Income Tax Ruling ITR 1997/1


Date of issue: 7 April, 1997


1. This Ruling is applicable to a person deriving income as a commissioned dealer's representative or commonly known as a remisier.




2.1 Commission Income

Commission (by whatever name called) which is calculated based on brokerage charged on securities transacted through the remisier is to be treated as business income and will be taxed under section 4(a) of the Income Tax Act 1967 (hereinafter referred to as the “the Act”).

2.2 Recovery of Contra Loss

Contra losses which have been deducted from the remisier’s commission or security deposit, etc. and allowed as a deduction under section 33 of the Act when subsequently recovered will be treated as business income under section 30(4)(a) of the same Act in the year it was recovered.

2.3 Interest Income On Security Deposit

Interest received by a remisier on his security deposit in the form of cash placed with the stockbroking company to make good against debts or liabilities will be treated as business income and assessable under section 4(a) of the Act as the deposit forms an essential part of the remisier’s normal business.


2.4 Deduction In General

The provisions for deductions are covered under section 33 of the Act. In general, all outgoings and expenses wholly and exclusively incurred in the production of income are allowable as a deduction in arriving at the adjusted income. Section 39 however sets out expenses which are strictly prohibited. The common ones being domestic and private expenditure and expenses of a capital nature.

2.5 Expenses Charged By The Stockbroking Company

The following common types of expenses charged by the stockbroking company to the remisier will be allowed as deduction:

(i) Contra loss and losses due to buying-in/selling-out
(ii) Contra interest
(iii) Error account (for example, error in executing clients’ order
(iv) Legal fees in respect of debt collection
(v) Scrip loss
(vi) Allocation of administrative expenses
(vii) Expenses paid on behalf of the remisiers

Expenses mentioned in items (i) to (v) above must be in relation to losses/ expenditure arising from the remisier’s clients only. Personal losses incurred through dealings using accounts of nominees will not be allowed as a deduction against the commission income.

For expenses mentioned under items (vi) and (vii), to be allowed, it must be expenses of a revenue nature. Expenditure charged on purchase of, for example, computers and hand phones would not be allowed as a deduction. However, if the assets are owned and used at the end of the basis period by the remisier, capital allowances may be allowed.

2.6 Other Expenses

Expenses incurred in addition to the expenses charged by the stockbroking company in the course of carrying on his business as a remisier will also be allowed as a deduction provided that it is allowable under section 33 of the Act and is not prohibited by section 39.

2.7 Any expenses claimed will have to be substantiated or supported with details as mentioned in Paragraph 3.2 below.

3. Documentation Required

3.1 Annual Statement From The Stocbroking Company

Annual statement of income and expenses to be furnished by the stockbroking company must indicate at least all the items below. The following format may be adopted:


Gross commission xxxx
Less: Contra losses xxxx
Other charges (to be itemised) xxxx xxxx
_____ _____
Add: Contra loss recovered xxxx
Net commission xxxx
Interest on security deposit (if any) xxxx
Other income (to specify) xxxx
Total income xxxx

Name of company ......................................
Signature ......................................
Name of officer ......................................
Designation ......................................

3.2 In respect of expenses claimed, the following particulars have to be furnished.

(i) Contra Loss/Buying-in Loss/Selling-out Loss

- Name, IC No. and address of client
- Date and contract note number
- Amount of loss
- Amount recovered
- Net amount claimed
- Action taken to recover the debt
- Confirm whether the client has been suspended from trading and his name has been included in the KLSE Defaulter List by submitting documentary evidence

(ii) Contra Interest

- Name and IC No. of client
- Amount of losses
- Amount of interest claimed

(iii) Error Account

- Nature of error
- How the error arises
- Amount claimed

(iv) Scrip Loss

- Name of counters
- Amount claimed
- Circumstances under which the scrip was lost

The particulars required in paragraphs 3.2(i) to 3.2(iv) above need not be certified by the stockbroking company. However, the Revenue reserves the right to call for any information should the need arises.

(v) Salaries/Commission

- Name, IC No. and address of recipient
- Amount paid and claimed
- Whether payment by cash, cheque, etc.
- Services performed by the recipient
- If the recipient is an employee of the remisier, state whether Income Tax (Deduction From Remuneration) (Amendment) Rules 1997 have been complied with.


4. The Inland Board of Malaysia reserves the right to amend any part of this Ruling or repeal the whole Ruling without giving any reason thereof.

5. This Ruling does not deprive taxpayers of the right of appeal to the Special Commissioners of Income Tax.

Inland Revenue Board of Malaysia
7 April, 1997

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