Income Tax Act 1967-Part II
Imposition and General Characteristics of The Tax
Section 3-Scope of Charge
A tax to be known as income tax shall be charged for each year of assessment upon the income of any person accruing in or derived from Malaysia or received in Malaysia from outside Malaysia.
Comment
Income must be accrued (i) in Malaysia or (ii) accrued outside Malaysia and receive in Malaysia.
Section 3B-Non-chargeability to tax in respect of offshore business activity
Notwithstanding S3, tax shall not be charged under this Act on income in respect of an offshore business activity carried on by an offshore company.
Section 4-Classes income on which tax is chargeable
Tax is chargeable on income in respect of
a) Business;
b) Employment;
c) Dividends, interest or discounts;
d) Rents, royalties or premiums;
e) Pension, annuities or other periodical payments;
f) Other gains or profits.
Comment
Section 2 define "Business" includes professional, vacation and trade, but excludes employment.
Section 4A-Special classes of income
Income of a person not resident in Malaysia which is derived from Malaysia is chargeable to tax.
Comment
It refer to special payments made to non-residents, to be taxed at sources and within 30 days of such payments being made, under Withholding Tax.
Section 7-Residence Individual
Section 7(1) (a) provides that a person stays in Malaysia for at least 182 days (not necessarily consecutive) in a calendar year, he/she would be a resident.
Section 7(1) (b) provided that any temporary absence from Malaysia shall be taken to form part of such period: (i) connected with his services in Malaysia and owing to service matters or attending conferences or seminars or study aboard; (ii) owing to ill-health involving himself or a member of his immediate family; and (iii) in respect of social visits not exceeding 14 days in the aggregate.
Section 8-Residence companies and bodies of persons
Section 8(1)(a) A Hindu joint family, if its manager or karta is resident for that basis year.
Section 8(1)(b) A company or a body of persons carrying on a business; if any time during the basis year the management and control of its affairs are exercised in Malaysia.
Section 8(1)(c) Any other company or body of persons; if any time during that basis year the management and control of its affairs are exercised in Malaysia by its directors or other controlling authority.
Section 12-Derivation of business income from Malaysian
Section 12(1)(a) Gross income from the business as is not attributable to operations of the business carried on outside Malaysia shall be deeded derived from Malaysia.
Comment
The following activities would be deemed the business to be derived from Malaysia: (i) contract concluded in Malaysia; (ii) stocks maintained in Malaysia from which orders are fulfilled; (iii) ownership and risk passes in Malaysia;(iv) sale proceeds received in Malaysia; (v) services rendered in Malaysia.
Section 13-Employment Income
Section 13(1)(a) Salaries,fees,bonus and allowances.
Section 13(1)(b) Benefits in kind
Section 13(1)(c) Living accommodation
Section 13(1)(d) Refunds from unapproved funds
Section 13(1)(e) Compensation for loss of employment.
Section 14-General provisions as to dividend income
Section 14(1) where a company resident for the basis year of assessment pays, credits or distributes a dividend shall be derived from Malaysia.
