education about malaysian taxation principles and practice Part 7

8.0 Year of Assessment
With effect from 1 January 2001, Malaysia moves towards the implementation of current year assessment. This results in the assessment of income tax to be concurrent with the derivation of the income.

The calendar year coinciding with a Y/A shall constitute the basis year for that Y/A.

8.1 Basic period
Self assessment was fully implemented in Y/A 2004. With effect from Y/A 2004, the income source of a person other than a company, trust body or co-operative society will be on calendar year basis. This is to facilitate the taxpayer on estimation of income tax, payment of tax and submission of return not later than 30 April of the following year.

8.2 Basis period for company, trust body and co-operative society
With effect from Y/A 2004, only company, trust body and co-operative society can have its basis period for a Y/A to be on a calendar year basis or non-calendar year basis.

8.3 Preceding year of assessment
Prior to 1 January 2000, Malaysia adopts the preceding Y/A. The imposition of the income tax is a year later than the derivation of income. Income earned in 1998 would be liable to income tax in 1999.

8.4 Y/A 2000 (preceding year)
In the year 2000, there would be two Y/As. One is the Y/A 2000 on preceding year (PYA) basis and the other is the Y/A 2000 on current year (CYA) basis.

In order to relieve taxpayers from paying two years’ income taxes within a year, the Malaysian Government has granted a waiver of income tax for the Y/A 2000 on the preceding year basis.

Resident company is further allowed to credit the chargeable income upon which income tax is waived into an exempt income account from which two-tier exempt dividends can be declared.

8.5 Non-application of income tax waiver
Although Y/A 2000 (PYA) is known as the tax waiver year, the following income would not be waived :

(i) Employment income received by non-citizen or non-resident individual who

commences or ceases employment in 1999;

(ii) Dividend income;

(iii) Royalty income, interest income (s 109), and special classes of income (s 109B) which are liable to final withholding tax.

In other words, income tax liability would still be imposed on the above income for the Y/A 2000 (preceding year basis).