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Sunday, November 30, 2014

Are income received in Malaysia from oversea taxable?

Some says income received in Malaysia from overseas are not taxable. Some says earnings are not taxable only if

 According to Deloitte Highlights 2014:


Corporate taxation:
Corporations are taxed on income derived from Malaysia. Foreign-sourced income is not taxable unless the corporation is carrying on a business in the banking, insurance, air transport or shipping sectors.

Personal taxation:
Basis: Individuals are taxed on income derived from Malaysia. Foreign-source income is not taxable in Malaysia

According to Price Waterhouse:

Issue 109 November 2013

PwC Alert
Local versus foreign sourced income - A continuous debate
Malaysia adopts a territorial scope of taxation. Section 3 of the Income Tax Act 1967 ("the Act") provides that only income that is accruing in or derived from Malaysia, and income remitted to Malaysia from outside Malaysia is subject to tax. In ongoing efforts to encourage Malaysian businesses to venture overseas and thereafter repatriate their profits to Malaysia, the government had since 1995, introduced various legistlations which exempts from tax, foreign sourced income remitted to Malaysia except for taxpayers carrying on banking, insurance, sea or air transport business.

Paragraph 28, Schedule 6 of the Act which exempts from tax,

"...income of any person, other than a resident company carrying on the business of banking, insurance or sea or air transport, for the basis year for a year of assessment derived from sources outside Malaysia and received in Malaysia."

broad guiding principle for determining where income is sourced from is enunciated by Lord Bridge in the landmark Privy Council case*, Commissioner of Inland Revenue v Hang Seng Bank Ltd (1990) STC 733:

There you are folks, according to 2 big International Accounting and Taxation firms.

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