MALAYSIAN 2015 BUDGET + The 2015 Budget was announced by the Prime Minister on 10 October 2014. + The 2015 Budget allocates a total of RM273.9 billion, an increase of RM9.8 billion compared with the 2014 initial allocation. Of the amount, RM223.4 billion is for Operating Expenditure while RM50.5 billion for Development Expenditure. In 2015, the Federal Government revenue collection is estimated at RM235.2 billion, an increase of RM10.2 billion from 2014. + The 2015 Budget is formulated with focus on the peoples economy and outlines seven main strategies: Strategies: First Strategy: Strengthening Economic Growth; Second Strategy: Enhancing Fiscal Governance; Third Strategy: Developing Human Capital and Entrepreneurship; Fourth Strategy: Advancing Bumiputera(Local Malay ethnics) Agenda; Fifth Strategy: Upholding Role of Women; Sixth Strategy: Developing National Youth Transformation Programme; and Seventh Strategy: Prioritising Well-Being of the Rakyat (People). Shariah (Islamic law) -compliant Financial Products + The Government will introduce a new shariah (Islamic law) -compliant investment product in 2015 called the Investment Account Platform (IAP). IAP will provide opportunities to investors in financing entrepreneurial activities and developing viable SMEs. To promote investment in IAP, the Government proposes individual investors be given income tax exemption on profits earned from qualifying investment for three consecutive years. + To boost domestic sukuk and bond issuance and trading, the Government introduced the Exchange Traded Bond and Sukuk (ETBS) in January 2013. The Government proposes that the Malaysian Government Securities and Government Investment Issues be listed and traded in ETBS. In addition, expenses incurred in the issuance of sukuk are given deduction from year of assessment 2003 until year of assessment 2015. Therefore, it is proposed that deduction for expenses incurred in the issuance of sukuk based on Ijarah and Wakalah principles be extended for another three years until year of assessment 2018. + The Merchant Shipping Act 2011 mandates insurance or financial security for third-party liability coverage for ships operating in Malaysia. Currently, most large cargo ship owners in Malaysia have third-party liability coverage through Protection and Indemnity (P&I) overseas. To assist owners of cargo ships with gross tonnage not exceeding 300 tonnes, the Government will establish a Malaysia P&I Club under Exim Bank. The Club will offer third-party liability protection at reasonable premiums. Tax Incentives + An incentive of 100% income tax exemption for a period of five years will be made available to encourage the private sector to manage, maintain and upgrade industrial estates in less developed areas. An incentive of 70% income tax exemption for a period of five years will be made available to the private sector to manage industrial estates in other areas. + The Government will provide incentive in the form of capital allowance on automation expenditure to encourage automation in the manufacturing sector, according to the following categories: (a) for high labour intensive industries (such as rubber products, plastics, wood, furniture and textiles), an automation capital allowance of 200% will be provided on the first RM4 million expenditure incurred within the period from 2015 to 2017; and (b) for other industries, automation capital allowance of 200% will be provided on the first RM2 million expenditure incurred within the period from 2015 to 2020. Additional Goods Not Subjected to GST + During the announcement of GST in the 2014 Budget, the Government proposed not to impose GST on basic food items and services. Based on the feedback received from all segments of society, the Government agrees to widen the scope of items that will not be subjected to GST as follows: (i) All types of fruits whether local or imported; (ii) White bread and whole-meal bread; (iii) Coffee powder, tea dust and cocoa powder; (iv) Yellow mee, kuey teow, laksa and meehoon (local noodles); (v) The National Essential Medicine covering almost 2,900 medicine brands. These medicines are used to treat 30 types of diseases including heart failure, diabetes, hypertension, cancer and fertility treatment; (vi) Reading materials such as childrens coloring books, exercise and reference books, text books, dictionaries and religious books; and (vii) Newspapers. + In addition, the Government has also agreed electricity consumption that is not subject to GST be increased from the first 200 units to 300 units. This will benefit 70% of households. Further, to ensure the implementation of GST does not burden the rakyat, the Government has agreed that the retail sale of RON95 petrol, diesel and LPG be given relief from the payment of GST. Through this measure, consumers and targeted groups will not have to pay GST on the purchase of RON95 petrol, diesel and LPG. + Of the 944 goods and services in the basket of goods of the CPI, the prices of 532 items or 56% are expected to reduce up to 4.1%. Among the goods are medicines, electrical appliances such as refrigerators and washing machines, textile products, plastic products such as pails and plates, shoes and slippers, household furniture, baby diapers, soap, meat, chicken eggs, cooking oil, seafood, rice and vegetables. Meanwhile, about 354 goods and services may experience some price increase but less than 5.8%. The Government hopes that traders will be responsible and do not raise prices indiscriminately to burden the rakyat. The Government will disseminate shoppers guide to enable consumers compare prices before and after the implementation