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Tutorial 1: Introduction to Income Tax Law

Tutorial 1: Introduction to Income Tax Law. ACT 3151 TAXATION 1. Question 1. Malaysian taxation is classified into two categories, that is direct tax and indirect tax. By giving examples, differentiate between direct tax and indirect tax. Direct taxes vs indirect taxes. Customer/ Taxpayer.

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Tutorial 1: Introduction to Income Tax Law

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  1. Tutorial 1: Introduction to Income Tax Law ACT 3151 TAXATION 1

  2. Question 1 • Malaysian taxation is classified into two categories, that is direct tax and indirect tax. By giving examples, differentiate between direct tax and indirect tax.

  3. Direct taxes vs indirect taxes Customer/ Taxpayer Business Enterprise Royal Malaysian Customs Indirect Taxes Example: Custom duties Direct Taxes Example: Income tax IRBM

  4. Question 2 • What are the types of income upon which income tax is chargeable?

  5. Section 4

  6. Section 4A • Special classes of income of a non-resident which is derived from Malaysia.

  7. Question 3 • Briefly explain what is meant by “World Scope Basis”.

  8. World Scope Basis • A Malaysian resident person who carries on business in: • banking • insurance • sea transport and • air transport will be chargeable to tax on all incomes wherever derived.

  9. Question 4 • The tax rate applicable to each category of chargeable person varies where some are taxed at flat rate while others are taxed at scaled rates or reduced rates. Identify which categories of person are applying flat rate or scaled rates.

  10. Question 5 • Section 3 of Income Tax Act 1967 provides that income tax shall be charged for each year of assessmentupon the income of any personaccruing in or derived fromMalaysia or received in Malaysia from outside Malaysia. • State when the income accrued in or derived from Malaysia will be taxed. • Determine whether income tax will be imposed on foreign income received in Malaysia by a non-resident individual.

  11. Year of Assessment (YA) • Refers to the year in which tax is assessed. • With effect from 1 January 2000, Malaysia implemented the current year assessment. • The assessment of income tax will be concurrent with the derivation of the income. • Eg: Income earned from 1.1.2011-31.12.2011 is chargeable to income tax for YA 2011.

  12. Accruing in or derived from • Determine the taxability of each source of income. • Income will subject to Malaysian tax if the source of income is in Malaysia or the source of income is located in Malaysia.

  13. Income accrued in or derived from Malaysia will be taxed at the time of accrual or derived notwithstanding the fact that the income may not have been received in Malaysia. • Foreign source income received will be exempted from income tax with effect from YA 2004.

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