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FOREWORD
A new government! A new Harapan! Budget 2019 marked the first budget proposal presented under
the present government by the Minister of Finance, YB Tuan Lim Guan Eng on 2 November 2018. With the theme “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society”, the 2019
Budget outlined 12 key strategies:-
1. Strengthening fiscal administration;
2. Restructuring and rationalising government debt;
3. Raising government revenue;
4. Ensuring welfare and quality of life;
5. Improving employment and employability;
6. Enhancing health and social welfare protection;
7. Raising real disposable income;
8. Education for a better future;
9. Unleashing the power of the new economy;
10. Seizing opportunities in the face of global challenges;
11. Redefining the role of government in business; and
12. Ensuring equitable and sustainable economic growth.
In line with the above strategies, various proposals were put forward in the 2019 Budget. Some of the
notable tax measures are as follows:-
Sales and Services Tax
To improve the efficiency and effectiveness of the Sales and Services Tax, the following
measures have been proposed:-
(a) Service tax exemptions for specific business-to-business (B2B) transactions be given to
certain group of service tax registrants.
(b) Service tax be imposed on imported services consumed by businesses (B2B) and the digital
products and services imported by consumers (B2C).
(c) A credit system for sales tax deductions be introduced to assist small manufacturers who
purchase products from importers. Personal Income Tax
Notable changes include:-
(a) Tax relief on contribution to approved schemes and life insurance premium or takaful
schemes be increased from RM6,000 to RM7,000.
(b) Relief given to a resident individual for net deposits made in that basis year into the SSPN
account be increased from RM6,000 to RM8,000.
Corporate tax
To ensure various tax legislations stay relevant and to reduce leakages, certain existing reliefs
and incentives under the Act be reviewed and amended as follows:-
.
(a) Carrying forward of unabsorbed business loss of a company be limited to 7 years of
assessment;
(b) Provision of group relief is reviewed where the surrendering of losses will apply to new
companies only and restricted to 3 years of assessment. The company that has unutilised
investment tax allowances or unutilised pioneer losses upon the expiry of its investment tax
allowance or pioneer status incentive is not eligible for group relief.
(c) The income tax rate on chargeable income of up to RM500,000 for SME be reduced from 18%
to 17%.
(d) Earning stripping rules are introduced under Section 140C to restrict the deductibility of
interest expenses in connection with financial assistance in a controlled transaction
(e) Deduction of expenses incurred in respect of any payment made by a resident to a Labuan
Company be restricted. Real Property Gains Tax (RPGT) and Stamp Duty
Key changes to RPGT and stamp duty include:- (a) The RPGT rates for the disposal of real properties or shares in a real property company after
the fifth year (i.e. sixth year or thereafter) by a resident individual or permanent resident be
increased from 0% to 5%;
(b) Stamp duty on the transfer of property valued at more than RM1,000,000 will be increased
from 3% to 4%;
(c) Stamp Duty Exemption
(i) Exemption of stamp duty on sale and purchase agreement and loan agreement executed
on acquisition of house by first-time homebuyers have been extended.
(ii) Rules and conditions governing the stamp duty exemptions in the case of
reconstructions or amalgamations of companies and transfer of property between
associated companies be reviewed.
Tax Systems and Administration
The following are notable amendments and additional provisions:-
(a) Restrictions on trade in Malaysian Ringgit and transactions between Labuan and Malaysian
resident will be removed. Flat tax of RM20,000 under the Labuan Business Activity Tax Act
1990 be abolished with effect from 1 January 2019.
(b) Tax exemption granted to wholesale money market funds on its interest income from
licensed banks, licensed Islamic banks, and development financial institutions be abolished.
(c) The following incentive be extended or expanded:-
(i) Venture Capital Tax Incentives be extended for another year, i.e. for applications
received by the Malaysian Securities Commission until 31 December 2019.
(ii) The list of green technology assets which qualify for the Green Technology Investment
Allowance be expanded from 9 assets to 40 assets.
(iii) Tax incentives be introduced for companies that incurred qualifying expenses in
implementing Industry 4WRD.
The Government has also launched a Special Voluntary Disclosure Program (SVDP) to encourage the
public to report their unreported or understated income, on a voluntary basis. This program will be
offered from 3 November 2018 until 30 June 2019 where reduced penalty rate will be imposed on
those income.
IMPORTANT NOTE
This bulletin is prepared gratuitously for clients and associates and is not intended in any way to be
acted upon as advice by Folks DFK & Co./Azman, Wong, Salleh & Co. and their associates. The
information herein (which incorporates legislation/gazettes up to 31 December 2018) may be subject
to further amendments upon the passing of the relevant legislations. Readers are advised to seek
appropriate advice before taking any action. Folks DFK & Co./Azman, Wong, Salleh & Co. and their
associates shall not be responsible or liable for any claims, losses or damages arising in any way out
of or in connection with any person relying upon this bulletin in organising their affairs.
CONTENT
Page
ABBREVIATIONS (i)
DEFINITIONS (ii) – (iii)
1. TAX SYSTEMS AND ADMINISTRATION
1.1 Special Classes of Income 1
1.2 Appeal on Assessment under Section 90(3) 1
1.3 Expansion of Derivation of Business Income 2
1.4 Requirement of Audited Accounts on Submission of Tax Return 2
1.5 Penalty for Breach of Confidence 3
1.6 Person Responsible for LLP 3
1.7 Review of Tax Rate for Foreign Fund Management Company 3
1.8 Restriction on Deductibility of Interest 4
1.9 Review of Tax System for Labuan Entity and Labuan Business Activity 5
1.10 Definition of Control under Section 140A 6
1.11 Tax Deduction for Contributions made to Social Enterprise 7
1.12 Donations to National Schools and Institutions of Higher Learning 7
1.13 Change of Income Tax Rates and Tax Treatment for Insurance and Re-
insurance Business
7
1.14 Special Voluntary Disclosure Program (SVDP) with Lower Penalties 8
2. TAXATION – INDIVIDUALS
2.1 Tax Relief on Contribution to Approved Schemes and Life Insurance
Premium or Takaful Scheme
9
2.2 Tax Relief on Net Annual Savings in the National Education Savings Scheme
(SSPN)
9
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
3.1 Review of Tax Treatment on Unabsorbed Business Losses 10
3.2 Reduction of Corporate Tax Rate for Small and Medium Enterprises (SME) 10
3.3 Deduction on Payments made to Labuan Entities 10
3.4 Review of the Tax Treatment on Provision of Group Relief 11
3.5 Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) Loan Paid by
Employers
11
4. TAX INCENTIVES
4.1 Limitation to Reinvestment Allowance (RA) and Investment Allowance for
Service Sectors (IASS) 12
4.2 Pioneer Losses (PL) 12
4.3 Extension of Tax Incentive for the Issuance of Sukuk Ijarah (leasing) and
Wakalah (Agency)
13
4.4 Extension of Tax Incentive for Issuance of Retail Debenture and Retail Sukuk 13
CONTENT
Page
4. TAX INCENTIVES (Cont’d)
4.5 Tax Incentives for Industry4WRD 14 - 15
4.6 Tax Incentive for Employers to Employ Senior Citizens and Ex-convicts 15
4.7 Withdrawal of Investment Tax Allowance (ITA) 15
4.8 Tax Incentives for Venture Capital 16
4.9 Definition of Research and Development (R&D) 17
4.10 Changes to Tax Exemption on Wholesale Money Market Funds 17
4.11 Review of Contract R&D Incentive 18
5. REAL PROPERTY GAINS TAX
5.1 Acquisition Price of Property Acquired prior to 1 January 2000 19
5.2 Disposal of Asset by Way of Gift 19
5.3 Review of Real Property Gains Tax (RPGT) Rates 20
6. STAMP DUTY
6.1 Review of Stamp Duty Rates for Transfer of Real Property 21
6.2 Review of Stamp Duty Exemption for the Purchase of First Residential
Property 21
6.3 Stamp Duty to be Imposed on Hire Purchase Agreement 21
6.4 Redefinition of Small and Medium Enterprise for Stamp Duty Purposes 22
6.5 Stamp Duty to be Imposed on Constitution of a Company 22
6.6 Review of Stamp Duty Exemption in Cases of Reconstruction or
Amalgamation of Companies 22
