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The Malaysian Inland Revenue Board (“MIRB”) has issued Public Ruling (“PR”) No. 10/2019 Withholding Tax on Special Classes of Income on 10 December 2019. It replaces PR No. 11/2018 and incorporates, amongst others, changes which have been effective upon the coming into operation of the Finance Act 2018, which includes the removal of the word “technical” under the scope of chargeability for section 4A(ii) income.

The notable changes of PR No. 10/2019 include:-

Tax Treatment Where No Payment or Crediting is Made to the Non-Resident Payee

Pursuant to PR No. 10/2019, no tax deduction is allowed in respect of an expense which has not been paid or credited to the non-resident payee regardless of whether the WHT has been paid to the MIRB. This latest position taken by the MIRB would affect companies which have not paid or credited their non-resident payees, but have paid the related WHT in advance.

An officer from the MIRB’s Tax Policy Department has verbally confirmed that in cases where an expense (for which WHT has been paid in advance) has been disallowed for a YA, an application to claim a tax deduction for the amount when paid shall be made by revising the tax computation and return for the YA in which the amount was disallowed. Revision shall be made within one year after the end of the year in which the payment or crediting to the non-resident is made.

Tax Treatment on Late Payment Charges (Interest)

Where late payment charges are paid to a non-resident, it should be ascertained whether or not such payments are considered as interest income to the non-resident. In the absence of a Double Taxation Arrangement (“DTA”) between Malaysia and the country of residence of the non-resident or where there is no mention on whether late payment charges are regarded as interest income in the DTA, Malaysian domestic tax laws shall prevail.

In this respect, late payment charges would constitute other income under paragraph 4(f) of the Income Tax Act, 1967 (“the Act”) and would be subject to WHT at the general rate of 10% under section 109F (as opposed to being previously treated as income under paragraph 4(c) of the Act and subject to WHT under section 109). 

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Contact KPMG

Should you have any questions or require further clarification, please do not hesitate to contact any of our Executive Directors, Directors, Associate Directors or Managers whom you are accustomed to dealing with or who are responsible for the tax affairs of your organisation at the following telephone numbers for respective offices:

Petaling Jaya Office

Tai Lai Kok
Executive Director –
Head of Tax and Head of Corporate Tax
ltai1@kpmg.com.my
+ 603 7721 7020

Long Yen Ping
Executive Director –
Head of Global Mobility Services yenpinglong@kpmg.com.my
+ 603 7721 7018

Bob Kee
Executive Director –
Head of Transfer Pricing
bkee@kpmg.com.my
+ 603 7721 7029

Ng Sue Lynn
Executive Director –
Head of Indirect Tax
suelynnng@kpmg.com.my
+ 603 7721 7271

Soh Lian Seng
Executive Director –
Head of Tax Risk Management
lsoh@kpmg.com.my
+ 603 7721 7019

Nicholas Crist
Executive Director –
Corporate Tax
nicholascrist@kpmg.com.my
+ 603 7721 7022

Dato’ Leanne Koh
Executive Director – 
Corporate Tax
leannekoh@kpmg.com.my
+ 603 7721 7026

Neoh Beng Guan
Executive Director – 
Corporate Tax
bneoh@kpmg.com.my
+ 603 7721 7025

Ong Guan Heng
Executive Director – 
Corporate Tax
guanhengong@kpmg.com.my
+ 603 7721 7027

Chang Mei Seen
Executive Director – 
Transfer Pricing
meiseenchang@kpmg.com.my
+ 603 7721 7028

Ivan Goh
Executive Director – 
Transfer Pricing
ivangoh@kpmg.com.my
+ 603 7721 7012

 

 

 

Evelyn Lee 
Executive Director –
Penang Tax
evewflee@kpmg.com.my
+604 238 2288 (ext. 312)

Regina Lau
Executive Director –
Kuching & Miri Tax
reglau@kpmg.com.my
+6082 268 308 (ext. 2188)

Titus Tseu
Executive Director –
Kota Kinabalu Tax
titustseu@kpmg.com.my
+6088 363 020 (ext. 2822)

Ng Fie Lih
Executive Director –
Johor Bahru Tax
flng@kpmg.com.my
+607 266 2213 (ext. 2514)

Crystal Chuah Yoke Chin
Tax Manager –
Ipoh Tax
ycchuah@kpmg.com.my
+605 253 1188 (ext. 320)