income tax comparison bangladesh vs malaysia

7/21/2019 Income Tax Comparison Bangladesh vs Malaysia

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Table of Content

Name Page No.

Acknowledgement 5

Executive Summary 6

Ca!ter" # Introduction $

Significance of the Study %

Objective of the Study %

Scope of the Study %

Country Per&!ective' (anglade& )*

Ca!ter" ## Income Tax Authorities )*

Sources of Income ))

Tax rates )+

Tax rebate of investment ),

Time to submit income tax return )-

Tax treaties )6

Country Per&!ective' alay&ia

Income Tax Authority )/

Tax rates +*

Income tax rebates +6

Who should submit income tax return +/

Taxable Period ,+

1

Com!ari&on of #ncome Tax Structure

Countr Per& ective' (an lade& 0 ala &ia



Tax treaties ,-

Ca!ter " ### Conclusion ,5

eference ,6

2



E1EC2T#3E S2A4

Taxation! one of the major sources of public revenue to meet a country"s revenue and

development expenditures #ith a vie# to accomplishing some economic and socialobjectives$ such as redistribution of income$ price stabili%ation and discouraging

harmful consumption& It supplements other sources of public finance such as issuance

of currency notes and coins$ charging for public goods and services and borro#ings&

As our country perspectives are 'angladesh ( )alaysia$ the tax structure in both the

country consists of both direct *income tax$ gift tax$ land development tax$ non!judicial

stamp$ registration$ immovable property tax$ etc+ and indirect *customs duty$ excise

duty$ motor vehicle tax$ narcotics and li,uor duty$ -AT$ S.$ foreign travel tax$ TT$

electricity duty$ advertisement tax$ etc+ taxes& Our study suggests that as the stated

countries once #ere the colonies of 'ritish aj$ both countries inherited 'ritish

Taxation culture in its/ income tax structure& Our study is based on some factors of

income tax #hich actually a matter of comparison bet#een t#o countries& These are

Income tax authorities$ sources of income$ tax rates$ tax rebate for investment$ time to

submit income tax return$ tax treaties among countries etc&

3



CAPTE4 " )

#NT4782CT#7N

The term 0Tax1 has been derived from the 2rench #ord 0Taxe1 and etymologically$ the

3atin #ord 0Taxare1 is related to the term "tax"$ #hich means "tocharge"& Tax is "a

contribution exacted by the state"& It is a non!penal but compulsory and unre,uited

transfer of resources from the private to the public sector$ levied based on

predetermined criteria&According to Article 456*4+ of the Constitution of 'angladesh$ taxation includes the

imposition of any tax$ rate$ duty or impost$ #hether general$ local or special$ and tax

shall be construed accordingly& ate is a local tax imposed by local government on its

residents or the property o#ners of the locality$ a duty is a tax levied on a commodity$

and an impost is a tax imposed for an entry into a country& 7nder the provision of

article 89 of the Constitution$ :no tax shall be levied or collected except by or under

the authority of an Act of Parliament: 'angladesh inherited a system of taxation from

its past 'ritish and Pa;istani rulers& The system$ ho#ever$ developed based on

generally accepted canons and there had been efforts to#ards rationali%ing the tax

administration for optimi%ing revenue collection$ reducing tax evasion and preventing

revenue lea;age through system loss& Taxes include narcotics duty$ land revenue$ non!

judicial stamp$ registration fee and motor vehicle tax&

Significance of te &tudy

It is envisaged that the study #ill find a causal comparison bet#een 'angladesh (

)alaysian Tax Structure& The study #ill sho# us ho# taxation #ill help both countries

4



psychological and economic!factors have been examined in order to understand

#hether these facilitate or constrain the overall tax policies&

The scope of the study #as mainly to adjudge and examine the ;ey issues involved in better income tax policies in 'angladesh ( )alaysia #hile emphasi%ing and

addressing the problems of these systems and solution through technology&

CAPTE4 " +

Among direct taxes$ income tax is one of the main sources of revenue& It is a

progressive tax system& Income tax is imposed on the basis of ability to pay& 0The more

a taxpayer earns the more he should pay1! is the basic principle of charging income

tax& It aims at ensuring e,uity and social justice&

7ur Com!ari&on i& ba&ed on te following factor&). #ncome Tax Autoritie&

+. Source& of #ncome

,. Tax 4ate&

-. Tax 4ebate for #nve&tment

5. Time to &ubmit income tax return

6. Tax treatie&

6



Country Per&!ective' (anglade&

). #ncome Tax Autoritie&'

<ational 'oard of evenue

Chief commissioner of taxes

.irectors =eneral of Inspection *Taxes+$

Commissioner of Taxes *Appeals+$

Commissioner of Taxes *3T7+

.irector =eneral *Training+$

.irector =eneral Central Intelligence Cell *CIC+$

Commissioners of Taxes$

Additional Commissioners of Taxes *Appeal>Inspecting+$

?oint Commissioners of Taxes*Appeal>Inspecting+$

.eputy Commissioners of Taxes$

Tax recovery officers$

Assistant Commissioners of Taxes$

@xtra Assistant Commissioners of TaxesInspectors of Taxes&

7



+. Source& of #ncome'

2or the purpose of computation of total income and charging tax thereon$ sources ofincome can be classified into categories$ #hich are as follo#sB

Salarie&

#ntere&t on &ecuritie&

#ncome from ou&e !ro!erty

#ncome from agriculture

#ncome from bu&ine&& or !rofe&&ion

Ca!ital gain&

#ncome from oter &ource&.

