Crowe Chat Vol.1/2022

Crowe Chat Vol.1/2022

Tax

28/01/2022
Crowe Chat Vol.1/2022

Welcome to our Crowe Chat Vol.1/2022. In this issue, we will cover the following topics:

  1. Implementation of 2% Withholding Tax on Payments Made to An Agent, Dealer, or Distributor
  2. Gazette Order on Conditions for Tax Rebate for Companies and Limited Liability Partnerships (LLPs)
  3. Gazette Order on Secretarial and Tax Filing Fees
  4. Gazette Order on Rental of Premises for Employees

 

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Implementation of 2% Withholding Tax on Payments Made to An Agent, Dealer or Distributor

A new withholding tax provision under Section 107D of the Malaysian Income Tax Act, 1967 (MITA) was introduced under the Finance Act 2021 with effect from 1 January 2022. Under this new provision, a company is required to impose and withhold 2% withholding tax on gross monetary payments made to a resident individual arising from sales, transactions or schemes carried out by that resident individual as the agent, dealer or distributor of the company. 

The company is only required to withhold the said 2% withholding tax on monetary payments paid to the resident individual if the total sum of payments (whether monetary or otherwise) received by that resident individual from the company in the immediately preceding year of assessment (YA) exceeded RM100,000. The withholding tax is to be remitted to the Director General of the Inland Revenue Board within thirty (30) days after paying or crediting the agents, dealers or distributors.

 

Media Release

The Inland Revenue Board of Malaysia (IRBM) has issued a Media Release (available in Bahasa Malaysia only) regarding the Implementation of the 2% Withholding Tax on Payments Made to An Agent, Dealer or Distributor.

 

 

Details of the Media Release

Since the deadline for payment of the withholding tax is 30 days from the date of payment of the monetary payments to the resident individuals by the Company, some withholding tax may be due for payment to the IRBM in January 2022 to March 2022.

However, the IRBM has agreed to defer the implementation of the remittance of the 2% withholding tax until 31 March 2022. This is to ensure that all payer companies can notify their agents, dealers or distributors regarding the imposition and remittance of the 2% withholding tax. Hence, companies are allowed to delay the remittance of the 2% withholding tax to the IRBM until 1 April 2022 without being subject to any increase in tax. 

The IRBM will issue Frequently Asked Questions (FAQs) on this subject matter in due course. 

Crowe Chat Vol.1/2022

Gazette Order on Conditions for Tax Rebate for Companies and Limited Liability Partnerships (LLPs)

The Government announced an income tax rebate for new Small Medium Enterprises (SMEs) and LLPs of up to RM20,000 per YA for the first 3 YAs under the PENJANA economic stimulus package. Subsequently, Section 6D of the MITA was introduced under Finance Act 2020 to legislate the proposal. In order to enjoy the income tax rebate, the SMEs and LLPs must be incorporated and must have commenced business between 1 July 2020 and 31 December 2021. Furthermore, the SMEs and LLPs must fulfill the requirements specified under Section 6D of the MITA and all other conditions that may be imposed by the Minister via a statutory order.

New Income Tax Order

Income Tax (Conditions For The Grant Of Rebate Under Subsection 6D(4)) Order 2021 was gazetted on 31 December 2021

 

Details of the New Income Tax Order (extracted verbatim from the relevant Order)

  • Effective from the YA 2021.
  • A company or an LLP does not own or is being owned directly or indirectly by a related company or a related LLP which has a paid-up capital in respect of ordinary shares or a contribution of capital (whether in cash or in kind) of more than RM2.5 million at the beginning of the basis period for a YA.
  • Business premises, plant, equipment and facility owned as well as employees (except for its Chief Executive Officer and directors) of the company or the LLP are different from its related company or its related LLP.
  • Business activity carried out by the company or the LLP is different from its related company or its related LLP or a sole proprietorship where the sole proprietorship is converted to a company or an LLP.
  • The company or the LLP is not a result of a merger or an acquisition of two or more companies or LLPs.
  • The company or the LLP is not a partnership or a company which has been converted into an LLP.
  • When the company or the LLP first commences operations on or after 1 July 2020 and its basis period ends on or before 31 December 2020, a rebate is granted for the YAs 2021 and 2022 only.
     
Crowe Chat Vol.1/2022

Gazette Order on Secretarial and Tax Filing Fee

The Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee) Rules 2020 provides that secretarial fees and tax filing fees which are incurred and paid in a YA are deductible up to a maximum of RM15,000 for a YA. 
 

Amended Income Tax Rules
Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing) (Amendment) Rules 2021 was gazetted on 24 December 2021. 

Details of the Amended Income Tax Rules
Major points highlighted in the Amended Income Tax Rules are:
  • Effective from the YA 2022.
  • A deduction in relation to secretarial and tax filing fees incurred can be claimed in the YA when the fees are incurred, regardless of whether the secretarial and tax filing fees incurred have been paid. 
  • However, for the YAs 2020 and 2021, the secretarial and tax filing fees incurred are only deductible when the fees are paid.
     

Gazette Order on Rental of Premises for Employees

The Government announced a further tax deduction on rental expenses of premises provided as living accommodation for employees under the PEMERKASA economic stimulus package. This further deduction applies to manufacturing companies and manufacturing related service companies registered under the [email protected] program.
 

New Income Tax Rules

To legislate the proposal, Income Tax (Deduction for Expenditure on Provision of Employees’ Accommodation) Rules 2021 was gazetted on 24 December 2021. 

 

Details of the New Income Tax Rules (extracted verbatim from the relevant Rules)

  • Effective from the YA 2021.
  • In ascertaining the adjusted business income of a company, a deduction of up to RM50,000 is allowed for the expenses incurred by the company on rental of a premise for the purpose of employees’ accommodation within the period from 1 January 2021 until 31 December 2022.
  • The amount of deduction allowed under these Rules is in addition to any deduction allowable under Section 33 of the MITA. 
  • The employees’ accommodation must be an accommodation certified with a Certificate for Accommodation as provided for under Section 24D of the Employees’ Minimum Standards of Housing, Accommodations and Amenities Act 1990, but excludes accommodation for directors.
 

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