sintering of metal parts) (7) Heat treatment (8) Mould texturing (9) Irradiation service (10) Gas sterilisation service (11) Overhaul, repair, reconditioning, modification or servicing

and testing of turbine engines, components or sub-assemblies

(12) Advanced composite materials (13) Mould designing (14) Advanced surface treatment or finishing for precision

engineering plastic parts (15) High purity gas piping system and parts thereof *(16) Metal stamping *(17) Galvanising, shearing or slitting of metal sheets or other

related engineering services

17.0 MANufActuRE of ELEctRIcAL ANd ELEctRoNIc pRoducts ANd coMpoNENts ANd pARts thEREof

(1) Digital television receivers (2) Colour television receiver parts:

(a) Cathode ray tubes (b) Electron guns (c) Polished glass panels or glass funnels for colour picture

tubes (3) Digital audio video recorders/players and parts:

(a) Digital audio video recorders/players (b) Digital tape mechanisms(c) Digital disk mechanisms (d) Optical pick-up units(e) Magnetic heads

(4) Computer, parts or computer peripherals:(a) Computers (excluding detached peripherals not

manufactured in-house)(b) Monitors (c) Computer printers (including printer mechanism) (d) Printer heads (e) Computer scanners

570


(f) Drive units(g) Head gimbal assemblies/head carriage assemblies (h) Headstack assemblies (i) Computer magnetic heads(j) Data storage media (k) Voice coil motors (l) Actuators(m) Electronic games equipment including photo-detector

joysticks(n) Disk substrates or disk blanks(o) Re-manufacturing of computer drives

(5) Electronic components:(a) Quartz crystals (b) Motors (c) Printed circuit boards (excluding rigid single sided

circuit boards) (d) Cables or wires for electronic devices including flat

cables(e) Hermetic seals (f) Electrical/electronic components moulded with

magnets (g) Heat shrinkable cable joints and terminations (h) Thermistors (i) Connectors with or without wires or cables(j) Bonding wires(k) Lead-frames(l) Magnets or ferrite cores(m) Displays-electroluminescent, plasma or liquid crystal(n) Membrane switches(o) Surface mount components(p) Optical fibres or optical fibre products(q) SMT chipholders on lead-frames(r) Solar cells(s) Magnetron(t) Fabrication of light emitting diodes (LED)(u) Precision bond pads

(6) Recorded and unrecorded media:(a) Compact discs(b) Magnetic webs or pancakes

(7) Electronic machines and equipment/devices:(a) Teller machine(b) Office equipment(c) Alarm equipment/systems or devices(d) Ultrasonic cleaners(e) Computing scales

571


(f) Cash registers(g) Demagnetisers(h) Industrial controllers(i) Computer Aided Design (CAD), Computer Aided

Manufacturing (CAM) or Computer Aided Engineering (CAE) equipment

(j) Robots or robotics(k) Multimedia integrated controller

(8) Wafer fabrication:(a) Semiconductor wafer fabrication(b) Reclaimed silicon wafers(c) Wafer or die level preparation

(9) Electrical products:(a) Uninterruptible power supplies(b) Batteries excluding manganese dioxide, dry cells and

lead acid batteries(c) Solar panels(d) Energy saving lighting and / or display(e) High intensity discharge (HID) lamps and parts thereof

(10) Telecommunication:(a) Telecommunication equipment including multi feature

mobile phones but excluding fixed line telephone sets(b) Antennae for communication equipment(c) Voice/pattern/vision recognition or synthesis

equipment(d) Data terminal displays(e) Global positioning system(f) Electronic navigational aid(g) Electronic tracking aid

(11) Software development and production(12) Discharge tubes and products thereof(13) Air sterilizer

*(14) Transformers or coils *(15) Automatic gate mechanisms *(16) Consumer electronic products; parts, sub-assemblies or

accessories thereof *(17) Industrial electronic products; parts, sub-assemblies and

accessories thereof *(18) Electrical household appliances and parts thereof *(19) Electrical industrial equipment or parts thereof

572


18.0 MANufActuRE of pRofEssIoNAL, MEdIcAL, scIENtIfIc ANd MEAsuRING dEvIcEs/pARts

(1) Medical, surgical, dental or veterinary devices/equipment (2) Gauges or measuring apparatus (3) Surveying, hydrographic, navigational, meteorological,

hydrological or geophysical instruments (4) Testing equipment (5) Clocks or watches (6) Stainless steel cannulae or tubes for needles

19.0 MANufActuRE of photoGRAphIc, cINEMAtoGRAphIc, vIdEo ANd optIcAL Goods

(1) Cameras (2) Lenses (3) Binoculars, telescopes, magnifying glasses or microscopes (4) Cinematographic or video equipment

20.0 MANufActuRE of pLAstIc pRoducts

(1) Inflatable plastic products (2) Specialised plastic films/sheets (3) Geosystems products [Cellular Confinement System (CCS)

and Porous Pavement System (PPS)](4) Plastic products for engineering use(5) Precision engineering plastic products(6) Multiwall pipes

(7) Expanded polystyrene foam

21.0 MIscELLANEous

(1) Musical instruments (2) Furniture hardware (3) Souvenirs, handicrafts or giftware (4) Electronic toys (5) Sports goods or equipment (6) Spectacles or spectacle frames (7) Accessories for the textile industry (8) Cutlery (9) Lock sets or lock cylinder mechanisms (10) Jewellery of precious metal (11) Costume jewellery (12) Designing and printing of decorative surfaces for commercial

applications(13) Integrated exhibits(14) Microbials and probiotics(15) Bank notes

573


(16) Thermic containers and parts thereof(17) Biodegradable disposable packaging and household wares(18) Bio-ceramic embedded textile products(19) Personal ballistic armour(20) Ball pen tips(21) Fall protection equipment

*(22) Toys (excluding electronic toys) *(23) Art and design apparatus - all types *(24) Enamelled household ware *(25) Cooker or barbeque sets

22.0 hotEL busINEss ANd touRIst INdustRy

(1) Establishment of medium and low-cost hotels (up to a three-star hotel)

(2) Expansion/modernisation of existing hotels (3) Establishment of tourist projects (4) Expansion /modernisation of tourist projects(5) Establishment of recreational camps(6) Establishment of convention centres

23.0 fILM INdustRy

(1) Film or video production (2) Post production for film or video

24.0 MANufActuRING RELAtEd sERvIcEs

(1) Research and development (R&D)(2) Design and prototyping(3) Technical or vocational training(4) Integrated logistic services(5) Integrated market support services(6) Integrated centralised utility facilities(7) Total chemical management system(8) Cold chain facilities and services for food products(9) Environmental management

(a) Energy conservation/efficiency services(b) Energy generation activities, using renewable energy

sources (biomass, hydro power, solar power)(c) Storage, treatment and disposal of toxic and hazardous

waste(d) Waste recycling activities

(i) agricultural waste or agricultural by-products(ii) recycling of toxic and non-toxic wastes

574


25.0 MANufActuRE of kENAf bAsEd pRoducts

(1) Animal feed, kenaf particle or fibre, reconstituted panel, board or products and moulded products.

26.0 pRotEctIvE EquIpMENt ANd dEvIcEs

(1) Coated/knitted safety gloves(2) Personal protective shield for body(3) Advance ballistic protection glass

II MANufActuRING RELAtEd sERvIcEs

List of Promoted Activities on Manufacturing Related Services

(1) Operational Headquarters (2) Regional Distribution Centres(3) International Procurement Centres(4) Regional Offices(5) Representative Offices(6) Research and development (R&D)(7) Design and phototyping(8) Technical or vocational training(9) Integrated logistic services(10) Integrated market support services(11) Integrated centralised utility facilities(12) Total chemical management system(13) Cold chain facilities and services for food products(14) Environmental management

(a) Energy conservation/efficiency services(b) Energy generation activities, using renewable energy

sources (biomass, hydro power, solar power)(c) Storage, treatment and disposal of toxic and

hazardous waste(d) Waste recycling activities - agricultural waste or agricultural by-products - recycling of toxic and non-toxic wastes

III hIGh tEchNoLoGy coMpANIEs

List of Promoted Activities and Products for High Technology Companies which are Eligible for Consideration of Pioneer Status or Investment Tax Allowance under the Promotion of Investments Act 1986

1.0 AdvANcEd ELEctRoNIcs

(1) Design, development and manufacture of:(a) Computer or peripheral (b) Microprocessor application

575


(2) Development and production of communication equipment

(3) Design and production of integrated circuits (IC)(4) Development and production of catchode ray tubes and

advance displays(5) Design, development and manufacturer of printer heads,

head gimbals/head carriages, headstacks, magnetic heads, voice coil motors and actuators

(6) Development and production of advanced connectors(7) Development and manufacturing of high density

interconnect printed circuit boards (PCB) excluding rigid single-sided PCB

(8) Design, development and manufacture of printer mechanism

(9) Development and production of surface mount components(10) Design, development and manufacture of Electro-Magnetic

Interference (EMI) shielding products(11) Design, development and manufacture of contra rotator

washing machines(12) Development and production of digital audio/video

products

2.0 EquIpMENt/ INstRuMENtAtIoN

(1) Design, development and manufacture of:(a) Medical equipment (b) Medical implant or devices (c) Scientific equipment(d) Cyclonic separation equipment

(2) Development and production of high pressure water cutting equipment

(3) Design, development and manufacture of air flow equipment and related products

(4) Development and production of high voltage busbars, auto transfer switches and dry type distribution transformers

3.0 bIotEchNoLoGy

(1) Development, testing and production of:(a) Pharmaceuticals (b) Fine chemicals (c) Food or food ingredients(d) Feed or feed supplements(e) Biodiagnostics (f) Horticultural products

576


(2) Development and production of:(a) Cell cultures (b) Biopolymers (c) Biomaterials

(3) Development and production of biotechnology processes for waste treatment

4.0 AutoMAtIoN ANd fLExIbLE MANufActuRING systEMs

(1) Development and production of:(a) Computer process control systems/equipment (b) Process instrumentation (c) Robotic equipment (d) Computer numerical control (CNC) machine tools

5.0 ELEctRo-optIcs ANd NoN-LINEAR optIcs

(1) Development and production of:(a) Optical lenses (b) Laser application equipment (c) Fibre-optic communication equipment

(2) Design, development and production of cameras including lens units, lens barrel units and view finder units

6.0 AdvANcEd MAtERIALs

(1) Development and production of:(a) Polymers or biopolymers (b) Superconductors (c) Fine ceramics or advanced ceramics (d) High strength composites(e) pigments

(2) Nano particles and their formulations thereof

7.0 optoELEctRoNIcs

(1) Development and production of:(a) Optoelectronics systems components (b) Optical systems components (c) Photo-couplers (d) Semiconductors lasers

8.0 softwARE ENGINEERING

(1) Development and production of:(a) Neural networks (b) Pattern recognition systems

577


(c) Machine vision (d) Fuzzy logic systems

9.0 ALtERNAtIvE ENERGy souRcEs

(1) Development and production of:(a) Fuel cells (b) Polymer batteries (c) Solar cells (d) Renewable energy (e) Floating energy power system

