kdu matrix 1.docx

7/21/2019 KDU MATRIX 1.docx

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KDU COLLEGE,MATRIX

To improve the effective tax rate of the group tax efficiency

PASB can do a tax planning to improve the effective rate.

The dividend income of RM 1 million received from its subsidiary is tax exempted due toa singletier system applied.

The provision of management and administrative service is tax deductible as it is a

specific provision related to business activity.

Party to secure loan

P!SB should be the party to secure loan due to it is a very profitable subsidiary and

loan can be borro"ed easily.

#roup relief

$ffective from %A &''() a loss ma*ing company+ie.PASB, is allo"ed to set off -' ofthe current year unabsorbed losses against the defined aggregate income of one or

more related companies "ithin the same group.

/n order to 0ualify for group relief) the follo"ing conditions have to be met

1, Tax resident and incorporated in Malaysia.2ue to P!SB 3 PSSB both are tax resident and incorporated in Malaysia) they

met the condition.

&, Related companies throughout the year and 1&months period prior to that year

of assessment.

4, 5aving common 1&months period ending on the same day.Since only P!SB ending date on 4' 6une is not the same as the others on 41

2ecember) P!SB should change to 41 2ecember to 0ualify this criteria.

7, Ma*e an irrevocable election to surrender or claim the business loss in their

respective tax return 8orm !.To claim the business loss) both PSSB and P!SB should ma*e an irrevocable

election.

9, Sub:ect to income tax at &9.both PSSB and P!SB should sub:ect to income tax at &9.

;, The claimant company has defined aggregate income for that year of

assessment.



-, The claimant and the surrendering companies each have paid <up capital of

ordinary shares of more than RM&.9 million.Since only PSSB paid up capital of RM &.7 million is belo" RM &.9 million)

PSSB should increase the paid up capital to RM &.9 million.

=, The shareholding) "hether direct or indirect) of the claimant and surrendering

companies in the group must not be less that -'.

Since only PASB have direct control of all of the subsidiaries) PASB should obtain '.9

more of P!SB in order to meet -' condition.

Bionexus status

Bio>exus company is a company involved in the business of life science +biotechnology

activity, that deals "ith living organisms and their organi?ation) life processes)

relationship to each other and their environment "hich has been approved "ith

Bio>exus status by the Malaysian Biotechnology !orporation Sdn Bhd.

A !ompany "ith Bio>exus status "ill be exempted from the payment of income tax in

respect of its statutory income.

Pym /ndustries Sdn Bhd extracted special tissues from the plant sap of a local plant

"hich is capable to increase the yields in rice farms and grain based plants. /t is

foreseen that there "ill be further research and development +R32, done on the plant

sap as "ell.

Since the extraction of special tissues culture from the plant is an activity that comprises

ecology) life science) therefore Pym /ndustries Sdn Bhd is eligible for Bio>exus status.

$xpenditures incurred by a Bio>exus Status !ompany+BS!, shall be given exemptionsfor the purpose of

+a, 8irst approved business underta*en by BS! ) or)+b, $xpansion pro:ect) for a period of 9 consecutive years of assessment) if

refers to building used for the activity of R32 and plant and machinery used

on life science.

Tax incentives are given to an amount of allo"ance of 1'' incurred in the basis period

and the amount of allo"ance to be exempted shall be e0ual to the amount of statutory

income for each year of assessment.

Provided that Pym /ndustries Sdn Bhd had generated income for the year 41 2ec &'19and the R32 "ill be done for a period of 9 consecutive years of assessment) the

company "ill be entitled to allo"ance "hich is e0uivalent to the statutory income for the

year.

Any losses accrued before the exemption period or during the exemption period are

allo"ed to be carried for"ard and is deductible against statutory income of the post

exemption year until they are fully utili?ed.



Permanent Establisment

2ouble taxation agreement is a result connecting factor of taxation la" bet"een t"orelevant countries. The connecting factors are the residence) the income and the

property. Many countries primary aim is to try to eliminate double taxation. The other

aim is to encourage the inflo" of capital and to improve trading in the country) especially

developing country.

