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Wanconnect Advisory PLT

Suite 2.9, Level 2, Block C, Plaza Damansara, 45, Medan Setia 1, Damansara Heights, 50490 Kuala Lumpur

Tel : +603 – 2095 5127 Fax : +603 – 2095 8127

Email : [email protected]

© Song Liew – August 2016

We are pleased to present you our Wanconnect Tax Highlight – August 2016. The goal and

objective is to update you on the pertinent changes during the period. We trust its contents are

informative and of interest to you.

Executive Summary

Goods and Services Tax (GST)

Royal Malaysian Customs Department (RMCD) has made an announcement and updated several

GST guides, mainly: -

1. Notification on GST-03 Return Amendment

The notification on GST-03 Return Amendment, as discussed in Point 1 of our Tax Highlight

- July 2016 will take effect from 23 August 2016.

2. Guide on Accounting Software Enhancement towards GST Compliance

The Guide on Enhance Your Accounting Software to be GST Compliant (as at 1 August

2016) discussed in Point 3 of our Tax Highlight – July 2016 was withdrawn until further

notice. As per the announcement made by RMCD:-

a. The guide will be replaced with previous guide with some amendments and

improvement; and

b. Tax Code “GS” shall be removed from GST-03.

3. Announcement in relation to Furnishing of GST-03 Return and Payment of GST

Furnishing of Returns and Payment of GST commencing on 1 May 2015 (for monthly

taxable period) and 1 July 2015 (for quarterly taxable period). Please make sure the first

taxable period is the same as the GST registration approval letter.

Kindly check the announcement for guides link appended.

August 2016

GST

Announcement

GST

Announcement

mailto:[email protected]

http://gst.customs.gov.my/en/hl/_layouts/customapplication/announcementDetails.aspx?ID=189






http://gst.customs.gov.my/en/Pages/default.aspx

http://gst.customs.gov.my/en/Pages/default.aspx





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4. Guide on Export

The Guide on Export has been updated with the following:-

a. Para 9 – To be eligible for input tax claim relating to goods that are exported, a

registered person (exporter) must ensure that:-

i. Form K2 / K8 must have an endorsement on Remarks column in Sistem

Maklumat Kastam (SMK) – “A claim for input tax under the GST Act 2014 will

be made”, and

ii. Customs official Receipt.

b. FAQ 8 – export documents to be kept has included the above (a).

5. Guide on Transitional Rules

The Guide on Transitional Rules has been updated with the following:-

a. Para 55 – The provision of goods and services under a “reviewable contract” can be

zero-rated until its first opportunity for review or for a period of five (5) years after

1 April 2015, whichever is the earlier if:-

i. Both supplier and recipient to the contract are GST registered persons;

ii. The contracted supply is a taxable supply;

iii. The contract must have been irrevocably in place and agreed by all parties

to it not less than two (2) years before 1 April 2015 (31 March 2013); and

iv. The recipient of the contracted supply is making wholly taxable supplies.

Guide on Export

Guide on

Transitional

Rules








http://gst.customs.gov.my/en/rg/SiteAssets/accounting_software/ACCOUNTING_SOFTWARE01082016.pdf









http://gst.customs.gov.my/en/rg/SiteAssets/specific_guides_pdf/EXPORT_12082016.pdf




http://gst.customs.gov.my/en/rg/SiteAssets/specific_guides_pdf/TRANSITIONAL_RULES_03082016.pdf



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b. Para 55, Example 13 : A ten (10) years business supply contract made on 1 January

2013 and provides for a market review to be made every five years. Such contract

shall be:-

i. Zero rated with effective from 1 April 2015 to 31 December 2017; and

ii. Subject to GST at 6% with effective from 1 January 2018.

6. Guide on Insurance and Takaful

The Guide on Insurance and Takaful (as at 22 October 2014) has been withdrawn and

replaced with a new guide (as at 19 August 2016). New topics have been added to the

guide:-

a. Manner to claim deemed input tax credit;

b. Non allowable deemed input tax claim;

c. Marketing and co-location office in Malaysia [outside Designated Area (DA)];

d. Input tax credit in respect of outsourcing activities; and

e. Specific issue affecting insurance or takaful – unidentified money collected by

insurance companies.