6.7 Review of Stamp Duty in cases of Transfer of Property between Associated
Companies 23
6.8 Stamp Duty Exemption for Perlindungan Tenang Products 24
7. INDIRECT TAX
7.1 Introduction, Definition and Review of Scope of Imported Taxable Service 25 - 26
7.2 Newly Prescribed Taxable Services 26
7.3 Redefinition of Management Services for Service Tax Purposes 27
7.4 Service Tax Exemptions for Specific Business-To-Business (B2B) Service Tax
Registrants 27 - 28
7.5 Determination of Sale Value of Taxable Goods 28
7.6 Power to Assess under Sales Tax Act 28
7.7 Deduction of Sales Tax 28
7.8 Excise Duty on Sugar Sweetened Beverages 29
7.9 Review of Import Duty Rate on Bicycles 29
ABBREVIATIONS
(i)
Act Income Tax Act 1967
AE Automation Equipment Allowance
CA Capital Allowance
DG Director General
DTA Double Taxation Arrangement
ESR Earning Stripping Rules
GST Goods and Services Tax
GSTA Goods and Services Tax Act 2014
IRB Inland Revenue Board
ITA Investment Tax Allowance
LLP Limited Liability Partnerships
MIDA Malaysian Investment Development Authority
OECD Organization for Economic Co-operation and Development
PIA Promotion of Investment Act 1986
PS Pioneer Status
QE Qualifying Expenditure
R&D Research & Development
RA Reinvestment Allowance
REITs Real Estate Investment Trusts
RMC Royal Malaysian Customs
RPGT Real Property Gains Tax
RPGTA Real Property Gains Tax Act 1976
SA Stamp Act 1949
SC Securities Commission
SME Small and Medium Enterprise
STA Service Tax Act 2018
SOCSO Social Security Organization
TCR Thin Capitalization Rules
WHT Withholding Tax
YA Year of Assessment
DEFINITIONS
(ii)
Base erosion and profit
shifting (“BEPS”)
refers to tax avoidance strategies that exploit gaps and mismatches in tax
rules to artificially shift profits to low or no-tax locations. Under the
OECD/G20 Inclusive Framework on BEPS, over 125 countries and
jurisdictions are collaborating to implement the BEPS measures and
tackle BEPS.
Country-by-country Report
(“CbC Report”)
the term “CbC Report” means the country-by-country report to be filed
annually by the Reporting Entity in accordance with the laws of its
jurisdiction of tax residence and with the information required to be
reported under such laws covering the items and reflecting the format set
out in the report published by the OECD with respect to Action 13 of the
Base Erosion and Profit Shifting project in September 2014, as may be
amended following the 2020 review contemplated therein.
(source: OECD/G20 Base Erosion and Profit Shifting Project. Action 13:
Country-by-country Reporting Implementation Package)
Industry4WRD National Policy on Industry 4.0, which would enable the manufacturing
sector to move into Industry 4.0 and along the way contribute to fulfilling
Malaysia’s commitment to the United Nation’s Sustainable Development
Goals (SDGs).
REITs
a unit trust which is approved by the SC as REITs or Property Trust
Fund.
SME a company incorporated in Malaysia with a paid-up capital in respect of
ordinary shares not exceeding RM2.5 million and LLP with RM2.5
million capital contribution and below at the beginning of the basis
period for the relevant YA. However, it excludes a company where:-
(a) 50% of the paid up capital in respect of the company’s ordinary
shares is directly or indirectly owned by a related company;
(b) 50% of the paid up capital in respect of ordinary shares of the related
company is directly or indirectly owned by the company; or
(c) 50% of the paid up capital in respect of ordinary shares of the
company and the related company is directly or indirectly owned by
another company.
“Related company” in this context is defined as a company which has a
paid up capital exceeding RM2.5 million in respect of ordinary shares at
the beginning of its basis period for a YA.
Sukuk
Sukuk has the same meaning as provided in the SC’s guidelines in respect
of Islamic securities. Sukuk refers to certificates of equal value which
evidence undivided ownership or investment in the assets using Shariah
principles and concepts endorsed by the Shariah Advisory Council but
does not include any agreement for a financing/investment where:-
(i) the financier/investor and customer/investee are signatories to the
agreement; and
(ii) the provision of financing/investment is in the ordinary course of
business of the financier/investor, including any promissory note
issued pursuant to the terms of such an agreement.
(Source: Guidelines on Sukuk issued by SC dated 8 January 2014).
DEFINITIONS
(iii)
Contract research and
development company
means a company which provides research and development services in
Malaysia only to a company other than its related company.
Earning Stripping Rules
(ESR)
a method endorsed by the OECD to limit tax deductions for interest
expenses and is one of the OECD’s action plans under the Base Erosion
Project Shifting (“BEPS”) strategy.
1. TAX SYSTEMS AND ADMINISTRATION
1
1.1
Special Classes of
Income – Widening
of Scope
Existing
Section 4A of the Act provides that the following income derived from
Malaysia by non-residents is chargeable to tax: -
(i) amounts paid in consideration of services rendered by the person or
his employee in connection with the use of property or rights
belonging to, or the installation or operation of any plant,
machinery or other apparatus purchased from, such persons;
(ii) amounts paid in consideration of technical advice, assistance or
services rendered in connection with technical management or
administration of any scientific, industrial or commercial
undertaking, venture, project or scheme; or
(iii) rent or other payments made under any agreement or arrangement
for the use of any moveable property.
Proposed
Subsection 4A(ii) be amended by deleting the word ‘technical’ and
reworded as follows:-
‘amounts paid in consideration of any advice given, or assistance or
services rendered in connection with the management or administration
of any scientific, industrial or commercial undertaking, venture, project
or scheme; or’
The provisions under Section 15A, Section 109B(1)(b) and Schedule 1
Part V(ii) of the Act in relation to the above are to be amended.
Effective
Upon coming into operation of the Finance Act 2018.
1.2
Appeal on
Assessment under
Section 90(3)
Existing
Section 99(1) of the Act provides that a person aggrieved by an
assessment made in respect of him may appeal to the Special
Commissioners against the assessment by giving to the DG within 30
days after the service of the notice of assessment (or within such
extended period as regards those days or months as may be allowed
under Section 100) a written notice of appeal in the prescribed form
(Form Q).
Proposed
A new subsection 99(1A) be introduced where a person who has failed to
furnish a return for a basis period for a year of assessment in accordance
with subsection 77A(1) may appeal against the assessment made by the
DG under subsection 90(3) by furnishing a return for that basis period
for that year of assessment together with the written notice of appeal
(Form Q) within the stipulated time.
Effective
Year of assessment 2019.
1. TAX SYSTEMS AND ADMINISTRATION
2
1.3 Expansion of
Derivation of
Business Income
Existing
Business income is subject to Malaysian income tax if it is derived or
deemed derived from Malaysia. Business income which is deemed to be
derived from Malaysia includes income from a business that is not
attributable to its operations carried on outside Malaysia.
Proposed
The derivation of business income provision under the Act be expanded to
include income of a person from a business attributable to a place of
business in Malaysia.
A place of business includes:-
(a) a place of management;
(b) a branch;
(c) an office;
(d) a factory;
(e) a workshop;
(f) a warehouse;
(g) a building site, or a construction, an installation or an assembly
project;
(h) a farm or plantation; and
(i) a mine, an oil or gas well, a quarry or any other place of extraction of
natural resources.
A person shall also be deemed to have a place of business in Malaysia if
that person:-
(a) carries on supervisory activities in connection with a building or
work site, or a construction, an installation or an assembly project; or
(b) has another person acting on his behalf who:-
(i) habitually concludes contracts, or habitually plays the
principal role leading to the conclusion of contracts that are
routinely concluded without material modification;
(ii) habitually maintains a stock of goods or merchandise in that
place of business from which such person delivers goods or
merchandise; or
(iii) regularly fills orders on his behalf.
