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MALAYSIA TAX BUDGET 2010: ENHANCED TAX INCENTIVES FOR HEALTHCARE COMPANY.

slang — Wed, 28 Oct 2009 10:36:53 +0000

It is proposed that 100% of the value of increase in exports would be exempted from tax in respect of services provided to foreign clients in Malaysia. The value of the increase in exports is taken to mean the difference of the value of the qualifying services exported in the current period and that of the immediately preceding period.

For the purpose of this incentive, foreign clients are defined as:

i) a company, partnership, an organisation or a cooperative society incorporated or registered outside Malaysia;

ii) non-Malaysian citizens who do not hold Malaysian work permits; or

iii) Malaysian citizens who are considered as non-residents living abroad.

The proposal is effective for a five-year period from 2010 to 2014.

MALAYSIA TAX BUDGET 2010: TAX INCENTIVE IN RELATION TO THE GREEN BUILDING INDEX (GBI)

slang — Tue, 27 Oct 2009 15:30:55 +0000

Green Building Index was developed by Pertubuhan Akitek Malaysia and the Association of Consulting Engineers Malaysia. It was launched on May 21, 2009

Under the GBI assessment framework:

points will be awarded for achieving and incorporating environment-friendly features which are above current industry practice.
Two different sets of GBIs have been developed for both commercial and residential properties.
The assessment criteria include:

(a) Energy and water efficiency

(b) Indoor environmental quality

(d) Usage recyclable and environment friendly materials and resources

(e) Adoption of new technologies

As a measure to encourage the construction of buildings using green technology, it is proposed that the owners of buildings awarded the GBI certificate be given exemption equivalent to 100% of the additional capital expenditure incurred to obtain the GBI certificate.

This incentive is applicable on new buildings and upgrading of existing buildings.

The proposal is effective for buildings awarded with GBI certificate from Oct 24, 2009 until Dec 31, 2014.

Further details on GBI can be viewed at http://www.greenbuildingindex.org.

MALAYSIA TAX BUDGET 2010: EXEMPTION FROM STAMP DUTY ON THE PURCHASE OF BUILDING THAT INCORPORATE WITH “GREEN TECHNOLOGY”

slang — Tue, 27 Oct 2009 15:29:20 +0000

In the Budget 2010, stamp duty exemption would be available for buyers of buildings and residential properties that have been issued a Green Building Index (GBI) certificate.

Details:

The GBI is a rating index for environmentally-friendly buildings.
The stamp duty exemption would only apply to buildings or residential properties bought directly from real property developers and the exemption is only given once to the first owner of the building.
It may not apply to existing buildings that have subsequently been granted the GBI certificate.
The amount of the stamp duty exemption is given only on the additional cost incurred by the property developer to obtain the GBI certificate, and not on the full value of the building.
The exemption will apply for sales and purchases agreements executed from Oct 24 2009 until Dec 31, 2014.

MALAYSIA TAX BUDGET 2010: EXPENSES INCURRED ON THE REGISTRATION OF TRADEMARKS IN MALAYSIA WILL BE ALLOWED AS TAX DEDUCTION FOR PURPOSES OF INCOME TAX COMPUTATION.

slang — Tue, 27 Oct 2009 15:27:37 +0000

The proposed tax deduction on the expenses incurred on the registration of trademarks will only apply to companies which have a paid-up capital in respect of ordinary shares of RM2.5mil and less at the beginning of the taxable period.

Details:

The company should not be related to a company which has a paid-up capital in respect of ordinary shares of more that RM2.5mil at the beginning of the taxable period.
In addition, the company should not have full-time employees exceeding 150 persons nor annual sales turnover exceeding RM25mil respectively.
The registration expenses include fees or payments made to trademark agents registered under the Trade Marks Act 1976.
This deduction is essentially targeted for small and medium enterprises. This proposal is effective from Year of Assessment 2010 to 2014.