,. Tax 4ate&

A. 7ter tan Com!anyB

2or individuals other than female taxpayers$ senior taxpayers of 5 years and above

and retarded taxpayers$ tax payable for the

8



2irst 6$6D$DDD>! <il

<ext 9$DD$DDD>! 4DE

<ext F$DD$DDD>! 45E

<ext 9$DD$DDD>! 6DEest Amount 65E

(. :or :emale Tax !ayer&

2irst 6$5$DDD>! <il

<ext 9$DD$DDD>! 4DE

<ext F$DD$DDD>! 45E

<ext 9$DD$DDD>! 6DE

est Amount 65E

2or retarded taxpayers threshold limit is TG&9$DD$DDD

)inimum tax for any individual assessee located in City Corporation area is T;& 9$DDD

)inimum tax for any individual assessee located in .istrict head,uarter is T;& 6$DDD

)inimum tax for any individual assessee located in any other area is T;&4$DDD

<on!resident Individual 65E

*other than non!resident 'angladeshi+

C. :or Com!anie&

Publicly Traded Company 6&5E

<on!publicly Traded Company 9&5E

'an;$ Insurance ( 2inancial Company *@xcept merchant ban;+ F6&5E

)erchant ban; 9&5E

Cigarette manufacturing company F5E

Publicly traded cigarette company FDE

)obile Phone Operator Company F5E

Publicly traded mobile company FDE

If any publicly traded company declares more than 6DE dividend$ tax rate #ould be

6F&5E and if declares less than 4DE dividend tax rate #ould be 9&5E&

If any non publicly traded company transfers minimum of 6DE shares of its paid!up

capital through IPO*Initial Public Offering+ it #ould get 4DE rebate on total tax in the

year of transfer&

9



-.Tax 4ebate for inve&tment '

A. 4ate of 4ebate'

Amount of allo#able investment is H actual investment or 9DE of total income or T;&

45D$DD$DDD>! #hichever is less&Tax rebate amounts to 45E of allo#able investment&

(. Ty!e& of inve&tment ;ualified for te tax rebate are '<

i& 3ife insurance premium up to 4DE of the face value& Contribution to Provident 2und

to #hich Provident 2und Act$ 465 applies& Self!contribution and employer/s

contribution to ecogni%ed Provident 2und& Contribution to Supper Annuation 2und&Contribution up to TG D$DDD to deposit pension scheme sponsored by any scheduled

ban; or a financial institution& Investment in mutual funds approved debenture or

debenture stoc;$ Stoc;s or Shares

ii& Contribution to 'enevolent 2und and =roup Insurance premium

iii& Contribution to Ja;at 2und

iv& .onation to charitable hospital approved by <ational 'oard of evenue

iv& .onation to philanthropic or educational institution approved by the =overnment

v& .onation to socioeconomic or cultural development institution established in'angladesh by Aga Ghan

vi& .evelopment <et#or;

vii& .onation to IC..'$

viii& .onation to philanthropic institution!CP$ Savar$ .ha;a

ix& .onation up to five lac to

*4+ Shishu S#asthya 2oundation Kospital )irpur$ Shishu Kospital$ ?essore and

Kospital for Sic; Children$ Sath;hira run by shishu s#asthya 2oundation$ .ha;a&

*6+ .iganta )emorial cancer Kospital$ .ha;a$

*9+

x& The @<T and Kead!<ec; cancer 2oundation of 'angladesh$ .ha;a and

*F+ ?atiya partibandhi 7nnayan

xi& 2oundation$ )irpur$ .ha;aL

xii& .onation to Asiatic society of 'angladesh

xiii&& .onation to )u;tijudha ?adughar

xiv& .onation to <ational level institution set up in memory of liberation #arL

xv& .onation to <ational level institution set up in memory of 2ather of the <ation

xvi& Any investment by an individual in 'angladesh =overnment Treasury 'ondL

xvii& Investment in purchase of one computer or one laptop by an individual assessee&

=o &ould &ubmit #ncome Tax 4eturn>

10



i& If total income of any individual other than female taxpayers$ senior male

taxpayers of 5 years and above and retarded taxpayers during the income

year exceeds T; 6$6D$DDD>!&If total income of any female taxpayer$ senior

male taxpayer of 5 years and above during the income year exceeds T;6$5$DDD>!&

ii& If total income of any retarded taxpayer during the income year exceeds TG&

9$DD$DDD&

iii& If any person #as assessed for tax during any of the 9 years immediately

preceding the income year& A person #ho lives in any city

corporation>paurashava>divisional KM>district KM and o#ns a building of

more than one storey and having plinth area exceeding 4$DD s,& feet>o#ns

motor car>o#ns membership of a club registered under -AT 3a#&

iv& If any person subscribes a telephone&

v& If any person runs a business or profession having trade license and operates

a ban; account&

vi& Any professional registered as a doctor$ la#yer$ income tax practitioner$

Chartered Accountant$ Cost( )anagement Accountant$ @ngineer$ Architect

and Surveyor etc& )ember of a Chamber of Commerce and Industries or a

trade Association&

vii& Any person #ho participates in a tender&viii& A person #ho has a Taxpayer"s Identification <umber *TI<+ in accordance

#ith the provision of section 48FA&

ix& Candidate for 7nion Parishad$ Paurashava$ City Corporation or Parliament

elections&

x& Any company registered under the Company Act$ 449 or 4F&

xi& Any <on!government organi%ation *<=O+ registered #ith <=O Affairs

'ureau&

5. Time to Submit #ncome Tax 4eturn'

:or Com!any

'y fifteenth day of ?uly next follo#ing the income year or$ #here the fifteenth day of

?uly falls before the expiry of six months from the end of the income year$ before the

expiry of such six months&

:or 7ter tan Com!any

7nless the date is extended$ by the Thirtieth day of September next follo#ing the

income year&

Con&e;uence& of Non<Submi&&ion of 4eturn and 4eturn of witolding tax.

