Comparison of Income Tax StructureCountry Perspective: Bangladesh & Malaysia

An Assignment on Development Finance

Course Code: FIN 3207

Submitted To:Ayesha AkhterAssistant Professor Department of Finance JagannathUniversity, Dhaka.

Submitted By:Md. Amir HossainGroup Representative of Creative ThinkersB.B.A, 6th Batch (3rdYear, 2ndSemester)Session: 2011-2012 Department of Finance JagannathUniversity, Dhaka.

Date of Submission: 30th April, 2015.

Group Members

Sl. No.NameRoll No.

01.Rafiqul Alam KhanB110203126

02.Rakibul HaqueB110203079

03.Md. Amir HossainB110203049

04. Md. Al AminB110203126

05.Imtiaz Mahbub 115298

06.Lutfun Nahar B110203017

07.Md. Monir HossainB110203040

08. Reshma AkterB110203042

09. Helal Al Chowdhury115315

10.Afnan Hossain115254

Letter of Transmittal

04th DecemberFarhan Sazia Lecturer Department of FinanceJagannathUniversity, Dhaka.

Subject: To submit an assignment of Comparison of Income Tax structure between Bangladesh & Malaysia.

Dear Madam,This is informed you that we have completed our Assignment on Comparison of Income Tax structure between Bangladesh & Malaysia. Here we tried our best to give an overview of income tax structure of Bangladeshi & Malaysian system, related to our course Business Taxation.In preparing this Assignment we have followed the instruction of yours, we will be glad to clarify any discrepancy that may arise.Thank you for your cooperation.

Sincerely,Md. Amir Hossain On the behalf of the groupDepartment of Finance.JagannathUniversity, Dhaka.

Table of ContentName Page No.

Acknowledgement5

Executive Summary6

Chapter IIntroduction7

Significance of the Study8

Objective of the Study8

Scope of the Study8

Country Perspective: Bangladesh 10

Chapter IIIncome Tax Authorities 10

Sources of Income11

Tax rates 12

Tax rebate of investment 13

Time to submit income tax return14

Tax treaties 16

Country Perspective: Malaysia

Income Tax Authority 19

Tax rates 20

Income tax rebates 26

Who should submit income tax return 29

Taxable Period32

Tax treaties 34

Chapter IIIConclusion35

Reference 36

Acknowledgement

First of all we would like to thank the Almighty for giving us the strength and the aptitude to complete this report within due time. We are deeply indebted to our course teacher Farhan Sazia for assigning us such an interesting topic named Comparison of Income Tax structure between Bangladesh & Malaysia. We also express the depth of our appreciation to our honorable course teacher for her suggestions and guidelines, which helped us in completing this report.

EXECUTIVE SUMMARYTaxation- one of the major sources of public revenue to meet a country's revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution of income, price stabilization and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings. As our country perspectives are Bangladesh & Malaysia, the tax structure in both the country consists of both direct (income tax, gift tax, land development tax, non-judicial stamp, registration, immovable property tax, etc) and indirect (customs duty, excise duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT, electricity duty, advertisement tax, etc) taxes. Our study suggests that as the stated countries once were the colonies of British Raj, both countries inherited British Taxation culture in its income tax structure. Our study is based on some factors of income tax which actually a matter of comparison between two countries. These are Income tax authorities, sources of income, tax rates, tax rebate for investment, time to submit income tax return, tax treaties among countries etc.

CHAPTER 1

INTRODUCTION The term Tax has been derived from the French word Taxe and etymologically, the Latin word Taxare is related to the term 'tax', which means 'tocharge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory and unrequited transfer of resources from the private to the public sector, levied based on predetermined criteria.According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by local government on its residents or the property owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for an entry into a country. Under the provision of article 83 of the Constitution, "no tax shall be levied or collected except by or under the authority of an Act of Parliament" Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system, however, developed based on generally accepted canons and there had been efforts towards rationalizing the tax administration for optimizing revenue collection, reducing tax evasion and preventing revenue leakage through system loss. Taxes include narcotics duty, land revenue, non-judicial stamp, registration fee and motor vehicle tax.

Significance of the study It is envisaged that the study will find a causal comparison between Bangladesh & Malaysian Tax Structure. The study will show us how taxation will help both countries economic development and demonstrate the effectiveness of tax governance lead to a greater citizen satisfaction. The study will also show how to integrate some technical glitch of tax imposition on the citizens of both countries.

Objective of the study The overall objective of the study is to examine the comparison of taxation system of Bangladesh & Malaysia. a) To identify the income tax authorities, b) To determine the citizens sources of incomec) To examine and assess the income tax rate of Bangladesh & Malaysia d) To examine the issues need to address to increase access to economic opportunities and formal inputs which promote better tax governance e) To review the tax treaties of the countries and does it really helping the economy f) To provide strategic directions on how to improve tax policies in Bangladesh & Malaysia.

Scope of the study The study makes an attempt to project a broad view of the status of the existing income tax authorities, sources income, tax rate, taxation policies, tax governance, tax treaties in Bangladesh& Malaysia. Some important factors such as personal, social, psychological and economic-factors have been examined in order to understand whether these facilitate or constrain the overall tax policies. The scope of the study was mainly to adjudge and examine the key issues involved in better income tax policies in Bangladesh & Malaysia while emphasizing and addressing the problems of these systems and solution through technology.

