dfk international is a top 10 international association of … · 2019-11-06 · 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 interests in more than one country for over 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 practice 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 2019

220 419 92 $1.303bn MEMBER FIRMS MEMBER OFFICES COUNTRIES MEMBER FEE INCOME

Proud recipient of the IAB 2015 Firm of the Year Award

FOREWORD

The Budget 2020 were tabled in Parliament on 11 October 2019 by the Minister of Finance, YB Tuan Lim Guan Eng.

With the theme “Driving Growth and Equitable Outcomes Towards Shared Prosperity”, the 2020 Budget outlined 4 main thrusts:-

1. Driving economic growth in the new economy and digital era; 2. Investing in Malaysians – levelling up human capital; 3. Creating a united, inclusive and equitable society; and 4. Revitalisation of public institutions and finances.

In line with the above objectives, various measures and proposals have been put forward. Some of the notable tax measures are as follows:-

❖ Personal Income Tax

Some of the changes include:-

(a) Increasing the tax rate on chargeable income of resident individual in excess of RM2 million and non-resident individuals from 28% to 30%.

(b) The scope of relief on medical expenses is expanded to include cost of fertility treatment incurred by married couples up to RM6,000.

(c) The tax exemption on employment income for women returning to work after career break is extended to 31 December 2023.

❖ Corporate tax

(a) To strengthen the role of SMEs and encourage more people into businesses, it has been proposed that the amount of chargeable income of SMEs subjected to the reduced tax rate of 17% be increased from RM500,000 to RM600,000. However, the preferential rate of 17% will only be applicable to SME having a gross income of not exceeding RM50 million from its business sources.

(b) Technology based companies and small and medium enterprises that intend to list on the ACE or LEAP market can claim tax deductions on certain listing costs up to RM1.5 million.

(c) Various existing tax incentives in the form of tax exemption, tax allowance or tax deduction were extended or expanded. These includes companies undertaking qualifying green activities, entities promoting and organising conferences in Malaysia, angel investors, venture capital industry and companies participating in the National Dual Training Scheme for Industry 4WRD.

(d) Electrical and electronic (E&E) companies which have exhausted the 15 years to claim RA is now allow to apply to MIDA for further ITA of 50% on qualifying expenditure incurred for a period of 5 years.

❖ Real Property Gains Tax (RPGT) and Stamp Duty

Key changes to RPGT and stamp duty include:-

(a) The RPGT rates on the disposal of properties by companies not incorporated in Malaysia will be amended where for disposal of property within 5 years from acquisition date, it will be at 30% and disposal from the 6th year onwards will be at 10%.

(b) Stamp duty remission of 50% on transfer of property by way of love and affection is only applicable to Malaysian citizens.

❖ Tax Systems and Administration

The following are notable amendments:-

(a) An application for extension of time to file an appeal (Form N) against an assessment is now restricted to 7 years after the expiration of the period to file an appeal.

(b) The current late payment penalty of 5% imposed on the amount of unpaid taxes arising from assessments after the expiration of 60 days from the stipulated due dates will no longer be imposed.

❖ Sales and Services Tax

(a) Introduction of the Approved Major Exporter Scheme to allow exporter to seek exemption on the payment of sales tax on importation of goods that are to be re-exported.

(b) Companies in a group that provides taxable services to third party that does not exceed 5% (previously not allowed) will continue to enjoy group relief facility on service tax exemption in respect of certain taxable services provided between companies in a group.

With the enactment of the Service Tax (Amendment) Act 2019 on 9 July 2019, the service tax on digital services provided by Foreign service provider has now been regulated. The foreign service provider who provides digital services outside Malaysia (subject to turnover threshold being met) will be required to register with the RMCD and charge service tax to consumers in Malaysia similar to those of local registered service providers.

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)

1. TAX SYSTEMS AND ADMINISTRATION

1.1 Effective Date for Tax Rate for Labuan Trading Activity 1

1.2 Gift of Money to Religious Authority and Public University 1

1.3 Gift of Money / Contribution In Kind 2

1.4 Review of Penalty Imposed on Unpaid Taxes 2

1.5 Review of Penalty Imposed on Submission of Amended Return 2

1.6 Lifting of Time Bar for Making an Assessment in Consequence to a Mutual Agreement Procedure

3

1.7 Extension of Time for Appeal under Section 100(1) 3

1.8 Recovery from Persons Leaving Malaysia under Section 104 3

2. TAXATION - INDIVIDUALS

2.1 Review of Income Tax Rate for Individuals 4

2.2 Increase in Limit of Tax Relief for Fees Paid to Childcare Centres and Kindergartens

4

2.3 Deduction of Tax from Income Derived from Withdrawal of a Deferred Annuity or Private Retirement Scheme (PRS)

4

2.4 Expansion of Scope for Relief of Medical Expenses 5

2.5 Tax Relief for Individual Performing Umrah and Pilgrimage 5

2.6 Extension of Tax Incentive for Women Returning to Work After Career Break 6

3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES

3.1 Review of Capital Allowance for Small Value Assets (SVA) 7

3.2 Review of Income Tax Rate for Small and Medium Enterprise (SME) 7

3.3 Tax Deduction on Listing Costs in Bursa Malaysia 7

3.4 Tax Treatment for Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) Loan Paid by Employers

8

3.5 Expanding the Scope of Tax Deduction for Community Projects 8

3.6 Tax Deduction for Sponsoring Arts, Cultural or Heritage Activity 9

3.7 Review of Tax Treatment for Expenses Incurred on Secretarial Fees and Tax Filing Fees

9

CONTENT

Page

4. TAX INCENTIVES

4.1 Review Incentive for Electrical and Electronic Industry 10

4.2 Tax Incentive for Intellectual Property Development Activity 10

4.3 Review of Green Technology Incentive 11

4.4 Tax Incentive for the Purchase of Tourism Vehicles 11

4.5 Review of Tax Incentive for Organising Conferences in Malaysia 12

4.6 Tax Incentive for Organising Arts, Cultural, Sports and Recreational Activities in Malaysia

12

4.7 Extension of Tax Incentive for Company Participating in National Dual Training Scheme

12

4.8 Expansion of Scope of Tax Incentives for Tourism Projects 13

4.9 Extension of Tax Treatment for Real Estate Investment Trusts (REITs) 13

4.10 Review of Tax Incentives for Automation 14

4.11 Extension of Tax Incentive on Issuance of Sustainable and Responsible Investments Sukuk

14

4.12 Extension of Tax Incentive for Issuance of Sukuk Wakalah 15

4.13 Extension of Tax Exemption on Management Fee Income for Sustainable and Responsible Investment Funds and Shariah-Compliant Fund

