Public Ruling On Trade Association

Based on the definition of “trade association” under subsection 53(3) of the ITA, an organization would be regarded as a trade association if it fulfills the following conditions:
(a) all of its members must carry on a business; and
(b) its objective must be that of safeguarding or promoting the businesses of its members.

However, where an organization’s membership is open not only to those who are in business but also to those who are under employment, the organization will not be regarded as a trade association.

An example of such an organization is a professional organization where the membership is not confined exclusively to those who are in practice but is also open to those who are employed. Such grant will prohibit the association from enjoyment of an exemption under Income Tax Order (Exemption) (No.8) 2002 or Income Tax Order (Exemption) (No.19) 2005.

(Take note that in recent budget the minister proposed to include professional association as trade association. Members of this kind includes professional under employment)

The Public Ruling No. 6 of 2005 can be seen here where IRBM elaborates more detail with regard to tax treatment.

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