10.0 AERospAcE

(1) Design or development and production or assembly of:(a) Aircraft(b) Aircraft equipment, components, accessories or

parts of aircraft(2) Modification and/or conversion of aircraft(3) Refurbishment or re-manufacture of aircraft equipment,

components, accessories or parts of aircraft

11.0 food pRoductIoN ANd food pRocEssING

(1) Food production using emerging technologies and advanced farming systems

(2) Development, testing and manufacturing of food products using emerging technologies and advanced manufacturing systems

12.0 ENGINEERING suppoRt INdustRIEs/sERvIcEs

(1) Design or development and manufacture of:(a) trim and form dies(b) semiconductor cavity/encapsulation moulds(c) suspension tooling for hard disk drive parts(d) progressive tooling for lead frames(e) fibre optic connection tooling(f) moulds, tools and dies for automotive industry

(2) Design, development and manufacture of advanced tooling and equipment for the production of precision components/parts for industrial applications

(3) Development and production of precision machined and die cast parts using advanced manufacturing systems

(4) Design and development including prototyping

578


13.0 wood pRocEssING

(1) Development, testing and processing of engineered wood products

14.0 IRoN ANd stEEL

(1) Super fine spring wire of diameter 2.0mm and below

Iv INdustRIAL LINkAGE pRoGRAMME (ILp)

List of Promoted Products and Activities in an Industrial Linkage Programme (ILP) which are Eligible for Consideration of Pioneer Status or Investment Tax Allowance under the Promotion of Investments Act 1986

1.0 MANufActuRE of RubbER pRoducts

(1) Moulded rubber products(2) Conveyor belts, transmission belts, V-type belts or rubber

beltings


(1) Plastic products for engineering use

3.0 MANufActuRE of cLAy-bAsEd, sANd-bAsEd ANd othER NoN-MEtALLIc MINERAL pRoducts

(1) Ceramic components or parts for electrical, electronic or industrial uses

(2) Glass envelopes(3) Glass fittings(4) Advanced composite materials or products


(1) Elastic webbings

5.0 MANufActuRE of IRoN ANd stEEL

(1) Wire or wire products of iron and steel(2) Steel fabricated products

579



(1) Copper clad laminates and products thereof(2) Wire or wire products of non-ferrous metals(3) Fabricated products of non-ferrous metals

7.0 suppoRtING pRoducts/sERvIcEs

(1) Metal castings(2) Metal forgings(3) Plating(4) Machining(5) Moulds, tool or dies(6) Heat treatment(7) Mould texturing(8) Metal stamping(9) Industrial seals or seal materials(10) Powder metallurgical parts (sintering of metal parts)(11) Maintenance, repair, overhaul, modification, servicing or

testing of turbine engines, components or sub-assemblies(12) Maintenance, repair, overhaul, modification, servicing or

testing of aircraft, aircraft components or accessories(13) Maintenance, repair, overhaul, modification, servicing or

testing of ship components or accessories

8.0 MANufActuRE of tRANspoRt EquIpMENt, coMpoNENts ANd AccEssoRIEs

(1) Parts and components for bicycles or tricycles(2) Parts and components for pleasure crafts, hydrofoils or

hovercrafts(3) Parts, components or accessories for motor vehicles(4) Aircraft equipment, components, accessories or parts

thereof

9.0 MANufActuRE of MAchINERy ANd MAchINERy coMpoNENts

(1) Machinery components

10.0 MANufActuRE of ELEctRIcAL ANd ELEctRoNIc pRoducts ANd coMpoNENts ANd pARts thEREof

(1) Computer peripherals:(a) Drive units(b) Keyboards

580


(2) Alarm equipment/system or devices(3) Parts, sub-assemblies or accessories of consumer or

industrial electronic products

v sMALL-scALE coMpANIEs

List of Promoted Activities and Products for Small-Scale Companies which are Eligible for Consideration of Pioneer Status or Investment Tax Allowance under the Promotion of Investments Act 1986

1.0 AGRIcuLtuRAL ActIvItIEs

(1) Aquaculture(2) Apiculture(3) Flowers and ornamental foliages(4) Sericulture

2.0 pRocEssING of AGRIcuLtuRAL pRoducE

(1) Coffee(2) Tea(3) Fruits(4) Vegetables(5) Herbs or spices(6) Cocoa and cocoa products(7) Coconut products except copra and crude coconut oil(8) Starch and starch products(9) Cereal(10) Sugar and confectionary products(11) Plant extracts(12) Aquatic products(13) Livestock products(14) Apiculture products(15) Aquaculture products(16) Animal feed ingredients (17) Agricultural wastes and by-products

3.0 foREstRy pRoducts

(1) Rattan products (excluding pole, peel and splits)(2) Bamboo products (3) Other forestry products

4.0 MANufActuRING of RubbER pRoducts

(1) Moulded rubber products

581


(2) Extruded rubber products (3) General rubber products (4) Foam rubber products (5) Inflatable rubber products

5.0 MANufActuRE of oIL pALM pRoducts ANd thEIR dERIvAtIvEs

(1) Margarine, vanaspati, shortening and other manufactured fat products

(2) Oleochemical or oleochemical derivatives or preparations(3) Biomass products(4) Palm heart products(5) Palm oil/palm kernel oil wastes or by-products

6.0 MANufActuRE of chEMIcALs ANd phARMAcEutIcALs

(1) Pigment preparation and dispersions or special coatings(2) Desiccant(3) Bio-resin (biopolymer)(4) Herbal medicament and preparations(5) Inkjet inks

7.0 MANufActuRE of wood ANd wood pRoducts

(1) Decorative panel boards (excluding plain plywood)(2) Timber mouldings(3) Builders carpentry and joinery(4) Products derived from utilisation of wood waste (e.g.

activated charcoal, wooden briquettes, wood wool)(5) Wooden household and office articles

8.0 MANufActuRE of pApER ANd pApERboARd pRoducts

(1) Moulded paper products


(1) Batik(2) Accessories for the textile industry(3) Knitted fabrics(4) Hand woven fabrics

582


10.0 MANufActuRE of cLAy-bAsEd ANd sANd-bAsEd pRoducts ANd othER NoN-MEtALLIc MINERAL pRoducts

(1) Artware, ornaments and articles of ceramic or glass(2) Glass fittings for lighting purposes(3) Panels, boards, tile blocks and similar articles of vegetable

fibre, straw, wood shavings or wood wastes, agglomerated with cement plaster or with other mineral binding substances

(4) Abrasive products for grinding, polishing and sharpening

11.0 MANufActuRE of IRoN ANd stEEL pRoducts

(1) Wire and wire products(2) Fabricated products


(1) Wire and wire products(2) Powder, cream or paste(3) Fabricated products

13.0 suppoRtING pRoducts/sERvIcEs

(1) Metal forgings(2) Machining(3) Metal stamping(4) Surface treatment/ finishing(5) Moulds, tools and dies(6) Industrial seals or seals materials(7) Cutting tools(8) Metal casting(9) Powder metallurgical parts (sintering of metal parts)(10) Mould texturing

14.0 MANufActuRE of hANdtooLs

(1) Handtools

15.0 MANufActuRE of tRANspoRt, coMpoNENts, pARts ANd AccEssoRIEs

(1) Transport components, parts and accessories

583


16.0 MANufActuRE of pARts ANd coMpoNENts foR MAchINERy ANd EquIpMENt

(1) Parts and components for machinery and equipment.

17.0 AssEMbLy ANd MANufActuRE of ELEctRIcAL ANd ELEctRoNIc pRoducts, coMpoNENts ANd pARts thEREof

(1) Decorative lights(2) Antennae(3) Capacitors(4) Disc card players(5) Energy-saving lighting and / or display(6) Resistors(7) Power supplies(8) Invertors(9) Key pads and key switches(10) Printed circuit board assemblies using surface mount

technology(11) Electronic ballast(12) Three-phase electrical accessories or devices(13) Telecommunication equipment, computer / computer

peripherals and industrial electronic equipment(14) Electrical security equipment/devices, components and

parts thereof(15) Measurement or scale instruments(16) Security equipment/devices, components and parts thereof(17) Testing equipment(18) Consumer electrical parts and components(19) Consumer electronics parts and components(20) Industrial electrical parts and components thereof(21) Industrial electronics parts and components thereof

18.0 MANufActuRE of kItchENwARE ANd tAbLEwARE

(1) Kitchenware(2) Tableware

584


19.0 MANufActuRE of fuRNItuRE, pARts ANd coMpoNENts

(1) Furniture, parts and components

20.0 MANufActuRE of GAMEs ANd AccEssoRIEs

(1) Games and accessories

21.0 MANufActuRE of hANdIcRAfts ANd souvENIRs

(1) Handicrafts(2) Souvenirs, giftware and decorative wares

22.0 MANufActuRE of spoRts Goods ANd EquIpMENt

(1) Sports goods and equipment

23.0 MANufActuRE of JEwELLERy ANd RELAtEd pRoducts

(1) Jewellery(2) Processed gems


(1) Decorative panels and ornaments(2) Bathroom and kitchen accessories(3) Plastic coils/mats(4) Epoxy encapsulation moulding compound(5) Geosystem products (cellular confinement system)

25.0 MIscELLANEous

(1) Wax products(2) Microbials and probiotics

1st Schedule Promoted activities/products for all areas

2nd Schedule * Additional promoted activities and products for promoted areas, (other than the Federal Territory of Labuan) i.e. Sabah, Sarawak, Perlis, Kelantan, Terengganu, Pahang and the district of Mersing in Johor.

3rd Schedule For the Federal Territory of Labuan, only the hotel business and tourist industry will qualify for the consideration of incentive gazetted for the promoted areas.

585


1.0 MItI hEAdquARtERs

kuala Lumpur Ministry of International Trade & Industry Block 10, Government Offices Complex, Jalan Duta, 50622 Kuala Lumpur, Malaysia Tel : (603) 6203 3022 Fax : (603) 6203 2337 Website : http://www.miti.gov.my E-mail : [email protected]

MINIstRy of INtERNAtIoNAL tRAdE ANd INdustRy (MItI)

H Useful Addresses

586


MALAYSIAN INDUSTRIAL DEVELOPMENT AUTHORITY (MIDA)

1.0 MIDA HEADQUARTERS

Malaysian Industrial Development Authority (MIDA) Block 4, Plaza Sentral, Jalan Stesen Sentral 5 Kuala Lumpur Sentral 50470 Kuala Lumpur, Malaysia Tel : (603) 2267 3633 Fax : (603) 2274 7970 E-mail : [email protected] Website : http://www.mida.gov.my

1.1 With effect from 17 September 2007, MIDA's Industry Support Division has moved to the One Sentral building. This building also houses the Logistic Services and Regional Operations Division as well as representatives from the various government agencies based in MIDA, which include the Immigration Unit set-up in December 2007. However, all other divisions in MIDA are housed in Plaza Sentral.

4th Floor, 1 SentralJalan Travers Kuala Lumpur Sentral50470 Kuala Lumpur.Tel : 603-2267 3633 (GL)Fax : 603-2274 7970

1.2 How to Get to MIDA in Plaza Sentral?

1. By Light Rail Transit (LRT) - Take the Putra line to KL Sentral station and exit from the entrance to the check-in area of the KL City Air Terminal (KL CAT). MIDA Plaza Sentral is just a 3-minute walk across the road.

