INCOME TAX (DEDUCTIONS) ġ S.L.123.07 1
SUBSIDIARY LEGISLATION 123.07
INCOME TAX (DEDUCTIONS) RULES
1st January, 2001
Legal Notice 322 of 2001.
Title.
Rules.
Interpretation.
Cap.123.
S.L.123.55
Benefits Rules;
"emoluments" has the same meaning assigned to it under the FSS
Rules;
S.L.123.55
Cap. 123.
"Fringe Benefits Rules" means the Fringe Benefits Rules, or any
other rules prescribed under the Income Tax Act in replacement
thereof;
S.L.372.14
Cap. 372.
"FSS Rules" means the Final Settlement System (FSS) Rules, or
any other rules prescribed under the Income Tax Management Act
in replacement thereof.
Deductions in 
respect of vehicles.
3. (1) Where any vehicle to which this rule applies was
acquired at a cost exceeding Lm3,000 in a year immediately
preceding any year of assessment and such vehicle is used and
employed in the production of the income, any deduction in respect
of wear and tear and any initial deduction with respect to the
vehicle under the provisions of article 14(1)( f ) and ( j ) of the Act
and any allowance due or charge made with respect to the vehicle
under the provisions of article 24 of the Act shall be computed as if
the cost of acquisition were Lm3,000.
(2) Where any vehicle to which this rule applies is leased to a
person in a year immediately preceding any year of assessment
commencing on or after the 1st lanuary, 2002 and such vehicle is
used and employed in the production of that person’s income, and
where the listed price of that vehicle exceeds Lm3,000, any
deduction that may be claimed by that person under the provisions
of article 14(1) of the Act in respect of payments made for the lease
of that vehicle shall not exceed the result obtained by multiplying
the said lease payments by Lm3,000 and dividing the result by the
listed price of that vehicle:
Provided that -
( a ) where the vehicle is used in terms of an arrangement
whereby the burden of wear and tear is on the lessee,
no deduction shall be allowable in respect of the lease
payments;
( b ) the provisions of this subrule (2) shall not apply where
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the vehicle is used by the said person, or on his behalf,
on an occasional basis for a period of less than seven
days during the year in question otherwise than as a
replacement for another vehicle leased to him;
( c ) where a leased vehicle is temporarily replaced by
another vehicle for a period of less than thirty
consecutive days without any change in the amount of
lease payments, this subrule (2) shall apply during the
period of replacement as if the reference to the listed
price of the vehicle were a referenee to the listed price
of the first-mentioned vehicle, but when a change in
the amount of lease payments is made on account of
such replacement or where the period of replacement
is thirty consecutive days or more, this subrule (2)
shall apply during the said period by reference to the
listed price of the second-mentioned vehicle.
(3) For the purpose of subrule (2) -
S.L.123.55
( a ) the listed price of a vehicle is the price shown for a
vehicle of that same or comparable make and model in
a price list drawn up or approved by the Commissioner
for the purposes of the Fringe Benefits Rules increased
by the cost of any optional accessories that may be
fitted in the vehicle;
( b ) a vehicle shall be deemed to be leased to a person if it
is used by him or on his behalf under any arrangement
whereby a payment is made or due to another person
as consideration for the said use;
( c ) "lease payments" means the total of the payments
made or due by a person during the year in question as
consideration for the use of a vehicle and any other
costs that may be incurred or reimbursed by him in the
said year in connection with the said use, including
insurance, licences, repairs and servicing, but
excluding fuel and garaging.
(4) This rule applies to any mechanically propelled vehicle
constructed or adapted as a means of transport for individuals, but
shall not apply to a vehicle of a type not commonly used as a
private vehicle and unsuitable to be so used, or to a vehicle used by
the person claiming a deduction referred to in this rule wholly or
mainly for the purpose of hire to or the carriage of members of the
public in the ordinary course of his trade or business:
Provided that for any year of assessment commencing on
or after the 1st January, 2002 this rule shall, moreover, not apply to
a vehicle used by the person claiming a deduction referred to in this
rule wholly or mainly for driving instruction in the ordinary course
of his trade or business.
