I INTRODUCTION

Malaysia is experiencing a year of challenges in 2016 as the nation moves towards Vision 2020, an ideal high-income developed economy set out in the Sixth Malaysia Plan 1991,2 and continues to be beleaguered by political turbulence and the global drop in crude oil and gas prices, revenue from which has traditionally been the stalwart of the Malaysian economy. This year further marks the second year of implementation of the Goods and Services Tax that was first introduced on 1 April 2015 to address issues such as a narrow tax base and overdependence on oil and gas revenue, which has invariably exposed Malaysia’s economy to a precarious position subject to the volatility of oil and gas prices.3

In the interim, the lucrativeness of Malaysia as a jurisdiction attractive to private wealth is relatively measured. While the Asia-Pacific region continues to record a robust high net worth individual (HNWI) population and healthy wealth growth rates (at 9.4 per cent and 9.9 per cent respectively) amid a decreased growth rate for the global climate in 2016,4 Malaysia experienced a relatively modest growth of HNWIs between 2013 and 2014, and the population of HNWIs increased by 1.7 per cent in 2014 and suffered a drop in 2015, while wealth grew by 3.7 per cent in 2014, and is anticipated to drive 0.2 per cent of global HMWI wealth growth through 2025.5

Nonetheless, with the introduction of new legislation and concurrent efforts to bolster Labuan’s status as an international business and financial centre, Malaysia continues to position itself to cater to the growing volume of private clients in the region.

II TAX

i Personal taxation

Malaysia’s taxation is principally governed by the Malaysian Income Tax Act 1967 (MITA). While the MITA lays out the fundamentals of personal income tax, there are other developments and case law in relation to personal income tax in Malaysia that should be taken into account in ascertaining the Malaysian taxation regime as a whole. Similar to other jurisdictions, such as Singapore, the scope of taxation in Malaysia is based on a territorial system.6

An individual in Malaysia is liable to income tax if he or she has income accruing in or derived from Malaysia (Malaysia-sourced income) or received in Malaysia from outside Malaysia (foreign-sourced income) for a year of assessment, for income in relation to banking, insurance, and sea or air transport businesses. Otherwise, all foreign-sourced income is exempt from tax.

The residence status7 of an individual is also an important factor in determining how an individual will be taxed, as a resident individual is taxed on both income accruing in or derived from Malaysia and foreign-sourced income, while a non-resident individual is only taxed on income accruing in or derived from Malaysia.

Pursuant to the recent Budget 2016, the prime minister increased the tax rate for income earners of 600,001 ringgit to 1 million ringgit from 25 per cent to 26 per cent and for income earners of 1 million ringgit and above, from 25 per cent to 28 per cent.8

As stated earlier, the law imposes income tax on profits derived in two circumstances: Malaysia-sourced income and foreign-sourced income in relation to banking, shipping, insurance, and air and sea transport businesses. However, Malaysian law does not provide any definition of ‘income’. Nonetheless, the MITA categorises income into a number of classes.9

Business income

Business income includes any gains derived from a trade, profession or vocation. In ascertaining whether the gains are derived from a trade, profession or vocation, one should look at the relevant case law (including countries with taxation laws that are pari materia to Malaysia) as the MITA does not provide any statutory definitions.

Trade

In determining whether an individual is carrying on a trade, one should consider the following factors (commonly known as the six badges of trade):

  • a the subject matter;
  • b period of ownership;
  • c frequency of transactions;
  • d supplementary work on or in connection with the asset realised to enhance marketability;
  • e organisation set up to dispose of goods; and
  • f motive for transaction.10
Profession

Profession is also not defined in the Act. Case law has defined ‘profession’ to involve ‘the idea of an occupation requiring either purely intellectual skill, or if any manual skill, as in painting and sculpture, or surgery, skill controlled by the intellectual skill of the operator, as distinguished from an occupation which is substantially the production, or the sale, or arrangement for the production or sale of commodities’.11

Vocation

This word is also not defined in the MITA. Therefore, we look to case law for guidance on its definition. For instance, the case of Patridge v. Mallandaine [(HL) 2 TC 179] held that persons who attend races, engaging themselves in systematic bets, are involved in a vocation.