15

4.14 Extension of Tax Incentive for Venture Capital 16

4.15 Expansion of Tax Incentive for Structured Internship Programme 17

4.16 Extension of Tax Incentive for Angel Investor 18

5. REAL PROPERTY GAINS TAX

5.1 Review of Real Property Gains Tax (RPGT) Rates for Companies Not

Incorporated in Malaysia 19

5.2 Acquisition Price of Property Acquired Prior to 1 January 2013 20

5.3 Review of Retention Rate by Acquirer on Disposal by Companies Not Incorporated in Malaysia

20

6. STAMP DUTY

6.1 Stamp Duty Exemption on Rent-To-Own Scheme 21

6.2 Stamp Duty on Foreign Currency Loan Agreement 21

6.3 Stamp Duty Remission for Transfer of Property by Way of Love and Affection 22

CONTENT

Page

7. INDIRECT TAX

7.1 Exemption of Entertainment Duty for Stage Performance 23

7.2 Review of Export Duty Rate on Crude Palm Oil 23

7.3 Introduction of Approved Major Exporter Scheme Under The Sales Tax Act

2018 24

7.4 Improvement on Group Relief Facility under Service Tax 25

7.5 Service Tax Exemption on Provision of Training and Coaching Services for

Disabled Person 25

8. SERVICE TAX ON DIGITAL SERVICES

8.1 Introduction, Definition and Scope of Digital service 26-28

ABBREVIATIONS

(i)

Act Income Tax Act 1967

ACA Accelerated Capital Allowance

AE Automation Equipment Allowance

CA Capital Allowance

DG Director General

DTA Double Taxation Arrangement

GST Goods and Services Tax

GSTA Goods and Services Tax Act 2014

IRB Inland Revenue Board

ITA Investment Tax Allowance

LBATA Labuan Business Activity Tax Act 1990

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

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

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)

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 resident and 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

1.1 Effective Date for Tax Rate for Labuan Trading Activity

Present A Labuan entity carrying on Labuan trading activity is taxed at 3% of its chargeable profits as reflected in the audited accounts. The commencement date for the removal of the election to be taxed at RM20,000 is 1 January 2019. Proposed The removal of the election to be taxed at RM20,000 has been clarified to commence from YA 2020 to avoid confusion.

1.2

Gift of Money to Religious Authority and Public University

Present There is no specific tax treatment on cash wakaf and endowment contribution. Proposed 1. The scope of tax deduction be expanded to allow a deduction equal to

any gift of money in the form of :-

(a) wakaf made to any appropriate religious authority established under any written law, body established by that appropriate religious authority or public university allowed by that appropriate religious authority to receive wakaf; or

(b) endowment made to a public university. *

*(The “public university” means a higher educational institution having the status of a University established under the Universities and University Colleges Act 1971 and the Universiti Teknologi MARA established under the Universiti Teknologi MARA Act 1976)

Provided that — (a) the wakaf or endowment is made for the purpose of achieving

the objective of establishment of the appropriate religious authority, body or public university;

(b) the appropriate religious authority, body or public university is approved by the DG; and

(c) the amount to be deducted shall not exceed the amount of 10% of the aggregate income of that person in the relevant year together with other gifts in aggregate made pursuant to Section 44(6), (11B) and (11C).

2. Any wakaf or endowment received including any income derived

therefrom of the above mentioned religious authorities / bodies and public university be exempted from income tax (amendment to Schedule 6). An appropriate religious authority, body or public university who is aggrieved by the DG’s decision on its application for approval may appeal to the Minister of Finance within 30 days after being informed of that decision.

Effective YA 2020.


2

1.3

Gift of Money / Contribution In Kind

Present The amount to be deducted from the aggregate income of a person in respect of any gift of money made to approved institutions, organisations or funds under Section 44(6), gift of money or contribution in kind to sports activity under Section 44(11B), or project of national interest under Section 44(11C) in aggregate shall not exceed:- (a) in the case of a taxpayer other than a company, 7% of its aggregate

income in the relevant year; or (b) in the case of a company, 10% of its aggregate income in the relevant

year. Proposed The tax deduction limit for taxpayers other than company be increased from 7% to 10% of aggregate income. Effective YA 2020.

1.4

Review of Penalty Imposed on Unpaid Taxes

Present Any balance of tax due arising from assessments but unpaid after the stipulated due dates will be increased by a rate of 10%. Any balance remaining unpaid upon the expiration of 60 days from the stipulated due date be increased by a rate of 5% on the amount unpaid. Proposed The rate of increase in tax of 5% imposed on the amount unpaid after the expiration of 60 days above shall no longer be imposed (amendments to Section 103). Effective 1 January 2020.

1.5

Review of Penalty Imposed on Submission of Amended Return

Present Pursuant to Section 77B(4), an increase of tax will be imposed on any tax or additional tax arising from an amended return (to make good of any understatement of tax payable):-

Item Date of submission of the amended tax return Penalty rate (a) Within 60 days after the statutory filing

deadline 10%

(b) After the 60 days period but not later than 6 months from the statutory filing deadline

10% + further 5%

Proposed The tax or additional tax payable pursuant to an amended return will only be increased by a sum equal to 10% of such tax or additional tax. The additional tax increase of 5% for an amended return furnished after 60 days will no longer be imposed. Effective 1 January 2020.


3

1.6

Lifting of Time Bar for Making an Assessment in Consequence to a Mutual Agreement Procedure

Present The DG have a time period of within 5 years (or 7 years in transfer pricing cases) to raise assessment or additional assessment in relation to mutual agreement procedure in double taxation arrangement. Proposed A new Section 91(7) be introduced where the DG may at any time (no time bar) make an assessment or additional assessment in consequence of mutual agreement procedure in double taxation arrangement under Section 132. Effective Upon coming into operation of the Finance Act 2019.

1.7

Extension of Time for Appeal under Section 100(1)

Present Under Section 99(1), a person who is making an appeal against an assessment has to submit the appeal (completed Form Q) for each year of assessment not later than 30 days after the notice of assessment is served. Under Section 100(1), if any Form Q has not been submitted within the specified period, an application for extension of time for appeal can be made by way of written application (Form N). There is no time limit imposed for the submission of Form N. Proposed An application for extension of time (Form N) under Section 100(1) must be made within 7 years after the expiration of the period to make an appeal. Effective YA 2020.

