7. Advice, Assistance or Services Rendered in Connection with Management or
Administration [Paragraph 4A(ii) o f the ITA]
7.1 Pursuant to section 5 of the Finance Act 2018 [Act 812], effective 28.12.2018,
paragraph 4A(ii) of the ITA consist s of amounts paid to a non -resident person
in consideration of advice given , assistance or services, which are performed
in and out side Malaysia, rendered in connection with management or
administration of any scientific, industrial or commercial undertaking, venture,
project or scheme.
The amendment to paragraph 4A(ii) of the ITA does not affect the scope of
payment made to the non -resident person in which the scope of payment
includes payments for non -technical assistance and non -technical services.
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INLAND REVENUE BOARD OF MALAYSIA Date of Publication: 10 December 2019
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7.2 Advice, assistance or services rendered in connection with management of
any scientific, industrial or commercial undertaking, venture, project or
scheme would include the passing over or utilisation of expert or specialised
knowledge, skills or expertise. Among the examples of management include
the provision of marketing, consultancy and legal services, supply of software
person nel, inter -company services and support such as testing and
calibration services.
7.3 Administration would cover management or administrative services in
connection with any scientific, industrial or commercial undertaking, venture,
project or scheme. Among th e example s of administration include assistance,
services, management and administrative functions such as planning,
direction, control, co -ordination, accounting, financial management
consultation and labour negotiations.
7.4 The following are examples of ser vices that generate income falling within the
scope of paragraph 4A(ii) of the ITA:
(a) Management or marketing services
Example 4
KMN International Hotel Management Ltd, a company resident in the
United Kingdom (UK), entered into an agreement with ABC Hotel (M)
Sdn Bhd in February 2017 to provide hotel management and marketing
services in Malaysia in connection with:
(i) the supervision and control of the general manager;
(ii) the supervision and co -ordination of staff training and development
programmes; and
(iii) the promotion and marketing plans for the hotel in Malaysia.
Under the terms of the agreement, the Malaysian company will pay a
monthly fee based on 5% of the gross turnover to KMN International
Hotel Management Ltd for the management and marketing services
provided in Malaysia. In addition, an annual fee of 2% on gross overseas
sales will be charged for marketing services performed overseas.
The fees for services rendered by KMN International Hotel Management
Ltd in and outside Malaysia are deemed derived from Malaysia and
chargeable to tax under paragraph 4A(ii) of the ITA. The monthly fees of
5% on the gross turnover and the annual fee of 2% on gross overseas
sales paid to KMN International Hotel Management Ltd are subject to
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withholding tax under section 109B of the ITA at the rate of 10%.
However, if it can be confirmed that KMN International Hotel
Management Ltd is a tax resident in the UK, then the withholding tax
rate is 8% pursuant to the DTAA between Malaysia and UK.
Effective 6.9.2017, the annual fee of 2% on gross overseas sales is
exempted from income tax as the services are rendered and performed
by KMN International Hotel Management Ltd outside Malaysia.
For the purpose of this example, it is assumed that KMN Interna tional
Hotel Management Ltd does not have a permanent establishment in
Malaysia.
If the non -resident company has a permanent establishment in
Malaysia, please refer to paragraph 19 in this PR for further information.
(b) Consultancy services
(i) Fee for consultanc y services
Example 5
Jet Engineering (M) Sdn Bhd, entered into an agreement in April
2017 with Jet Engineering Services (Asia) Pte Ltd, a Singapore
company. The Singapore company would provide specialist or
personnel to carry out engineering inspection and rectification
works in Port Dickson, Kuantan, Melaka and Vietnam for a period
of 2 months (May and June 201 9). The total agreed fee s was
RM500,000 including RM150,000 which is attributable to the work
done in Vietnam.