/n general) permanent establishment means a fixed place of business in "hich the

business is "holly or partly carried on. /n a cross border transaction) the central issue in

all countries is "ho has the right to tax on the gains and profits earned for the company.

/n the double taxation agreement bet"een Malaysia and treaty countries such as

Australia) the permanent establishment concept is employees to resolve this issue.

Taxation is necessary to be imposed on the foreign enterprise profit "hen it participates

in the economic life of Malaysia in an independent and material "ay. @n the other

hand) "hen the foreign enterprise does not establish a permanent establishment in

Malaysia) thus the profits many be exempted from tax. 5o"ever) "ithholding tax issue

should be considered in situation "here permanent establishment is not present. To

*no" "hether a permanent establishment exist it has to go through 4 tests

1, the asset test

&, the agency relationship test

4, the activity test

Based on the information give) "e are able to conclude that >eumann /nternational Pte

td +>/, is not a permanent enterprise in Malaysia. This is because

1, >/ does not have a fixed place of business in Malaysia. They only send its employees

to perform technical consultancy support services for a period of 9 months. They "ill

only be in Malaysia temporary.

&, /n normal circumstance) technical consultancy support services "ill be deemed that

the enterprise has a permanent establishment. 5o"ever) as the service provided is lessthan ; months) thus) it "ill not fall under permanent establishment.

Cithholding tax

ii, Cithholding tax is a tax that is imposed on a non resident "ho has business dealings



in Malaysia. To ensure that the government is able to collect the tax efficiently) an act

has been establish to appoint the payer )eg employer) to be the agent to collect the

income tax from such non residents. This is to "ithhold a portion of the payment and

pay to tax authorities. This portion of tax is call "ithholding tax.

ocal labor and material cost of P!SB "ould not be liable to "ithholding tax as the labor is a resident in Malaysia. The materials are also bought "ithin Malaysia.

easing of heavy plant and machinery from Saporo+ 6apan , limited is sub:ect to a 1'

"ithholding tax "hich fall under the scope of section 7A +iii, . Section 7A +iii, covers the

lease rental for moveable properties such as plant and machinery.

RM&)''')'''x 1' D RM&'')'''

The technical consultancy support service provided by >eumann /nternational Pte td

+ >/ , "ill also be sub:ect to 1' "ithholding tax under scope of Section 7A +ii,. Section7A +ii, covers the payment on services for technical advice) technical assistance) and

technical services. /t also renders in connection "ith technical management and

administration. /t also includes passing over or utili?ation of expert or speciali?ed

*no"ledge) s*ills and expertise.

RM 9'')''' x 1' D RM 9')'''

Reimbursement of business class airfare to Malaysia is a an off poc*et expenses. Thus)

it is sub:ect to 1' "ithholding tax.

RM &')''' x 1' D RM &)'''

Training in Malaysia for >/ is not sub:ect to "ithholding tax as it is deemed derived from

Malaysia.

Royalties that are paid to a Singapore company are sub:ect to 1' "ithholding tax.

5o"ever the offshore service are not sub:ect to "ithholding tax as it is not deemed from

Malaysia.

RM &)''')''' x 1' D RM &'')'''

The annual maintenance of the refinery is not sub:ect to "ithholding tax as the service is

deemed derive from Malaysia.

Three >ational Eey $conomic Areas +>E$A, chosen are $ducation) Tourism) and

Cholesale and Retail.



$ducation

Fnder this area) there "ill be four business activities of focus based on existing mar*et

share and potential future gro"th "hich are

1, $arly !hildcare and $ducation +$!!$,

&, Basic $ducation Primary and Secondary +B$,4, Technical $ducation and Gocational Training +T$GT,7, Tertiary $ducation ocal and Abroad +T$,

The type of business activities opportunities to be promoted are as follo"s

2iscipline !lusters to support $ducation >E$A to meet global industry

re0uirements and trends. The discipline clusters focused on /slamic 8inance and

Business) 5ealth Sciences) Advanced $ngineering and 5ospitality Tourism.