An individual engaged in a business that falls under any of the above categories is subject to income tax on gains obtained thereof. Similarly, other gains arising from the running of a business, such as rental income and interest income, are also taxable.

Employment income

Employment income is gains derived from an employment. Section 2 of the MITA defines employment as any situation where the relationship of ‘master and servant’ subsists, or any appointment or office, whether public or not and whether or not that relationship subsists, for which remuneration is payable.12

A fundamental principle of Malaysian income tax is that for income to be taxable as employment income it must be in respect of having or exercising an employment.13 The law in relation to employment income is quite clear in that one can clearly say that an individual who has a master and servant relationship or is remunerated for holding an appointment or office clearly falls under this category.

ii Gift

The Malaysian parliament has not specifically made laws to govern gifts. In general, gifts are not income and, hence, not taxable. Nonetheless, one should look at whether the gift is made voluntarily and whether it is connected to a business or employment. In short, the character of the gift would depend on the motive of the giver.14

iii Succession

There is no inheritance tax in Malaysia. Hence, property transferred by a predecessor to a successor in the context of effecting succession will not be taxed. Generally, capital gains are not taxed in Malaysia, except for gains derived from the disposal of real property or shares in a real property company (real property gains tax). Real property includes any land and any interest, option or right over such land in Malaysia.15 The rate for real property gains tax for individuals is between zero per cent (if the property is held for more than five years) and 30 per cent (if the property is disposed within three years). For individuals who are not permanent residents,16 the rate applicable is 5 per cent (if the property is held for more than five years) and 30 per cent (if the property is disposed within five years).17

iv Cross-border developments

With the worldwide focus on globalisation and the fact that cross-border transactions are becoming increasingly simpler to administer, international business operations and the use of international wealth structures by wealthy families or individuals are gaining popularity. In this regard, tax implications are inevitable.

At the time of writing, in August 2016, Ukraine is set to sign a double taxation agreement (DTA) with Malaysia during the official visit of Ukraine’s president to Malaysia.18 Akin to many other countries, Malaysia operates a territorial scope of taxation. The same income from a cross-border transaction may be taxed in two or more countries depending on determination of residency and permanent establishment. In this circumstance, DTAs entered into with various countries accommodate and deal with the tax conflicts.

As such, in Malaysia, when the same income has been subject to tax in two or more countries, the MITA allows the minister to declare arrangements that afford relief or credit, with the view of reducing the incidence of double taxation.19 For countries that have signed a DTA with Malaysia, taxpayers are accorded bilateral credit.20 The relief is given by way of statutory order in the Government Gazette. For countries that do not enter into a DTA, taxpayers could resort for unilateral credit.21

In this context, one frequently asked question is that in the event of conflict, does the treaty or domestic law take precedence? In general, this is very much dependent on each respective country’s view on international law. In countries such as the United States, treaties have the same footing as domestic law.22 In comparison, in Malaysia, by virtue of Section 132(1)(b) of the MITA, which reads, ‘…not withstanding anything in any written law’, these legislated words clearly give DTA precedence over domestic law.23 This principle has been well established and confirmed by Malaysian courts in several occasions.24

To further foster cross-border transactions, specific provisions have recently been enacted to provide for tax information exchange arrangements and mutual administrative assistance arrangement.25 Treaty countries would exchange information and cooperate to eliminate tax avoidance.

III SUCCESSION

i Introduction

Benjamin Franklin once said, ‘in this world, nothing is certain except death and taxes.’ Of the two, death, though certain, cannot be predicted as to when it will happen. It is, therefore, important to ensure that one’s estate is well planned in advance.

The law of succession is an important law that regulates the inheritance and entitlement of properties both moveable and immoveable and even trusts and debts in the event of death. There are three main legislations in this area – the Wills Act 1959, the Probate and Administration Act 1959 and the Distribution Act 1958.

