dfk international is a top 10 international …...dfk international is a top 10 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 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 2018

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

A new government! A new Harapan! Budget 2019 marked the first budget proposal presented under

the present government by the Minister of Finance, YB Tuan Lim Guan Eng on 2 November 2018. With the theme “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society”, the 2019

Budget outlined 12 key strategies:-

1. Strengthening fiscal administration;

2. Restructuring and rationalising government debt;

3. Raising government revenue;

4. Ensuring welfare and quality of life;

5. Improving employment and employability;

6. Enhancing health and social welfare protection;

7. Raising real disposable income;

8. Education for a better future;

9. Unleashing the power of the new economy;

10. Seizing opportunities in the face of global challenges;

11. Redefining the role of government in business; and

12. Ensuring equitable and sustainable economic growth.

In line with the above strategies, various proposals were put forward in the 2019 Budget. Some of the

notable tax measures are as follows:-

Sales and Services Tax

To improve the efficiency and effectiveness of the Sales and Services Tax, the following

measures have been proposed:-

(a) Service tax exemptions for specific business-to-business (B2B) transactions be given to

certain group of service tax registrants.

(b) Service tax be imposed on imported services consumed by businesses (B2B) and the digital

products and services imported by consumers (B2C).

(c) A credit system for sales tax deductions be introduced to assist small manufacturers who

purchase products from importers. Personal Income Tax

Notable changes include:-

(a) Tax relief on contribution to approved schemes and life insurance premium or takaful

schemes be increased from RM6,000 to RM7,000.

(b) Relief given to a resident individual for net deposits made in that basis year into the SSPN

account be increased from RM6,000 to RM8,000.

Corporate tax

To ensure various tax legislations stay relevant and to reduce leakages, certain existing reliefs

and incentives under the Act be reviewed and amended as follows:-

.

(a) Carrying forward of unabsorbed business loss of a company be limited to 7 years of

assessment;

(b) Provision of group relief is reviewed where the surrendering of losses will apply to new

companies only and restricted to 3 years of assessment. The company that has unutilised

investment tax allowances or unutilised pioneer losses upon the expiry of its investment tax

allowance or pioneer status incentive is not eligible for group relief.

(c) The income tax rate on chargeable income of up to RM500,000 for SME be reduced from 18%

to 17%.

(d) Earning stripping rules are introduced under Section 140C to restrict the deductibility of

interest expenses in connection with financial assistance in a controlled transaction

(e) Deduction of expenses incurred in respect of any payment made by a resident to a Labuan

Company be restricted. Real Property Gains Tax (RPGT) and Stamp Duty

Key changes to RPGT and stamp duty include:- (a) The RPGT rates for the disposal of real properties or shares in a real property company after

the fifth year (i.e. sixth year or thereafter) by a resident individual or permanent resident be

increased from 0% to 5%;

(b) Stamp duty on the transfer of property valued at more than RM1,000,000 will be increased

from 3% to 4%;

(c) Stamp Duty Exemption

(i) Exemption of stamp duty on sale and purchase agreement and loan agreement executed

on acquisition of house by first-time homebuyers have been extended.

(ii) Rules and conditions governing the stamp duty exemptions in the case of

reconstructions or amalgamations of companies and transfer of property between

associated companies be reviewed.

Tax Systems and Administration

The following are notable amendments and additional provisions:-

(a) Restrictions on trade in Malaysian Ringgit and transactions between Labuan and Malaysian

resident will be removed. Flat tax of RM20,000 under the Labuan Business Activity Tax Act

1990 be abolished with effect from 1 January 2019.

(b) Tax exemption granted to wholesale money market funds on its interest income from

licensed banks, licensed Islamic banks, and development financial institutions be abolished.

(c) The following incentive be extended or expanded:-

(i) Venture Capital Tax Incentives be extended for another year, i.e. for applications

received by the Malaysian Securities Commission until 31 December 2019.

(ii) The list of green technology assets which qualify for the Green Technology Investment

Allowance be expanded from 9 assets to 40 assets.

(iii) Tax incentives be introduced for companies that incurred qualifying expenses in

implementing Industry 4WRD.

The Government has also launched a Special Voluntary Disclosure Program (SVDP) to encourage the

public to report their unreported or understated income, on a voluntary basis. This program will be

offered from 3 November 2018 until 30 June 2019 where reduced penalty rate will be imposed on

those income.

IMPORTANT NOTE

This bulletin is prepared gratuitously for clients and associates and is not intended in any way to be

acted upon as advice by Folks DFK & Co./Azman, Wong, Salleh & Co. and their associates. The

information herein (which incorporates legislation/gazettes up to 31 December 2018) may be subject

to further amendments upon the passing of the relevant legislations. Readers are advised to seek

appropriate advice before taking any action. Folks DFK & Co./Azman, Wong, Salleh & Co. and their

associates shall not be responsible or liable for any claims, losses or damages arising in any way out

of or in connection with any person relying upon this bulletin in organising their affairs.

CONTENT

Page

ABBREVIATIONS (i)

DEFINITIONS (ii) – (iii)

1. TAX SYSTEMS AND ADMINISTRATION

1.1 Special Classes of Income 1

1.2 Appeal on Assessment under Section 90(3) 1

1.3 Expansion of Derivation of Business Income 2

1.4 Requirement of Audited Accounts on Submission of Tax Return 2

1.5 Penalty for Breach of Confidence 3

1.6 Person Responsible for LLP 3

1.7 Review of Tax Rate for Foreign Fund Management Company 3

1.8 Restriction on Deductibility of Interest 4

1.9 Review of Tax System for Labuan Entity and Labuan Business Activity 5

1.10 Definition of Control under Section 140A 6

1.11 Tax Deduction for Contributions made to Social Enterprise 7

1.12 Donations to National Schools and Institutions of Higher Learning 7

1.13 Change of Income Tax Rates and Tax Treatment for Insurance and Re-

insurance Business

7

1.14 Special Voluntary Disclosure Program (SVDP) with Lower Penalties 8

2. TAXATION – INDIVIDUALS

2.1 Tax Relief on Contribution to Approved Schemes and Life Insurance

Premium or Takaful Scheme

9

2.2 Tax Relief on Net Annual Savings in the National Education Savings Scheme

(SSPN)

9

3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES

3.1 Review of Tax Treatment on Unabsorbed Business Losses 10

3.2 Reduction of Corporate Tax Rate for Small and Medium Enterprises (SME) 10

3.3 Deduction on Payments made to Labuan Entities 10

3.4 Review of the Tax Treatment on Provision of Group Relief 11

3.5 Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) Loan Paid by

Employers

11

4. TAX INCENTIVES

4.1 Limitation to Reinvestment Allowance (RA) and Investment Allowance for

Service Sectors (IASS) 12

4.2 Pioneer Losses (PL) 12

4.3 Extension of Tax Incentive for the Issuance of Sukuk Ijarah (leasing) and

Wakalah (Agency)

13

4.4 Extension of Tax Incentive for Issuance of Retail Debenture and Retail Sukuk 13

CONTENT

Page

4. TAX INCENTIVES (Cont’d)

4.5 Tax Incentives for Industry4WRD 14 - 15

4.6 Tax Incentive for Employers to Employ Senior Citizens and Ex-convicts 15

4.7 Withdrawal of Investment Tax Allowance (ITA) 15

4.8 Tax Incentives for Venture Capital 16

4.9 Definition of Research and Development (R&D) 17

4.10 Changes to Tax Exemption on Wholesale Money Market Funds 17

4.11 Review of Contract R&D Incentive 18

5. REAL PROPERTY GAINS TAX

5.1 Acquisition Price of Property Acquired prior to 1 January 2000 19

5.2 Disposal of Asset by Way of Gift 19

5.3 Review of Real Property Gains Tax (RPGT) Rates 20

6. STAMP DUTY

6.1 Review of Stamp Duty Rates for Transfer of Real Property 21

6.2 Review of Stamp Duty Exemption for the Purchase of First Residential

Property 21

6.3 Stamp Duty to be Imposed on Hire Purchase Agreement 21

6.4 Redefinition of Small and Medium Enterprise for Stamp Duty Purposes 22

6.5 Stamp Duty to be Imposed on Constitution of a Company 22

6.6 Review of Stamp Duty Exemption in Cases of Reconstruction or

Amalgamation of Companies 22

6.7 Review of Stamp Duty in cases of Transfer of Property between Associated

Companies 23

6.8 Stamp Duty Exemption for Perlindungan Tenang Products 24

7. INDIRECT TAX

7.1 Introduction, Definition and Review of Scope of Imported Taxable Service 25 - 26

7.2 Newly Prescribed Taxable Services 26

7.3 Redefinition of Management Services for Service Tax Purposes 27

7.4 Service Tax Exemptions for Specific Business-To-Business (B2B) Service Tax

Registrants 27 - 28

7.5 Determination of Sale Value of Taxable Goods 28

7.6 Power to Assess under Sales Tax Act 28

7.7 Deduction of Sales Tax 28

7.8 Excise Duty on Sugar Sweetened Beverages 29

7.9 Review of Import Duty Rate on Bicycles 29

ABBREVIATIONS

(i)

