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Institutions/Organizations/Funds Primarily Is Not For Profit

General Explanation Regarding The Contents Of The Constitution

General Explanation Regarding The Contents Of The Constitution/Objectives Of The Institution/Organization/Fund That Can Be Considered By The Director General Of Inland Revenue (DGIR) Under Subsection 44(6) Of The Income Tax 1967 (ITA 1967)

  1. This note is intended to provide an explanation regarding the content/format and the constitution/objectives of the institution/organization/fund for the purpose of approval by the DGIR under subsection 44(6) of the Income Tax Act 1967. It is hoped that this note can help provide understanding and clarification to taxpayers, tax agents, IRBM officers, and the general public regarding the content of the constitution/objectives of institutions/organizations/funds that are not profit-oriented.
  2. The constitution/objectives of an institution/organization/fund form the cornerstone of its establishment. It is the fundamental document for the long-term governance of any institution/organization/fund that must be written and cannot be amended. Therefore, the DGIR will examine and refine every clause/article/objective in the constitution of the institution/organization/fund that relates to the DGIR’s approval considerations. Clauses/articles/objectives that do not pertain to the scope of subsection 44(6) will not affect DGIR’s assessment of the application. The basis for writing and stating the constitution/rules should be based on:

    2.1 Why are institutions/organizations/funds established, and what are their goals and objectives

    2.2 Who are the stakeholders and decision-makers, and who will benefit from its activities

    2.3 How do institutions/organizations/funds operate, the basic principles and structure of decision-making, as well as the implementation of financial regulations and asset management

    Among the contents of the constitution/objectives that can be considered are:

    1. Purpose: the establishment of institutions/organizations/funds, who will benefit and how these benefits will reach them
    2. Objectives: What are the intentions and aspirations that the institution/organization/fund aims to achieve
    3. Types of institutions/organizations/funds: for example, corporate foundations/private foundations/public foundations, associations, welfare or educational funds, construction funds, and so on
    4. Membership in the institution/organization/fund: who can become a member, duties, and rights of members. How to become a member or be terminated as a member, as well as membership matters
    5. Structure and procedures for making decisions within the institution/organization/fund:
      • General meetings and other meetings
      • Election and appointment of various positions within the institution/organization/fund
      • Authority and function
      • Who can make decisions
      • How the institution/organization/fund makes decisions and is administered
      • How the institution/organization/fund carries out its activities
      • Authority limits for approving expenditures
    6. Roles, rights and responsibilities: of each trustee, committee, and various other positions, and their accountability
    7. How financial system controls and asset management are maintained within the institution/organization/fund: an explanation to ensure that resources and finances are not misused and are used correctly
    8. Audit process and accounting periods: specify these important dates for the purpose of closure and auditing for reporting purposes
    9. Closure/Dissolution of the institution/organization/fund: follow-up actions and responsibility for the financial and assets of the institution/organization/fund need to be clearly stated
  3. Any amendment to the constitution/objectives after obtaining approval from the DGIR under subsection 44(6) must receive approval from the DGIR before being submitted to the CCM, ROS, BHEUU, and others. Applications can be made in writing by submitting the original constitution and a draft of the proposed constitution amendments. Copies of the minutes/notes of board of directors/trustees/committee meetings must be submitted along with the application.
Disclaimer :This note is intended solely to provide general explanations for the questions raised. It cannot be used as a reference for specific factual and legal issues. Response to factual questions are in accordance with legal provisions and existing guidelines. This note only provides guidance and general explanations for the purpose of understanding, education, and awareness.