Taxation is a Fiscal Instrument

Taxation is a Fiscal Instrument

Taxation is a fiscal instrument

Introduction

The ruling serves to provide the tax treatment in respect of an investment holding company resident in Malaysia. The relevant provisions of the Income Tax Act 1967 (the Act) applicable in this Ruling are Paragraphs 4(a), 4(d), 4(f), 8(1)(b), 8(1)(c), Sections 43, 44, 60F, 60FA and paragraph 75 of Schedule 3. This Public Ruling shall take effect from year of assessment (YA) 2006 and onwards.

An Investment holding company as defined under Section 60F(2) of the Act means a company whose activities consist mainly in the holding of investments and not less than 80% of its gross income (whether exempt or not) other than gross income from a source consisting of a business of holding of an investment is derived from the holding of those investments; whereas, a business of holding of an investment means a business of letting of real property where a company in any YA provides any maintenance services or support services in respect of the real property.

Discussion

Maintenance services or support services should be comprehensively and actively provided which include:

cleaning services or repairs for the purpose of maintenance and management of the real property such as structural elements of the building, stairways, fire escapes, entrances and exits, lobbies, corridors, lifts/ escalators, compounds, drains, water tanks, sewers, pipes, wires, cables or other fixtures and fittings; and

maintenance and management of the exterior parts of the real property such as playing fields, recreational areas, driveways, car parks, open spaces, landscape areas, walls and fences, exterior lighting or other external fixtures and fittings.

A person who only provides security services or other facilities is not considered to provide maintenance services or support services comprehensively. Actively means the person who owns or lets out the real property

a. provides himself; or

b. hires another person or another firms to provide the maintenance services or support services.

The determination of whether income from the letting of real property is a business source or a non-business source is explained in details in Public Ruling No.4/2011 (Income From letting of property). Generally, there are two (2) criteria in determining whether a company is an IHC and such criteria are:

its main activity is the holding of investment; and

not less than eighty percent (80%) of the company's gross income (whether exempt or not) is derived from the holding of those investments. The gross income is limited only to interest, dividend and rental under paragraph 4(d) of the Act.

Tax bracket

From January 2010, a spouse of the next tax bracket combination 4,4or 3,5 , a fact driving over select. The factor method allows a more equitable distribution of income tax primarily for dual earner whose income is very different. The tax bracket for married couples is a secondary choice for the final tax burden, because the sum of the two income -splitting table is applied to a joint spousal income tax results. Due to the different tax bracket combinations you can only achieve interest savings ...