ACC3024 Advanced Taxation Lecture 2 PDF

8/18/2019 ACC3024 Advanced Taxation Lecture 2 PDF

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ACC3024 : A

L 2A A C (P 2)

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• Residence status for an incorporated entity – meaning of control and management

– s.8 – Case law – Residence = Permanent Establishment??

• ‘Operation’ carried out in Malaysia – s.12 – Case law

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Residence of companies

Incorporation Test

Central Management and Control Test

Other Controlling Authority Test (not included inITA67)

3 common tests used to determine theresidency of a company:

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Residence rules – company

s.8(1)(b) –• a company carrying on a business is

resident in Malaysia for the basis year (calendar year) for a YA if at any time duringthat basis year the management and control ofits business is exercised in Malaysia

s.8(1)(c) –• management and control of its affairs are

exercised in Malaysia by its directors or othercontrolling authority.

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• Management and control of its business/ affairsin Malaysia – resident in Malaysia – Place of business [s.8(1)(b)] ≈ Permanent

Establishment (see later slides) – place where Board of Directors (not shareholders)

meet [s.8(1)(c)]

• A question of fact• N.B. Not place of operations or place company

was incorporated

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Central management & control test

A company is Malaysian Resident for tax if it: – has its central management and control in

Malaysia;• it is deemed to have carried on business in

Malaysia – Looks like two tests but is really only one (see

Malayan Shipping Co Ltd v FCT ).

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Malayan Shipping... v FCT

Facts of the case:• Incorporated in Singapore.

• Registered office in Singapore.

• Major shareholder and managing director, Mr.

Sleigh, was an Australian resident.

• He had broad powers and could approve andappoint or remove directors easily.

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Malayan Shipping v FCT

Facts of the case:The company’s day to day activities were notconducted in Australia

It involved chartering a ship in London and sub-chartering it in Singaporean waters.

There was no actual business conducted in Australia.

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Malayan Shipping... V FCT

Outcome of the case:Central management and control was with Mr. Sleigh,an Australian resident.

Therefore the central management and control was in Australia.

Since central management and control was in Australia, the company was carrying on a business in Australia.

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Significance of being a tax resident• No obligation to withhold tax for payment to

resident companies*

• Entitlement to tax incentives (e.g. Sch 7A para1 reinvestment allowance)*

• Entitlement to double tax relief (e.g. Sch 7para 1)*

*Will be covered later

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Significance of being a tax resident cont• Entitlement to lower tax rate depending on paid

up capital (Sch 1 para 2A)

• Prior to YA 2008 – resident companies mustcomply with the then s.108 provisions on payingdividends (see corporate distributions)

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PE C C

•

• , • , •

, > 6

( D A)•

( )

• AND (

O PE)

M & :

• • , ,

• , ,

M & :• L

• P

• B

1 6

I PE ?

• , • Q ,

• E 1: AJ L , A

KL M . H ,

M A . I

: – PE M ? – M ?

1 7

AJ L O M

• • , • , •

, > 6 (

D A)•

( )• AND

( O PE)

M & :•

• , ,

• ,

,

M & :• L

• P • B

• AJS Ltd’s sales office is both PE and tax resident in Malaysia• ONLY income derived by sales office from Malaysia will be

taxed.

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I PE ?

• E 2: AJ L , A

M . 10 .

A . AJ M

, M

HQ A . . I :

– PE M ? – M ?

1 9

AJ L O M

• • , • , •

, > 6

( D A)•

( )

• AND (

O PE)

M & :•

• , ,

• , ,

M & :• L

• P

• B

2 0

• AJ L PE M

• I M ( . . ) .4( ) M

( PE) M .12(1)( ) :

– M ;

– C / M• A ,

.107A

AJ L O M

2 1


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• AJ L PE

M• I D A• I M ( . . )

.4( ) ( PE) M

.12(1)( ) :

– M ;

– C / M• .107A

AJ L O M I CD I 3 O ?

2 2

I PE ?

• E 3: AJ L , A KL

M ( ).

. A M

A ( B2B ) KL HQ

A . A A . I :

– PE M ? – M ?

2 3

AJ L C P O M

• • , • , •

, > 6

( D A)•

( )

• AND (

O PE)

M & :•

• , ,

• , ,

M & :• L

• P

• B

2 4


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• AJ L PE M• M

M ( PE)

M .12(1)( ) , M

• N , ; ,

• B AJ

( . . DHL), HQ A

AJ L C P O M

2 5

I PE?• Q , • Q ,

• E 4: AJ L ,

. M . A, (70% ), CEO AJ , J B . H

. M

M . A . I , J B . I AJ L :

– PE M ? – M ?

2 6

AJ L M

• • , • , •

, > 6 (

D A)•

( )• AND

( O PE)

M & :•

• , ,

• ,

,

M & :• L

• P • B

• AJS Ltd is likely to be a tax resident without clear PE identity inMalaysia

• Case: Malayan Shipping Co Ltd v FCT

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‘Operation’ carried out in Malaysia

.12 I A67 M

, :• .1( )

M ( . . M );

• .1( ) M ,, , ,

, , M( . . ).

K I DGI

F :

• .

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K I DGI

• H C (HC) (2012) CI : – E CI . H B CI – CIB H

B

– ,

– H , HC I B :

• F A ; •

.

K I DGI

• C A (2013) HC:

– .

– I B

, HC CI☺

– , HC CI M ( ).

Documents

ACC3024 Advanced Taxation Lecture 2 PDF