2. By Komuter KTM (commuter train) - Stop in KL Sentral sta-tion and do as above.

3. By taxi - Drop off at MIDA's main entrance at Plaza Sentral in Brickfields, directly across the entrance to the check-in area of the KL City Air Terminal (KL CAT).

4. By car - Park in the basement of Plaza Sentral and take the lift to the ground floor. Walk to Block 4.

587


2.0 MIDA STATE OFFICES

Selangor Jauriah A. GhaniDirector Malaysian Industrial Development Authority 22nd Floor, Wisma MBSAPersiaran Perbandaran,40000 Shah AlamSelangor Darul EhsanMalaysia Tel : (603) 5518 4260Fax : (603) 5513 5392 E-mail : [email protected]

Sarawak Asmayuddin JamaluddinDirector Malaysian Industrial Development Authority Room 404, 4th Floor Bangunan Bank Negara No. 147, Jalan Satok P.O. Box 716 93714 Kuching, Sarawak MalaysiaTel : (6082) 254 251 / 237 484Fax : (6082) 252 375Email : [email protected]

Perak Nor' Aini Mat TalhaDirector Malaysian Industrial Development Authority Level 4, Perak Techno TradeCentre (PTTC)Bandar Meru Raya, P.O.Box 210,Off Jalan Jelapang, 30720 Ipoh, Perak Darul RidzuanMalaysia Tel : (605) 526 9962 / 526 9961Fax : (605) 527 9960 E-mail : [email protected]

Kedah & Perlis Abdul Mukti Abu BakarDirector Malaysian Industrial Development Authority 4th Floor, East WingNo. 88, Menara Bina Darulaman Berhad, Lebuhraya Darulaman05100 Alor Setar Kedah Darul Aman MalaysiaTel : (604) 731 3978Fax : (604) 731 2439Email : [email protected]

Terengganu Hasdi MohamoodDirector Malaysian Industrial Development Authority 5th Floor, Menara Yayasan IslamTerengganu, Jalan Sultan Omar 20300 Kuala Terengganu Terengganu Darul ImanMalaysia Tel : (609) 622 7200 Fax : (609) 623 2260 E-mail : [email protected]

Kelantan Hussain SallehDirector Malaysian Industrial Development Authority Aras 5-C, Menara Pejabat KelantanTrade Centre, Jalan Bayam,15200 Kota Bharu, Kelantan Darul NaimMalaysia Tel : (609) 748 3151 Fax : (609) 744 7294E-mail : [email protected]

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Pahang Rosidah MazlanDirector Malaysian Industrial Development Authority Suite 3, 11th Floor Kompleks TeruntumP.O. Box 178 25720 Kuantan Pahang Darul MakmurMalaysia Tel : (609) 513 7334 Fax : (609) 513 7333E-mail : [email protected]

Penang Zabidah DaudDirector Malaysian Industrial Development Authority Unit 4.03 Tingkat 4, Menara Boustead Penang, 39, Jalan Sultan Ahmad Shah 10050 Pulau Pinang Pulau PinangMalaysia Tel : (604) 228 0575 Fax : (604) 228 0327E-mail : [email protected]

Johor Masri Zohaini IdrisDirector Malaysian Industrial Development Authority Room 15.03, Level 15 Wisma LKN 49, Jalan Wong Ah Fook 80000 Johor Bahru Johor Darul Ta’zimMalaysia Tel : (607) 224 2550 / 5500Fax : (607) 224 2360 E-mail : [email protected]

Sabah Nazuki AbdullahDirector Malaysian Industrial Development Authority Lot D9.4 & D9.5, Tingkat 9 Block D, Bangunan KWSPKaramunsing 88100 Kota Kinabalu, Sabah MalaysiaTel : (6088) 211 411 Fax : (6088) 211 412Email : [email protected]

Melaka Ruzlisham Mat DiahDirector Malaysian Industrial Development Authority 3th Floor, Menara MITC Kompleks MITC Jalan Konvensyen75450 Ayer Keroh, MelakaMalaysia Tel : (606) 232 2876/78 Fax : (606) 232 2875 E-mail : [email protected]

Negeri Sembilan Mohd Harun ElikDirector Malaysian Industrial Development Authority Suite 13.01 & 13.02, 13th Floor, Menara MAA70200 SerembanNegeri Sembilan Darul KhususMalaysia Tel : (606) 762 7921/7884 Fax : (606) 762 7879 E-mail : [email protected]

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MALAYSIA EXTERNAL TRADE DEVELOPMENT CORPORATION (MATRADE)

2.0 MATRADE State Offices

JohorDirectorMatrade Southern Regional OfficeMalaysia External Trade Development Corporation (MATRADE)Suite 6B, Tingkat 6Menara Ansar, 65 Jln Trus80000 Johor BahruJohor, MalaysiaTel : (607) 222 9400Fax : (607) 222 9500Email : [email protected]

PenangMalaysia External Trade Development Corporation (MATRADE) 1st Floor, FMM Building2767, Mukim 1, Lebuh Tenggiri 2Bandar Seberang Jaya13700 Seberang Perai Tengah Pulau PinangMalaysiaTel : (604) 398 2020Fax : (604) 398 2288E-mail : [email protected]

TerengganuDirectorMatrade Eastern Regional OfficeMalaysia External Trade Development Corporation (MATRADE)Tingkat 5, Menara Yayasan Islam TerengganuJalan Sultan Omar

1.0 MATRADE HEADQUARTERS

Menara MATRADEJalan Khidmat Usaha, Off Jalan Duta50480 Kuala Lumpur, Malaysia Tel : (603) 6207 7077 Fax : (603) 6203 7037Toll-free : 1800-88-7280 Website : www.matrade.gov.my E-mail : [email protected]

20300 Kuala TerengganuTerengganu, MalaysiaTel : (609) 624 4778Fax : (609) 624 0778Email : [email protected]

SabahMalaysia External Trade Development Corporation (MATRADE)Lot C5.2A, Tingkat 5, Block CBangunan KWSPJalan Karamunsing88100 Kota Kinabalu,Sabah, MalaysiaTel : (6088) 240 881 / 242 881Fax : (6088) 243 881E-mail : [email protected]

SarawakMalaysia External Trade Development Corporation (MATRADE)Tingkat 10, Menara Grand Lot 42, Section 46Ban Hock Road 93100 Kuching, SarawakMalaysiaTel : (6082) 246 780 / 248 780 Fax : (6082) 256 780 E-mail : [email protected]

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RELEVANT ORGANISATIONS

BANK NEGARA MALAYSIAJalan Dato’ OnnP.O. Box 1092250929 Kuala Lumpur, MalaysiaTel : (603) 2698 8044Fax : (603) 2691 2990Website : www.bnm.gov.myE-mail : [email protected]

BURSA MALAYSIA BERHAD Customer Care Centre Lower Ground Floor, Bukit Kewangan 50200 Kuala Lumpur, MalaysiaTel : (603) 2732 0067Fax : (603) 2732 5258Website : www.klse.com.myE-mail : [email protected]

DEPARTMENT OFINDUSTRIAL RELATIONSLevel 9, Block D4, Complex DFederal GovernmentAdministrative Centre62530 Putrajaya, MalaysiaTel : (603) 8886 5000Fax : (603) 8889 2355Website : www.jpp.mohr.gov.myEmail : [email protected]

DEPARTMENT OF LABOURLevel 5, Block D3, Complex DFederal GovernmentAdministrative Centre62502 Putrajaya, MalaysiaTel : (603) 8886 5000Fax : (603) 8889 2368Website : www.jtksm.mohr.gov.myE-mail : [email protected]

DEPARTMENT OF OCCUPATIONALSAFETY AND HEALTHLevel 2, 3 and 4, Block D3, Complex DFederal GovernmentAdministrative Centre62530 Putrajaya, MalaysiaTel : (603) 8886 5000Fax : (603) 8889 2443Website : www.dosh.gov.myE-mail : [email protected]

COMPANIES COMMISSION OF MALAYSIA (CCM) Menara SSM@SentralNo 7, Jalan Stesen Sentral 5Kuala Lumpur Sentral50470 Kuala LumpurTel : (603) 2299 4400Fax : (603) 2299 4411Website : www.ssm.com.my E-mail : [email protected]

DEPARTMENT OF ENVIRONMENTMinistry of Natural Resources and EnvironmentLevel 1-4, Podium 2&3, Wisma Sumber Asli, No.25 Persiaran Perdana, Precinct 4, Federal Government Administrative Centre62574 Putrajaya, MalaysiaTel : (603) 8871 2000 / 2200Fax : (603) 8889 1973 / 1975Website : www.doe.gov.myE-mail : [email protected]

HUMAN RESOURCEDEVELOPMENT BERHADWisma PSMB, Jalan BeringinDamansara Heights50490 Kuala Lumpur, MalaysiaTel : (603) 2096 4800Fax : (603) 2096 4999Website : www.hrdnet.com.myE-mail : [email protected]

IMMIGRATION DEPARTMENTLevel 1-7, Block 2G4, Precinct 2Federal Government Administrative Centre62550 Kuala Lumpur, MalaysiaTel : (603) 8880 1000Fax : (603) 8880 1200Website : www.imi.gov.myE-mail : [email protected]

INLAND REVENUE BOARD13th Floor, Block 9Government Office ComplexJalan Duta, P.O. Box 1183350758 Kuala Lumpur, MalaysiaTel : (603) 6209 1000Fax : (603) 6203 9592Website : www.hasil.gov.myE-mail : [email protected]

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EMPLOYEES PROVIDENT FUNDKWSP BuildingJalan Raja Laut50350 Kuala Lumpur, MalaysiaTel : (603) 8732 6000Fax : (603) 2694 8433Website : www.kwsp.gov.myE-mail : [email protected]

EXPORT-IMPORT BANK OF MALAYSIA (EXIM BANK)Level 8, UBN TowerNo. 10, Jalan P RamleeP.O Box 1302850796 Kuala Lumpur, MalaysiaTel : (603) 2034 6666Fax : (603) 2034 6699Website : www.exim.com.myE-mail : [email protected]

MALAYSIAN INDUSTRIALDEVELOPMENT FINANCE BHD (MIDF)Level 21, Menara MIDF 82, Jalan Raja Chulan 50200 Kuala Lumpur, MalaysiaTel : (603) 2173 8888 Fax : (603) 2173 8877 Website : http://www.midf.com.myE-mail : [email protected]

MALAYSIAN TECHNOLOGY DEVELOPMENT CORPORATION SDN BHD (MTDC)Menara Yayasan Tun RazakLevel 8-9, Jalan Bukit Bintang55100 Kuala Lumpur, MalaysiaTel : (603) 2161 2000Fax : (603) 2163 7542 / 3 / 4 / 5Website : www.mtdc.com.myE-mail : [email protected]

MALAYSIAN INDUSTRY-GOVERNMENT GROUP FOR HIGH TECHNOLOGYLevel 6, Block A2, Menara PjH, Precinct 2,Federal Government Administrative Centre62100 Putrajaya, MalaysiaTel : (603) 8315 7888Fax : (603) 8888 8232Website : www.might.org.myE-mail : [email protected]

INTELLECTUAL PROPERTY CORPORATION MALAYSIALevel 32, Menara Dayabumi Jalan Sultan Hishamuddin 50623 Kuala Lumpur, Malaysia Tel : (603) 2263 2100 / 2274 5113 Fax : (603) 2274 1332 Website : www.myipo.gov.my E-mail : [email protected]

