(a) An investment dealing company & an unlisted investment holding company
Investment Dealing Unlisted Investment
Company Holding Company Definition - A company which - A company is actively whose activities involved in buying consist wholly of and selling making of investments & investments and making profit whose income is from dealing derived there activities. from S60F - Section - 4 (a) business - 4 (C) dividends, interest 4 (d) rent 4 (e) annuity 4 (f) other income Deduction Test - Wholly & - Each source W exclusively &E incurred (100% - At aggregate deductible) income level deduct franction of permitted expenses Basis of - Financial year - Financial year assessment Unabsorbed Losses - Utilization yes - No utilization - Carry forward against other yes sources - No carry forward to future year = permanent loss Capital Allowance - Yes - No Gain on sale of - Gain for sales of - Capital gain at investment shares is revenue company level profit taxable (b) A listed Investment holding company and an Unlisted investment holding company
Listed Investment Holding Company Unlisted Investment Holding
Company 1 - The interest and rent are each - The interest and rent are each treated as a business income under treated as non-business income S4(a) of the ITA 1967 under S4(c) and S4 (d) respectively 2 - Capital allowance can be given. It - Capital allowance will not be will be allocated to each business granted to set-off against the based on the proportion of gross investment income income from each business over the - However, industrial building total gross income from all the allowance can be set-off against businesses the adjusted rental income - However, the excess capital provided it is an industrial allowance (i.e. unabsorbed capital building for manufacturing allowance) in a YA is not allowed to business. be carried forward, and thus is a permanent loss. 3 - Expenses such as the directors - Expenses such as the directors fees, salaries of staff, accounting, fees, salaries of staff, audit and secretarial fees, rent, accounting, audit and postage and stationery etc. would secretarial fees, rent, postage NOT be regarded as permitted and stationery etc. would be expenses. However, such expenses regarded as permitted can be fully allowed in arriving at expenses. the adjusted business income - A fraction based on the formula: - If there is more than one business, such expenses (common expenses) A x B / 4C OR 5% of B; would be allocated to each business whichever is the lower would based on the proportion of gross be given in arriving at the total income from each business over the income. total gross income from all the businesses - Meanwhile, if there is no gross income, the deduction of expenses shall be disregarded. Likewise, any excess of deduction of expenses (i.e. unabsorbed business loss) against gross income from the business source shall be disregarded too. (c) An unlisted investment holding company and resident unit trust Unlisted Investment Holding Company Resident Unit Trust 1 The interest and rent are each treated as non-business income under S4(c) and S4 (d) respectively 2 - Capital allowance will not be -10% special capital allowance for granted to set-off against the rental income investment income - However, industrial building allowance can be set-off against the adjusted rental income provided it is an industrial building for manufacturing business. 3 - Expenses such as the directors fees, - Expenses such as managers salaries of staff, accounting, audit remuneration, maintenance of register and secretarial fees, rent, postage of unit holders, share registration and stationery etc. would be expenses and secretarial, audit and regarded as permitted expenses. accounting, telephone charges, - A fraction based on the formula: printing and stationary and postage would be regarded as permitted A x B / 4C OR 5% of B; whichever is expenses. the lower would be given in arriving - A fraction based on the formula: at the total income. A x B / 4C OR 10% of A; whichever is the higher would be given in arriving at the total income. 4 All interest income are taxable - Long list of exemption for interest income - Expenditure incurred on the alteration of an existing building for the purpose of installing that machinery or plant and other expenditure incurred incidentally to the installation thereof provided that such expenditure does not exceed 75% of the aggregate of itself and any other qualifying capital expenditure. - Expenditure incurred on preparing or levelling land in order to prepare a site for the installation of the machinery or plant provided that such expenditure does not exceed 10% of the aggregate of itself and any other qualifying capital expenditure. - The special deduction will be in the form of an allowance equal to 10% of the qualifying capital expenditure made against the adjusted income from the source relating to the derivation of rental from the letting of real property. Any unabsorbed allowances will not be allowed to be carried forward to subsequent years of assessment.