Effective
Upon coming into operation of the Finance Act 2018.
1.4
Requirement of
Audited Accounts
on Submission of
Tax Return –
Revision in line with
Companies Act
2016
Existing
A company is required to submit its income tax return to the IRB based on
accounts audited by a professional accountant together with a report made
by the professional accountant in accordance with subsection 174(1) and
(2) of the Companies Act 1965.
Proposed
A company shall submit its income tax return based on the financial
statements made in accordance with the requirements of the Companies
Act 2016.
Effective
Year of assessment 2019.
1. TAX SYSTEMS AND ADMINISTRATION
3
1.5 Penalty for Breach
of Confidence
Existing
Section 117(1) of the Act provides that any classified person who in
contravention of Section 138:-
(a) communicates classified material to another person; or
(b) allow another person to have access to classified material,
shall be guilty of an offence and shall, on conviction, be liable to a fine not
exceeding RM4,000 or imprisonment for a term not more than one year or
both.
Proposed
The punitive provision under Section 117 be extended to include any
person who receives any classified material, knowing or having reasonable
ground to believe at the time when he receives it that such classified
material is communicated or disclosed to him in contravention of this Act,
and use the classified material, or produce or disclose the classified
material to any other person.
Effective
Upon coming into operation of the Income Tax (Amendment) Act 2018.
1.6 Person Responsible
for LLP
Existing
The responsibility for doing all acts and things required to be done by or
on behalf of a LLP for the purposes of this Act shall lie jointly and
severally ─
(a) with the compliance officer who is appointed amongst the partners of
the limited liability partnership; or
(b) if no compliance officer is appointed as such, any one or all of the
partners thereof.
Proposed The responsibility for doing all acts and things required to be done by or
on behalf of a LLP be extended to include persons qualified to act as
secretaries under the Companies Act 2016 who is a citizen or permanent
resident of Malaysia and ordinarily resides in Malaysia.
Effective
Upon coming into operation of the Income Tax (Amendment) Act 2018.
1.7 Review of Tax Rate
for Foreign Fund
Management
Company –
Consistent with
Internationally
Agreed Taxation
Standard
Existing
Chargeable income of a Foreign Fund Management Company in relation
to the source consisting of the provision of fund management services to
foreign investors is taxed at a preferential rate of 10%.
Proposed
The preferential tax rate of 10% is abolished and foreign fund management
company be subject to tax at the rate of 24%.
Effective
Year of assessment 2021.
1. TAX SYSTEMS AND ADMINISTRATION
4
1.8 Restriction on
Deductibility of
Interest –
Implementation of
ESR under OECD’s
BEPS Action 4
Existing
Earning stripping rules (ESR) will take effect from 1 January 2019 in
place of the thin capitalization rules which was removed effective from 1
January 2018.
Under the ESR, deduction on excessive interest on financial assistance
between associated persons is disallowed.
Proposed
A new Section 140C on ESR be introduced. Under the Section:-
(a) In ascertaining the adjusted income of a person from each of his
sources consisting of a business, no deduction from the gross income
from that source shall be allowed in respect of any interest expense
in connection with or on any financial assistance in a controlled
transaction granted directly or indirectly to that person which is in
excess of the maximum amount of interest as determined under any
rules made under this Act.
(b) Under the Section:-
(i) “controlled transaction” shall be construed as a financial
assistance—
(a) between persons one of whom has control over the other;
or
(b) between persons both of whom are controlled by some
other person (in this section referred to as “third person”);
(ii) “control” has the meaning assigned to it in subsection
140A(5A) [refer to 1.10 below];
(iii) “financial assistance” includes loan, interest bearing trade
credit, advances, debt or the provision of any security or
guarantee;
(iv) “interest expense” means—
(a) interest on all forms of debt; or
(b) payments economically equivalent to interest (excluding
expenses incurred in connection with the raising of
finance)”.
Effective
1 January 2019.
1. TAX SYSTEMS AND ADMINISTRATION
5
1.9 Review of Tax
System for Labuan
Entity and Labuan
Business Activity -
Consistent with
Internationally
Agreed Taxation
Standard
Existing
A Labuan entity carrying on Labuan trading activity is taxed at 3% of its
chargeable profits as reflected in the audited accounts, or RM20,000 to be
elected annually.
Where a Labuan entity carrying on a Labuan business activity which is a
Labuan trading activity does not have a basis period for a year of
assessment, the Labuan entity shall be charged for that year of assessment
to tax of RM20,000.
“Labuan business activity” means a Labuan trading or a Labuan non-
trading activity carried on in, from or through Labuan in a currency other
than Malaysian currency, by a Labuan entity with non-resident or with
another Labuan entity with certain exceptions.
i.
Proposed
Amendment to the Labuan Business Activity Tax Act 1990 are proposed
as follows:-
(a) the definition of the Labuan business activity be substituted as
follows:-
“Labuan business activity” means a Labuan trading or a Labuan
non-trading activity carried on in, from or through Labuan, excluding
any activity which is an offence under any written law;”
(b) A Labuan entity, shall for the purpose of the Labuan business
activity:-
(i) have an adequate number of full time employees in Labuan;
and
(ii) have an adequate amount of annual operating expenditure in
Labuan,
as prescribed under the Labuan Business Activity Tax (Requirements
for Labuan Business Activity) Regulations 2018 (P.U.(A) 392)
(c) The election for income tax at the fixed rate of RM20,000 under
LBATA 1990 be abolished.
(d) Income derived from intellectual property assets held by a Labuan
entity be subject to the prevailing income tax rate under the Income
Tax Act 1967.
(e) Where a Labuan entity carrying on a Labuan business activity which
is a Labuan trading activity does not have a basis period for a year of
assessment, the DG may direct that the basis period for that year of
assessment and subsequent years of assessment to include a period or
periods (which may be of any period) as specified in the direction.
With the new definition, restrictions on transactions between Labuan
Entity and resident of Malaysia and in Ringgit are to be removed.
Effective
1 January 2019.
1. TAX SYSTEMS AND ADMINISTRATION
6
1.10 Definition of
Control under
Section 140A
Existing
Pursuant to Section 140A(2) where a person in the basis period for a year
of assessment enters into a transaction with an associated person for that
year for the acquisition or supply of property or services, then, for all
purposes of the Act, that person shall determine and apply the arm’s length
price for such acquisition or supply. Section 140A(5) provides that such
transaction shall be construed as a transaction between ─
(a) persons one of whom has control over the other;
(b) individuals who are relatives of each other; or
(c) persons both of whom are controlled by some other person.
By virtue of Section 139, a person shall be taken to have control of a
company:-
(a) if he exercises or is able to exercise or is entitled to acquire control
(whether direct or indirect) over the company's affairs and in
particular, without prejudice to the generality of the preceding words,
if he possesses or is entitled to acquire the greater part of the share
capital or voting power in the company;
(b) if he possesses or is entitled to acquire either:-
(i) the greater part of the issued share capital of the company;
(ii) such part of that capital as would, if the whole of the income of
the company were in fact distributed to the members, entitle
him to receive the greater part of the amount so distributed; or
(iii) such redeemable share capital as would entitle him to receive on
its redemption the greater part of the assets which, in the event
of a winding up, would be available for distribution among
members; or
(c) if in the event of a winding up he would be entitled to the greater part
of the assets available for distribution among members.
Proposed Section 140A(5A) be introduced to expand the definition of control for the
purpose of Section 140A(5) as follows:-
‘Control’ refers to persons one of whom owns shares of the other person,
or a third person who owns shares of both persons, where the percentage
of the share capital held in either situation is 20% or more and─
(a) the business operations of that person depends on the proprietary
rights provided by the other person or a third person;
(b) the business activities of that person are specified by the other
person, and the prices and other conditions relating to the supply are
influenced by such other person or a third person; or
(c) where one or more of the directors or members of the board of
directors of a person are appointed by the other person or a third
person.