LABUAN FINANCIAL SERVICES AUTHORITY (LABUAN FSA)Level 17, Main Office TowerFinancial Park Complex, Jalan Merdeka87000 Federal Territory Labuan, MalaysiaTel : (6087) 591 200 / 300Fax : (6087) 413 328 / 453 442 / (6087) 441 496Website : www.lofsa.gov.myE-mail : [email protected]

MALAYSIA PRODUCTIVITY CORPORATION (MPC)Lorong Produktiviti, off Jalan Sultan,46200 Petaling Jaya, SelangorMalaysiaTel : (603) 7955 7266Fax : (603) 7957 8068Website : www.mpc.gov.myE-mail : [email protected]

PORT KLANG AUTHORITYMail Bag Service 202Jalan Pelabuhan Utara42005 Port Klang, SelangorMalaysiaTel : (603) 3168 8211Fax : (603) 3167 0211 / 3168 9117Website : www.pka.gov.my E-mail : [email protected]

ROYAL CUSTOMS MALAYSIALevel 7 NorthMinistry of Finance Complex, Precinct 2No.3, Persiaran PerdanaFederal GovernmentAdministrative Centre62592 Putrajaya, MalaysiaTel : (603) 8882 2300 / 2500Fax : (603) 8889 5884Website : www.customs.gov.myE-mail : [email protected]

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MALAYSIA TOURISM PROMOTION BOARD17th Floor, Menara Dato' OnnPutra World Trade Centre45, Jalan Tun Ismail50480 Kuala Lumpur, MalaysiaTel : (603) 2615 8188Fax : (603) 2693 5884 / 0207Website : www.tourism.gov.myE-mail : [email protected]

MULTIMEDIA DEVELOPMENT CORPORATION SDN BHDMSC Malaysia Headquarters2360 Persiaran APEC63000 CyberjayaSelangor Darul Ehsan, MalaysiaTel : (603) 8315 3000Fax : (603) 8315 3115Website : www.mdec.com.myE-mail : [email protected]

SME BANKMenara SME Bank Jalan Sultan IsmailP.O. Box 1235250774 Kuala Lumpur MalaysiaTel : (603) 2615 2020 / 2828 Fax : (603) 2692 8520 / 2698 1748 Website : www.smebank.com.my E-mail : [email protected]

SOCIAL SECURITY ORGANISATION (SOCSO)Menara Perkeso 281 Jalan Ampang50538 Kuala LumpurMalaysiaTel : (603) 4257 5755 / 4264 5463Fax : (603) 4256 7798Website : www.perkeso.gov.myE-mail : [email protected]

SECURITIES COMMISSIONNo. 3, Persiaran Bukit KiaraBukit Kiara,50490 Kuala LumpurMalaysiaTel : (603) 6204 8777Fax : (603) 6201 5078Website : www.sc.com.myE-mail : [email protected]

SME CORP MALAYSIALevel 20, West Wing, Menara MATRADEJalan Khidmat Usaha, Off Jalan Duta50480 Kuala Lumpur, MalaysiaTel : (603) 6207 6000Fax : (603) 6201 6564Website : www.smidec.gov.myE-mail : [email protected]

TELEKOM MALAYSIA BERHADLevel 51, North WingMenara TM Off Jalan Pantai Baru50672 Kuala LumpurMalaysiaTel : (603) 2240 1221Fax : (603) 2283 2415Website : www.tm.com.myE-mail : [email protected]

TENAGA NASIONAL BERHAD129, Jalan Bangsar59200 Kuala LumpurMalaysiaTel : (603) 2296 5566Fax : (603) 2283 3686 / 2288 1419Website : www.tnb.com.myE-mail : [email protected]

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MINISTRIES

PRIME MINISTER’S DEPARTMENTPerdana Putra BuildingFederal GovernmentAdministration Centre62502 PutrajayaMalaysiaTel : (603) 8888 8000Fax : (603) 8888 3444Website : http://www.pmo.gov.myE-mail : [email protected]

MINISTRY OF AGRICULTURE AND AGRO-BASED INDUSTRYLevel 9, Wisma TaniNo. 28 Persiaran Perdana, Precinct 4Federal Government Administrative Centre62624, Putrajaya, MalaysiaTel : (603) 8870 1000Fax : (603) 8888 6020Website : www.moa.gov.myE-mail : [email protected]

MINISTRY OF DOMESTIC TRADE, CO-OPERATIVES AND CONSUMERISMNo.13, Persiaran Perdana, Precinct 2Federal Government Administrative Centre62623 Putrajaya, MalaysiaTel : (603) 8882 5500 / 1800-886-800 Fax : (603) 8882 5762Website : http://www.kpdnkk.gov.myE-mail : [email protected]

MINISTRY OF EDUCATIONBlock E8, Complex EFederal Government Administrative Centre62604 Putrajaya, Malaysia Tel : (603) 8884 6000 Fax : (603) 8889 5235Website : http://www.moe.gov.myE-mail : [email protected], [email protected]

MINISTRY OF DEFENCEJalan Padang Tembak50634 Kuala LumpurMalaysiaTel : (603) 2071 5019Fax : (603) 2691 4576Website : www.mod.gov.myE-mail : [email protected]

MINISTRY OF FINANCEFinance Ministry ComplexNo.5 Persiaran Perdana, Precinct 2Federal Government Administrative Centre62592 Putrajaya, MalaysiaTel : (603) 8882 3000Fax : (603) 8882 3892 / 3894 Website : http://www.treasury.gov.myE-mail : [email protected]

MINISTRY OF FOREIGN AFFAIRSWisma Putra No. 1, Jalan Wisma Putra, Precinct 2, 62602 Putrajaya, MalaysiaTel : (603) 8887 4000 / 4570 / (603) 8889 2476 Fax : (603) 8889 1717 / 2816Website : http://www.kln.gov.myE-mail : [email protected]

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MINISTRY OF ENERGY, GREEN TECHNOLOGY AND WATERBlock E4/5, Government Complex E, Federal Government Administrative Centre 62668 Putrajaya Malaysia Tel : (603) 8883 6200Fax : (603) 8889 3712 Website : http://www.kettha.gov.myE-mail : [email protected]

MINISTRY OF FEDERAL TERRITORIES AND URBAN WELLBEINGG-4, Block 2, PJH TowerPrecinct 2, Federal Government Administrative Centre62100 Putrajaya, MalaysiaTel : (603) 8889 7888 Fax : (603) 8888 0375Website : http://www.kwp.gov.myE-mail : [email protected]

MINISTRY OF HOUSING AND LOCAL GOVERNMENTLevel 3-7, Block KPusat Bandar Damansara50782 Kuala Lumpur, MalaysiaTel : (603) 2094 7033Fax : (603) 2094 9720Website : http://www.kpkt.gov.myE-mail : [email protected], [email protected]

MINISTRY OF HUMAN RESOURCELevel 6-9, Block D3, Complex DFederal Government Administrative Centre62530 Putrajaya, MalaysiaTel : (603) 8886 5000Fax : (603) 8889 2381Website : http://www.mohr.gov.myE-mail : [email protected] [email protected]

MINISTRY OF HEALTHBlock E1, E6, E7 & E10, Complex EFederal Government Administrative Centre62590 Putrajaya, MalaysiaTel : (603) 8883 3888 Website : http://www.moh.gov.myE-mail : [email protected]

MINISTRY OF HIGHER EDUCATIONBlock E3, Complex EFederal Government Administrative Centre62505 Putrajaya, MalaysiaTel : (603) 8883 5000Fax : (603) 8889 3921 Website : http://www.mohe.gov.myEmail : [email protected] [email protected]

MINISTRY OF HOME AFFAIRSBlock D1 & D2, Complex DFederal Government Administrative Centre62546 Putrajaya, MalaysiaTel : (603) 8886 8000Fax : (603) 8889 1613 / 1610Website : http://www.moha.gov.myE-mail : [email protected]

MINISTRY OF PLANTATION INDUSTRIES AND COMMODITIESLevel 15, Lot 2G4, Persiaran Perdana, Precinct 2, Federal Government Administrative Centre62654 Putrajaya, MalaysiaTel : (603) 8880 3300Fax : (603) 8880 3482Website : http://www.kppk.gov.myE-mail : [email protected]

MINISTRY OF RURAL AND REGIONAL DEVELOPMENTBlock D9, Complex DFederal Government Administrative Centre62606 Putrajaya, MalaysiaTel : (603) 8886 3500 / 3700Fax : (603) 8889 2104 Website : http://www.rurallink.gov.myE-mail : [email protected] [email protected]

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Note : For updates on list of promoted activities and products, visit MIDA’s web site at http://www.mida.gov.my

Source : Malaysian Industrial Development Authority (MIDA) Malaysia - Investment in the Manufacturing sector policies, Incentives and Facilities

Issue Date : April 2010

MINISTRY OF INFORMATION COMMUNICATION & CULTURE4th Floor, Wisma TVAngkasapuri, Bukit Putra 50610 Kuala Lumpur, MalaysiaTel : (603) 2282 5333Fax : (603) 2284 8115 Website : http://www.moi.gov.my E-mail : [email protected]

MINISTRY OF NATURAL RESOURCES AND ENVIRONMENTNo. 25, Persiaran Perdana, Precinct 4Federal Government Administrative Centre62574 Putrajaya, MalaysiaTel : (603) 8886 1111Fax : (603) 8889 2672Website : http://www.nre.gov.myE-mail : [email protected]

MINISTRY OF TRANSPORTLevel 5-7, Block D5, Complex DFederal Government Administrative Centre62616 Putrajaya, MalaysiaTel : (603) 8886 6000Fax : (603) 8889 1569Website : http://www.mot.gov.myE-mail : [email protected] [email protected]

MINISTRY OF WOMEN, FAMILY AND COMMUNITY DEVELOPMENTLevel 1-6, Block EKompleks Pejabat Kerajaan Bukit Perdana, Jalan Dato Onn50515 Kuala Lumpur, MalaysiaTel : (603) 2693 0095Fax : (603) 2693 4982Website : www.kpwkm.gov.myE-mail : [email protected]

MINISTRY OF SCIENCE, TECHNOLOGY AND INNOVATIONSLevel 1-7, Block C4 & C5Federal Government Administrative Centre62662 Putrajaya, MalaysiaTel : (603) 8885 8000Fax : (603) 8888 9070Website : http://www.mosti.gov.myE-mail : [email protected]

MINISTRY OF TOURISMMenara Dato' OnnPutra World Trade Centre45 Jalan Tun Ismail 50695 Kuala Lumpur, MalaysiaTel : (603) 2693 7111Fax : (603) 2694 1146 Website : http://www.motour.gov.myE-mail : [email protected] [email protected]

MINISTRY OF WORKS6th Floor, Block BKompleks Kerja RayaJalan Sultan Salahuddin50580 Kuala Lumpur, MalaysiaTel : (603) 2711 1100 Fax : (603) 2711 1590 / 1592Website : http://www.kkr.gov.myE-mail : [email protected]

