TAXATION SPECIALISED INDUSTRIES
A Coggle Diagram about BANK WITH OVERSEAS SUBSIDIARY, Investment in shares & property held by bank, RESIDENT BANK (Sc 60C-taxation of resident bank and financial institution, taxed on world income scope-banking business income(accruing or derived), overseas branch-taxed to Malaysia income tax and suffer foreign tax-applied double taxation(bilateral or unilateral)), DEDUCTIBILITY OF BAD DEBT, OVERSEAS BUSINESS LOSS FROM BANKING, NON-BANKING BUSINESS INCOME, INTEREST PAID BY BANKS OR FINANCE COMPANIES, INCENTIVES TO BANK (Income Tax (Exemption)(No.12) Order 2007 [PU(A) 154/2007] and Income tax (Exemption)(No.16) Order 2007 [PU(A) 278/2007]), INTRODUCTION (governed by BAFIA, supervised by BNM and BANK-carries business of receiving money in any currency, paying/collect cheques, advances for customer), CHARGEABLE INCOME (no special reguation and Gross income includes interest and discount receivable, commission, gain on foreign exchange (realised), dividends from short term investments, rental of safe deposit boxes, sales of Malaysian Government Securities (MGS)), INTEREST IN SUSPENSE (Interest income received or receivable for YA would be subject to tax notwithstanding that the interest income has not been received
For loans which are in arrears for a period of 6 months or more, the interest income accrued to such loan installment will be credited into interest in suspense account. The loan is said to be ‘non-performing loan’.
Interest in suspense is not treated as income for accounting purpose
However, S24(1) expressly provides that interest in suspense will be assessed as business income even though the income had not been received. Thus, the bank should simultaneously provide specific provision for bad debts to reduce its chargeable income. [S34(2), 34(3A)]), Loan to rescuing contractor or developer, overseas branch exemption, WITHHOLDING TAX ON NET WORKING FUNDS- S 37(1)(b) BAFIA 89’
Requires foreign bank to maintain 6% of total assets or RM10 Million WIL as net working funds
When there is a shortfall, normally foreign banks would remit funds from overseas branch/HQ . The interest paid on overseas branch would be subjected to 15% withholding tax, TAX PLANNING -Its more tax efficient for interest to be charged on overseas branch/HQ when funds are remitted in MY (net working funds) since interest expense is allowable in computing tax liability of the MY branch.
This is because corporate tax is 25% while withholding tax on interest payment is only at 15% and TAX PLANNING ON FOREIGN BANKING INCOME -Malaysian resident bank is taxed on the world scope on its banking business source
-Dividends;declared by the foreign subsidiary, received in Malaysia by the Malaysian bank
-The withholding tax on dividend income, and the possibility of recovering the underlying tax from the overseas country must be considered in determining the setting up of overseas branch or overseas subsidiary