Malaysia_ Divesture_ asset transfer

 

Control transfer does not apply, based on the following:

 

  1. Whether a transfer of control has occurred will be determined based on the date of disposal of the assets. The timing of negotiations is not relevant for tax purposes. Instead, the tax treatment is determined with reference to the actual date the assets are transferred.
  2. Even if the assets are transferred prior to the divestiture, it is not appear to have control over these assets. the US company only holds a 26% shareholding in the transferor and has limited board representation (2 out of 5 directors), which does not indicate control for this purpose.

Where Malaysian entity (transferee's entity) applies the control transfer provisions and claims capital allowance based on the tax written-down value (“TWDV”) of the assets in the company(transferor)’s books, and if this TWDV exceeds the consideration (i.e. the net book value as at 30 November 2024), transferee entity may overclaim capital allowances, potentially resulting in an understatement of income and exposure to tax penalties.

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