MINISTRY OF YOUTHS AND SPORTSMenara KBSNo. 27, Persiaran Perdana, Precint 4Federal Government Administrative Centre 62570 Putrajaya, MalaysiaTel : (603) 8871 3333 Fax : (603) 8888 8770 Website : http://www.kbs.gov.myE-mail : [email protected]

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Laws of Malaysia ACT 702

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LAWS OF MALAYSIA

Act 702

FINANCE ACT 2010

Date of Royal Assent … 6 January 2010

Date of publication in the Gazette … … … 14 January 2010

Finance ACT 702

599

Finance Act 2010

LAWS OF MALAYSIA

Act 702

FINANCE ACT 2010

ARRANGEMENT OF SECTIONS

CHAPTER I

PRELIMINARY

Section

1. Short title

2. Amendment of Acts

CHAPTER II

AMENDMENTS TO THE INCOME TAX ACT 1967

3. Commencement of amendments to the Income Tax Act 1967

4. Amendment of section 2

4A. Amendment of section 6A



7. Amendment of section 60I



10. Amendment of section 107C



13. Amendment of section 152A

14. Amendment of Schedule 1


16. Amendment of Schedule 7B


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CHAPTER III

AMENDMENTS TO THE STAMP ACT 1949

Section

17. Commencement of amendments to the Stamp Act 1949

18. New section 72A

19. Amendment of First Schedule

20. Amendment of Second Schedule

CHAPTER IV

PART I

AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967

21. Commencement of amendments to the Petroleum (Income Tax) Act 1967



24. New sections 30A and 30B

25. New section 34A


27. New section 39A


29. New section 40A


31. New section 49A



34. New section 82A

PART II

MISCELLANEOUS

35. Application of this Part

36. Year of assessment 2010

Finance ACT 702

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Finance Act 2010

37. Estimate and instalment for year of assessment 2010 current year basis

38. Savings and transitional provisions

CHAPTER V

AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976

Section

39. Commencement of amendments to the Real Property Gains Tax Act 1976






45. Amendment of section 21A

46. Amendment of section 21B



49. New section 48A




53. New section 57A




57. Savings and transitional provisions

CHAPTERVI

AMENDMENT TO THE LABUAN OFFSHORE BUSINESS ACTIVITY TAX ACT 1990

58. Commencement of amendment to the Labuan Offshore Business Activity Tax Act 1990

59. New section 12A


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LAWS OF MALAYSIA

Act 702

FINANCE ACT 2010

An Act to amend the Income Tax Act 1967, the Stamp Act 1949, the Petroleum (Income Tax) Act 1967, the Real Property Gains Tax Act 1976 and the Labuan Offshore Business Activity Tax Act 1990.

[ ]

ENACTED by the Parliament of Malaysia as follows:

CHAPTER I

PRELIMINARY

Short title

1. This Act may be cited as the Finance Act 2010.

Amendment of Acts

2. The Income Tax Act 1967 [Act 53], the Stamp Act 1949 [Act 378], the Petroleum (Income Tax) Act 1967 [Act 543], the Real Property Gains Tax Act 1976 [Act 169] and the Labuan Offshore Business Activity Tax Act 1990 [Act 445] are amended in the manner specified in Chapters II, III, IV, V and VI respectively.

CHAPTER II

AMENDMENTS TO THE INCOME TAX ACT 1967

Commencement of amendments to the Income Tax Act 1967

3. (1) Sections 4 and 4A, subparagraph 5(a)(i), sections 6, 7, 14, 15 and 16 have effect for the year of assessment 2010 and subsequent years of assessment.

(2) Subparagraphs 5(a)(ii), (iii), (iv) and paragraph 5(b) have effect for the years of assessment 2010, 2011 and 2012.

(3) Section 8 has effect for the year ending 31 December 2009 and subsequent years.

Finance ACT 702

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Finance Act 2010

(4) Sections 9, 11, 12 and 13 come into operation on the coming into operation of this Act.

(5) Section 10 has effect for the year of assessment 2011 and subsequent years of assessment.

Amendment of section 2

4. The Income Tax Act 1967, which is referred to as the “principal Act” in this Chapter, is amended in section 2 by inserting after subsection (8) the following subsection:

“(9) Any reference in subsection 107C(4A), paragraph 2A of Schedule 1 and paragraph 19A of Schedule 3 to a company which has a paid-up capital in respect of ordinary shares of two million five hundred thousand ringgit and less at the beginning of the basis period for a year of assessment shall exclude a company which is established for the issuance of asset-backed securities in a securitization transaction approved by the Securities Commission.”.

Amendment of section 6A

4A. Subsection 6A(2) of the principal Act is amended —

(a) in paragraph (c), by substituting for the full stop at the end of the paragraph a colon; and

(b) by inserting after paragraph (c) the following proviso to that subsection:

“Provided that where Part XIV of Schedule 1 applies, thirty-five thousand ringgit shall consist of chargeable income of that individual from all sources.”.


5. Section 46 of the principal Act is amended —

(a) in subsection (1) —

(i) in paragraph (a), by substituting for the word “eight” the word “nine”;

(ii) in paragraph (k), by deleting the word “and” at the end of the paragraph;

(iii) in paragraph (l), by substituting for the full stop at the end of the paragraph the words “; and”; and


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(iv) by inserting after paragraph (l) the following paragraph:

“(m) an amount limited to a maximum of five hundred ringgit in respect of expenses expended or deemed expended under subsection (3) in that basis year by that individual for the payment of monthly bill for broadband subscription under that individual’s name as evidenced by receipts issued in respect of such bill.”; and

(b) in subsection (3), by substituting for the words “and (l)” the words “, (l) and (m)”.


6. Section 49 of the principal Act is amended by substituting for subsection (1A) the following subsection:

“(1A) For the purposes of subsection (1) —

(a) where the aggregate amount of deduction allowed under that subsection in respect of payments, other than payment of premium for any deferred annuity contracted by an individual on or after 1 January 2010, or contributions or both, is six thousand ringgit or less, there shall be allowed a further deduction on any payment of premium for such deferred annuity:

Provided that the total of that aggregate amount of deduction and that further deduction shall not exceed seven thousand ringgit; and

(b) where subsection 50(2) or 50(3) applies, the total deduction under that subsection shall not exceed six thousand ringgit or where paragraph (a) applies, shall not exceed seven thousand ringgit.”.

Amendment of section 60I

7. Subsection 60I(4) of the principal Act is amended —

(a) in the definition of “Islamic securities”, by inserting after the words “Securities Commission” the words “or Labuan Offshore Financial Services Authority”; and

(b) in the definition of “special purpose vehicle”—

(i) by inserting after the words “Companies Act 1965” the words “or a company incorporated under the Offshore Companies Act 1990 which has made an election under section 3A of the Labuan Offshore Business Activity Tax Act 1990”; and

Finance ACT 702

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Finance Act 2010

(ii) by inserting after the words “Securities Commission” the words “or Labuan Offshore Financial Services Authority”.



(a) by substituting for subsection (1) the following subsection:

“(1) Every employer shall, for each year, furnish to the Director General a return in the prescribed form not later than 31 March in the year immediately following the first-mentioned year containing —

(a) the number of employees employed in the firstmentioned year;

(b) the number of employees subject to deductions under the Income Tax (Deduction From Remuneration) Rules 1994 [P.U. (A) 507/1994] for the first-mentioned year;

(c) the number of new employees employed in the first-mentioned year;

(d) the number of employees who have resigned in the first-mentioned year;

(e) the number of employees who have resigned and left Malaysia in the first-mentioned year; and

(f) such other particulars as may be required by the Director General.”; and

(b) by inserting after subsection (1) the following subsection:

“(1A) For the purpose of subsection (1), every employer shall, for each year, prepare and render to his employee a statement of remuneration of that employee on or before the last day of February in the year immediately following the first-mentioned year containing the following information:

(a) the relevant particulars of the employee;

(b) the full amount of the gross income falling within section 13 paid, payable or provided by or on behalf of the employer to that employee in respect of the employment;

(c) pension, annuity or periodical payment falling under paragraph (4)(e);


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(d) total deductions under the Income Tax (Deduction From Remuneration) Rules 1994 paid to the Director General in the first-mentioned year;

(e) the compulsory contributions made by the employees to the Pension Fund or Employees’ Provident Fund, or any approved fund pursuant to section 150;

(f) details relating to the payment of arrears and others for the years prior to the first-mentioned year;

(g) tax exempt allowances, perquisites, gifts and benefits for the first-mentioned year; and

(h) such other particulars as may be required by the Director General.”.


9. Subsection 107(4) of the principal Act is amended by inserting after the words “failed to deduct” the words “, and such amount of tax shall be a debt due from that employer to the Government and shall be payable forthwith to the Director General”.

Amendment of section 107C

10. Section 107C of the principal Act is amended—

(a) in subsection (4), by inserting after the words “in a year of assessment” the words “and the basis period for that year is not less than six months”;

(b) in subsection (8), by inserting after the words “(3),” the words “(4),”;

(c) by inserting after subsection (10) the following subsection:

“(10A) Where for a year of assessment —

(a) no estimate is furnished by a company, trust body or co-operative society and no direction is given by the Director General to make payment by instalment under subsection (8);

(b) no prosecution under section 120 has been instituted in relation to failure to furnish such estimate; and

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(c) tax is payable by that company, trust body or co-operative society pursuant to an assessment for that year of assessment,

such tax payable shall without any further notice be increased by a sum equal to ten per cent of the tax payable and that sum shall be recoverable as if it were tax due and payable under this Act:

Provided that if that company, trust body or co-operative society pays that sum or, where the sum is remitted under subsection (11), that company, trust body or cooperative society shall not be liable to be charged on the same facts with an offence under section 120.”; and

(d) in subsection (11), by substituting for the words “or (10)” the words “, (10) or (10A)”.


11. Section 112 of the principal Act is amended by inserting after subsection (3) the following subsection:

“(4) The Director General may require any person to pay an additional amount of penalty in accordance with subsection (3) in respect of any additional tax which is payable by that person for a year of assessment.”.


12. Subsection 120(1) of the principal Act is amended by substituting for paragraph (b) the following paragraph:

“(b) fails to furnish a return in accordance with subsection 83(1) or to prepare and render a statement in accordance with subsection 83(1A);”.


13. Section 152A of the principal Act is amended —

(a) in subsection (3), by substituting for the words “return in the prescribed form” the words “form prescribed under this Act”;

(b) in subsection (4), by substituting for the word “return” the words “form prescribed under this Act”; and

(c) in subsection (5)—


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(i) by substituting for the words “a return” the words “the form”;

(ii) by substituting for the words “the return” the words “the form”; and

(iii) by substituting for the words “such return” the words “the form”.

Amendment of Schedule 1

14. Schedule 1 to the principal Act is amended —

(a) in Part I —

(i) in paragraph 1, by substituting for the words “27 per cent” appearing in the column “Rate of Income Tax” the words “26 per cent”; and

(ii) in paragraph 1A, by substituting for the words “27 per cent” the words “26 per cent”;

(b) in Part IV —

(i) by deleting the words “For every ringgit of the next” appearing in line no. 10 of the column “Chargeable Income”;

(ii) by deleting the words “500,000” appearing in line no. 10 of the column “RM”; and

(iii) by deleting the words “27 per cent” appearing in the column “Rate of income tax”; and

(c) by inserting after Part XIII the following Part:

“PART XIV

1. Notwithstanding Part I, income tax shall be charged for a year of assessment on the chargeable income of an individual who is a knowledge worker and residing in a specified region in respect of having or exercising employment with a person who is carrying on a qualified activity in a specified region at the rate of 15 per cent on every ringgit of that chargeable income.