There are also opportunities to venture into ne" discipline clusters such as oil)

gas and energy) etc.

8urthermore) there is opportunity to capitali?e on MalaysiaHs uni0ue postion as a

multicultural and multilingual environment by incorporating !entre for

$xcellence in anguage earning ma*ing Malaysia to become a anguage 5ub.

Tax incentives available for $!!$ private institutions registered "ith Ministry of

$ducation +M@$, are

Tax exemption on statutory income from the business of the pre

school*indergarten for a period of 9 years +from %A &'14, /BA at annual rate of 1' for building used as preschool*indergarten

Tax benefits are also given to private childcare operators "ho establish

their facilities at "or*places

As for B$ specifically related to profit oriented private or /nternational School

registered "ith M@$ tax incentives available are

-' income tax exemption for a period of 9years or /TA of 1'' on I!$

incurred "ithin 9 years "hich can be used to offset -' of statutory

income /mport duty and sales tax exemption for educational e0uipment

2ouble deduction for overseas promotional expenses

Also) for T$ tax incentives available is$xpenses on development of ne" courses "hich comply "ith regulatory

re0uirements relating to those courses are available for deduction over a

period of three years



8inancial Services

The second >E$A is 8inancial Services. The importance of this sector to

MalaysiaHs $conomy has been gro"ing over the past decade) "ith its #2P

share increasing.

The proposed development ta*es on a holistic approach of both financial

institutions and financial mar*ets strengthening four *ey trustsJ strengthen

the core) serve needs of a high income population) develop ne" sectors)

and develop a portfolio.

There are various of business activities opportunities available as follo"s

/. !ommercial Ban*ing segment can gro" "ith innovation in delivery

of financial services such as branchless ban*ing) increased

financial inclusion via national literacy programme and fast gro"ing

personal finance segment

//. /slamic Ban*ing segment has a high potential gro"th leading to

opportunities such as /slamic bro*ing and migration of money

lending business to /slamic ban*s to tighten money lending

business.

///. /nsurance and Ta*aful on the other hand is expected to contributeby increased insurance ta*eup from #overnmentHs effort to

educate public on financial planning and importance of protection.

/G. /nvestment Ban*ing also has its business opportunities of increase

of /nitial Public @ffering issuance due to vigorous effort to be listed

of Bursa Malaysia. There are also effort of integration of capital

mar*ets "ithin Asia Pacific.

Tax incentives available for licensed /slamic ban*ing and ta*aful business

are as follo"s

Tax exemption on statutory income from business conducted in

international currencies



Stamp duty exemption on certain instruments relating to /slamic

ban*ing) ta*aful activities and /slamic capital mar*et to promote

Malaysia as an /nternational /slamic 8inancial !entre

Fnder"riting) distribution or dealing in su*u* originating fromMalaysia is given tax exemption on statutory income.

The tax incentives "here dividends from Real $state /nvestment

Trust +R$/T, at 1' remain for the next five years

>o balancing charge on disposal of industrial building from a

company to a R$/T

Stamp duty exemption on instruments of transferpurchase in

relation to R$/T

>e"ly establish /slamic stoc* bro*ing company that applies to

Bursa Malaysia from &('; to 411&19 and commences its

business "ithin & years from date of approval are given deduction

on establishment expenditure.

Suggestion to enhance the incentives are by providing incentives for use

of epayment) financial courses provided by financial institutions

5ealthcare

The final >E$A discussed is healthcare "hich aims to gro" three main

subsectors namely) pharmaceuticals) health travel and medical

technology.

Cith this there are business opportunities as follo"s

/. Medical technology manufacturing "hich aim to attract multinational

companies to "or* "ith Malaysian companies in the manufacturing

of medical devices for the local and export mar*et.

kdu matrix 1.docx

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