This document discusses Labuan business activities and taxation under the Labuan Business Activity Tax Act 1990. It provides examples of Labuan trading and non-trading activities, and explains how Alpha Holdings (L) Ltd would be taxed. Dividends received by Alpha (M) Sdn Bhd and interest payments between Labuan entities would be tax exempt. Zakat payments made by Labuan companies are eligible for tax rebates, while companies in peninsular Malaysia are subject to a 2.5% tax on aggregate income.
This document discusses Labuan business activities and taxation under the Labuan Business Activity Tax Act 1990. It provides examples of Labuan trading and non-trading activities, and explains how Alpha Holdings (L) Ltd would be taxed. Dividends received by Alpha (M) Sdn Bhd and interest payments between Labuan entities would be tax exempt. Zakat payments made by Labuan companies are eligible for tax rebates, while companies in peninsular Malaysia are subject to a 2.5% tax on aggregate income.
This document discusses Labuan business activities and taxation under the Labuan Business Activity Tax Act 1990. It provides examples of Labuan trading and non-trading activities, and explains how Alpha Holdings (L) Ltd would be taxed. Dividends received by Alpha (M) Sdn Bhd and interest payments between Labuan entities would be tax exempt. Zakat payments made by Labuan companies are eligible for tax rebates, while companies in peninsular Malaysia are subject to a 2.5% tax on aggregate income.
This document discusses Labuan business activities and taxation under the Labuan Business Activity Tax Act 1990. It provides examples of Labuan trading and non-trading activities, and explains how Alpha Holdings (L) Ltd would be taxed. Dividends received by Alpha (M) Sdn Bhd and interest payments between Labuan entities would be tax exempt. Zakat payments made by Labuan companies are eligible for tax rebates, while companies in peninsular Malaysia are subject to a 2.5% tax on aggregate income.
i) Explain the meaning of Labuan business activity as provided under
Section 2, Labuan business Activity Tax Act 1990 (LBATA)
By Section 2(1) of LBATA 1990, Labuan business entity means: a Labuan trading or a Labuan non- trading activity carried on in, from or through Labuan in a currency other than Malaysian currency by a Labuan business entity with a non- resident or with another Labuan entity ii) State two examples each for Labuan trading activity and Labuan nontrading activity Labuan trading activity: banking, insurance, trading and management Labuan non- trading activity: investment in securities, shares, loans and deposits
iii) State with reason, how Alpha Holdings (L) Ltd would be taxed under the Labuan Business Activity Tax Act 1990 Alpha Holdings (L) Ltd would be taxed at a preferential rate of 3% of its chargeable profits as declared by the entity or at a fixed rate of RM20,000 upon election by entity. This is because Alpha Holdings (L) is carrying on trading business (management service activity) and the non trading business(investment holding activities) will be taxed at 0% iv) State the tax treatment of dividends received by Alpha (M) Sdn Bhd Tax treatment of dividends received by Alpha (M) Sdn Bhd will be exempted from tax
v) Assume Alpha Holdings (L) Ltd has obtained an offshore loan from Tris Trust Bank (L) Ltd which is lisenced to carry out banking business in Labuan. Alpha Holdings (L) Ltd has obtained approval from the Minister of Finance to lend out the funds to Alpha (M) Sdn Bhd. State whether Alpha (M) Sdn Bhd is required to withhold tax from interest payments made to Alpha Holdings (L) Ltd. Alpha (M) Sdn Bhd is not required to withhold tax from interest payments made to Alpha Holdings (L) Ltd because interest paid by Labuan entity to another Labuan entity will be exempted
vi) State the tax treatment of the zakat payment made by company in Labuan as well as the company in Semenanjung Malaysia. Zakat paid by company in Labuan will be given tax rebate against the tax charged ( whether at 3% of chargeable profit or upon election RM20,000) for a year of assessment whereas for company in Semenanjung Malaysia will be charged 2.5% of the Agregate Income
OCT 2009 (QUESTION 6)
a. The taxability of income derived from offshore trading activities as well as non-trading activities of Labuan offshore companies. The income derived from offshore trading activities will be taxable and non trading activities will be non- taxable b. The withholding tax implications on payments made to a non-resident person. Withholding tax will be exempted because the payment is from Labuan entity to non- resident person. c. Director fees received by Encik Sofar and his Malaysian resident director. The director fees received by Encik Sofar is exempted because Encik Sofar is non resident and the Malaysian resident director will be charged to the tax.
d) The employment income received by his manager.
His manager will enjoy an exemption of 50% on their gross income since he is non resident person. e) The payment of zakat on business and donation made to Malaysian government by the Labuan offshore company. The payment of zakat on business for a year assessment will be granted a tax rebate subject to a maximum of the tax charged that is 3% of the net profit or RM20,000 upon election. However, there is no restriction for donation made to Malaysian Government by Labuan offshore company.
