Tuesday 11 August 2020

New Public Rulings No.1/2020, No.2/2020, No.3/2020 and No.4/2020

We would like to inform that the following Public Rulings (PRs) have been uploaded in the website of the LHDNM recently: - 

Public Rulings

Title

Date of

Publication

Objective & Salient Points

No. 1/2020

[click HERE]

Tax Incentives For Bionexus Status Companies

22.05.2020

To explain the tax treatment in respect of tax incentives for a BioNexus Status Company (BNX) in Malaysia. 

 

It is stated in this PR that a BioNexus Status is a special status awarded to qualified biotechnology companies undertaking value-added biotechnology or life sciences activities. A company which has been awarded the BioNexus Status would be able to enjoy fiscal incentives, funding assistance and other benefits to assist the growth of the company.

 

The PR also explains the application process for BioNexus status, the tax incentives available for a BNX and treatment of losses incurred by a BNX.

 

Note: This PR replaces PR No. 8/2018.

No. 2/2020

[click HERE]

 

 

 

 

 

 

 

 

No. 3/2020

[click HERE]

 

Note : Both PRs are

to be read together

Tax Treatment Of Stock In Trade Part I - Valuation Of Stock

 

 

 

 

 

 

 

 

Tax Treatment Of Stock In Trade Part II - Withdrawal Of Stock

03.06.2020

 

 

 

 

 

 

 

 

 

03.06.2020

To explain the valuation of stock in trade in relation to a business carried on by a person in Malaysia. 

 

The PR states that for tax purposes, the value of the stock in trade is important in determining the adjusted income of a business.

 

The PR explains the basis of valuation of stock in trade for tax purposes is that the market value of an inventory (stock in trade) would be equal to the fair value or estimated selling price. Net realizable value is not acceptable for tax purposes.

 

To explain the tax treatment of withdrawal of stock in trade in ascertaining the adjusted income in relation to a business for the basis period for a year of assessment carried on by a person in Malaysia. 

 

The PR states that the stock in trade withdrawn from a business for own use or for use in a different business activity or reclassification from trading to capital or vice versa due to a change of intention of the business, has to be accounted for and valued to an amount equal to the market value of that stock in trade.

 

It is also stated that the market value of stock in trade can be reduced under certain circumstances. Reference can be made to the example provided in this PR.

 

In the event the stock in trade is parted with by compulsion, the PR states that the gains or profits from a business shall include an amount receivable arising from stock in trade parted with by element of compulsion (including requisition or compulsory acquisition). The amount receivable will be treated as gross income of the business in the year where the stock in trade was compulsorily acquired.

 

Note: The above PRs replace PR 4/2006.

No. 4/2020

[click HERE]

Tax Treatment Of Any Sum Received And A Debt Owing That Arises In Respect Of Services To Be Rendered

16.06.2020

To explain where in the relevant period –

 

(a) any sum received by a person, notwithstanding that no debt is owing to the

person; and

(b) a debt is owing to a person

 

that arises in respect of services to be rendered is to be treated as gross income of the person from a business for the relevant period. 

 

The PR explains that the amendment to paragraph 24(1)(b) of the ITA provides that where in a relevant period, a debt owing to the relevant person arises in respect of services to be rendered in the relevant period or in any following basis period, the amount of the debt is to be treated as gross income of the relevant person from the business for the relevant period.

 

Pursuant to the subsection 24(1A) of the ITA, where in the relevant period, any sum is received by a relevant person in the course of carrying on a business, in respect of any services to be rendered in the relevant period or in any following basis period, the sum is to be treated as gross income of the relevant person from the business for the relevant period the sum is received, notwithstanding that  “no debt is owing to the relevant person in respect of such services”. In other words, payment received in advance will be brought to tax in the basis period the sum is received.

 

The PR states that the application of paragraph 24(1)(b) would have to be considered first before applying subsection 24(1A).

 

The PR also provides examples of services that are not subject to the above paragraph 24(1)(b) and subsection 24(1A) of the ITA.

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