1.8

Recovery from Persons Leaving Malaysia under Section 104

Present The DG may prevent any person (including a director as defined under Section 75A) from leaving Malaysia where he is of the opinion that the person is about or likely to leave Malaysia without settling any tax payable by issuing a certificate containing particulars of the tax, sums and debts payable by that person to any Commissioner of Police or Director of Immigration. Proposed Circumstances where the DG may prevent a person from leaving Malaysia, is extended to include cases where a person has not paid the increase in tax under Section 107(C)(10A) [For the failure by a Company, trust body or co-operative society to submit an estimate of tax payable]. Effective Upon coming into operation of the Finance Act 2019.

2. TAXATION – INDIVIDUALS

4

2.1

Review of Income Tax Rate for Individuals

Revision in chargeable income band and tax rate of resident individuals is proposed as follows:-

Chargeable income Tax rate Net

change Present Proposed (RM) (%) (%) (%)

1 – 5,000 0 0 - 5,001 – 20,000 1 1 -

20,001 – 35,000 3 3 - 35,001 – 50,000 8 8 - 50,001 – 70,000 14 14 -

70,001 – 100,000 21 21 - 100,001 – 250,000 24 24 - 250,001 – 400,000 24.5 24.5 - 400,001 – 600,000 25 25 -

600,001 – 1,000,000 26 26 - 1,000,000 – 2,000,000 28 28 -

>2,000,000 28 30 2% The income tax rate for non-resident individuals be revised from 28% to 30%. Effective YA 2020.

2.2 Increase in Limit of

Tax Relief for Fees Paid to Childcare Centres and Kindergartens

Present Section 46(1)(r) provides that a relief up to RM1,000 is given to individuals who enrolled their children aged up to 6 years old in childcare centres or kindergartens registered with the Department of Social Welfare or Ministry of Education. The relief is given either to the husband or wife should they elect to be separately assessed. Proposed The tax relief be increased from RM1,000 to RM2,000 for a YA. Effective YA 2020.

2.3 Deduction of Tax

from Income Derived from Withdrawal of a Deferred Annuity or Private Retirement Scheme (PRS)

Present Income derived from withdrawal of a deferred annuity and PRS due to permanent total disablement, serious disease and mental disability, death or permanently leaving Malaysia before reaching 55 years old is exempted from the payment of WHT of 8%. Proposed Income derived from withdrawal for the purposes of healthcare or housing (which is in compliance with the criteria as set out in the relevant guidelines of the SC) are accorded the same exemption. Effective 1 January 2020.


5

2.4 Expansion of Scope for Relief of Medical Expenses

Present Section 46(1)(g) provides that a relief up to RM6,000 is given on medical expenses incurred on serious diseases on self, spouse or child. The claim must be supported with receipts and evidenced by certification of a registered medical practitioner. Proposed The above income tax relief on medical expenses be expanded to include the cost of fertility treatment incurred by married couples. “Fertility treatment” means intrauterine insemination or in vitro fertilization treatment or any other fertility treatment. Effective YA 2020.

2.5 Tax Relief for

Individual Performing Umrah and Pilgrimage

Present Effective from 1 September 2019, a departure levy is imposed on outbound air travellers as follows:-

Flight class ASEAN Other than

ASEAN countries

Economy Class RM8 RM20

Other than economy class RM50 RM150

Proposed An individual can claim an income tax rebate equivalent to the amount of the departure levy paid by him for performing Umrah or other religious pilgrimage. The rebate can be claimed twice in a lifetime and shall not be granted in respect of departure levy paid for purpose of performing hajj. The claim shall be evidenced with proof of boarding pass and — (a) Umrah visa issued by the embassy of the Kingdom of Saudi Arabia; or (b) In the case of other religious pilgrimage, a written verification by a

religious body recognised by the Committee for the Promotion of Inter Religious Understanding and Harmony Among Adherents, Department of National Unity and Integration, Prime Minister’s Department.

Effective YA 2019.


6

2.6 Extension of Tax Incentive for Women Returning to Work After Career Break

Present An approved individual is exempted from payment of income tax in respect of her gross income derived from an employment for a period not exceeding 12 consecutive months. The approved individual is a woman:- (a) who is a Malaysian citizen residing in Malaysia; (b) who has ceased and has not derived any employment income for a

continuous period of at least 24 months prior to or as at 27 October 2017;

(c) who has at least 3 years of experience prior to the cessation of employment;

(d) who has not exceeded the age of 58 years on the date of application; (e) who has signed a full time employment contract in Malaysia with a

qualifying employer for a period of at least 24 months; (f) who has worked for at least 12 consecutive months from the

employment contract period with the same qualifying employer and the period of that employment is between 27 October 2017 to 31 December 2020;

(g) whose gross income from an employment contract is at least RM5,000 a month; and

(h) whose application has been approved.

Qualifying employer means any person excluding — (a) a company which is controlled, either directly or indirectly, by the

approved individual; (b) a sole proprietorship; or (c) a relative of the approved individual who is a parent (including

parent in law), a child (including step child or child adopted in accordance with any law), a brother or sister, or a grandparent or grandchild, or a spouse.

The tax exemption is effective from the YAs 2018 to 2020 and the applications shall be made to the Minister through Talent Corporation Malaysia Berhad (TalentCorp) from 1 January 2018 to 31 December 2019. Proposed The existing tax exemption be extended to include application received by TalentCorp from 1 January 2020 to 31 December 2023. In addition, a monthly salary incentive of RM500 be given for a period of 2 years to women (aged between 30 to 50) who return to the workforce. The qualifying employer is also be given a monthly incentive of RM300 for a period of 2 years.

3. TAXATION – COMPANIES & UNCORPORATED BUSINESSES

7

3.1

Review of Special Allowances for Small Value Assets (SVA)

Present Assets with value not exceeding RM1,300 each (SVA) are eligible for special allowance of 100%, subject to a maximum claim of RM13,000 in a YA. There is no limit for SMEs. Proposed (a) The value of each SVA be increased from RM1,300 to RM2,000 and

the limit of claim (applicable to non-SME) be increased from RM13,000 to RM20,000 in a YA.