CHAPTER 2

Among direct taxes, income tax is one of the main sources of revenue. It is a progressive tax system. Income tax is imposed on the basis of ability to pay. The more a taxpayer earns the more he should pay- is the basic principle of charging income tax. It aims at ensuring equity and social justice.

Our Comparison is based on the following factors1. Income Tax Authorities2. Sources of Income3. Tax Rates4. Tax Rebate for Investment5. Time to submit income tax return6. Tax treaties

Country Perspective: Bangladesh

1. Income Tax Authorities:

National Board of RevenueChief commissioner of taxesDirectors General of Inspection (Taxes),Commissioner of Taxes (Appeals),Commissioner of Taxes (LTU)Director General (Training),Director General Central Intelligence Cell (CIC),Commissioners of Taxes,Additional Commissioners of Taxes (Appeal/Inspecting),Joint Commissioners of Taxes(Appeal/Inspecting),Deputy Commissioners of Taxes,Tax recovery officers,Assistant Commissioners of Taxes,Extra Assistant Commissioners of TaxesInspectors of Taxes.

2. Sources of Income:

For the purpose of computation of total income and charging tax thereon, sources of income can be classified into 7 categories, which are as follows:

SalariesInterest on securitiesIncome from house propertyIncome from agricultureIncome from business or professionCapital gainsIncome from other sources.

3. Tax Rates

A. Other than Company:

For individuals other than female taxpayers, senior taxpayers of 65 years and above and retarded taxpayers, tax payable for theFirst 2,20,000/- NilNext 3,00,000/- 10%Next 4,00,000/- 15%Next 3,00,000/- 20%Rest Amount 25%B. For Female Tax payersFirst 2,75,000/- NilNext 3,00,000/- 10%Next 4,00,000/- 15%Next 3,00,000/- 20%Rest Amount 25%For retarded taxpayers threshold limit is TK.3,00,000Minimum tax for any individual assessee located in City Corporation area is Tk. 3,000Minimum tax for any individual assessee located in District headquarter is Tk. 2,000Minimum tax for any individual assessee located in any other area is Tk.1,000Non-resident Individual 25%(other than non-resident Bangladeshi)

C. For Companies

Publicly Traded Company 27.5%

Non-publicly Traded Company 37.5%

Bank, Insurance & Financial Company (Except merchant bank) 42.5%

Merchant bank 37.5%

Cigarette manufacturing company 45%

Publicly traded cigarette company 40%

Mobile Phone Operator Company 45%

Publicly traded mobile company 40%

If any publicly traded company declares more than 20% dividend, tax rate would be 24.75% and if declares less than 10% dividend tax rate would be 37.5%.

If any non publicly traded company transfers minimum of 20% shares of its paid-up capital through IPO(Initial Public Offering) it would get 10% rebate on total tax in the year of transfer.

4.Tax Rebate for investment :

A. Rate of Rebate:Amount of allowable investment is actual investment or 30% of total income or Tk. 150,00,000/- whichever is less.Tax rebate amounts to 15% of allowable investment.

B. Types of investment qualified for the tax rebate are :-

i. Life insurance premium up to 10% of the face value. Contribution to Provident Fund to which Provident Fund Act, 1925 applies. Self-contribution and employers contribution to Recognized Provident Fund. Contribution to Supper Annuation Fund. Contribution up to TK 60,000 to deposit pension scheme sponsored by any scheduled bank or a financial institution. Investment in mutual funds approved debenture or debenture stock, Stocks or Shares

ii. Contribution to Benevolent Fund and Group Insurance premiumiii. Contribution to Zakat Fundiv. Donation to charitable hospital approved by National Board of Revenueiv. Donation to philanthropic or educational institution approved by the Governmentv. Donation to socioeconomic or cultural development institution established in Bangladesh by Aga Khan vi. Development Networkvii. Donation to ICDDRB,viii. Donation to philanthropic institution-CRP, Savar, Dhakaix. Donation up to five lac to (1) Shishu Swasthya Foundation Hospital Mirpur, Shishu Hospital, Jessore and Hospital for Sick Children, Sathkhira run by shishu swasthya Foundation, Dhaka. (2) Diganta Memorial cancer Hospital, Dhaka, (3)x. The ENT and Head-Neck cancer Foundation of Bangladesh, Dhaka and (4) Jatiya partibandhi Unnayan xi. Foundation, Mirpur, Dhaka;xii. Donation to Asiatic society of Bangladeshxiii.. Donation to Muktijudha Jadugharxiv. Donation to National level institution set up in memory of liberation war;xv. Donation to National level institution set up in memory of Father of the Nationxvi. Any investment by an individual in Bangladesh Government Treasury Bond;xvii. Investment in purchase of one computer or one laptop by an individual assessee.