Act Income Tax Act 1967

AE Automation Equipment Allowance

CA Capital Allowance

DG Director General

DTA Double Taxation Arrangement

ESR Earning Stripping Rules

GST Goods and Services Tax

GSTA Goods and Services Tax Act 2014

IRB Inland Revenue Board

ITA Investment Tax Allowance

LLP Limited Liability Partnerships

MIDA Malaysian Investment Development Authority

OECD Organization for Economic Co-operation and Development

PIA Promotion of Investment Act 1986

PS Pioneer Status

QE Qualifying Expenditure

R&D Research & Development

RA Reinvestment Allowance

REITs Real Estate Investment Trusts

RMC Royal Malaysian Customs

RPGT Real Property Gains Tax

RPGTA Real Property Gains Tax Act 1976

SA Stamp Act 1949

SC Securities Commission

SME Small and Medium Enterprise

STA Service Tax Act 2018

SOCSO Social Security Organization

TCR Thin Capitalization Rules

WHT Withholding Tax

YA Year of Assessment

DEFINITIONS

(ii)

Base erosion and profit

shifting (“BEPS”)

refers to tax avoidance strategies that exploit gaps and mismatches in tax

rules to artificially shift profits to low or no-tax locations. Under the

OECD/G20 Inclusive Framework on BEPS, over 125 countries and

jurisdictions are collaborating to implement the BEPS measures and

tackle BEPS.

Country-by-country Report

(“CbC Report”)

the term “CbC Report” means the country-by-country report to be filed

annually by the Reporting Entity in accordance with the laws of its

jurisdiction of tax residence and with the information required to be

reported under such laws covering the items and reflecting the format set

out in the report published by the OECD with respect to Action 13 of the

Base Erosion and Profit Shifting project in September 2014, as may be

amended following the 2020 review contemplated therein.

(source: OECD/G20 Base Erosion and Profit Shifting Project. Action 13:

Country-by-country Reporting Implementation Package)

Industry4WRD National Policy on Industry 4.0, which would enable the manufacturing

sector to move into Industry 4.0 and along the way contribute to fulfilling

Malaysia’s commitment to the United Nation’s Sustainable Development

Goals (SDGs).

REITs

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

Fund.

SME a company incorporated in Malaysia with a paid-up capital in respect of

ordinary shares not exceeding RM2.5 million and LLP with RM2.5

million capital contribution and below at the beginning of the basis

period for the relevant YA. However, it excludes a company where:-

(a) 50% of the paid up capital in respect of the company’s ordinary

shares is directly or indirectly owned by a related company;

(b) 50% of the paid up capital in respect of ordinary shares of the related

company is directly or indirectly owned by the company; or

(c) 50% of the paid up capital in respect of ordinary shares of the

company and the related company is directly or indirectly owned by

another company.

“Related company” in this context is defined as a company which has a

paid up capital exceeding RM2.5 million in respect of ordinary shares at

the beginning of its basis period for a YA.

Sukuk

Sukuk has the same meaning as provided in the SC’s guidelines in respect

of Islamic securities. Sukuk refers to certificates of equal value which

evidence undivided ownership or investment in the assets using Shariah

principles and concepts endorsed by the Shariah Advisory Council but

does not include any agreement for a financing/investment where:-

(i) the financier/investor and customer/investee are signatories to the

agreement; and

(ii) the provision of financing/investment is in the ordinary course of

business of the financier/investor, including any promissory note

issued pursuant to the terms of such an agreement.

(Source: Guidelines on Sukuk issued by SC dated 8 January 2014).

DEFINITIONS

(iii)

Contract research and

development company

means a company which provides research and development services in

Malaysia only to a company other than its related company.

Earning Stripping Rules

(ESR)

a method endorsed by the OECD to limit tax deductions for interest

expenses and is one of the OECD’s action plans under the Base Erosion

Project Shifting (“BEPS”) strategy.


1

1.1

Special Classes of

Income – Widening

of Scope

Existing

Section 4A of the Act provides that the following income derived from

Malaysia by non-residents is chargeable to tax: -

(i) amounts paid in consideration of services rendered by the person or

his employee in connection with the use of property or rights

belonging to, or the installation or operation of any plant,

machinery or other apparatus purchased from, such persons;

(ii) amounts paid in consideration of technical advice, assistance or

services rendered in connection with technical management or

administration of any scientific, industrial or commercial

undertaking, venture, project or scheme; or

(iii) rent or other payments made under any agreement or arrangement

for the use of any moveable property.

Proposed

Subsection 4A(ii) be amended by deleting the word ‘technical’ and

reworded as follows:-

‘amounts paid in consideration of any advice given, or assistance or

services rendered in connection with the management or administration

of any scientific, industrial or commercial undertaking, venture, project

or scheme; or’

The provisions under Section 15A, Section 109B(1)(b) and Schedule 1

Part V(ii) of the Act in relation to the above are to be amended.

Effective

Upon coming into operation of the Finance Act 2018.

1.2

Appeal on

Assessment under

Section 90(3)

Existing

Section 99(1) of the Act provides that a person aggrieved by an

assessment made in respect of him may appeal to the Special

Commissioners against the assessment by giving to the DG within 30

days after the service of the notice of assessment (or within such

extended period as regards those days or months as may be allowed

under Section 100) a written notice of appeal in the prescribed form

(Form Q).

Proposed

A new subsection 99(1A) be introduced where a person who has failed to

furnish a return for a basis period for a year of assessment in accordance

with subsection 77A(1) may appeal against the assessment made by the

DG under subsection 90(3) by furnishing a return for that basis period

for that year of assessment together with the written notice of appeal

(Form Q) within the stipulated time.

Effective

Year of assessment 2019.


2

1.3 Expansion of

Derivation of

Business Income

Existing

Business income is subject to Malaysian income tax if it is derived or

deemed derived from Malaysia. Business income which is deemed to be

derived from Malaysia includes income from a business that is not

attributable to its operations carried on outside Malaysia.

Proposed

The derivation of business income provision under the Act be expanded to

include income of a person from a business attributable to a place of

business in Malaysia.

A place of business includes:-

(a) a place of management;

(b) a branch;

(c) an office;

(d) a factory;

(e) a workshop;

(f) a warehouse;

(g) a building site, or a construction, an installation or an assembly

project;

(h) a farm or plantation; and

(i) a mine, an oil or gas well, a quarry or any other place of extraction of

natural resources.

A person shall also be deemed to have a place of business in Malaysia if

that person:-

(a) carries on supervisory activities in connection with a building or

work site, or a construction, an installation or an assembly project; or

(b) has another person acting on his behalf who:-

(i) habitually concludes contracts, or habitually plays the

principal role leading to the conclusion of contracts that are

routinely concluded without material modification;

(ii) habitually maintains a stock of goods or merchandise in that

place of business from which such person delivers goods or

merchandise; or

(iii) regularly fills orders on his behalf.

Effective

Upon coming into operation of the Finance Act 2018.

