2-dfk international

DFK International is a top 10 international association of independent accounting firms and business advisers.

DFK International is a worldwide association of independent accounting, tax and business advisory firms.

DFK International is registered in England and Wales as a private company that is limited by guarantee.

Registered office: Temple Chambers, Suite 120, 3-7 Temple Avenue, London, EC4Y 0DA

Company Number: 09306225

The association has been meeting the needs of clients with cross-border interests for more than 50 years. The partners in its member firms share:

Enthusiasm for fully understanding client objectives and delivering effective advice Dedication to providing personal and timely services through experienced advisers Commitment to achieving consistent professional and ethical standards

Each DFK member is an independent legal entity in its own country. DFK International is a non-profit making consortium of independent firms and does not itself practise in the field of accountancy and does not provide business advisory service. Such services are provided by the independent member and correspondent firms of DFK International.

A grouping of members who include DFK in their firm's name are classified as network firms in accordance with EU and IFAC requirements. Member firms that do not include DFK in their firm's names are not network firms and belong to the association as either Full or Correspondent Members.

DFK International World Statistics 2016

214 412 92 $1.224bnMEMBER FIRMS MEMBER OFFICES COUNTRIES MEMBER FEE INCOME

FOREWORD

The Budget proposals for 2018 were presented in Parliament on 27 October 2017 by YAB Dato’ Sri

Mohd Najib Tun Haji Abdul Razak, the Prime Minister and Minister of Finance of Malaysia.

With the theme “Prospering an Inclusive Economy, Balancing Between Worldly and Hereafter, for

the Wellbeing of Rakyat, Towards the TN50 Aspiration”, the 2018 Budget outlines 8 main thrusts:-

1. Invigorating Investment, Trade and Industry;

2. Moving Towards TN50 Aspiration;

3. Empowering Education, Skills and Trainings, and Talent Development;

4. Driving Inclusive Development;

5. Prioritising the Wellbeing of Rakyat and Providing Opportunities to Generate Income;

6. Fortifying the Fourth Industrial Revolution and Digital Economy;

7. Enhancing Efficiency and Delivery of Government - Linked Companies and Public Service;

and

8. Balancing between the Worldly and Hereafter.

In line with the above objectives, various strategies and programmes have been formulated in the

2018 Budget. Some of the notable tax measures are as follows:-

Goods and Services Tax (“GST”)

Some of the key amendments to the GST Act 2014 are:-

(a) All supplies made by Local Authorities will not be subject to GST (out of scope);

(b) Management and maintenance services rendered by housing developers to owners of

stratified residential buildings be exempted from GST; and

(c) All magazines, journals, periodicals and comics will be zero rated;

(d) GST relief be provided to the following:-

(i) Cruise ship operators for the handling services provided by sea port operators in

Malaysia;

(ii) Companies in the aviation, shipping and oil and gas industries for the importation of “big

ticket items";

(iii) Construction services for the construction of schools buildings and places of worship,

where the construction is financed by approved donations; and

(iv) Importation of oil and gas-related equipment under a lease agreement supplied by

companies located in the Designated Area (Labuan, Langkawi and Tioman) to customers

in Malaysia.

Personal Income Tax

Notable changes include:-

(a) The income tax rates for resident individuals are to be reduced by two percentage points for

the following income bands:- RM20,001 – RM35,000: from 5% to 3%

RM35,001 – RM50,000: from 10% to 8%; and

RM50,001 – RM70,000: from 16% to 14%

(b) Income Tax exemption on employment income up to 12 months for women returning to the

workforce and who have been on a career break for at least 2 years.

(c) 50% income tax exemption for rental income not exceeding RM2,000 per month from

residential homes received by Malaysian resident individuals for up to 3 years of assessment.

(d) Tax relief on net savings into the Skim Simpanan Pendidikan 1 Malaysia (SSP1M) up to

RM6,000 be extended to year of assessment 2020.

Corporate tax

To continue to promote economic growth and competitiveness:-

(a) Various existing incentives in the form of tax exemption or tax allowance were extended or

enhanced. These include incentives for automation, adoption of advanced technology

(Industrial Revolution 4.0), hotel and tourism, medical tourism and healthcare industry and

angel investors.

(b) Income tax exemption for venture capital management companies has been expanded to

include management and performance fee.

(c) The inclusion of expenditure for the development of software as qualifying expenditure.

Tax Systems and Administration

The following are notable amendments and additional provisions:-

(a) Paragraph 61A(5) of Schedule 3 of the Act has been substituted to provide the computation

to determine the residual expenditure of an asset in the year of assessment after it has been

classified as held for sale.

(b) New provisions under Section 21(3A), 107C(11B) and 112(3A) be introduced to govern the

notification of change of accounting period of a company, limited liability partnership, trust

body or co-operative society and consequences for failure to comply.

(c) Earning stripping rules will take effect from 1 January 2019 in place of the thin capitalization

rules which will cease to have effect from 1 January 2018.

In addition, by way of the Income Tax (Exemption)(No.9) Order 2017 [PU(A)323/2017] dated

23 October 2017, effective from 6 September 2017 the income of a non-resident person derived

from Malaysia in relation to services, technical advice or assistance referred to in Section 4A(i)

and (ii) of the Act which are rendered and performed by the person outside Malaysia is exempted

from withholding tax.

Furthermore, automatic exchange of information will take effect from September 2018.

Real Property Gains Tax (RPGT) and Stamp Duty

(a) Key changes to RPGT include:- (i) Change of tax rates of the estate of a deceased person who was not a citizen or a

permanent resident to rates applicable to non-citizen;

(ii) Withholding and remitting tax at 7% instead of 3% of the consideration where the

disposer is neither a citizen nor a permanent resident;

(iii) Limiting the “no gain no loss” provision under paragraph 3(b) of the 2nd

Schedule to

assets owned by a citizen only in respect of transfers between spouses or to a company.

(b) Stamp Duty

Stamp duty exemption on loan and transfer instruments relating to revived abandoned

housing projects is extended to 31 December 2020 while stamp duty will be exempted on

contract notes for exchange traded funds and structured warrants.