The law of succession is influenced by English common law,26 owing to the fact that Malaysia was a colony of the British empire prior to its independence on 31 August 1957.

ii Key changes and applicable changes affecting personal property

The major change to the Malaysian law of succession was made in 1997, when the Distribution Act 1958 was amended27 in terms of the procedure for intestate distribution. The amendment to the Distribution Act 1958, among others, recognised equality between genders (i.e., husband and wife) and also improved the rights of parents of an intestate deceased.

iii Cross-border developments

Although Malaysia is part of the Association of Southeast Asian Nations (ASEAN), there has been a lack of movement to introduce cross-border law of succession between Member States similar to that done by the European Union in 2015.28

The closest resemblance to cross-border law of succession can be seen among Commonwealth Member States, of which Malaysia is a member. In cases where grants of representation are issued in the courts of competent jurisdiction in a Commonwealth Member State, the same can be re-sealed in courts of equal level at other Commonwealth member states or vice versa.29

As it stands, of the 10 Member States of ASEAN, only three (i.e., Malaysia, Singapore and Brunei Darussalam) are members of the Commonwealth. There is no legislation to allow the re-sealing of a Malaysian grant of representation in non-Commonwealth Member States such as Thailand, Indonesia and the Philippines. In an era of globalisation, the time has come for ASEAN countries to look into harmonising laws of succession.

IV WEALTH STRUCTURING & REGULATION

i Common vehicles for wealth structuring

It was commonly perceived that only the wealthy would plan their wealth and finance. However, as time passed, and through education and awareness, many now realise the importance of planning their wealth and finance in advance.

The common vehicles or ‘instruments’ used in wealth, financial and estate planning are wills, codicils, trusts, foundations and charitable remainder trusts. In particular, wills and trusts are instruments that have proven effective in succession planning. HNWIs commonly use the combined package of trusts, foundation and charities in managing their wealth, with the goal of having their wealth to last over a few generations.

Legal treatment

Over the years, Malaysian courts have revamped and expedited the process of obtaining a grant of representation. Malaysian courts generally dispose uncontested applications for a grant of representation in under three months from the date of filing.30

There are several advantages of making a will. The main advantages are that it only takes effect after the death of the testator, hence, leaving the testator in total and complete control of his or her personal assets during his or her lifetime, and the person has control over the manner in which his or her estate is distributed after death. In this regard, a valid will must comply with the requirements under the Wills Act 1959. For example, a will must be in writing and signed by the testator in front of two witnesses. There can only be one will at any given time and the latest will revokes all former wills, codicils and testamentary documents.

Trust instruments, on the other hand, bypass the need for court processes (i.e., a grant of representation) but the effect of a trust is that the settlor will have to part with his or her assets from the time of formation of the trust, thus effectively putting him or her out of control of his or her own assets during his or her lifetime. Trust instruments also cater for very specific subject matters and may not be a viable replacement for a will in terms of testamentary disposition of assets. A trust instrument is a good supplement to a will.

Charities and foundations, while getting more popular by the day in countries such as the United States, have yet to gain any real form of traction in Malaysia. In particular, the benefits of setting up a foundation – a hybrid of a trust and a company – that is able to tap into both the benefits of trusts and the advantages of being a corporate body, have not attracted the attention of individuals in Malaysia, with the exception of those HNWIs as a form of asset protection and wealth management.

Though Malaysia has the necessary foundation law31 to offer private foundations as a vehicle for the protection of assets and estate planning, many have not seized this opportunity, perhaps because of a lack of awareness or high set-up costs. Just like wills and trusts, the public need to be educated and introduced to these two vehicles and when costs of setting up are reduced, perhaps we will see more resorting to foundations and charities for asset protection and estate planning.

Wills are, by far, the most basic instrument to fall back on for estate planning and wealth management after death.

Tax treatment

The principles of English trust law are instrumental in moulding the Malaysian law of trusts. Today, it is primarily governed by the Trustees Act 1949 and the Civil Law Act 1956,32 which still allow for the applicability of the common law of England, rules of equity and statutes of general application, subject to qualifications.