Effective
1 January 2019.
1. TAX SYSTEMS AND ADMINISTRATION
7
1.11 Tax Deduction for
Contributions made
to Social Enterprise
Existing
Donations made by a person to institutions or organisations or a fund
approved by the DG are allowed as tax deduction limited to ─
(a) 7% of the aggregate income for a person other than company
(b) 10% of the aggregate income for a company
Proposed
Tax deduction above be extended to donations made to any social
enterprise.
Effective
To be gazetted by way of statutory order.
1.12 Donations to
National Schools
and Institutions of
Higher Learning
Existing
Donations made by a person to national schools or public institutions of
higher learning are not tax deductible.
Proposed
Donations made by a person to national schools and public institutions of
higher learning that are registered with the Ministry of Education for the
purposes of upgrading infrastructure be eligible for tax deduction.
Deduction for donations made to other schools and institutions of higher
learning that are registered with the Ministry of Education for the purposes
of upgrading infrastructure will be evaluated on a case-by-case basis.
Effective
To be gazetted by way of statutory order.
1.13 Change of Income
Tax Rates and Tax
Treatment for
Insurance and Re-
insurance Business
(a) Tax rates
Type of business Tax rate
Existing Proposed
Reinsurance business/ retakaful fund 24%
8% Inward re-insurance business/ inward
retakaful fund 5%
Offshore insurance/ takaful business 5% 24%
(b) Source of business income
Existing
The reinsurance business and general insurance business are considered as
one source of business income, where inward re-insurance business is a
separate source of business from the reinsurance business.
Proposed
The reinsurance business shall be a separate source of income from the
general fund.
Effective
Year of assessment 2019.
1. TAX SYSTEMS AND ADMINISTRATION
8
1.14 Special Voluntary
Disclosure Program
(SVDP) with Lower
Penalties
Existing
The penalties imposed for incremental tax payable arising from a
voluntary disclosure by a taxpayer as set out in the IRB’s Tax Audit
Framework 2018 are as follows:-
Full voluntary disclosure Penalty
rate
Within 60 days from the tax filing due date 10%
After 60 days but by the end of the 6th
month from the tax filing due
date
15.5%
After 6 months from the tax filing due date 35%
Proposed
Special Voluntary Disclosure Programme (SVDP) be implemented. An
operational guideline has been issued by IRB on 3 November 2018
(updated on 30 November 2018) on the implementation of this
programme. This SVDP covers voluntary disclosure by taxpayers on:-
(a) income not previously declared, under declared, expenses over
claimed or not allowable, reliefs, deductions and rebates over
claimed;
(b) gains on disposal of assets (real properties and shares in real property
companies) not previously declared or under declared; and
(c) stamping of instruments not previously stamped.
Under the SVDP, taxpayers will enjoy reduced penalty rates from 3
November 2018 to 30 June 2019 as follows:-
Disclosure period Penalty
rate
Payment
by or on
From 3 November 2018 to 31 March 2019 10% 1 April 2019
From 1 April 2019 to 30 June 2019 15% 1 July 2019
For disclosure made after 30 June 2019, penalty rates of between 80% to
300% would apply.
Effective
3 November 2018 to 30 June 2019.
2. TAXATION - INDIVIDUALS
9
2.1 Tax Relief on
Contribution to
Approved Schemes
and Life Insurance
Premium or
Takaful Scheme
Existing
A combined tax relief up to RM6,000 is given to resident individual on
the contributions made to approved schemes such as the Employees
Provident Fund (EPF) and payment for life insurance premiums or
takaful scheme under Takaful Act 1984.
Proposed
The combined tax relief on the above contributions be increased to
RM7,000, segregated as follows:-
(a) Tax relief up to RM4,000 on contributions to approved schemes;
and
(b) Tax relief up to RM3,000 on payment for life insurance premiums
or takaful contributions.
Public servants that under the pension scheme be given tax relief up to
RM7,000 on payment for life insurance premiums or takaful
contributions.
Effective
Year of assessment 2019.
2.2
Tax Relief on Net
Annual Savings in
the National
Education Savings
Scheme (SSPN)
Existing
A relief up to RM6,000 a year is given to a resident individual for net
deposits made in that basis year by that individual for his / her child into
the SSPN account established under the Perbadanan Tabung Pendidikan
Tinggi Nasional Act 1997.
Proposed
The tax relief be increased to RM8,000.
Effective
Years of assessment 2019 to 2020.
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
10
3.1
Review of Tax
Treatment on
Unabsorbed
Business Losses
Existing
There is no time limit on the carrying forward of unabsorbed business
losses.
Proposed
Unabsorbed business losses are allowed to be carried forward as
follows:-
(a) Unabsorbed losses for a year of assessment be allowed to be carried
forward for a maximum of 7 consecutive years of assessment. Any
amount ascertained for that year of assessment which is not
deducted at the end of the period of 7 years of assessment shall be
disregarded. [New Section 44 (5F)]
(b) Transition provision to Section 43 and Section 44 of the Act
Unabsorbed losses up to the year of assessment 2018 shall be
allowed to be carried forward for utilization until the year of
assessment 2025. Any amount that has not been deducted at the end
of the year of assessment 2025 shall be disregarded.
Effective
Year of assessment 2019.
3.2
Reduction of
Corporate Tax Rate
for Small and
Medium Enterprises
(SME)
Reduction in income tax rates for SME and LLP is proposed as follows:-
Chargeable income
(RM)
Existing tax rates
(%)
Proposed tax rates
(%)
Up to RM500,000 18 17
Exceeding RM500,000 24 24
Effective
Year of assessment 2019.
3.3 Deduction on
Payments made to
Labuan Entities
Existing
Malaysian tax resident who transacts with Labuan entity is entitled for
tax deduction on allowable expenditure incurred.
Proposed
A new Section 39(1)(r) be introduced to provide that the Minister may
prescribed rules on the deductibility of the expenses paid by a Malaysian
tax resident to a Labuan entity.
Pursuant to the Income Tax (Deduction Not Allowed for Payment Made
to Labuan Company by Resident) Rules 2018 (P.U.(A) 375/2018), the
Minister has prescribed the following rules on the deductibility of
payments made by a resident to a Labuan Company as follows:-
Type of payment Amount disallowed for deduction
(a) Interest income 33% of the amount of payment
(b) Lease rental 33% of the amount of payment
(c) Other payments 97% of the amount of payment
Effective
1 January 2019.
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
11
3.4
Review of the Tax
Treatment on
Provision of Group
Relief
Existing
A company (surrendering company) may surrender not more than 70% of
its current year of assessment adjusted loss to one or more related
companies (claimant company) to be set-off against the claimant
company's aggregate income subject to certain rules and conditions as
contained in the Act. The adjusted loss for any year of assessment may be
surrendered without any time restriction.
Proposed
(a) Amendments be made to Section 44A(1) to limit the period where
the losses can be surrendered for 3 consecutive years of assessment.
(b) A new Section 44(1A) be introduced to specify the commencement
of the 3 consecutive years of assessment as follows:-
Where the surrendering company ─
(i) first commences operation in a 12 month basis period, the
‘basis period for 3 consecutive years of assessment’
commences immediately following such 12 month basis
period; or
(ii) first commences operation in a basis period which is less or
more than 12 months (‘first basis period’) and the first basis
period is followed by a 12 month basis period (‘second basis
period’), the ‘basis period for 3 consecutive years of
assessment’ commences immediately following the second
basis period.
Transitional provisions to Section 44A provide that ─
Commencement of
operations of the
surrendering company
YA(s) losses can be surrendered
YA2015 YA2019
YA2016 YA2019 & YA2020
YA2017 YA2019, YA2020, YA2021
(c) New subsection 44A(10)(aa) be introduced to preclude the claim of
group relief or the surrender of its losses by a company that has
unutilised investment tax allowance or adjusted loss from a pioneer
business under the PIA.
Effective
Year of assessment 2019.
3.5
Perbadanan Tabung
Pendidikan Tinggi
Nasional (PTPTN)
Loan Paid by
Employers
Existing
There is no tax relief granted to employers who settle the PTPTN loans
on behalf of their employees.
Proposed
Employers who have made repayment of the PTPTN loans on behalf of
their full-time employees are eligible for tax deduction, provided the
repaid amount is not recovered from the employees.