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 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 SYSTEM AND ADMINISTRATION

1.1 Notification of Change in Accounting Period and Penalty for Non-compliance 1

1.2 Basis Period for a Year of Assessment of Limited Liability Partnership in

respect of Certain Deduction on Approved Donation

2

1.3 Failure to Furnish Country-by-Country Report (CbCR) 2

2. TAXATION – INDIVIDUALS

2.1 Reduction of Income Tax Rates for Resident Individuals 3

2.2 Tax Exemption on Rental Income from Residential Homes received by

Resident Individuals

3

2.3 Tax Exemption on Earnings for Women Returning to the Workforce 3

2.4 Extension of Tax Relief Period on Savings in Skim Simpanan Pendidikan

1Malaysia (SSP1M)

4

3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES

3.1 Deduction of tax on the Distribution of Income of a Real Estate Investment

Trust (REIT) or Property Trust Funds (PTF)

5

3.2 Determining the Residual Expenditure of an Asset which is Classified as

Asset Held for Sale

5

3.3 Removal of Section 140A(4)(Thin Capitalization Provisions) 6

3.4 Determining the Income which is Exempt from Tax – Inconsistencies in the

Definition of Public Entertainer Removed

6

3.5 Tax Treatment for Takaful Business – Extension of Scope of Deductible

Management Expenses and Computation of the Amount to be Deducted

7

3.6 Capital Allowance for Information and Communication Technology (ICT)

Equipment and Software

8

4. TAX INCENTIVES

4.1 Tax Exemption on the Green Sustainable and Responsible Investments (Green

SRI) Sukuk Grant

9

4.2 Tax Exemption on Management Fee Income for Sustainable and Responsible

Investment (SRI) funds

9

4.3 Review of Tax Incentives for Automation in Manufacturing 9

4.4 Extension of Tax Incentive for Hiring the Disabled 10

4.5 Extension of Tax Incentives for Angel Investors 10

4.6 Review of Tax Incentives for Venture Capital 11 – 12

4.7 Tax Incentive for Transformation to Industry 4.0 12

4.8 Extension of Tax incentives for Medical Tourism 13

CONTENT

Page

4. TAX INCENTIVES (cont’d)

4.9 Review of Tax Incentives for Export of Private Healthcare Services 13

4.10 Extension of Tax Incentives for Principal Hub(PH) 14

4.11 Expansion of the Scope of Double Deduction Incentive for Expenses Incurred

in Obtaining Certification for Quality System and Standard

14

4.12 Extension of Incentives for New 4 and 5 Star Hotels 15

4.13 Extension of Tax Incentives for Tour Operating Companies 15

5. REAL PROPERTY GAINS TAX

5.1 Review of RPGT Rates for an Executor of the Estate of a Deceased Person

Who was not a Citizen and not a Permanent Resident

16

5.2 Review of Retention Rate by Acquirer on Disposal by Non-Citizen and Non-

Permanent Resident

16

5.3 Disposal Price is Deemed Equal to Acquisition Price 17

5.4 RPGT - Conditional Contracts 17

6. STAMP DUTY

6.1 Extension of Stamp Duty Exemption to Revive Abandoned Housing Projects 18

6.2 Stamp Duty Exemption for Trading of Exchange Traded Funds (ETF) and

Structured Warrants (SW)

18

7. GOODS AND SERVICES TAX

7.1 Additional Reading Materials subject to GST at Zero Rate 19

7.2 GST Treatment on Management and Maintenance Services of Stratified

Residential Buildings

19

7.3 Review of the GST Treatment for Local Authorities 19

7.4 GST Relief on Construction Services for School Buildings and Places of

Worship

20

7.5 GST Relief on the Importation of Big Ticket Items 20

7.6 Relief from Payment of GST on Importation of Goods under Lease

Agreements from Designated Areas to Malaysia

21

7.7 GST Relief on Handling Services rendered to Operators of Cruise Ships 21

7.8 Second Schedule - Matter to be treated as neither a Supply of Goods nor a

Supply of Services

21

7.9 The Merger of Customs Appeal Tribunal and Goods and Services Tax Appeal

Tribunal

22

7.10 Determining the Value of Supplies for Cessation of Liability to be registered –

Supplies to be excluded

22

7.11 Power of DG to Raise Assessment under the GSTA 23

8. 2017 – SELECTED TAX CASES AND DECISIONS 24-25

ABBREVIATIONS

(i)

Act Income Tax Act 1967

AE Automation Equipment Allowance

CA Capital Allowance

CAT Customs Appeal Tribunal

CRS

Common Standard on Reporting and Due Diligence for Financial

Account Information

DG Director General

DTA Double Taxation Arrangement

FATCA Foreign Account Tax Compliance Act

GST Goods and Services Tax

GSTA Goods and Services Tax Act 2014

GSTAT GST Appeal Tribunal

IRB Inland Revenue Board

ITA Investment Tax Allowance

LLP Limited Liability Partnerships

MIDA Malaysian Investment Development Authority

MOF Minister of Finance

OECD Organization for Economic Co-operation and Development

PIA Promotion of Investment Act 1986

PS Pioneer Status

PTF Property Trust Funds

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

Schedule 3 Schedule 3 of the Act – Capital Allowances and Charges

Schedule 6 Schedule 6 of the Act – Exemptions From Tax

SME Small and Medium Enterprise

SOCSO Social Security Organization

TIEAs Tax Information Exchange Agreements

TCR Thin Capitalization Rules

WHT Withholding Tax

YA Year of Assessment

DEFINITIONS

(ii)

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)

Mutual Administrative

Assistance Arrangement

an Arrangement between the Government of Malaysia with the

Government of any territory outside Malaysia with a view to the mutual

administrative assistance in tax matters which includes simultaneous tax

examinations, automatic exchange of information or tax administrations

abroad under Section 132B of the Act.

Tax Information Exchange

Agreements

was developed by the OECD Global Forum Working Group on Effective

Exchange of Information. The purpose of this Agreement is to promote

international co-operation in tax matters through exchange of

information.

Free zone means any part of Malaysia declared under the provisions of subsection

3(1) of the Free Zones Act 1990 to be a free commercial zone or a free

industrial zone.

Input Tax as defined under Section 2 of the GSTA:-

(a) Tax on any supply of goods and services to a taxable person; and

(b) Tax paid or to be paid by a taxable person on any importation of

goods,

and the goods and services are used or are to be used for the purposes of

any business carried on or to be carried on by the taxable person:-

provided that where the goods or services are used or are to be used

partly for the purposes of any business carried on or to be carried on by

the taxable person and partly for other purposes, tax on the supply and

importation shall be apportioned so that only so much as is attributable to

the purposes of his business is counted as his input tax.

Output Tax as defined under Section 2 of the GSTA means tax on any taxable supply

of goods or services made by a taxable person in the course or

furtherance of his business in Malaysia.

REITs

a unit trust which is approved by the SC as REITs or Property Trust

Fund.

DEFINITIONS

(iii)

SME A SME is defined as 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).

1. TAX SYSTEMS AND ADMINISTRATION

1

1.1

Notification of

Change in

Accounting

Period and

Penalty for Non-

compliance

Present The requirement to notify the DG on the change of an accounting period

by a company, limited liability partnership, trust body or co-operative

society is contained in the Public Ruling No. 7/2011 (Notification of

Change in Accounting Period of a Company, Trust Body/ Co-operative

Society) but not in the Act.

