LABUAN BUSINESS ACTIVITY TAX (AUTOMATIC EXCHANGE OF FINANCIAL ACCOUNT INFORMATION) REGULATIONS 2018 [P.U. (A) 20/2018]
The above Regulations were gazetted on 8 February 2018. They are made under S21(1)(b) of the Labuan Business Activity Tax Act 1990 (LBATA).
Common Reporting Standard (CRS)
Please click on the following link to the page on IRBM’s website on CRS for the Automatic Exchange of Financial Account Information.
The table below sets out the Contents of the above Regulations and provides a brief overview of these Regulations.
|Regulation #||Heading and Notes|
|1||Citation and commencement
The citation is as shown above. The Regulations are deemed to have effect from 1 July 2017.
Provides definitions of terms used in these Regulations. (Definitions of words which are underlined in this Table are found in regulation 2.)
These Regulations have effect for and in connection with the implementation of the Standard (Std) for the purpose of giving effect to the Arrangements. They apply to any Labuan entity which is a Financial Institution as defined in Section VIII of the Std. Non-Reporting Financial Institutions (NRFI) are identified in Reg. 3(3).
|4||Application of Standard
For the purpose of these Regulations, the Std shall be applied consistently with the Commentaries on the Std.
|5||Due diligence obligation
Every Reporting Financial Institution (RFI) which is not a NRFI shall identify the Reportable Account (RA) from the Financial Account (FA) maintained by the RFI by applying the due diligence procedure (DDP) as specified in Sections II to VII of the Std.
An account is treated as a RA beginning from the date it is identified as a RA pursuant to the DDPs specified above, and information pertaining to the RA shall be reported annually in the calendar year following the year to which the information relates.
|6||Financial Account treated as other than RA or not RA
States when a RFI may (for the purposes of Reg. 5):
(a) treat a FA that meets the conditions specified in Reg. 6(1)(a) as other than a RA in the circumstances described in para. B of Section VII of the Std; and
(b) treat a FA that meets the conditions specified in Reg. 6(1)(b) as a FA that is not a RA until the date specified, provided that the FA meets the requirements [(I) to (III)] as stated in that sub-regulation.
|7||Determination of date and calendar year
Refers to the Second Schedule. In applying the DDP, the relevant dates for the purposes of the provisions of the Std specified in column (2) of that Schedule shall be the dates corresponding against it as specified in column (3).
Also provides for the periods 1.1.2017 to 30.6.2017, and 1.7.2017 to 31.12.2017, to be treated as separate calendar years for the purposes of specified provisions found in the Std.
|8||Balance or value of account
This regulation relates to accounts with negative balances or values and the determination of the balance or value of accounts denominated in a currency other than the USD.
A FA held by an individual as a partner of a partnership is deemed to be an entity account.
|10||Modification of due diligence procedure
Specific DDP described in the Std are referred to in relation to how each is to be applied to specified accounts. Some of the accounts that are mentioned under Reg. 10 are Lower Value Account and High Value Account (in Reg. 10(1), New Account and Preexisting Account [Reg.10(2) and 10(3)], New Entity Account [Reg. 10(4)]. (Please refer to this Regulation for details.)
|11||Condition for modification of due diligence procedure
Reg.11(1) and 11(2) state the conditions for the application of Reg.10(2) and Reg.10(3) respectively.
Reg.11(3) states that a RFI shall not apply the DDP–
(a) for New Account to Preexisting Account; and
(b) for Preexisting Account to a New Account –
except when specific requirements are met which are stated in Reg.11(3)(a) and 11(3)(b) respectively.
States the circumstances under which an Entity is considered as a “Related Entity” of another entity for the purpose of general reporting requirements (Section 1 of the Std) and the application of DDP (Section II to VII of the Std).