11



Imposition of penalty amounting to 4DE of tax on last assessed income subject to a

minimum of T;& 4$DDD>!& In case of a continuing default a further penalty of T;& 5D>!

for every day of delay&

Con&e;uence& of u&ing fake T#N

.CT can impose a penalty not exceeding TG&6D$DDD>!& 2or continuous use of fa;e TI<

deliberately! 9 years imprisonment$ up to TG& 5D$DDD>! fine or both&

A&&e&&ment Procedure&'

2or a return submitted under normal scheme$ assessment is made after giving an

opportunity of hearing&

2or returns submitted under 7niversal Self Assessment Scheme$ the ac;no#ledgement

slip is determined to be an assessment order& 7niversal Self Assessment is of coursesubject to audit&

A!!eal again&t te order of 8CT'

A taxpayer can file an appeal against .CT"s order to the Commissioner

*Appeals+>Additional or ?oint Commissioner of Taxes *Appeals+ and to the Taxes

Appellate Tribunal against an Appeal order&

Tax witolding function&'

In 'angladesh #ithholding taxes are usually termed as Tax deduction and collected at

source& 7nder this system both private and public limited companies or any other

organi%ation specified by la# are legally authori%ed and bound to #ithhold taxes at

some point of ma;ing payment and deposit the same to the =overnment @xche,uer&

The taxpayer receives a certificate from the #ithholding authority and gets credits of

tax against assessed tax on the basis of such certificate

12



a& Inland

evenue 'oardof )alaysia

*I')+ and

oyal

)alaysian

Customs&

b& 3in; to Inland

evenue 'oard

)alaysia&

c& 3in; to oyal)alaysian

Customs&

Tax Audit Activity

Audit cases can be selected based on a number of factors$ such asB is; analysis criteria

Information received from a third partyIndustry Type

A specific issue concerning a certain group of taxpayers

3ocation

There are t#o types of audit H a des; audit #hich is carried out at the I')/s office$ and a

field audit #hich is carried out at the taxpayer/s business premise&

A typical tax audit commences #ith a letter of notification of an audit$ #hich #ill indicate the

records that should be made available for audit$ the years of assessment to be audited and thenames of the relevant audit officers& This is follo#ed by an examination of the relevant

documents& The I') #ill then issue an audit findings report$ #hich #ill contain details of

any proposed tax adjustments and the rationale for those adjustments& If the taxpayer

disagrees #ith the adjustments$ an official objection must be submitted& If there are no

objections to the adjustments made$ the I') #ill issue a notice of additional assessment&

The timeframe for settlement of a tax audit should be 9 months from the commencement of

the audit$ but can ta;e longer to reach a resolution in more complex cases&

Gey focus areas for the I') in tax audits conducted in recent years have includedB

NTransfer pricing

A!!eal

13

6. NAE 7: te tax treatie& countrie&

1. 7G&

2. SI<=APO@&

3. SW@.@<&

4. P Gorea

5. CA<A.A

6. PAGISTA<

7. O)A<IA8. SI 3A<GA

9. 2A<C@

10.)A3ASIA&

11. ?APA<

12.I<.IA

13.=@)A<

14.TK@ <@TK@3A<.S

15.ITA3I

16..@<)AG 17.CKI<A

18.'@3=I7)

19.TKAI3A<.

20.PO3A<.

Agreement on Avoidance of 8ouble Taxation for Air Tran&!ort

concluded and ratification under !roce&& wit te following countrie&'

4& Oman&

6& Saudi Arabia&

9& 7nited Arab @mirates&

Negotiation concluded wit following countrie& on Avoidance of

8ouble Taxation Agreement ?com!reen&ive@ and ratification under

!roce&&'

4& Egy!tB <egotiation completed& atification under process&6& #ndone&iaB atification from 'angladesh side is completed&

atification of Indonesian side is a#aited&

9& #ranB <egotiation completed but some unresolved issues are trying to

settle through letter correspondence&

F& auritiu&B The final agreement *printed in treaty paper+ is sent to the

)inistry of 2oreign Affairs for formal signature&

5& Ne!al' <egotiation completed& atification under process&

& NorwayB atification from 'angladesh side is completed& atification

of <or#egian side is a#aited&

& Pili!!ine&B Our Cabinet has approved$ #e are no# #aiting for

fulfillment of instrument of ratification of Philippines&

8& atarB )inistry of 3a#$ .ha;a has made some changes in initialed

agreement& We have sent agreement #ith changes to Matar authority for

their acceptance&



A taxpayer can appeal against an assessment as a result of a tax audit& The appeal must be

made #ithin 9D days after the service of the notice of additional assessment&

+. Tax 4ate&

A. Per&onal #ncome TA1

Source of TA1

Section F$ Income Tax Act 4 *ITA 4+$ classifies income that is subject to tax into

main classes as follo#sBi& =ains or profits from a business$ for #hatever period of time carried onL

ii& =ains or profits from an employmentL

iii& .ividends$ interest or discountsL

iv& ents$ royalties or premiumsL

v& Pensions$ annuities or other periodical payments not falling under any of the

foregoing paragraphsL

vi& =ains or profits not falling under any of the foregoing paragraphs&

In addition$ under section FA$ ITA 4$ the special classes of income derived from

)alaysia of a non!resident individual are subject to tax in respect of the follo#ingB

i& Amounts paid in consideration of services rendered by the person or his employee in

connection #ith the use of property or rights belonging to$ or the installation or

operation of any plant$ machinery or other apparatus purchased from$ such person&

ii& Amounts paid in consideration of technical advice$ assistance or services rendered in

connection #ith technical management or administration of any scientific$ industrial or

commercial underta;ing$ venture$ project or schemeL

iii& ent or other payments made under any agreement or arrangement for the use of

any moveable property&

+*)- #ncome Tax 4ate& for

4e&ident&

Taxable #ncome (and 4

National #ncome Tax 4ate&

D ! 5$DDD ) D plus DE

5$DD4 H 4D$DDD ) D plus 6E

4D$DD4 H 6D$DDD ) 4DD plus 6E

14



6D$DD4 H 95$DDD ) 6DD plus E

95$DD4 H 5D$DDD ) DD plus 44E

5D$DD4 H D$DDD ) 4$5D plus 4E

D$DD4 H 4DD$DDD ) 9$8DD plus 6FE4DD$DD4 H and above )$6DD plus 6E

<on!residents are subject to #ithholding taxes on certain types of income& Other

income is taxed at a rate of 6E&

If a )alaysian or foreign national 0;no#ledge #or;er1 resides in the Is;andar

.evelopment egion and is employed in certain ,ualifying activities by a designated

company and if their employment commences on or after 6F October 6DD but not

later than 94 .ecember 6D45$ the #or;er may apply to be subject to tax at a reducedrate of 45E& The individual must not have derived any employment income in