(b) SMEs will continue be exempted from the new limit imposed of

RM20,000 provided that its gross income from all of its business sources does not exceed RM50 million.

Effective YA 2020.

3.2 Review of Income

Tax Rate for Small and Medium Enterprise (SME)

1. The amount of chargeable income of SMEs subject to the reduced rate of 17% be increased as follows:-

Chargeable Income Income Tax

Rate % Present Proposed Up to RM500,000 Up to RM600,000 17

Exceeding RM500,000

Exceeding RM600,000

24

2. Only companies with paid up capital or LLP with capital contribution

up to RM2.5 million and having a gross income of not exceeding RM50 million from all of its business sources are eligible for the above preferential tax rate of 17%.

Effective YA 2020.

3.3

Tax Deduction on Listing Costs in Bursa Malaysia

Present Expenses incurred for listing of a company on Bursa Malaysia is not eligible for tax deduction. Proposed Tax deduction up to RM1.5 million be given to technology-based companies and Small and Medium Enterprises on the cost of listing in the Access, Certainty, Efficiency (ACE) Market and Leading Entrepreneur Accelerator Platform (LEAP) Market. The listing costs eligible for deduction are as below:- (a) fees to authorities; (b) professional fees; and (c) underwriting, placement and brokerage fees. Effective YAs 2020 to 2022.


8

3.4

Tax Treatment for Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) Loan Paid by Employers

Present A. Employer

An employer with sources of income from a registered business is eligible for tax deduction on the amount of educational loan paid from 1 January 2019 to 31 December 2019 on behalf of his Malaysian employee to PTPTN. The deduction is subject to the following conditions:- (a) the employer shall not impose any payment to the employee as

a consideration for the payment of educational loan made by the employer to the PTPTN;

(b) the employer and the employee are not the same person; (c) the employee is employed on a full-time basis; and (d) the employee is not a relative of the employer, that is:

(i) a spouse; (ii) a parent, including a step parent or a parent in law; (iii) a child, including a step child or a child adopted in

accordance with any law; (iv) a brother or a sister, including a step brother or a step

sister; or (v) a grandparent or a grandchild, including a step grandparent

or a step grandchild.

B. Employee The loan repayment made on behalf by his employer is treated as perquisite to the employee and is exempted from his personal income tax.

Proposed The tax incentive above be extended for another 2 years. Effective For repayments made from 1 January 2020 to 31 December 2021.

3.5 Expanding the

Scope of Tax Deduction for Community Projects

Present Expenses incurred by businesses on the provision of services, public amenities and contributions to a charity or community project pertaining to education, health, housing, conservation or preservation of environment, enhancement of income of the poor, infrastructure and information and communication technology, approved by the Minister of Finance are eligible for tax deduction. Proposed The scope of charity or community projects be expanded to include maintenance of a building designated as a heritage site by the Commissioner of Heritage under the National Heritage Act 2005. Effective YA 2020.


9

3.6 Tax Deduction for Sponsoring Arts, Cultural or Heritage Activity

Present The amount of tax deduction allowed on expenditure incurred for sponsoring any arts, cultural or heritage activity in aggregate shall not exceed RM700,000 (limited to RM300,000 in respect of sponsoring foreign arts, cultural on heritage activity). Proposed The limit of tax deduction allowed be increased from RM700,000 to RM1,000,000. The maximum amount for sponsoring foreign arts, cultural on heritage activity remains at RM300,000. Effective YA 2020.

3.7 Review of Tax

Treatment for Expenses Incurred on Secretarial Fees and Tax Filing Fees

Present Tax deduction is given for secretarial fees and tax filing fees up to RM5,000 and RM10,000 respectively for each YA. Proposed The tax deduction limit for secretarial fees and tax filing fees be combined and allowed up to RM15,000 for each YA. Effective YA 2020.

4. TAX INCENTIVES

10

4.1

Review Incentive for Electrical and Electronic Industry

Present Electrical and electronic (E&E) companies engaged in manufacturing activities are eligible for the following tax incentives:- (a) Pioneer Status or Investment Tax Allowance under the Promotion of

Investment Act 1986; or

(b) Reinvestment Allowance (RA) for 15 consecutive YAs for qualifying capital expenditure incurred on modernisation, expansion, diversification and automation. Companies that have exhausted its eligible period of 15 years are eligible for a special RA claim on qualifying expenditure from YAs 2016 to 2018.

Proposed E&E companies which have exhausted the 15 years to claim RA be given Investment Tax Allowance of 50% on qualifying capital expenditure incurred within a period of 5 years. This allowance can be set-off against 50% of statutory income for each YA. Effective Applications received by the MIDA from 1 January 2020 to 31 December 2021.

4.2

Tax Incentive for Intellectual Property Development Activity

Present Tax incentives provided for research and development (R&D) activities include:- (a) double deduction on in-house R&D expenditure approved by the IRB; (b) double deduction on R&D contributions to approved research

institutions or expenditure for R&D services obtained from approved institutions or research companies;

(c) tax deduction for cost of acquisition of proprietary rights; (d) income tax exemption for companies that commercialise resource

based and non-resource-based R&D findings; and (e) income tax exemption for R&D contract companies that provide R&D

services. Proposed The intellectual property development activities in Malaysia be given income tax exemption of 100% up to 10 years on qualifying intellectual property income derived from patent and copyright software of qualifying activities. The Modified Nexus Approach will be adopted to ensure that only income derived from intellectual property developed in Malaysia is eligible for this tax incentive. Effective Applications received by the MIDA from 1 January 2020 to 31 December 2022.

4. TAX INCENTIVES

11

4.3 Review of Green Technology Incentive

Present Tax incentives are available for companies undertaking qualifying green activities as follows:- (a) Green Investment Tax Allowance (GITA)

Investment Tax Allowance (ITA) of 100% on capital expenditure for qualifying green activities for the period until 31 December 2020. This allowance can be set-off against up to 70% of statutory income.

(b) Green Income Tax Exemption (GITE)

Income tax exemption of 100% of statutory income for qualifying green services activities for a period until YA 2020.

Proposed (a) GITA

ITA of 100% on capital expenditure be extended for a period of 3 years. This allowance can be set-off against up to 70% of statutory income.

(b) GITE

(i) Tax incentive be extended for a period of 3 YAs but the tax exemption be given for 70% of statutory income.

(ii) New tax incentive in the form of income tax exemption of 70% of statutory income for a period up to 10 YAs is given to solar leasing activities which are certified by Sustainable Energy Development Authority (SEDA).

