eKTP 44

Withholding Tax
Part 2 of 3

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Reference is made to our last e-KTP 43 regarding the minor changes on WHT, i.e. the Finance Act 2017 has been published in the Gazette on 16 January 2017 and come into operation on 17 January 2017.

The following changes do not have significant changes but we wish to highlight that it may impact your tax position or your responsibility as a taxpayer.

 

1. Derivation of Special Classes of Income

As per our last eKTP 43, we have mentioned that the payment to non-residents for offshore services would not be subject to WHT. However, with this amendment of Income Tax Act 1967, payment to non-residents for onshore as well as offshore services would be subject to WHT.

In other words, the income from services rendered by non-residents under Special Classes of Income under Section 4A shall be deemed derived from Malaysia regardless of whether the services are performed in Malaysia or outside Malaysia.

 

2. Royalty

Prior to January 2017, the definition of royalty is

“Any sums paid as consideration for the use of, or the right to use copyrights, artistic or scientific works, patents, designs or models, plans, secret processes or formulae, trademarks, or tapes for radio or television broadcasting, motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights”

However, with this amendment of Income Tax Act 1967, the definition of royalty has been widened to include the use of or the right to use “software”. Therefore, to relook your existing contract whether your payment to non-residents could fall within the definition of royalty.

 

3. Public Entertainer

Prior to January 2017, the definition of public entertainer means

“a stage, radio or television artiste, a musician, sportsperson or an individual exercising any profession, vocation or employment of a similar nature”

However, with this amendment of Income Tax Act 1967, the definition of public entertainer has been widened to include “a compere, model, circus performer, lecturer, speaker…” Therefore, to relook your existing contract whether your payment to non-residents could fall within the definition of public entertainer.