Income Tax (Determination of Knowledge Worker and Qualifying Activity in the East Coast Economic Region) Rules 2023
- CCS
- Dec 24, 2023
- 2 min read
The Income Tax (Determination of Knowledge Worker and Qualifying Activity in the East Coast Economic Region) Rules 2023 [P.U. (A) 330, gazetted on 01/11/2023], establish the qualifications and conditions for individuals to be considered qualifying persons for tax purposes in the East Coast Economic Region.
It covers criteria for knowledge workers, designated companies, and the calculation of chargeable income.
These Rules have effect from the year of assessment 2022. A knowledge worker in the East Coast Economic Region is defined as a person who has met any condition as determined by the Minister and:
Holds a degree or master's degree in any professional field from a university recognised by the Government of Malaysia and has at least ten years of working experience in the relevant professional field or
Holds a doctor of philosophy degree in any related field from a university recognised by the Government of Malaysia and has at least five years of working experience in the relevant field recognised or
Holds a professional certificate in any technical field from an institution or university recognized by the Government of Malaysia and has at least fifteen years of working experience in the relevant technical field.
Designated companies, as referred to in the Income Tax Rules, are defined as companies that are:
Incorporated under the Companies Act 2016 [Act 777];
Resident in Malaysia;
Undertaking a qualifying activity in the Malaysia-China Kuantan Industrial Park and
Fulfilling any other conditions as determined by the Minister.
For a qualifying person who is a resident of Malaysia, the chargeable income that is subject to tax under Part XIV of Schedule 1 to the Income Tax Act 1967 is ascertained using the following formula [7]:
Chargeable Income = (A x C) / BWhere:
A is the statutory income from employment with the designated company in the basis period for that year of assessment.
B is the aggregate income in the basis period for that year of assessment.
C is the chargeable income in the basis period for that year of assessment, which is subject to tax as specified in paragraph 1 of Part I and Part XIV of Schedule 1 to the Act.
For a qualifying person who is not a resident of Malaysia, the formula is slightly different [2]:
Chargeable Income = (A x C) / BWhere:
A is the statutory income from employment with the designated company in the basis period for that year of assessment.
B is the aggregate income in the basis period for that year of assessment.
C is the chargeable income in the basis period for that year of assessment, which is subject to tax as specified in paragraph 1A of Part I and Part XIV of Schedule 1 to the Act.
In the case of a combined assessment under subsection 45(2) of the Act, the aggregate income referred to in the formula shall include the income from the spouse.
It's important to note that any excess of the chargeable income of that qualifying person which is subject to tax shall be charged to income tax for a year of assessment at the rate that would have been applicable for his chargeable income if the person had not been approved as a qualifying person under these Rules.
The above formulas are used to determine the portion of a qualifying person's income subject to preferential tax treatment under the rules set forth for the East Coast Economic Region.
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