1.4

Requirement of

Audited Accounts

on Submission of

Tax Return –

Revision in line with

Companies Act

2016

Existing

A company is required to submit its income tax return to the IRB based on

accounts audited by a professional accountant together with a report made

by the professional accountant in accordance with subsection 174(1) and

(2) of the Companies Act 1965.

Proposed

A company shall submit its income tax return based on the financial

statements made in accordance with the requirements of the Companies

Act 2016.

Effective



3

1.5 Penalty for Breach

of Confidence

Existing

Section 117(1) of the Act provides that any classified person who in

contravention of Section 138:-

(a) communicates classified material to another person; or

(b) allow another person to have access to classified material,

shall be guilty of an offence and shall, on conviction, be liable to a fine not

exceeding RM4,000 or imprisonment for a term not more than one year or

both.

Proposed

The punitive provision under Section 117 be extended to include any

person who receives any classified material, knowing or having reasonable

ground to believe at the time when he receives it that such classified

material is communicated or disclosed to him in contravention of this Act,

and use the classified material, or produce or disclose the classified

material to any other person.

Effective

Upon coming into operation of the Income Tax (Amendment) Act 2018.

1.6 Person Responsible

for LLP

Existing

The responsibility for doing all acts and things required to be done by or

on behalf of a LLP for the purposes of this Act shall lie jointly and

severally ─

(a) with the compliance officer who is appointed amongst the partners of

the limited liability partnership; or

(b) if no compliance officer is appointed as such, any one or all of the

partners thereof.

Proposed The responsibility for doing all acts and things required to be done by or

on behalf of a LLP be extended to include persons qualified to act as

secretaries under the Companies Act 2016 who is a citizen or permanent

resident of Malaysia and ordinarily resides in Malaysia.

Effective


1.7 Review of Tax Rate

for Foreign Fund

Management

Company –

Consistent with

Internationally

Agreed Taxation

Standard

Existing

Chargeable income of a Foreign Fund Management Company in relation

to the source consisting of the provision of fund management services to

foreign investors is taxed at a preferential rate of 10%.

Proposed

The preferential tax rate of 10% is abolished and foreign fund management

company be subject to tax at the rate of 24%.

Effective



4

1.8 Restriction on

Deductibility of

Interest –

Implementation of

ESR under OECD’s

BEPS Action 4

Existing

Earning stripping rules (ESR) will take effect from 1 January 2019 in

place of the thin capitalization rules which was removed effective from 1

January 2018.

Under the ESR, deduction on excessive interest on financial assistance

between associated persons is disallowed.

Proposed

A new Section 140C on ESR be introduced. Under the Section:-

(a) In ascertaining the adjusted income of a person from each of his

sources consisting of a business, no deduction from the gross income

from that source shall be allowed in respect of any interest expense

in connection with or on any financial assistance in a controlled

transaction granted directly or indirectly to that person which is in

excess of the maximum amount of interest as determined under any

rules made under this Act.

(b) Under the Section:-

(i) “controlled transaction” shall be construed as a financial

assistance—

(a) between persons one of whom has control over the other;

or

(b) between persons both of whom are controlled by some

other person (in this section referred to as “third person”);

(ii) “control” has the meaning assigned to it in subsection

140A(5A) [refer to 1.10 below];

(iii) “financial assistance” includes loan, interest bearing trade

credit, advances, debt or the provision of any security or

guarantee;

(iv) “interest expense” means—

(a) interest on all forms of debt; or

(b) payments economically equivalent to interest (excluding

expenses incurred in connection with the raising of

finance)”.

Effective

1 January 2019.


5

1.9 Review of Tax

System for Labuan

Entity and Labuan

Business Activity -

Consistent with

Internationally

Agreed Taxation

Standard

Existing

A Labuan entity carrying on Labuan trading activity is taxed at 3% of its

chargeable profits as reflected in the audited accounts, or RM20,000 to be

elected annually.

Where a Labuan entity carrying on a Labuan business activity which is a

Labuan trading activity does not have a basis period for a year of

assessment, the Labuan entity shall be charged for that year of assessment

to tax of RM20,000.

“Labuan business activity” means a Labuan trading or a Labuan non-

trading activity carried on in, from or through Labuan in a currency other

than Malaysian currency, by a Labuan entity with non-resident or with

another Labuan entity with certain exceptions.

i.

Proposed

Amendment to the Labuan Business Activity Tax Act 1990 are proposed

as follows:-

(a) the definition of the Labuan business activity be substituted as

follows:-

“Labuan business activity” means a Labuan trading or a Labuan

non-trading activity carried on in, from or through Labuan, excluding

any activity which is an offence under any written law;”

(b) A Labuan entity, shall for the purpose of the Labuan business

activity:-

(i) have an adequate number of full time employees in Labuan;

and

(ii) have an adequate amount of annual operating expenditure in

Labuan,

as prescribed under the Labuan Business Activity Tax (Requirements

for Labuan Business Activity) Regulations 2018 (P.U.(A) 392)

(c) The election for income tax at the fixed rate of RM20,000 under

LBATA 1990 be abolished.

(d) Income derived from intellectual property assets held by a Labuan

entity be subject to the prevailing income tax rate under the Income

Tax Act 1967.

(e) Where a Labuan entity carrying on a Labuan business activity which

is a Labuan trading activity does not have a basis period for a year of

assessment, the DG may direct that the basis period for that year of

assessment and subsequent years of assessment to include a period or

periods (which may be of any period) as specified in the direction.

With the new definition, restrictions on transactions between Labuan

Entity and resident of Malaysia and in Ringgit are to be removed.

Effective

1 January 2019.


6

1.10 Definition of

Control under

Section 140A

Existing

Pursuant to Section 140A(2) where a person in the basis period for a year

of assessment enters into a transaction with an associated person for that

year for the acquisition or supply of property or services, then, for all

purposes of the Act, that person shall determine and apply the arm’s length

price for such acquisition or supply. Section 140A(5) provides that such

transaction shall be construed as a transaction between ─

(a) persons one of whom has control over the other;

(b) individuals who are relatives of each other; or

(c) persons both of whom are controlled by some other person.

By virtue of Section 139, a person shall be taken to have control of a

company:-

(a) if he exercises or is able to exercise or is entitled to acquire control

(whether direct or indirect) over the company's affairs and in

particular, without prejudice to the generality of the preceding words,

if he possesses or is entitled to acquire the greater part of the share

capital or voting power in the company;

(b) if he possesses or is entitled to acquire either:-

(i) the greater part of the issued share capital of the company;

(ii) such part of that capital as would, if the whole of the income of

the company were in fact distributed to the members, entitle

him to receive the greater part of the amount so distributed; or

(iii) such redeemable share capital as would entitle him to receive on

its redemption the greater part of the assets which, in the event

of a winding up, would be available for distribution among

members; or

(c) if in the event of a winding up he would be entitled to the greater part

of the assets available for distribution among members.

Proposed Section 140A(5A) be introduced to expand the definition of control for the

purpose of Section 140A(5) as follows:-

‘Control’ refers to persons one of whom owns shares of the other person,

or a third person who owns shares of both persons, where the percentage

of the share capital held in either situation is 20% or more and─

(a) the business operations of that person depends on the proprietary

rights provided by the other person or a third person;

(b) the business activities of that person are specified by the other

person, and the prices and other conditions relating to the supply are

influenced by such other person or a third person; or

(c) where one or more of the directors or members of the board of

directors of a person are appointed by the other person or a third

person.

Effective

1 January 2019.


7

1.11 Tax Deduction for

Contributions made

to Social Enterprise

Existing

Donations made by a person to institutions or organisations or a fund

approved by the DG are allowed as tax deduction limited to ─

(a) 7% of the aggregate income for a person other than company

(b) 10% of the aggregate income for a company

Proposed

Tax deduction above be extended to donations made to any social

enterprise.

Effective

To be gazetted by way of statutory order.

1.12 Donations to

National Schools

and Institutions of

Higher Learning

Existing

Donations made by a person to national schools or public institutions of

higher learning are not tax deductible.

Proposed

Donations made by a person to national schools and public institutions of

higher learning that are registered with the Ministry of Education for the

purposes of upgrading infrastructure be eligible for tax deduction.