of GST. Individual and Corporate taxation • Individual income tax rates will be reduced by 1 to 3 percentage points. With this measure, 300,000 individual taxpayers will no longer pay income tax. • Tax payers with family and income of RM4,000 per month will not have tax liability. • Individual income tax will be restructured whereby the chargeable income subject to the maximum rate will be increased from exceeding RM100,000 to exceeding RM400,000. The current maximum tax rate at 26% will be reduced to 24%, 24.5% and 25%. This will result in the existing taxpayer enjoying a tax saving of at least 5.3%. • For year of assessment 2015, cooperative income tax rate will also be reduced by 1 to 2 percentage points. In addition, secretarial fee and tax filing fee are allowed as deduction. • For year of assessment 2016, corporate income tax rate will be reduced by 1 percentage point from 25% to 24%. • For year of assessment 2016, income tax rate for SMEs will also be reduced by 1 percentage point from 20% to 19%. + Expenses incurred for training in accounting and ICT relating to GST will be given additional tax deduction. + To encourage private companies to conduct Technical and Vocational Training (TEVT) programmes, the Government proposes that the existing tax incentives be enhanced as follows: (a) Double deduction for scholarships awarded to students in vocational and technical courses at the certificate level; and (b) Double deduction on expenses incurred by a company to implement a structured internship programme for students at diploma and vocational level; and (c) Further deduction on training expenses incurred by an employer for employees to obtain certificate qualifications from accredited vocational and professional bodies. + To safeguard the welfare of workers, the Employment Act 1955 and related labour acts will be reviewed, including better terms and conditions of employment, appointment and dismissal, flexible working arrangements and termination benefits; + In 2011, Skim Latihan 1Malaysia (1Malaysia Training Scheme) has enabled around 45,000 graduates from the low-income households and rural areas to obtain jobs. The Government supports CSR effort by the employers in its implementation through double deduction incentive to companies for the purpose of tax computation until 31 December 2016. I propose the tax incentive be extended until 31 December 2020. + The Government aspires to position Malaysia as a choice location for Startups in the region. Among the efforts is the establishment of MaGIC which aims to create a more conducive ecosystem to facilitate the Startups to commence operations. To attract more expatriate entrepreneurs establish Startups in Malaysia, the paid-up capital for Startups is set at RM75,000. Eligible expatriate Startup entrepreneurs will be given Work Pass for one year. + Under the Youth Housing Scheme (offers a funding limit for a first home not exceeding RM500,000 for married youth aged between 25 and 40 years with household income not exceeding RM10,000), the Government will provide monthly financial assistance of RM200 to borrowers for the first two years to reduce the burden of monthly installments. The Government will also give a 50% stamp duty exemption on the instrument of transfer agreements and loan agreements. + For oil palm smallholders, the Government will continue to provide incentives for new planting and replanting. Further, export duty exemption for crude palm oil (CPO) will be extended until December 2014. + To reduce the burden of medical expenses and treatment of serious diseases, the Government proposes the existing tax relief be increased to RM6,000 per year. The relief is available to the tax payer, the spouse and children. Currently, expenses incurred for treatment of serious diseases such as cancer, kidney failure and heart attack are given a tax relief up to RM5,000 per year. + The Government will allocate RM2.2 billion to the Ministry of Women, Family and Community Development. Among the programmes that will be implemented include (a) increase tax relief for each disabled child from RM5,000 to RM6,000; and (b) increase tax relief for the purchase of basic supporting equipment for the tax payer, spouse, children and parents with disabilities from RM5,000 to RM6,000. + To enable more people to own their first home and reduce the cost of buying a house, the Government has agreed to extend the 50% stamp duty exemption on instruments of transfer and loan agreements and increase the purchase limit from RM400,000 to RM500,000. The exemption will be given until 31 December 2016. The Government also agrees to improve Skim Rumah Pertamaku (My First Home Scheme) under the purview of Cagamas by raising the ceiling price to RM500,000 in line with the stamp duty exemption. In addition, the age of borrowers to qualify for the scheme will be increased from 35 to 40 years. + In tandem with the Governments aspiration to modernise the tax system and given that people are more responsible, it is proposed that tax on gains from the disposal of property be self-assessed by the taxpayer effective from the year 2016. Currently, gains from the disposal of property under the Real Property Gains Tax Act 1976, are assessed formally. The Government has implemented the Self-Assessment System for individual and company income tax effective from the year 2001 and 2004 respectively. For more details, please contact: KC Chia KC Chia & Noor, Chartered Accountants Lot 20.02, Menara KH, Jalan Sultan Ismail Kuala Lumpur, Malaysia [email protected] kcn.my
Posted on: Fri, 17 Oct 2014 02:48:51 +0000
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