Who should submit Income Tax Return?

i. If total income of any individual other than female taxpayers, senior male taxpayers of 65 years and above and retarded taxpayers during the income year exceeds Tk 2,20,000/-.If total income of any female taxpayer, senior male taxpayer of 65 years and above during the income year exceeds Tk 2,75,000/-.ii. If total income of any retarded taxpayer during the income year exceeds TK. 3,00,000.

iii. If any person was assessed for tax during any of the 3 years immediately preceding the income year. A person who lives in any city corporation/paurashava/divisional HQ/district HQ and owns a building of more than one storey and having plinth area exceeding 1,600 sq. feet/owns motor car/owns membership of a club registered under VAT Law.

iv. If any person subscribes a telephone.v. If any person runs a business or profession having trade license and operates a bank account.vi. Any professional registered as a doctor, lawyer, income tax practitioner, Chartered Accountant, Cost& Management Accountant, Engineer, Architect and Surveyor etc. Member of a Chamber of Commerce and Industries or a trade Association.vii. Any person who participates in a tender.viii. A person who has a Taxpayer's Identification Number (TIN) in accordance with the provision of section 184A.ix. Candidate for Union Parishad, Paurashava, City Corporation or Parliament elections.x. Any company registered under the Company Act, 1913 or 1994.xi. Any Non-government organization (NGO) registered with NGO Affairs Bureau.

5. Time to Submit Income Tax Return:

For CompanyBy fifteenth day of July next following the income year or, where the fifteenth day of July falls before the expiry of six months from the end of the income year, before the expiry of such six months.

For Other than CompanyUnless the date is extended, by the Thirtieth day of September next following the income year.

Consequences of Non-Submission of Return and Return of withholding tax.Imposition of penalty amounting to 10% of tax on last assessed income subject to a minimum of Tk. 1,000/-. In case of a continuing default a further penalty of Tk. 50/- for every day of delay.

Consequences of using fake TINDCT can impose a penalty not exceeding TK.20,000/-. For continuous use of fake TIN deliberately- 3 years imprisonment, up to TK. 50,000/- fine or both.

Assessment Procedures:For a return submitted under normal scheme, assessment is made after giving an opportunity of hearing.For returns submitted under Universal Self Assessment Scheme, the acknowledgement slip is determined to be an assessment order. Universal Self Assessment is of course subject to audit.

Appeal against the order of DCT:A taxpayer can file an appeal against DCT's order to the Commissioner (Appeals)/Additional or Joint Commissioner of Taxes (Appeals) and to the Taxes Appellate Tribunal against an Appeal order.

Tax withholding functions:In Bangladesh withholding taxes are usually termed as Tax deduction and collected at source. Under this system both private and public limited companies or any other organization specified by law are legally authorized and bound to withhold taxes at some point of making payment and deposit the same to the Government Exchequer. The taxpayer receives a certificate from the withholding authority and gets credits of tax against assessed tax on the basis of such certificate21

6. NAME OF the tax treaties countries

1. UK.2. SINGAPORE.3. SWEDEN.4. RP Korea5. CANADA6. PAKISTAN7. ROMANIA 8. SRI LANKA9. FRANCE 10. MALAYSIA.11. JAPAN12. INDIA13. GERMANY14. THE NETHERLANDS15. ITALI16. DENMARK17. CHINA18. BELGIUM19. THAILAND20. POLAND

Agreement on Avoidance of Double Taxation for Air Transport concluded and ratification under process with the following countries:1. Oman.2. Saudi Arabia.3. United Arab Emirates.

Negotiation concluded with following countries on Avoidance of Double Taxation Agreement (comprehensive) and ratification under process:1.Egypt: Negotiation completed. Ratification under process. 2.Indonesia: Ratification from Bangladesh side is completed. Ratification of Indonesian side is awaited. 3.Iran: Negotiation completed but some unresolved issues are trying to settle through letter correspondence.4.Mauritius: The final agreement (printed in treaty paper) is sent to the Ministry of Foreign Affairs for formal signature.5.Nepal: Negotiation completed. Ratification under process. 6.Norway: Ratification from Bangladesh side is completed. Ratification of Norwegian side is awaited. 7.Philippines: Our Cabinet has approved, we are now waiting for fulfillment of instrument of ratification of Philippines.8.Qatar: Ministry of Law, Dhaka has made some changes in initialed agreement. We have sent agreement with changes to Qatar authority for their acceptance.9.Russian Federation: Negotiation completed. Ratification under process. 10.Turkey: Ratification from Bangladesh side is completed. Ratification of Turkish side is awaited. 11.United States of America: Negotiation completed. Ratification under process.

First round of talks has been completed:1. South Africa: Second round of talks will be held in Dhaka in any time in year 2002 in Dhaka.

Correspondence for DTA is going on with the following countries:1.Australia2.Austria3.Bahrain4.Cyprus5.Finland6.Greece7.Hong Kong

8.Myanmar9.Morocco10.Nigeria11.Spain12.Switzerland13.Tunisia

Country Perspective: Malaysia

Country Perspective: Malaysia

1.Income Tax Authorities

a. Inland Revenue Board of Malaysia (IRBM) and Royal Malaysian Customs. b. Link to Inland Revenue Board Malaysia. c. Link to Royal Malaysian Customs.

Tax Audit ActivityAudit cases can be selected based on a number of factors, such as: Risk analysis criteria Information received from a third party Industry Type A specific issue concerning a certain group of taxpayers Location

There are two types of audit a desk audit which is carried out at the IRBMs office, and a field audit which is carried out at the taxpayers business premise.