Proposed

(I) Notification of change in accounting period

A new subsection 21A(3A) is introduced to provide that a company,

limited liability partnership, trust body or co-operative society shall

notify the DG in the prescribed form of any change in its accounting

period by the following prescribed due date:

First accounting period for

new accounts upon change

Due date to notify the DG

Less than 12 months

30 days before the end of the

new accounting period

More than 12 months

30 days before the end of the

old accounting period

(II) Non-compliance penalties

Where the taxpayer fails to notify the DG on the change of

accounting period by the prescribed due date, it is proposed:

(a) New Section 107C(11B)

Any amount of penalty imposed for failure to pay any tax

instalment or under estimation of tax payable under Section

107C based on the accounting period prior to the new accounts

shall continue to be recoverable.

(b) New Section 112(3A)

Any late filing penalty that has been imposed under Subsection

112(3) based on the accounting period prior to the new accounts

shall continue to be recoverable.

(c) New Section 120(1)(i)

Non-compliance of the notification requirement is an offence,

and the taxpayer shall on conviction be liable to a fine of not less

than RM200 and not more than RM20,000 or to imprisonment

for a term not exceeding 6 months or to both.

Effective

(i) The provision in Items I, II(a) and II(b) are effective from year of

assessment 2019.

(ii) The provision in Item II(c) is effective upon coming into operation of

the Finance (No.2) Act 2017.

1. TAX SYSTEMS AND ADMINISTRATION

2

1.2

Basis Period

for a Year of

Assessment of

Limited

Liability

Partnership in

respect of

Certain

Deduction on

Approved

Donation

Present

Deduction shall be made from the aggregate income of a relevant person on an

approved donation/gift made by him in the basis year pursuant to the following

subsections:-

Subsection Approved donation / gift

44(6)

any gift of money to the Government, a State Government, a

local authority or an institution or organization or an approved

fund

44(6A)

of any gift of artefact, manuscript or painting to the Government

or State Government

44(8)

gift of money made for the provision of library facilities which

are accessible to the public, to public libraries and libraries of

schools and institutions of higher education, not exceeding

RM20,000.

44(11)

any gift of painting to the National Art Gallery or any state art

gallery.

Subsection 44(12) of the Act provides that references to the basis year in relation

to a company, trust body or co-operative society for the above purposes shall

be construed as references to the basis period for the year of assessment of that

company, trust body or co-operative society.

Proposed

Subsection 44(12) be amended to include a limited liability partnership (LLP).

Effective

Upon coming into operation of the Finance (No.2) Act 2017

1.3

Failure to

Furnish

Country-by-

Country

Report

(CbCR)

Present

It is an offence where a person fails to comply with the following requirements

to implement or facilitate the operation of the mutual administrative assistance

arrangement under Section 132B. Penalties for the offence are as follows:

Section Offence Penalty

112A Failure to furnish CbCR. Fine of not less

than RM20,000

and not more than

RM100,000 or to

imprisonment for a

term not exceeding

6 months or to

both.

113A Make an incorrect return, information return

or report, or giving incorrect information.

119B Failure to comply with rules (CbCR, CRS,

FATCA) made under Section 154(1)(c) on

Mutual administrative assistance .

Proposed

The punitive provisions under Section 112A, 113A and Section 119B of the Act

be expanded to include non-compliance of the rules made under Section

154(1)(c) of the Act to implement and facilitate the operation of double taxation

arrangements under Section 132 and tax information exchange arrangements

under Section 132A of the Act.

Effective

Upon coming into operation of the Income Tax (Amendment) Act 2017

2. TAXATION - INDIVIDUALS

3

2.1

Reduction of

Income Tax Rates

for Resident

Individuals

Proposed

The income tax rates of tax resident individuals shall be revised on the

following chargeable income bands.

Chargeable income

Present Proposed Tax

Savings Tax

rate

**Tax

payable

Tax

rate

**Tax

payable

(RM) (%) (RM) (%) (RM) (RM)

0 - 5,000 0 0 0 0 0

5,001 - 20,000 1 *0 1 *0 0

20,001 - 35,000 5 *500 3 *200 300

35,001 - 50,000 10 2,400 8 1,800 600

50,001 - 70,000 16 5,600 14 4,600 1,000

70,001 - 100,000 21 11,900 21 10,900 1,000

100,001 - 250,000 24 47,900 24 46,900 1,000

250,001 - 400,000 24.5 84,650 24.5 83,650 1,000

400,001 - 600,000 25 134,650 25 133,650 1,000

600,001 - 1,000,000 26 238,650 26 237,650 1,000

Above 1,000,000 28 28

*After tax rebate of RM400 for chargeable income up to RM35,000

** Cumulative

Effective

Year of assessment 2018

2.2

Tax Exemption on

Rental Income

from Residential

Homes received by

Resident

Individuals

Present

Rental income received by a resident individual is subject to income tax

under Section 4(d) of the Act.

Proposed

50% income tax exemption is given on rental income received by

Malaysian resident individuals, subject to the following conditions:-

(a) Rental income received does not exceed RM2,000 per month for

each residential home;

(b) The residential home must be rented under a legal tenancy

agreement between the owner and the tenant; and

(c) Tax exemption is given for 3 consecutive years of assessment.

Effective

Years of assessment 2018 to 2020

2.3

Tax Exemption on

Earnings for

Women Returning

to the Workforce

Proposed

Individual income tax exemption is given on employment income up to a

maximum of 12 consecutive months to women who return to the

workforce after a career break of at least 2 years as at 27 October 2017.

The tax exemption is applicable for years of assessment 2018 to 2020.

Effective

Applications submitted to Talent Corporation Malaysia Berhad from 1

January 2018 to 31 December 2019

2. TAXATION - INDIVIDUALS

4

2.4

Extension of Tax

Relief Period on

Savings in Skim

Simpanan

Pendidikan 1

Malaysia

(SSP1M)(formerly

known as Skim

Simpanan

Pendidikan

Nasional)

Present

Tax relief up to RM6,000 is given to a resident individual on his net

savings deposited into SSP1M. The tax relief is applicable for the years

of assessment 2012 to 2017.

Proposed

The above tax relief be extended for another 3 years.

Effective



5

3.1

Deduction of tax on

the Distribution of

Income of a Real

Estate Investment

Trust (REIT) or

Property Trust

Funds (PTF)

Present

Any income which is exempt from tax by virtue of Section 127 shall be

disregarded for the purposes of the Act except for provisions in relation

to deduction of withholding tax under Section 107A, Section 109 and

Section 109B and any tax deduction under Section 107A, 109 or 109B

from any such income shall be refunded under Section 111.

Proposed

Subsection 127(5) of the Act be amended to provide for refund of

withholding tax on income distributed by REIT or PTF under Section

109D to unit holders where the unit holders are exempted from tax.

Effective


3.2

Determining the

Residual

Expenditure of an

Asset which is

Classified as Asset

Held for Sale

Present

Where an asset (qualifying capital expenditure) is classified as asset held

for sale in accordance with generally accepted accounting principles,

such asset is deemed to be disposed in the following basis period

(whether or not the asset is sold).

The residual expenditure of such asset for that following basis period is

determined by –

the total qualifying expenditure incurred by that person,

reduced by an amount of annual allowance which would have been

made to him for that following basis period as if the asset had

been in use in that following basis period for the purpose of

business.

