Tax Incentive for Malaysia E-commerce Website

 

To encourage the growth and usage of electronic commerce (E-commerce), Malaysia government has since Year 2002 allows the eligible tax payers: whether individuals, companies, or enterprises to deduct their cost incurred in developing an E-commerce enabled website by introducing The Income Tax (Deduction for Cost of Developing Website) Rules 2003 (“the Rules”).

 

What is “E-commerce enabled”?

The Rules has defined “E-commerce enabled” as a system of processes where transaction involving the transfer of information, products, services or payments can be made through electronic networks for an electronically confirmed consideration as verified by the Malaysian Communications and Multimedia Commission (“MCMC”).

 

How does this tax deduction works?

The Rules is effective as at to date since the year of assessment of 2002. As such, any tax payers: whether individuals, companies, or enterprises, which have gained profits from its business, shall be allowed to deduct the necessary startup cost of E-commerce enabled website in their income tax or company tax audit for that year of assessment. However, pursuant to the Rules, the relevant startup costs shall be divided into five shares whereby one-fifth of the startup costs are allowed for deduction for that year of assessment and the remaining balance of the costs shall be deducted in four following years of assessment in equal share.

 

The requirement:

Before one is eligible for the above tax deduction, the tax payers must fulfill the following requirements and to submit application to MCMC:

1. The applicant must have a website;

2. The website must be hosted on a web server in Malaysia;

3. There must be server software or applications that supply information to the web server upon request.  Futhermore, there must be:

(a) Shopping cart or any programs that facilitates the collection of information. The program is a way to let web shoppers select the products or services they want, preview the sale amounts, delete items if they change their minds subsequently, enter their payment and       shipping information, and then cancel the order completely if they desire to.

(b) Security capabilities that allow the encryption of data during the transfer of customer information.

4. The collection of payment may be made online or offline. If online payment, there must be:

(a) A software to process transactions and send information to all of the involved parties (seller’s bank, customer’s bank, etc.).

(b) Internet security capabilities that allow the encryption of data during the transfer of customer information

 

The Procedure:

1. The applicant shall complete and submit the prescribed form entitled “Application Form for    Certification of E-Commerce Website” to MCMC together with the processing fees of RM100.00 by way of cheque payable to MCMC.

2. The application can be submitted to the following address:

Chairman

Malaysian Communications and Multimedia Commission

63000 Cyberjaya

Selangor Darul Ehsan

Attn: En. Jailani Johari, Head of Regulatory and State Coordination Division

Tel: 03-86888000, Fax: 03-86881002

3. Once the certificate has been obtained, the applicant must attach the certificate to the income              tax return form for submission to the Inland Revenue Board.

 

Important Notes:

Apart from the information to be provided in the prescribed application form, MCMC may request for additional information from the applicant. Also, MCMC has the reserved rights to amend any of the conditions and criteria for applications over time in accordance to the development of electronic transaction and online system.

Therefore, it is advisable for any interested parties to contact MCMC at the contact below for further enquiries:-

Licensing Department Regulatory and Coordination Division

Malaysian Communications and Multimedia Commission

63000 Cyberjaya, Selangor Darul Ehsan.

Tel: +603 8688 8000

http://www.mcmc.gov.my

This information is provided by CHUR ASSOCIATES®