Effective
For repayments made between 1 January 2019 to 31 December 2019.
4. TAX INCENTIVES
12
4.1
Limitation to
Reinvestment
Allowance (RA) and
Investment
Allowance for
Service Sectors
(IASS)
Existing
RA is given in respect of qualifying expenditure incurred in the basis
periods for 15 consecutive years of assessment beginning from the year of
assessment for the basis period in which a claim for that RA was first
made.
IASS is given on qualifying expenditure incurred for the purpose of an
approved service project within 5 years of assessment from the date of
approval.
The unutilized RA and IASS can be carried forward indefinitely until they
are fully utilized.
Proposed
(a) Unutilized RA and IASS for a year of assessment be allowed to be
carried forward up to 7 consecutive years of assessment
commencing immediately after the end of the qualifying period of
RA and IASS.
(b) Unutilized RA and IASS ascertained up to the year of assessment
2018 where the qualifying period has ended in the year of
assessment 2018 and prior, be allowed to be carried forward for a
period of 7 consecutive years of assessment commencing from the
year of assessment 2019.
Any amount ascertained for that year of assessment which is not utilized
at the end of the period of 7 years of assessment shall be disregarded.
Effective
Year of assessment 2019.
4.2 Pioneer Losses (PL) Existing
The unabsorbed pioneer losses under the PIA can be carried forward
indefinitely until it is fully absorbed.
Proposed
(a) Unabsorbed PL for a year of assessment be allowed to be carried
forward up to 7 consecutive years of assessment commencing
immediately following the year of assessment that relates to the
basis period in which the day the post pioneer business falls.
Transitional provision
(b) Unabsorbed PL ascertained up to the year of assessment 2018 where
the post pioneer business falls in the year of assessment 2018 and
prior, be allowed to be carried forward for a period of 7 consecutive
years of assessment commencing from the year of assessment 2019.
Any amount ascertained for that year of assessment which is not absorbed
at the end of the period of 7 years of assessment shall be disregarded.
Effective
Year of assessment 2019.
4. TAX INCENTIVES
13
4.3
Extension of Tax
Incentive for the
Issuance of Sukuk
Ijarah (leasing) and
Wakalah (Agency)
Existing
(a) Deduction is given on expenses incurred for the issuance of sukuk
under the principles of Ijarah (leasing) and Wakalah (agency)
approved by the SC or the Labuan Financial Services Authority.
(b) The following additional expenses incurred by a company on the
issuance of Sukuk under the principles of Ijarah and Wakalah
approved by the SC are given further tax deduction:-
(i) Professional fees relating to due diligence, drafting and
preparation of prospectus;
(ii) Printing costs of prospectus;
(iii) Advertisement cost of prospectus;
(iv) Securities Commission prospectus registration fee;
(v) Bursa Malaysia processing fee and initial listing fee;
(vi) Bursa Malaysia new issue crediting fee; and
(vii) Primary distribution fee.
Proposed
The above tax deductions be extended for another 2 years.
Effective
Years of assessment 2019 to 2020.
4.4
Extension of Tax
Incentive for
Issuance of Retail
Debenture and Retail
Sukuk
Existing
Double deduction is given on additional expenses incurred for issuance of
the following product approved by the SC from the YAs 2016 to 2018:-
(a) Retail debenture; and
(b) Retail Sukuk under the principle of Mudharabah, Musyakarah,
Istisna’, Murabahah, and Bai’ Bithaman Ajil based on Tawarruq.
The additional expenses which qualify for deduction are as follows:-
(i) Professional fees relating to due diligence, drafting and preparation
of prospectus;
(ii) Printing costs of prospectus;
(iii) Advertisement cost of prospectus;
(iv) Securities Commission prospectus registration fee;
(v) Bursa Malaysia processing fee and initial listing fee;
(vi) Bursa Malaysia new issue crediting fee; and
(vii) Primary distribution fee.
Proposed
Double deduction in respect of the above be extended for another 2
years.
Effective
Years of assessment 2019 to 2020.
4. TAX INCENTIVES
14
4.5 Tax Incentives for
Industry4WRD
Existing
Companies adopting advance technology known as Industry4.0 are given
Accelerated Capital Allowance (ACA) and Automation Equipment
Allowance (AE) to be provided on the first RM10 million qualifying
capital expenditure incurred and is fully claimable within 2 years of
assessment.
Industry4wrd Policy has been introduced to encourage and attract
stakeholders towards the application of I4.0 technology, create a
comprehensive ecosystem for I4.0 application process by the industry
and transform the manufacturing sector holistically.
Proposed
In order to achieve the Industry4WRD Policy aspirations and goals, the
following tax incentives be given:-
(a) Income Tax Incentive For I4.0 Readiness Assessment (I4.0-RA)
Tax deduction on I4.0-RA expenses for up to RM27,000 paid to
Malaysian Productivity Corporation.
(b) Income Tax Incentive For Industry4WRD Vendor Development
Programme
Double deduction on operating expenditure incurred in
implementing the Industry4WRD Vendor Development Program
such as costs in relation to product development, upgrading
capabilities of vendors and skill training of vendors, as verified by
the Ministry of International Trade and Industries (MITI).
The qualifying expenditure are capped at RM1 million per year for 3
consecutive years of assessment.
(c) Income Tax Incentive For Human Capital Development
(i) Further deduction on scholarships provided by companies to
Malaysian students pursuing studies at technical and
vocational levels, diplomas and degrees in the fields of
engineering and technology. The eligibility criteria of
students:-
a) a Malaysian and resident in Malaysia;
b) receives full time course of study;
c) has no means on his own; and
d) whose parents or guardian have total monthly income
not exceeding RM8,000 per month.
(ii) Further deduction on expenses incurred by companies
participating in the National Dual Training Scheme for the
I4.0 program approved by the Ministry of Human Resources;
(iii) Tax deduction on expenses for development of new I4.0
technology and engineering courses by the Private Higher
Education Institutions. The new courses must be verified by
Ministry of Education;
(iv) Further deduction on expenditure incurred by a company in
upgrading and developing its employees technical skills in
I4.0 technology for training programmes approved by the
Malaysian Investment Development Authority (MIDA);
4. TAX INCENTIVES
15
4.5 Tax Incentives for
Industry4WRD –
Cont’d
Proposed
(c) (v) Further deduction on expenditure incurred by a company in
conducting internship programme approved by the Ministry of
Human Resources for undergraduate students in fields of
engineering and technology; and
(vi) Tax deduction on equipment and machinery contributed by
companies to Skills Development Centres, Polytechnics or
Vocational Colleges certified by the Ministry of Human
Resources or the Ministry of Education.
Effective
Item
(a) From year of assessment 2019 to year of assessment 2021.
(b) For Memorandum of Understanding (MOU) signed between
company and MITI from 1 January 2019 to 31 December
2021.
(c)(i) From year of assessment 2019 to year of assessment 2021.
(c)(ii) For programmes implemented from 1 January 2019 to 31
December 2019.
(c)(iii) From year of assessment 2019 to year of assessment 2021.
(c)(iv) For companies participating in the Readiness Assessment
Intervention Plan from 1 January 2019 to 31 December 2019.
(c)(v) From year of assessment 2019 to year of assessment 2021.
(c)(vi) For contributions made from 1 January 2019 to 31 December
2021.
4.6
Tax Incentive for
Employers to Employ
Senior Citizens and
Ex-convicts
Existing
Remuneration paid by employers who employ disabled persons that are
certified by department of Social Welfare and workers affected by
accidents/ critical illnesses that are certified by The Medical Board of the
Social Security Organization (SOCSO) is given further tax deduction.
Proposed
Employer who employs senior citizens (above 60 years old) or ex-
convicts on full time basis whose monthly remuneration does not exceed
RM4,000 is given further tax deduction on the remuneration paid. Effective
Years of assessment 2019 to 2020.
4.7
Withdrawal of
Investment Tax
Allowance (ITA)
Existing
ITA given shall be withdrawn in the year of disposal if the relevant
qualifying expenditure is disposed off at any time within 2 years from
the date of acquisition of that qualifying expenditure.
