Question

Provide the tax privileges a resident company enjoys as compared to their non-resident counterpart (MALAYSIA)

Answer 1

Tha tax privileges a resident company enjoys as compared to their non-resident in Malaysia.

1. Scope of charges:

a. For resident company, Companies carrying on business of banking, insurance, shipping and air transport income is taxable on a world income scope.

b. Other companies income accured in or derived from Malaysia.

For non-resident company, income accured in or derived from Malaysis.

2. Derivation of Dividents: For resident company, dividends distribution are deemed derived from Malaysia. Beginning from 1-1-2014 all dividends distributied by a resident company are exempt from tax in Malaysia

For non-resident dividends distribution are not derived from Malaysia.

3. Double taxation relief: Applicable for resident company where as not applicable to non-resident company.

4. Able to enjoy tax treaty benefits: Applicable for both resident and non-resident company.

5. Incentives available under ITA 1967 and Promotion of Investment Act 1986: It is applicable only for resident company.

6. Tax rates: For resident company,

i. As specified in paragraph 2 of part 1, Schedule 1, ITA 1967.

ii. Tax rate for companies with a paid up capital of RM2.5 million and less at the begging of the basis period is as follows:

a. RM500,000 20%

b. Exceeding RM500,000 25%

However, Pursuant to paragraph 2B of part 1, schedule 1, ITA 1967 which was introduced with effect from the year of assessment 200, a company will not quality for the above preferential tax rates if more than 50% of the paid up capital in respect of ordinary shares of-

a. That company is owned directly or indirectly by a related company

b. The related company is owned directly or indirectly by that company or

c. That company and the related company is owned directly or indirectly by other company.

# Related company means is whose paid up capital in respect of ordinary share exceeds RM2.5 million at beginning of the year.

iii. The tax rate applicable for an insurer from inward re-insurance business or offshore insurance business is as specified in paragraph 3, part 1 of Schedule1, ITA 1967.

iv. The tax rate applicabl for a family fund referred to in section 60AA of th ITA 1967 other than income arising from family solidarity re-takaful business and inward family solidarity re-tankful business of a resident or non-resident operator is as specified in part XII of schedule 1, ITA 1967.

For non-resident, as Specified in paragraph 2 of part 1, Schedule 1, ITA 1967.

7. Withholding tax: It is not applicable to resident company.

Source: INLAND REVENUE BOARD MALAYSIA.