| |
Issues
|
Clarification
- Part 9
|
| 41 |
What
is the legal basis for the imposition of levy? |
The
levy is imposed pursuant to regulations made under the Exchange Control
Act 1953. |
| 42 |
Who
is liable to pay levy? |
-
The
levy is imposed on foreign funds other than foreign direct investments
(FDI).
-
The
amount of levy depends on the duration the funds are held in Malaysia.
|
| 43 |
What
is a FDI? |
A
FDI is an investment made by nonresident in:
-
a
company where the nonresident is entitled to exercise or control the
exercise of not less than 10% of the votes attached to the voting
shares of the company;
-
a
company where the directors are accustomed, or are under the obligation,
whether formal or informal, to act in accordance with the directions,
instructions or wishes of the nonresident; or
-
a
body, whether corporate or non-corporate, where the management is
accustomed, or is under an obligation, whether formal or informal,
to act in accordance with the directions or wishes of the nonresident
|
| 44 |
What
is the status of FDI with regards to the levy system? |
FDIs
are not subject to levy. In fact, the 12-month rule introduced on 1 September
1998 has never been imposed on the FDIs.
It has always
been the government policy to encourage long-term investment.
|
| 45 |
How
to determine levy payable?
|
(A)
For funds brought in before 15 February 1999:
-
the
principal amount repatriated after one year from 1 September 1998
or one year from the actual date the amount came into the country
(if it is after 1 September 1998) will not attract any levy;
-
if
the principal amount is repatriated within one year, it will be subject
to levy at a decreasing rate, depending on the duration the principal
is held, as follows:
|
Period
held
|
%
of Levy
|
| Up
to 7 months |
30
|
| Exceeding
7 months – up to 9 months |
20
|
| Exceeding
9 months – up to 12 months |
10
|
| Exceeding
12 months |
0
|
- all profits
realised during the one year period will not attract levy, even if it
is repatriated after the one year period;
-
If
an investment is made during the one year holding period, but the
profit is realised only after the one year holding period, that profit
will still be exempted from levy.
-
For
investments made after the one year holding period, the levy
of 10% will apply on the profit generated. .
| Example:
1.
Profit realised during one-year period
| 01/10/98 |
Funds
brought in |
RM
2 million |
| 10/10/98 |
Purchase
shares |
RM
2 million |
| 15/11/98 |
Sold
shares |
RM
2.3 million |
| Profit
realised |
RM
0.3 million |
| If
repatriated at any time, even after 12 months |
no
levy |
2.
| 01/10/98 |
Funds
brought in |
RM
2 million |
| 10/10/98 |
Purchase
shares (during 12-month holding period of principal) |
RM
2 million |
| 10/11/99 |
Sold
shares (after 12-month holding period of principal) |
RM
2.3 million |
| Profit
realised |
RM
0.3 million |
| If
repatriated |
no
levy |
3.
| 01/10/98 |
Funds
brought in |
RM
2 million |
| 20/11/99 |
Purchase
shares (after 12-month holding period of principal) |
RM
2 million |
| 22/11/99 |
Sold
shares (after 12-month holding period of principal) |
RM
2.3 million |
| Profit
realised |
RM
0.3 million |
| If
repatriated |
Attract
10% levy |
4.
| 01/09/98 |
Funds
brought in |
RM
2 million |
| 15/11/98 |
Funds
brought in |
RM
1.5 million |
| 14/02/99 |
Funds
brought in |
RM
1 million |
| 03/10/99 |
Repatriate |
RM
4.5 million |
Levy
imposed:
| Principal |
RM
1 million x 20% = RM 0.2 million |
(7
mths < P <= 9 mths) |
|
|
RM
1.5 million x 10% = RM 0.15 million |
(9
mths < P <= 12 mths) |
|
|
RM
2 million x 0% = 0 |
(P
> 12 mths) |
| Total
repatriated |
RM
4.5 million - RM 0.35 million |
RM
4.15 million |
|
(B) Funds
brought in on or after 15 February 1999
- The principal
amount is not subject to levy upon repatriation;
- Profits
realised and repatriated within 12 months after investment is made are
subject to a levy of 30% of the profits;
- Profits
realised and repatriated after 12 months from the date of investment
are subject to a levy of 10% of the profits; and
- For profits
realised during the 12-months period of the investment, but repatriated
after 12-months from the date of investment, such profits are subject
to a levy of 10%.
| Example:
1.
| 18/02/99 |
Funds
brought in |
RM
2 million |
| 18/02/99 |
Purchase
shares |
RM
2 million |
| 20/03/99 |
Sold
shares (within 12 months from date of transaction) |
RM
2.3 million |
| Profit
realised |
RM
0.3 million |
| If
repatriated before 18.2.2000 |
Attract
30% levy |
| If
repatriated after 18.2.2000 |
Attract
10% levy |
2.