Deductions in 
respect of 
emoluments.
4. (1) When a person pays emoluments in a year immediately
preceding any year of assessment commencing on or after the 1st
January, 2002, and such payment represents outgoings and
expenses incurred wholly and exclusively in the production of his
income, the deductions that may be allowed in respect thereof for
INCOME TAX (DEDUCTIONS) ġ S.L.123.07 3
that year of assessment under article 14(1) of the Act shall not
exceed the amount of the said outgoings and expenses that relate to
emoluments that have been duly accounted for.
S.L.123.55
(2) Without prejudice to subrule (1), a deduction under article
14(1) of the Act relating to the provision of a fringe benefit falling
under Part C (Category 2 Benefits - Use of Property) of the Fringe
Benefits Rules shall not exceed the lower of:
( a ) the outgoings and expenses, determined in accordance
with the relevant provisions of Part IV of the Act,
incurred in the provision of the said fringe benefit; and
( b ) the value of that fringe benefit as determined in
accordance with the said rules without, however, any
reduction in the value contemplated in subrule 24(5) of
the said rules with respect to any rent paid by the
beneficiary:
Provided that where any rent or other consideration
is paid by the beneficiary it shall constitute income in
the hands of the provider of the benefit.
(3) The following provisions of this subrule shall apply,
without prejudice to subrule (1), for determining the deduction, if
any, that may be allowed to a person under article 14(1) of the Act
relating to the provision of a fringe benefit consisting in a transfer
of an asset to which Part D (Category 3 Benefits - Other Benefits)
of the Fringe Benefits Rules applies:
( a ) where the asset is one in respect of which any
deduction had been allowed to that person under the
provisions of article 14(1)( f ) and ( j ) of the Act, no
deduction shall be allowed in respect of the provision
of the said fringe benefit: provided that in the
balancing statement required for the purposes of
article 24 of the Act -
(i) where the said asset has been transferred at no
consideration it shall be treated as having been
put out of use for no value; and
(ii) where the said asset has been transferred at a
consideration it shall be treated as having been
sold for that consideration,
and a balancing allowance shall be allowed or a
balancing charge shall be made accordingly;
( b ) where the asset is one in respect of which no deduction
had been allowed to that person under any of the
provisions of article 14(1)( f ) and ( j ) of the Act, the
deduction in respect of the provision of the fringe
benefit shall not exceed the cost at which the provider
of the benefit had acquired that asset, including any
costs incurred by the employer in transferring that
asset: provided that any consideration paid by the
beneficiary shall constitute income in the hands of the
employer;
( c ) where the transfer is one which falls within the scope
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of the provisions of article 5 of the Act, no deduction
shall be allowed under the provisions of article 14 of
the Act in respect of the provision of the fringe
benefit: provided that the gains or profits derived from
the said transfer shall be determined in accordance
with the provisions of the said article 5 without
reference to the value of the fringe benefit.
(4) For the purpose of this rule emoluments shall not be
deemed to have been duly accounted for except to the extent that
their value has been correctly reported in the Payee Statement of
Earnings and the Payer’s Annual Reconciliation Statement
prepared in terms of the FSS Rules with respect to the relevant year
and furnished to the Commissioner by not later than twelve months
after the relevant time limit prescribed under the said Rules.
Claims for 
deductions by 
beneficiaries of 
fringe benefits.
S.L.123.55
5. Except as otherwise provided in the Fringe Benefits Rules,
the value of a benefit determined in accordance with those rules
shall be deemed to be net of all outgoings and expenses incurred by
the beneficiary in connection with that benefit, and no further
deduction shall be allowed to that person under article 14(1) of the
Act in respect of that benefit.
