Taxation Aspects for Social Benefit Initiatives …...Taxation Aspects for Social Benefit...

Taxation Aspects for Social Benefit Initiatives

Scope of presentation

Social Initiatives – contribution

Types of Initiatives

Related issues

Subsection 44(6)

Taxation Aspects

Related Provisions

Issues on Waqf & Current Status

Q&A

2

Taxation Aspects on Social Initiative / “incentive”

Social Initiatives - contributions

Donation

Waqaf

Zakat

3

Taxation Aspects on Social Initiative / “incentive”

Taxation Aspects

Donor

Tax deduction?

Recipient

Institutions

Subject to tax?

4

Subsection 44(6) ACP 1967

Subject to subsection (12), there shall be deducted pursuant to this

subsection from the aggregate income of a person for the relevant

year reduced by any deduction falling to be made for that year in

accordance with subsection (1) an amount equal to any gift of money

made by him in the basis year for that year to the Government, a

State Government, a local authority or an institution or organisation

approved for the purposes of this section by the Director General on

the application of the institution or organisation concerned:

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Subsection 44(6) ACP 1967

………..there shall be deducted………………from the aggregate income

of a person ………….an amount equal to any gift of money ……… to the

Government, a State Government, a local authority or an institution

or organisation approved ……………..by the Director General …………:

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Important terms

Subsection 44(6)

Government

Federal

State

Local Authority

DGIR Approved Institution

7

Taxation Aspects on Social Initiative

Donor

Taxation Aspects

Donor

Donor qualify for Tax deduction on

donation given

To Government, State

Government & Local Council

100% of Donation

Institution approved by DGIR

On AI

7% for individual

10% fo Company8

Taxation Aspects on Social Initiative

Recipient

Taxation Aspects

Recipient

Tax Exemption on income

Government/State Govt

Para 5 Sch 6

Local Council

Para 6 Sch 6

DGIR Approved Inst

Para 13(1)(a) Sch 6

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Other Related Provision – ITA 1967

General

Related Provison –ITA 1967

Donation ‘incentive’

Subsection 34(6)(h), 34(6)(ha)

Subsection 44(6), 44(11B), 44(11C)

etc

Waqf – no special provision under ITA

Zakat

Individual – Rebate Sec 6A(3)

Company- Business- 44(11A)

10

Related Provision – ITA 1967

Tax Incentive

Name – very important

Different Tax Treatment

Govern by different Section

Donation


Subsection 44(6), 44(11B),

44(11C)

etc

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Zakat

Name – very important


Zakat

Individual – Rebate Sec 6A(3)

net

Company- Business- 44(11A)

2.5% of AI

12


Waqf

Name – important


Waqf

No provision in ITA

13


Donation

Name – important


Application & Approval


MOF

Expenditure incurred

Subsection 44(6)

IRB

Appeal – MOF

Cash only

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Donation

Name – important

Application & Approval

Subsection 44(11B)

Sports

MOF

Cash/inkind

Subsection 44(11C)

National & Strategic important

MOF

Cash/cost contribution in kind

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Waqf

Waqf

No special prov under ITA

IRB stand on waqf ?

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CONDITIONS FOR CREATING CASH-WAQF

There are three legal conditions to be

fulfilled when creating cash-waqf.

• Irrevocability: This means that once the founder created the cash-waqf he cannot revoke it back, however, he/she can benefit from its investment/revenue.

• Perpetually: Once the cash-waqf is created it must be perpetual. This will ensure regular and continual support from the cash-waqf to financing needy areas in the Muslim society.

• Inalienability this means that once cash is created as waqf no one can ever become the owner to alienate it, i.e. it becomes a ‘frozen asset’. It cannot be the subject to be given as gift, inheritance, or any alienation whatsoever.