From a taxation perspective, section 61(2) of the MITA provides that the income of the trust body of a trust shall be assessed and taxed separately from the income of a beneficiary from any source in relation to the trust.33 In other words, this necessitates that income tax can only be charged once, either in the hands of the trustee or the beneficiary when it is paid out to the latter.

For a trust body, any source forming part of the property of the trust, any source of a trustee of the trust, being a source of his by virtue of specific provisions of the MITA and any income from any such source, save that gains arising from the realisation of investments from unit trusts, shall be treated as income of the trust body of the trust.34

For a beneficiary to a trust, subject to qualifications, he or she will be subject to tax on his or her share of income. It is noted, however, that in relation to sources of income of a beneficiary to said trust, it may comprise the following:

  • a ordinary source from the trust;35 and
  • b further sources,36 defined under the relevant provisions as the amount of excess from the difference between statutory income from the beneficiary’s ordinary source in relation to the trust and the total income from all sums received in Malaysia from the trust body in the basis year, together with all sums received from outside Malaysia in any year and remitted to Malaysia in the basis year.

On top of that, a trust body is regarded as resident for the basis year for a year of assessment if any trustee member of that body is resident for that basis year. In certain circumstances, the trust body in question shall not be regarded as resident in Malaysia for that basis year if:37

  • a the trust was created outside Malaysia by a person or persons who were not citizens;
  • b the income of the trust body for that basis year is wholly derived from outside Malaysia;
  • c the trust is administered for the whole of the basis year outside Malaysia; or
  • d at least half of the number of the member trustees are not resident in Malaysia for the basis year.

For a beneficiary, residency status is regulated by Sections 7 and 8 of the MITA.

The residence status of a trust is pertinent for the following reasons:

  • a a further source of a non-resident individual derived from sources outside of Malaysia is exempt from income tax when remitted into Malaysia;38 and
  • b if the trust body is resident for the basis year in question:39

• the amount payable in respect of any annuity for the basis year shall be deemed to be derived from Malaysia whether or not the trust body has any total income for that year of assessment; and

• in ascertaining the total income of the trust body for that year of assessment that amount shall be deducted in a specific manner stipulated by the relevant provisions.

In terms of tax rates, the applicable tax rate in respect of a trust body is fixed at a rate of 25 per cent for the year of assessment 2014, and 24 per cent for subsequent years. This can be contrasted with the applicable tax rate for resident individuals, which stretches across a range of zero per cent to 28 per cent, depending on the income bracket, or that of a non-resident individual, which is fixed at 28 per cent.40 With the comparative tax rates in mind, the setting up of trusts in Malaysia may be a viable option for private clients.

In line with Malaysia’s efforts to brand itself as an Islamic investment hub, exemptions are accorded to resident companies in Malaysia in respect of payment of income tax for statutory income derived from a business of providing fund management services to foreign investors41 or to local investors42 in Malaysia in respect of funds managed in accordance with sharia or Islamic principles.

In Malaysia, the law governing charities is not entrenched in any specific act and instead comprises an array of Malaysian legislation, including the Companies Act 1965 and the Societies Act 1966, and case law.

The terms ‘charity’ or ‘charitable institution’ are not expressly defined in the MITA. Rather, Section 44(6) of the MITA accords deductions at specific rates for gifts of money made to an organisation or institution43 approved by the relevant authorities. This deduction is read in line with paragraph 13 Schedule 6 of the MITA, which accords tax exemption to institutions or organisations approved for the purposes of Section 44(6) or religious institutions or organisations that are not operated or conducted primarily for profit and that are established in Malaysia exclusively for the purposes of religious worship or the advancement of religion. In short, an organisation or institution that obtained approval from the relevant authorities under Section 44(6)44 will automatically45 be eligible for tax exemption.