Proposed
ITA given shall be withdrawn in the year of disposal if the relevant
qualifying expenditure is disposed off at any time within 5 years from
the date of acquisition of that qualifying expenditure.
Effective
Year of assessment 2019.
4. TAX INCENTIVES
16
4.8
Tax Incentives for
Venture Capital
Existing
Tax incentives for the venture capital industry are as follows:-
(a) Venture Capital Management Corporation (VCMC)
A VCMC registered with the Securities Commission of Malaysia
(SC) is exempted from tax on management fees, performance fees
and the statutory income derived from the share of profits from a
Venture Capital Company (VCC) on any investment made by the
VCC.
(b) Venture Capital Company (VCC)
A VCC which has at least 50% of the funds invested in a Venture
Company (VC) in the form of seed, start up and early stage funds is
eligible for income tax exemption on the statutory income derived
from all sources of income other than interest income arising from
deposit placements. The exemption is given for a period of 5 years
from the years of assessment 2018 to 2022.
(c) Investment In VC
A company or an individual investing in a VC is given tax deduction
equivalent to the amount of investment made in the VC in arriving
at the adjusted income. The tax deduction is given at the time the
investment is disposed of as certified by the SC, and not at the time
the investment is made and the investment was made at least two
years prior to the date of its disposal.
(d) Investment in VCC funds
A company or an individual with business income investing in the
VCC funds created by a VCMC be given tax deduction equivalent to
the value of investment made subject to a maximum amount of
RM20 million per year for each individual or company.
The above incentives are eligible to applications received by the
Securities Commission Malaysia between the period commencing from 1
January 2018 up to 31 December 2018.
Proposed
The application period of the tax incentive above be extended for another
one year.
Effective
Applications received by the SC from 1 January 2019 to 31 December
2019.
4. TAX INCENTIVES
17
4.9
Definition of
Research and
Development (R&D)
– to Align with
OECD
Existing
There is no definition of ‘research and development’ in the Act. Public
Ruling 5/2004 – Double Deduction Incentive on Research Expenditure
provides a definition of ‘research’ which based on the definition of the
PIA.
Proposed
The definition of “research and development” be introduced in Section 2
of the Act and redefined under the PIA as follows:-
“research and development” means any systematic, investigative and
experimental study that involves novelty or technical risk carried out in
the field of science or technology with the object of acquiring new
knowledge or using the results of the study for the production or
improvement of materials, devices, products, produce, or processes, but
does not include:-
(i) quality control or routine testing of materials, devices or products;
(ii) research in the social sciences or the humanities;
(iii) routine data collections;
(iv) efficiency surveys or management studies;
(v) market research or sales promotion;
(vi) routine modifications or changes to materials, devices, products,
processes or production methods; or
(vii) cosmetic modifications or stylistic changes to materials, devices,
products, processes or production methods.
Effective
Upon coming into operation of the Income Tax (Amendment) Act 2018.
4.10 Changes to Tax
Exemption on
Wholesale Money
Market Funds
Existing
Interest paid or credited by a bank, Islamic Bank and Development
Financial Institution to unit trust fund and Wholesale Money Market
Funds (meeting SC’s criteria) are exempted from tax.
Proposed
Tax exemption shall not apply to the interest paid or credited to a
Wholesale Money Market Funds (amendment to Paragraph 35 Schedule
6).
Effective
From 1 January 2019.
4. TAX INCENTIVES
18
4.11 Review of Contract
R&D Incentive
Existing
Contract research and development company is eligible to apply for the
following tax incentives:
(a) Pioneer status with income tax exemption of 100% of the statutory
income for 5 years; or
(b) Investment tax allowance of 100% of qualifying capital expenditure
incurred within 10 years that can be offset against 70% of the
statutory income for each year of assessment.
Proposed
New conditions be introduced where at the time of application for the
incentives, a contract R&D company is required to have an adequate
number of full time employees and have incurred adequate amount of
annual operating expenditure in Malaysia for the activity relating to
research and development.
Transitional provision
Where pioneer status has been granted earlier, the new requirements must
be met by these companies as follows:-
Pioneer status granted Compliance with the new requirements by
on or before 16.10.2017 1 July 2021
after 16.10.2017 1 January 2019
Further, pioneer income of a contract R&D company shall not include any
income derived from an intellectual property right if it is receivable as
consideration for the commercial exploitation of that right.
“intellectual property right” means a right arising from any patent, utility
innovation and discovery, copyright, trade mark and service mark,
industrial design, layout-design of integrated circuit, secret processes or
formulae and know-how, geographical indication and the grant of
protection of a plant variety, and other like rights, whether or not
registered or registrable.”
Effective
1 January 2019.
5. REAL PROPERTY GAINS TAX
19
5.1 Acquisition
Price of
Property
Acquired prior
to 1 January
2000
Existing
Under Schedule 2 of the RPGTA, where the disposal of a chargeable asset
which was previously acquired prior to 1 January 1970 is subject to tax, the
acquisition price of the asset shall be the market value as at 1 January 1970.
Proposed
A new paragraph 2A of the Schedule 2, RPGTA be introduced to provide a
new cut-off date to determine the acquisition price of an asset which has been
changed to 1 January 2000. Reference to 1 January 1970 shall be construed as
reference to 1 January 2000.
Effective
1 January 2019.
5.2 Disposal of
Asset by Way of
Gift
Existing
Pursuant to Paragraph 12(2) Schedule 2 of the RPGTA, where an asset is
disposed of by way of a gift where the donor and recipient are husband and
wife, parent and child or grandparent and grandchild:-
(a) The donor shall be deemed to have received no gain and suffered no
loss on the disposal if the donor is a citizen; and
(b) The recipient shall be deemed to acquire the asset at an acquisition price
equal to the acquisition price paid and permitted expenses incurred by
the donor if the gift is made within 5 years after the date of
acquisition by the donor.
Proposed The time restriction on when the gift is made under (b) above be deleted.
Effective
1 January 2019.
5. REAL PROPERTY GAINS TAX
20
5.3 Review of
Real
Property
Gains Tax
(RPGT)
Rates
Existing
RPGT rates on gains from disposal of chargeable assets (including shares in real
property company) are as follows:-
Disposal of chargeable
asset:
Effective RPGT rates
Companies Other Than Company and
Other Than Non-Citizen
and Non-Permanent
Resident Individual
Non-Citizen
and Non-
Permanent
Resident
Individual
Within 3 years from
date of acquisition 30% 30% 30%
In the 4th year from
date of acquisition 20% 20% 30%
In the 5th year from
date of acquisition 15% 15% 30%
In the 6th and
subsequent years, from
date of acquisition
5% 0% 5%
Proposed
The RPGT rates on gains from disposal of chargeable assets in the 6th and subsequent
years, from date of acquisition (including shares in real property company) be revised
as follows:-
Disposal of chargeable
asset
Effective RPGT rates
Companies Other Than Company
and Other Than Non-
Citizen and Non-
Permanent Resident
Individual
Non-Citizen and
Non- Permanent
Resident
Individual
In the 6th and
subsequent years, from
date of acquisition
10% 5% * 10%
* (i) Pursuant to Real Property Gains Tax (Exemption) Order 2018 [P.U.(A) 360], RPGT
exemption is given to Malaysian citizens for the disposal of chargeable assets (other
than shares in a real property company) costing RM200,000 and below.
(ii) Pursuant to Real Property Gains Tax (Exemption) (No.3) Order 2018 [P.U.(A) 372],
RPGT exemption is given to any individual who is citizen or permanent resident
who disposed of a chargeable asset (other than shares in the real property company)
where:
a) the contract for the disposal of a chargeable asset is executed before 1 January
2019; and
b) the contract for the disposal of the chargeable asset is conditional where the
approval by the Government or a State Government for the disposal of the
chargeable assets is obtained in the year 2019 or any year thereafter.
