Wednesday, 10 February 2021

Wednesday, 3 February 2021

Special Deduction on Renovation and Refurbishment Expenses

One of the tax measures introduced under the Short-Term Economic Recovery Plan (“PENJANA”) was the Special tax deduction for renovation and refurbishment of business premises, which has recently been gazette under P. U. (A) 381. 

These Rules have the effect from the year of assessment 2020.

Criteria for claiming the special deduction are as follows:-

- The cost of renovation and refurbishment must be incurred for business premise

- The cost is to be incurred from 1 Mar 2020 until 31 Dec 2021 (Qualifying period)

- Subject to maximum of RM300,000 for the entire qualifying period 

- The cost which is entitled for the deduction is specified in the First Schedule of the Gazette Order, as follows:-


- It shall not include the cost specified in the Second Schedule, as follows:-

- The cost of renovation and refurbishment incurred must be certified by an external auditor. For the purpose of audit certification, kindly ensure the supporting documents are in place, such as supplier invoices, proof of payment, photo of renovation work (before and after). Site visit may be requested by external auditor for verification purpose. 

- The special tax deduction does not apply where capital allowance or allowable expense under S33(1) ITA 1967 has been claimed in relation to the cost of renovation and refurbishment.

P.U. 381 - Income Tax (Costs of Renovation and Refurbishment of Business Premises) Rules 2020


Transfer Pricing Documentation - Submission within 14 days upon request!

In the 2021 Budget proposals, there were some changes made to the Income Tax Act 1967 (“ITA”) and one of the more notable ones was the introduction of new provisions over transfer pricing (“TP”) penalties. The Malaysian TP Guidelines were also updated to stipulate that TP documentation must be submitted within 14 days instead of the 30 days that were given previously.

TP is set to be one of the avenues that the Malaysian tax authorities will be zooming into in 2021. As such, much needed attention must be given to TP to ensure that our clients and taxpayers at large are managing their tax risk well.

TP basically affects companies with related party transaction(s) (“RPT”)” in which prices transacted must be ‘arm’s length’ in nature, i.e. the transacted price(s) must be similar to how independent companies transact with one another.

The Inland Revenue Board Malaysia (“IRB”) has issued TP Guidelines which can be used as a reference point by taxpayers when preparing the TP documentation.

In the abovementioned TP Guidelines, the IRB has recently made two (2) important amendments as follows –

Please note that in Malaysia, there is no requirement in the law for TP documentation to be submitted on any predetermined or annual/regular basis. It is submitted or made available upon request by the IRB, normally when the companies are selected for TP audits. Probably, due to this, there tends to be a relaxed approach taken by many taxpayers that the TP documentation can be prepared as and when the need arises. It is important to note that it is not possible to prepare TP documentation in 14 days or even 30 days for that matter!

The timeline needed to prepare the TP documentation depends on the complexity and volume of RPT transactions. It is also important to take note that unlike other countries, TP in Malaysia also includes “domestic” transaction(s) as well as “cross-border” transactions.  As such, companies must place importance to prepare TP documentation pro-actively to avoid getting things wrong and then scrambling for solutions after the inquest begins!

Please take note that there were no specific TP penalties in place prior to the 2021 Budget proposals. The following “NEW” penalty section 113B in the ITA was introduced obviously with strict TP compliance for taxpayers in mind and we provide this below -

In addition to the above penalty under section 113B, new subsections 140A(3A), (3B) and (3C) were also introduced in the ITA. A new concept of imposing a “5% surcharge” is introduced as follows –

The surcharge may make companies which are in a loss-making position or in a non-tax payable position due to tax holidays/incentives to take seriously the need to prepare TP documentation that meets the expected standards under the laws and guidelines.
With the shorter 14-day timeframe, it is important for taxpayers to ensure that contemporaneous TP documentation is in place and up to date. ‘Contemporaneous’ refers to ensuring that all data in the TP documentation is valid and updated in the relevant financial period under review. The preparing of contemporaneous TP documentation requires specific expertise and technical knowledge. Baker Tilly Malaysia urges their clients and taxpayers at large to consult advisers on what needs to be the minimum to be put in place to avoid undue problems with the tax authorities. The TP documentation will be subject to scrutiny by the IRB during the course of an audit, and there tends to be greater reliance placed on work of external consultants when assessing the sufficiency and compliance of the documentation with the Rules and Guidelines.  
With such severe TP penalties being imposed with effect from 1 January 2021, it is time for companies with RPT to pay careful attention to ensuring, without delay, the preparation of robust TP documentation, if they have not already paid heed.

Wednesday, 20 January 2021

PERMAI (“Perlindungan Ekonomi & Rakyat Malaysia”) Assistance Package

The Prime Minister announced the PERMAI Assistance Package valued at RM15 billion on 18 January 2021. A total of 22 initiatives will be implemented under the PERMAI Assistance Package, anchoring on three main objectives as follows –

  • Combatting the COVID-19 outbreak
  • Safeguarding the welfare of the people
  • Supporting the business community

Prior to the PERMAI Assistance Package, the Government had unveiled various economic stimulus packages to alleviate the ill-effects of the Covid-19 pandemic such as Prihatin, Prihatin Plus, Penjana and KITA Prihatin totaling RM305 billion. Further allocations were also announced in Budget 2021 in relation to Covid-19.

Below are a select few of the highlights and tax initiatives under the PERMAI Assistance Package, which essentially enhances or extends previous measures announced –

a screenshot of a cell phone

Further details will follow as and when they are made available.

Sunday, 8 November 2020

2021 Budget Highlights

The COVID-19 pandemic heralded a significant increase in spending on tackling the crisis, making the newly tabled 2021 Budget the biggest allocated budget in Malaysian history. It is expected to help the nation’s economy get back on track.

Click on the following image to download our latest publication, 2021 Budget Highlights, which gives you a snapshot of the tax proposals introduced in the Budget.

If you have any enquiries with regards to the above publication, feel free to contact us.