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CASH-WAQF MODELS

1. Waqf Shares Model

2. Waqf Takaful Model

3. Direct Model

4. Mobile Model

5. Corporate Cash Waqf Model

6. Compulsory Model

7. Deposit Product Model

8. Co-Operative Model

9. Waqf Mutual Fund Model

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Deposit

DIRECT CASH WAQF MODEL

Beneficiaries

Beneficiaries

Beneficiaries

Waqif

founder

Donator

ContributionsRevenue

Bank

(invest)

Revenue

Generated

Religious

Institution/

NGO

In 1998, Johor Corporation had endowed cash to Kumpulan Waqf An-Nur Berhad

(KWANB), by simply depositing money to a specific bank account. – SS 44(11C)

The introduction of cash waqf fund in IIUM in the early 1990s was identical to Al-

Azhar University Waqf. However, and due to the law of administration of waqf of

1952 which gave the right for the State Religious Councils to administer any waqf,

IIUM was force to change the wording of cash waqf to Endowment Fund in order to

manage its own cash waqf which is specifically meant to help students

1. Malaysia

2. Singapore

3. Bahrain

4. UAE

5. Pakistan

6. India

7. US

8. South Africa

9. IDB

10. OPEC

4/20/2017 19


Waqf – tax’s perpective

Waqf


Tax treatment on Waqf

No approval given under Ss 44(6) on waqf

Waqf An Nur – Ss 44(11C)

Ss 44(6) ?????

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Waqf



Waqf not treated as donation under Ss44(6)

Failed to comply Ss 44(6) conditions on the Recipient

Condition to be fulfilled – elements of donation under Ss 44(6)

No condition/string/restriction

Waqaf – principal must remained

Donation – free to use

No double benefit

Donation – tax deduction

Waqf – maintain, restricted

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Waqf


Condition for donation Ss 44(6) - cont

Against 50% spending requirement

Waqf – only profit can be utilised

Donation - free

No two way – temporary ownership

Waqf – some waqf can go back to

donor

Donation - no

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Waqf


Condition for donation Ss 44(6) - cont

Not for investment – purchase a

building and rental objective

Waqf – to acquire building used to

generate rental income

Donation – for approved objectives

To acquire building required

DGIR approval

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Waqf

Tax treatment on Waqf is not a donation under Ss

44(6)

Condition for donation Ss 44(6) -cont

Cash only no inkind (tax receipt)

Waqf – cash and inkind

For specific approved objectives only Ss 44(7)

Waqf – wider scope

Purchase & disposal of assets require IRB

approval

Waqf – depend on donor

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Waqf

Tax treatment on Waqf- is not a donation under Ss

44(6)


Dissolve isues

Institution Ss 44(6)

Balance donate to other Approved Ss

44(6) institutions

Waqf – no transfer

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Waqf

Tax treatment on Waqf -is not a donation under Ss

44(6)


Waqf for building purposes eg mosque, school,

not inline with Ss 44(6)

Require special application and

documentations

Under different heading

Building Fund for worship

Building Fund for School

TPRI (Fund for Worship Operations) 26


Waqf – tax’s perpective – Action & Solution

Waqf

Tax treatment on Waqf - is not a donation under Ss

44(6)

Meeting with MOE, Public , Universities and IRB

on Sept 2016

Issues under MOF studies

Solution

Short term

Long Term

Introducing new special provision

Same as zakat

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The Impact Of Subsection 44(6)

Total Number Of Approved

Institutions

As December 2015

1825 registered and active

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The Significants Of Subsection 44(6)

Totao amount claimed

Types Year 2012 Year 2013 Year 2014

Individual RM 50.93 mil RM 269.05 mil RM 378.62 mil

Companies RM 825.623 mil RM 1,070.22 mil RM 901.36 mil

Total RM 876.55 mil RM 1,339.27 mil RM 1,279.98 mil

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Referances

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Referances

Taxation Aspects for Social Benefit Initiatives …...Taxation Aspects for Social Benefit...

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Transcript of Taxation Aspects for Social Benefit Initiatives …...Taxation Aspects for Social Benefit...