MALAYSIA TAX BUDGET 2010 BUSINESS HIGHLIGHTS

slang — Mon, 26 Oct 2009 09:16:40 +0000

The following is 2010 Budget Highlights in brief:

Malaysian Economy:

Malaysia economy to grow 2-3 per cent in 2010
Mining to grow 1.1 per cent, manufacturing sector 1.7 per cent, agriculture 2.5 per cent, construction 3.2 per cent and service 3.6 per cent.
Private consumption expand 2.9 per cent while private investment 3.4 per centPer capita income to increase by 2.5 per cent to RM24,661
Government to allocate RM899 million to intensify tourism industry.
Government to enhance tax incentives for healthcare service providers who offer services to foreign health tourists with income tax exemptions of 100 per cent on the value of increased exports from 50 per cent previously.
TNB to spend RM5 billion to implement electricity generation, transmission and distribution projects in 2010.
Public-private collaborations to include an integrated immigration, customs and quarantine complex in Bukit Kayu Hitam, construction of six UiTM campuses and the development of MATRADE centre
1Malaysia Development Bhd (1MDB) will establish a corporate social responsibility fund totalling RM100 million as a start to finance community activities
RM14.8 billion is allocated to manage, build and upgrade hospitals and clinics
Government allocates RM2.3 billion to build and upgrade infrastructures in rural areas.
Government provides RM41 million to improve income and quality of life of the Orang Asli Community by implementing various projects.
Budget 2010 allocations totalled RM191.5 billion, of which RM138.3 billion is for operating expenditure and RM53.2 billion for development expenditure.
Federal Government revenue in 2010 to decline by 8.4 per cent to RM148.8 billion.
Budget deficit at 5.6 per cent of GDP compared with 7.4 per cent in 2009

Tax Impact on Individual Taxpayer:

Maximum income tax rate to be further reduced to 26 per cent from 27 per cent effective from the 2010 year of assessment.
Personal tax relief will be increased to RM9,000 from RM8,000 effective from the 2010 year of assessment.
Existing personal tax relief of RM6,000 for EPF contributions and life insurance premiums be raised to RM7,000.
Income tax on Employment income of Malaysians and foreign knowledge workers residing and working in Iskandar Malaysia be imposed at 15 per cent compared with the maximum 26 per cent for the rest of the country.
Tax relief on broadband subscription fee for individual taxpayer up to RM500 a year from 2010 to 2012
Civil servants are eligible to apply for computer loans once in every three years and up to a maximum of RM5,000 from the government once in every five years
The Government will issue 1Malaysia Sukuk totalling RM3 billion.
The Government will establish the 1Malaysia Retirement Scheme to be administrated by EPF.
In January 2010 an EPF scheme that enables EPF contributors to utilise current and future savings in Account 2 to promote house ownership.
Employees EPF contributions will be raised again to 11 per cent on a voluntary basis with immediate effect. However, from Jan 1, 2011 employees’ EPF contribution will revert to 11 per cent.
Real Property Gain tax of five(5%) per cent be imposed on gains from the disposal of real property from 1 January 2010. This applies all which includes individual and corporation.

Others:

