zb bhd, carrying on a share brokering business, was incorporated and has its head office in kuala lumpur. its representative residing in korea acted for some malaysian clients in the purchase and sale of shares in korea companies quoted on the stock exchange there.
the representative of zb bhd signed the contracts in korea on behalf of the malaysian clients and was paid 5% commission on the purchase and sale of shares. the commission was paid into a korea bank account of zb bhd and was not remitted to malaysia. zb bhd paid, after deducting the 5% commission, the profit made on the sale of the shares into the clients' accounts maintained in korea.
the company's representative in korea acted on the instructions received from the investment committee in the head office on the purchase and sale of shares in korea companies.
state, with reasons, whether the commission received by zb bhd are assessable, and whether the profit on the sale of shares are assessable to tax in malaysia.
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what the answernfor this question?
To determine whether the commission received by ZB Bhd and the profit on the sale of shares are assessable for tax in Malaysia, we need to consider the key factors and rules of Malaysian tax law.
1. Business Presence and Permanent Establishment:
ZB Bhd is incorporated in Malaysia and has its head office in Kuala Lumpur. However, it also has a representative residing in Korea who acts on behalf of Malaysian clients. This raises a question of whether ZB Bhd has a permanent establishment or business presence in Korea.
According to Malaysian tax law, a foreign company is considered to have a permanent establishment in Malaysia if it has a fixed place of business, such as an office, branch, or agency. Since ZB Bhd's representative in Korea is acting on behalf of the company and signing contracts, it is possible that ZB Bhd may be considered to have a permanent establishment in Korea.
2. Source of Income:
The source of income is relevant in determining the taxability of income in Malaysia. Generally, income derived from a Malaysian source is subject to Malaysian tax.
In this case, the commission received by ZB Bhd is paid into a Korean bank account and is not remitted to Malaysia. While the source of the commission income is related to activities in Korea, it is necessary to consider whether this income is still considered derived from a Malaysian source due to the business relationship between ZB Bhd and its representative in Korea.
3. Profit on Sale of Shares:
The profit made on the sale of shares could be considered as capital gains. In Malaysia, capital gains on the sale of shares are generally not subject to tax, unless the shares are trading in real property companies or the taxpayer is considered to be a dealer in shares.
However, if ZB Bhd's representative in Korea is actively engaged in trading shares on behalf of Malaysian clients, and if the company is deemed to have a permanent establishment in Korea, the profits derived from such trading activities may be subject to Malaysian tax as trading income.
Based on the information provided, without further details on the nature and extent of ZB Bhd's activities in Korea, it is difficult to definitively determine whether the commission received and the profit on the sale of shares are assessable for tax in Malaysia. A detailed analysis taking into account the specific circumstances and applicable tax laws is needed to make a conclusive determination. It is recommended to seek professional advice from a tax consultant or authority in Malaysia.