Further, it is noted that an approved organisation or institution may also carry out businesses whereby the business is carried on in the course of the actual carrying out of the primary purpose of the institution or organisation, or the work in connection with the business is mainly carried on by persons for whose benefit the institution or organisation was established.46

The MITA allows such an approved organisation or institution to apply no more than 25 per cent of its accumulated funds as at the beginning of the basis period for the year of assessment for the carrying on of or participation in a business, provided that its profits shall be used solely for charitable purposes or for the primary purpose for which the institution or organisation was established, or to carry out charitable activities outside Malaysia with the prior consent of the Minister.47

While internal guidelines and rulings by the Malaysian Inland Revenue Board have no legal effect,48 it is worth noting that the Malaysian Inland Revenue Board issued a guideline in which they stipulated that at least 50 per cent of the income and donation received must be spent yearly in carrying out the objectives of the institution or organisation, and failure to meet this condition will result in withdrawal of the exempt status.49

From the wording of the legislation as well as the position adopted by the Malaysian Inland Revenue Board in its Public Ruling, it appears that these businesses50 would not jeopardise the tax exemption enjoyed under paragraph 13 Schedule 6 unless the approved organisation or institution applied more than 25 per cent of its funds or the business in question does not conform to the relevant provisions.51

Therefore, the requirement for approval, as well as limitations in terms of the nature of business and the utilisation of profits derived, should very well be taken into consideration when weighing the merits of a charitable institution or organisation as a wealth-structuring vehicle.

In Malaysia, the establishment of a limited liability partnership (LLP)52 is governed by the Limited Liability Partnerships Act 2012. Unlike conventional partnerships under the Partnership Act 1961, under which individual partners are subject to income tax, an LLP is treated as a separate taxable person for the purposes of the MITA. Its residence status is accorded for under Section 8(1A) of the MITA and the MITA stipulates that for an LLP53 the responsibility for carrying out all acts required to be done by or on behalf of a LLP lies jointly and severally with either the compliance officer appointed among the partners or if no such person is appointed, any one or all of the partners.

Generally, an LLP will attract tax at the rate of 25 per cent for year of assessment 2015, and 24 per cent for subsequent years. This is, however, subject to qualifications that, if fulfilled, will attract different tax rates.54

It is also pertinent to note that where a partnership or company converts to an LLP, for the year of assessment in which the conversion occurs, every partner shall continue to be personally assessable and chargeable to tax for that year of assessment and for any previous year of assessment before the conversion in like manner and to the like amount, as the company would have been taxed prior to the conversion.55

The Labuan perspective

The Federal Territory of Labuan, a federal territory of Malaysia best known as an offshore financial centre, offers attractive alternatives in its bid to attract investors. With a sound and robust regulatory framework in place, some of its key highlights are as follows.

The existence and constituents of a Labuan trust is governed by the Labuan Trusts Act 1996. Under the Act, income derived from trust property in respect of a Labuan trust is subject to the Labuan Business Activity Tax Act 1990,56 which imposes tax at a lower rate of 3 per cent for Labuan trading activity,57 or non-chargeable for non-trading activity.58 Alternatively, taxpayers may elect to be charged to tax 20,000 ringgit59 or to be charged to tax in accordance with the MITA.60

It is noted, however, that the rate of 3 per cent will only be applicable to trust property that does not include Malaysian property, and generally, trust property excludes Malaysian property,61 unless prior consent of the authorities is obtained or the trust in question is for charitable purposes. Where the trust property in question includes Malaysian property, income from the trust property is subject to the MITA.62

Further, affairs pertaining to a Labuan trust enjoy legislative protection in terms of higher levels of secrecy with strict disclosure laws, and leave from the court is necessary if any details in any court proceedings are to be divulged.63

Where a Labuan trust is validly created, the courts do not vary or set it aside. In addition, the courts do not recognise the validity of any claim against the trust property in question pursuant to the laws of a foreign jurisdiction unless in specific circumstances,64 or if it is proven that the trust is fraudulent.65 The unenforceability of claims of a foreign jurisdiction may be a factor to be taken into account in considering the viability of a Labuan trust.