Maximum tax rate for cooperatives will be reduced to 26 per cent while the fixed tax rate for non-resident individuals will be cut to 26 per cent.
Allow 100 per cent foreign equity participation in corporate finance and financial planning companies compared with the present requirement of at least 30 per cent local shareholding.
The government is currently at the final stage of completing the study on the implementation of goods and services tax (GST), particularly to identify the social impact of GST on the people. The purpose of this study is to ensure that if GST needs to be implemented to stabilised Government finance, it will not burden the population. If the government implements GST, it will replace the current sales tax and service tax as well as exemption will be granted to the low income group. The GST rate to be imposed will be lower than the current sales tax and service tax rates.
Formulate Halal Act in collaboration with State Islamic Religious Councils.
To corporatise the Halal Industry Development Corporation as an agency under MITI
Intensify Halal Certification by the Islamic Development Department of Malaysia (JAKIM) by collaborating with international institutions to obtain standards certification such as HACCP ad GMP.
To provide RM24 million to develop halal products anti-smuggling system at three entry points and three main ports.
Allocate RM137 million to upgrade and improve drainage and irrigation infrastructures in paddy fields involving 180,000 farmers.
To provide RM70 million to build the Paya Peda Dam Project in Terengganu to increase water supply capacity to paddy irrigation scheme in Besut.
Allocate RM82 million to modernise aquaculture industry and conduct entrepreneurship training scheme for aquaculture breeders with focus on production of fish fry and ornamental fish.
The stock market will be further liberalised to enhance its efficiency as well as attract domestic and foreign investment. For this purpose, the government will undertake the following measures: First, liberalise the commission sharing arrangements between stockbrokers and remisiers in 2 stages to encourage retail participation in the stock market. The first stage, which takes effect immediately, allows flexible brokerage sharing at a minimum rate of 40 percent for remisiers. The commission sharing will be fully liberalised in the second stage, effective 1 January 2011.
Islamic banking assets account for 18.8 per cent of Malaysia’s total banking assets while takaful industry assets contribute 7.7 per cent of total insurance and takaful industry assets. To ensure rapid development of financial services, particulalrly in Islamic finance, the government proposes that the existing tax incentives be extended to 2015.
Effective Jan 1 2010, government agrees to allow agencies to retain 50 per cent of rentals received while the remaining 50 per cent will be remitted to the government as revenue.
The Government will implement fuel subsidy management system in early 2010.

FRS 112-Reconciliation Of Effective Tax Rate To Statutory Rate

slang — Tue, 21 Oct 2008 04:07:51 +0000

In FRS112 on Income Taxes or IAS 12, there is a requirement for a reconciliation statement between the Effective tax rate (ETR) to the Statutory Rate in the notes to the financial statement wherein the following are normally taken up:

Non allowable expenses
Deferred tax assets not recognized
Expenses not allowed for tax purposes
Non taxable income
Differential tax rate-SME’s ( small & medium enterprise), foreign subsidiaries
Over/under provision for prior years
Changes in tax rates of overseas subsidiaries
Changes in deferred tax due to tax rate changes

The idea of this reconciliation is allow transparency for outsiders/shareholders to understand whats the company has done to manage its taxation namely how much the actual existing taxation rate compared to the norm statutory rate. An excessive variance between ETR versus statutory rate is alarming and should be critically look at. However, sad to say, many of us tend to ignore or take lightly of such review of the reconciliation.

My two cents is that whether you are an accountant, financial controller or CFO or top management, we should look at this reconciliation more carefully

Why is this so?

Effective tax rate (ETR) is very important. In my earlier article on Economic value added (EVA), it is mentioned that ETR is one way to improve EVA as ETR is an outright cash flow where, when we manage to plan it carefully, will increase shareholder value / EVA.

Deliberate investment in tax exempted industrial areas, looking ahead to plan for future material non-allowable expenses into allowable type, ensuring certain subsidiaries of the group enjoy the SME’s status by making sure the threshold on authorized capital not exceeded, might be some suggestions to reduce ETR

So look out carefully this reconciliation in your company’s notes to the financial statement and please plan ahead to try to lower ETR to enhance company’s shareholder value. Incidentally, one part of the kpa/kpi of an inhouse tax manager is to reduce the ETR of the group/company.

Recent Impact By The Single-Tier Corporate Tax System

slang — Tue, 02 Oct 2007 09:04:35 +0000

In earlier article the mechanism of the single-tier corporate tax system as announced in the Budget 2008 on Sept 7 has been discussed.

Reported in the Press, as a result of the effect of the new system on dividends this will pose some of the following impact on:-

Corporate:

Chemical paint maker Acoustech Bhd has had to change its dividend declaration.
Another main board-listed counter, PLUS Expressways Bhd, had its valuations revised upwards by analysts.Citi Investment Research said in a Sept 19 report that PLUS future earnings “could be boosted 22% on the new dividend tax system.”
MIMB Investment Bank head of equity research Pong Teng Siew expects an across-the-board adjustment of valuations for many counters on Bursa Malaysia, in particular high dividend-paying stocks.
Analyst valuations would be either revised upwards or downwards, depending on the counter. Analysts who had used a dividend discount basis to value companies would also have to readjust their valuations accordingly.
Companies that have had a high ‘tax shield’ of accumulated past tax losses from either restructuring or otherwise would now be the same (as those without tax shields) in dividend-paying terms,
Another effect of the new corporate tax policy is that companies that have large accumulated tax-exempt profits will now be able to declare dividends without incurring costs. Previously, companies that made non-taxable profits would have to pay tax on dividends declared on such profits.