Details the requirements to be met under the obligation imposed by Reg.13(1) for a RFI to furnish, in respect of the calendar 2017 and every following calendar year, an information return to the Director General (DG) on or before 30 June of the year following the calendar year to which the return relates, setting out the information required to be reported (as described in the relevant sections of the Std) in relation to every FA identified as a RA that is maintained by the RFI at any time during the calendar year.
|14||Special provision for reporting of Preexisting Individual Accounts
States the deadline for furnishing the return under Reg 13(1) for the above mentioned Accounts – i.e. 31.7.2018 for a High Value Account, and 31.7.2019 for a Low Value Account.
|15||Furnishing of information return
The above return shall be furnished on an electronic medium, or by way of electronic transmission in a format to be determined by the DG.
|16||Use of information by DG
All information obtained under these Regulations may be used by the DG for any purpose related to the administration the LBATA (the Act) or the ITA.
This is stated to be –
Details the requirements relating to retaining and safekeeping of records that a RFI obtains or creates for the purpose of complying with these Regulations, including self certification and records of documentary evidence.
A RFI may appoint a third party as its agent to carry out the obligations imposed on it by these Regulations, subject to the requirements stated under Reg.19(2).
|20||Powers of DG
The DG may exercise all powers vested in him under the Act to administer and enforce compliance with the provisions of the Arrangements and these Regulations.
These include the power to obtain information from a FI [Reg.20(2)], to be given free access to enter any premise or place of business of a FI for specified purposes [Reg.20(3)] and to make extracts/ copies of any books, records or other documents or material made available to him for purpose of enforcing or administering these Regulations [Reg.20(4)]
|21||Incorrect information return
The penalty (upon conviction) for an offence of making an incorrect information return or giving incorrect information under these Regulations is a fine not exceeding RM1 million, or imprisonment for a term not exceeding 2 years or both.
|22||Failure to comply with Regulations
The same penalty as stated above applies upon conviction of an offence for failing to comply with these Regulations. In addition, the court may further order the person convicted of the offence to comply with the relevant provisions of these Regulations within 30 days or such period as the court deems fit, from the date the order is made.
This anti-avoidance provision empowers the DG to disregard or vary the arrangement or practice, or make such adjustments as he thinks fit with a view to counteracting the whole or part of certain effects (direct or indirect) which are described under Reg. 23(a), (b) and (c).
|24||Special provision for Passive NFE
With reference to sub-para. D(2) of Section V and sub-para. A(2) of Section VI of the Std, Reg. 24(1) lists the circumstances under which an Entity is taken not to be a Passive NFE. Nevertheless, for the purpose of the Reg.24(1), a FI shall be taken not to be a Passive NFE for the years 2017 to 2019.
|First Schedule||Excluded Accounts|
|Second Schedule||Refer Subregulation 7(1)|
To read the Regulations in full at the official website of the Attorney-General’s Chambers.
These Exemption Orders were gazetted on 14 February 2018 [P.U. (A) 38/2018] and 21 February 2018 [P.U. (A) 48/2018] respectively. The first Order is deemed to have come into operation from the year of assessment (YA) 2014 until YA 2015 and the second from YA 2016 until YA 2020. The following applies to both Orders.
Exemption [subparagraph 2(1)]
The person referred to in subparagraph 2(2) is exempted from the provisions of S54A(1) and (2) of the ITA and from payment of income tax on the statutory income for the basis period for a YA which is derived from a source of business income consisting of a Malaysian ship.
Under subparagraph 2(2), the person eligible for the above exemption is a person who is resident in Malaysia and carries on the business of –
(a) Transporting passengers or cargo by sea on a Malaysian ship; or
(b) Letting out on charter a Malaysian ship owned by him on a voyage or time charter basis.
(Note: Under the prevailing S54A(1) of the ITA which was effective for YA 2012 and subsequent years of assessment , the person meeting the above eligibility criteria is exempted from tax on 70% his statutory income from that business for that YA. The Income Tax (Exemption) (No. 2) Order 2012 [P.U. (A) 167/2012], effective for YA 2012 until YA 2013, provided 100% exemption on the same income of the same qualifying person.)
To read the Orders in full at the official website of the Attorney-General’s Chambers.