Proposed

Subparagraph 61A (5) under Schedule 3 of the Act be amended to clarify

that where in determining the residual expenditure of the asset which is

classified as asset held for sale, it shall be the qualifying expenditure

reduced by –

(a) any of the initial allowance in relation to that asset for any year of

assessment;

(b) any of the annual allowance in relation to that asset for any year of

assessment; and

(c) an amount of annual allowance which would have been made to that

person for the basis period in which the asset was classified as

held for sale as if the asset had been in use in that basis period for

the purpose of a business.

Effective



6

3.3

Removal of Section

140A(4) (Thin

Capitalization

Provisions)

Present

Thin Capitalization Rules (TCR) was introduced during the 2009 budget,

but its implementation has been deferred until 31 December 2017.

Subsection 140A(4) of the Act contains provisions relating to thin

capitalization that empowers the DG to disallow as a deduction,

excessive interest on financial assistance between associated person.

Proposed

Provisions under Section 140A(4) of the Act relating to thin

capitalization for financial assistance between associated persons is

removed. It is proposed that Earning Stripping Rules (ESR), as advocated

by the OECD be implemented to replace the TCR, to control excessive

deductibility of interest expense on loan between related parties.

Under the ESR, interest deduction on loans between related companies

within the same group will be limited to a ratio as determined by a

country’s tax authority, ranging from 10% to 30% of the company’s

profit before tax either using the Earnings Before Interest and Taxes

(EBIT) or the Earnings Before Interest, Tax, Depreciation, and

Amortization (EBITDA).

Effective

1 January 2018 (Removal of Section 140A(4))

1 January 2019 (Introduction of ESR)

3.4

Determining the

Income which is

Exempt from Tax –

Inconsistencies in

the Definition of

Public Entertainer

Removed

Present

The income of a non-resident individual from an employment exercised

by him in Malaysia is exempted from tax if he satisfied the “not

exceeding 60 days” rules under Paragraph 21, Schedule 6 of the Act.

Pursuant to paragraph 22, Schedule 6 of the Act, such exemption does

not apply to the income from an employment exercised by a non-resident

public entertainer (that is to say, any professional entertainer, artiste,

athlete or other individual who entertains whether in public or private for

profit on stage, radio or television, at a stadium or sports ground, or

otherwise) and no part of that income is paid out of the public funds of

the government of a country outside Malaysia.

Proposed

The description of public entertainer as set out in paragraph 22 Schedule

6 of the Act above (in italics) be deleted and the definition of public

entertainer shall refer to those as defined under Section 2 of the Act.

Effective



7

3.5 Tax Treatment for

Takaful Business -

Extension of Scope

of Deductible

Management

Expenses and

Computation of the

Amount to be

Deducted

Present

Pursuant to Section 60AA subparagraph 9(b)(iii) and 10(b)(iii), the tax

deduction on management expenses for shareholders’ fund of a takaful

operator is restricted to an amount in connection with general takaful

business carried out with the principle of wakalah.

Proposed

I. Section 60AA subparagraph 9(b)(iii) and 10(b)(iii) are respectively

substituted by the following subsections to extend the scope of

deduction on the management expenses as follows:-

Revised section 60AA(9)(b)(iii) and 60AA(10)(b)(iii)

The amount of management expenses incurred by him in that period

in connection with:

A. Wakalah fee receivable in relation to the general fund, inward

retakaful fund, offshore fund or family retakaful fund;

B. Any other fee receivable in relation to the general fund, inward

retakaful fund, offshore fund or family retakaful fund; or

C. Any other fee receivable in relation to an investment fund from

the family fund.

II. A new subsection 60AA(10B) be introduced to provide a formula

for the computation of management expenses to be deducted from

any other fee receivable (in respect of B and C under the above

proposal) as follows:

A x C

B

Where

A : is the total amount of gross income for that period in

respect of any other fee receivable in connection with

the general fund, inward re-takaful fund, offshore fund

or family re-takaful fund or any other fee receivable in

respect of an investment fund from the family fund

excluding the amount of gross income in respect of

wakalah fee;

B : is the total amount of gross income for that period in

respect of any other fee receivable in connection with

the general fund, inward re-takaful fund, offshore fund

or family re-takaful fund or any other fee receivable in

respect of an investment fund from the family fund

excluding the amount of gross income in respect of

wakalah fee for commission; and

C : is the total management expenses incurred.

Effective



8

3.6

Capital Allowance

for

Information and

Communication

Technology (ICT)

Equipment

and Software

Present

Effective from years of assessment 2009 until 2016, expenses incurred in

purchasing ICT equipment and software are eligible for Accelerated

Capital Allowance (ACA). The allowance is fully deductible in the year

of purchase with initial allowance (IA) of 20% and annual allowance

(AA) of 80%.

The expenditure incurred on the development of customized software

comprising consultation fee, licensing fee and incidental fee related to

software development is regarded as non-qualifying expenditure.

Proposed

Item Qualifying Expenditure Effective

from: CA Rates

(i)

Expenditure incurred on the

purchase of ICT equipment and

computer software packages.

Year of

assessment

2017

IA: 20%

AA: 20%

(ii)

Expenditure incurred on the

development of customized

software comprising

consultation fee, licensing fee

and incidental fee related to

software development.

Year of

assessment

2018

4. TAX INCENTIVES

9

4.1

Tax Exemption on

the Green

Sustainable and

Responsible

Investments (Green

SRI) Sukuk Grant

Present

The Securities Commission (SC) provides the Green SRI sukuk grant to

the Green SRI sukuk issuers to finance external review expenditure

incurred up to a maximum amount of RM300,000. Such grant is taxable

in the hands of the recipient.

Proposed

Tax exemption is given to the recipients of the Green SRI sukuk grant.

Effective

Applications received by the SC from 1 January 2018 to 31 December

2020

4.2

Tax Exemption on

Management Fee

Income for

Sustainable and

Responsible

Investment (SRI)

funds

Present

A resident company incorporated in Malaysia that provides management

services of Shariah-compliant funds certified by the SC is exempted from

income tax on the statutory income derived from the business of

providing fund management services to the following:-

(a) foreign investors in Malaysia;

(b) local investors in Malaysia; and

(c) Business Trusts or REITs in Malaysia.

Proposed

Tax exemption be extended to management fee income from management

of conventional and Shariah-complaint SRI fund approved by the SC.

Effective


4.3

Review of Tax

Incentives for

Automation in

Manufacturing

Present

Manufacturing companies are eligible for accelerated capital allowance

(ACA) and Automation Equipment Allowance (AE) on the purchase of

automation equipment (Qualifying expenditure):-

Industries Qualifying expenditure (QE)

High labour intensive

industries (such as rubber,

plastic, wood, and textile

products)

ACA of 100% and AE of 100% on the

first RM4 million qualifying

expenditure incurred from years of

assessment 2015 to 2017.

