Religious bodies are tax exempted, says Inland Revenue Dept

Income Tax Act 1967 was amended to make explicit the automatic qualification of such bodies for tax exemption, says the department.

PETALING JAYA: The Inland Revenue Board (IRB) has explained that the Income Tax Act 1967 was recently amended to make clear the tax exempt status of religious organisations, reported The Star Online.

“All religious institutions or organisations qualify for tax exemptions, provided their income is from donations and intended for religious activities,” it said in a statement.

IRB said the amendment explicitly stated that religious institutions and organisations qualified for tax exemption.

“The amendment to paragraph 13(1)(b) Schedule 6 Income Tax Act 1967 (Act 53) in Budget 2017 seeks to provide clarity of the law on the application of exemption to religious institutions or organisations.

“Prior to this amendment, there has been some confusion among taxpayers as to whether or not religious institutions or organisations automatically qualify for the exemption under the act, or if they were required to obtain approval from the IRB director-general, under Section 44(6) Act 53.”

It said all religious institutions or organisations automatically qualified for tax exemption on income from donations contributed by followers, solely for the purpose of religious worship activities or the advancement of religion.

“The exemption applies to all religions.”

It explained that income from business or rental was taxable under Act 53 and outside the scope of the exemption.

“Taxable income is income after the deduction of all expenses incurred in the production of said business, and income from rental. This treatment is consistent with the principles of Act 53.”

Lawmakers and churches had believed the amendment had made some types of donations received by non-Muslim religious organisations taxable.

A tax consultant reportedly questioned the passing of the amendment that would cause non-Muslim religious institutions and charitable bodies to pay tax on income derived from some types of donations.

Seputeh MP Teresa Kok had urged the prime minister to confirm whether the interpretation of the amendment to the Income Tax Act was correct and to explain the rationale behind it if it was.

-FMT