A typical tax audit commences with a letter of notification of an audit, which will indicate the records that should be made available for audit, the years of assessment to be audited and the names of the relevant audit officers. This is followed by an examination of the relevant documents. The IRBM will then issue an audit findings report, which will contain details of any proposed tax adjustments and the rationale for those adjustments. If the taxpayer disagrees with the adjustments, an official objection must be submitted. If there are no objections to the adjustments made, the IRBM will issue a notice of additional assessment. The timeframe for settlement of a tax audit should be 3 months from the commencement of the audit, but can take longer to reach a resolution in more complex cases. Key focus areas for the IRBM in tax audits conducted in recent years have included: Transfer pricing

Appeal

A taxpayer can appeal against an assessment as a result of a tax audit. The appeal must be made within 30 days after the service of the notice of additional assessment.

2. Tax Rates

A. Personal Income TAX

Source of TAX

Section 4, Income Tax Act 1967 (ITA 1967), classifies income that is subject to tax into main classes as follows: i. Gains or profits from a business, for whatever period of time carried on;ii. Gains or profits from an employment;iii. Dividends, interest or discounts;iv. Rents, royalties or premiums;v. Pensions, annuities or other periodical payments not falling under any of the foregoing paragraphs;vi. Gains or profits not falling under any of the foregoing paragraphs.In addition, under section 4A, ITA 1967, the special classes of income derived from Malaysia of a non-resident individual are subject to tax in respect of the following:

i. Amounts paid in consideration of services rendered by the person or his employee in connection with the use of property or rights belonging to, or the installation or operation of any plant, machinery or other apparatus purchased from, such person.ii. Amounts paid in consideration of technical advice, assistance or services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme;iii. Rent or other payments made under any agreement or arrangement for the use of any moveable property.

2014 Income Tax Rates for Residents Taxable Income Band RM

National Income Tax Rates

0 - 5,000

RM 0 plus 0%

5,001 10,000 RM 0 plus 2%

10,001 20,000 RM 100 plus 2%

20,001 35,000 RM 200 plus 6%

35,001 50,000 RM 900 plus 11%

50,001 70,000 RM 1,650 plus 19%

70,001 100,000 RM 3,800 plus 24%

100,001 and above RM7,200 plus 26%

Non-residents are subject to withholding taxes on certain types of income. Other income is taxed at a rate of 26%. If a Malaysian or foreign national knowledge worker resides in the Iskandar Development Region and is employed in certain qualifying activities by a designated company and if their employment commences on or after 24 October 2009 but not later than 31 December 2015, the worker may apply to be subject to tax at a reduced rate of 15%. The individual must not have derived any employment income in Malaysia for at least 3 years before the date of the application. Effective from the 2012 year of assessment, Malaysian professionals returning from abroad to work in Malaysia would be taxed at a rate of 15% for the first 5 consecutive years following the professionals return to Malaysia under the Returning Expert Program (REP).

B. Corporate Income Tax

Tax Rate

Corporate tax rates for companies resident in Malaysia: 25 percent (24 percent from YA 2016)

Special tax rates for companies resident in Malaysia with ordinary paid-up share capital of MYR 2.5 million and below at the beginning of the basis period for a year of assessment (provided not more than 50 percent of the ordinary paid-up share capital of the company is directly or indirectly owned by (or linked to) a related company which has an ordinary paid-up share capital of more than MYR 2.5 million at the beginning of the basis period for a year of assessment): 20 percent on the first MYR 500,000 (19 percent from YA 2016) 25 percent on every ringgit exceeding MYR 500,000 (24 percent from YA 2016)

Residence

A company will be a Malaysian tax resident if at any time during the basis year, the management and control of the companys business or any one of its businesses are exercised in Malaysia.

Compliance Requirements

Assessment system Self assessment Estimate of tax payable must be made 1 month before the commencement of a year of assessment Monthly installments must be paid based on the estimate of tax payable

Filing due date 7 months from the date following the close of the accounting period

International withholding tax rates

Dividends paid to non-residents are not subject to withholding tax.

Royalties paid/credited to non-residents are subject to withholding tax at 10 percent. The rate may be lowered by the relevant Double Taxation Agreement (DTA). Interest paid/credited to non-residents is subject to withholding tax at 15 percent. The rate may be lowered by the relevant DTA.

Holding Rules

There are currently transitional rules in place prior to the full implementation of the single tier dividend system, which is to have full effect from January 1, 2014. The transitional rules affect franked dividends paid by a resident company to its shareholders. The dividends will be regarded as franked dividends provided: They are paid in cash on ordinary shares; and The ordinary shares have been held continuously for 90 days or more (this condition does not apply to dividends paid by publicly listed companies) There is no capital gains tax in Malaysia. However, there is real property gains tax (RPGT). RPGT is levied on the disposal of realproperty situated in Malaysia as well as the disposal of shares in a Real Property Company (RPC). An RPC is a controlled company which owns real property or shares or both in another RPC, which have a defined value of not less than 75 percent of the value of its total tangible assets.

Tax Losses

Current period offset business losses may be set off against income from other sources for that year. Tax losses may be carried forward indefinitely to set off against future business income only, unless the company is dormant and does not satisfy the continuity of ownership test.

Tax Consolidation

There are no consolidation provisions in Malaysia. However, resident companies within a 70 percent owned group can surrender up to 70 percent of their current year's adjusted business losses to other related resident companies, provided certain conditions are met.