Others

ACA of 100% and AE of 100% on the

first RM2 million qualifying

expenditure incurred from years of

assessment 2015 to 2020.

Proposed

The above tax incentives for high labour intensive industries be extended

for another 3 years and this allowance is fully claimable within 1 year.

Effective

Applications received by MIDA until 31 December 2020

4. TAX INCENTIVES

10

4.4

Extension of Tax

Incentive for Hiring

the Disabled

Present

Double deduction on the salary paid is given to the employers who

employ disabled persons, certified by the Department of Social Welfare

(JKM).

Proposed

Employers who employ workers affected by accidents/critical illnesses

are eligible for double deduction on condition that the employees are able

to work within their capabilities as certified by The Medical Board of the

Social Security Organization (SOCSO).

Effective


4.5 Extension of Tax

Incentives for Angel

Investors

Present

An angel investor is exempted from income tax on his aggregate income

for an amount equivalent to the value of his investments in ordinary

shares made in an investee company.

The claim of the incentive is applicable to:-

(a) an angel investor—

(i) who is a resident in Malaysia and whose sources of income is

not derived solely from business;

(ii) who has made an application to the Minister on or after 1

January 2013 but not later than 31 December 2017 to make an

investment in an investee company;

(iii) who does not have a parent, including a parent in law, a child,

including a step child, or child adopted in accordance with any

law, a brother or sister, or a grandparent or grandchild, or a

spouse, who makes any investment in the investee company;

(iv) whose investment is for the sole purpose of financing the

activities of the investee company as approved by the Minister;

and

(v) whose investment shall not be more than 30% of the total paid-

up share capital of the investee company; and

(b) an investee company—

(i) incorporated under the Companies Act 1965 and a resident in

Malaysia;

(ii) which at least 51% of its issued ordinary share capital is directly

owned by a shareholder (other than an angel investor) who is a

citizen; and

(iii) which carries on activities as approved by the Minister.

Proposed

The applications period of the tax incentive above be extended for another

3 years.

Effective

Applications submitted to the MOF from 1 January 2018 to 31 December

2020

4. TAX INCENTIVES

11

4.6

Review of Tax

Incentives for

Venture Capital

Present

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 the statutory income derived from the

share of profits from a Venture Capital Company (VCC) on any

investment made by the VCC.

(b) VCC

A VCC which has at least 70% of the funds invested in a Venture

Company (VC) or at least 50% of the funds invested in a VC in the

form of seed capital 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 10 years or the life span of the fund established

for investment in the VC, whichever is shorter.

(c) Investment in a 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.

Proposed

(a) VCMC

The income tax exemption be expanded to include management fees

and performance fees received in managing VCC funds.

(b) VCC

The minimum investment limit of 70% in the form of seed, start-up

and early stage fund in the VC be reduced to 50% and the 50%

balance is allowed for other investments.

(c) 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.

Tax exemption be given for the period of 5 years from the year of

assessment 2018 to year of assessment 2022.

Effective

Applications received by the SC from 1 January 2018 to 31 December

2018.

Definition:-

Seed capital financing – a financing provided by a VCC to a VC for the

purposes of research, assessment and development of an initial concept or

prototype.

4. TAX INCENTIVES

12

4.6

Review of Tax

Incentives for

Venture Capital –

Cont’d

Definition:-

Start-up financing – a financing provided by a VCC to a VC for product

development and initial marketing.

Early stage financing – a financing provided by a VCC to a VC as:-

(i) capital expenditure or working capital to initiate commercialization

of a technology or product,

(ii) additional capital expenditure or additional working capital to

increase production capacity, marketing or product development, or

(iii) an interim financing for the purpose of being listed on the official list

of a stock exchange.

4.7

Tax Incentive for

Transformation to

Industry 4.0

Proposed

To encourage companies to adopt advanced technology, known as

Industry 4.0 which includes the following technology drivers:-

(a) big data analytics;

(b) autonomous robots;

(c) simulation;

(d) industrial internet of things;

(e) cyber security;

(f) horizontal and vertical system integration;

(g) cloud computing;

(h) additive computing;

(i) augmented reality; and

(j) artificial intelligence,

It is proposed that the 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.

Effective

Applications received by MIDA from 1 January 2018 to 31 December

2020

4. TAX INCENTIVES

13

4.8

Extension of Tax

Incentives for

Medical Tourism

Present

A company that provides private healthcare facilities to qualified

healthcare travellers will be given exemption on income equivalent to

ITA of 100% of qualifying capital expenditure for a period of 5 years in

its expansion, modernization and refurbishment undertaking subject to the

conditions that for each year assessment:-

(a) at least 5% of the total patients are qualified healthcare travellers;

and

(b) at least 5% of the company’s gross income is derived from qualified

healthcare travellers.

Eligible companies must be:-

(i) Licensed by the Ministry of Health; and

(ii) Registered with the Malaysian Healthcare Travel Council.

A Qualified healthcare traveller is as follows:-

(i) Malaysia My Second Home participant and his dependents;

(ii) Expatriate holding a Malaysian work permit and his dependents; or

(iii) Non-Malaysian citizen who visits and receives treatment from

private healthcare facilities in Malaysia.

Applications are to be submitted to MIDA by 31 December 2017.

Proposed

The existing incentive is to be extended for another 3 years with revised

conditions that for each year of assessment:-

(a) at least 10% of the total patients are qualified healthcare travellers;

and

(b) at least 10% of the company’s gross income is derived from

qualified healthcare travellers.

Effective

Applications submitted to MIDA from 1 January 2018 to 31 December

2020

4.9

Review of Tax

Incentives for Export

of Private

Healthcare Services

Present

Private healthcare companies exporting healthcare services to foreign

patients either in Malaysia or from Malaysia qualify for tax exemption of

50% on the value of increased exports of services to be set off against

70% of the statutory income for a year of assessment.

Proposed

The percentage of tax exemption be increased to 100% of the value of

increased exports of services to be set off against 70% of the statutory

income for a year of assessment subject to the following conditions:-

(a) At least 10% of the total number of patients receiving private

healthcare services comprise qualified healthcare travellers for each

year of assessment; and

(b) At least 10% of the company’s gross income is derived from

qualified healthcare travellers for each year of assessment.

Effective


4. TAX INCENTIVES

14

4.10

Extension of Tax

Incentives for

Principal Hub (PH)

Present

Income tax exemption is given to a Principal Hub (PH) (a locally

incorporated company that uses Malaysia as a base for conducting its

regional and global businesses and operations to manage, control and

support its key functions) according to 3 tier preferential tax rates of 0%,

5% or 10% based on the certain criteria, among others:-

(i) Minimum paid-up capital of RM2.5 million;

(ii) Minimum annual sales of RM300 million;

(iii) Monitoring and providing services to at least 3 related companies

locating and operating outside of Malaysia;

(iv) Carrying out qualifying services activities including strategic

services such as financial and talent management services; and

(v) Acquire local professionals and local financial services.