)alaysia for at least 9 years before the date of the application&

@ffective from the 6D46 year of assessment$ )alaysian professionals returning from

abroad to #or; in )alaysia #ould be taxed at a rate of 45E for the first 5 consecutive

years follo#ing the professional/s return to )alaysia under the eturning @xpert

Program *@P+&

(. Cor!orate #ncome Tax

Tax 4ate

Corporate tax rates for companies resident in )alaysiaB

N65 percent *6F percent from A 6D4+

Special tax rates for companies resident in )alaysia #ith ordinary paid!up share

capital of ) 6&5 million and belo# at the beginning of the basis period for a year of

assessment *provided not more than 5D percent of the ordinary paid!up share capital of

the company is directly or indirectly o#ned by *or lin;ed to+ a related company #hich

has an ordinary paid!up share capital of more than ) 6&5 million at the beginning

of the basis period for a year of assessment+B

N6D percent on the first ) 5DD$DDD *4 percent from A 6D4+

N65 percent on every ringgit exceeding ) 5DD$DDD *6F percent from A 6D4+

4e&idence

15



A company #ill be a )alaysian tax resident if at any time during the basis year$ the

management and control of the company/s business or any one of its businesses are

exercised in )alaysia&

Com!liance 4e;uirement&

Assessment system H Self assessment

@stimate of tax payable must be made 4 month before the commencement of

a year of assessment

)onthly installments must be paid based on the estimate of tax payable

2iling due date H months from the date follo#ing the close of the

accounting period

#nternational witolding tax rate&

.ividends paid to non!residents are not subject to #ithholding tax&

oyalties paid>credited to non!residents are subject to #ithholding tax at 4D percent& The

rate may be lo#ered by the relevant .ouble Taxation Agreement *.TA+&

Interest paid>credited to non!residents is subject to #ithholding tax at 45 percent& The rate

may be lo#ered by the relevant .TA&

olding 4ule&

There are currently transitional rules in place prior to the full implementation of the

single tier dividend system/$ #hich is to have full effect from ?anuary 4$ 6D4F& The

transitional rules affect fran;ed dividends paid by a resident company to its

shareholders& The dividends #ill be regarded as fran;ed dividends providedB

NThey are paid in cash on ordinary sharesL and

NThe ordinary shares have been held continuously for D days or more *this condition

does not apply to dividends paid by publicly listed companies+

There is no capital gains tax in )alaysia& Ko#ever$ there is real property gains tax

*P=T+&

P=T is levied on the disposal of realproperty situated in )alaysia as #ell as the

disposal of shares in a eal Property Company *PC+& An PC is a controlled

company #hich o#ns real property or shares or both in another PC$ #hich have adefined value of not less than 5 percent of the value of its total tangible assets&

16



Tax Bo&&e&

Current period offset H business losses may be set off against income from other

sources for that year& Tax losses may be carried for#ard indefinitely to set off againstfuture business income only$ unless the company is dormant and does not satisfy the

continuity of o#nership test&

Tax Con&olidation

There are no consolidation provisions in )alaysia& Ko#ever$ resident companies

#ithin a D percent o#ned group can surrender up to D percent of their current year"s

adjusted business losses to other related resident companies$ provided certain

conditions are met&

Tran&fer of Sare&

Stamp duty of D&9 percent *of the price or value of the shares$ #hichever is higher+ is

payable on the transfer of shares

Tran&fer of A&&et&

On the transfer of land and buildings$ ad valorem stamp duty at rates from 4 to 9

percent on the transfer consideration or the mar;et value of the property$ #hichever is

higher$ is payable&

C:C 4ule&

There is no C2C regime in )alaysia&

Tran&fer Pricing

)alaysia/s transfer pricing regime is largely based on O@C. guidelines& .ocuments pertaining to transfer pricing do not need to be submitted #ith a taxpayer/s annual

income tax return$ but they should be made available to the tax authority upon re,uest&

17



Tin Ca!italiation

)alaysia has thin capitali%ation legislation& Ko#ever$ the implementation of theregime has been deferred to the end of .ecember 6D45&

Deneral Anti<Avoidance

There are general anti!avoidance rules in )alaysia #hich allo# the tax authority to

disregard$ vary or ma;e any adjustment deemed fit$ if there is reason to believe that

any transaction has the effect of evading$ avoiding or altering the incidence of tax&

S!ecial Tax 4egime& for S!ecific #ndu&try or &ector&

2oreign!sourced income received in )alaysia by a resident company *other than a

resident company carrying on the business of ban;ing$ insurance$ shipping$ or air

transport+ is exempt from tax&

C. #ndirect Tax

Service tax is chargeable on the value of taxable services provided by a taxable person&

@xamples of taxable services includeL operators of hotels$ operators of restaurants$ barsand coffee houses$ insurance companies$ telecommunication companies$ consultants

and professional firms& There is a limited exemption for services provided #ithin a

group&

Sales tax is a form of consumption tax levied on taxable goods manufactured in

)alaysia or imported into )alaysia for local consumption& @xports are exempt&

Standard 4ate

Service TaxB percent

Sales TaxB =enerally 5 percent or 4D percent

DST 4eform&

=oods and services tax *=ST+ is to be introduced in )alaysia from 4 April 6D45$ and