Deduction for donations made to other schools and institutions of higher

learning that are registered with the Ministry of Education for the purposes

of upgrading infrastructure will be evaluated on a case-by-case basis.

Effective

To be gazetted by way of statutory order.

1.13 Change of Income

Tax Rates and Tax

Treatment for

Insurance and Re-

insurance Business

(a) Tax rates

Type of business Tax rate

Existing Proposed

Reinsurance business/ retakaful fund 24%

8% Inward re-insurance business/ inward

retakaful fund 5%

Offshore insurance/ takaful business 5% 24%

(b) Source of business income

Existing

The reinsurance business and general insurance business are considered as

one source of business income, where inward re-insurance business is a

separate source of business from the reinsurance business.

Proposed

The reinsurance business shall be a separate source of income from the

general fund.

Effective



8

1.14 Special Voluntary

Disclosure Program

(SVDP) with Lower

Penalties

Existing

The penalties imposed for incremental tax payable arising from a

voluntary disclosure by a taxpayer as set out in the IRB’s Tax Audit

Framework 2018 are as follows:-

Full voluntary disclosure Penalty

rate

Within 60 days from the tax filing due date 10%

After 60 days but by the end of the 6th

month from the tax filing due

date

15.5%

After 6 months from the tax filing due date 35%

Proposed

Special Voluntary Disclosure Programme (SVDP) be implemented. An

operational guideline has been issued by IRB on 3 November 2018

(updated on 30 November 2018) on the implementation of this

programme. This SVDP covers voluntary disclosure by taxpayers on:-

(a) income not previously declared, under declared, expenses over

claimed or not allowable, reliefs, deductions and rebates over

claimed;

(b) gains on disposal of assets (real properties and shares in real property

companies) not previously declared or under declared; and

(c) stamping of instruments not previously stamped.

Under the SVDP, taxpayers will enjoy reduced penalty rates from 3

November 2018 to 30 June 2019 as follows:-

Disclosure period Penalty

rate

Payment

by or on

From 3 November 2018 to 31 March 2019 10% 1 April 2019

From 1 April 2019 to 30 June 2019 15% 1 July 2019

For disclosure made after 30 June 2019, penalty rates of between 80% to

300% would apply.

Effective

3 November 2018 to 30 June 2019.

2. TAXATION - INDIVIDUALS

9

2.1 Tax Relief on

Contribution to

Approved Schemes

and Life Insurance

Premium or

Takaful Scheme

Existing

A combined tax relief up to RM6,000 is given to resident individual on

the contributions made to approved schemes such as the Employees

Provident Fund (EPF) and payment for life insurance premiums or

takaful scheme under Takaful Act 1984.

Proposed

The combined tax relief on the above contributions be increased to

RM7,000, segregated as follows:-

(a) Tax relief up to RM4,000 on contributions to approved schemes;

and

(b) Tax relief up to RM3,000 on payment for life insurance premiums

or takaful contributions.

Public servants that under the pension scheme be given tax relief up to

RM7,000 on payment for life insurance premiums or takaful

contributions.

Effective


2.2

Tax Relief on Net

Annual Savings in

the National

Education Savings

Scheme (SSPN)

Existing

A relief up to RM6,000 a year is given to a resident individual for net

deposits made in that basis year by that individual for his / her child into

the SSPN account established under the Perbadanan Tabung Pendidikan

Tinggi Nasional Act 1997.

Proposed

The tax relief be increased to RM8,000.

Effective

Years of assessment 2019 to 2020.


10

3.1

Review of Tax

Treatment on

Unabsorbed

Business Losses

Existing

There is no time limit on the carrying forward of unabsorbed business

losses.

Proposed

Unabsorbed business losses are allowed to be carried forward as

follows:-

(a) Unabsorbed losses for a year of assessment be allowed to be carried

forward for a maximum of 7 consecutive years of assessment. Any

amount ascertained for that year of assessment which is not

deducted at the end of the period of 7 years of assessment shall be

disregarded. [New Section 44 (5F)]

(b) Transition provision to Section 43 and Section 44 of the Act

Unabsorbed losses up to the year of assessment 2018 shall be

allowed to be carried forward for utilization until the year of

assessment 2025. Any amount that has not been deducted at the end

of the year of assessment 2025 shall be disregarded.

Effective


3.2

Reduction of

Corporate Tax Rate

for Small and

Medium Enterprises

(SME)

Reduction in income tax rates for SME and LLP is proposed as follows:-

Chargeable income

(RM)

Existing tax rates

(%)

Proposed tax rates

(%)

Up to RM500,000 18 17

Exceeding RM500,000 24 24

Effective


3.3 Deduction on

Payments made to

Labuan Entities

Existing

Malaysian tax resident who transacts with Labuan entity is entitled for

tax deduction on allowable expenditure incurred.

Proposed

A new Section 39(1)(r) be introduced to provide that the Minister may

prescribed rules on the deductibility of the expenses paid by a Malaysian

tax resident to a Labuan entity.

Pursuant to the Income Tax (Deduction Not Allowed for Payment Made

to Labuan Company by Resident) Rules 2018 (P.U.(A) 375/2018), the

Minister has prescribed the following rules on the deductibility of

payments made by a resident to a Labuan Company as follows:-

Type of payment Amount disallowed for deduction

(a) Interest income 33% of the amount of payment

(b) Lease rental 33% of the amount of payment

(c) Other payments 97% of the amount of payment

Effective

1 January 2019.


11

3.4

Review of the Tax

Treatment on

Provision of Group

Relief

Existing

A company (surrendering company) may surrender not more than 70% of

its current year of assessment adjusted loss to one or more related

companies (claimant company) to be set-off against the claimant

company's aggregate income subject to certain rules and conditions as

contained in the Act. The adjusted loss for any year of assessment may be

surrendered without any time restriction.

Proposed

(a) Amendments be made to Section 44A(1) to limit the period where

the losses can be surrendered for 3 consecutive years of assessment.

(b) A new Section 44(1A) be introduced to specify the commencement

of the 3 consecutive years of assessment as follows:-

Where the surrendering company ─

(i) first commences operation in a 12 month basis period, the

‘basis period for 3 consecutive years of assessment’

commences immediately following such 12 month basis

period; or

(ii) first commences operation in a basis period which is less or

more than 12 months (‘first basis period’) and the first basis

period is followed by a 12 month basis period (‘second basis

period’), the ‘basis period for 3 consecutive years of

assessment’ commences immediately following the second

basis period.

Transitional provisions to Section 44A provide that ─

Commencement of

operations of the

surrendering company

YA(s) losses can be surrendered

YA2015 YA2019

YA2016 YA2019 & YA2020

YA2017 YA2019, YA2020, YA2021

(c) New subsection 44A(10)(aa) be introduced to preclude the claim of

group relief or the surrender of its losses by a company that has

unutilised investment tax allowance or adjusted loss from a pioneer

business under the PIA.

Effective


3.5

Perbadanan Tabung

Pendidikan Tinggi

Nasional (PTPTN)

Loan Paid by

Employers

Existing

There is no tax relief granted to employers who settle the PTPTN loans

on behalf of their employees.

Proposed

Employers who have made repayment of the PTPTN loans on behalf of

their full-time employees are eligible for tax deduction, provided the

repaid amount is not recovered from the employees.

Effective

For repayments made between 1 January 2019 to 31 December 2019.

4. TAX INCENTIVES

12

4.1

Limitation to

Reinvestment

Allowance (RA) and

Investment

Allowance for

Service Sectors

(IASS)

Existing

RA is given in respect of qualifying expenditure incurred in the basis

periods for 15 consecutive years of assessment beginning from the year of

assessment for the basis period in which a claim for that RA was first

made.

IASS is given on qualifying expenditure incurred for the purpose of an

approved service project within 5 years of assessment from the date of

approval.

The unutilized RA and IASS can be carried forward indefinitely until they

are fully utilized.

Proposed

(a) Unutilized RA and IASS for a year of assessment be allowed to be

carried forward up to 7 consecutive years of assessment

commencing immediately after the end of the qualifying period of

RA and IASS.

