Taxation

TUTORIAL 6

Advanced Taxation / BAC 4644/Dr Nakha Ratnam Somasundaram

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INVESTMENT HOLDING COMPANY

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Question

What is an investment holding company?

Answer

These are companies that hold investments and for financial purposes, they generally function as a holding company within a group of companies usually providing common user services with or without charges: in other instances they are used as a vehicle for listing purposes in the Malaysian stock exchange (Bursa Malaysia).

With effect from the year of assessment 2006, one need to distinguish between an ordinary investment holding company, and an investment holding company listed in the Malaysian stock exchange, since the tax treatment are different.

In other words, distinguish:

(a) an investment holding company (IHC); and

(b) a listed investment holding company (LIHC)

With effect from the year of assessment, an IHC is defined to mean a company whose activities consists mainly of investments, and not less than 80% of its gross income other than gross income from a source consisting of a business of holding an investments (whether exempt or not) is derived therefrom.

A business of holding of an investment is defined as follows:

It means the business of letting properties and the company also provides maintenance or support services in respect of the property.

In other words, if the company:

(a) does NOT provide any maintenance services in the letting of the property it is an investment income

(b) if it provides maintenance services then it a business of letting of property – and the income will be excluded as an investment income for the purposes of the 80% computation

(c)

Example 1

Determination of IHC status | | | | | |

Sources of income | | A | B | C | D | E |

| | | | | | | |

Rent (Business) | | 85,000 | 20,000 | 0 |...