Thursday, 8 November 2018

Malaysian Tax Budget Conference 2019

The new government’s maiden budget announced last Friday indicates that they are trying to balance between being a socialist government and being pro-business to boost economic growth. They announced a creative host of subsidies, grants  and allocation of funds, and utilised tax measures to promote economic growth and well-being. 

The government proposed measures to increase tax revenue such as introducing new taxes (levy on international departures, soda tax) or increasing existing ones (taxes on gaming industry, RPGT for sixth year and beyond disposals, stamp duty on property transactions over RM1 million). They modified existing tax rules to curb income set-off – imposition of a 7-year time limit for businesses to utilise losses and allowances from tax reliefs. They also proposed to impose service tax on foreign services providers that provide online services (downloaded software or music) as well as on imported services acquired by Malaysian businesses, which should level the playing fields between local and foreign players. Apart from that, the government proposed a special voluntary disclosure programme where taxpayers who voluntarily disclosed unreported income are entitled to reduced penalty rates.

The government also proposed tax measures to improve social welfare. They widened the scope of donations – Donations to social enterprises are now qualified for deduction. They focused on employee welfare – a 100% deduction for PTPTN payments made by an employer on behalf of its employees and a 200% deduction on remuneration of full-time employees who are either senior citizens or ex-convicts. These deductions, however, are subject to conditions. They government also proposed a stamp duty exemption for first time home-buyers in respect of property valued between RM300,000 and RM1 million, subject to conditions, consistent with their promise of affordable housing.

The government also proposed tax measures to encourage green businesses. Companies producing environmentally-friendly plastics will be granted Pioneer Status (70% exemption of statutory income) or Investment Allowance (60% of qualifying capital expenditure) for five years. It also proposed to expand the list of green assets that qualify for green technology investment allowance from 9 to 40.

While many agree that the measures implemented are targeted at selective business industries, it is still important for the government to continue with the tax reform reviews with the aim of making the tax system more efficient, neutral and progressive while promoting the long-term productivity of the economy.

Find out more about these taxes, key trends, challenges and opportunities that may impact your business and influence your strategy in 2019, at our Malaysian Tax Budget Conference 2019.

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