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FOREWORD
The Budget proposals for 2018 were presented in Parliament on 27 October 2017 by YAB Dato’ Sri
Mohd Najib Tun Haji Abdul Razak, the Prime Minister and Minister of Finance of Malaysia.
With the theme “Prospering an Inclusive Economy, Balancing Between Worldly and Hereafter, for
the Wellbeing of Rakyat, Towards the TN50 Aspiration”, the 2018 Budget outlines 8 main thrusts:-
1. Invigorating Investment, Trade and Industry;
2. Moving Towards TN50 Aspiration;
3. Empowering Education, Skills and Trainings, and Talent Development;
4. Driving Inclusive Development;
5. Prioritising the Wellbeing of Rakyat and Providing Opportunities to Generate Income;
6. Fortifying the Fourth Industrial Revolution and Digital Economy;
7. Enhancing Efficiency and Delivery of Government - Linked Companies and Public Service;
and
8. Balancing between the Worldly and Hereafter.
In line with the above objectives, various strategies and programmes have been formulated in the
2018 Budget. Some of the notable tax measures are as follows:-
Goods and Services Tax (“GST”)
Some of the key amendments to the GST Act 2014 are:-
(a) All supplies made by Local Authorities will not be subject to GST (out of scope);
(b) Management and maintenance services rendered by housing developers to owners of
stratified residential buildings be exempted from GST; and
(c) All magazines, journals, periodicals and comics will be zero rated;
(d) GST relief be provided to the following:-
(i) Cruise ship operators for the handling services provided by sea port operators in
Malaysia;
(ii) Companies in the aviation, shipping and oil and gas industries for the importation of “big
ticket items";
(iii) Construction services for the construction of schools buildings and places of worship,
where the construction is financed by approved donations; and
(iv) Importation of oil and gas-related equipment under a lease agreement supplied by
companies located in the Designated Area (Labuan, Langkawi and Tioman) to customers
in Malaysia.
Personal Income Tax
Notable changes include:-
(a) The income tax rates for resident individuals are to be reduced by two percentage points for
the following income bands:- RM20,001 – RM35,000: from 5% to 3%
RM35,001 – RM50,000: from 10% to 8%; and
RM50,001 – RM70,000: from 16% to 14%
(b) Income Tax exemption on employment income up to 12 months for women returning to the
workforce and who have been on a career break for at least 2 years.
(c) 50% income tax exemption for rental income not exceeding RM2,000 per month from
residential homes received by Malaysian resident individuals for up to 3 years of assessment.
(d) Tax relief on net savings into the Skim Simpanan Pendidikan 1 Malaysia (SSP1M) up to
RM6,000 be extended to year of assessment 2020.
Corporate tax
To continue to promote economic growth and competitiveness:-
(a) Various existing incentives in the form of tax exemption or tax allowance were extended or
enhanced. These include incentives for automation, adoption of advanced technology
(Industrial Revolution 4.0), hotel and tourism, medical tourism and healthcare industry and
angel investors.
(b) Income tax exemption for venture capital management companies has been expanded to
include management and performance fee.
(c) The inclusion of expenditure for the development of software as qualifying expenditure.
Tax Systems and Administration
The following are notable amendments and additional provisions:-
(a) Paragraph 61A(5) of Schedule 3 of the Act has been substituted to provide the computation
to determine the residual expenditure of an asset in the year of assessment after it has been
classified as held for sale.
(b) New provisions under Section 21(3A), 107C(11B) and 112(3A) be introduced to govern the
notification of change of accounting period of a company, limited liability partnership, trust
body or co-operative society and consequences for failure to comply.
(c) Earning stripping rules will take effect from 1 January 2019 in place of the thin capitalization
rules which will cease to have effect from 1 January 2018.
In addition, by way of the Income Tax (Exemption)(No.9) Order 2017 [PU(A)323/2017] dated
23 October 2017, effective from 6 September 2017 the income of a non-resident person derived
from Malaysia in relation to services, technical advice or assistance referred to in Section 4A(i)
and (ii) of the Act which are rendered and performed by the person outside Malaysia is exempted
from withholding tax.
Furthermore, automatic exchange of information will take effect from September 2018.
Real Property Gains Tax (RPGT) and Stamp Duty
(a) Key changes to RPGT include:- (i) Change of tax rates of the estate of a deceased person who was not a citizen or a
permanent resident to rates applicable to non-citizen;
(ii) Withholding and remitting tax at 7% instead of 3% of the consideration where the
disposer is neither a citizen nor a permanent resident;
(iii) Limiting the “no gain no loss” provision under paragraph 3(b) of the 2nd
Schedule to
assets owned by a citizen only in respect of transfers between spouses or to a company.
(b) Stamp Duty
Stamp duty exemption on loan and transfer instruments relating to revived abandoned
housing projects is extended to 31 December 2020 while stamp duty will be exempted on
contract notes for exchange traded funds and structured warrants.