Personal Income Tax

Those taxed at less than the corporate tax rate will no longer be able to receive refunds (from dividend tax credits). For example, pensioners (with shares in dividend-paying companies) will have less disposable income during their retirement years. There would be a disincentive to borrow to finance equity investments
Those who are taxed at a marginal rate higher than the corporate tax rate will no longer have to pay additional tax.

Double taxation does arise under the current imputation system of taxation in the case of non-residents who are unable to claim credit in their home countries in respect of tax deducted or deemed deducted from dividends.

Incidentally, for those unfamiliar, this one-tier corporate tax system has already been introduced in Singapore from Jan 1, 2003, with a five-year transition until Dec 31, 2007
As for Malaysia’s single-tier corporate tax system, it provides a six-year transition period up to Dec 31, 2013. Hence, with this new system, this will be adopted by existing companies at different times, for example when their Section 108 credit is exhausted within or at the end of the six years or when they elect to move into the new system although a Section 108 credit still remains.[The Section 108 tax credit account is a tax credit reserve from which companies can pay dividends under the two-tier tax system]

Budget 2008- One Tier System And Tax Incentive For SMEs

slang — Thu, 20 Sep 2007 15:25:07 +0000

Two Major Changes are:

The abolishment of the imputation system and the implementation of single-tier system of taxation for dividends, impacting both the Inland Revenue Board (IRB) and the taxpayer. Present:

Company income tax is based on the full imputation system where tax is imposed at the company level and at the shareholder level on dividends. The tax imposed at the shareholder level will take into account the tax paid by the company.

The imputation system involves significant administrative cost to ensure compliance. At the company level, there is compliance on keeping track of tax paid, determining the tax rate and the amount of dividend paid.

At the IRB level, there is work to verify the vouchers and process the refund since the imputation system lends itself to abuse and fraud by the creation of false dividend vouchers.

The imputation system also tends to distort corporate tax structure since the tax-exempt dividend in cases where companies enjoy tax exemption can only be enjoyed by two tiers – the subsequent tiers being subject to tax.

Furthermore, a company with insufficient tax credit will be constrained not to declare the maximum dividend.

Moving forward:

The introduction of the one-tier system makes it more convenient administratively.

It also made those companies without any credit balance to move into the single-tier system immediately while those with balance are given six years to move into the said system.

Tax Incentives For Corporate Small & Medium

Enterprise(SMEs):Present:

The Government had been very supportive of the small and medium enterprises (SMEs) by granting special two-tier tax rates, of which the first RM500,000 of chargeable income is taxed at a lower rate of 20%.

Moving forward:

The Budget now offers SMEs at the initial stage of their operation to be exempted from submitting their tax estimates of tax payable as well as installment payments.

The full income tax payment would need to be made only at the point of submission of the income tax returns, which is seven months from the date of the closing of accounts.

The facility is given effective from year of assessment 2008 for two years of assessment beginning from the date of commencement of operation.

This is a welcome move as it is normal for businesses to face cashflow constraints at the initial stage due to business teething stage and the difficulty in securing loans for lack of a track record.

However, this does not include companies with bigger paid-up capital that does not fall within the definition of SMEs.

Tax Updates- Advance Tax Ruling

slang — Fri, 25 May 2007 09:23:06 +0000

Advance Tax Ruling (ATR) was introduced during the 2007 Budget speech (1/9/2006) by Datuk Abdullah Badawi.
So what is difference between an Advance Tax Ruling compared to the Public Ruling?
Append below the contrast:
Advance Tax Ruling:

Advance Tax Ruling is the Director-General of Inland Revenue’s written interpretation on how any provision of the Income Tax Act, 1967
It applies to a person in relation to a proposed arrangement and
It will only apply to the specific applicant.