The fees for services rendered by Jet Engineering Services (Asia)
Pte Ltd in and outside Malaysia are deemed derived from Malaysia
and chargeable to tax under paragraph 4A(ii) of the ITA. The gross
fee of RM350,000 is subject to withholding tax under section 109B
of the ITA at the rate of 10% . If it can be confirmed that Jet
Engineering Services (Asia) Pte Ltd is a tax resident in Singapore,
then the withholding tax rate is 5% as provided in the DTA between
Malaysia and Singapore. The fee of RM150,000 relating to the
services performed in Viet nam is exempted from –
(i) income tax effective 6.9.2017; and
(ii) withholding tax in the said DTA.
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For the purpose of this example, it is assumed that Jet Engineering
Services (Asia) Pte Ltd does not have a permanent establishment
in Malaysia; and
If the non -resident company has a permanent establishment in
Malaysia, please refer to paragraph 19 in this PR for further
information.
(ii) Fee for consultancy services includes reimbursement
Example 6
M & A Ltd, an architectural firm in London was engaged in April
2017 to provide plans for a modern hospital in Kuala Lumpur. Staff
from the firm came several times to Malaysia for inspection of the
site, discussions with the local company and finally delivered the
master plan. The plans were drawn in its office in London. I t was
agreed that consultancy fees of RM1 million would include
reimbursements payable by monthly invoices based on the
progress of work done. The agreement also provided an analysis
of the fees charged.
The fees for services rendered by M & A Ltd in and o utside
Malaysia are deemed derived from Malaysia and chargeable to tax
under paragraph 4A(ii) of the ITA. The fees including
reimbursements are subject to withholding tax under section 109B
of the ITA at the rate of 10%. However, if it can be confirmed tha t
M & A Ltd is a tax resident in the UK, then the withholding tax rate
is 8% pursuant to the DTA between Malaysia and UK.
Effective 6.9.2017, the portion of the fees including
reimbursements related to the services performed outside
Malaysia is exempted fr om income tax.
For the purpose of this example, it is assumed that M & A Ltd does
not have a permanent establishment in Malaysia.
If the non -resident company has a permanent establishment in
Malaysia, please refer to paragraph 19 in this PR for further
information .
(iii) Monthly fees for consultancy services include reimbursement in
respect of related expenses
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INLAND REVENUE BOARD OF MALAYSIA Date of Publication: 10 December 2019
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Example 7
FGH (M) Sdn Bhd, is a hardware and software provider. The
company had entered into an agreement with PQR Software Pte
Ltd, a company in India. PQR would provide personnel to work with
FGH to supply and implement an Integrated Cash Management
System in a Malaysian bank in Malaysia. It was agreed that FGH
would pay monthly fees which included reimbursements such as
air tickets, local lodging, food and other related expenses.
The fees for services rendered by PQR are deemed derived from
Malaysia and chargeable to tax under paragraph 4A(ii) of the ITA.
The monthly fees which includes reimbursements are subject to
withholding tax under section 109B of the ITA at the rate of 10%.
However, reimbursements for local lodging would not be subject to
withholding tax under section 109B.
For more information on reimbursements, please refer to
paragraph 9 of this PR.
For the purpose of this example, it is assume d that PQR does not
have a permanent establishment in Malaysia.
If the non -resident company has a permanent establishment in
Malaysia, please refer to paragraph 19 in this PR for further
information.
(c) Legal services in connection with a debt or agency arran gement
Example 8
A legal firm resident in Spain was engaged by a Malaysian company in
December 201 8 to advise on matters regarding a debt reduction
agreement and an agency agreement. The services were performed
wholly in Malaysia.
The fees for services ren dered in Malaysia by the legal firm are deemed
derived from Malaysia and chargeable to tax under paragraph 4A(ii) of
the ITA. The fees are subject to withholding tax under section 109B of
the ITA at the rate of 10%. However, if it can be confirmed that the legal
firm is a tax resident in Spain, then the withholding tax rate is 5%
pursuant to the DTA between Malaysia and Spain.
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INLAND REVENUE BOARD OF MALAYSIA Date of Publication: 10 December 2019
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(d) Inter-company services
Example 9
Em Electric Canada Limited is a multi -national company dealing with
multi -branded products in the fields of telecommunications, process
management, storage solutions, industrial automation and other related
services. The Malaysian subsidiary, Em Technology Sdn Bhd, while
undertaking projects for various Malaysian customers, always seeks
assistance fro m its parent company or other subsidiaries who are not
resident in Malaysia to provide training, project management and other
related services.
