LHDN & Witholding Tax

LHDN - Efiling

https://www.ithmm.com/e-filing-lhdn/

https://www.biztory.com.my/withholding-tax-in-malaysia/

https://www.bisnesforum.com/forum/financial-legal/taxes/42-withholding-tax-on-facebook-and-google-advertising

Reits witholding Tax

E-Form

http://phl.hasil.gov.my/pdf/pdfborang/CP37E_Pin3_2014.pdf

http://askchong.com/2010/10/why-you-must-invest-in-reits.html

Advantage of Investing in Reits

http://www.hasil.gov.my/bt_goindex.php?bt_kump=2&bt_skum=6&bt_posi=1&bt_unit=5&bt_sequ=1&bt_lgv=2

https://www.winrayland.com/2018/03/REITs.html

http://aliinvest.blogspot.com/2019/04/no-withholding-tax-stock.html

Reference: https://www.bisnesforum.com/forum/financial-legal/taxes/42-withholding-tax-on-facebook-and-google-advertising

Withholding tax on Facebook and Google advertising

12-12-2020, 08:02 PM

According to IRB Malaysia

Withholding tax is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and paid to the Inland Revenue Board of Malaysia.

'Payer' refers to an individual/body other than individual carrying on a business in Malaysia. He is required to withhold tax on payments for services rendered/technical advice/rental or other payments made under any agreement for the use of any moveable property and paid to a -resident payee.

'Payee' refers to a non-resident individual/body other than individual in Malaysia who receives the above payments.

Source

Nowadays businesses are using digital such as Facebook and Google to advertise their products and services. If you look at their invoice, Facebook issue from Ireland and Google issue from Singapore, therefore they are non-resident and the payment is subject to withholding tax.

Tax treatment on digital advertising provided by a non-resident
People often confuse whether Facebook and Google advertising are classify as royalty (Section 109) or special classes of income: payment for service (Section 109B).

Royalty is defined as:

Any sums paid as consideration for the use of or the right to use:

1. Copyrights, artistic or scientific works, patents, designs or models, plans, secret processes or formulae, trademarks or tapes for radio or television broadcasting, motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights.
2. Know-how or information concerning technical, industrial, commercial or scientific knowledge, experience or skill.
3. Income derived from the alienation of any property, know-how or information mentioned in above paragraph of this definition.

Special classes of income include:

1. payments for services rendered by the NR payee or his employee in connection with the use of property or rights belonging to or the installation or operation of any plant, machinery or apparatus purchased from the NR payee.
2. payments for technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme or
3. rents or other payments (made under any agreement or arrangement) for the use of any moveable property.

Source

Based on the above definition, it is hard to differentiate the type of withholding tax apply on Facebook and Google advertising.

On 16 March 2018, IRB issue PRACTICE NOTE NO. 1/2018, its stated the main criteria that determine whether withholding tax under section 109 or 109B of the Act applies are as follows:-

• Subject to section 109 of the Act, if it is for the purchase or use of (for example) an application (Apps) by the payer that allows the payer to create their own advertisement campaign; or
• Subject to section 109B of the Act, if it does not involve the purchase or use of an Apps but merely a provision of service by the non-resident. In this case, the payer solely relies on the service provider to deal with all aspects of digital advertising.

Of course, IRB has clear the doubt, Facebook and Google are used as platform to create our own advertisement campaign, therefore is fall under royalty (Section 109).

You could also look at GUIDELINES ON TAXATION OF ELECTRONIC COMMERCE TRANSACTIONS published by IRB on 13 May 2019,

Page 12 Example 3

MB Sdn Bhd (MB) undertakes the activity of online trading in scarves and accessories. MB uses a renowned social media company as a platform to advertise the sales of its products. The social media company allows its customers including MB to create its own advertisement campaign using its platform. The payment made to the social media company is classified as royalty and it is subject to withholding tax under section 109 of ITA 1967.

Withholding tax rate
The rate is generally tax at 10%. In this case, since Malaysia has double tax agreement with Singapore and Ireland, withholding tax is tax at lower rate which is 8%. Source

Facebook and Google have card as payment method only, you are unable to withhold 8%, the regross method come in.

According to Facebook user Anas Sazali, you need to regross to determine the amount of withholding tax.