For applications received by MIDA from 1 May 2015 to 30 April 2018.

Proposed

The above tax incentives be extended for another 3 years to 31 December

2020.

Effective

Applications received by MIDA from 1 May 2018 to 31 December 2020

4.11

Expansion of the

Scope of Double

Deduction Incentive

for Expenses

Incurred in

Obtaining

Certification for

Quality System and

Standard

Present

The companies registered with the Malaysian Healthcare Travel Council

(MHTC) that provide private healthcare services are given double

deduction on expenses incurred in obtaining certification for quality and

standards from the following 5 approved certification bodies:-

(i) Malaysian Society for Quality in Health – Malaysia;

(ii) Joint Commission International – United States of America;

(iii) CHKS accreditation Unit – United Kingdom;

(iv) The Australian Council on Health Care Standard – Australia; and

(v) Accreditation Canada – Canada.

Proposed

The above tax incentive be extended to companies registered with MHTC

that provides dental and ambulatory healthcare services.

Effective


4. TAX INCENTIVES

15

4.12

Extension of

Incentives for New 4

and 5 Star Hotels

Present

Hotel operators undertaking new investments in 4 and 5 star hotels in

Malaysia are given the following tax incentives:-

(a) Peninsular Malaysia

(i) Pioneer Status (PS) with income tax exemption of 70% of

statutory income for 5 years; or

(ii) Investment Tax Allowance (ITA) of 60% on the qualifying capital

expenditure incurred within a period of 5 years and to be set off

against 70% of the statutory income for each YA.

(b) Sabah and Sarawak

(i) PS with income tax exemption of 100% of statutory income for 5

years; or

(ii) ITA of 100% on the qualifying capital expenditure incurred

within a period of 5 years and to be set off against 100% of the

statutory income for each YA.

The above incentives are available for applications received by MIDA

until 31 December 2018.

Proposed

The above incentives be extended for another 2 years.

Effective

Applications received by MIDA until 31 December 2020

4.13

Extension of Tax

Incentives for Tour

Operating

Companies

Present

Resident tour operators licensed under the Tourism Industry Act 1992 to

carry on a tour operating business are given the following tax incentives

up to the year of assessment 2018 :-

(a) 100% income tax exemption on statutory income derived from group

inclusive tours participated by not less than 750 tourists from outside

Malaysia per year; and

(b) 100% income tax exemption on statutory income derived from

domestic tours participated by not less than 1,500 local tourists per

year.

“Group inclusive tour” means a tour package to or in Malaysia or any

place within Malaysia undertaken by tourists from outside Malaysia,

inclusive of transportation by air, land or sea and accommodation.

“Domestic tour” means a tour package for travel within Malaysia

undertaken by local tourists inclusive of transportation by air, land or sea

and accommodation.

Proposed

The above tax incentives be extended for another 2 years.

Effective



16

5.1

Review of RPGT Rates

for an Executor of the

Estate of a Deceased

Person Who was not a

Citizen and not a

Permanent Resident

Present

The RPGT rates for an executor of the estate of a deceased person

who was not a citizen and not a permanent resident are between 0%

to 30% depending on the holding period of real properties, as

follows:-

Category of disposal Rate of tax

Disposal within 3 years after the date of

acquisition of the chargeable assets

30%

Disposal in the 4th year after the date of

acquisition of the chargeable asset

20%



15%


acquisition of the chargeable asset or thereafter

Nil

Proposed

The RPGT rates on the gains from disposal of real properties for an

executor of the estate of a deceased person who was not a citizen

and not a permanent resident are to be revised as follows:-

Category of disposal Rate of tax

Disposal within 5 years after the date of

acquisition of the chargeable assets

30%



5%

Effective

1 January 2018

5.2

Review of Retention Rate

by Acquirer on Disposal

by Non-Citizen and Non-

Permanent Resident

Present

Section 21B of the RPGTA provides that the acquirer of a real

property or shares in a real property company is required to retain a

sum not exceeding 3% of the total value of the consideration, and

(whether or not that amount is so retained) remit the sum withheld

to the DG within 60 days from the date of disposal.

Proposed

A new Subsection 21B(1A) be introduced that where the disposer

in a disposal referred to the above is not a citizen and not a

permanent resident, the acquirer shall retain a sum not exceeding

7% of the total value of the consideration, and (whether or not that

amount is so retained) remit the sum withheld to the DG within 60

days from the date of disposal.

Effective

1 January 2018


17

5.3

Disposal Price is Deemed

Equal to Acquisition

Price

Present

Pursuant to Schedule 2 Paragraph 3(b) of the RPGTA, the disposal

price shall be deemed equal to the acquisition price on the transfer

of assets between spouses or the transfer of assets owned by an

individual, by his wife or by an individual jointly with his wife or

with a connected person to a company (whether or not resident in

Malaysia) controlled by the individual, by his wife or by the

individual jointly with his wife or with a connected person for a

consideration consisting of shares in the company, or for a

consideration consisting substantially of shares in the company and

the balance of a money payment.

Proposed

A new Paragraph 3(2) is introduced to provide that the above shall

only apply to transfers of assets between spouses or to a company

where it involves an asset owned by a citizen.

Effective

1 January 2018

5.4

RPGT - Conditional

Contracts

Present

Pursuant to Schedule 2 Paragraph 16 of the RPGTA, if a contract

for the disposal of an asset is conditional and the condition is

satisfied, the acquisition and disposal of the asset will be considered

as taking place at the time the contract was made, unless –

(a) The acquisition or disposal requires the approval by the

Government or a State Government or an authority or

committee appointed by the Government or a State

Government, the date of disposal shall be the date of such

approval; or

(b) The approval referred to in subparagraph (a) is conditional the

date of disposal shall be the date when the last of all such

conditions is satisfied.

Proposed

Schedule 2 Paragraph 16 is amended to exclude the approval from

an authority or committee appointed by the Government or a State

Government as highlighted in (a) above.

Effective

1 January 2018

6. STAMP DUTY

18

6.1

Extension of Stamp Duty

Exemption to Revive

Abandoned Housing

Projects

Present

Stamp duty exemption is given for the revival of abandoned

housing projects to the following parties:-

(a) Rescuing contractors who is appointed or approved by the

Minister of Housing and Local Government to carry on

rehabilitation works for an abandoned project in respect of:-

(i) Any loan instrument or loan agreement approved by the

bank and financial institution to finance the abandoned

project; and

(ii) Any instrument of transfer for the purpose of transferring

revived residential property in relation to the abandoned

projects.

(b) Original purchaser that is a purchaser whose name is stated in

the Sale And Purchase Agreement in relation to an abandoned

project in respect of:-

(i) Any loan instrument or loan agreement approved by the

bank and financial institution for the purpose of financing

the revived residential property in relation to the

abandoned project; and

(ii) Any instrument of transfer for the purpose of transferring

the revived residential property in relation to the

abandoned project.

