Rules on Income Tax Exemption from Export of Private Health Care Services Gazetted
06 January 2022
The
Income Tax (Exemption) (No. 13) Order 2021 [P.U.(A) 501/2021] (“
the Rules”) was gazetted on 30 December 2021 and has effect from the year of assessment (“
YA”) 2021 until YA 2022.
Exemption
The Rules exempt a person resident in Malaysia from payment of income tax in respect of income derived from the export of private healthcare services in the basis period for a YA subject to the following:
- the amount of income derived from the export of private health care services under the Rules shall be equal to 100% of the value of increased exports for a YA provided the following conditions are fulfilled:
- at least 10% of the taxpayer’s total patients consist of foreign clients who have obtained private health care services in each YA; and
- at least 10% of the taxpayer’s gross income is derived from the foreign clients who have obtained private health care services in each YA.
- The maximum amount of statutory income against which tax exemption may be claimed under the Rules is limited to 70% of the taxpayer’s statutory income.
Unutilised exemption
The Rules allow any utilised tax exemption to be carried forward to the subsequent YAs until the taxpayer has fully utilised the amount that is exempted from tax.
Separate account
A taxpayer who claims tax exemption under the Rules is required maintain a separate account for the income derived from the export of private health care services.
Claim for reinvestment allowance
For the taxpayer who is claiming reinvestment allowance under Schedule 7A to the Income Tax Act (“ITA”), Paragraph 5 (duty to maintain an exempt account) and Paragraph 6 (issuance of tax-exempted dividend) of Schedule 7A to the ITA shall apply mutatis mutandis to the amount of income exempted under the Rules.
Key definitions
For the purposes of the Rules:
- a “non-Malaysian citizen individual” means a non-Malaysian citizen individual other than:
- a participant of Malaysia My Second Home programme and his dependents;
- a holder of a Malaysian student pass and his dependents; and
- a holder of a Malaysian work permit and his dependents;
- the “value of increased exports” means the difference of the value of private health care services exported in the basis period and that of the immediately preceding basis period;
- a “foreign client” means a company, a partnership, an organisation or a cooperative society which is incorporated or registered outside Malaysia or a non-Malaysian citizen individual or a non-resident Malaysian citizen living abroad and his dependents; and
- “private health care services” means private health care services provided in Malaysia or from Malaysia to foreign clients.
Non-application
The Rules are not applicable if a taxpayer in the basis period for a YA has been granted:
- any incentives (except for deductions for promotion of exports) under the Promotion of Investments Act 1986;
- any investment allowance under Schedule 7B of the ITA;
- an exemption under paragraph 127(3)(b) or subsection 127(3A) of the ITA in respect of an approved service project; or
- an exemption under Income Tax (Exemption) (No. 9) Order 2002 [P.U.(A) 57/2002] ('E.O. 9/2002').
Comments
Simultaneously with the gazetting of the Rules,
Income Tax (Exemption) (No. 9) (Amendment) Order 2021 [P.U.(A) 499/2021] has removed private healthcare service as one of the qualifying services under E.O. 9/2002 for the purposes of the tax exemption for increase in exports effective from YA 2021.
With the Covid-19 pandemic still wreaking havoc to international travel, the extent to which private health care service providers will benefit from the Rules remains questionable.
Alert prepared by Desmond Liew (Senior Associate) of the Tax Practice of Skrine.
This alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.