Transfer of Shares

Stamp duty of 0.3 percent (of the price or value of the shares, whichever is higher) is payable on the transfer of shares

Transfer of Assets

On the transfer of land and buildings, ad valorem stamp duty at rates from 1 to 3 percent on the transfer consideration or the market value of the property, whichever is higher, is payable.

CFC Rules

There is no CFC regime in Malaysia.

Transfer Pricing

Malaysias transfer pricing regime is largely based on OECD guidelines. Documents pertaining to transfer pricing do not need to be submitted with a taxpayers annual income tax return, but they should be made available to the tax authority upon request.

Thin Capitalization

Malaysia has thin capitalization legislation. However, the implementation of the regime has been deferred to the end of December 2015.

General Anti-Avoidance

There are general anti-avoidance rules in Malaysia which allow the tax authority to disregard, vary or make any adjustment deemed fit, if there is reason to believe that any transaction has the effect of evading, avoiding or altering the incidence of tax. Special Tax Regimes for Specific Industry or sectors

Foreign-sourced income received in Malaysia by a resident company (other than a resident company carrying on the business of banking, insurance, shipping, or air transport) is exempt from tax.

C. Indirect Tax

Service tax is chargeable on the value of taxable services provided by a taxable person. Examples of taxable services include; operators of hotels, operators of restaurants, bars and coffee houses, insurance companies, telecommunication companies, consultants and professional firms. There is a limited exemption for services provided within a group.Sales tax is a form of consumption tax levied on taxable goods manufactured in Malaysia or imported into Malaysia for local consumption. Exports are exempt.

Standard Rate

Service Tax: 6 percent Sales Tax: Generally 5 percent or 10 percent

GST ReformsGoods and services tax (GST) is to be introduced in Malaysia from 1 April 2015, and will replace the existing sales and service taxes. The standard rate of GST will be 6 percent, although some supplies will be zero-rated or exempt. Businesses with an annual taxable sales value of MYR 500,000 and above will be required to register for GST purposes. Businesses below the threshold may register on a voluntary basis.

D. Other Tax

Property Tax

Local councils may impose a levy rate (commonly known as land tax) on residents in respect of services provided by the local council. The amount varies from council to council and is dependent on the value of the property. Quit rent is a form of tax imposed by the State Government. It is imposed on owners of landed property (as opposed to units in high-rise building). The amount of quit rent imposed varies from state to state and will depend on the locality and category of land use.

Import Duty

Import duty is generally payable on imported goods at the time of clearance from Customs control. The rates of import duty generally ranges from 0 percent to 60 percent depending on the category of goods imported. Malaysia is committed to ASEAN and as such, import duties imposed on most manufactured goods of ASEAN origin have been reduced to a range of 0 percent to 5 percent.

Export Duty

Export duty is generally imposed on delectable resources to discourage export of such commodities.

Excise Duty

Excise duty is a domestic tax imposed on a limited range of locally manufactured goods or goods imported into Malaysia. The rate of tax to be levied varies and would depend on the nature of the goods manufactured or imported. Excise duty is generally levied on alcoholic beverages, tobacco products and motor vehicles.

Inheritance or Gift Tax

There is no inheritance or gift tax in Malaysia.

3. Income Tax Rebate

Investment tax allowances are a means of effecting a substantial artificial reduction in taxable profits. In Malaysia there is a very wide variety of investment tax allowances. Broadly speaking, they are an alternative to Pioneer Status, but they are in addition to the right of every company to depreciate assets over their useful lives and set the depreciation off against taxable profits.Investment tax allowances are transferred into an "exempt income account" where they are exempt from corporate income tax.Dividends paid to shareholders out of the "exempt income account" are free of withholding taxes on distribution. Dividends from the "exempt income account" paid to a parent corporation which in turn distributes them to its shareholders are also free of withholding taxes.Some of the main types of investment tax allowances (ITA) are as follows: Manufacturing Companies.A company granted ITA gets an allowance of 60% (at the time of writing) of qualifying capital expenditure (such as factory, plant, machinery or other equipment used for the approved project) incurred within five years from the date on which the first qualifying capital expenditure is incurred. Companies can offset this allowance against 70% of their statutory income for each year of assessment. Any unutilized allowance can be carried forward to subsequent years until fully utilized. The remaining 30% of statutory income will be taxed at the prevailing company tax rate.

To encourage investment in the promoted areas i.e. the States of Sabah and Sarawak and the designated "Eastern Corridor" of Peninsular Malaysia, applications received from 13 September 2003 from companies located in these areas receive an allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be utilized to offset against 100% of the statutory income for each year of assessment. Companies which have been granted approval for this incentive but have not commenced commercial production, or applications under consideration, are also eligible. All project applications received by December 31, 2010 are eligible for this enhanced incentive.

Applications received from September 13,2003,from existing locally-owned companies that reinvest in the production of heavy machinery such as cranes, quarry machinery, batching plant and port material handling equipment, were eligible for Investment Tax Allowance of 60% (100% for promoted areas) on the additional qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for promoted areas) of the statutory income for each year of assessment.

