INLAND REVENUE BOARD OF MALAYSIA DISPOSAL OF …

1 INLAND REVENUE BOARD OF MALAYSIA . DISPOSAL OF PLANT OR MACHINERY. PART I - OTHER THAN CONTROLLED SALES. PUBLIC RULING NO. 7/2017. Translation from the original Bahasa MALAYSIA text. DATE OF PUBLICATION: 12 DECEMBER 2017. DISPOSAL OF PLANT OR MACHINERY. PART I . OTHER THAN CONTROLLED SALES. Public Ruling No. 7/2017. Date of Publication: 12 December 2017. INLAND REVENUE BOARD OF MALAYSIA . Published by INLAND REVENUE BOARD of MALAYSIA First edition 2017 by INLAND REVENUE BOARD of MALAYSIA All rights reserved on this Public Ruling are owned by the INLAND REVENUE BOARD of MALAYSIA .

2 One print or electronic copy may be made for personal use. Professional firms and associations are permitted to use the Public Ruling for training purposes only. Systemic or multiple reproduction, distribution to multiple location via electronic or other means, duplication of any material in this Public Ruling for a fee or commercial purposes, or modification of the content of the Public Ruling is prohibited. DISPOSAL OF PLANT OR MACHINERY. PART I . OTHER THAN CONTROLLED SALES. Public Ruling No. 7/2017. Date of Publication: 12 December 2017. INLAND REVENUE BOARD OF MALAYSIA .

3 CONTENTS Page 1. Objective 1. 2. Relevant Provisions of the Law 1. 3. Interpretation 1. 4. Application of the Law 2. 5. Date of DISPOSAL 2. 6. DISPOSAL Value 2. 7. Amount of Adjustment 3. 8. Other DISPOSAL of assets 10. DIRECTOR GENERAL'S PUBLIC RULING. Section 138A of the Income Tax Act 1967 (ITA) provides that the Director General is empowered to make a Public Ruling in relation to the application of any provisions of the ITA. A Public Ruling is published as a guide for the public and officers of the INLAND REVENUE BOARD of MALAYSIA . It sets out the interpretation of the Director General in respect of the particular tax law and the policy as well as the procedure applicable to it.

4 The Director General may withdraw this Public Ruling either wholly or in part, by notice of withdrawal or by publication of a new Public Ruling. Director General of INLAND REVENUE , INLAND REVENUE BOARD of MALAYSIA . DISPOSAL OF PLANT OR MACHINERY. PART I - OTHER THAN CONTROLLED SALES. Public Ruling No. 7/2017. INLAND REVENUE BOARD OF MALAYSIA Date Of Publication: 12 December 2017. 1. Objective The objective of this Public Ruling (PR) is to explain the tax treatment in relation to the DISPOSAL of plant or machinery which is not subject to controlled sales.

5 2. Relevant Provisions of the Law This PR takes into account laws which are in force as at the date this PR is published. The provisions of the Income Tax Act 1967 (ITA) related to this PR are paragraphs 19A, 33 to 37, 53, 61, 61A, 61B, 62 and 71 of Schedule 3. of the ITA. 3. Interpretation The words used in this PR have the following meanings: Asset means plant and machinery used for the purposes of a business and on which qualifiying expenditure has been incurred. Balancing allowance refers to the difference where the DISPOSAL value of an asset is less than the residual expenditure on the date of DISPOSAL .

6 Balancing charge refers to the difference where the DISPOSAL value of an asset is more than the residual expenditure on the date of DISPOSAL . Disposed means an asset is sold, discarded or destroyed or it ceased to be used for the purposes of the business. Market value means the price for the goods sold in a transaction between independent persons dealing at arm's length. DISPOSAL value means an amount equal to its market value or net proceeds of the sale, whichever is the greater. Person includes a company, a body of persons, a limited liability partnership and a corporation sole.

7 Residual expenditure means cost of asset less . (a) initial allowances; and _____. Page 1 of 18. DISPOSAL OF PLANT OR MACHINERY. PART I - OTHER THAN CONTROLLED SALES. Public Ruling No. 7/2017. INLAND REVENUE BOARD OF MALAYSIA Date Of Publication: 12 December 2017. (b) annual allowances; or (c) notional allowance which is equal to the annual allowance if claimed or could have been claimed. qualifying expenditure means capital expenditure incurred on the provision, construction or purchase of plant and machinery used for the purpose of a business other than assets that have an expected life span of less than two (2) years.

8 4. Application of the Law On the DISPOSAL of a plant or machinery in the basis period for a year of assessment, an adjustment must be made by a person who has claimed capital allowances on that plant or machinery by computing a balancing allowance or a balancing charge. 5. Date of DISPOSAL The date of DISPOSAL of an asset is the date when the asset is sold, discarded or destroyed or ceased to be used for the purposes of the business. 6. DISPOSAL Value If an asset is disposed of by a person, the DISPOSAL value of that asset shall be taken on the date of its DISPOSAL which is equivalent to: (a) Market value; or (b) If an asset is disposed of by way of sale, transfer or assignment.

9 (i) Market value at the date of the sale, transfer or assignment; or (ii) The net proceeds of the sale, transfer or assignment, whichever is the greater;. Provided that where the asset is disposed of in such circumstances that insurance or compensation moneys are received by that person, the DISPOSAL value is the market value or insurance or compensation moneys, whichever is the greater. Example 1 DISPOSAL value is the market value Cekap Ekspress Sdn Bhd purchased a van costing RM150,000 in 2013. The van ceased to be used in 2016 and sold at a price of RM45,000.

10 The market value at the time it was deemed disposed of _____. Page 2 of 18. DISPOSAL OF PLANT OR MACHINERY. PART I - OTHER THAN CONTROLLED SALES. Public Ruling No. 7/2017. INLAND REVENUE BOARD OF MALAYSIA Date Of Publication: 12 December 2017. was RM55,000. The van was licensed for commercial purpose for the transportation of company goods. The sale proceeds of RM45,000 is compared with the market value of RM55,000, whichever is higher. Thus the DISPOSAL value is RM55,000. Example 2 DISPOSAL value is the net proceeds of the sale price Same facts as in Example 1 except that the van was sold at a price of RM65,000.