The accession of the Labuan Financial Services and Securities Act 2010 further establishes a more comprehensive framework in relation to private funds management in Labuan. The Act governs the requirements on an establishment of a private fund in Labuan, including the requirement for notice for private funds,66 as well as the appointment, duties and other aspects pertaining to private trust companies in Labuan to increase its appeal, with regard to the provision of wealth management facilities, and attract more private investors.

A recent development of Labuan legislation brings in place the Labuan Foundations Act 2010, which allows for the establishment of a Labuan foundation. The founder and beneficiary of a Labuan foundation may be resident or non-resident.67 For Labuan foundations, not unlike the Labuan Trusts Act 1996, the income derived from any property which is not Malaysian property is subject to the Labuan Business Activity Tax Act 1990.68 Again, there are restrictions in place in relation to the property of a Labuan foundation that governs the applicable tax laws69 and secrecy and confidentiality provisions in place.70

In addition, not unlike the Limited Liability Partnerships Act 2012, a Labuan LLP under the Labuan Limited Partnerships and Labuan Limited Liability Partnerships Act 2010 accords a separate legal personality in respect of Labuan LLPs,71 which is a taxable Labuan entity for tax purposes, and precludes members from personal liability save to the extent of their own investments.72

ii Regulation

There may be people who abuse these vehicles, meant for genuine asset protection and estate planning, as means of laundering monies gained from illegal activities or worse, to finance acts of terrorism both locally and globally. This is more so with the ever-increasing global threat of terrorism from terrorist organisations using their ill-gotten gains to perform acts of terrorism on a global front.73

It is apt that, in line with the various recommendations by the Financial Action Task Force,74 Malaysia has the necessary legislation in place to counter these illegal activities. Malaysia’s primary anti-money laundering regulation is the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFA).

The AMLATFA came into operation on 15 January 2002 as a legislation to, inter alia, provide for the offence of money laundering, the measures to be taken for the prevention of money laundering and to provide for the forfeiture of property involved in or derived from money laundering, proceeds of an unlawful activity and instrumentalities of an offence, and incidental matters.

This is further supplemented by Section 114 of the MITA, which provides for the criminal offence of tax evasion – a ‘serious offence’ as defined under AMLATFA. Although AMLATFA came into operation in early 2002, it is pertinent to note that the Act is applicable to any serious offence, foreign serious offence or unlawful activity whether committed before or after the commencement date and applies to any property situated in or outside Malaysia.75 In other words, the Acts covers a wide range of activities76 and have far-reaching implications that may transcend time or territorial limitations.

Other anti-money laundering regulations includes the Malaysian Anti-Corruption Commission Act 2009, with the latter establishing the Malaysian Anti-Corruption Commission, an independent and accountable anti-corruption body tasked with, among others, detecting and investigating any suspected offences under the MACCA 2009. With these regulations in force, Malaysia is well placed to ensure that vehicles meant for genuine asset protection, estate planning and wealth management are not used for the wrong reasons.77

V CONCLUSIONS & OUTLOOK

Internationally, in the light of the burgeoning need for global economic cooperation, Malaysia, while not an OECD member country, has partaken in various technical and administrative tax initiatives by the OECD/G20 and recently signed the Multilateral Competent Authority Agreement on exchange of Country-by-Country-Reporting78 to address multinational tax avoidance.

On a national level, it can be observed that attractive tax incentives and exemptions are accorded for various wealth structure vehicles, especially foundations and charities for asset protection and estate planning within Malaysia. Hence, it is apparent that Malaysia has the requisite means to cater to the thriving market of private clients.

Further, amid the sluggish global economic climate and low oil prices, the Malaysian government announced the recalibration and restructuring of Budget 201679 to ensure the viability and sustainability of the Malaysian economy. In this exercise, the government further indicated that there will be tightening of tax enforcement and tax collection by way of increasing compliance and auditing efforts, in addition to extending special consideration to waive or reduce penalty for taxpayers who make voluntary disclosure.80 With these measures in place, it is seen that Malaysia is actively introducing measures to align and ensure that the nation’s growth trajectory is strong and steady to remain buoyant in the current economic climate.