Whereas Public Ruling:

Is issued for the purpose of providing guidance for the public and officers of the Inland Revenue Board.
It sets out the Director General’s interpretation of the particular tax law and the policy and procedure that are to be applied .
If a taxpayer disagrees or is unclear on any aspect of a Public Ruling, he may seek a Private Ruling from the IRB.

Recently, the IRB has released the draft Income Tax ( Advance Ruling) Rules 2007 which prescribe the scope, application procedures and fees imposed.
Salient points include:
General:

It is effective 1 January 2007
Any ATR issued is binding on both the DGIR and the applicant.
As ATR is a private and confidential document, it is not been released to the public

Scope:

An ATR will only be issued for an arrangement which is been contemplated by an applicant
The following scenarios are outside the scope: where the Act authorizes or requires the Finance Minister or DGIR to:

· Impose or remit a penalty
· Remit tax due and payable
· Approve any application under the Act
· Inquire into the correctness of any return or other information
· Prosecute any person or
· Recover any debt owing by any person.
In circumstances where the DGIR declines to issue an ATR the applicant will be notified in writing of his decision and the reason.
Application for An ATR:

Shall be made in a prescribed form and shall contain:

· the identity of the applicant/authorized person ( eg tax agent)
· a complete description of all relevant facts and documents
· a statement identifying the relevant provisions of the Act
· the proposition of law relevant to the issues, eg case laws
· a statement whether previous application has been made and
· any other particulars required by the DGIR
An application may be withdrawn at any time before an ATR is issued by notification in writing to the DGIR.
Format of ATR:
An ATR issued by the DGIR will state:

it is made under section 138B of the Act
the identity of the person, provision of the Act and the arrangement
how the provision of the Act applies to the arrangement and to the person
period or year of assessment applicable
material assumptions (if any) made by DGIR and
condition ( if any) stipulated by DGIR

An ATR may be withdrawn by the DGIR in specific circumstances eg where the interpretation of law is changed due to court decision.
Disclosure in tax return

In submitting his return, the taxpayer is required to indicate where an ATR has been obtained, he has relied on the ruling in completing his return.

Fees for An ATR
The following fees are payable:

An initial non-refundable application fee of Rm500
Additional fee of Rm150 per hour ( or part hour ) after the first 4 hours
Reimbursable fees for any costs and reasonable disbursement incurred by the IRB in obtaining external advice (prior consent will be sought from applicant)

The fees are payable even if application is withdrawn by applicant.
Processing time

An ATR will be issued within 60 days from the date of submission of a complete application.

Conclusion:
With the implementation of the ATR system, taxpayers can now plan their tax affairs in advance and have greater certainty in terms of their tax exposure.

Malaysia Moving Forward – Abolishment of Real Property Gains Tax & Special Incentive Area –Iskandar Development Region

slang — Mon, 26 Mar 2007 07:51:10 +0000

At the Invest Malaysia Conference 2007 held on 22 March 2007, our Prime Minister during his speech presented at the Invest Malaysia Conference 2007 on 22 March 2007:

The Government has decided not to impose Real Property Gains Tax (RPGT) throughout the country commencing 1 April 2007.
A first incentives package was announced for the Iskandar Development Region (IDR), starting with certain zones within the IDR and for six targeted sectors, namely creative industries, educational services,financial advisory and consulting, healthcare, logistic and tourism related services.

For the proposed incentives for the IDR which are as follows :-

corporate income tax exemption for activities within these zones and
outside Malaysia for 10 years, upon commencement of operations; and
withholding tax exemption on certain payments for 10 years upon
commencement of operations;

provided such operations commenced before the end of 2015.

Furthermore, qualifying companies will enjoy:

Exemption from Foreign Investment Committee (FIC) rules;
Freedom to source capital globally; and
Unrestricted employment of foreign employees within the approved
zones.

Further details of the incentive and support package will be announced
by the Prime Minister in due course.