Effective Item (a): Applications received by the MIDA until 31 December 2023. Item (b): Applications received by the MIDA from 1 January 2020 to 31 December 2023.

4.4

Tax Incentive for the Purchase of Tourism Vehicles

Present No incentive exists currently. Proposed In conjunction with Visit Malaysia Year 2020, new incentive proposals be given to licensed tour operators as follows:- (a) ACA on expenditure incurred on the purchase of new locally

assembled excursion bus with initial allowance of 20% and annual allowance of 40% to be fully claimed within 2 years; and

(b) excise duty exemption of 50% on the purchase of new locally assembled vehicles used as tourism vehicles.

Effective Item (a): YAs 2020 to 2021. Item (b): Applications received by the MOF from 1 January 2020 to 31 December 2021.

4. TAX INCENTIVES

12

4.5 Review of Tax Incentive for Organising Conferences in Malaysia

Present A company incorporated under the Companies Act 2016, or an association or organisation registered under the Societies Act 1966 performing the duties of promoting and organising conferences held in Malaysia including the arranging of accommodation, tours and sightseeing for foreign participants are eligible for income tax exemption of 100% of its statutory income subject to the organiser bringing in at least 500 foreign participants annually. Proposed In conjunction with Visit Malaysia Year 2020, income tax exemption of 100% of statutory income be extended to include any entities hosting international conferences in Malaysia whose main activities are other than promoting and organising conferences subject to the organiser bringing in at least 500 foreign participants annually. Effective YAs 2020 to 2025.

4.6 Tax Incentive for

Organising Arts, Cultural, Sports and Recreational Activities in Malaysia

Present No incentive exists currently. Proposed To attract foreign tourists in conjunction with Visit Malaysia Year 2020, income tax exemption of 50% be given on statutory income of the company that organises:- (a) any arts and cultural activities approved by Ministry of Tourism, Arts

and Culture; and (b) international sports and recreational competitions approved by

Ministry of Youth and Sports. Effective YAs 2020 to 2022.

4.7 Extension of Tax

Incentive for Company Participating in National Dual Training Scheme

Present Double deduction is given on expenses incurred by companies participating in the National Dual Training Scheme for Industry4WRD programmes approved by the Ministry of Human Resources (MOHR). This incentive is meant for programmes approved by the MOHR from 1 January 2019 until 31 December 2019. Proposed The above double deduction be extended for another 2 years. Effective Programmes approved by the MOHR from 1 January 2020 to 31 December 2021.

4. TAX INCENTIVES

13

4.8 Expansion of Scope of Tax Incentives for Tourism Projects

Present A company that undertakes new investment as well as reinvestment on expansion and modernisation of tourism project including theme park, holiday camp, recreational project and convention centre is eligible for tax incentives as follows:- (a) Pioneer Status with tax exemption of 70% of statutory income for a

period of 5 years; or (b) Investment Tax Allowance (ITA) of 60% on the qualifying capital

expenditure incurred within 5 years. This allowance can be set-off against up to 70% of statutory income for each year of assessment.

Proposed (a) The above incentives be extended to new investment in integrated

tourism and sports tourism projects.

(b) It is further proposed the new investment for international theme park be given tax incentives as follows:- (i) Pioneer Status with tax exemption of 100% of statutory income

for 5 years; or (ii) ITA of 100% on the qualifying capital expenditure incurred

within 5 years. This allowance can be set-off against 70% of statutory income.

Effective Applications received by the MIDA from 1 January 2020.


Treatment for Real Estate Investment Trusts (REITs)

Present Investors in REITs are subject to the following tax treatment:- (a) resident corporate investors receiving profit distribution from REITs

listed on Bursa Malaysia are subject to current corporate tax rate; (b) non-resident corporate investors receiving profit distribution from

REITs listed on Bursa Malaysia are subject to a final WHT at the rate of 24%;

(c) foreign institutional investors (pension funds and collective investment funds) receiving profit distribution from REITs listed on Bursa Malaysia are subject to final 10% WHT from the YAs 2009 to 2019; and

(d) non-corporate investors including resident and non-resident individuals and other local entities receiving profit distribution from REITs listed on Bursa Malaysia are subject to final 10% WHT from the YAs 2009 to 2019.

Proposed The existing tax incentives in items (c) and (d) above be extended for another 6 years. Effective YAs 2020 to 2025.

4. TAX INCENTIVES

14

4.10 Review of Tax Incentives for Automation

Present Manufacturing companies are eligible for ACA of 100% and income tax exemption (claim up to 70% of Statutory Income for each YA) equivalent to the expenditure incurred on the purchase of automation equipment (Qualifying expenditure) as follows:-

Industries Qualifying Expenditure (QE) Category 1 Labour-intensive industries (such as rubber, plastic, wood and textile products)

First RM4 million qualifying expenditure incurred from YAs 2015 to 2020.

Category 2 Others

First RM2 million qualifying expenditure incurred from YAs 2015 to 2020.

Applications must be submitted to MIDA from 1 January 2015 until 31 December 2020. Proposed (a) the above incentives (for both categories) be extended for another 3

years until YA 2023; and (b) the scope of incentive for Category 2 be expanded to the services

sector. Effective Item (a): Applications received by the MIDA until 31 December 2023. Item (b): Applications received by the MIDA from 1 January 2020 to 31 December 2023.


Incentive on Issuance of Sustainable and Responsible Investments Sukuk

Present Deduction is given on the issuance cost of Sustainable and Responsible Investments (SRI) Sukuk either approved by, authorised by or lodged with the SC over the period from YAs 2016 to 2020. SRI Sukuk refers to the financing of projects with the following objectives:- (a) Preserve and protect the environment and natural resources; (b) Conserve the use of energy; (c) Promote the use of renewable energy; (d) Reduce greenhouse gas emission; or (e) Improve the quality of life of society. Proposed The above tax deduction be extended for another 3 years. Effective YAs 2021 to 2023.

4. TAX INCENTIVES

15

4.12 Extension of Tax Incentive for Issuance of Sukuk Wakalah

Present (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) Securities Commission prospectus registration fee; (iii) Bursa Malaysia processing fee and initial listing fee; (iv) Bursa Malaysia new issue crediting fee; (v) Primary distribution fee; (vi) Printing costs of prospectus; and (vii) Advertisement cost of prospectus.

