Derivation

- derived from Malaysia – taxable

- derived outside Malaysia – in scope of chargeability to tax S3 of ITA but exempted under para 28
schedule 6
- Special industries (bank, air transport, shipping, insurance) chargeable to tax
- Labuan Business activity - charge under LBATA

Classes of income
s.4(a) Business income
s.4(b) Employment income
s.4(c) Dividend, interest & discount
s.4(d) Royalty, rental & premium
s.4(e) Pension, annuity
s.4(f) Other income (commission)

Special classes of income (Withholding tax)

S.4A(i) – paid for service rendered by non-resident (property rendered/ installation of plant)
S.4A(ii) – paid for advice given
S.4A(iii) – paid for agreement for use of moveable property
SME
- incorporated and resident in Malaysia
- Paid up ordinary share capital not exceeding RM 2.5m as at beginning basis period
- not more than 50% of share directly/ indirectly owned by related company/ company / another
company
Residence status
Individual – 182days, link another period of 182 days, 3 out of 4 immediate preceding year at least
90days, 3 preceding year & following YA
Company – management and control in Malaysia (the place conduct business affairs (meeting))
Donation
Gift and contributions
- government, public facilities for disable person 100%
- institution, sport activity, approved project, wakaf 10% of aggregate income
- libraries, approved healthcare facility RM20,000
Zakat
2.5% of aggregate income

Rebate for Company & LLP – RM 20,000 for 3 consecutive year (not exceed RM2.5m, income less
than RM 50m & commence after 01.07.2020 but not later than 31.12.2021)
Combined assessment
- living together
- election made in writing in tax return
- person elects must have income
Badge of trade
Incorporation of company – company = profit seeking
Nature of subject matter – subject yield income
Profit seeking motive at time of acquisition
Financing arrangements – own fund / loan
Improvement or alterations to subject matter – motive to profit seeking
Period of ownership
Circumstance lead to disposal – emergency need for fund
Methods employed to disposal
Interest in same or similar field
Repetitions of similar transactions
Accounting evidence

Revenue expenses
-incurred wholly and exclusively in production of income
Capital expenditure
- qualifying assets used in business

Commencement date
Manufacturing – plant and machinery in place & raw materials arrived
Trading – stocks sold
Plantation – the seedlings are first planted / animal stocks purchased
Letting of property – property ready for letting
Acquisition – business operation are acquired
Grant and subsidy
- Earlier of grant received or relevant expenditure incurred
- From other parties – capital not taxable, revenue taxable
Donation, Gift – without any consideration given in return – not taxable
Award - taxable
Scholarship – exempted
Compensation for personal damage – if permanent then not taxable
Insurance proceed – if beneficiary is employee then not taxable
Deductible expenses test
Once and for all – one-off payment
Enduring benefit
Identifiable asset
Fixed capital & circulating capital – circulating capital = stock
Business entity
Initial expenses
Interest restriction
Loan is partially or fully taken for non-qualifying assets
RM10,000 – for company
RM 6,000 – for non company
Interest on late payment for debts (Trading) – allow to deduct
Refinance loan – if original loan allow then allow
Repair and renewal expenses
Exclude reconstruct or rebuilding – Capital in nature
Repair – replace part damaged to its original condition without any element of improvement, addition
and alteration
Initial repair – disallow as capital in nature
Replacement – whole part – capital in nature
Replacement of implements, utensils or articles less than 2 years life span then revenue in nature
Pre-commencement expenses
Incorporation expenses – incorporated after 13.09.2003 and share less than RM2.5m
- cost printing memorandum of association
- cost of registering the company, statutory documents and stamp duty
- cost of drawing up preliminary contracts
- cost of printing debentures
- cost of seal of the company
- underwriting commission
Business training
- to improve basic skills
- incurred within 1 year before commencement of business
- allow under S.33
Recruitment of employees
- enable the person to commence business
- allow under s.33
- incurred within 1 year before commencement of business
Franchise fee
- local franchise brand
- franchise fee not refundable
Professional indemnity insurance premium
- professional carries on business of his profession – allow, otherwise not qualify
Bad debts
- trade related
- included in previous YA
- continuing business
- irrecoverable
- specific debtor
- reasonable steps taken (issue reminder)
Debts taken over upon acquisition – disallow – not included in gross business
Waiver of debt – disallow due to commercial consideration
Debt from related – to qualify need evidence as it is arm length basis and valid business reasons
Expenses acquire treasury shares related to Employees Share Scheme (ESS)
- Through issuance of new share – disallow as no actual cost incurred
- Employer reacquire its own treasury shares - allow
Stock in trade
Capital allowance
Determination of disposal value
Asset held for sell
Industrial Building Allowance
- factory
- dock, wharf, depot or jetty
- warehouse
- water, electricity and telecommunication station
- facility of employees
Agricultural Allowance
Control transfer
Employment income
Double deduction
Pioneer Status
Investment Tax Allowance
Reinvestment Allowance
Incentive for value added
Incentive for export

MITC
R & D (4 types)
Labuan Business Activities
Group relief losses
LEASE
IHC
Estate of deceased individuals
Settlement
Unit Trust
Real Estate Investment Trust (Reit)

LLP
Withholding tax
Transfer pricing
SST