TaxLetter 31

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Human Resource Development Fund Gazette Orders

Gazette Order  P.U.(A)84/2021   Pembangunan Sumber Manusia Berhad (Amendment of First Schedule) Order 2021

In order to strengthen the lifelong learning for skills enhancements, the Human Resource Development Fund (“HRDF”) has widened its scope of coverage in Part I of First Schedule of Pembangunan Sumber Manusia Berhad (“PSMB”) Act 2001 as follows:

In Part II of the First Schedule of PSMB Act 2001, employer with:-

i. Five (5) to nine (9) employees; and

ii. Five (5) or more but less than five hundred thousand (500,000) employees which is non-governmental organization and carrying out labour union; religious organization; political organization; nursing care facilities, including nursing home for elderly person, disable person, orphanage, chemicals abuser or any welfare services; or social work without lodging.

may opt to register with HRDF:

Effective 1 March 2021.

Gazette Order  P.U.(A)84/2021    Pembangunan Sumber Manusia Berhad (Exemption of Levy) Order 2021

Nevertheless, relaxation is given to new employers as the HRDF contribution will be exempted effective from 1 March 2021 to 31 May 2021. Therefore, the actual contribution date will commence on 1 June 2021.

Gazette Order P.U.(A)84/2021    Pembangunan Sumber Manusia Berhad (Amendment of First Schedule) Order 2021

New industries covered under Part I of the First Schedule of PSMB Act 2001:-

Special Voluntary Disclosure Programme (“SVDP”) Update

There are allegations that the Inland Revenue Board of Malaysia (“IRBM”) has made a U-turn on the treatments on taxpayers who took part in the Special Voluntary Disclosure Programme (“SVDP”), which was implemented from 3 November 2018 to 30 September 2019.

On 9 March 2021, IRBM has denied such allegations and clarified that treatments on each case were based on facts and merits. The IRBM mentioned that a total of 286,428 taxpayers have participated in SVDP, with a total taxes and penalties collection of RM7.877 billion, and 11,176 were new taxpayers.

IRBM gave its assurance that it would accept their SVDP in good faith, provided full income and payment has been made within the stipulated period. Nevertheless, the computation of tax will still be checked to ensure the accuracy of the SVDP made.

Sales and Service Tax Guides Updates

Guide on Information Technology Services

In accordance with an update on Example 24 provided in the Information Technology (“IT”) Services Guide, a registered person who fulfill the following conditions:-

a)Registered person under Service Tax Act 2018 and account for service tax using SST-02 form;

b)Provide same services to customer as imported taxable services acquired;

c)Imported taxable service is for furtherance of business and not for personal consumption; and

d)Has paid amount payable for the imported taxable service to the service provider.

is granted exemption by Minister to account and pay service tax on imported taxable service based on the self-recipient accounting, under the Service Tax Policy (“STP”) No. 2/2020.

Effective 1 January 2020.

Guide on Digital Services by Foreign Service Provider (“FSP”)

The Royal Malaysian Customs Department (“RMCD”) has clarified that the following are defined as Digital Services:-

a)Digital image which can be downloaded online;

b)Presentation template which can be downloaded via dedicated cloud-based storage; and

c)3D drawing which has been purchased from overseas company but received in a form of softcopy.

Pursuant to Paragraph 23 of the Guide, effective from 14 May 2020, exemption is given to Foreign Registered Person (“FRP”) or FSP that provides digital service to Malaysia’s company within the same group of companies. Meanwhile, FRP who provides digital service only to a company in Malaysia who is in the same group of companies may apply for cancellation of registration. Kindly refer to Paragraph 4 to Paragraph 7 of the First Schedule of the Service Tax Regulations 2018 for the qualifying conditions of a company to be within a group of companies.

Effective from 1 January 2021, the Director General may:-

a)Upon application of FRP, approve service tax to be due at the time when invoice is issued;

b)Credit notes and debit notes shall be issued by FRP to make service tax adjustments when there is a reduction or increase in the amount of service tax being accounted; and

c)Any application for remission of penalties shall be made online through MySToDS and submitted together with the relevant supporting documents.