The tax incentive is effective from YAs 2019 to 2020. Proposed The tax treatment be extended for another 5 years for the issuance of Sukuk under the principles of Wakalah. No extension of incentive is accorded to the issuance of Sukuk under the principle of Ijarah. Effective YAs 2021 to 2025.


Exemption on Management Fee Income for Sustainable and Responsible Investment Funds and Shariah-Compliant Fund

Present A resident company incorporated in Malaysia that provides management services of conventional Sustainable and Responsible Investment (SRI) and Shariah-compliant SRI 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) local investors in Malaysia; (b) foreign investors in Malaysia; and (c) business trusts investors or REITs in Malaysia. The tax exemption will end by YA 2020. Proposed The above tax exemption be extended for another 3 years. Effective YAs 2021 to 2023.

4. TAX INCENTIVES

16

4.14 Extension of Tax Incentives for Venture Capital Industry

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 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 Capital (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 YAs 2018 to 2022.

(c) Investment in VCC funds A company or an individual with business income investing in the VCC funds created by a VCMC is given tax deduction equivalent to the value of investment made subject to a maximum amount of RM20 million per year.

(d) Investment in VC A company or an individual with business income investing in 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.

The above incentives are eligible to applications received by the SC from 1 January 2019 to 31 December 2019. Proposed The application period of tax incentive above be extended for another 4 years. Effective Applications received by the SC until 31 December 2023.

4. TAX INCENTIVES

17

4.15 Expansion of Tax Incentive for Structured Internship Programme

Present Double deduction is given on expenses incurred by a person resident in Malaysia and approved by the TalentCorp to conduct Structured Internship Programme (SIP) up to YA 2019. The eligible criteria to claim this tax incentive are as follows:- (a) the students are Malaysian citizens pursuing a full-time degree

programme in Higher Educational Institutions or its equivalent, diploma level and vocational level [Diploma Kemahiran Malaysia (DKM)(Level 4 & 5) and Sijil Kemahiran Malaysia (SKM)(Level 3)] in engineering and technology field only;

(b) complete the approved internship programme before completion of the final semester;

(c) internship programme conducted for a minimum period of 10 weeks; and

(d) internship monthly allowance of not less than RM500 paid to the students.

Double deduction is given on the following expenses:-

Types of allowable expenses Allowable sum (a) internship monthly allowance paid

to the students Not less than RM500 paid

(b) expenditure incurred for the students:-

Not exceeding

RM5,000 for

each student for

a YA

• provision of training

• meals, travelling and accommodation

(c) fee paid to a person who has been appointed to conduct an approved internship programme

Proposed The above double deduction be extended for another 2 years. The scope of the programme be expanded to include Bachelor’s Degree, Diploma and Vocational [DKM (Level 4 & 5) and SKM (Level 3)] in all academic fields. Effective YAs 2020 to 2021.

4. TAX INCENTIVES

18

4.16 Extension of Tax Incentive for Angel Investor

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 subject to the following criteria:- (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 MOF on or after 1 January 2013 but not later than 31 December 2020 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 that makes any investment in the investee company;

(iv) whose investment shall not be more than 30% of the total paid-up share capital of the investee company; and

(v) whose investment is for the sole purpose of financing the activities of the investee company as approved by the MOF.

(b) an investee company— (i) incorporated under the Companies Act 2016 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 MOF.

Application for the incentives to be submitted to the MOF by 31 December

2020.

Proposed

The applications period of the tax incentive above be extended for another 3 years. Effective

Applications received by the MOF until 31 December 2023.


19

5.1 Review of Real Property Gains Tax (RPGT) Rates for Companies Not Incorporated in Malaysia

Present RPGT rates on gains from disposal of chargeable assets (including shares in real property company) are as follows:-

Disposal of chargeable asset

(from date of acquisition)

Effective RPGT rates

[Part I] Except where Part II or Part

III is applicable

[Part II] Companies

[Part III] Non-Citizen

and Non- Permanent

Resident Individual *

Within 3 years 30% 30% 30% In the 4th year 20% 20% 30% In the 5th year 15% 15% 30% In the 6th and subsequent years

5% 10% 10%

* also applies to an executor of the estate of a deceased person who is not a citizen and not a permanent resident. Under the RPGTA, there is no distinction between companies incorporated in or outside Malaysia. Further, no specific rate(s) of tax has been prescribed for disposal of assets by trustee. Proposed The RPGT rates on gains from disposal of chargeable assets as prescribed under 5th Schedule to the RPGTA shall be revised with appropriate categorization of companies and trustees as follows:-

Disposal of chargeable asset

(from date of acquisition)

Effective RPGT rates

[Part I] Except

where Part II or Part

III is applicable

[Part II] Companies

incorporated in Malaysia or a Trustee of a

trust

[Part III] Companies

not incorporated in Malaysia, Non-Citizen

and Non- Permanent

Resident Individual *

Within 3 years 30% 30% 30% In the 4th year 20% 20% 30% In the 5th year 15% 15% 30% In the 6th and subsequent years

5% 10% 10%

* also applies to an executor of the estate of a deceased person who is not a citizen and not a permanent resident. Effective Upon coming into operation of the Finance Act 2019.


20

5.2 Acquisition Price of Property Acquired Prior to 1 January 2013

Present Under Paragraph 2A, Schedule 2 of the RPGTA, where the disposal of a chargeable asset which was previously acquired prior to 1 January 2000 is subject to tax, the acquisition price of the asset shall be the market value as at 1 January 2000, applicable to Malaysian citizens and permanent residents. Proposed Paragraph 2A of the Schedule 2, RPGTA be amended to replace the market value as of 1 January 2000 by the market value as of 1 January 2013 as the acquisition price for the disposal of the chargeable asset acquired prior to year 2013. Effective For disposal of chargeable asset from 12 October 2019.

5.3 Review of

Retention Rate by Acquirer on Disposal by Companies Not Incorporated in Malaysia

Present Subsection 21B(1A) provides that where the disposer, in a disposal of a real property or shares in a real property company, 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. There is no emphasis on the disposal of chargeable asset by companies incorporated outside Malaysia. Proposed The requirement to withhold 7% of the consideration sum by the acquirer is extended to disposal where the disposer is a company incorporated outside Malaysia. Effective Upon coming into operation of the Finance Act 2019.

