Introduction of Investment Holding Company (IHC)
With reference to public ruling 3/2011, investment holding company means a company whose activities consist mainly of holding of investments, with not less than 80% of its gross income is derived from the investment held.
It is really important to note that gross income from business of holding an investment such as providing maintenance or support services is not regarded as an investment income.
2 Types of IHC
There are 2 types of investment holding company and governed under different provision under the income tax act 1967.
- Listed IHC
- s.60FA states that if an IHC is listed on Bursa Malaysia for any period in the basis period for a year of assessment, the IHC is deemed to be a listed IHC. The income of listed IHC will be treated as business income and the expenses will be given full tax deduction.
- However, any unabsorbed losses and capital allowances will not be allowed to carried forward.
- Unlisted IHC
- Governed under s.60F of the income tax act 1967. IHC is allowed to claim a deduction for a certain portion of your administrative expenses, such as director’s fee, wages and allowance, management fees, secretarial, audit, accounting fee, telephone charges, printing, postage and other incidental expenses to the maintenance of an office.
- However, such deduction will only be restricted to a maximum of 5% of the total gross income consisting of dividend, interest and rent. Any unabsorbed expenses will not be allowed to be carried forward.
This is the overview for IHC, if you are not sure the your company whether are IHC or the deduction is applicable or not, feel free to call us at 011-1217 8183.