Malaysia broadens its withholding tax scope, 02 February 2017

The recent change to the scope of withholding tax now requires non-residents to pay withholding tax in respect of services to local companies that are rendered offshore. Previously, only services rendered in Malaysia by non-residents were taxed. Another change sees the imposition of royalty withholding tax on any payment for the use of software to non-residents.

These changes are in line with global sentiment — where governments are increasing their tax base. For example, the US has introduced the Foreign Account Tax Compliance Act (FATCA) and certain countries in the Middle East are introducing GST or VAT. Local corporations will be affected by the new rulings.

Although the withholding tax is imposed on non-resident companies, local corporations are usually responsible for withholding tax from the non-resident and remitting it to the Inland Revenue Board. There could be instances where the non-resident refuses to incur the withholding tax which will increase the cost of hiring offshore expertise.

However, both corporations and non-residents may attempt to seek relief under double taxation agreements (DTAs) that Malaysia has entered to with other countries. It should be noted that DTAs prevail over local law.

It is advisable for taxpayers to review their cross-border contractual and payment arrangements to assess whether the changes in the scope of withholding tax applies to them.

Source: The Edge Malaysia, 31 January 2017

IRB clarifies personal income tax reliefs, 04 November 2016

During the Inland Revenue Board’s (IRB) National Tax Seminar in Kuching, the IRB clarified the changes to the personal income tax reliefs provided in the Budget 2017 andFinance Act 2016.

The IRB acknowledged that taxpayers may face difficulties to obtain receipts for purchase of newspapers and suggested that regulations may be relaxed for smaller items. However, big ticket purchases (eg tablet or computer) would require a receipt for tax relief purposes.

The IRB informed that the claim for spousal relief has been tightened to prevent those with spouse deriving foreign income from abusing the relief as their spouse is actually contributing to total household income.

Reliefs for breastfeeding equipment and childcare fees were introduced for the working mothers, and an indication of the Government encouraging working mothers to return to the workforce.

Source: Borneo Post Online, 4 November 2016