Budget 2019 and Young Working Adults in Malaysia

by Shawn Ho and Ee Lyne Chong (Corporate, Property and Tax Practice Group, Donovan & Ho)

www.dnh.com.my

This article was first published on Donovan & Ho's website on 7 November 2018.

With the Budget 2019 tabled in Parliament by the Finance Minister on 2 November 2018, this article highlights the features of how this Budget will affect young working adults in Malaysia.

Transport – Petrol, Toll, Public Transport

If you own only one car or motorbike with an engine capacity of 1500cc and below, you will be able to enjoy a subsidy for RON95 petrol amounting to RM0.30 per litre. This subsidy will be capped at 100 litres per month for cars and 40 litres per month for motorbikes. It will be interesting to see how, among other considerations, one’s actual petrol consumption is monitored, and how local and foreign vehicles are distinguished.  

For those that have been feeling a pinch when your SMART TAG device beeps several times a day, there will be no toll hike in 2019! Tolls for motorbikes for the Penang Bridge, Second Penang Bridge and the Malaysia-Singapore Second Link will also be abolished.

To encourage the regular use of public transport, our government will be introducing a RM100 unlimited public transport monthly pass, for the rail and RapidKL bus networks from 1 January 2019; as well as a RM50 monthly pass for RapidKL bus services.

Digital Entertainment – Spotify, Netflix, etc.

Service tax (currently at 6%) will be imposed on imported services, particularly on imported foreign digital services consumed in Malaysia, with effect from 1 January 2020. This will cover transactions on electronic software, downloaded music, video and online advertising.

This is one of the initiatives to tax the digital economy, being focused on taxing digital products and services / electronically supplied services based on the place of consumption, as recommended by the Organisation for Economic Cooperation and Development.

Food and Beverage

In line with addressing the increasing obesity rates in Malaysia, excise duty of RM0.40 per litre will be imposed on 2 categories of packaged sweet drinks from 1 April 2019. This will cover drinks with high levels of sugar or sweetener, as well as fruits and vegetable drinks with over 12g of sugars per 100ml.

Travel – International Flights

The government will introduce a departure levy of RM20 when you fly to Asean countries, and RM40 to other countries. This will apply to air travellers who leave the country from 1 June 2019.

Household Income Subsidy

The Government will continue to provide financial assistance to the B40 (bottom 40%) Group:

• Households with monthly income of RM2,000 and below will receive financial assistance of RM1,000.
• Households with monthly income from RM2,001 to RM3,000 will receive RM750; and
• Households with monthly income from RM3,001 to RM4,000 will receive RM500.  

Property

If you are thinking of purchasing property, stamp duty will likely be your biggest transactional cost. With effect from January 2019, stamp duty will be applicable as follows:

• First RM100,000 – 1%
• RM100,001 to RM500,000 – 2%
• RM500,001 to RM1,000,000 – 3%
• RM1,000,001 upwards – 4% (new)

The good news for first time home buyers of residential properties are the various stamp duty exemptions or remissions (ie lower rates) of varying degrees and for limited periods, for residential properties valued up to RM1,000,000. Some of the exemptions apply to the sale and purchase agreement as well as the loan agreement. So make sure to enquire into the details before your first home purchase.

For those of you looking to dispose an existing property, do note that disposal of property held for 5 full years or more will now be taxed at a residual 5%, increased from the current 0%. This is effective from 1 January 2019, however, this bracket of real property gains tax will be exempted for properties under RM200,000.

Also, a ‘first in the world’ property crowdfunding platform will allow first time house buyers to place only 20% as down payment, with the balance 80% financed using a peer-to-peer lending framework regulated by the Securities Commission. Details of which will follow and will be interesting to study.

This article was written by Shawn Ho and Ee Lyne Chong from our corporate, property and tax practice group.  Our corporate team advises on legal compliance, corporate governance, shareholder and founder arrangements, joint venture and partnership structures and corporate tax matters. Have a question? Contact us.