| 18/02/99 |
Funds
brought in |
RM
2 million |
| 18/02/99 |
Purchase
shares |
RM
2 million |
| 20/03/2000 |
Sold
shares (after 12 months from date of transaction) |
RM
2.3 million |
| Profit
realised |
RM
0.3 million |
| If
repatriated at any time |
Attract
10% levy |
|
|
| 46 |
How
would the value of shares and other fixed income ringgit instruments be
determined? |
- For share
purchases transacted on the Kuala Lumpur Stock Exchange before 1 September
1998, the value would be fixed at the closing market price on 28 August
1998, the last trading day before 1 September 1998;
- For the
fixed income instruments, the value would be fixed at the nominal value
on the same date; and
- For ringgit
assets purchased or obtained on or after 1 September 1998, the valuation
would be based on the cost of acquiring the assets, supported with documentary
evidence.
|
| 47 |
How
is the monitoring of the funds to be repatriated done? |
-
For
funds that came in before 15 February 1999, it is the duty
of the non-resident to provide documentary evidence on the type of
funds to be repatriated, whether principal or profit and on the length
of time of holding of funds;
-
For
funds that came in on or after 15 February 1999, the bank would
monitor on per account basis. Such incoming funds are to be credited
into a Special External Account, segregated from those funds that
came in before 15 February 1999.
|
| 48 |
What
types of funds would be exempted from levy? |
- For funds
that came in before 15 February 1999:-
-
principal
which has been held for more than 12 months;
-
dividends,
interest and rental earned;
-
profits
realised within 12 month holding period of the principal
-
profits
on investment made during 12 month holding period, but realised
after the one year holding period.
- Principal
and profit earned via Designated External Account for trading on the
COMMEX or KLOFFE.
- For funds
that came in on or after 15 February 1999:
-
Principal
-
dividends,
interest and rental earned;
-
principal
and profit earned via Designated External Account for trading on
the COMMEX or KLOFFE.
|
| 49 |
Are
gains from zero coupon bonds subject to levy? |
All
gains from zero coupon bonds are deemed as interest and are, therefore,
exempted from levy. |
| 50 |
Can
a fund management company offset gains from one client against losses of
a different client? |
Funds
of all clients in the same account would be considered on a net basis. |
| 51 |
Are
fund managers required to maintain individual external accounts for each
client? |
Not
necessarily. However, if the fund manager wants to treat each fund/client
separately, then it is necessary to operate separate account for each client.
All funds
that are brought in on or after 15 February 1999 would need to
be placed in separate Special External Account.
|
| 52 |
Is
there any form to be completed for the repatriation of funds? |
Yes,
there are two types of forms:-
- BNM/JKPW/EA1
(pink) for repatriation of funds that came before 15 February 1999;
and
- BNM/JKPW/EA2
(green) for repatriation of funds that came in on or after 15 February
1999.
The forms
are to be completed only upon repatriation by the nonresident or authorised
persons. The remitting bank is to check on compliance with the levy system.
|
| 53 |
Can
one claim rebate for any losses? |
For
funds that come in on or after 15 February 1999, levy would be imposed only
on any gains over and above the initial sum brought in up to the point of
repatriation. Any subsequent losses are not eligible for rebate but can
be offset against any subsequent gains. |
| 54 |
How
can a bank ensure that documentary evidence is not being used more than
once? |
The
banks are required to stamp on the documentary evidence to make sure that
it is not used more than once, as per instruction in BNM’s circular
letter dated 3 December 1998. |
| 55 |
Banks
authorised to collect levy. |
The
following has been authorised to collect levy:-
- All commercial
banks,
- Bank Islam
Berhad; and
- Merchant
Banks as follows:-
- Arab
Malaysian Merchant Bank Berhad
- Aseambankers
Malaysia Berhad
- Commerce
International Merchant Bankers Berhad
- Malaysian
International Merchant Bankers Berhad
- Perwira
Affin Merchant Bank Berhad
- RHB
Sakura Merchant Bankers Berhad
|
| 56 |
Is
there any fees or commission to be paid to the commercial banks for the
repatriation or collection of levy? |
The
banks would be collecting only the normal fees/commission currently paid
for the repatriation of funds. |
| 57 |
When
is the date for the collection of levy? |
It
would be the value date for the conversion of funds. |
| 58 |
Would
contra profits be subject to levy? |
Contra
profits made after 15 February 1999 would be subject to levy. |
| 59 |
Does
the restriction on transfer of funds between External Accounts still apply? |
Yes,
it is still subject to ECM 3. |
| 60 |
Is
the transfer of funds from the EA to SEA of the same account holder allowed? |
Yes,
subject to payment of levy on principal if the funds transferred
were held in the External Accounts for not more than one year. |
| 61 |
What
are the rules for the imposition of levy for funds repatriated?
|
The
general rules are as follows:
-
For
funds that came in before 15 February 1999, realised profit
on investment made during the 12-month holding period of the principal
can be taken out without levy. However, in the case where the principal
amount is repatriated, principal with the shortest holding
period is deemed to be repatriated first.
-
For
funds that come in on or after 15 February 1999, if profits
were to be repatriated where some profit attract 30% levy and some
attract 10%, then profit with the shortest holding period
(i.e. which attract 30%) is deemed to be repatriated first.
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