(b) Unutilized RA and IASS ascertained up to the year of assessment

2018 where the qualifying period has ended in the year of

assessment 2018 and prior, be allowed to be carried forward for a

period of 7 consecutive years of assessment commencing from the

year of assessment 2019.

Any amount ascertained for that year of assessment which is not utilized

at the end of the period of 7 years of assessment shall be disregarded.

Effective


4.2 Pioneer Losses (PL) Existing

The unabsorbed pioneer losses under the PIA can be carried forward

indefinitely until it is fully absorbed.

Proposed

(a) Unabsorbed PL for a year of assessment be allowed to be carried

forward up to 7 consecutive years of assessment commencing

immediately following the year of assessment that relates to the

basis period in which the day the post pioneer business falls.

Transitional provision

(b) Unabsorbed PL ascertained up to the year of assessment 2018 where

the post pioneer business falls in the year of assessment 2018 and

prior, be allowed to be carried forward for a period of 7 consecutive

years of assessment commencing from the year of assessment 2019.

Any amount ascertained for that year of assessment which is not absorbed

at the end of the period of 7 years of assessment shall be disregarded.

Effective


4. TAX INCENTIVES

13

4.3

Extension of Tax

Incentive for the

Issuance of Sukuk

Ijarah (leasing) and

Wakalah (Agency)

Existing

(a) Deduction is given on expenses incurred for the issuance of sukuk

under the principles of Ijarah (leasing) and Wakalah (agency)

approved by the SC or the Labuan Financial Services Authority.

(b) The following additional expenses incurred by a company on the

issuance of Sukuk under the principles of Ijarah and Wakalah

approved by the SC are given further tax deduction:-

(i) Professional fees relating to due diligence, drafting and

preparation of prospectus;

(ii) Printing costs of prospectus;

(iii) Advertisement cost of prospectus;

(iv) Securities Commission prospectus registration fee;

(v) Bursa Malaysia processing fee and initial listing fee;

(vi) Bursa Malaysia new issue crediting fee; and

(vii) Primary distribution fee.

Proposed

The above tax deductions be extended for another 2 years.

Effective


4.4

Extension of Tax

Incentive for

Issuance of Retail

Debenture and Retail

Sukuk

Existing

Double deduction is given on additional expenses incurred for issuance of

the following product approved by the SC from the YAs 2016 to 2018:-

(a) Retail debenture; and

(b) Retail Sukuk under the principle of Mudharabah, Musyakarah,

Istisna’, Murabahah, and Bai’ Bithaman Ajil based on Tawarruq.

The additional expenses which qualify for deduction are as follows:-

(i) Professional fees relating to due diligence, drafting and preparation

of prospectus;

(ii) Printing costs of prospectus;

(iii) Advertisement cost of prospectus;

(iv) Securities Commission prospectus registration fee;

(v) Bursa Malaysia processing fee and initial listing fee;

(vi) Bursa Malaysia new issue crediting fee; and

(vii) Primary distribution fee.

Proposed

Double deduction in respect of the above be extended for another 2

years.

Effective


4. TAX INCENTIVES

14

4.5 Tax Incentives for

Industry4WRD

Existing

Companies adopting advance technology known as Industry4.0 are given

Accelerated Capital Allowance (ACA) and Automation Equipment

Allowance (AE) to be provided on the first RM10 million qualifying

capital expenditure incurred and is fully claimable within 2 years of

assessment.

Industry4wrd Policy has been introduced to encourage and attract

stakeholders towards the application of I4.0 technology, create a

comprehensive ecosystem for I4.0 application process by the industry

and transform the manufacturing sector holistically.

Proposed

In order to achieve the Industry4WRD Policy aspirations and goals, the

following tax incentives be given:-

(a) Income Tax Incentive For I4.0 Readiness Assessment (I4.0-RA)

Tax deduction on I4.0-RA expenses for up to RM27,000 paid to

Malaysian Productivity Corporation.

(b) Income Tax Incentive For Industry4WRD Vendor Development

Programme

Double deduction on operating expenditure incurred in

implementing the Industry4WRD Vendor Development Program

such as costs in relation to product development, upgrading

capabilities of vendors and skill training of vendors, as verified by

the Ministry of International Trade and Industries (MITI).

The qualifying expenditure are capped at RM1 million per year for 3

consecutive years of assessment.

(c) Income Tax Incentive For Human Capital Development

(i) Further deduction on scholarships provided by companies to

Malaysian students pursuing studies at technical and

vocational levels, diplomas and degrees in the fields of

engineering and technology. The eligibility criteria of

students:-

a) a Malaysian and resident in Malaysia;

b) receives full time course of study;

c) has no means on his own; and

d) whose parents or guardian have total monthly income

not exceeding RM8,000 per month.

(ii) Further deduction on expenses incurred by companies

participating in the National Dual Training Scheme for the

I4.0 program approved by the Ministry of Human Resources;

(iii) Tax deduction on expenses for development of new I4.0

technology and engineering courses by the Private Higher

Education Institutions. The new courses must be verified by

Ministry of Education;

(iv) Further deduction on expenditure incurred by a company in

upgrading and developing its employees technical skills in

I4.0 technology for training programmes approved by the

Malaysian Investment Development Authority (MIDA);

4. TAX INCENTIVES

15

4.5 Tax Incentives for

Industry4WRD –

Cont’d

Proposed

(c) (v) Further deduction on expenditure incurred by a company in

conducting internship programme approved by the Ministry of

Human Resources for undergraduate students in fields of

engineering and technology; and

(vi) Tax deduction on equipment and machinery contributed by

companies to Skills Development Centres, Polytechnics or

Vocational Colleges certified by the Ministry of Human

Resources or the Ministry of Education.

Effective

Item

(a) From year of assessment 2019 to year of assessment 2021.

(b) For Memorandum of Understanding (MOU) signed between

company and MITI from 1 January 2019 to 31 December

2021.

(c)(i) From year of assessment 2019 to year of assessment 2021.

(c)(ii) For programmes implemented from 1 January 2019 to 31

December 2019.

(c)(iii) From year of assessment 2019 to year of assessment 2021.

(c)(iv) For companies participating in the Readiness Assessment

Intervention Plan from 1 January 2019 to 31 December 2019.

(c)(v) From year of assessment 2019 to year of assessment 2021.

(c)(vi) For contributions made from 1 January 2019 to 31 December

2021.

4.6

Tax Incentive for

Employers to Employ

Senior Citizens and

Ex-convicts

Existing

Remuneration paid by employers who employ disabled persons that are

certified by department of Social Welfare and workers affected by

accidents/ critical illnesses that are certified by The Medical Board of the

Social Security Organization (SOCSO) is given further tax deduction.

Proposed

Employer who employs senior citizens (above 60 years old) or ex-

convicts on full time basis whose monthly remuneration does not exceed

RM4,000 is given further tax deduction on the remuneration paid. Effective


4.7

Withdrawal of

Investment Tax

Allowance (ITA)

Existing

ITA given shall be withdrawn in the year of disposal if the relevant

qualifying expenditure is disposed off at any time within 2 years from

the date of acquisition of that qualifying expenditure.

Proposed

ITA given shall be withdrawn in the year of disposal if the relevant

qualifying expenditure is disposed off at any time within 5 years from

the date of acquisition of that qualifying expenditure.

Effective


4. TAX INCENTIVES

16

4.8

Tax Incentives for

Venture Capital

Existing

Tax incentives for the venture capital industry are as follows:-

(a) Venture Capital Management Corporation (VCMC)

A VCMC registered with the Securities Commission of Malaysia

(SC) is exempted from tax on management fees, performance fees

and the statutory income derived from the share of profits from a

Venture Capital Company (VCC) on any investment made by the

VCC.

(b) Venture Capital Company (VCC)

A VCC which has at least 50% of the funds invested in a Venture

Company (VC) in the form of seed, start up and early stage funds is

eligible for income tax exemption on the statutory income derived

from all sources of income other than interest income arising from

deposit placements. The exemption is given for a period of 5 years

from the years of assessment 2018 to 2022.