2. In this Part —

(a) the knowledge worker, qualified activity and specified region referred to in paragraph 1; and

(b) where the individual has income from a source other than the employment referred to in paragraph 1 or where subsection 45(2) applies, the chargeable income of the individual referred to in that paragraph,

shall be as determined by the Minister by rules made under this Act.”.

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(a) in subparagraph 33B(b), by inserting after the words “Securities Commission” the words “or the Labuan Offshore Financial Services Authority”; and

(b) in subparagraph 35(b), by inserting after the word “debentures” the words “or Islamic Securities”.

Amendment of Schedule 7B

16. Paragraph 9 of Schedule 7B to the principal Act is amended —

(a) in the definition of “capital expenditure”, by substituting for the full stop at the end of the definition a semicolon; and

(b) by inserting after the definition of “capital expenditure” the following definition:

‘ “incurred” has the same meaning assigned to it in paragraphs 46 and 55 of Schedule 3.’.

CHAPTER III

AMENDMENTS TO THE STAMP ACT 1949

Commencement of amendments to the Stamp Act 1949

17. This Chapter comes into operation on 1 January 2010.

New section 72A

18. The Stamp Act 1949, which is referred to as the “principal Act” in this Chapter, is amended by inserting after section 72 the following section:

“Penalty relating to stamp certificates

72A. Any person who—

(a) sells or offers for sale a stamp certificate;

(b) fraudulently attaches a stamp certificate to an instrument other than the instrument for which the stamp certificate was issued;

(c) fraudulently detaches a stamp certificate or fraudulently causes a stamp certificate to be detached from the instrument;

(d) counterfeits, or knowingly performs any part of the process of counterfeiting, any stamp certificate issued by the Collector;


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(e) sells or offers for sale any certificate which he knows or ought reasonably to know to be a counterfeit of any stamp certificate issued by the Collector;

(f) has in his possession any certificate which he knows to be a counterfeit of any stamp certificate, intending to use or dispose of it as a genuine stamp certificate in order that it may be used as a genuine stamp certificate; or

(g) uses as a genuine stamp certificate knowing it to be a counterfeit of any stamp certificate,

shall be guilty of an offence and shall be liable on conviction to a fine not exceeding five thousand ringgit.”.

Amendment of First Schedule

19. Paragraph 6 under “GENERAL EXEMPTIONS” in the First Schedule to the principal Act is amended by inserting after the words “Central Bank” the words “, the Labuan Offshore Financial Services Authority”.

Amendment of Second Schedule

20. The Second Schedule to the principal Act is amended by inserting after item 21 the following item:

CHAPTER IV

PART I

AMENDMENTS TO THE PETROLEUM (INCOME TAX) ACT 1967

Commencement of amendments to the Petroleum (Income Tax) Act 1967

21. (1) Sections 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33 and 34 come into force on 1 January 2010 and sections 5, 30, 30A, 30B, 34A, 38, 39A, 40, 40A, 48, 49A, 51, 58 and 82A as amended by those sections shall have effect for the year of assessment 2010 in respect of the basis period ending in the year 2010 and subsequent years of assessment.

(2) Sections 35, 36 and 38 come into operation on 1 January 2010.

(3) Section 37 has effect for the year of assessment 2010 in respect of the basis period ending in the year 2010 and the year of assessment 2011.

ARTICLES OF ASSOCIATION AND MEMORANDUM OF ASSOCIATION OF A COMPANY

The Registrar of Companies”.

“22

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22. The Petroleum (Income Tax) Act 1967, which is referred to as the “principal Act” in this Chapter, is amended in section 5 —

(a) by substituting for subsection (1) the following subsection:

“(1) For the purposes of this Act, the accounting period ending on any day in a year of assessment shall constitute the basis period for that year of assessment.”; and

(b) by substituting for subsection (3) the following subsection:

“(3) Notwithstanding subsection (1) where —

(a) by virtue of subsections (1) and (2) there has been taken as the basis period for a year of assessment of a chargeable person an accounting period ending on any day in that year of assessment; and

(b) there is a failure to make up the accounts of that chargeable person for an accounting period ending on the corresponding day in the year following that year of assessment,

the Director General may direct that the basis period for the year of assessment in which the failure occurs, or the basis periods for that year and the following year of assessment, shall consist of a period or periods (which may be of any length) as specified in the direction.”.


23. The principal Act is amended by substituting for section 30 the following section:

“Return of income

30. (1) Every chargeable person shall, with respect to the basis period for each year of assessment, furnish to the Director General a return in the prescribed form, within seven months from the date following the end of the basis period for that year of assessment.

(2) For the purposes of this section, a return for a year of assessment shall—

(a) specify the chargeable income and the amount of tax payable (if any) on that chargeable income for that year; and

(b) contain such particulars as may be required by the Director General.”.


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New sections 30A and 30B

24. The principal Act is amended by inserting after section 30 the following sections:

“Return on expenditure during exploration period

30A. (1) Every chargeable person shall, for each exploration period, furnish to the Director General within seven months from the date following the end of that period a return in the prescribed form containing—

(a) the amount of exploration expenditure incurred by that chargeable person in relation to petroleum operation in that period; and

(b) such particulars as may be required by the Director General.

(2) For the purposes of subsection (1)—

(a) the first exploration period of the chargeable person shall be the period that commences on the date the petroleum agreement is signed, or on such other date as may be determined by the chargeable person with the approval of the Director General; and

(b) each exploration period shall be a period of twelve months except in the case of the first exploration period or final exploration period, where the period may be less than twelve months.

(3) In this section, “exploration period” means a period or periods prior to the first basis period of the chargeable person.

Amendment of return

30B. (1) Where for a year of assessment a chargeable person has furnished a return in accordance with subsection 30(1), that person may make amendment to such return in an amended return as prescribed by the Director General in respect of the amount of tax or additional tax payable by that person on the chargeable income.

(2) An amended return under subsection (1) shall only be made after the due date for the furnishing of the return pursuant to subsection 30(1), but not later than six months from that date.

(3) For the purposes of this section, the amended return shall—

(a) specify the amount or additional amount of chargeable income and the amount of tax or additional tax payable on that chargeable income;

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(b) specify the increased sum ascertained in accordance with subsection (4); or

(c) contain such particulars as may be required by the Director General.

(4) Where an amended return is furnished by a chargeable person under subsection (1), any amount of tax or additional tax payable by that person under the amended return shall be increased by a sum equal to ten per cent of that amount and the increased sum shall constitute part of such tax or additional tax payable by that person.

(5) The amendment under subsection (1) shall only be made once.

(6) Where—

(a) a return for a year of assessment has been furnished in accordance with subsection 30(1); and

(b) the Director General has made an assessment for that year of assessment under section 39

no amendment shall be made under this section.”.

New section 34A

25. The principal Act is amended by inserting after section 34 the following section:

“Duty to keep records

34A. (1) Subject to this section, every chargeable person carrying on petroleum operation shall keep and retain in safe custody relevant records for a period of seven years from the end of the year to which any expenditure or income from that operation relates, to enable the Director General or an authorized officer to ascertain—

(a) the expenditure for the exploration period from that operation; or

(b) the income or the adjusted loss from that operation for the basis period for any year of assessment.

(2) Where a chargeable person referred to in subsection (1) has not furnished a return as required under this Act in relation to the exploration period or year of assessment, that chargeable person shall keep and retain the records referred to in subsection (1) for a period of seven years after the end of the year in which the return is furnished.


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(3) Every chargeable person shall, for each exploration period or basis period for the year of assessment, make up accounts of his expenditure or profits or losses arising from his petroleum operations and those accounts which shall be audited by a professional accountant, together with a report made by that accountant shall contain, in so far as they are relevant, the matters set out in subsections 174(1) and (2) of the Companies Act 1965.

(4) Any chargeable person who is required by this section to keep records and—

(a) does so electronically shall retain them in an electronically legible form and shall keep the records in such manner as to enable the records to be readily accessible and convertible into writing; or

(b) has originally kept records manually and subsequently converts those records into electronic form shall retain those records prior to the conversion in their original form.

(5) All records that relate to any petroleum operation in Malaysia shall be kept and retained in Malaysia.

(6) For the purposes of this section—

“exploration period” has the same meaning assigned to it under section 30A; and “records” includes—

(a) books of account recording receipts and payments or income and expenditure; and

(b) invoices, vouchers, receipts and such other documents as in the opinion of the Director General are necessary to verify the entries in any books of account.”.



“38. (1) Where a chargeable person has furnished a return under section 30 to the Director General for a year of assessment, the Director General shall be deemed to have made, on the day on which the return is furnished, an assessment in respect of that chargeable person relating to the amount of tax on the chargeable income based on the respective amounts as specified in the return.

(2) For the purposes of this Act, where the Director General is deemed

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to have made an assessment under subsection (1)—

(a) the return referred to in that subsection shall be deemed to be a notice of assessment; and

(b) such notice of assessment shall be deemed to have been served on the chargeable person on the day on which the Director General is deemed to have made the assessment.

(3) Where a chargeable person for a year of assessment has not furnished a return in accordance with section 30, the Director General may, according to the best of his judgment, determine the amount of the chargeable income of that person for that year and make an assessment accordingly:

Provided that the making of an assessment in respect of a chargeable person under this subsection shall not affect any liability otherwise incurred by that chargeable person by reason of his failure to deliver the return.”.

New section 39A


“Deemed assessment on the amended return

39A. (1) Where for a year of assessment a chargeable person has furnished an amended return in accordance with section 30B, the Director General shall be deemed to have made, on the day on which the amended return is furnished, an assessment or additional assessment in respect of that person relating to the amount of tax or additional tax payable on the chargeable income, based on the respective amounts as specified in the amended return.

(2) For the purposes of this Act, where the Director General is deemed to have made an assessment or additional assessment under subsection (1)—

(a) the amended return referred to in that subsection shall be deemed to be a notice of assessment or additional assessment; and

(b) such deemed notice of assessment or additional assessment shall be deemed to have been served on the chargeable person on the day on which the Director General is deemed to have made the assessment or additional assessment.”.


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(a) in subsection (1), by inserting after the words “An assessment” the words “, other than an assessment under subsections 38(1) and 39A(1),”; and

(b) in subsection (2), by inserting after the words “an assessment” the words “, other than an assessment under subsections 38(1) and 39A(1),”.

New section 40A


“Composite assessment

40A. (1) Without prejudice to section 39, where a chargeable person—

(a) makes default in furnishing a return in accordance with section 30;

(b) makes an incorrect return by omitting or understating any income in respect of which he is required by this Act to make a return; or

(c) gives any incorrect information in relation to any matter affecting his own chargeability to tax,

for any year or years of assessment (hereinafter referred to in this section as the “relevant year or relevant years”), the Director General and that chargeable person may come to an agreement in writing as to the payment by that chargeable person of a sum of money (hereinafter referred to in this section as the “total amount”) being—

(i) the amount of tax which has been undercharged or not charged for the relevant year or relevant years in consequence of such default in furnishing a return or making an incorrect return or giving any incorrect information; and

(ii) the amount of any penalty or penalties which that chargeable person may be required to pay for the relevant year or relevant years pursuant to subsection 51(3) or 52(2) or both (or where such penalty is abated or remitted under section 63, so much, if any, of the penalty which has not been abated or remitted).

