Cross Border Transactions and Tax implications

In today’s era of globalization, there are countless transactions that take place on a cross border basis. These could be in the form of sale and purchase transactions, services rendered, financing activities, investment activities, the derivation of income from conducting business overseas as well as making payments to non-residents / foreign parties for goods purchased, the employment of expatriates etc, to name a few. (more…)

Prior to the Budget 2006 proposed amendments and the subsequent Finance Act that amended the definition of an Investment Holding Company (IHC), the tax treatment of rental income was largely based on the Inland Revenue Board’s Public Ruling on the tax treatment for income from the letting of real properties (Public Ruling No. 1/2004 issued in June 2004), and the Director General Ruling No.1/95 issued in May 1995.

Based on the Public Ruling, rental income from the letting of properties would generally be treated as investment income (section 4(d) source) but it could qualify as business income (Section 4(a) source) if the taxpayer satisfies a number of conditions. These conditions can broadly be regarded as the “qualitative” and “quantitative” tests. (more…)