(c) Investment In VC

A company or an individual investing in a VC is given tax deduction

equivalent to the amount of investment made in the VC in arriving

at the adjusted income. The tax deduction is given at the time the

investment is disposed of as certified by the SC, and not at the time

the investment is made and the investment was made at least two

years prior to the date of its disposal.

(d) Investment in VCC funds

A company or an individual with business income investing in the

VCC funds created by a VCMC be given tax deduction equivalent to

the value of investment made subject to a maximum amount of

RM20 million per year for each individual or company.

The above incentives are eligible to applications received by the

Securities Commission Malaysia between the period commencing from 1

January 2018 up to 31 December 2018.

Proposed

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

one year.

Effective

Applications received by the SC from 1 January 2019 to 31 December

2019.

4. TAX INCENTIVES

17

4.9

Definition of

Research and

Development (R&D)

– to Align with

OECD

Existing

There is no definition of ‘research and development’ in the Act. Public

Ruling 5/2004 – Double Deduction Incentive on Research Expenditure

provides a definition of ‘research’ which based on the definition of the

PIA.

Proposed

The definition of “research and development” be introduced in Section 2

of the Act and redefined under the PIA as follows:-

“research and development” means any systematic, investigative and

experimental study that involves novelty or technical risk carried out in

the field of science or technology with the object of acquiring new

knowledge or using the results of the study for the production or

improvement of materials, devices, products, produce, or processes, but

does not include:-

(i) quality control or routine testing of materials, devices or products;

(ii) research in the social sciences or the humanities;

(iii) routine data collections;

(iv) efficiency surveys or management studies;

(v) market research or sales promotion;

(vi) routine modifications or changes to materials, devices, products,

processes or production methods; or

(vii) cosmetic modifications or stylistic changes to materials, devices,

products, processes or production methods.

Effective


4.10 Changes to Tax

Exemption on

Wholesale Money

Market Funds

Existing

Interest paid or credited by a bank, Islamic Bank and Development

Financial Institution to unit trust fund and Wholesale Money Market

Funds (meeting SC’s criteria) are exempted from tax.

Proposed

Tax exemption shall not apply to the interest paid or credited to a

Wholesale Money Market Funds (amendment to Paragraph 35 Schedule

6).

Effective

From 1 January 2019.

4. TAX INCENTIVES

18

4.11 Review of Contract

R&D Incentive

Existing

Contract research and development company is eligible to apply for the

following tax incentives:

(a) Pioneer status with income tax exemption of 100% of the statutory

income for 5 years; or

(b) Investment tax allowance of 100% of qualifying capital expenditure

incurred within 10 years that can be offset against 70% of the

statutory income for each year of assessment.

Proposed

New conditions be introduced where at the time of application for the

incentives, a contract R&D company is required to have an adequate

number of full time employees and have incurred adequate amount of

annual operating expenditure in Malaysia for the activity relating to

research and development.

Transitional provision

Where pioneer status has been granted earlier, the new requirements must

be met by these companies as follows:-

Pioneer status granted Compliance with the new requirements by

on or before 16.10.2017 1 July 2021

after 16.10.2017 1 January 2019

Further, pioneer income of a contract R&D company shall not include any

income derived from an intellectual property right if it is receivable as

consideration for the commercial exploitation of that right.

“intellectual property right” means a right arising from any patent, utility

innovation and discovery, copyright, trade mark and service mark,

industrial design, layout-design of integrated circuit, secret processes or

formulae and know-how, geographical indication and the grant of

protection of a plant variety, and other like rights, whether or not

registered or registrable.”

Effective

1 January 2019.


19

5.1 Acquisition

Price of

Property

Acquired prior

to 1 January

2000

Existing

Under Schedule 2 of the RPGTA, where the disposal of a chargeable asset

which was previously acquired prior to 1 January 1970 is subject to tax, the

acquisition price of the asset shall be the market value as at 1 January 1970.

Proposed

A new paragraph 2A of the Schedule 2, RPGTA be introduced to provide a

new cut-off date to determine the acquisition price of an asset which has been

changed to 1 January 2000. Reference to 1 January 1970 shall be construed as

reference to 1 January 2000.

Effective

1 January 2019.

5.2 Disposal of

Asset by Way of

Gift

Existing

Pursuant to Paragraph 12(2) Schedule 2 of the RPGTA, where an asset is

disposed of by way of a gift where the donor and recipient are husband and

wife, parent and child or grandparent and grandchild:-

(a) The donor shall be deemed to have received no gain and suffered no

loss on the disposal if the donor is a citizen; and

(b) The recipient shall be deemed to acquire the asset at an acquisition price

equal to the acquisition price paid and permitted expenses incurred by

the donor if the gift is made within 5 years after the date of

acquisition by the donor.

Proposed The time restriction on when the gift is made under (b) above be deleted.

Effective

1 January 2019.


20

5.3 Review of

Real

Property

Gains Tax

(RPGT)

Rates

Existing

RPGT rates on gains from disposal of chargeable assets (including shares in real

property company) are as follows:-

Disposal of chargeable

asset:

Effective RPGT rates

Companies Other Than Company and

Other Than Non-Citizen

and Non-Permanent

Resident Individual

Non-Citizen

and Non-

Permanent

Resident

Individual

Within 3 years from

date of acquisition 30% 30% 30%

In the 4th year from


In the 5th year from


In the 6th and

subsequent years, from

date of acquisition

5% 0% 5%

Proposed

The RPGT rates on gains from disposal of chargeable assets in the 6th and subsequent

years, from date of acquisition (including shares in real property company) be revised

as follows:-

Disposal of chargeable

asset

Effective RPGT rates

Companies Other Than Company

and Other Than Non-

Citizen and Non-

Permanent Resident

Individual

Non-Citizen and

Non- Permanent

Resident

Individual

In the 6th and

subsequent years, from

date of acquisition

10% 5% * 10%

* (i) Pursuant to Real Property Gains Tax (Exemption) Order 2018 [P.U.(A) 360], RPGT

exemption is given to Malaysian citizens for the disposal of chargeable assets (other

than shares in a real property company) costing RM200,000 and below.

(ii) Pursuant to Real Property Gains Tax (Exemption) (No.3) Order 2018 [P.U.(A) 372],

RPGT exemption is given to any individual who is citizen or permanent resident

who disposed of a chargeable asset (other than shares in the real property company)

where:

a) the contract for the disposal of a chargeable asset is executed before 1 January

2019; and

b) the contract for the disposal of the chargeable asset is conditional where the

approval by the Government or a State Government for the disposal of the

chargeable assets is obtained in the year 2019 or any year thereafter.

Effective

1 January 2019.

6. STAMP DUTY

21

6.1

Review of Stamp

Duty Rates

for Transfer of

Real Property

Stamp duty rates on instrument of conveyance, assignment or transfer of any

property (except stock, shares and marketable securities) be revised as

follows:-

Value of Real Property Stamp Duty Rate (%)

Current Proposed

First RM100,000 1 1

RM100,001 to RM500,000 2 2

RM500,001 to RM1,000,000 3 3

RM1,000,001 and above 3 4*

* For instrument of transfer that is stamped between the period 1 January

2019 to 30 June 2019 and where the value of the property is between

RM1,000,000 to RM2,500,000, the stamp duty rate on the band shall be

remitted by 1%.

Effective

1 January 2019.

6.2

Review of Stamp

Duty Exemption

for the Purchase

of First

Residential

Property

Existing

(a) Purchase of First residential property with a price not exceeding

RM300,000

100% stamp duty exemption on the instrument of transfer and loan

agreement.

(b) Purchase of First residential property with a price from RM300,001 -

RM500,000

100% stamp duty exemption on the instrument of transfer and loan

agreement but limited to the first RM300,000 of the value of residential

property. The remaining balance of the value is subject to the prevailing

rate of stamp duty.

Exemptions under (a) and (b) above are effective for sale and purchase

agreement (SPA) executed from 1 January 2017 to 31 December 2018.

(c) Purchase of First residential property with a price above RM500,000

There is currently no stamp duty exemption.

Proposed and Effective date

(a) Stamp duty exemption under (a) above be extended to SPA executed

from 1 January 2019 to 31 December 2020.

