november 2008 examination - The Malaysian Institute Of Certified ...

should be noted that hand phones with computer facilitiesare excluded from the exemption. From the employer’sperspective, the cost of providing these benefits will be taxdeductible pursuant to the Income Tax (Deduction for Giftsof New Personal Computers and Monthly BroadbandSubscription fees to Employees) Rules 2008.Accelerated Agriculture AllowanceQualifying agricultural expenditure incurred on anagricultural project or on a forest plantation project forrubber wood will be eligible for a 100% allowance (subjectto conditions) pursuant to the Income Tax (AcceleratedAgriculture Allowance) (Plantation of Rubber Wood Tree)Rules 2008.Public Ruling No. 2/2008 –Reinvestment AllowanceA Public Ruling on Reinvestment Allowance (RA) hasfinally been issued. RA claims have often been the focusof tax audits and it is therefore useful to have a PublicRuling to provide clarification on the IRB’s view of thefollowing:- projects that qualify for RA;- expenditure that qualifies for RA;- the period of eligibility for RA; and- the computation of RA.Taxpayers in the manufacturing and agriculturalsectors should familiarise themselves with Public RulingNo. 2/2008.Guidelines on the Income TaxTreatment From Adopting FRS 139 –Financial Instruments: Recognition andMeasurementLabuan Offshore CompaniesElection for Labuan Offshore Companies to beTaxed under the Income Tax Act, 1967 (ITA)The 2008 Budget proposed a change in the law allowingLabuan offshore companies (OCs), which have been taxedunder the Labuan Offshore Business Activity Tax Act, 1990(LOBATA) to elect irrevocably to be taxed under the ITA.The Finance Act 2007 amended the ITA and LOBATA toallow for this. The Labuan Offshore Business Activity Tax(Forms) (Amendment) Regulations 2008 were recentlygazetted, to provide for a prescribed form on which theelection is to be made. In addition, the Inland RevenueBoard has issued guidelines on the tax treatment of OCswhich elect to be taxed under the ITA.Liberalisation of Rules in Relation to LabuanOffshore CompaniesThe Labuan Offshore Financial Services Authority (LOFSA)has recently announced a liberalisation in the rulespertaining to OCs. LOFSA has granted a blanket approvalto allow OCs to:i) carry on business with Malaysian residents,ii) invest into domestic companies (so long as the holdingdoes not amount to a controlling holding); andiii) wholly own a domestic company to carry on an offshorebusinessIt should be noted however that where approvals arerequired from other regulatory authorities, such as BankNegara Malaysia, the Securities Commission and the ForeignInvestment Committee (FIC), such approvals must still beobtained. Further, LOFSA has issued a notification form whichOCs are required to submit when undertaking (i) – (iii) above.The Ministry of Finance (MOF) has issued the aboveguidelines which are applicable to financial institutionsonly and are effective from the year of assessment 2008.FRS 139 relates to the recognition and measurement offinancial instruments for accounting purposes. Althoughthe effective date for the implementation of FRS 139 hasbeen deferred by the Malaysian Accounting StandardsBoard, Bank Negara Malaysia (BNM) has incorporated asignificant portion of the FRS 139 into its reportingrequirements as per the BNM guidelines and directives onfinancial assets and liabilities. The purpose behind theMOF’s guidelines is to address the income tax treatmentarising from the adoption of FRS 139 with a view toconverging the accounting and tax treatment of financialassets and liabilities, in particular, the timing of incomerecognition and the deductibility of expenses. Theguidelines can be obtained from the MOF’s website:www.treasury.gov.my.www.micpa.com.myAugust 2008 | The Malaysian Accountant |5