High Technology CompaniesA high technology company is a company engaged in defined activities or in the production of defined products in areas of new and emerging technologies. A high technology company qualifies for Investment Tax Allowance of 60% of qualifying capital expenditure incurred within five years from the date the first capital expenditure is incurred. Any unutilized allowance can be carried forward to subsequent years until the whole amount has been fully utilized. The allowance can be utilized to offset against 100% of its statutory income for each year of assessment. A Malaysian-owned company that acquires a foreign-owned company abroad to acquire high technology for production within the country or to gain new export markets for local products will be granted an annual allowance of 20% of the acquisition cost for five years.

SMEsEffective from the year of assessment of 2009, small- and medium-scale companies with paid-up capital of RM2.5 million and below are eligible for a reduced corporate tax on chargeable income of up to RM500,000. The tax rate on the remaining chargeable income is maintained at the normal rate. Dividends distributed will be given a tax credit (20% at the time of writing) in the hands of the shareholders.To qualify for the incentive, the small-scale company has to comply with any one of the following criteria : The companys finished products should be used as raw materials or components by manufacturing industries; The companys products shall substitute imports and the local material content is more than 50% in terms of value; The company exports at least 50% of its output; or The project contributes towards the socio-economic development of the rural population. l expenditure incurred within five years from the date on which the first qualifying capital expenditure was incurred.Companies can offset this allowance against 70% of the statutory income in the year of assessment. Any unutilized allowance can be carried forward to subsequent years until the whole amount has been used up. The remaining 30% of the statutory income will be taxed at the prevailing company tax rate.As an added incentive, companies that locate in the States of Sabah, Sarawak, the Federal Territory of Labuan and the designated Eastern Corridor of Peninsular Malaysia get an allowance of 80% on qualifying capital expenditure incurred. The allowance can be utilized to offset 85% of the statutory income in the year of assessment. This additional incentive applies to all applications received by December 31, 2010. R & D ExpenditureAn R&D company, i.e., a company that provides R&D services in Malaysia to its related company or to any other company, is eligible for an ITA of 100% on qualifying capital expenditure incurred within 10 years. The allowance can be offset against 70% of the statutory income in the year of assessment. Should the R&D company opt not to avail itself of the allowance, its related companies can enjoy a double deduction for payments made to the R&D company for services rendered. Contract R&D and R&D companies can apply for the various incentives as long as they fulfill the following criteria: Research undertaken should be in accordance with the needs of the country and bring benefit to the economy At least 70% of the income of the company should be derived from R&D activities For manufacturing-based R&D, at least 50% of the workforce of the company must be appropriately qualified personnel performing research and technical functions; and For agriculture-base R&D, at least 5% of the workforce of the company must be appropriately qualified personnel performing research and technical functions A company can enjoy double deduction on revenue (non-capital) expenditure for research which is directly undertaken and approved by the Minister of Finance. This double deduction applies to payment for the use of services of approved research institutes, R&D companies or contract R&D companies. It also applies to cash contributions to approved research institutes.

4. Who Should Submit Income Tax Return? Residents and non-residents are subject to tax on Malaysian-source income only.

Residence status for tax purposes Individuals are considered resident in any of the following circumstances: They are physically present in Malaysia for 182 days or more during the calendar year. They are physically present in Malaysia for less than 182 days during the calendar year, but are physically present in Malaysia for at least 182 consecutive days in the second half of the immediate preceding calendar year or in the first half of the immediate following calendar year. Periods of temporary absence are considered part of a period of consecutive presence if the absence is related to the individuals service in Malaysia, personal illness, illness of an immediate family member or social visits not exceeding 14 days. They are present in Malaysia during the calendar year for at least 90 days and have been resident or present in Malaysia for at least 90 days in any 3 of the four preceding years. They have been resident for the 3 preceding calendar years and will be resident in the following calendar year. This is the only case in which an individual may qualify as a resident even though he or she is not physically present in Malaysia during a particular calendar year.

For the purposes of determining residence, presence during part of a day is counted as a whole day. Income subject to tax

Employment income - Gross income from employment includes wages, salary, remuneration, leave pay, fees, commissions, bonuses, gratuities, perquisites or allowances (in money or otherwise) arising from employment. An individual employed in Malaysia is subject to tax on income arising from Malaysia, regardless of where the employment contract is signed or the remuneration is paid. Gross income also includes income for any period of leave attributable to employment in Malaysia and income for any period during which the employee performs duties outside Malaysia incidental to the employment in Malaysia. Employee benefits and amenities not convertible into money are included in employment income. Short-term visitors to Malaysia enjoy a tax exemption on income derived from employment in Malaysia if their employment does not exceed any of the following periods: A period totaling 60 days in a calendar year A continuous period or periods totaling 60 days spanning two calendar years A continuous period spanning two calendar years, plus other periods in either of the calendar years, totaling 60 days

Non-citizen individuals working in Operational Headquarters (OHQs), Regional Offices, International Procurement Centres (IPCs) and Regional Distribution Centres (RDCs) are taxed only on that portion of income attributable to the number of days that they are in Malaysia.

Self-employment and business income - All profits accruing in Malaysia are subject to tax. Income from any business source is subject to tax. A business includes a profession, a vocation or a trade, as well as any associated manufacture, venture or concern.

Contract payments to non-resident contractors are subject to a total withholding tax of 13% (10% for tax payable by the no-resident contractor and 3% for tax payable by the contractors employees). Income derived in Malaysia by a non-resident public entertainer is subject to a final withholding tax at a rate of 15%. Individuals may carry forward business losses indefinitely.