#ill replace the existing sales and service taxes&

The standard rate of =ST #ill be percent$ although some supplies #ill be %ero!rated

or exempt&

'usinesses #ith an annual taxable sales value of ) 5DD$DDD and above #ill be

re,uired to register for =ST purposes& 'usinesses belo# the threshold may register on

a voluntary basis&

8. 7ter Tax

18



Pro!erty Tax

3ocal councils may impose a levy rate *commonly ;no#n as land tax/+ on residents inrespect of services provided by the local council& The amount varies from council to

council and is dependent on the value of the property&

Muit rent is a form of tax imposed by the State =overnment& It is imposed on o#ners of

landed property *as opposed to units in high!rise building+& The amount of ,uit rent

imposed varies from state to state and #ill depend on the locality and category of land

use&

#m!ort 8uty

Import duty is generally payable on imported goods at the time of clearance from

Customs/ control& The rates of import duty generally ranges from D percent to D

percent depending on the category of goods imported&

)alaysia is committed to AS@A< and as such$ import duties imposed on most

manufactured goods of AS@A< origin have been reduced to a range of D percent to 5

percent&

Ex!ort 8uty

@xport duty is generally imposed on delectable resources to discourage export of such

commodities&

Exci&e 8uty

@xcise duty is a domestic tax imposed on a limited range of locally manufactured

goods or goods imported into )alaysia& The rate of tax to be levied varies and #ould

depend on the nature of the goods manufactured or imported& @xcise duty is generally

levied on alcoholic beverages$ tobacco products and motor vehicles&

#neritance or Dift Tax

There is no inheritance or gift tax in )alaysia&

,. #ncome Tax 4ebate

Investment tax allo#ances are a means of effecting a substantial artificial reduction in

taxable profits& In )alaysia there is a very #ide variety of investment tax allo#ances&

'roadly spea;ing$ they are an alternative to Pioneer Status$ but they are in addition to

19



the right of every company to depreciate assets over their useful lives and set the

depreciation off against taxable profits&

Investment tax allo#ances are transferred into an :exempt income account: #here they

are exempt from corporate income tax&

.ividends paid to shareholders out of the :exempt income account: are free of

#ithholding taxes on distribution& .ividends from the :exempt income account: paid

to a parent corporation #hich in turn distributes them to its shareholders are also free

of #ithholding taxes&

Some of the main types of investment tax allo#ances *ITA+ are as follo#sB

anufacturing Com!anie&& A company granted ITA gets an allo#ance of DE

*at the time of #riting+ of ,ualifying capital expenditure *such as factory$ plant$

machinery or other e,uipment used for the approved project+ incurred #ithin five

years from the date on #hich the first ,ualifying capital expenditure is incurred&

Companies can offset this allo#ance against DE of their statutory income for each

year of assessment& Any unutili%ed allo#ance can be carried for#ard to subse,uent

years until fully utili%ed& The remaining 9DE of statutory income #ill be taxed at the

prevailing company tax rate&

To encourage investment in the promoted areas i&e& the States of Sabah and Sara#a;

and the designated :@astern Corridor: of Peninsular )alaysia$ applications received

from 49 September 6DD9 from companies located in these areas receive an

allo#ance of 4DDE on the ,ualifying capital expenditure incurred #ithin a period of

five years& The allo#ance can be utili%ed to offset against 4DDE of the statutory

income for each year of assessment& Companies #hich have been granted approval

for this incentive but have not commenced commercial production$ or applications

under consideration$ are also eligible& All project applications received by .ecember

94$ 6D4D are eligible for this enhanced incentive&

Applications received from September 49$ 6DD9$ from existing locally!o#ned

companies that reinvest in the production of heavy machinery such as cranes$ ,uarry

machinery$ batching plant and port material handling e,uipment$ #ere eligible for

Investment Tax Allo#ance of DE *4DDE for promoted areas+ on the additional

,ualifying capital expenditure incurred #ithin a period of five years& The allo#ance

can be offset against DE *4DDE for promoted areas+ of the statutory income for

each year of assessment&

20



ig Tecnology Com!anie& A high technology company is a company

engaged in defined activities or in the production of defined products in areas of

ne# and emerging technologies& A high technology company ,ualifies for

Investment Tax Allo#ance of DE of ,ualifying capital expenditure incurred #ithin

five years from the date the first capital expenditure is incurred& Any unutili%ed

allo#ance can be carried for#ard to subse,uent years until the #hole amount has

been fully utili%ed& The allo#ance can be utili%ed to offset against 4DDE of its

statutory income for each year of assessment& A )alaysian!o#ned company that

ac,uires a foreign!o#ned company abroad to ac,uire high technology for

production #ithin the country or to gain ne# export mar;ets for local products #ill

be granted an annual allo#ance of 6DE of the ac,uisition cost for five years&

SE& @ffective from the year of assessment of 6DD$ small! and medium!scale

companies #ith paid!up capital of )6&5 million and belo# are eligible for a

reduced corporate tax on chargeable income of up to )5DD$DDD& The tax rate on

the remaining chargeable income is maintained at the normal rate& .ividends

distributed #ill be given a tax credit *6DE at the time of #riting+ in the hands of the

shareholders& To ,ualify for the incentive$ the small!scale company has to comply

#ith any one of the follo#ing criteria B

The company/s finished products should be used as ra# materials or

components by manufacturing industriesL The company/s products shall substitute imports and the local material

content is more than 5DE in terms of valueL

The company exports at least 5DE of its outputL or

The project contributes to#ards the socio!economic development of the

rural population&

l expenditure incurred #ithin five years from the date on #hich the first

,ualifying capital expenditure #as incurred&

Companies can offset this allo#ance against DE of the statutory income in the year

of assessment& Any unutili%ed allo#ance can be carried for#ard to subse,uent years

until the #hole amount has been used up& The remaining 9DE of the statutory

income #ill be taxed at the prevailing company tax rate&

As an added incentive$ companies that locate in the States of Sabah$ Sara#a;$ the

