top of page
  • CCS

IRBM’s Response to CTIM on e-C 2022 (1)

Updated: Oct 18, 2022


138. Sample Return Form C 2022
.pdf
Download PDF • 2.37MB

138.1 Guidebook C2022
.pdf
Download PDF • 14.00MB

The Inland Revenue Board of Malaysia (IRBM) released its answer on 29 July 2022 to the following issues that were brought up in the CTIM Feedback and Comments on Form e-C 2022 on 20 July 2022.

Issue No 1

Form e-C for Y/A 2022:

The accompanying attachments provide a summary of the statutory income received in Malaysia from a source outside of Malaysia.


This income could have come from a business, partnership, or other statutory sources.


Item A2

Aggregate statutory income from sources of business(es) and partnership(s) outside Malaysia received in Malaysia effective from 01.07.2022 (If 7 = MY)

Item A7

  1. aggregate of other statutory income from sources outside Malaysia received in Malaysia effective from 01.07.2022 (If 7 = MY) – Dividends, interest, discounts, rents, royalties, premiums and other income.

The issue arises when the amount of income from overseas to be sent back and received may not correspond precisely to the amount mentioned in the company's audited financial statements.


CTIM would like to seek IRBM's clarification on the concept of statutory income ("SI") and hopes that IRBM can assist in computing the aforementioned statutory income.


IRBM Response:

Determination of statutory income for income received in Malaysia from abroad is subject to subsection 42(1) of the ITA.


The taxpayer must state the amount remitted by type of income.


If there is a difference between the amounts in the financial statements and the remitted amount, it must be proven with supporting documents.


The IRBM explains that "Income Received in Malaysia" refers to income transferred or brought into Malaysia, either in the form of cash or via transfer of electronic funds; or both.


Technical guidelines related to the treatment of foreign source income in Malaysia are prepared and will be issued for guidance to taxpayers.


For banking, insurance, shipping and air transport According to the specific provisions on banking business (S.60C), insurance business (S.60), and sea and air transport undertakings (S.54), the gross income of these taxpayers should generally be determined by reference to their income wherever it has accrued or been derived. This is required to comply with the provisions of specific sections (i.e., worldwide income scope).


These taxpayers don't need to have received their income earned outside of Malaysia to be subject to taxation in Malaysia.


As a result, the above attachments do not apply to these categories of companies.


Foreign Exchange Rates

The amount of income acquired from overseas that was received in Malaysia needs to be reported using the foreign currency exchange rate that was in effect on the day the income was received in Malaysia.


Taxpayers have the option of using the exchange rate that is displayed on the Official Portal of the National Accountant's Department (AGD), or if they are transacting through a financial institution, they can use the rates of foreign currency exchange that are employed by the bank.


Taxpayers in Malaysia are required to retain records of any foreign source of income.


In a situation where the foreign source income (FSI) is from multiple countries in one business source (e.g., Business 1), the income reporting should be conducted separately for each country. When filing electronically, users can record their business income from many countries using the same business code.


Issue No 2

Generally, a company will have a pool of funds or the same bank account overseas.


When the funds are received in Malaysia, it is difficult for taxpayers to identify whether the funds remitted are:

  • At gross income level or statutory income level

  • From business source (if more than one business source, the taxpayer is also required to identify the amount – see Item A2 (attachment))

  • From other sources of income

  • From a source of income that is exempted from tax

IRBM Response:

The explanation provided by IRBM is that it is the taxpayer's responsibility to determine and declare the amount of income that must be reported for tax purposes.


Therefore, each income brought into Malaysia from overseas needs to be recorded separately according to the type of income.


Issue No 3

On December 30, 2021, the Minister of Finance announced that foreign-source dividend income received by Resident Companies and Limited Liability Partnerships from 1.1.2022 to 31.12.2026 (5 years) would continue to be exempt from Malaysian income tax, subject to conditions set out in guidelines that issued by the IRBM.


The Company Return Form Guidebook 2022 has mandated that to qualify for exemption dividend income, the headline tax rate in the country of origin must be at least 15%.


This requirement can be found in Item F9 of the form.

IRBM Response:

IRBM confirmed that the dividend income from a foreign source where the headline tax rate is at least 15% qualifies for exemption, and such dividend income exempted from the tax shall be disclosed/declared in Item F9.


Overseas income received in Malaysia from 1.1.2022 to 30.6.2022 should refer to gross income.


Item A20

Income from sources outside Malaysia received in Malaysia for the period from 01.01.2022 to 30.06.2022 [If 7 = MY]

IRBM Response:

The explanation provided by IRBM is that it is the taxpayer's responsibility to determine and declare the amount of income that must be reported for tax purposes.


Therefore, each income brought into Malaysia from overseas needs to be recorded separately according to the type of income.

Issue No 4

In the past, this section was utilised to record normal business and pioneer losses under the heading of the appendix: Summary of Losses (Including Pioneer Losses after tax relief period).