6. STAMP DUTY

21

6.1

Stamp Duty Exemption on Rent-To-Own Scheme

Present Rent-to-Own (RTO) is a deferred home ownership scheme where the residential home will be bought by the financial institutions and rent to a tenant who is given an option to purchase the residential home based on the shariah compliant principle of ijarah Muntahia Bi Tamlik.

Stamp duty at ad valorem rate is imposed on instrument of conveyance, assignment or transfer of the residential home at two levels, if the tenant opts to purchase the said property:- (a) transfer of the residential home from housing developer to financial

institutions; and (b) transfer of the residential home from the financial institutions to the

buyer. Proposed 100% stamp duty exemption be given on the instrument of transfer of first

residential home priced up to RM500,000 for the following transactions — (a) transfer of the residential home from housing developer to financial

institutions; and (b) transfer of the residential home from the financial institutions to the

buyer.

The stamp duty exemption is subject to the following conditions — (a) financial institutions regulated by Bank Negara Malaysia (BNM) that

provide home financing under this RTO scheme must obtain approval from BNM; and

(b) housing developers collaborating with financial institutions that provide RTO schemes must be registered with National Housing Department, Ministry of Housing and Local Government.

Effective (a) Transfer of the residential home from housing developer to financial

institutions Sale and purchase agreement executed from 1 January 2020 to 31 December 2022.

(b) Transfer of the residential home from the financial institutions to the buyer Tenancy agreement executed from 1 January 2020 to 31 December 2022.

6.2 Stamp Duty on

Foreign Currency Loan Agreement

Present Conventional and shariah compliant loan agreements in foreign currency are subject to stamp duty at an ad valorem rate of 5% for every RM1,000 of the loan amount, with the maximum stamp duty payable for each loan agreement restricted to RM500. Proposed The maximum stamp duty payable on foreign currency loan agreements be increased from RM500 to RM2,000. Effective date For loan agreement executed from 1 January 2020.

6. STAMP DUTY

22

6.3

Stamp Duty Remission for Transfer of Property by Way of Love and Affection

Present Stamp duty rates on instrument of conveyance, assignment or transfer of any property (except stock, shares and marketable securities) are as follows:-

Value of Real Property Stamp Duty Rate (%) First RM100,000 1 RM100,001 to RM500,000 2 RM500,001 to RM1,000,000 3 RM1,000,001 and above 4

50% remittance of stamp duty is granted for transfer of real property from parents to children and vice versa by way of love and affection. The remission is applicable to Malaysian citizen and non-citizen. Proposed The 50% remission of stamp duty for transfer of real property from parents to children and vice versa by way of love and affection is only applicable to Malaysian citizen. Effective For instrument of real property transfer executed from 1 January 2020.

7. INDIRECT TAX

23

7.1 Exemption of Entertainment Duty for Stage Performance

Present Full exemption on entertainment duty is given for — (a) stage show and performance for charity purposes; (b) stage show and performance by foreign artistes of international

standing and certified by Ministry of Communications and Multimedia Malaysia [Kementerian Komunikasi dan Multimedia Malaysia (KKMM)];

(c) international performance, exhibition, fair and sports competition held at the National Sports Complex, Istana Budaya, Balai Seni Lukis Negara and Petronas Philharmonic Hall;

(d) performance by local artistes held at the Bukit Jalil National Sports Complex and Bukit Kiara Sports Complex;

(e) stage performance by theatre groups held at the Federal Territory of Kuala Lumpur, Labuan and Putrajaya; and

(f) cultural and arts performance by local artistes held at the Federal Territory of Kuala Lumpur, Labuan and Putrajaya.

Entertainment duty at the rate of 5% is imposed on stage performance held by local and international artistes that have not been certified by KKMM. This 5% rate is given through the 20% entertainment duty exemption provided under Entertainment Duty (Exemption) (No.24) Order 2006. Proposed In conjunction with the Visit Malaysia Year 2020, full entertainment duty exemption be given on admission tickets for stage performances that include concerts, singing, music, dances and theatres including cultural and artistic performance by local and international artists held at any venue in the Federal Territory of Kuala Lumpur, Labuan and Putrajaya subject to approval by the relevant local authorities. Effective 1 January 2020 until 31 December 2020.

7.2 Review of Export

Duty Rate on Crude Palm Oil

Export duty rate on Crude Palm Oil (CPO) after taking into consideration of partial export duty exemption be reduced as follows:-

CPO Market Price (FOB RM/tonne)

Export Duty Rate (%)

Present Proposed < 2,250 NIL NIL

2,250 – 2,400 4.5 3.0 2,401 – 2,550 5.0 4.5 2,551 – 2,700 5.5 5.0 2,701 – 2,850 6.0 5.5 2,851 – 3,000 6.5 6.0 3,001 – 3,150 7.0 6.5 3,151 – 3,300 7.5 7.0 3,301 – 3,450 8.0 7.5

> 3,450 8.5 8.0 Effective 1 January 2020.

7. INDIRECT TAX

24

7.3 Introduction of Approved Major Exporter Scheme Under The Sales Tax Act 2018

Present (a) Drawback of sales tax is given to any person approved by the DG of

Customs on sales tax which has been paid on the goods imported or purchased from registered manufacturers, and subsequently exported.

(b) Sales tax exemption is given to any manufacturer approved by the DG

of Customs on the importation or purchase of taxable raw materials, components, packing and packaging materials that are solely use in the manufacture of exempted goods for export.

The above approved persons or manufacturers are required to determine in advance the quantity of goods imported or purchased which are subsequently exported or sold locally, and the goods imported for the purpose of export are not sold locally or brought into the Principal Customs Area. Proposed Approved Major Exporter Scheme be introduced to allows any person who qualifies to be exempted from payment of the whole sales tax which may be charged and levied on the taxable goods imported, transported from designated areas or special areas or purchased from a registered manufacturer provided that —

(a) the taxable goods shall be exported, or transported to designated

areas or special areas; or

(b) the taxable goods are used as raw materials, packing and packaging materials or components to be manufactured, which subsequently shall be exported, or transported to designated areas or special areas as goods exempted from sales tax pursuant to an order made under Sales Tax Act 2018.

A person (trader or manufacturer) is eligible to apply for the Approved Major Exporter Scheme whose annual sales comprise at least 80% export sales. Any person granted an approval under the Approved Major Exporter Scheme shall record the tax exempted on the importation, transportation or purchase of the taxable goods in the form and manner may be determined by the DG of Customs. Where any person who has been granted an approval under the scheme fails to comply with the prescribed conditions, any sales tax that has been exempted shall become due and payable by the person from the date of the non-compliance of the conditions and such sales tax shall be paid in the form and manner as may be determined by the DG of Customs. Effective Coming into operation on the date to be appointed by the MOF by notification in the Gazette.