2ederal Territory of 3abuan and the designated 0@astern Corridor1 of Peninsular

)alaysia get an allo#ance of 8DE on ,ualifying capital expenditure incurred& The

allo#ance can be utili%ed to offset 85E of the statutory income in the year of

assessment& This additional incentive applies to all applications received by.ecember 94$ 6D4D&

21



4 0 8 Ex!enditure An (. company$ i&e&$ a company that provides (.

services in )alaysia to its related company or to any other company$ is eligible

for an ITA of 4DDE on ,ualifying capital expenditure incurred #ithin 4D years&

The allo#ance can be offset against DE of the statutory income in the year of

assessment& Should the (. company opt not to avail itself of the allo#ance$

its related companies can enjoy a double deduction for payments made to the

(. company for services rendered& Contract (. and (. companies can

apply for the various incentives as long as they fulfill the follo#ing criteriaB

esearch underta;en should be in accordance #ith the needs of the

country and bring benefit to the economy

At least DE of the income of the company should be derived from (.

activities 2or manufacturing!based (.$ at least 5DE of the #or;force of the

company must be appropriately ,ualified personnel performing research

and technical functionsL and

2or agriculture!base (.$ at least 5E of the #or;force of the company

must be appropriately ,ualified personnel performing research and

technical functions

A company can enjoy double deduction on revenue *non!capital+

expenditure for research #hich is directly underta;en and approved by the

)inister of 2inance& This double deduction applies to payment for the useof services of approved research institutes$ (. companies or contract

(. companies& It also applies to cash contributions to approved

research institutes&

-. =o Sould Submit #ncome Tax 4eturn>

esidents and non!residents are subject to tax on )alaysian!source income only&

4e&idence &tatu& for tax !ur!o&e&

Individuals are considered resident in any of the follo#ing circumstancesB

Q They are physically present in )alaysia for 486 days or more during the calendar

year&

Q They are physically present in )alaysia for less than 486 days during the calendar

year$ but are physically present in )alaysia for at least 486 consecutive days in thesecond half of the immediate preceding calendar year or in the first half of the

immediate follo#ing calendar year& Periods of temporary absence are considered part

22



of a period of consecutive presence if the absence is related to the individual/s service

in )alaysia$ personal illness$ illness of an immediate family member or social visits

not exceeding 4F days&

Q They are present in )alaysia during the calendar year for at least D days and have been resident or present in )alaysia for at least D days in any 9 of the four preceding

years&

Q They have been resident for the 9 preceding calendar years and #ill be resident in the

follo#ing calendar year& This is the only case in #hich an individual may ,ualify as a

resident even though he or she is not physically present in )alaysia during a particular

calendar year&

2or the purposes of determining residence$ presence during part of a day is counted as

a #hole day&#ncome &ub9ect to tax

Em!loyment income < =ross income from employment includes #ages$ salary$

remuneration$ leave pay$ fees$ commissions$ bonuses$ gratuities$ per,uisites or

allo#ances *in money or other#ise+ arising from employment&

An individual employed in )alaysia is subject to tax on income arising from )alaysia$

regardless of #here the employment contract is signed or the remuneration is paid&

=ross income also includes income for any period of leave attributable to employment

in )alaysia and income for any period during #hich the employee performs dutiesoutside )alaysia incidental to the employment in )alaysia&

@mployee benefits and amenities not convertible into money are included in

employment income&

Short!term visitors to )alaysia enjoy a tax exemption on income derived from

employment in )alaysia if their employment does not exceed any of the follo#ing

periodsB

Q A period totaling D days in a calendar year

Q A continuous period or periods totaling D days spanning t#o calendar years

Q A continuous period spanning t#o calendar years$ plus other periods in either of thecalendar years$ totaling D days

<on!citi%en individuals #or;ing in Operational Kead,uarters *OKMs+$ egional

Offices$ International Procurement Centres *IPCs+ and egional .istribution Centres

*.Cs+ are taxed only on that portion of income attributable to the number of days that

they are in )alaysia&

Self<em!loyment and bu&ine&& income ! All profits accruing in )alaysia are subject

to tax&Income from any business source is subject to tax& A business includes a profession$ a

vocation or a trade$ as #ell as any associated manufacture$ venture or concern&

23



Contract payments to non!resident contractors are subject to a total #ithholding tax of

49E *4DE for tax payable by the no!resident contractor and 9E for tax payable by the

contractor/s employees+&

Income derived in )alaysia by a non!resident public entertainer is subject to a final#ithholding tax at a rate of 45E&

Individuals may carry for#ard business losses indefinitely&

#nve&tment income ! Interest income received by individuals from monies deposited

in approved institutions is exempt from tax&

Other interest$ dividends$ royalties and rental income are aggregated #ith other income

and taxed accordingly& .ividends received by individuals are exempt from tax$

effective from the 6DD8 year of assessment& .ividends distributed under the imputation

system continue to be taxable&Certain types of income derived in )alaysia by non!residents are subject to final

#ithholding tax at the follo#ing ratesB

Ty!e of income

7se of movable property

4DE

Technical advice$ assistance or

services

4DE

Installation services on the

supply of plant$ machinery and

similar assets

4DE

Personal services associated

#ith the use of intangible

property

4DE

oyalties for the use or

conveyance of intangible

property

4DE

Interest 45E

8irector& fee& ! .irectors/ fees are considered employment incomeL therefore$ fees

derived from )alaysia are taxable& 2ees are deemed to be derived from )alaysia if the

company is resident in )alaysia for the year of assessment& If the fees are derived

from a country other than )alaysia$ they are not taxed&

Em!loyer<!rovided &tock o!tion& < Tax legislation governs the taxation of employer!

