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OTHER SOURCES OF INCOME AND SCHEDULE 6 EXEMPTIONS - Coggle Diagram
OTHER SOURCES OF INCOME AND SCHEDULE 6 EXEMPTIONS
INTRODUCTION
Business income
Employment income
Other income
Dividend, interest & discounts
rent, royalties, premiums
pensions, annuities and periodical payments
gains/profits not falling under any of the above
DIVIDENDS
What is dividend?
distribution to shareholders where a company is not in liquidation is deemed to be dividend unless such distribution is an authorised or permitted capital reduction
Gross dividend income
single-tier dividend is exempted from tax
distributions that do not constitute dividend
distributions made in the course of liquidation by the liquidator, as such distribution is merely the return of the shareholders' original capital investment
distribution made by a company under a scheme of authorised or permitted capital reduction, as such distribution is also a return of part of the original capital investment
Basis period
Individual
calendar year
Company
financial year end
INTEREST
Deeming provision of interest income
where the interest is known for a period that has elapsed for more than 4 yrs before the beginning of YA, the gross income for the basis period of the relevant YA shall be treated as income that began 4 yrs before the beginning of the YA in which the receipt of interest first became known
Income tax exemption
NR from payment of income tax on interest paid or credited in the basis year for a YA by BKRM Bhd
Individual resident in Malaysia from payment of income tax on interest received from either of the following
Negotiable certificate of deposit
rediscounting of banker's acceptance on repurchase agreement or any similar instrument of trade financing that is traded in money market fund
individual resident in Malaysia from payment of income tax gains or profit, interest or bonus received from money deposited with the following institutions
bank licensed under Financial Services Act 2013
Islamic bank licensed under the Islamic Financial Services Act 2013
development financial institution prescribed under the Development Financial Institution 2002
Lembaga Tabung Haji established under Tabung Haji Act 1995
Malaysian Building Society Berhad incorporated under the Companies Act 1965
The Borneo Housing Mortgage Finance Berhad incorporated under Companies Act 1965
co-operative society registered under the Co-operative Societies Act 1993
Deemed obtainable
interest that relates to loan between related parties is deemed obtainable when interest is due to be paid
related parties
between persons one of whom has control over the other
between persons both of whom are controlled by some other person
individuals who are relative of each other
Deemed interest income on loan/advances to directors
where interest charged on the loan
total interest payable by the director > deemed interest, the deemed interest shall be disregarded
total interest payable < deemed interest, amount chargeable shall be the deemed interest
deemed interest by a company shall be higher of
total amount of interest chargeable
total deemed interest ascertained above
RENT
return received by landlord at certain specific times from the tenant for the use of land, a house or a property
Deductible expenses
assessment rates
quit rent
loan interest
insurance premium
repairs & maintenance (revenue)
Controlled transaction & transaction between relatives
shall be deemed obtainable on demand in the following basis period and treated as gross income for the following period
transaction between
persons one of whom has control over the other
individuals who are relatives of each other
persons both of whom are controlled by some other persons
ROYALTIES
agreement governing rights on the use of patents, copyright or even technical advice or know-how. Can either be income or capital nature
Capital or revenue?
Capital
not chargeable to tax
Revenue
ownership of the patent is not passed on to the user
chargeable to tax
royalty deemed derived from Malaysia
if responsibility for payment of royalties lies with the Govt, a State Govt or a local authority
if responsibility for payment of royalty in the basis YA lies with a person resident for that year
if royalty is charged as an outgoing or expense against any income accruing in or derived from Malaysia
Exemptions
RM10,000 - publication of, or the use of or the right to use, any artistic work
RM12,000 - translation of books or literary work
RM20,000 - musical composition
individual's performance in cultural performance
PENSIONS, ANNUITIES & PERIODICAL PAYMENTS
introduction
amount paid by a former employer to a retired employee
subject to tax on the person that receives the pension
can be taxable or exempted
pensions received from approved scheme may be exempted from tax
all other pensions from employment received would be taxable
exemptions
exempted if related to widows' or widowers' and orphans' pensions, and pensions paid under an approved scheme
annuity - fixed sum payable either in perpetuity or for a term of years
recipient of annuity will have the amount received taxed as gross income from annuity
annuity purchased by annuitant from a Malaysian life insurer, the amount received is exempted
periodical payments - payments made periodically at fixed times
recurring nature, eg: alimony payments, payments made under a separation order by the court
source of income & chargeable to tax
EXEMPT INCOME
NR employee
period or periods do not exceed 60 days in that basis year
not exceed a continuous period of 60 days that overlaps two successive basis years
continuous period of not exceeding 60 days which overlaps those basis years, together with a period or periods, do not exceed 60 days
do not apply to a public entertainer
remittance
resident company carrying on specialised business shall be exempted from tax
Other exemptions