(b) Stamp duty exemption under (b) above be extended to SPA executed

from 1 July 2019 to 31 December 2020.

(c) 100% stamp duty exemption be given on instrument of transfer only

for the purchase of a first residential property priced between

RM300,001 and RM1 million from any housing developer, for SPA

executed from 1 January 2019 to 30 June 2019.

6.3 Stamp Duty to be

Imposed on Hire

Purchase

Agreement

Existing

SA 1949 does not cover conventional hire purchase agreement specifically.

Proposed

Item 22(6) First Schedule of the SA be expanded to impose stamp duty

(RM10) on conventional hire purchase agreements.

Effective

The coming into operation of the Finance Act 2018.

6. STAMP DUTY

22

6.4 Redefinition of

Small and

Medium

Enterprise for

Stamp Duty

Purposes

Existing

Section 2 of the SA 1949 define "small and medium enterprise" as follows:-

(a) in relation to the manufacturing, manufacturing related services and

agro-based industries sectors, an enterprise with full-time employees

not exceeding one hundred and fifty people or annual turnover not

exceeding twenty-five million ringgit; and

(b) in relation to the services, primary agriculture, and information and

communication technology sectors, an enterprise with full-time

employees not exceeding fifty people or annual turnover not exceeding

five million ringgit.

Proposed

Small and medium enterprise be redefined as follows:-

(a) in relation to the manufacturing activities, an enterprise with sales

turnover not exceeding fifty million ringgit or full-time employees not

exceeding two hundred people; or

(b) in relation to the services, and other sectors, an enterprise with sales

turnover not exceeding twenty million ringgit or full-time employees

not exceeding seventy-five people.

Effective


6.5 Stamp Duty to be

Imposed on

Constitution of a

Company

Existing

Under item 10 and 53, First Schedule of SA, stamp duty of RM100 each is

imposed on Articles of Association and Memorandum of Association.

Proposed

Item 10 and 53, First Schedule of SA be deleted and a new item 29A be

introduced to impose stamp duty of RM200 on the “Constitution of a

Company”.

Effective


6.6 Review of Stamp

Duty Exemption

in Cases of

Reconstruction

or Amalgamation

of Companies

Existing

Section 15 of Stamp Act 1949 provides relief from stamp duty in cases of

reconstruction or amalgamation of companies under certain conditions.

Under Section 15(5), the relief from stamp duty will be withdrawn if there are

certain breaches in the beneficial ownership of shareholding resulting from

the reconstruction or amalgamation within a period of 2 years.

Proposed

(a) The limiting period of beneficial ownership of 2 years be extended to 3

years.

(b) In the event of any breach of the 3-year or other qualifying conditions,

nullifying any exemption of stamp duty given, companies enjoying the

exemption shall notify the Collector of such breaches within 30 days

from the date of such occurrence.

Effective


6. STAMP DUTY

23

6.7 Review of Stamp

Duty in cases of

Transfer of

Property between

Associated

Companies

Existing

Section 15A of Stamp Act 1949 provides relief from stamp duty in the case

of transfer of beneficial interest in property between associated companies.

For the purposes of Section 15A, a company is considered to be associated if

one company is the beneficial owner of not less than 90% of the issued share

capital of the other, or that a third company is the beneficial owner of not less

than 90% of the issued share capital of each of the transferee and transferor

companies.

To qualify for the stamp duty exemption, the following conditions must be

satisfied:-

(a) the consideration, or any part of the consideration, for the transfer must

not be provided or received, directly or indirectly, by a person other

than a company which at the time of the execution of the instrument

was associated with either the transferor or the transferee;

(b) the interest in the property was not previously transferred, directly or

indirectly, by other person;

(c) the transferor and the transferee must not ceased to be associated by

reason of a change in the percentage of the issued share capital of the

transferee in the beneficial ownership of the transferor or a third

company.

Proposed

Additional conditions be imposed for the stamp duty exemption under

Section 15A as follows:-

(a) the transfer of the property of the associated companies is to achieve

greater efficiency in operation;

(b) the transferee company must be incorporated in Malaysia.

(c) The transferor and the transferee must not ceased to be associated by

reason of a change in the percentage of the issued share capital of the

transferee in the beneficial ownership of the transferor or a third

company within the period of 3 years from the date of the conveyance

or transfer of the property;

(d) the transferee company must not dispose the property that it has

acquired within 3 years from the date of the conveyance or transfer of

the property.

Companies that are granted stamp duty exemption under this section and if it

is subsequently found that any declaration or other evidence furnished is

untrue, the exemption shall be revoked and the stamp duty shall be

chargeable together with interest at the rate of 6% per annum.

Where any claim of duty exemption has been nullified by breaches of 3-year

holding period or other conditions under Section 15A(4), all parties to the

instruments of transfer shall notify the Collector of such breaches within 30

days from the date of such occurrence.

For the purpose of claiming the stamp duty exemption under this section, the

collector requires the delivery of the statutory declaration by:

(i) Advocate and Solicitor – Peninsular Malaysia

(ii) Advocate of High Court – Sabah and Sarawak

Effective


6. STAMP DUTY

24

6.8

Stamp Duty

Exemption for

Perlindungan

Tenang Products

Existing

Insurance policies and takaful certificates attract stamp duty of RM10 for

each policy/certificate. Stamp duty exempted for policies with the sum

insured of not exceeding RM5,000.

Perlindungan Tenang products were launched in December 2017 which is

affordable and accessible with simple claiming process. These products are

aimed to enable Malaysians especially from the lower income group to have

insurance protection which includes life insurance, fire and flood with low

premium.

Proposed

Stamp duty exemption be given for insurance policies and takaful

certificates under the Perlindungan Tenang products with yearly

premium/contribution not exceeding RM100.

Effective

For policies/certificates issued from 1 January 2019 until 31 December

2020.

7. INDIRECT TAXES

25

7.1

Introduction,

Definition and

Review of Scope of

Imported Taxable

Service

Existing

“Imported taxable service” is not defined nor included in the scope of the

Service Tax Act 2018 (STA).

Proposed

The scope of service tax be widened to include any imported taxable

service as follows:-

(a) Services imported by business (B2B), where the recipient of the

imported service shall account, declare and pay the service tax to the

RMCD; and

(b) Digital products and services imported by consumers (B2C), where

the foreign suppliers who provide such digital products and services

to consumers in Malaysia shall register, charge service tax on the

services provided and pay the service tax collected to the RMCD (as

proposed in Appendix 20 of the Budget Speech).

Consequential proposals/amendments be introduced as follows:-

(i) Definition

“Imported taxable service” be defined as any taxable service

acquired by any person in Malaysia from any person who is outside

Malaysia.”

(ii) Value of imported taxable services

Section 9(d) be introduced to provide that the value of imported

taxable services shall be as prescribed by the MOF;

(iii) Date when service tax is due

Section 11(1) be enhanced to provide that the service tax on an

imported taxable service shall be due at the time when payment is

made or invoice is received for the service, whichever is the earlier;

(iv) Duty to keep records

The compliance on duty to keep records under Section 24 be

extended to include all records of imported taxable service and it

shall also apply to any person other than a taxable person who, in

carrying on his business, acquires any imported taxable service;

(v) Furnishing of declaration and payment of service tax due

A new section 26A be introduced to govern the compliance of

furnishing of declaration and payment of service tax due and payable

by person other than taxable person on the imported taxable

services;

Penalty on failure to comply

Any person who fails to comply with the above, commits an offence

and shall, on conviction, be liable to a fine not exceeding RM50,000

or to imprisonment for a term not exceeding 3 years or to both

The punitive provisions for failure to make service tax payment

within the stipulated due date by person other than taxable person on

the imported taxable services be introduced as follows:-

7. INDIRECT TAXES

26

7.1 Introduction,

Definition and

Review of Scope of

Imported Taxable

Service – Cont’d

Proposed – Cont’d

Penalty on failure to comply

Section Period of default Penalty rate

26A(4)(a) First 30 days after the

stipulated due date

10% of the amount of service tax

which remains unpaid

26A(4)(b) Second 30 days after

the stipulated due date

Additional 15% of the amount of

service tax which remains unpaid

26A(4)(c) Third 30 days after the

stipulated due date

Additional 15% of the amount of

service tax which remains unpaid (vi) Power of DG to assess

Section 27 be amended to provide that the DG’s power to assess is

extended to include any person other than a taxable person who, in

carrying on his business, acquires any imported taxable service but

fails to furnish a declaration under section 26A or furnishes a

declaration which appears to the DG to be incomplete or incorrect.