provided stoc; options& 7nder the tax legislation$ employer!provided stoc; options are

subject to tax as employment income& The taxable income is calculated based on the

difference bet#een the fair mar;et value of the underlying stoc; at the exercise date orexercisable date$ #hichever is lo#er$ and the stri;e price& This amount is recognised at

the time the option is exercised$ and is taxed as current!year income&

24



Ca!ital gain&

In general$ capital gains are not taxable& Ko#ever$ gains derived from the disposal of

real property located in )alaysia and gains derived from the sale of shares in closely

controlled companies #ith substantial real property interests are subject to real property gains tax *P=T+&

Capital gains derived from the disposal of chargeable assets by an individual bet#een

4 ?anuary 6D4D and 94 .ecember 6D4D #ithin t#o and 5 years after the ac,uisition

date are taxed at effective rates of 4DE and 5E$ respectively&

@ffective from 4 ?anuary 6D49$ capital gains derived from the disposal of chargeable

assets by an individual #ithin t#o and 5 years after such date are taxed at effective

rates of 45E and 4DE$ respectively&

All disposals made after such 5!year period are exempt from P=T&

7ter taxe&

)alaysia does not impose estate$ gift or net #orth taxes&

Social &ecurity

<o social security tax is levied in )alaysia$ but employees #ho are )alaysian citi%ens

are re,uired to contribute to the @mployees/ Provident 2und *@P2+& The @P2 is a

statutory savings scheme to provide for employees/ old!age retirement in )alaysia&

7nder the @mployees/ Provident 2und Act 454$ all employers and employees are

re,uired to ma;e monthly contributions to the @P2&The statutory contribution rate is 69E or 6FE of monthly #ages& The employer pays at

rate of 46E if the employee/s monthly #ages are above ) 5$DDD per month or 49E if

the employee/s monthly #ages are belo# ) 5$DDD per month& The employee

contributes 44E of monthly #ages&

@mployees/ contributions are deducted at source& <o ceiling applies to the amount of

#ages subject to @P2 contributions& @xpatriates are not re,uired to contribute to the

@P2$ but may elect to contribute to ta;e advantage of the available tax relief&

Self!employed persons may elect to contribute to the @P2& The individual may ma;e

voluntary contributions at a fixed monthly rate of any amount from ) 5D to )

5$DDD&

Tax filing and !ayment !rocedure&

A self!assessment system of taxation for individuals is in effect in )alaysia& A notice

of assessment is deemed served on the submission of the tax return to the tax

authorities& An appeal must be filed #ithin 9D days from the date of the deemed notice

of assessment *that is$ #ithin 9D days of the date of submission of the tax return+&

<on!residents #ho are subject to final #ithholding taxes do not need to file tax returns

unless re,uired to do so by the tax authorities&

An individual arriving in )alaysia #ho is subject to tax in the follo#ing year of

assessment must notify the tax authorities of chargeability #ithin t#o months afterarrival&

25



2or employees$ tax payment is made through mandatory monthly #ithholdings under

the )onthly Tax .eduction Scheme *)T.S+& All employers must deduct tax from

cash remuneration$ #hich includes #ages$ salaries$ overtime payments$ commissions$

tips$ allo#ances$ bonuses and gratuities$ based on tax tables provided by the Inlandevenue authorities and pay the amount of taxes #ithheld to the tax authorities #ithin

4D days after the end of each month& @mployers must #ithhold tax at a rate of 6E

from #ages paid to non!resident employees&

5. Taxable Period

The .irector =eneral of Custom shall assign each taxable person to one of the

follo#ing categories for the purpose of determining their taxable periodB!

i! Category A ! the category of taxable persons #hose taxable period is a period of one

month ending on the last day of any month of any calendar monthLii! Category ' ! the category of taxable persons #hose taxable period is a period of

three months ending on the last day of the month of any calendar yearB or

iii! Category C ! the category of taxable persons #hose taxable period is a period of six

months ending on the last day of any month of any calendar year

It is indicated that category A is for a person #ith turnover in excess of )5 million as

#ell as export!based entities #hereas category ' is for a person #ith turnover of less

than )5million

:urni&ing of 4eturn& and Payment of Tax@very taxable person shall furnish to the .irector =eneral of Custom a prescribed

return in the prescribed manner not later than the last day of the follo#ing month after

the end of the taxable period to #hich the return relates and every taxable person shall

;eep the accounting records relating to =ST in 'ahasa )alaysia or @nglish for a

period of seven years&

8< Cu&tom& 8uty

Customs duty is a tax levied on imports by the customs authorities of a country to raise

state revenue$ and>or to protect domestic industries from more efficient competitors

from abroad& In )alaysia$ all goods dutiable on import are put through customs duty

according to Customs .uties Order$ 4& The types of duties are import duty$ sales

tax$ and export duty& The duty rates depend on the types of goods imported or

exported& oyal Customs and @xcise gives concession in the tariff rates for a range of

goods along the lines of )alaysiaRs dedication arising from the bilateral and

multilateral trade negotiations #ith other A&&ociation of Sout Ea&t A&ian Nation&

*AS@A<+ members&

)any goods deriving from other AS@A< members are eligible for admission into

)alaysia at special rate of duty& Importers #ho #ish to claim the special rate of duty

must submit at the time of lodging an import entry certificate of origin given by asuitable authority of the exporting country&