The above exemptions are applicable to instruments executed since

1 January 2013 until 31 December 2017.

Proposed

The above stamp duty exemption be extended for another 3 years.

Effective

Instruments executed up to 31 December 2020

6.2

Stamp Duty Exemption

for Trading of Exchange

Traded Funds (ETF) and

Structured Warrants

(SW)

Present

Stamp duty is charged on contract notes at the rate of RM1.00 for

every RM1,000 and part thereof for trading of shares of listed

companies on Bursa Malaysia subject to a cap of RM200 for each

contract.

Proposed

Exemption of stamp duty be given on contract notes for trading of

ETF and SW by investors.

ETF is an open-ended investment fund listed and traded on a stock

exchange and which invests in a basket of securities.

SW is a security instrument listed on a stock exchange that gives

right to buy or sell the underlying instrument in the future for a

fixed price.

Effective

Contract notes executed from 1 January 2018 to 31 December 2020

7. GOODS & SERVICES TAX

19

7.1

Additional Reading

Materials subject to GST

at Zero Rate

Present

GST (Zero-rated Supply) Order 2014 and GST (Zero-rated Supply)

(Amendment) (No.2) Order 2015 provide for certain newspapers,

journals and periodicals and certain online services with regards to

newspapers, journals and periodicals to be zero-rated.

Proposed The list of zero rated supplies with respect to reading materials be

extended to include magazines, journals, periodicals and comics.

Effective 1 January 2018

7.2

GST Treatment on

Management and

Maintenance Services of

Stratified Residential

Buildings

Present The supply of services of the management and maintenance

including recovery of group insurance cost, assessment tax and quit

rent by the Joint Management Body and Management Corporation

to the owners of a building for residential purposes held under a

strata title is treated as exempt supply under the GST (Exempt

Supply) (Amendment) Order 2015 and 2016.

Proposed The GST exemption on the above supply of services be extended to

housing developers.

Effective

1 January 2018

7.3

Review of the GST

Treatment for Local

Authorities

Present Section 64 of GSTA provides that any supply made by the Local

Authorities in respect of regulatory and enforcement functions is

not subject to GST (out of scope supply).

Local authorities which make taxable supplies other than the above

is required to register under the GSTA 2014 and eligible to claim

input tax credit in respect of its supplies.

Proposed It is proposed that all supplies made by Local Authorities be treated

as supplies not subject to GST (out of scope supply).

As the Local Authorities are no longer required to be registered

under the GSTA 2014 and not eligible to claim input tax credit,

GST relief will be given to Local Authorities on the acquisition of

all goods excluding petroleum, commercial buildings or land and

on the importation of motor cars.

Effective 1 April 2018 or 1 October 2018 as opted by the Local Authorities


20

7.4

GST Relief on

Construction Services for

School Buildings and

Places of Worship

Present Government schools, Government-aided schools and Chinese

independent high schools have been given 50% GST relief on

construction services for the construction of school building

including hall and sport facilities. The GST relief is granted only

for construction projects approved by the respective authorities.

The GST relief is subject to construction contracts signed before 1

April 2015. This date was extended to 31 March 2017.

There is no specific GST relief given for construction services in

respect of places of worship.

Proposed It is proposed that 100% GST relief be given on construction

services for the construction of school buildings and places of

worship financed through public donations.

The GST relief is restricted to construction services for which the

invoice has not been issued and subject to the following conditions:

(a) the approval under Section 44(6) of the Act for their

construction fund has been obtained;

(b) the approvals for development and constructions by Local

Authorities, the Ministry of Education Malaysia or State

Religious Councils (for surau or mosques) have been

obtained;

(c) construction of school building including hall and sport

facilities are directly used for teaching and learning purposes;

(d) the relief does not apply to the purchase of commercial

buildings; and

(e) construction services contract signed on or after 1 April 2017.

Effective Applications submitted to the MOF from 27 October 2017

7.5

GST Relief on the

Importation of Big Ticket

Items

Present

Importations of big ticket items such as aircrafts, ships and oil rigs

by companies in aviation, shipping and oil and gas industries are

subject to GST of 6%.

Proposed It is proposed that companies carrying out activities in aviation,

shipping and oil and gas industries be given relief from paying GST

on the importation of big ticket items. The list of big ticket items

and the terms and conditions of approvals are to be stipulated by

the MOF.



21

7.6

Relief from Payment of

GST on Importation of

Goods under Lease

Agreements from

Designated Areas to

Malaysia

Present Goods under lease agreements removed from a designated area to

Malaysia are subject to GST of 6%.

Proposal It is proposed that the relief from payment of GST be given to

companies involves in the oil and gas industry on the importations

of goods under lease agreements from designated area to Malaysia.

The list of goods and the terms and conditions of approvals are to

be stipulated by the MOF.


7.7

GST Relief on Handling

Services rendered to

Operators of Cruise Ships

Present Loading, unloading, handling services and storage of goods carried

or to be carried in a ship or aircraft in a port by a port operator or an

aircraft operator is determined as zero-rated supply under Second

Schedule of GST (Zero-Rated Supply) Order 2014.

"Ship" is defined under the Item 2, Goods and Services Tax (Zero-

Rated Supply) Order 2014, to include every description of vessel

used in navigation not propelled by oars as provided under the

Merchant Shipping Ordinance 1952 including any vessel owned or

operated by the Government of a foreign state but does not include

any vessel which is designed or adapted for recreation, pleasure or

other than freight transportation or passenger transportation.

Cruise ships are categorised as "ship" used for recreation and

pleasure are not eligible for zero-rated treatment for handling

services provided by sea port operators.

Proposed It is proposed that cruise ship operators are given relief from

payment of GST on handling services provided by sea port

operators in Malaysia.

Effective 1 January 2018 to 31 December 2020

7.8 Second Schedule - Matter

to be treated as neither a

Supply of Goods nor a

Supply of Services

Present

Any contribution made to the pension, provident or social security

fund under any written law shall be treated as neither a supply of

goods nor a supply of services.

Proposed

It is extended to any levy made under the Pembangunan Sumber

Manusia Berhad Act 2001 [Act 612].

Effective



22

7.9

The Merger of Customs

Appeal Tribunal and

Goods and Services Tax

Appeal Tribunal

Present Any person aggrieved by the decision of the DG of Customs on

matters relating to customs and GST may appeal to the Customs

Appeal Tribunal (CAT) and the GST Appeal Tribunal (GSTAT)

separately.

Both tribunals are independent judicial bodies to hear and decide

appeals filed against the decision of the DG of Customs. The CAT

began operating on 1 June 2007 and its authority covers appeals

against all the decision of the DG of Customs under the Customs

Act 1967, the Excise Act 1976, Sales Tax Act 1972 and the Service

Tax Act 1975 except matters relating to compound and seizure of

goods.