Effective

Item (a): From 1 January 2019.

Item (b): From 1 January 2020.

Item (i) to (vi): From 1 January 2019.

7.2 Newly Prescribed

Taxable Services

Existing

Taxable services are prescribed by the Minister under Service Tax

Regulations 2018.

Proposed

(a) The prescribed taxable services be expanded to include the following

services:-

Category Services

I

Amusement park service

Brokerage and underwriting services

Cleaning services

G Training or coaching services under consultancy

services (b) Where there is a change in any taxable service as specified in the

First Schedule , the effect of the change on service tax shall be as

follows:-

(i) In the case where a service is newly specified as a taxable

service and the provision of such service is spanning after the

change, service tax shall be charged on the proportion of the

service which is attributed to the part of the period after the

change.

(ii) In the case where payment is received before 1 January 2019 in

connection with the newly prescribed services and such taxable

service will only be provided on or after the date of change, no

service tax shall be charged on the payment received.

Effective

1 January 2019.

7. INDIRECT TAXES

27

7.3 Redefinition of

Management

Services for Service

Tax Purposes

Existing

Provision of all types of management services including project

management or project coordination is prescribed as taxable services

under Category G, Item (i) of the Service tax Regulations 2018.

Proposed

The management services for service tax purposes be redefined as

provision of any of the following management services:-

(a) Project management services, full or part of the project;

(b) Tourism management services;

(c) Logistics management services;

(d) Maintenance management services;

(e) Warehousing management services;

(f) Collection and debt management services;

(g) Car park management services;

(h) Sports facilities management services;

(i) Secretarial management services;

(j) Any management services other than specified in (a) to (i) made on

behalf of another person. Effective

1 January 2019.

7.4 Service Tax

Exemptions for

Specific Business-

To-Business (B2B)

Service Tax

Registrants

Existing Service tax exemption is only given on the professional services provided

by any company to its related companies within the same group of

companies.

Proposed

Service tax exemption be given to a service tax registered person under

the following professional and other service provider groups in Schedule

1, Service Tax Regulation 2018, who acquires the same taxable services

from another service tax registered person.

Item Taxable person Item Taxable services

G(1) Advocates and

solicitors

G(a) Legal services

G(2) Syarie Lawyer G(b) Legal services on Islamic

matters

G(3) Public Accountant G(c) Accounting, auditing,

bookkeeping, consultancy

G(4) Surveyors, valuers,

appraisers, estate

agent

G(d) Valuation, appraisal, estate

agency, consultancy

G(5) Professional engineer G(e) Engineering consultancy

services

G(6) Architect G(f) Architectural consultancy

services

G(7) Consultant G(g) Professional consultancy

G(8) Information

technology

G(h) Information technology

services

G(9) Management G(i) Management services

I(8) Advertiser I(8) Advertising services

7. INDIRECT TAXES

28

7.4 Service Tax

Exemptions for

Specific Business-

To-Business (B2B)

Service Tax

Registrants – Cont’d

Effective

1 January 2019. In the case the provision of such service is spanning

after the change, service tax shall be charged on the proportion of the

service which is attributed to the part of the period before 1 January

2019.

7.5 Determination of

Sale Value of

Taxable Goods

Existing Where any registered manufacturer under the Sales Tax Act 2018

receives taxable goods from any person to be manufactured and

subsequently returns the goods so manufactured to such person, the sale

value of the goods so manufactured shall, subject to approval of the DG,

be the amount that the manufacturer charges for work performed by him.

Proposed

The determination of the above sale value of taxable goods be extended

to any manufacturers who receive taxable goods from any person to be

manufactured and subsequently returns the goods so manufactured to

such person.

Effective

1 January 2019.

7.6 Power to Assess

under Sales Tax Act

Existing The DG may assess to the best of his judgment the amount of sales tax

due and payable, and the penalty payable under subsection 27(9), if any,

by the taxable person and shall forthwith notify him of the assessment

in writing.

Proposed

The DG’s power to assess be extended to include any person and not

limiting to a taxable person.

Effective

1 January 2019.

7.7 Deduction of Sales

Tax

Proposed

Sales tax in respect of taxable goods purchased by any registered

manufacturer is given deduction based on the following rates: -

Category Rate of sales tax

deduction

For any taxable goods charged and

levied with sales tax at the rate of 5%

2% of the total value of the

taxable goods purchased

For any taxable goods charged and

levied with sales tax at the rate of 10%

4% of the total value of the

taxable goods purchased

Conditions and manner of sales tax deduction is prescribed under the

Sales Tax (Amendment) Regulations 2018 [P.U.(A) 399].

Any registered manufacturer may make an application for the deduction

of sales tax paid in respect of taxable goods purchased by the registered

manufacturer which are raw materials, components or packaging

materials used solely in the manufacturing of his taxable goods.

Effective

1 January 2019.

7. INDIRECT TAXES

29

7.8

Excise Duty on

Sugar Sweetened

Beverages

Existing There is no excise duty imposed on sugar sweetened beverages.

Proposed

An excise duty of RM0.40 per litre be charged on the sugar sweetened

beverages as follows:-

(a) Fruit juices and vegetable juices whether or not containing added

sugar or other sweetening substances under the tariff heading of

20.09, which contains sugar exceeding 12 grams per 100 millilitres;

and

(b) Beverages including carbonated drinks containing added sugar and

other non-alcoholic beverages under the tariff heading of 22.02,

which contains sugar exceeding 5 grams per 100 millilitres.

Effective

1 April 2019.

7.9

Review of Import

Duty Rate on

Bicycles

Existing Bicycles are subject to import duty rates as follows:-

Tariff Code Description Import Duty

Rates

8712.00.10 00 Racing bicycles 0%

8712.00.20 00 Bicycles designed to be ridden by children 0%

8712.00.30 00 Other bicycles 25%

Proposed

The import duty rate for bicycles under the tariff code 8712.00.30 00 be

reduced from 25% to 15%.

Effective

1 January 2019.

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

Suite 1102, Wisma Tun Sambanthan

No.2, Jalan Sultan Sulaiman

50000 Kuala Lumpur

Tel : 03-22732688

Fax : 03-22742688 Printed by: Akitiara Corporation Sdn Bhd

1 & 3, Jalan TTP 1/3

Taman Industri Puchong, Batu 12

47100 Puchong, Selangor

Tel : 03-80619988

Fax : 03-80619933

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

~ IPOH ~

Folks DFK & Co. Azman, Wong, Salleh & Co.

48A, Persiaran Greenhill 30450 Ipoh, Perak


Tel: 05-2551606, 05-2547807 Fax: 05-2535877

~ JOHOR ~

Folks DFK & Co. Azman, Wong, Salleh & Co. Suite 2 & 3, Level 20, Menara KOMTAR, Johor Bahru City Centre,

80000 Johor Bahru


Tel: 07-2234753, 07-2234530

Fax: 07-2232723

Folks Management Services Sdn Bhd Suite 5-02, Level 5, Plaza DNP

59, Jalan Dato' Abdullah Tahir

80250 Johor Bahru


Tel: 07-3333502

Fax: 07-3333601 ~ AFFILIATES’ OFFICES ~ We have affiliate offices in the following cities:

• PENANG

• KUCHING • SIBU

• SARIKEI

• MIRI • BINTULU

• KOTA KINABALU

Folks DFK & Co. / Azman, Wong, Salleh & Co. are independent member firms of DFK International

with over 400 offices across the world

www.dfk.com

mailto:[email protected]

http://www.folksdfk.com/

http://www.dfk.com/

dfk international is a top 10 international …...dfk international is a top 10 international...

Documents