The main amendment made in PR 12/2017 is the incorporation of information relating to “new provisions” which came into force from 1.1.2017 that relate to appeal and relief application against non-taxable cases under S97A of the Income Tax Act 1967 (ITA) and relief application not in respect of error or mistake under S131A of the ITA.
The contents of PR 7/2015 have been revised with the insertion of minor amendments except for paragraphs 4 and 12, which have been rewritten to include explanations on the applications of S97A(1A) & S97A(2) (in para.4), and S131A & S97A(5) (in para.12). (e-CTIM TECH DT 80/2015 for the summary of PR 7/2015.)
The following table sets out the Contents (headings of the main paragraphs) of this PR. A brief outline of the contents of paragraphs 4.8, 12.2 and 12.3 (not found in the previous PR) is provided.
|Para. #||Heading / Summary
(Sections cited refer to sections of the ITA, unless otherwise stated.)
|2.||Relevant Provisions of the Law|
|4.||Right of Appeal and Time for Appeal|
|4.8||Appeal Against a Non-Chargeability Case
Under S97A(1A) and S97A(2) an appeal may be made under the following circumstances:
|(a) ITRF has been furnished
If a person has furnished an ITRF under S77(1) or 77A(1) (within the stipulated period) for a year of assessment (YA) in which he has no chargeable income (CI), the ITRF is deemed to be a notification made by the DGIR to that person on the date he furnished that return. He may appeal against the deemed notification within 30 days from the date of being so notified if he is not satisfied with the tax treatment mentioned in any PR, or any known stand, rules and practices by the DGIR.
(Examples 6 and 7)
|(b) ITRF not required to be furnished
Where an ITRF is not required to be furnished for a YA under S77(1), but the person intends to appeal on any tax treatment mentioned in any PR, or any known stand, rules and practices by the DGIR, he must furnish the ITRF for that YA, and submit an appeal in writing within 30 days after the submission of the ITRF, or after receiving the Notice of Non-chargeability (NONC)
(Example 8 – this illustrates the application of (amongst others) S97A(1A) where a taxpayer who was not chargeable to tax for YA 2016, submitted the ITRF for YA 2016 on 30.6.2017, and that ITRF is deemed to be a notification by the DGIR to the taxpayer under S97A(1A) for the purpose of an appeal to the Special Commissioners of Income Tax.)
|(c) Audit cases
The IRBM will issue a written notification to the taxpayer where (as a result of a tax audit) it is found, that the taxpayer is not chargeable to tax under specified circumstances. The specific circumstances are mentioned in para. 4.8(c). (items (i) and (ii)) and the contents of the notification are set out under items (a) and (b) of that same paragraph.
Any appeal to the SCIT on such notification shall be submitted within 30 days after the notification is served.
|5.||Appeal for Partnership Cases|
|6.||Appeal Procedure (Form Q)|
|7.||Grounds of Appeal|
|8.||Late Appeal Procedure (Form N)|
|9.||Review of Assessment|
|10.||Disposal of Appeal at IRBM Level|
|12.||Review of Assessment Through Application for Relief|
|12.2||In Respect of Non-error or Mistake Under Section 131A of the ITA|
|12.2.1||A taxpayer may make an application for relief for non-error or mistake in the ITRF made by him.|
|12.2.2||The conditions for relief application are –
(a) the ITRF has been furnished pursuant to S77(1) or S77A(1);
(b) all taxes charged for the YA shall be paid.
|12.2.3||This paragraph sets out the circumstances under which relief application for non-error and mistake cases is allowed (Please refer to items (a), (b) and (c) ).|
|12.2.4||The period of time for the application for relief is –
– For items (a) and (b) under the above paragraph, within 5 years after the end of the year in which the exemption, relief, remission, allowance or deduction is published in the Gazette, or the approval is granted, whichever is the later; and
– For item (c) under the above paragraph, within 1 year after the end of the year in which payment is made.