Effective
1 January 2019.
6. STAMP DUTY
21
6.1
Review of Stamp
Duty Rates
for Transfer of
Real Property
Stamp duty rates on instrument of conveyance, assignment or transfer of any
property (except stock, shares and marketable securities) be revised as
follows:-
Value of Real Property Stamp Duty Rate (%)
Current Proposed
First RM100,000 1 1
RM100,001 to RM500,000 2 2
RM500,001 to RM1,000,000 3 3
RM1,000,001 and above 3 4*
* For instrument of transfer that is stamped between the period 1 January
2019 to 30 June 2019 and where the value of the property is between
RM1,000,000 to RM2,500,000, the stamp duty rate on the band shall be
remitted by 1%.
Effective
1 January 2019.
6.2
Review of Stamp
Duty Exemption
for the Purchase
of First
Residential
Property
Existing
(a) Purchase of First residential property with a price not exceeding
RM300,000
100% stamp duty exemption on the instrument of transfer and loan
agreement.
(b) Purchase of First residential property with a price from RM300,001 -
RM500,000
100% stamp duty exemption on the instrument of transfer and loan
agreement but limited to the first RM300,000 of the value of residential
property. The remaining balance of the value is subject to the prevailing
rate of stamp duty.
Exemptions under (a) and (b) above are effective for sale and purchase
agreement (SPA) executed from 1 January 2017 to 31 December 2018.
(c) Purchase of First residential property with a price above RM500,000
There is currently no stamp duty exemption.
Proposed and Effective date
(a) Stamp duty exemption under (a) above be extended to SPA executed
from 1 January 2019 to 31 December 2020.
(b) Stamp duty exemption under (b) above be extended to SPA executed
from 1 July 2019 to 31 December 2020.
(c) 100% stamp duty exemption be given on instrument of transfer only
for the purchase of a first residential property priced between
RM300,001 and RM1 million from any housing developer, for SPA
executed from 1 January 2019 to 30 June 2019.
6.3 Stamp Duty to be
Imposed on Hire
Purchase
Agreement
Existing
SA 1949 does not cover conventional hire purchase agreement specifically.
Proposed
Item 22(6) First Schedule of the SA be expanded to impose stamp duty
(RM10) on conventional hire purchase agreements.
Effective
The coming into operation of the Finance Act 2018.
6. STAMP DUTY
22
6.4 Redefinition of
Small and
Medium
Enterprise for
Stamp Duty
Purposes
Existing
Section 2 of the SA 1949 define "small and medium enterprise" as follows:-
(a) in relation to the manufacturing, manufacturing related services and
agro-based industries sectors, an enterprise with full-time employees
not exceeding one hundred and fifty people or annual turnover not
exceeding twenty-five million ringgit; and
(b) in relation to the services, primary agriculture, and information and
communication technology sectors, an enterprise with full-time
employees not exceeding fifty people or annual turnover not exceeding
five million ringgit.
Proposed
Small and medium enterprise be redefined as follows:-
(a) in relation to the manufacturing activities, an enterprise with sales
turnover not exceeding fifty million ringgit or full-time employees not
exceeding two hundred people; or
(b) in relation to the services, and other sectors, an enterprise with sales
turnover not exceeding twenty million ringgit or full-time employees
not exceeding seventy-five people.
Effective
The coming into operation of the Finance Act 2018.
6.5 Stamp Duty to be
Imposed on
Constitution of a
Company
Existing
Under item 10 and 53, First Schedule of SA, stamp duty of RM100 each is
imposed on Articles of Association and Memorandum of Association.
Proposed
Item 10 and 53, First Schedule of SA be deleted and a new item 29A be
introduced to impose stamp duty of RM200 on the “Constitution of a
Company”.
Effective
The coming into operation of the Finance Act 2018.
6.6 Review of Stamp
Duty Exemption
in Cases of
Reconstruction
or Amalgamation
of Companies
Existing
Section 15 of Stamp Act 1949 provides relief from stamp duty in cases of
reconstruction or amalgamation of companies under certain conditions.
Under Section 15(5), the relief from stamp duty will be withdrawn if there are
certain breaches in the beneficial ownership of shareholding resulting from
the reconstruction or amalgamation within a period of 2 years.
Proposed
(a) The limiting period of beneficial ownership of 2 years be extended to 3
years.
(b) In the event of any breach of the 3-year or other qualifying conditions,
nullifying any exemption of stamp duty given, companies enjoying the
exemption shall notify the Collector of such breaches within 30 days
from the date of such occurrence.
Effective
The coming into operation of the Finance Act 2018.
6. STAMP DUTY
23
6.7 Review of Stamp
Duty in cases of
Transfer of
Property between
Associated
Companies
Existing
Section 15A of Stamp Act 1949 provides relief from stamp duty in the case
of transfer of beneficial interest in property between associated companies.
For the purposes of Section 15A, a company is considered to be associated if
one company is the beneficial owner of not less than 90% of the issued share
capital of the other, or that a third company is the beneficial owner of not less
than 90% of the issued share capital of each of the transferee and transferor
companies.
To qualify for the stamp duty exemption, the following conditions must be
satisfied:-
(a) the consideration, or any part of the consideration, for the transfer must
not be provided or received, directly or indirectly, by a person other
than a company which at the time of the execution of the instrument
was associated with either the transferor or the transferee;
(b) the interest in the property was not previously transferred, directly or
indirectly, by other person;
(c) the transferor and the transferee must not ceased to be associated by
reason of a change in the percentage of the issued share capital of the
transferee in the beneficial ownership of the transferor or a third
company.
Proposed
Additional conditions be imposed for the stamp duty exemption under
Section 15A as follows:-
(a) the transfer of the property of the associated companies is to achieve
greater efficiency in operation;
(b) the transferee company must be incorporated in Malaysia.
(c) The transferor and the transferee must not ceased to be associated by
reason of a change in the percentage of the issued share capital of the
transferee in the beneficial ownership of the transferor or a third
company within the period of 3 years from the date of the conveyance
or transfer of the property;
(d) the transferee company must not dispose the property that it has
acquired within 3 years from the date of the conveyance or transfer of
the property.
Companies that are granted stamp duty exemption under this section and if it
is subsequently found that any declaration or other evidence furnished is
untrue, the exemption shall be revoked and the stamp duty shall be
chargeable together with interest at the rate of 6% per annum.
Where any claim of duty exemption has been nullified by breaches of 3-year
holding period or other conditions under Section 15A(4), all parties to the
instruments of transfer shall notify the Collector of such breaches within 30
days from the date of such occurrence.
For the purpose of claiming the stamp duty exemption under this section, the
collector requires the delivery of the statutory declaration by:
(i) Advocate and Solicitor – Peninsular Malaysia
(ii) Advocate of High Court – Sabah and Sarawak
Effective
The coming into operation of the Finance Act 2018.
6. STAMP DUTY
24
6.8
Stamp Duty
Exemption for
Perlindungan
Tenang Products
Existing
Insurance policies and takaful certificates attract stamp duty of RM10 for
each policy/certificate. Stamp duty exempted for policies with the sum
insured of not exceeding RM5,000.
Perlindungan Tenang products were launched in December 2017 which is
affordable and accessible with simple claiming process. These products are
aimed to enable Malaysians especially from the lower income group to have
insurance protection which includes life insurance, fire and flood with low
premium.
Proposed
Stamp duty exemption be given for insurance policies and takaful
certificates under the Perlindungan Tenang products with yearly
premium/contribution not exceeding RM100.
Effective
For policies/certificates issued from 1 January 2019 until 31 December
2020.
7. INDIRECT TAXES
25
7.1
Introduction,
Definition and
Review of Scope of
Imported Taxable
Service
Existing
“Imported taxable service” is not defined nor included in the scope of the
Service Tax Act 2018 (STA).
Proposed
The scope of service tax be widened to include any imported taxable
service as follows:-
(a) Services imported by business (B2B), where the recipient of the
imported service shall account, declare and pay the service tax to the
RMCD; and
(b) Digital products and services imported by consumers (B2C), where
the foreign suppliers who provide such digital products and services
to consumers in Malaysia shall register, charge service tax on the
services provided and pay the service tax collected to the RMCD (as
proposed in Appendix 20 of the Budget Speech).