Staff from the parent company and other subsidiaries in Canada are
assigned to work in Malaysia for 3 months from June to August 201 9.
The salaries of the assigned staff are borne by the non -resident parent
company or subsidiaries. The parent company or subsidiaries will issue
debit notes to recover the staff cost and other reimbursements from Em
Technology Sdn B hd. A debit note is issued as an allocation of cost
depending on the nature of the jobs involved.
The fees (debit notes) for assistance and service rendered by Em
Electric Canada Limited and its subsidiaries are deemed derived from
Malaysia and chargeable to tax under paragraph 4A(ii) of the ITA. The
amount shown in the debit notes are subject to withholding tax under
section 109B of the ITA at the rate of 10%.
For the purpose of this example, it is assumed that the Canadian
company does not have a permanen t establishment in Malaysia.
If the non -resident company has a permanent establishment in
Malaysia, please refer to paragraph 19 of this PR for further information.
Note
In the absence of Technical Fee Article in the DTA between Malaysia
and Canada, the In come Not Expressly Mentioned Article is applicable.
Please refer to paragraph 18(1)(b) of this PR for further information.
Example 10
AZ Sdn Bhd pays management fees to its parent company in the United
States of America (USA). The parent company provided personnel to
carry out the management services in Malaysia. The managerial
services provided by the USA company to AZ Sdn Bhd are assis tance,
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INLAND REVENUE BOARD OF MALAYSIA Date of Publication: 10 December 2019
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management and support in management, decision making, sales and
business development, financial decision making, legal matters, public
relations activities, risk management service and other management
support as mutually agreed by AZ Sdn Bhd and its parent company. The
managerial services are rendered wholly in Malaysia.
The fees for services rendered by the parent company in Malaysia are
deemed to be derived from Malaysia and chargeable to tax under
paragraph 4A(ii) of the ITA. The fees are s ubject to withholding tax under
section 109B of the ITA at the rate of 10%.
(e) Specially -tailored training course
Specially -tailored training courses are courses that are specifically
designed to meet the business needs of a company in connection with
a compa ny project for a specific group of people may fall under
paragraph 4A(ii) of the ITA.
Example 11
Aircraft Services Sdn Bhd and Dublin Aerospace, Ireland entered into a
joint-venture agreement to provide maintenance and repair services of
aircrafts in Malay sia. Dublin Aerospace is required to provide assistance
to Aircraft Services Sdn Bhd in Malaysia. An aircraft engineer from
Dublin Aerospace who is an expert in aircraft engineering was assigned
to conduct a 2 week course in Malaysia for the aircraft techn icians from
Aircraft Services Sdn Bhd. This course was specially -tailored to provide
training in relation to the maintenance and repair of the latest aircrafts.
Payment was made to Dublin Aerospace.
The payment to Dublin Aerospace for the aircraft engineer to conduct
the specially -tailored training course to meet the business project needs
in Malaysia is deemed to be derived from Malaysia and chargeable to
tax under paragraph 4A(ii) of the ITA. The gross payment is subject to
withholding tax under section 109B of the ITA at the rate of 10%.
(f) Testing and calibration services
Example 12
Safety Products Sdn Bhd made payments to Inspec Ltd, a company
based in France, in consideration for its services in providing testing,
measurement and calibration services fro m 1.4.201 9 to 20.4.201 9 that
were carried out in Malaysia .
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The fees for services rendered by Inspec Ltd are deemed to be derived
from Malaysia and chargeable to tax under paragraph 4A(ii) of the ITA.
The gross amount paid to the company in France is subj ect to
withholding tax under section 109B of the ITA at the rate of 10%.
For the purpose of this Example, it is assumed that the company in
France does not have a permanent establishment in Malaysia.
If the non -resident company has a permanent establishment in
Malaysia, please refer to paragraph 19 in this PR for further information.
Gilagolf 