GSTAT began operating on 1 April 2015 and its authority covers

appeals against the decision of the DG of Customs relating to GST,

except those stipulated under the Fourth Schedule, Goods and

Services Tax Act 2014.

Proposed Both the tribunals be merged and all appeals relating to the decision

of the DG of Customs to be heard by a single tribunal which is

CAT. Through this merger, taxpayers or companies aggrieved by

the decision of the DG of Customs on customs and GST matters

may submit their appeal to CAT.


7.10

Determining the Value of

Supplies for Cessation of

Liability to be registered –

Supplies to be excluded

Present

In determining the value of any taxable person’s supplies for the

purposes of cessation of liability to be registered, the following

supplies shall be excluded:-

(a) Supplies of goods that are capital assets of the business in the

course or furtherance of which they are supplied or to be

supplied;

(b) Supplies of imported services;

(c) Supplies made in accordance with the Warehousing Scheme

under Section 70;

(d) Supplies made by a person who belongs in a country other

than Malaysia or a recipient, in accordance with the

Approved Toll Manufacturer Scheme under Section 72; or

(e) Supplies made within or between designated areas under

Section 155 except where such supply is subject to an order

under Section 160(1).

Proposed

For the purpose of determining the value of supplies, the exclusion

under Item (a) above will only be applicable if the supplies are due

to cessation of business.

Effective



23

7.11

Power of DG to Raise

Assessment under the

GSTA

Present

Section 43 provides that where any taxable person-

(a) fails to apply for GST registration;

(b) fails to furnish a GST return within the stipulated due date; or

(c) furnishes a return which to the DG appears incomplete or

incorrect,

the DG may assess amount of tax and penalty under Section 41(8)

and to the best of his judgement the amount shall be due and

payable, whether or not that person appeals against the assessment.

The assessment shall not be made more than 6 years from the date

on which the tax was due and payable or from the date on which

the refund was made, as the case may be, except where in the

opinion of the DG any form of fraud or wilful default has been

committed by or on behalf of any person in connection with or in

relation to tax.

Proposed

A new Section 43(1A) is introduced to extend the power of the DG

to make assessment to any person other than a taxable person who:-

(a) fails to furnish a declaration under Section 42; or

(b) furnishes a declaration which to the DG appears incomplete or

incorrect.

Effective


2017 – SELECTED TAX CASES AND DECISIONS

24

SPECIAL COMMISSIONERS OF INCOME TAX

Case Issue / Decision In favor of

DHTI Sdn Bhd v Ketua

Pengarah Hasil Dalam

Negeri (2017) MSTC 10058

The taxpayer was entitled to claim capital allowance on

the capital expenditure incurred on the telecommunication

towers. The telecommunication towers indeed functioned

as the apparatus for the taxpayer’s business and not

merely a place of business.

Taxpayer

HIGH COURT


Ketua Pengarah Hasil Dalam

Negeri v Kualiti Alam Sdn

Bhd (2017) MSTC 30139

The DGIR was correct in rejecting the reinvestment

allowance claims as the taxpayer did not manufacture or

process any product that had value to be sold, and

therefore the investments had not been made in

connection with a “qualifying project” within the meaning

of paragraph 8 of the Schedule 7A of the Act.

Tax

authorities


Negeri v United Malacca

Berhad (2017) MSTC 30140

The late payment charge that had been paid by the Land

Administrator to the taxpayer following a compulsory

acquisition of the taxpayer’s land was capital in nature.

The reimbursement of retrenchment benefits paid by the

taxpayer to its former employees who had to be made

redundant as a consequence of the compulsory acquisition

was not subject to income tax.

Taxpayer

Sastep Sdn Bhd v Ketua

Pengarah Hasil Dalam

Negeri (2017) MSTC 30143

The taxpayer had failed to exhibit any documents to

establish the equipment rental transactions with the debtor

which was a related party. It also failed to take action to

recover the debts and to repossess the equipment. The

taxpayer only took legal action against the debtor after it

was time barred. The DGIR was right in disallowing the

claim for bad debts and raise additional assessment plus

penalty of 45% on the basis of incorrect return.

Tax

authorities

Chantika Kelang Beras Sdn

Bhd v Ketua Pengarah Hasil

Dalam Negeri (2017) MSTC

30145

Both High Court and the Special Commissioners found

that despite the word “subsidy” used in the Ministry of

Agriculture’s document to the taxpayer, the real character

of the payment received was compensation to cover the

costs for having to sell paddy seedlings and ST15 rice at

lower prices than the market and hence the income tax

exemption given on grant and subsidy received from the

Federal or the State Government is not applicable on the

payment received.

(The Court of Appeal allowed the Taxpayer’s appeal.

There is no ground of judgment made available by the

Court of Appeal.)

Tax

authorities

2017 – SELECTED TAX CASES AND DECISIONS

25

HIGH COURT



Negeri v Rapid Growth

Technology Sdn Bhd (2017)

MSTC 30148

Following the successful claim of reinvestment allowance

(RA) by other taxpayers for non-production area, the

taxpayer submitted an appeal against its own assessment

(which was made based on the prevailing public ruling)

under Section 131 of the Act for review of its RA claim.

The taxpayer is estopped by Section 131(4) of the Act

from seeking relief for error or mistake as it did not

challenge the interpretation of the Act in the then

prevailing public ruling.

Tax

authorities

COURT OF APPEAL



Negeri v Mudah.My Sdn

Bhd (2017) MSTC 30137

It was evident that the payments made by the taxpayer to

the non-resident companies were for the “right to use”,

thus, falling very well within the scope of the definition of

“royalty” under Section 2 of the Act and accordingly,

were subject to withholding taxes.

Tax

authorities

Society of La Salle Brothers

v Ketua Pengarah Hasil

Dalam Negeri (2017) MSTC

30138

The decision of the DGIR in issuing the notices of

assessment was illegal as it has failed to take into account

the taxpayer’s vested right under the 1947 Ordinance

which has not been shown to have been impaired by the

amendments effected to the Act. The taxpayer continues

to be entitled to the tax exemption.

Taxpayer

FEDERAL COURT


Positive Vision Labuan

Limited v Ketua Pengarah

Hasil Dalam Negeri & Other

Appeals (2017) MSTC

30136

A taxpayer who has made an irrevocable election to be

taxed under the Act, would only not be entitled to enjoy

the benefit as provided under the Income Tax (Exemption)

Order (No. 22) Order 2007 from the date of its election.

Taxpayer

Kerajaan Malaysia v Mudek

Sdn Bhd (2017) MSTC

30149

A taxpayer who was aggrieved of the RPGT assessment

should have lodged an appeal to the Special

Commissioners. On the service of notice of assessment on

a person, the RPGT assessed is payable, whether or not

the person appeals against the assessment, and can be

recovered by the Government by civil proceedings. On

such proceedings, the court has no power to entertain any

plea that the amount recoverable is excessive, incorrectly

assessed, under appeal or incorrectly increased.

Tax

authorities

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