(2) Where the Director General and a chargeable person have come

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to an agreement pursuant to subsection (1), the Director General may make a composite assessment in respect of that chargeable person in the total amount.

(3) As soon as may be after a composite assessment has been made, the Director General shall cause a notice of composite assessment to be served on the chargeable person in respect of whom the composite assessment was made.

(4) A notice served under subsection (3) shall be in the prescribed form and shall indicate in addition to any other material included therein—

(a) the relevant year or relevant years;

(b) the amount or aggregate amount of tax undercharged or not charged in the relevant year or relevant years;

(c) the amount or aggregate amount of any penalty imposed by virtue of subsection 51(3) or 52(2) or both (or where such penalty is abated or remitted under section 63, so much, if any, of the penalty which has not been abated or remitted); and

(d) the place at which payment of the total amount is to be made.

(5) The total amount shall be collected as if it were part of the tax payable by the chargeable person in respect of whom the composite assessment has been made.

(6) Notwithstanding any other provision of this Act —

(a) a composite assessment made under this section shall be final and conclusive for the purposes of this Act; and

(b) no appeal shall lie against the composite assessment.”.



“48. (1) Except as provided in subsections (2) and (3), tax payable under an assessment for a year of assessment shall be due and payable on the due date whether or not the chargeable person appeals against the assessment.

(2) Where an assessment is made under subsection 38(3), section 39 or section 40A, or where an assessment is increased under subsection 45(2), the tax payable under the assessment or increased assessment shall, on the service of the notice of assessment or


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composite assessment or increased assessment, as the case may be, be due and payable on the chargeable person assessed at the place specified in that notice whether or not that chargeable person appeals against the assessment or increased assessment.

(3) Where an assessment or additional assessment has been made under section 39A, the tax or additional tax payable under the assessment shall be due and payable on the day the amended return is furnished whether or not that person appeals against the assessment or additional assessment.

(4) Where any tax due and payable under subsection (1) has not been paid by the due date, so much of the tax as is unpaid upon the expiration of that date shall without any further notice being served be increased by a sum equal to ten per cent of the tax so unpaid, and that sum shall be recoverable as if it were tax due and payable under this Act.

(5) Subject to subsection (6), where any tax due and payable under subsection (2) has not been paid within thirty days after the service of the notice, so much of the tax as is unpaid upon the expiration of that period shall without any further notice being served be increased by a sum equal to ten per cent of the tax so unpaid, and that sum shall be recoverable as if it were tax due and payable under this Act.

(6) Where any tax is payable in accordance with subsection (2), the Director General may allow the tax to be paid by instalments in such amounts and on such dates as he may determine and in the event of default in payment of any one of the instalments on the date specified for payment the balance of the tax then outstanding shall be due and payable on that date and shall without any further notice being served be increased by a sum equal to ten per cent of that balance, and that sum shall be recoverable as if it were tax due and payable under this Act.

(7) Notwithstanding the foregoing subsections, where the tax due and payable is increased by a sum under subsection (4), (5) or (6), the Director General may in his discretion for any good cause shown remit the whole or any part of that sum and, where the amount remitted has been paid, the Director General shall repay that amount.

(8) For the purposes of this section, “due date” means the last day of the seventh month from the date following the end of the accounting period.”.

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New section 49A


“Estimate of tax payable and payment by instalments

49A. (1) Every chargeable person shall, with respect to the basis period for each year of assessment, furnish to the Director General an estimate of his tax payable for that year of assessment.

(2) Except as provided in paragraph (4)(a), the estimate of tax payable for a year of assessment shall be made in the prescribed form and furnished to the Director General not later than thirty days before the beginning of the basis period for that year of assessment.

(3) The estimate of tax payable for a year of assessment shall not be less than eighty-five per cent of the revised estimate of tax payable for the immediately preceding year of assessment or if no revised estimate is furnished, shall not be less than eighty-five per cent of the estimate of tax payable for the immediately preceding year of assessment.

(4) Where the first basis period for a year of assessment of a chargeable person is not less than six months—

(a) the estimate of tax payable for that year of assessment shall be made in the prescribed form and furnished to the Director General within three months from the beginning of that basis period; and

(b) subsections (2) and (3) shall apply to a chargeable person beginning from the second year of assessment.

(5) Where an estimate of tax payable for a year of assessment has been furnished in accordance with subsection (2)—

(a) the amount of estimate shall be paid to the Director General in ten equal monthly instalments;

(b) each instalment shall be paid by the due date;

(c) the first instalment may be made from the second month of the basis period for that year of assessment of that chargeable person;

(d) all ten monthly instalments shall be made before the second month of the basis period immediately following the basis period for that year of assessment; and

(e) the chargeable person shall indicate in the prescribed form


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referred to in subsection (2), the respective months in the basis period of that year of assessment or the following basis period, in which the ten monthly instalments shall be paid.

(6) Where an estimate of tax payable for a year of assessment has been furnished in accordance with paragraph (4)(a), the estimate of tax payable shall be paid to the Director General in equal monthly instalments determined according to the number of months in the basis period for that year of assessment and each instalment shall be paid by the due date beginning from the sixth month of the basis period for that year of assessment in respect of which that estimate has been furnished.

(7) A chargeable person may, in the sixth or the ninth month, or in both months of the basis period for a year of assessment, furnish to the Director General a revised estimate of his tax payable for that year in the prescribed form and—

(a) where the revised estimate exceeds the amount of instalments which is payable in that year prior to that revised estimate, the difference shall be payable in the remaining instalments in equal proportion; or

(b) where the amount of instalments which is payable in that year prior to that revised estimate exceeds the revised estimate, the remaining instalments shall cease immediately.

(8) Notwithstanding subsections (1), (3), (4), (5), (6) and (7), the Director General may direct any chargeable person to make payment by instalments on account of tax which is or may be payable by that chargeable person for a year of assessment at such times and in such amounts as the Director General may direct.

(9) Where the Director General directs a chargeable person to make payment by instalments under subsection (8) before the sixth month of the basis period for a year of assessment of that chargeable person, the total amount of that instalments shall be deemed, for the purpose of this section, to be the estimate of tax payable by that chargeable person for that year of assessment:

Provided that subject to any revision under subsection (7), that instalments shall be payable in accordance with subsections (8) and (11).

(10) Where subsection (9) applies and for a year of assessment, a chargeable person has furnished a revised estimate under subsection (7), reference to the amount of instalments which is payable in subsection

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(7) shall be construed as reference to the amount of instalments which is payable under subsection (8) prior to the revised estimate.

(11) Where any instalment amount due and payable has not been paid by the due date or on the date specified by the Director General, the amount unpaid shall, without further notice being served, be increased by a sum equal to ten per cent of the amount unpaid, and the amount unpaid and the increase on the amount unpaid shall be recoverable as if it were tax due and payable under this Act.

(12) Where the tax payable under an assessment for a year of assessment exceeds the revised estimate of tax payable for that year of assessment or if no revised estimate is furnished, the estimate of tax payable for that year of assessment, by an amount of more than thirty per cent of the tax payable under the assessment, then, without any further notice being served, the difference between that amount and thirty per cent of the tax payable under the assessment shall be increased by a sum equal to ten per cent of the amount of that difference, and that sum shall be recoverable as if it were tax due and payable under this Act.

(13) Where for a year of assessment—

(a) no estimate is furnished by a chargeable person, and no direction is given by the Director General to make payment by instalment under subsection (8);

(b) no prosecution under section 58 has been instituted in relation to failure to furnish such estimate; and

(c) tax is payable by that person under an assessment for that year of assessment,

such tax payable shall without any further notice be increased by a sum equal to ten per cent of the tax payable and that sum shall be recoverable as if it were tax due and payable under this Act:

Provided that if that person pays that sum or, where the sum is remitted under subsection (14), he shall not be liable to be charged on the same facts with an offence under section 58.

(14) Notwithstanding the foregoing subsections, where the estimate of tax payable for a year of assessment is increased by a sum under subsection (11), (12) or (13) the Director General may in his discretion for any good cause shown remit the whole or any part of that sum and, where the amount remitted has been paid, the Director General shall repay the same.


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(15) Nothing in this section shall prevent the collection of any tax from a person to whom this section applies in accordance with section 48 or the payment of that tax being enforced in accordance with section 49.

(16) For the purposes of this section—

“due date” means the tenth day of a calendar month;

“revised estimate” means a revised estimate made in the ninth month of the basis period or if there is no revised estimate made in the ninth month of the basis period, the revised estimate made in the sixth month of the basis period.”.



“Failure to furnish return

51. (1) Any person who makes default in furnishing a return in accordance with section 30 or 30A, shall, if he does so without reasonable excuse, be guilty of an offence and shall, on conviction, be liable to a fine not exceeding five thousand ringgit or to imprisonment for a term not exceeding one year or to both.

(2) Where a person has been convicted of an offence under subsection (1), the court may make a further order that the person shall comply with the relevant provision of this Act under which the offence has been committed within thirty days, or such other period as the court deems fit, from the date the order is made.

(3) Where in relation to a year of assessment, a person makes default in furnishing a return in accordance with section 30 and no prosecution under subsection (1) has been instituted in relation to that default—

(a) the Director General may require that person to pay a penalty equal to treble the amount of that tax which, before any set-off or repayment under this Act, is payable for that year; and

(b) if that person pays that penalty (or, where the penalty is abated or remitted under section 63, so much, if any, of the penalty as has not been abated or remitted), he shall not be liable to be charged on the same facts with an offence under subsection (1).

(4) The Director General may require a person to pay an additional amount of penalty in accordance with subsection (3) in respect of

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any additional tax which is payable by that person for a year of assessment.

(5) In any prosecution under subsection (1), the burden of proving that a return has been made shall be upon the accused person.”.


33. Section 58 of the principal Act is amended—

(a) in paragraph (a), by deleting the word “or” at the end of the paragraph;

(b) in paragraph (b), by substituting for the comma at the end of the paragraph the words “, or”; and

(c) by inserting after paragraph (b) the following paragraph:

“(c) fails to furnish an estimate in accordance with subsection 49A(2) or (3), or paragraph 49A(4)(a),”.

New section 82A


“Electronic medium

82A. (1) The Director General may allow any form prescribed under this Act (in this section referred to as the “prescribed form”) to be furnished by a chargeable person in an electronic medium or by way of an electronic transmission.

(2) For the purposes of subsection (1), the conditions and specifications under which any prescribed form is to be furnished shall be determined by the Director General.

(3) For the purposes of subsection (1), a chargeable person may authorize in writing a tax agent to furnish on his behalf a prescribed form in the manner provided for in subsection (1).

(4) A prescribed form furnished in accordance with subsection (3) on behalf of any chargeable person shall be presumed to have been furnished on that chargeable person’s authority, until the contrary is proved, and the chargeable person shall be deemed to be cognizant of its contents.

