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Income Tax (Deduction For Incorporation Expenses) Rules 2003 [P.U. (A) 475/2003]

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The Inland Revenue Board of Malaysia (IRBM) has issued their responses dated 16 February 2023 to CTIM members’ issues dated 18 January 2023 on the following: –

  1. Deduction for Expenses in relation to the Cost of Detection Test of Covid-19 for Employees [P.U. (A) 404/2021 as amended by P.U. (A) 291/2022]
  2. Qualifying Plant Allowances for Computers and Information Technology Equipment, and Cost of Provision of Computer Software [P.U. (A) 187/1998 and P.U. (A) 272/1999]
  3. Income Tax (Deduction For Incorporation Expenses) Rules 2003 [P.U. (A) 475/2003] as amended by P.U. (A) 472/2005
  4. Amended Guidelines On Tax Deduction Of Secretarial Fees And Tax Filing Fees From YA 2022 Onwards dated 17 August 2022

This article will see IRBM’s response regarding item 3, Income Tax (Deduction For Incorporation Expenses) Rules 2003 [P.U. (A) 475/2003] as amended by P.U. (A) 472/2005.

Rule 2(1) of the P.U. (A) 475/2003, as amended by the P.U. (A) 472/2005, states:

The CTIM has made comments regarding the Income Tax (Deduction for Incorporation Expenses) Rules 2003 [PU(A) 475/2003].

According to Rule 2(1), a company with an authorised capital of up to RM2.5 million can claim a deduction for the expenses incurred during incorporation (pre-incorporation expenses).

Abolishing the par value concept through Section 74 of the Companies Act (CA) 2016 has led to the elimination of the authorised share capital concept linked to the CA 1965.

This means that PU(A) 475/2003 may require amendments to apply to companies incorporated under the CA 2016.

The phrase “authorised capital” in Rule 2(1)(a) could be replaced with “paid-up capital in respect of ordinary shares.” The CTIM requests that the tax authorities address this matter.

Feedback from LHDNM:

IRBM acknowledges and will bring this matter to the Ministry of Finance for policy consideration.

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