Footnotes

1 DP Naban is a senior partner, SM Shanmugam is a partner and Josiah Lim Yun-Xi, Heng Jia, Ngo Su Ning and Cindy Bong Xin Yi are associates at Lee Hishammuddin Allen & Gledhill.

2 See: article by Economic Planning Unit of the Prime Minister’s Department of Malaysia (www.epu.gov.my/wawasan-2020-1991-2020) accessed on 2 August 2016.

3 Country Note – Malaysia, extract from the Economic Outlook for Southeast Asia, China and India. 2014: Beyond the Middle-Income Trap (http://dx.doi.org/10.1787/saeo-2014-en) (available for download).

4 Asia-Pacific Wealth Report 2015 (www.worldwealthreport.com) (available for download).

5 Figure 6 of the World Wealth Report 2016 (www.knightfrank.com/wealthreport ) (available for download).

6 Section 3 of the Income Tax Act 1967.

7 Section 7 and Schedule 1 of the Income Tax Act 1967.

8 See: the 2016 Malaysian Budget speech (www.bnm.gov.my/files/Budget_Speech_2016.pdf) (available for download).

9 Section 4 of the Income Tax Act 1967.

10 See the Radcliff Commission final report in 1954, United Kingdom.

11 CIR v. Maxse [(CA) 12 TC 41].

12 Section 2 of the Income Tax Act 1967.

13 McMillan v. Guest (24 TC 190).

14 Murray v. Goodhews [1978] STC 207.

15 Section 2 of the Real Property Gains Tax Act 1976.

16 See Section 2 of the Real Property Gains Tax Act 1976, on definition on ‘permanent resident’.

17 Schedule 5 of the Real Property Gains Tax Act 1976.

18 See newspaper article: Ukraine, Malaysia To Sign Double Tax Treaty dated 28 July 2016 by Ulrika Lomas; see: www.tax-news.com/news/Ukraine_Malaysia_To_Sign_Double_Tax_Treaty____71824.html, accessed on 5 August 2016.

19 Section 132(1) of the Income Tax Act 1967.

20 See: Paragraph 16 of Schedule 3 of the Income Tax Act 1967. Bilateral credit means credit in respect of foreign tax which, by virtue of any arrangements having effect under Section 132, is to be allowed as a credit against Malaysian tax.

21 Section 133 of the Income Tax Act 1967.

22 Jayapalan Kasipillai, A Comprehensive Guide to Malaysian Taxation, Third Edition (2007) McGraw-Hill.

23 See Lembaga Hasil Dalam Negeri Malaysia v. Alam Maritim (M) Sdn Bhd (2013) MSTC 30-068 and Re Geoffrey Robertson [2001] 4 CLJ 317.

24 See Director General of Inland Revenue v. Euromedical Industries Ltd (1981) 2 MLJ 208 and SGSS Singapore (Pte) Ltd v. Ketua Pengarah Hasil Dalam Negeri (2000) MSTC 3814.

25 Sections 132A and 132B of the Income Tax Act 1967.

26 Section 3 of the Civil Law Act 1956 (Revised 1972).

27 See: Distribution (Amendment) Act 1997.

28 See: EU Law 650/2012 (‘Brussels IV Regulation’).

29 Section 52 of the Probate and Administration Act 1959 (Revised 1972).

30 See: Speech by The Right Honourable Tun Arifin Bin Zakaria, Chief Justice of Malaysia at the opening of the legal year 2016 at paragraph 50.

