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Payments made overseas for work done in Malaysia are taxable

04 Apr 2019 / 11:19 H.

KUALA LUMPUR: Payments made overseas for work done or services rendered in Malaysia are taxable, said a tax expert.

“The fact that you paid it in Singapore (example) makes no difference to the taxability. People assume that the moment it is foreign, it’s (tax) exempt. Income earned overseas is exempt, but income earned in Malaysia is taxable even though it’s paid overseas,“ Axcelasia Inc group chairman Dr Veerinderjeet Singh (pix) told reporters at the Malaysian Tax Conference 2019 today.

He explained that when services are rendered in the country and activities to generate that income are carried out here, despite payment being made overseas, it is still taxable in Malaysia.

Veerinderjeet noted that Malaysia has a “wonderful” territorial system that only imposes tax on income derived from the country, as foreign income derived outside Malaysia is not taxable.

“That’s a wonderful part of our system which we should be selling this effectively to our investors. Singapore doesn’t have this system. We’re far better than Singapore in terms of the territorial system and many people don’t realise this,” said Veerinderjeet.

Meanwhile, he said while tax incentives create leakages, they are still necessary for Malaysia to encourage investments.

“In the context of Malaysia, we have so many little incentives here and there – some double deductions, some accelerated capital allowances, some pioneer status, investment tax allowances and so on. Some are good, some may not need to be there.”

He said some double deduction incentives provided to special sectors may only have 10 companies applying for it in a year, hence the country can clean up some of these incentives that are not needed.

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