Investment income - Interest income received by individuals from monies deposited in approved institutions is exempt from tax. Other interest, dividends, royalties and rental income are aggregated with other income and taxed accordingly. Dividends received by individuals are exempt from tax, effective from the 2008 year of assessment. Dividends distributed under the imputation system continue to be taxable. Certain types of income derived in Malaysia by non-residents are subject to final withholding tax at the following rates:

Type of income

Use of movable property 10%

Technical advice, assistance or services 10%

Installation services on the supply of plant, machinery and similar assets 10%

Personal services associated with the use of intangible property 10%

Royalties for the use or conveyance of intangible property 10%

Interest 15%

Directors fees - Directors fees are considered employment income; therefore, fees derived from Malaysia are taxable. Fees are deemed to be derived from Malaysia if the company is resident in Malaysia for the year of assessment. If the fees are derived from a country other than Malaysia, they are not taxed. Employer-provided stock options - Tax legislation governs the taxation of employer-provided stock options. Under the tax legislation, employer-provided stock options are subject to tax as employment income. The taxable income is calculated based on the difference between the fair market value of the underlying stock at the exercise date or exercisable date, whichever is lower, and the strike price. This amount is recognised at the time the option is exercised, and is taxed as current-year income. Capital gains In general, capital gains are not taxable. However, gains derived from the disposal of real property located in Malaysia and gains derived from the sale of shares in closely controlled companies with substantial real property interests are subject to real property gains tax (RPGT). Capital gains derived from the disposal of chargeable assets by an individual between 1 January 2010 and 31 December 2010 within two and 5 years after the acquisition date are taxed at effective rates of 10% and 5%, respectively. Effective from 1 January 2013, capital gains derived from the disposal of chargeable assets by an individual within two and 5 years after such date are taxed at effective rates of 15% and 10%, respectively. All disposals made after such 5-year period are exempt from RPGT.

Other taxes Malaysia does not impose estate, gift or net worth taxes. Social security No social security tax is levied in Malaysia, but employees who are Malaysian citizens are required to contribute to the Employees Provident Fund (EPF). The EPF is a statutory savings scheme to provide for employees old-age retirement in Malaysia. Under the Employees Provident Fund Act 1951, all employers and employees are required to make monthly contributions to the EPF. The statutory contribution rate is 23% or 24% of monthly wages. The employer pays at rate of 12% if the employees monthly wages are above RM 5,000 per month or 13% if the employees monthly wages are below RM 5,000 per month. The employee contributes 11% of monthly wages. Employees contributions are deducted at source. No ceiling applies to the amount of wages subject to EPF contributions. Expatriates are not required to contribute to the EPF, but may elect to contribute to take advantage of the available tax relief. Self-employed persons may elect to contribute to the EPF. The individual may make voluntary contributions at a fixed monthly rate of any amount from RM 50 to RM 5,000. Tax filing and payment procedures A self-assessment system of taxation for individuals is in effect in Malaysia. A notice of assessment is deemed served on the submission of the tax return to the tax authorities. An appeal must be filed within 30 days from the date of the deemed notice of assessment (that is, within 30 days of the date of submission of the tax return). Non-residents who are subject to final withholding taxes do not need to file tax returns unless required to do so by the tax authorities. An individual arriving in Malaysia who is subject to tax in the following year of assessment must notify the tax authorities of chargeability within two months after arrival. For employees, tax payment is made through mandatory monthly withholdings under the Monthly Tax Deduction Scheme (MTDS). All employers must deduct tax from cash remuneration, which includes wages, salaries, overtime payments, commissions, tips, allowances, bonuses and gratuities, based on tax tables provided by the Inland Revenue authorities and pay the amount of taxes withheld to the tax authorities within 10 days after the end of each month. Employers must withhold tax at a rate of 26% from wages paid to non-resident employees.

5. Taxable PeriodThe Director General of Custom shall assign each taxable person to one of the following categories for the purpose of determining their taxable period:-i- Category A - the category of taxable persons whose taxable period is a period of one month ending on the last day of any month of any calendar month;ii- Category B - the category of taxable persons whose taxable period is a period of three months ending on the last day of the month of any calendar year: oriii- Category C - the category of taxable persons whose taxable period is a period of six months ending on the last day of any month of any calendar yearIt is indicated that category A is for a person with turnover in excess of RM5 million as well as export-based entities whereas category B is for a person with turnover of less than RM5million

Furnishing of Returns and Payment of TaxEvery taxable person shall furnish to the Director General of Custom a prescribed return in the prescribed manner not later than the last day of the following month after the end of the taxable period to which the return relates and every taxable person shall keep the accounting records relating to GST in Bahasa Malaysia or English for a period of seven years.