Consequential proposals/amendments be introduced as follows:-
(i) Definition
“Imported taxable service” be defined as any taxable service
acquired by any person in Malaysia from any person who is outside
Malaysia.”
(ii) Value of imported taxable services
Section 9(d) be introduced to provide that the value of imported
taxable services shall be as prescribed by the MOF;
(iii) Date when service tax is due
Section 11(1) be enhanced to provide that the service tax on an
imported taxable service shall be due at the time when payment is
made or invoice is received for the service, whichever is the earlier;
(iv) Duty to keep records
The compliance on duty to keep records under Section 24 be
extended to include all records of imported taxable service and it
shall also apply to any person other than a taxable person who, in
carrying on his business, acquires any imported taxable service;
(v) Furnishing of declaration and payment of service tax due
A new section 26A be introduced to govern the compliance of
furnishing of declaration and payment of service tax due and payable
by person other than taxable person on the imported taxable
services;
Penalty on failure to comply
Any person who fails to comply with the above, commits an offence
and shall, on conviction, be liable to a fine not exceeding RM50,000
or to imprisonment for a term not exceeding 3 years or to both
The punitive provisions for failure to make service tax payment
within the stipulated due date by person other than taxable person on
the imported taxable services be introduced as follows:-
7. INDIRECT TAXES
26
7.1 Introduction,
Definition and
Review of Scope of
Imported Taxable
Service – Cont’d
Proposed – Cont’d
Penalty on failure to comply
Section Period of default Penalty rate
26A(4)(a) First 30 days after the
stipulated due date
10% of the amount of service tax
which remains unpaid
26A(4)(b) Second 30 days after
the stipulated due date
Additional 15% of the amount of
service tax which remains unpaid
26A(4)(c) Third 30 days after the
stipulated due date
Additional 15% of the amount of
service tax which remains unpaid (vi) Power of DG to assess
Section 27 be amended to provide that the DG’s power to assess is
extended to include any person other than a taxable person who, in
carrying on his business, acquires any imported taxable service but
fails to furnish a declaration under section 26A or furnishes a
declaration which appears to the DG to be incomplete or incorrect.
Effective
Item (a): From 1 January 2019.
Item (b): From 1 January 2020.
Item (i) to (vi): From 1 January 2019.
7.2 Newly Prescribed
Taxable Services
Existing
Taxable services are prescribed by the Minister under Service Tax
Regulations 2018.
Proposed
(a) The prescribed taxable services be expanded to include the following
services:-
Category Services
I
Amusement park service
Brokerage and underwriting services
Cleaning services
G Training or coaching services under consultancy
services (b) Where there is a change in any taxable service as specified in the
First Schedule , the effect of the change on service tax shall be as
follows:-
(i) In the case where a service is newly specified as a taxable
service and the provision of such service is spanning after the
change, service tax shall be charged on the proportion of the
service which is attributed to the part of the period after the
change.
(ii) In the case where payment is received before 1 January 2019 in
connection with the newly prescribed services and such taxable
service will only be provided on or after the date of change, no
service tax shall be charged on the payment received.
Effective
1 January 2019.
7. INDIRECT TAXES
27
7.3 Redefinition of
Management
Services for Service
Tax Purposes
Existing
Provision of all types of management services including project
management or project coordination is prescribed as taxable services
under Category G, Item (i) of the Service tax Regulations 2018.
Proposed
The management services for service tax purposes be redefined as
provision of any of the following management services:-
(a) Project management services, full or part of the project;
(b) Tourism management services;
(c) Logistics management services;
(d) Maintenance management services;
(e) Warehousing management services;
(f) Collection and debt management services;
(g) Car park management services;
(h) Sports facilities management services;
(i) Secretarial management services;
(j) Any management services other than specified in (a) to (i) made on
behalf of another person. Effective
1 January 2019.
7.4 Service Tax
Exemptions for
Specific Business-
To-Business (B2B)
Service Tax
Registrants
Existing Service tax exemption is only given on the professional services provided
by any company to its related companies within the same group of
companies.
Proposed
Service tax exemption be given to a service tax registered person under
the following professional and other service provider groups in Schedule
1, Service Tax Regulation 2018, who acquires the same taxable services
from another service tax registered person.
Item Taxable person Item Taxable services
G(1) Advocates and
solicitors
G(a) Legal services
G(2) Syarie Lawyer G(b) Legal services on Islamic
matters
G(3) Public Accountant G(c) Accounting, auditing,
bookkeeping, consultancy
G(4) Surveyors, valuers,
appraisers, estate
agent
G(d) Valuation, appraisal, estate
agency, consultancy
G(5) Professional engineer G(e) Engineering consultancy
services
G(6) Architect G(f) Architectural consultancy
services
G(7) Consultant G(g) Professional consultancy
G(8) Information
technology
G(h) Information technology
services
G(9) Management G(i) Management services
I(8) Advertiser I(8) Advertising services
7. INDIRECT TAXES
28
7.4 Service Tax
Exemptions for
Specific Business-
To-Business (B2B)
Service Tax
Registrants – Cont’d
Effective
1 January 2019. In the case the provision of such service is spanning
after the change, service tax shall be charged on the proportion of the
service which is attributed to the part of the period before 1 January
2019.
7.5 Determination of
Sale Value of
Taxable Goods
Existing Where any registered manufacturer under the Sales Tax Act 2018
receives taxable goods from any person to be manufactured and
subsequently returns the goods so manufactured to such person, the sale
value of the goods so manufactured shall, subject to approval of the DG,
be the amount that the manufacturer charges for work performed by him.
Proposed
The determination of the above sale value of taxable goods be extended
to any manufacturers who receive taxable goods from any person to be
manufactured and subsequently returns the goods so manufactured to
such person.
Effective
1 January 2019.
7.6 Power to Assess
under Sales Tax Act
Existing The DG may assess to the best of his judgment the amount of sales tax
due and payable, and the penalty payable under subsection 27(9), if any,
by the taxable person and shall forthwith notify him of the assessment
in writing.
Proposed
The DG’s power to assess be extended to include any person and not
limiting to a taxable person.
Effective
1 January 2019.
7.7 Deduction of Sales
Tax
Proposed
Sales tax in respect of taxable goods purchased by any registered
manufacturer is given deduction based on the following rates: -
Category Rate of sales tax
deduction
For any taxable goods charged and
levied with sales tax at the rate of 5%
2% of the total value of the
taxable goods purchased
For any taxable goods charged and
levied with sales tax at the rate of 10%
4% of the total value of the
taxable goods purchased
Conditions and manner of sales tax deduction is prescribed under the
Sales Tax (Amendment) Regulations 2018 [P.U.(A) 399].
Any registered manufacturer may make an application for the deduction
of sales tax paid in respect of taxable goods purchased by the registered
manufacturer which are raw materials, components or packaging
materials used solely in the manufacturing of his taxable goods.
Effective
1 January 2019.
7. INDIRECT TAXES
29
7.8
Excise Duty on
Sugar Sweetened
Beverages
Existing There is no excise duty imposed on sugar sweetened beverages.
Proposed
An excise duty of RM0.40 per litre be charged on the sugar sweetened
beverages as follows:-
(a) Fruit juices and vegetable juices whether or not containing added
sugar or other sweetening substances under the tariff heading of
20.09, which contains sugar exceeding 12 grams per 100 millilitres;
and
(b) Beverages including carbonated drinks containing added sugar and
other non-alcoholic beverages under the tariff heading of 22.02,
which contains sugar exceeding 5 grams per 100 millilitres.
Effective
1 April 2019.
7.9
Review of Import
Duty Rate on
Bicycles
Existing Bicycles are subject to import duty rates as follows:-
Tariff Code Description Import Duty
Rates
8712.00.10 00 Racing bicycles 0%
8712.00.20 00 Bicycles designed to be ridden by children 0%
8712.00.30 00 Other bicycles 25%
Proposed
The import duty rate for bicycles under the tariff code 8712.00.30 00 be
reduced from 25% to 15%.
Effective
1 January 2019.
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