International Tax Issues due to COVID-19 Travel Restrictions

Tax Residency for Year of Assessment (”YA”) 2020 & YA 2021

The COVID-19 pandemic has caused complications in determining the residence status of expatriate taxpayers in Malaysia. For example, expatriates who attended meetings overseas were denied entry into Malaysia, due to the travel restriction imposed by the Malaysian Government. Although the services rendered by the expatriate is related to its employment in Malaysia, as the expatriate is physically outside of Malaysia, the one hundred and eighty-two (182) physical presence days in Malaysia became questionable. 

Fortunately, the IRBM provides relaxation to allow the period of temporary absence to be taken to form part of the taxpayer’s period or periods in Malaysia for the purpose of determining tax residency. However, such period of temporary absence must be supported by proper documentations and information. These documentations and information must be kept and submitted to the IRBM upon request. Example of documents may include (but not restricted to) travel documents, local or foreign authority travel restrictions guidelines and similar relevant documents which may prove that the taxpayer’s temporary absence or presence in Malaysia was due to COVID-19 travel restrictions or documents which indicate that effort was taken by the taxpayer to return to Malaysia during the Movement Control Order period.

The Movement Control Order period starts from 18 March 2020 as prescribed and extended by the Ministerial Order made under Section 11 of the Prevention and Control of Infectious Diseases Act 1988 which is gazetted from time to time.

Application for the determination of the taxpayer’s resident status during the Movement Control Order period must be referred to the IRBM’s branch that handles the taxpayer’s income tax file. Each application will be reviewed and assessed in accordance with the merit of the case. Confirmation of taxability from foreign tax authorities may be requested if such need arises.

Stamp Duty Gazette Orders

Gazette Order  P.U.(A)53/2021  Stamp Duty (Exemption) Order 2021

P.U.(A) 53/2021 exempts stamp duty from all instrument of transfer for the purchase of only one (1) unit of residential property which is worth (market value) not more than five hundred thousand ringgit (RM500,000) executed by a Malaysian citizen individual.

Gazette Order  P.U.(A)54/2021  Stamp Duty (Exemption) (No. 2) Order 2021

Whereas P.U.(A) 54/2021 exempts stamp duty on any loan agreement to finance the purchase of one unit of residential property which is worth (market value) not more than five hundred thousand ringgit (RM500,000) executed between a Malaysian citizen individual named in the sale and purchase agreement and a financial institutions under relevant Acts.

The qualifying conditions below shall be observed in order to enjoy the exemptions stated above:-

a)The sale and purchase agreement for the purchase of the residential property is executed on or after 1 January 2021 but not later than 31 December 2025; and

b)The individual has never owned any residential property including a residential property which is obtained by way of inheritance or gift, which is held either individually or jointly.

The application for the exemption shall be accompanied by a statutory declaration under the Statutory Declarations Act 1960.

Gazette Order  P.U.(A)73/2021  Stamp Duty (Exemption) (No. 3) Order 2021

The Minister exempts stamp duty on instruments in relation to an approved merger or acquisition by the Ministry of Entrepreneur Development and Cooperatives, executed by small and medium enterprises. The instruments are defined as:-

a)Contract or agreement for the sale or leasing of property (land, building, machinery and equipment);

b)Instrument of transfer and memorandum of understanding;

c)Loan or financing agreement; and

d)First leasing agreement.

The exemption shall apply to instrument executed on or after 1 July 2020 but not later than 31 December 2021.

Income Tax Gazette Orders

Gazette Order  P.U.(A)95/2021  Income Tax (Exemption) (No. 2) Order 2021

A Malaysian resident qualifying person is exempted from paying income tax in the basis period of each YA in relation to gains or profits derive, in lieu of interest, from Sukuk Prihatin.

Qualifying person means:

a)A Malaysian individual citizen who’s eighteen (18) years and above;

b)A body corporate incorporated under the laws of Malaysia but excluding a financial institution and a holder of a Capital Markets Services Licence carrying on the business of fund management under the Capital Markets and Services Act 2007 [Act 671]; or

c)A body of persons, partnership or limited liability partnership registered under any written law in Malaysia and businesses that carry on in Malaysia but excluding a trustee registered as a member of Association of Trust Companies Malaysia who acts on behalf of the person.

Effective YA 2020.