D- Customs DutyCustoms duty is a tax levied on imports by the customs authorities of a country to raise state revenue, and/or to protect domestic industries from more efficient competitors from abroad. In Malaysia, all goods dutiable on import are put through customs duty according to Customs Duties Order, 1996. The types of duties are import duty, sales tax, and export duty. The duty rates depend on the types of goods imported or exported. Royal Customs and Excise gives concession in the tariff rates for a range of goods along the lines of Malaysias dedication arising from the bilateral and multilateral trade negotiations with other Association of South East Asian Nations (ASEAN) members.Many goods deriving from other ASEAN members are eligible for admission into Malaysia at special rate of duty. Importers who wish to claim the special rate of duty must submit at the time of lodging an import entry certificate of origin given by a suitable authority of the exporting country.Goods imported for use as raw material in particular industries are exempt from customs duty. A tourist may bring in personal goods in reasonable quantities without paying duties subject to conditions. A Malaysian who has lived abroad or foreign nationals who have been permitted to reside in Malaysia are allowed to import used household belongings duty free, subject to conditions. Raw materials used directly in the manufacture of approved products for export are exempt from customs duty, including packaging materials and casings. Trafficking of illegal drugs is a grave offence leading to death penalty. Items like 200 cigarettes, maximum 1 litre ofwine, cosmetics, perfumes, soaps amounting to maximum value of Ringgit Malaysia (RM) 200, etc can be imported duty-free if the items are imported by the visitor on his person or baggage or residents of Malaysia who have left the nation for more than 120 hours. All goodsfrom Israel and South Africa and any item having an imprint of anycurrency note or bank note issued currently or at any time in anynation are prohibited. Free export of tobacco products and alcoholic beverages in reasonable quantities is allowed. Goods for export, whether dutiableor otherwise, must be displayed at the place of export or anotherplace as decided by the Customs. Export goods can be declared bythe owner, exporter, consignor or an agent allowed by the owner orexporter and approved by the Customs.

E- Local TaxLocal tax in Malaysia comes in the form of assessment tax. The assessment tax refers to the property tax collected by the local authorities for the provision of the services to the residents. Property or Assessment Tax also is levied on all property holdings, including shops, factories, residential, agricultural and others, situated in the areas under the jurisdiction of local authorities. The rates of the assessment tax collected are different from one local government to another. Moreover it also differs in a form of property rights. Whereas, the type of property categorized to residential, commercial orindustrial.For an example, the assessment tax rate fixed by Majlis Bandaraya Johor Bahru in the state of Johore on residential type of property is 0.13% but at the same time they rate of assessment tax for commercial type of property is 0.26%. In another hand, Majlis Daerah Kulai set its assessment tax rate for the residential is 0.30% while the rate of commercial type property is 0.45%. In most states, the amount of assessment tax is calculated based on certain percentage of annual value of the property. The annual value of a property is the total value of rents if the property is rented out in the open market. In case of Johor, the calculation is based on the proportion of improvement in the total value of tax paid.

7. Tax Treaties Countries

Tax treaties Malaysia has entered into double tax treaties with 78 countries, some of which are not yet in force at the time of writing. Under the treaties, a foreign tax credit is available for the lesser of Malaysian tax payable on the foreign income or the amount of foreign taxes paid. For non-treaty countries, the foreign tax credit available is limited to one-half of the foreign tax paid. Agreements with some countries provide for reduced withholding taxes under certain conditions

Currently, Malaysia has entered into treaties to mitigate double taxation with 68 countries listed below: Albania, Ireland, Qatar, Argentina, Italy, Romania, Australia, Japan, Russia, Austria, Jordan, Saudi Arabia, Bahrain, Kazakhstan, Seychelles, Bangladesh, Korea, Singapore, Belgium, Kuwait, South Africa, Brunei, Kyrgyz, Spain, Canada, Lebanon, Sri Lanka, China, Luxembourg, Sudan, Chile, Malta, Sweden, Croatia, Mauritius, Switzerland, Czech Republic, Mongolia, Syria, Denmark, Morocco, Thailand, Egypt, Myanmar, Turkey, Fiji, Namibia, Turkmenistan, Finland, Netherlands, United Arab Emirates, France, New Zealand, United Kingdom, Germany, Norway, United States of America, Hungary, Pakistan, Uzbekistan, India, Papua New Guinea, Venezuela, Indonesia, Philippines, Vietnam, Iran, Poland.

Conclusion:

In the previous chapter weve discussed the income tax structure of Bangladesh & Malaysia. Though the rate of tax revenue is to GDP is very negligible, despite the government is trying to maximize its tax revenue through different method. But the government should also remind the cannon of convenience while collecting tax from assesses. As we are living in a civilized society - should come forward to pay taxes to government in order to conduct the administrative, defense and development activities of the country. Otherwise we would not be able to prove ourselves as civilized people. Tax is the most important in the hand of the government to control the economy as well as the inflection. It also helps in push money to the economy, develop certain source of the economy and control some other activities of the economy. No Government can run its and perform administration works without collecting tax as a source of revenue. So, the Government imposes tax over the company and the corporations. On the other hand Government can also intensive to the infant and certain basic industry for protection through its tax policy.

References:1.Bangladesh Income Tax (Theory and Practice8th Edition(Income tax, Value added tax, Gift tax)Nikhil Chandra Shil, Mohammad Zakaria Masud, Mohammad Faridul Alam2.Nationan Board of Revenue (NBR) websitehttp://www.nbr-bd.org3.http://www.financialinfobd.com/4.http://www.taxrates.cc5. Three taxes of Bangladesh.M. A. Akkas, M. com. MBA(AIT). (2003),(Income tax, value added tax, gift Tax), pp, 6-9.6. Inland Revenue Board of Malaysia Websitehttp://www.hasil.gov.my/