Tax exemption for national tourism activities registered in the Official Journal – Tax

Malaysia: Tax exemption for domestic tourist activities classified in the Official Journal

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The Income Tax Ordinance (Exemption) (No.9) 2021 [P.U.(A) 344/2021] (‘OCOM n ° 9‘) was published in the Official Journal on August 23, 2021. OE n ° 9 has effect from tax year 2021 until tax year 2022.

IB No.9 exempts an eligible person from paying income tax for a base period for a tax year in respect of statutory income from an eligible activity. The exemption under OE # 9 only applies to the total number of local tourists for an eligible activity that is not less than 200 people in a base period for an assessment year.

For the purposes of EO 9:

  1. a ‘eligible person‘is a Malaysian resident company licensed under the Tourism Industry Act 1992 to operate as a tour operator and which is engaged in a qualifying business;
  2. a ‘eligible activity‘is an organized travel company that offers organized travel within Malaysia for use by local and foreign tourists, including air, land or sea transportation and accommodation;
  3. a ‘tour operator company‘has the same meaning attributed to it in the 1992 Law on the Tourism Industry, i.e. any company providing all or part of the following services:
    • arrange the sale or commission of any transport, accommodation, tourist services or any other incidental service for tourists inside or outside Malaysia;
    • arranging or conducting for the sale or commission of inbound or outbound visits;
    • provision of means of transport for rent to tourists; and
    • any other service incidental to one of the services listed above;

    Notwithstanding the definition of ‘tour operator company‘, it should be noted that the exemption under OE No. 9 only applies to the statutory income of a tour operator business which is derived from the qualifying activity, i.e. national tour packages for trips to Malaysia that are used by local and foreign tourists.

  4. the total number of local and foreign tourists for an eligible activity must be verified in writing by an authorized officer of the Ministry of Tourism, Arts and Culture of Malaysia.

When an eligible person performs an eligible activity and an activity other than an eligible activity, each activity is treated as a separate and distinct source from that eligible person. A qualified person who enjoys exemption from income tax under OE No. 9 must keep a separate account for the income derived from each of the aforementioned activities during the base period for each year d ‘taxation.

Comment

While it is doubtful whether domestic licensed tour operators will derive much benefit from the tax exemption provided by OE 9 for the first part of this year due to the various travel control measures imposed in many parts of the country. Malaysia, the gradual relaxation of these measures in the near future could lead to a boom in the local tourism industry due to the release of pent-up demand for domestic travel.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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