Insurance Companies engaging non-resident consultants must understand the Withholding Tax | Special Classes of Income

It is normal for insurers nowadays to appoint consultants from overseas to assist with various new development or projects; probably those expertise were not commonly available in the country. If this being so, then the amount that insurers is to pay to the appointed consultant is subject to this thing called, “Special Classes of Income” or rather that said consultant is earning this special income. This will also mean, the insurer is required to deduct off 10% of the amount payable as that withholding tax for remittance to the Inland Revenue Board. The following explanatory notes are relevant for a better understanding….

[ad name=”HTML-headline-animator”]The Director General have required tax payer to withhold 10% of tax upon the amount paid to a non-resident person for the service rendered in Malaysia under Section 109 of the Income Tax Act 1967.

What is Special Classes Of Income
The income of a non-resident person from the following special classes of income is chargeable to tax in Malaysia if it is derived from Malaysia:
(a) amounts paid in consideration of services rendered by the non-resident person or his employee in connection with:
(i) the use of property or rights belonging to him, or
(ii) the installation or operation of any plant, machinery or other apparatus purchased from him [paragraph 4A(i) of the ITA 1967],
(b) amounts paid to a non-resident person in consideration of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, scheme [paragraph 4A(ii) of the ITA 1967], or
(c) rent or other payments made under any agreement or arrangement to a non- resident person for the use of any moveable property [paragraph 4A(iii) of the ITA 1967].

Therefore the next time we need to sort out this portion of the withholding tax otherwise insurers would have to find ways to absorb this amount.

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1 comment for “Insurance Companies engaging non-resident consultants must understand the Withholding Tax | Special Classes of Income

  1. jo
    July 17, 2015 at 20:28

    What was so great that insurers have to assign works to overseas consultant? Much of those works could be easily available within the country now.

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