(5) Where subsection (3) applies—

(a) the chargeable person who authorizes the tax agent shall make a declaration in the prescribed form stating that—


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(i) the tax agent is authorized to furnish the form to the Director General on his behalf; and

(ii) the information provided by him to the tax agent for the preparation of the form is true and correct;

(b) the tax agent shall make a declaration in the prescribed form furnished in accordance with subsection (1) stating that—

(i) the form is prepared in accordance with the information given by the chargeable person; and

(ii) he has received a declaration made by the chargeable person under paragraph (a);

(c) the chargeable person shall keep and retain in safe custody such prescribed form being the hard copy of the form so furnished and that copy shall be made under the processes and procedures which are designed to ensure that the information contained in the form shall be the only information furnished in accordance with this section;

(d) the hard copy shall be signed by the chargeable person; and

(e) the hard copy in paragraph (c) and the declaration made under paragraph (a) shall be kept and retained for a period of seven years from the end of the year of assessment in which the prescribed form is furnished.

(6) A prescribed form referred to in subsection (1) is deemed to have been furnished by a chargeable person to the Director General on the date on which acknowledgement of receipt of the form is transmitted electronically by the Director General to the chargeable person.”.

PART II

MISCELLANEOUS

Application of this Part

35. Where there is any inconsistency between any provision of this Part and any provision of the principal Act, the provision of the principal Act shall be void to the extent of the inconsistency.

Year of assessment 2010

36. (1) For the avoidance of doubt, it is declared that in the year 2010, there shall be two years of assessment, namely—

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(a) the year of assessment 2010 in respect of the basis period ending in the year 2009 (preceding year basis); and

(b) the year of assessment 2010 in respect of the basis period ending in the year 2010 (current year basis).

(2) The year of assessment 2010 on current year basis shall be a separate year of assessment which follows the year of assessment 2010 on preceding year basis.

Estimates and instalments for the year of assessment 2010 in respect of current year basis and year of assessment 2011

37. (1) A chargeable person is not required to furnish any estimate under section 49A of the principal Act for the year of assessment 2010 in respect of current year basis.

(2) The Director General may in accordance with subsection 49A(8) of the principal Act, direct any chargeable person to make payment by instalments on account of tax which is or may be payable by that chargeable person for the year of assessment 2010 in respect of current year basis at such times and in such amounts as the Director General may direct.

(3) For the year of assessment 2011, the estimate of tax payable in respect of a chargeable person furnished to the Director General under subsection 49A(2) of the principal Act shall not be less than eighty-five per cent of the amount of tax payable for the year of assessment 2010 in respect of preceding year basis or, where that tax payable has not been determined, of the amount of tax payable for the year of assessment 2009.

Savings and transitional provision

38. If any chargeable person is liable to tax on a preceding year basis under section 5 of the principal Act prior to the commencement of the amendments to that section in this Act, then such chargeable person shall continue to be so liable.

CHAPTER V

AMENDMENTS TO THE REAL PROPERTY GAINS TAX ACT 1976

Commencement of amendments to the Real Property Gains Tax Act 1976



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40. The Real Property Gains Tax Act 1976, which is referred to as the “principal Act” in this Chapter, is amended in section 7 —

(a) in the shoulder note, by substituting for the words “, allowable losses and tax relief for allowable losses” the words “and allowable losses”;

(b) by substituting for subsection (4) the following subsection:

“(4) Where—

(a) there is an allowable loss in respect of a disposal, such allowable loss shall be allowed as a deduction to reduce the total chargeable gain of a person for a year of assessment in which the disposal was made; and

(b) by reason of an insufficiency or absence of total chargeable gain for the year of assessment in which the allowable loss arose, effect cannot be given or cannot be given in full to paragraph (a), the allowable loss which has not been so allowed (or so much thereof as has not been so allowed for that year) shall be allowed as a deduction to reduce the total chargeable gain of a person for the first subsequent year of assessment for which there is total chargeable gain and so on for subsequent years of assessment until the whole amount of the allowable loss to be allowed has been allowed.”; and

(c) by inserting after subsection (4) the following subsection:

“(5) For the purposes of subsection (4), in the case of an individual, the chargeable gain referred to in that subsection shall exclude any amount exempt under Schedule 4.”.



(a) in subsections (1) and (2), by substituting for the words “one month” the words “sixty days”;

(b) in subsection (3), by substituting for the word “thirty” the word “sixty”; and

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42. Subsection 16(2) of the principal Act is amended in paragraph (a) of the proviso by substituting for the words “tax assessed for any tax relief for” the words “chargeable gain for any”.


43. Paragraph 17(c) of the principal Act is amended by substituting for subparagraph (iii) the following subparagraph:

“(iii) the amount of allowable losses allowed;”.


44. Subsection 20(1) of the principal Act is amended by deleting the words “tax relief for”.


45. The principal Act is amended by substituting for section 21A the following section:

“Certificate of non-chargeability

21A. The Director General shall send a certificate of non-chargeability to the disposer in the prescribed form where he is satisfied that no chargeable gain has arisen.”.

Amendment of section 21B

46. The principal Act is amended by substituting for section 21B the following section:

“Duty of acquirer to retain and pay part of the consideration

21B. (1) Where on a disposal to which section 13 applies, the consideration consists wholly or partly of money, the acquirer shall retain the whole of that money or a sum not exceeding two per cent of the total value of the consideration whichever is the less, and (whether or not that amount is so retained) he shall within sixty days after the date of such disposal pay that amount to the Director General:

Provided that the Director General may under special circumstances allow extension of time for that amount to be paid over.

(c) in subsection (5), by deleting the words “year immediately preceding the”.


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(2) Where the acquirer fails to pay any amount due under subsection (1), that amount which he fails to pay shall be increased by a sum equal to ten per cent of that amount and that amount and the increased sum shall be a debt due from him to the Government and shall be payable forthwith to the Director General.

(3) Where in pursuance of this section, any amount referred to in subsection (1) is paid to the Director General by the acquirer or recovered by the Director General from the acquirer—

(a) the Director General shall apply that amount towards payment of the tax charged on the disposer to whom the acquirer was liable to pay the payments to which the amount relates; or

(b) if the acquirer has not retained that amount in paying the payment under subsection (1) with respect to which the amount relates, the acquirer may recover that amount from that disposer as a debt due to him.

(4) Notwithstanding subsection (1), where the amount due from the acquirer under subsection (1) is increased by a sum under subsection (2), the Director General may, in his discretion for any good cause shown, remit the whole or any part of that sum and, where the sum remitted has been paid, the Director General shall repay the same.”.



(a) in subsection (1)—

(i) in paragraph (a), by deleting the word “and” at the end of the paragraph;

(ii) in paragraph (b), by substituting for the comma the words “; and”;

(iii) by inserting after paragraph (b) the following paragraph:

“(c) the debt payable by him under subsection 21B(2),”; and

(iv) by substituting for the words “and sums so payable” wherever appearing the words “, sums so payable and debt so payable”; and

(b) in subsection (4), by substituting for the words “tax and sums” wherever appearing the words “tax, sums and debt”.

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48. Subsection 24(2) of the principal Act is amended by deleting the words “(or is deemed under subsection 21B(3) to have been paid)”.

New section 48A


“Admissibility of electronic record

48A. (1) Notwithstanding any other written law, where in any proceedings under this Act an electronic record of—

(a) any prescribed form is furnished by way of electronic transmission under section 57A; or

(b) any other document is stored or received by or communicated to the Director General in an electronic medium or by way of electronic transmission,

the electronic record or the copy or print-out of that electronic record shall be admissible as evidence of the fact stated or contained therein:

Provided that the record or the copy or print-out is—

(A) certified by the Director General to contain all or any information furnished, stored, communicated or received in an electronic medium or by way of electronic transmission under this section; or

(B) otherwise authenticated in the manner provided in the Evidence Act 1950 for authentication of documents produced by computer.

(2) Where the electronic record of any form prescribed under this Act or any other document, or a copy or print-out of that record is admissible under subsection (1), it shall be presumed, until the contrary is proved, that the record or the copy or print-out accurately reproduces the content of that form or document.

(3) For the purposes of this Act, “electronic medium” includes a data, text, image or any other information stored, received or communicated by means of electronic, magnetic, optical, imaging or any other data processing device.”.




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(a) in subsection (1), by deleting the words “requisition,”; and

(b) in subsection (2), by deleting the words “requisition or” wherever appearing.



(a) in the shoulder note, by deleting the words “and requisitions”; and

(b) by deleting the words “or requisitions” and “or requisition” wherever appearing.


52. Section 55 of the principal Act is amended by deleting the words “, requisition” wherever appearing.

New section 57A


“Electronic medium

57A. (1) The Director General may allow any form prescribed under this Act to be furnished by any person or by any class of persons in an electronic medium or by way of an electronic transmission.

(2) For the purposes of subsection (1), the conditions and specifications under which any prescribed form is to be furnished shall be determined by the Director General.”.



(a) in paragraph 6—

(i) in sub-subparagraph (1)(c), by deleting the words “and, subject to subparagraph (2), any interest paid on capital employed to acquire the asset”; and

(ii) by deleting subparagraph (2);

(b) in the proviso to paragraph 12, by deleting the words “and the gift is made within five years after the date of acquisition of the asset by the donor,”; and

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(c) by substituting for paragraph 31 the following paragraph:

“Prohibition of deduction for allowable losses from chargeable gains for earlier years

31. Any allowable loss suffered in a year of assessment shall not be allowed as a deduction from the chargeable gains accruing in any earlier year of assessment.”.


55. Paragraph 2 of Schedule 4 to the principal Act is amended by substituting for the word “five” the word “ten”.


56. Part I of Schedule 5 to the principal Act is amended —

(a) in the column “Category of disposal”—

(i) in item no. 4, by inserting after the words “chargeable asset” the words “or thereafter”; and

(ii) by deleting item no. 5; and

(b) in the column “Rate of tax”, by deleting the word “Nil” appearing against item no. 5.

Savings and transitional provisions

57. (1) Where—

(a) a person is entitled to a tax relief pursuant to subsection 7(4) of the principal Act prior to the amendment to that subsection under section 40 of this Act; and

(b) such relief has not been allowed as a deduction from the total tax assessed (if any) of that person for the year of assessment 2007,

such relief shall be allowed as a deduction from the total tax assessed, in the first year of assessment subsequent to the year of assessment 2009 where there is total tax assessed, and so on for subsequent years of assessment until the whole amount of such relief is fully allowed as a deduction.

(2) For the purposes of paragraph (1)(b), the year of assessment 2007 shall refer to a period ending 31 March 2007.


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CHAPTER VI

AMENDMENT TO THE LABUAN OFFSHORE BUSINESS ACTIVITY TAX ACT 1990

Commencement of amendment to the Labuan Offshore Business Activity Tax Act 1990


New section 12A

59. The Labuan Offshore Business Activity Tax Act 1990 is amended by inserting after section 12 the following section:

“Fund for Tax Refund

12A. (1) There shall be paid from time to time into the Fund for Tax Refund established under section 111B of the Income Tax Act 1967 such amount of tax collected under this Act as may be authorized by the Minister.

(2) The moneys of the Fund referred to in subsection (1) shall be applied for the making of a refund under section 12.

(3) Section 14A of the Financial Procedure Act 1957 [Act 61] shall not apply to any refund made under section 12.”.