26



=oods imported for use as ra# material in particular industries are exempt from

customs duty& A tourist may bring in personal goods in reasonable ,uantities #ithout

paying duties subject to conditions& A )alaysian #ho has lived abroad or foreign

nationals #ho have been permitted to reside in )alaysia are allo#ed to import usedhousehold belongings duty free$ subject to conditions& a# materials used directly in

the manufacture of approved products for export are exempt from customs duty$

including pac;aging materials and casings& Traffic;ing of illegal drugs is a grave

offence leading to death penalty& Items li;e 6DD cigarettes$ maximum 4 litre of

#ine$ cosmetics$ perfumes$ soaps amounting to maximum value of inggit )alaysia

*)+ 6DD$ etc can be imported duty!free if the items are imported by the visitor on his

person or baggage or residents of )alaysia #ho have left the nation for more than 46D

hours& All goods

from Israel and South Africa and any item having an imprint of anycurrency note or ban; note issued currently or at any time in any

nation are prohibited& 2ree export of tobacco products and alcoholic beverages in

reasonable ,uantities is allo#ed& =oods for export$ #hether dutiable

or other#ise$ must be displayed at the place of export or another

place as decided by the Customs& @xport goods can be declared by

the o#ner$ exporter$ consignor or an agent allo#ed by the o#ner or

exporter and approved by the Customs&

E< Bocal Tax3ocal tax in )alaysia comes in the form of assessment tax& The assessment tax refers

to the property tax collected by the local authorities for the provision of the services to

the residents& Property or Assessment Tax also is levied on all property holdings$

including shops$ factories$ residential$ agricultural and others$ situated in the areas

under the jurisdiction of local authorities& The rates of the assessment tax collected are

different from one local government to another& )oreover it also differs in a form of

property rights& Whereas$ the type of property categori%ed to residential$ commercial

orindustrial&

2or an example$ the assessment tax rate fixed by )ajlis 'andaraya ?ohor 'ahru in the

state of ?ohore on residential type of property is D&49E but at the same time they rate

of assessment tax for commercial type of property is D&6E& In another hand$ )ajlis

.aerah Gulai set its assessment tax rate for the residential is D&9DE #hile the rate of

commercial type property is D&F5E& In most states$ the amount of assessment tax is

calculated based on certain percentage of annual value of the property& The annual

value of a property is the total value of rents if the property is rented out in the open

mar;et& In case of ?ohor$ the calculation is based on the proportion of improvement in

the total value of tax paid&

$. Tax Treatie& Countrie&

27



Tax treatie&

)alaysia has entered into double tax treaties #ith 8 countries$ some of #hich are not

yet in force at the time of #riting&7nder the treaties$ a foreign tax credit is available for the lesser of )alaysian tax

payable on the foreign income or the amount of foreign taxes paid& 2or non!treaty

countries$ the foreign tax credit available is limited to one!half of the foreign tax paid&

Agreements #ith some countries provide for reduced #ithholding taxes under certain

conditions

Currently$ )alaysia has entered into treaties to mitigate double taxation #ith 8

countries listed belo#BAlbania$ Ireland$ Matar$ Argentina$ Italy$ omania$ Australia$ ?apan$ ussia$ Austria$

?ordan$ Saudi Arabia$ 'ahrain$ Ga%a;hstan$ Seychelles$ 'angladesh$ Gorea$ Singapore$

'elgium$ Gu#ait$ South Africa$ 'runei$ Gyrgy%$ Spain$ Canada$ 3ebanon$ Sri 3an;a$

China$ 3uxembourg$ Sudan$ Chile$ )alta$ S#eden$ Croatia$ )auritius$ S#it%erland$

C%ech epublic$ )ongolia$ Syria$ .enmar;$ )orocco$ Thailand$ @gypt$ )yanmar$

Tur;ey$ 2iji$ <amibia$ Tur;menistan$ 2inland$ <etherlands$ 7nited Arab @mirates$

2rance$ <e# Jealand$ 7nited Gingdom$ =ermany$ <or#ay$ 7nited States of America$

Kungary$ Pa;istan$ 7%be;istan$ India$ Papua <e# =uinea$ -ene%uela$ Indonesia$

Philippines$ -ietnam$ Iran$ Poland&

Conclu&ion'In the previous chapter #e/ve discussed the income tax structure of 'angladesh (

)alaysia& Though the rate of tax revenue is to =.P is very negligible$ despite the

28



government is trying to maximi%e its tax revenue through different method& 'ut the

government should also remind the cannon of convenience #hile collecting tax from

assesses& As #e are living in a civili%ed society ! should come for#ard to pay taxes to

government in order to conduct the administrative$ defense and development activitiesof the country& Other#ise #e #ould not be able to prove ourselves as civili%ed people&

Tax is the most important in the hand of the government to control the economy as

#ell as the inflection& It also helps in push money to the economy$ develop certain

source of the economy and control some other activities of the economy& <o

=overnment can run it/s and perform administration #or;s #ithout collecting tax as a

source of revenue& So$ the =overnment imposes tax over the company and the

corporations& On the other hand =overnment can also intensive to the infant and

certain basic industry for protection through its tax policy&

References:1.

Bangladesh Income Tax -Theory and Practice8th Edition(Income tax, Value added tax, Gift tax) i!"il #"and$a %"il, &o"ammad 'a!a$ia &aud, &o"ammad a$idul*lam2.Nationan Board of Revenue (NBR !e"site"tt+--.n/$/d.o$3."tt+--.nancialinfo/d.com-

4."tt+--.tax$ate.cc#$ %Three taxes of Bangladesh&$

29

http://www.nbr-bd.org/

http://www.financialinfobd.com/

http://www.taxrates.cc/

http://www.financialinfobd.com/

http://www.taxrates.cc/

http://www.nbr-bd.org/



&. *. *!!a, &. com. &* (*I). (2003),(Income tax, alue added tax,ift ax), ++, 69.6. Inland Revenue Board of 'alaysia e"site

"tt+--."ail.o.m-

http://www.hasil.gov.my/

http://www.hasil.gov.my/

income tax comparison bangladesh vs malaysia

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