7. Relief Guide on Item 5, First Schedule of GST (Relief) Order 2014 and GST (Relief)

(Amendment) (No. 2) Order 2015

The RMCD has published a guide on Item 5, First Schedule of GST (Relief) Order 2014 and

GST (Relief) (Amendment) (No. 2) Order 2015. The objective of this guide is to assist:-

a. Private educational institutions to obtain relief from payment of GST on acquisition

of goods; and

b. Suppliers not to charge GST on the supply of goods to the said Private educational

institutions.

Guide on

Insurance and

Takaful

Relief Guide on

Item 5, First

Schedule of

GSTR









http://gst.customs.gov.my/en/rg/SiteAssets/industry_guides_pdf/INSURANCE_AND_TAKAFUL_19082016.pdf






http://gst.customs.gov.my/en/rg/SiteAssets/gst_relief/ReliefGuideOnItem5_110816_ENG.pdf




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This guide outlines the implementation procedures which include:-

Private Educational Institutions

a. Conditions to qualify for relief;

b. Documentation to submit prior to issuance of invoice;

c. Documentation to submit if the goods are to be imported from overseas;

d. Private Educational Institutions shall not dispose, sell or transfer the goods; and

e. Keeping records or accounts of the goods for GST officer inspection / audit.

Supplier

a. Issuance of tax invoice under “Relief from charging GST for supply to a person given

relief under Item 5(a), (b), (c) or (d), First Schedule, GST (Relief) Order 2014”;

b. Declaration of Column 13 in GST-03; and

c. Keeping records for GST officer inspection / audit.

This guide also provides appendixes and examples of documentations which registered

person should refer to.

Income Tax

1. Tax Collection Framework – Amendment 1/2016

As part of the 2016 Budget Recalibrations’ effort announced by the Prime Minister of

Malaysian in encouraging more tax payers to voluntarily disclose their correct income and

to settle their tax arrears, the Inland Revenue Board of Malaysia (“IRB”) has issued on a

Media Release and provide offers in support of the abovementioned initiatives (issued on

10 February 2016):-

Tax Collection

Framework -

Amendment

1/2016


http://lampiran.hasil.gov.my/pdf/pdfam/GPO_Bil_1_2016_PINDAAN_05082016.pdf




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Reduction of Penalty at specific rate for voluntary disclosure

a. Tax payers who failed to submit their income tax return form or petroleum tax

return;

b. Tax payers who wish to declare the correct income against income declared

previously;

c. Disposers who failed to report the gains obtained from the disposals of real

properties within a stipulated period of time; and

d. Stamp duty payers who failed to present stampable instruments within a stipulated

period of time.

Waiver of Tax Increase

The offer is offered to tax payers who wished to settle in full their income tax, petroleum

tax, real property gain tax or withholding tax arrears before or on the 15 December 2016.

These offers are effective beginning of 1 March 2016 until 15 December 2016.

On 1 August 2016, IRB has issued the tax collection framework (amendment 1/2016)

(Malay Language). The framework outlines:-

a. The applicable laws and amendments in respect of penalty reduction:-

i. Subsection 112(3) of Income Tax Act 1967 (“ITA”) – Penalty for default

where no prosecution;

ii. Subsection 113(2) of ITA – Penalty for incorrect return or incorrect

information; and

iii. Amended to include transfer pricing audit.

The rate of penalty offered are:-

- 15% or 20% based on payment period for voluntary disclosure;

- 25% or 30% based on payment period for tax audit;

- 15% or 25% based on availability of transfer pricing documentation; and


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- 25% or 35% based on payment period for tax investigation / 20% or 25%

based on payment period and voluntary disclosure 14 days before

investigation visit

b. The applicable laws and amendments in respect of waiver of tax increase:

i. Subsection 103 of ITA – Payment of tax;

ii. Subsection 107(B)(3) of ITA – Instalment amount due not paid;

iii. Subsection 107(B)(4) of ITA – Where tax payable exceeds total of

instalments;

iv. Subsection 107(C)(9) of ITA – Where unpaid instalment be increased; and

v. Subsection 107(C)(10) of ITA – Penalty where tax payable under an

assessment exceeds estimate or revised estimate of tax payable

The tax collection framework has provided various scenarios and examples for

eligibility of waiver of tax increase.