31 See the Labuan Foundations Act 2010.

32 Section 3 of the Civil Law Act 1956.

33 Section 61(2) of the Income Tax Act 1967.

34 Section 61(b) of the Income Tax Act 1967.

35 Section 61(1)(c) of the Income Tax Act 1967.

36 Section 61(5) of the Income Tax Act 1967.

37 Section 61(3) of the Income Tax Act 1967.

38 Paragraph 28 Schedule 6 of the Income Tax Act 1967.

39 Section 63(3) of the Income Tax Act 1967.

40 Schedule 1 of the Income Tax Act 1967.

41 Income Tax (Exemption) (No. 15) Order 2007 (PU (A) 199/2007).

42 Income Tax (Exemption) (No. 6) Order 2008 (PU (A) 255/2008).

43 Section 44(7) of the Income Tax Act 1967, which defines ‘institution’ and ‘organisation’ respectively.

44 Section 44(6) of the Income Tax Act 1967.

45 See: Public Ruling of the Malaysian Inland Revenue Board (Public Ruling No. 1/2015).

46 Section 44(7B) of the Income Tax Act 1967.

47 Section 44(7A) of the Income Tax Act 1967.

48 See the decisions of the Malaysian courts in Metacorp Development Sdn Bhd v. Ketua Pengarah Hasil Dalam Negeri [2011] 5 MLJ 447 and KPHDN v. Success Electronics (2012) MSTC paragraph 30-039.

49 See the IRB’s Guidelines for Application of Approval under Subsection 44(6) of the Income Tax Act 1967.

50 Sections 44(7A) and (7B) of the Income Tax Act 1967.

51 Ibid.

52 See definition under Section 3 of the Limited Liability Partnerships Act 2012.

53 Section 75B(1) of the Income Tax Act 1967.

54 Paragraphs 2D, 2E and 3 of Part I Schedule 1 of the Income Tax Act 1967.

55 Subsections 75B(3) and (4) of the Income Tax Act 1967.

56 Section 7(6) of the Labuan Trusts Act 1996.

57 Section 4 of the Labuan Business Activity Tax Act 1990 defines ‘Labuan trading activity’ and ‘Labuan non-trading activity’.

58 Section 9 of the Labuan Business Activity Tax Act 1990.

59 Section 7 of the Labuan Business Activity Tax Act 1990.

60 Section 3A of the Labuan Business Activity Tax Act 1990.

61 Section 7 of the Labuan Trusts Act 1996.

62 Section 7 of the Labuan Trusts Act 1996.

63 Section 8a of the Labuan Trusts Act 1996.

64 Section 10 of the Labuan Trusts Act 1996.

65 Section 11 of the Labuan Trusts Act 1996.

66 Section 28 of the Labuan Financial Services and Securities Act 2010.

67 Sections 5 and 6 of the Labuan Foundations Act 2010.

68 Section 6(3) of the Labuan Foundations Act 2010.

69 Section 5(2), 6(2) of the Labuan Foundations Act 2010.

70 Sections 62 to 64, 71 and 73 of the Labuan Foundations Act 2010.

71 Section 55 of the Labuan Limited Partnerships and Labuan Limited Liability Partnerships Act 2010.

72 Sections 55 and 56 of the Labuan Limited Partnerships and Labuan Limited Liability Partnerships Act 2010.

73 See: FATF (2015), Financing of the terrorist organisation Islamic State in Iraq and the Levant (ISIL), FATF, (www.fatf-gafi.org/topics/methodsandtrends/documents/financing-of-terrorist-organisation-isil.html).

74 See: Amongst others, FATF 2001 recommendations, FATF 2012 recommendations, FATF 40 recommendations.

75 Section 2(1) and (2) of the AMLATFA.

76 Section 4(1) of the AMLATFA.

77 See: Newspaper Article: Minister says Malaysia has adopted comprehensive framework that criminalises terrorism financing (http://www.themalaymailonline.com/malaysia/article/minister-says-malaysia-has-adopted-comprehensive-framework-that-criminalise#sthash.3hjr0aaL.dpuf).

78 Malaysia signed the Multilateral Competent Authority Agreement on 27 January 2016.

79 See the 2016 Budget Recalibration Speech, Bank Negara Malaysia website: http://w2.bnm.gov.my/index.php?ch=en_announcement&pg=en_announcement&ac=39&lang=en, accessed 5 August 2016.

80 Media Statement by the Malaysian Inland Revenue Board (www.hasil.gov.my/pdf/pdfam/Kenyataan_Media10012016_pengurangan_penalti_dan_Penghapusan_kenaikan_cukai.pdf, accessed 5 August 2016).