For example:

Payment to Facebook / Google: RM10,000
Withholding tax @ 8%: RM869.57 (RM10,000 X 8/92)

Source

Submission of withholding tax

Section 109 Income Tax Act 1967 states:

"(1) Where any person (in this section referred to as the payer) is liable to pay interest or royalty derived from Malaysia to any other person not known to him to be resident in Malaysia, other than interest or royalty attributable to a business carried on by such other person in Malaysia, he shall upon paying or crediting the interest (other than interest on an approved loan or interest of the kind referred to in paragraph 33, 33A, 33B, 35 or 35A of Part 1, Schedule 6) or royalty deduct therefrom tax at the rate applicable to such interest or royalty, and (whether or not that tax is so deducted) shall within one month after paying or crediting the interest or royalty render an account and pay the amount of that tax to the Director General:

Provided that the Director General may under special circumstances allow extension of time for tax deducted to be paid over.

(2) Where the payer fails to pay any amount due from him under subsection (1), that amount which he fails to pay shall be increased by a sum equal to ten per cent of the amount which he fails to pay, and that amount and the increased sum shall be a debt due from him to the Government and shall be payable forthwith to the Director General.”

Source

You will have to submit withholding tax using CP37 form within 1 month after payment made to Facebook and Google. Fail to do so will have to pay 10% penalty.

You can print out CP37 (link) and hand write the details or fill in the details online (link) and print out. The latter is more convenience and you would prefer this if you have bad handwriting.

All withholding tax payments (other than for non-resident public entertainers) must be made with the relevant payment forms, duly completed, together with copy of invoices issued by the NR payee and copy of payment documents as proof of date of payment /crediting to the NR payee.


Type Of Income Subject To Withholding Tax And Withholding Tax Rate On Non-Resident Persons:

Withholding Tax On Non-Resident Persons :

Please ensure that the forms are completed accurately furnishing the Malaysian tax reference number for the payer, payee as well as the payee's country of origin.

If the payer does not have the reference number of the payee, the payer may request for such number from :

Director
Non Resident Branch
Customer Services Unit
3rd Floor Left, Block 8
Government Office Complex
Jalan Duta, 50600 Kuala Lumpur,


stating the full name, address of the payee and the nature of payment.

For urgent payment (where the income tax reference number of the payee is not known), the payer may send the Forms CP 37A/ CP 37/ CP 37D together with the payment, copy of invoice and remittance slip (telegraphic transfer) directly to:


Director
Non Resident Branch
Withholding Tax Unit
7th Floor, Block 8
Government Office Complex

Source

Particulars of Facebook / Google royalty had been paid / credited

1. Facebook

Full name of payee - Facebook Ireland Limited
Reference no. - 462932
Malaysian income tax no. - C 2354867110
Address - 4 Grand Canal Square, Grand Canal Harbour, Dublin 2, Ireland

2. Google

Full name of payee - Google Asia Pacific Pte. Ltd.
Reference no. - 200817984R
Malaysian income tax no. - C 2493192407
Address - 70 Pasir Panjang Road, #03-71 Mapletree Business City, Singapore 117371

Source

Payment of withholding tax via monetary transfer
Payment of withholding tax via monetary transfer can be done in the following way:-

Payment via Telegraphic Transfer (TT) / Interbank Giro Transfer (IBG) / Electronic Fund Transfer (EFT)
Tax payment via TT, IBG or EFT can be made to the Inland Revenue Board of Malaysia (IRBM) banks account. Details of the account are as follows:

Bank Account Number - 8000766957
Beneficiary - Ketua Pengarah Hasil Dalam Negeri
Name and address of the bank - CIMB Bank Berhad, Cawangan Jalan Tuanku Abdul Halim, Tingkat Bawah Blok 8, Kompleks Pejabat Kerajaan, Jalan Tuanku Abdul Halim, 50480 Kuala Lumpur

For telegraphic transfer (RENTAS), the CIMB Bank Berhad SWIFT's code is CIBBMYKL

Please enter GB0000010X as LHDNM company registration number if required.

Supporting documents of withholding tax via email
Send the following documents to email: HelpTTpayment@hasil.gov.my

1. Forms CP37 / CP37A / CP37D / CP37E / CP37F / CP37G / CP147
2. Vendor's invoice
3. Payment slip to vendor
4. Remittance slip (telegraphic transfer) to IRB

IMPORTANT: Must email the supporting documents same day as date of telegraphic transfer

Last edited by mojito; 31-01-2021, 06:16 PM.

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