INCOME TAX (DEDUCTION FOR COST ON ACQUISITION OF A FOREIGN OWNED COMPANY) RULES 2003 [P.U. (A) 310]

INCOME TAX (DEDUCTION FOR COST ON ACQUISITION OF A FOREIGN OWNED

COMPANY) RULES 2003 [P.U. (A) 310]

(Gazetted on 21 August, 2003)

 

IN exercise of the powers conferred by paragraph 154(1)(b) of the Income Tax Act 1967 [Act 53], the Minister makes the following rules:

 

Citation and commencement

 

1. (1) These rules may be cited as the Income Tax (Deduction for Cost on Acquisition of a Foreign Owned Company) Rules 2003.

 

(2) These Rules are deemed to have come into operation on 21 September 2002.

 

Interpretation

 

2. In these Rules, unless the context otherwise requires—

 

“acquisition of foreign owned company” means acquisition of a foreign owned company located outside Malaysia for the purpose of acquiring high technology for production within the country or for acquiring new export markets

for local products as approved by the Malaysian Industrial Development Authority;

 

“local owned company” means a company incorporated under the Company’s Act 1965 [Act 125] with at least 60% Malaysian equity ownership and involved in manufacturing, trading or marketing activities;

 

‘ “locally owned company” means a resident company in Malaysia which is established under the Companies Act 1965 [Act 125] and involved in manufacturing, trading or marketing                       activities of local products where—

 

                        (a) for a company which is not listed on the stock exchange established under subsection 8(2) of the Securities Industry Act 1983 [Act 280], at least sixty per cent of its equity is                      directly owned by Malaysian;

                        or

 

                        (b) for a company which is listed on the stock exchange established under subsection 8(2) of the Securities Industry Act 1983—

 

                                    (i) at least fifty per cent of its equity is directly owned by the Malaysian; and

 

                                    (ii) at least sixty per cent of its equity is directly owned by the Malaysian on the first day of listing on the stock exchange;’

 

(Amendment Rules 2008 [P.U. (A) 81])

 

“pioneer company” has the same meaning as defined under section 2 of the Promotion of Investments Act 1986 [Act 327].

 

Deduction

 

3. (1) In ascertaining the adjusted income from the business of a locally owned company which has incurred cost of acquisition of a foreign owned company in the basis period for a year of assessment, there shall be allowed a deduction of an amount equal to one-fifth of that cost for that year of assessment and for each of the four following years of assessment.

 

(2) For the purpose of deduction under subrule (1), the cost of acquisition of a foreign owned company is deemed to be incurred in the basis period for the year of assessment in which the date of completion of the acquisition falls as verified by the Malaysian Industrial Development Authority.

 

(3) Where the cost of acquisition of a foreign owned company is incurred by a pioneer company, the pioneer company may make an election that the deduction referred to in subrule (1) be allowed for the first year of assessment and four subsequent years of assessment in the post pioneer period.

 

(4) Where the acquired foreign owned company is disposed of within five years from the date of completion of the acquisition, the annual allowance shall be withdrawn in the respective years of assessment such allowance has been allowed.

 

“Non-application

 

(4) These Rules shall not apply to a company which submits its application to Malaysian Industrial Development Authority after 31 December 2008.”.

 

(Amendment Rules 2008 [P.U. (A) 81])

 

Made 5 August 2003

[Perb. 0.3865/325; LHDN. 01/35/(S)/42/51/231-17.3; PN(PU²)80/XXXVIII]

 

DR. JAMALUDIN BIN MOHD JARJIS

 Second Minister of Finance

 

[To be laid before the Dewan Rakyat pursuant to subsection 154(2) of the Income Tax Act 1967]