2. Public Ruling (“PR”) 4/2016 – Tax Incentives for Child Care Centre and Kindergarten

Operators

The objective of this PR is to explain the tax treatment on the incentives provided.

Interpretation the terms are explained below:-

a. Childcare centre – premise where 4 or more children under age of 4 from more than

1 household whom are cared for a fee, registered with the Department of Social

Welfare and subject to Child Care Centre Act 1984; and

b. Kindergarten – premise provided for 10 or more children aged 4 to 6 years with aim

of receiving education, registered with the State Education Department and subject

to Education Act 1996.

PR 4/2016 - Tax

Incentive for

Child Care

Centres and

Kindergarten


http://lampiran.hasil.gov.my/pdf/pdfam/PR_4_2016.pdf





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The tax incentives are:-

a. With effect from year of assessment (“YA”) 2013, a tax exemption in respect of its

business statutory income for a period of 5 consecutive YA; and

b. Qualifying building expenditure can claim as an industrial building allowance

(“IBA”).

Kindly refer to the PR for practical scenarios and examples.

3. PR 5/2016 – Tax Incentives for Employers who provides Child Care Centres

The government encourages employers to provide childcare centres for their employees

to ensure that children have appropriate care and treatment while their parents at work.

The following are the initiatives taken by the IRB:-

a. Pursuant to s. 34(6)(i) of the ITA, expenses incurred by an employer for the

provision and maintenance of a child care centre provided for the benefit of the

employees is eligible for a deduction;

b. Child care allowances paid by employer to its employees who have children are also

an allowable expense under subsection 33(1) of the ITA; and

c. As for employee, up to RM2,400 child care allowance a year is exempted from his /

her individual tax.

With effect from YA 2013, additional tax incentive / double deduction is given to employer

which provides (a) and (b) above. Kindly refer to the PR for practical scenarios and

examples.

4. PR 6/2016 – Group Relief for Companies

Group relief is available to all locally incorporated resident companies subject to terms and

condition under s.44A of the ITA. The provision allows company within a group to

surrender not more than 70% of its adjusted loss in the basis period for a YA to one or more

related companies within the group.

PR 6/2016 - Group

Relief for

Companies

PR 5/2016 - Tax

Incentive for

Employers who

provides Child

Care Centres










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This PR outlines the:-

a. Qualifying criteria for group relief;

b. Definition of related companies and eligibility for group relief;

c. Maintaining ordinary shareholding level at 70% and above for that YA;

d. Computation of group relief;

e. Circumstances of more than one surrendering or claimant company;

f. Revision of adjusted loss;

g. Penalty of incorrect information;

h. Companies not eligible for group relief; and

i. Other pertinent matters.

5. Operational Guideline 3/2016 - Tax Clearance Letter Application for Companies, Limited

Liability Partnership (“LLP”) and Labuan Entities (Labuan Companies & Labuan LLP)

This guideline specifies the method of Tax Clearance Letter application and documentation

required for corporate taxpayers, LLP and Labuan Companies & Labuan LLP.

Kindly refer to the guide and appendixes for application forms.

This highlight is provided gratuitously and without liability. It is intended as a general guide only. Readers should seek appropriate professional advice regarding any

particular problems they encounter. Accordingly, Wanconnect Advisory PLT assumes no responsibility for any errors or omissions it may contain, whether caused by

negligence or otherwise, or any losses, however caused, sustained by any person that relies on it. For further information, clarification or advice on any of the contents

stated herein, please feel free to contact us.

Operational

Guideline 3/2016 -

Tax Clearance

Letter


http://lampiran.hasil.gov.my/pdf/pdfam/GarisPanduanOperasi_Bil_3_2016_2.pdf




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http://goo.gl/6miUfc

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https://goo.gl/forms/8CfYthft5jiwihmH3

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https://goo.gl/forms/v0dHru5lrNB1LXWD3

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Hyperlink 2016 - Wanconnectwanconnect.com.my/wp-content/uploads/2016/09/Tax-Higlight-August-2016-2.pdf · Suite 2.9, Level 2, Block C, Plaza Damansara, 45, Medan Setia 1, Damansara

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