7. INDIRECT TAX

25

7.4 Improvement on Group Relief Facility under Service Tax

Present Group relief facility is provided where a company in a group of companies provides taxable services (except employment services and security services) under Group G, First Schedule of Service Tax Regulations 2018, to any company within the same group of companies, such services shall NOT subject to service tax. The above will not be applicable if the company provides the same taxable services to a third party who is not within the same group of company. Proposed The group relief facility be extended to Group where services provided to the third party does not exceed 5% of the total value of services provided within 12 months. Effective 1 January 2020.

7.5 Service Tax

Exemption on Provision of Training and Coaching Services for Disabled Person

Present Provision of consultancy services including professional consultancy services other than specifically mentioned in the First Schedule, Service Tax Regulations 2018, or training or coaching services (with or without the issuance of certificate for which the fees imposed) are subject to service tax, unless — (a) the provision of consultancy services are relating to healthcare

services and veterinary services; (b) the provision of consultancy, training or coaching services are in

connection with — (i) goods or land situated outside Malaysia; or (ii) matters outside Malaysia other than matter specified in (i)

above. (c) the said services are provided by —

(i) R&D company as well as contract R&D company under Section 2, Promotion of Investment Act 1986;

(ii) approved research companies under Section 34B, Income Tax Act 1967; or

(iii) Federal or State Government, local authorities or statutory bodies.

Proposed Service tax exemption be given on the training and coaching services provided by the following service providers to disabled persons with hearing, visual, physical, speech, mental, and learning disabilities:- (a) training and coaching centres registered with Ministry of Health

Malaysia or Department of Social Welfare; or (b) training and coaching centres endorsed by any national association

for disabled persons registered with Registrar of Societies Malaysia. Effective 1 January 2020.


26

8.1 Introduction, Definition and Scope of Digital Service

Following the announcement made in Budget 2019 on the widening of the scope of service tax to include any digital service by a foreign service provider, the Service Tax (Amendment) Act 2019 was enacted on 9 July 2019 to regulate such services. Provisions in the act include the following — 1. Definition

The following definitions have been inserted in Section 2 of the STA. (a) “Digital service” means any service that is delivered or

subscribed over the internet or other electronic network and which cannot be obtained without the use of information technology and where the delivery of the service is essentially automated.

(b) "Foreign service provider" means any person who is outside

Malaysia providing any digital service to a consumer and includes any person who is outside Malaysia operating an online platform for buying and selling goods or providing services (whether or not such person provides any digital service) and who makes transactions for provision of digital services on behalf of any person.

(c) “Consumer” means any person who fulfils any two of the

following:- (i) makes payment for digital services using credit or debit

facility provided by any financial institution or company in Malaysia;

(ii) acquires digital services using an internet protocol address registered in Malaysia or an international mobile phone country code assigned to Malaysia;

(iii) resides in Malaysia.

(d) “Foreign registered person” means any foreign service provider who is registered under Section 56C.

2. Value of digital services – Section 56A(2)

The value of digital services on which the service tax is payable shall be the value charged by the foreign registered person.

3. Date when service tax is due – Section 56A(4)

The service tax on the digital service provided to consumer shall be due at the time when payment for the digital service is received by the foreign registered person.

4. Liability to register and application for registration New Sections 56B and 56C have been introduced to regulate the registration of foreign service providers.


27

8.1 Introduction, Definition and Scope of Digital Service – Cont’d

Registration before effective date Any foreign service provider who provides digital services before 1 January 2020 shall be liable to be registered if there are reasonable grounds for believing that the total value of his digital services provided in January 2020 and eleven months immediately succeeding that month will exceed the total value of digital services of RM500,000 (as prescribed). Any foreign service provider who is liable to be registered shall apply to the DG of Customs to be registered as foreign registered person and the application shall be made 3 months before 1 January 2020, i.e. within 1 October 2019 to 31 December 2019.

5. Cessation of liability to be registered, notification of cessation of liability and cancellation of registration New Sections 56D, 56E and 56F have been introduced to regulate the deregistration of foreign registered person as well as to impose fines for various non-compliances.

6. Duty to keep records New Section 56J has been introduced to regulate the compliance on duty to keep all records of provision of digital service by foreign registered person including invoices, receipts and all other records as the DG of Customs may determine.

7. Furnishing of declaration and payment of service tax due

New Section 56H has been introduced to regulate the furnishing of returns and payment of service tax due and payable by foreign registered person on the digital service. 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 foreign registered person on the digital services are as follows:-

Section Period of default Penalty rate 56I(2)(a) First 30 days after

the stipulated due date

10% of the amount of service tax which remains unpaid

56I(2)(b) Second 30 days after the stipulated due date

Additional 15% of the amount of service tax which remains unpaid

56I(2)(c) Third 30 days after the stipulated due date

Additional 15% of the amount of service tax which remains unpaid


28

8.1 Introduction, Definition and Scope of Digital Service – Cont’d

8. Power of DG of Customs to assess Section 27 has been amended to provide that the DG of Customs is empowered to assess foreign service provider who fails to apply for registration under Section 56C.

A publication by: Folks Management Services Sdn Bhd (178398-K)

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FOLKS DFK & CO. (AF0502) / AZMAN, WONG, SALLEH & CO.(AF0012)

~ KUALA LUMPUR ~ (Headquarters)

Folks DFK & Co. Azman, Wong, Salleh & Co. Folks Taxation Sdn Bhd 12th Floor, Wisma Tun Sambanthan No 2, Jalan Sultan Sulaiman 50000 Kuala Lumpur Email: [email protected] Tel: 03-22732688 Fax: 03-22742688 Website: http://www.folksdfk.com

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Folks Management Services Sdn Bhd Suite 5-02, Level 5, Plaza DNP 59, Jalan Dato' Abdullah Tahir 80250 Johor Bahru Email: [email protected] Tel: 07-3333502 Fax: 07-3333601 ~ AFFILIATES’ OFFICES ~ We have affiliate offices in the following cities: • PENANG • KUCHING • SIBU • SARIKEI • MIRI • BINTULU • KOTA KINABALU

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