(Examples 12 and 13)
|12.3||In Respect of Non-Taxable Case Under Section 97A(5) of the ITA|
|12.3.1||A person who has furnished the ITRF to the DGIR and has no CI for a YA may make an application for relief to the DGIR in writing:
(a) to amend the ITRF in cases of errors or mistakes as specified in para. 12.1.4 of this PR, or
(b) in cases of non-error or mistake as specified in para. 12.2.3 of this PR.
|12.3.2.||The period of time for the above application is –
(i) for (a) above – 6 months from the date of submission of the ITRF (Example 14):
(ii) for (b) above – within the period specified in para. 12.2.4 of this PR (Example 15)
|13.||Application for Relief Procedure|
|14.||Comparison Between Appeal and Application for Relief|
|15.||Updates and Amendments|
|Appendix 1 – Comparison between an appeal under section 99 of the ITA and an application for relief under sections 97A, 131 and 131A of the ITA|
To read the PR in full at the websites of the LHDNM.
Second Finance Minister Datuk Seri Johari Abdul Ghani encouraged the Inland Revenue Board (IRB) to utilise a more open approach and not be overzealous in its tax enforcement efforts.
Johari acknowledged that IRB needs to improve tax compliance through enforcement. However, he encouraged IRB to also engage with stakeholders — professional bodies, tax practitioners, employers and the public — to improve education and awareness of taxation.
Johari said that it is important for the IRB to engage with the public to raise awareness about its tax collection duties, especially since the IRB has been perceived as being overzealous in its tax enforcement efforts. He said that it is important for the IRB to explain that the tax collections are being done for the development of the country.
Source: The Star Online, 2 March 2018
The Inland Revenue Board (IRB) has published a public ruling (PR) on “Disposal of Plant or Machinery Part II — Controlled Sales” (PR No 1/2018) dated 26 February 2018.
The PR explains the definition of control as well as the tax treatment for the disposal of plant and machinery between parties that are related in terms of control.
Kindly refer to the IRB website for further details.
Source: IRB website, 27 February 2018
The Inland Revenue Board (IRB) said that it aims to collect RM134.7b in direct taxes for 2018. This represents a 6.1% increase compared to the 2017 target of RM126.9b, said the IRB’s chief executive officer, Datuk Seri Sabin Samitah.
He said that the IRB should be able to achieve the collection target, based on the growth in Malaysia’s 2018 GDP. He added that as of 27 February 2018, IRB has managed to collect RM21.8b, which represents a 23.79% increase compared to the collection for the same period in 2017.
Source: Malay Mail Online, 1 March 2018
Malaysia will refer to the Organisation for Economic Co-operation and Development (OECD)’s tax mechanism for taxing industries such as short-stay leasing platform Airbnb and e-hailing services such as Grabcar and Uber, said Second Finance Minister Datuk Seri Johari Abdul Ghani.
Source: The Edge Markets, 1 March 2018
The Inland Revenue Board (IRB) has provided on information on how Malaysian Financial Institutions (MYFI) can register for filing reports under the Common Reporting Standards (CRS).
Kindly visit the IRB website for further details.
Source: IRB website, 28 February 2018
|15 March 2018||Due date for PCB payments|
|15 March 2018||Due date for monthly instalments|
|31 March 2018||Tax estimates for companies with April year-end (30 April 2019)|
|31 March 2018||6th month revision of tax estimates for companies with September year-end (30 September 2018)|
|31 March 2018||9th month revision of tax estimates for companies with June year-end (30 June 2018)|
|31 March 2018||Statutory Due Date for Form E Submission|
|15 April 2018||Due date for PCB payments|
|15 April 2018||Due date for monthly instalments|
|15 April 2018||15 days grace period for Form E Submission via E-filing only|
|30 April 2018||Tax estimates for companies with May year-end (31 May 2019)|
|30 April 2018||6th month revision of tax estimates for companies with October year-end (31 October 2018)|
|30 April 2018||9th month revision of tax estimates for companies with July year-end (31 July 2018)|
|30 April 2018||Statutory due date for BE Form Submission|