TAX 267/467

TAXATION 1
TOPIC 1
BASIS OF MALAYSIAN INCOME TAX
ZALILAWATI YAACOB
UiTM Puncak Alam
LEARNING OUTCOME
Objectives and contribution of taxation to the Economy
01
Sources of Revenue Law
02
Types of Taxes
03
04 Classes of Income

05 Charging sections and scope of charge

 BASIS OF MALAYSIAN INCOME TAX
Section 3
01 income
. tax charged for
each YA upon income of
Definition of tax any person derived or a
02 ccrued in M’sia
A means by which governmen
ts finance their expenditure Objectives of Tax
03 Redistribute
wealth, Boost
Sources of revenue law up economy.
Statute laws, case 04
laws, informal laws
Types of taxes
Direct
05 Vs
Classes of Income Indirect.
4 (a), 4 b), 4 (c) ), 06
4 (d) , 4 (e), 4 (f).
INTRODUCTION
 What is Taxation
The process by which the government of a Cambridge English
country obtains money from its people in order to pay Dictionary
for its expenses

Contribution levied on persons property, or business Oxford Dictionary

For the support of government

Law Cases:
1. A compulsory extraction of money by a public Mathew v The Chicory
authority for purposes of enforceable by law Marketing Board, 1938

2. Raising money for the purposes of government by R v Bager, 1908

means of contributions from individual persons
Is an amount of money which is taken from your IRB Tax guide
Earnings to help towards some of the cost of services
we received in the country
OBJECTIVES & CONTRIBUTION TO
ECONOMY
Raise More Revenue
01
Prevent Concentration Of
02
Wealth In A Few Hands
03Redistribute Wealth For Common
Good
04
Boost Up The Economy
05 Reduce Unemployment
 SOURCES OF REVENUE LAW

Statute Informal
Laws Laws
Income Tax Act 1967
REVENUE Inland Revenue’sPublic
LAW Ruling

Case Laws
Created by the decision of courts
 TYPES OF TAXPAYERS
1.Resident Individual who does not
carry on any business
2. Resident individual who carries on
business
3. Partnership
4. Resident Individual (Knowledge
Worker/Expert Worker)
5.Non Resident Individual
6.Non Resident Individual (Knowledge
Worker)
7.Deceased Person’s Estate
8.Association
9.Hindu Joint Family
10. Company
11. Co-operative Society
12. Limited Liability Partnership
13. Unit Trust/Property Trust
14. Real Estate Investment Trust
/Property Trust
15.Business Trust
 CLASSES OF INCOME - SEC 4 of ITA 1967
A tax is chargeable on income of a person resident in Malaysia
S 4(a) gains of profits from a business
S 4(b) gains of profits from an employment

S 4(c) dividends, interest or discount

S 4(d) rents, royalties/ premium
Classes of Income
S 4(e) pension, annuities or other periodical payments
S 4 (f) gains or profits not falling under any of the above

SPECIAL CLASSES OF INCOME – SEC 4A of ITA 1967

A tax is chargeable on income of a person non-resident in
Malaysia
S4A Special Classes of income
S 15 Interest, Royalty
S 107 Contract Payment

S 109A Public Entertainer

S4f Other income such as commission, guarantee fee

 SPECIAL CLASSES OF INCOME – S 4
A4A
Sec 4A(i)
• services in connection with •
use of property or rights;
or installation or use of
any plant, machinery or
other apparatus
purchased from the NR
person
• include provision of person •
nel for advisory and super
visory services
Sec 4A (ii) Sec 4A (iii)
technical advice, assistance or services in connection • rental of moveable
with technical management or administration of any properties
scientific or commercial project (equipment,
machinery and
ships)
Budget 2019 – the
word ‘technical’
not include commission payment being removed to
cover a wider scope
of services rendered

• Technical – marketing, consultancy, legal service, staff

training, supply of technical personnel
• Administration – mgt and admin. function, planning,
direction, fin management

• Does not include disposal of asset by NR and freight charges paid to NR for export or shipment of goods

• Also include non-refundable deposit and advance payment

Income Income receipts (Chargeable to income tax): eg:provision of services, sale of goods/trading stock
Capital receipts (Not Chargeable to income tax): eg: personal gift, profit from disposal of long termi
nvetsment (properties, shares), gambling, sale of capital assets (motor vehicles, factory, plant and
machinery)
Person S2 of Act defines 'person' to include a company, a body of
persons: e.g. Co-operative societies

Accruing 1) Accruing in ( right to receive) - coming of income in a

in or derived passive manner: e.g. interest, rental, dividend
from
2) Derived from (received)- active involvement in obtaining
the income: e.g. employment income
Foreign 1) Foreign income not received in Malaysia is NOT taxable. (not physically received)
Income
2) Foreign income received in Malaysia is NOT taxable due to Sch.6 Para 28 of ITA, 1967.

Income Tax 1) Territorial - Residents and non-residents (individuals/corporates) are

charged based on taxed on their Malaysian-sourced income
2) Remittance of foreign income by a person is tax exempt.
3) World Income scope - Resident companies carrying on a business of banking, insurance, sea
or air transport are taxed on their Malaysian- sourced income
TAX RATES FOR
RESIDENT
INDIVIDUAL