Global Tax Alert | 23 July 2013

Malaysia acts to promote trade and investment

  • Share

Taxable deduction for cost incurred to acquire a foreign-owned high technology company

On 4 July 2013, new rules (the Rules) were enacted, which provide a taxable deduction to a qualifying domestic company for the cost of acquiring a foreign-owned high technology company. The deduction is available in the form of amortization of equal amounts over five years of assessment.1 The Rules are retroactively applicable to a qualifying Malaysian company that submits an application to the Malaysian Investment Development Authority on or after 3 July 2012 through 31 December 2016, for which approval is granted.

Malaysia signs new income tax treaty with Poland

On 8 July 2013, Malaysia signed a new income tax treaty (new Treaty) with Poland which will replace the current 1977 Malaysia-Poland Treaty (current Treaty). The new Treaty generally conforms to the current policies and guidance of the Organisation for Economic Co-operation and Development and will enter into force in a tax year following the calendar year in which the ratification procedures are completed.

The new Treaty is expected to strengthen bilateral cooperation as well as trade and investments between the two countries. One of the main features of the new Treaty is a reduction in interest and royalty withholding tax rates of 10% and 8% respectively from the 15% rate on both types of income under the current Treaty. However, interest is exempt from Malaysian tax if paid to the Government of Poland, any Polish political division or statutory bodies, the National Bank of Poland and the Bank Gospodarstra Krajowego in Poland (the Bank of National Economy).

The new Treaty contains a new article on “fees for technical services” and applies to payments in consideration for any services of a technical, managerial or consultancy nature, which are subject to an 8% withholding tax.

Endnote

1. A year of assessment is an accounting/financial year for which tax liability arises.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Consultants Sdn Bhd, Kuala Lumpur
  • Julian Wong
    +60 3 7495 8347
    julian.wong@my.ey.com
  • Yeo Eng Ping
    +60 3 7495 8214
    eng-ping.yeo@my.ey.com
  • Anil Kumar Puri
    +60 3 7495 8413
    anil-kumar.puri@my.ey.com
Ernst & Young LLP, Asia Pacific Business Group, New York
  • Chris Finnerty
    +1 212 773 7479
    chris.finnerty@ey.com
  • Jeff Hongo
    +1 212 773 6143
    jeff.hongo@ey.com
  • Kaz Parsch
    +1 212 773 7201
    kazuyo.parsch@ey.com
  • Bee-Khun Yap
    +1 212 773 1816
    bee-khun.yap@ey.com

EYG no. CM3673