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 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 SYSTEM AND ADMINISTRATION
1.1 Notification of Change in Accounting Period and Penalty for Non-compliance 1
1.2 Basis Period for a Year of Assessment of Limited Liability Partnership in
respect of Certain Deduction on Approved Donation
2
1.3 Failure to Furnish Country-by-Country Report (CbCR) 2
2. TAXATION – INDIVIDUALS
2.1 Reduction of Income Tax Rates for Resident Individuals 3
2.2 Tax Exemption on Rental Income from Residential Homes received by
Resident Individuals
3
2.3 Tax Exemption on Earnings for Women Returning to the Workforce 3
2.4 Extension of Tax Relief Period on Savings in Skim Simpanan Pendidikan
1Malaysia (SSP1M)
4
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
3.1 Deduction of tax on the Distribution of Income of a Real Estate Investment
Trust (REIT) or Property Trust Funds (PTF)
5
3.2 Determining the Residual Expenditure of an Asset which is Classified as
Asset Held for Sale
5
3.3 Removal of Section 140A(4)(Thin Capitalization Provisions) 6
3.4 Determining the Income which is Exempt from Tax – Inconsistencies in the
Definition of Public Entertainer Removed
6
3.5 Tax Treatment for Takaful Business – Extension of Scope of Deductible
Management Expenses and Computation of the Amount to be Deducted
7
3.6 Capital Allowance for Information and Communication Technology (ICT)
Equipment and Software
8
4. TAX INCENTIVES
4.1 Tax Exemption on the Green Sustainable and Responsible Investments (Green
SRI) Sukuk Grant
9
4.2 Tax Exemption on Management Fee Income for Sustainable and Responsible
Investment (SRI) funds
9
4.3 Review of Tax Incentives for Automation in Manufacturing 9
4.4 Extension of Tax Incentive for Hiring the Disabled 10
4.5 Extension of Tax Incentives for Angel Investors 10
4.6 Review of Tax Incentives for Venture Capital 11 – 12
4.7 Tax Incentive for Transformation to Industry 4.0 12
4.8 Extension of Tax incentives for Medical Tourism 13
CONTENT
Page
4. TAX INCENTIVES (cont’d)
4.9 Review of Tax Incentives for Export of Private Healthcare Services 13
4.10 Extension of Tax Incentives for Principal Hub(PH) 14
4.11 Expansion of the Scope of Double Deduction Incentive for Expenses Incurred
in Obtaining Certification for Quality System and Standard
14
4.12 Extension of Incentives for New 4 and 5 Star Hotels 15
4.13 Extension of Tax Incentives for Tour Operating Companies 15
5. REAL PROPERTY GAINS TAX
5.1 Review of RPGT Rates for an Executor of the Estate of a Deceased Person
Who was not a Citizen and not a Permanent Resident
16
5.2 Review of Retention Rate by Acquirer on Disposal by Non-Citizen and Non-
Permanent Resident
16
5.3 Disposal Price is Deemed Equal to Acquisition Price 17
5.4 RPGT - Conditional Contracts 17
6. STAMP DUTY
6.1 Extension of Stamp Duty Exemption to Revive Abandoned Housing Projects 18
6.2 Stamp Duty Exemption for Trading of Exchange Traded Funds (ETF) and
Structured Warrants (SW)
18
7. GOODS AND SERVICES TAX
7.1 Additional Reading Materials subject to GST at Zero Rate 19
7.2 GST Treatment on Management and Maintenance Services of Stratified
Residential Buildings
19
7.3 Review of the GST Treatment for Local Authorities 19
7.4 GST Relief on Construction Services for School Buildings and Places of
Worship
20
7.5 GST Relief on the Importation of Big Ticket Items 20
7.6 Relief from Payment of GST on Importation of Goods under Lease
Agreements from Designated Areas to Malaysia
21
7.7 GST Relief on Handling Services rendered to Operators of Cruise Ships 21
7.8 Second Schedule - Matter to be treated as neither a Supply of Goods nor a
Supply of Services
21
7.9 The Merger of Customs Appeal Tribunal and Goods and Services Tax Appeal
Tribunal
22
7.10 Determining the Value of Supplies for Cessation of Liability to be registered –
Supplies to be excluded
22
7.11 Power of DG to Raise Assessment under the GSTA 23
8. 2017 – SELECTED TAX CASES AND DECISIONS 24-25
ABBREVIATIONS
(i)
Act Income Tax Act 1967
AE Automation Equipment Allowance
CA Capital Allowance
CAT Customs Appeal Tribunal
CRS
Common Standard on Reporting and Due Diligence for Financial
Account Information
DG Director General
DTA Double Taxation Arrangement
FATCA Foreign Account Tax Compliance Act
GST Goods and Services Tax
GSTA Goods and Services Tax Act 2014
GSTAT GST Appeal Tribunal
IRB Inland Revenue Board
ITA Investment Tax Allowance
LLP Limited Liability Partnerships
MIDA Malaysian Investment Development Authority
MOF Minister of Finance
OECD Organization for Economic Co-operation and Development
PIA Promotion of Investment Act 1986
PS Pioneer Status
PTF Property Trust Funds
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
Schedule 3 Schedule 3 of the Act – Capital Allowances and Charges
Schedule 6 Schedule 6 of the Act – Exemptions From Tax
SME Small and Medium Enterprise
SOCSO Social Security Organization
TIEAs Tax Information Exchange Agreements
TCR Thin Capitalization Rules
WHT Withholding Tax
YA Year of Assessment
DEFINITIONS
(ii)
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)
Mutual Administrative
Assistance Arrangement
an Arrangement between the Government of Malaysia with the
Government of any territory outside Malaysia with a view to the mutual
administrative assistance in tax matters which includes simultaneous tax
examinations, automatic exchange of information or tax administrations
abroad under Section 132B of the Act.
Tax Information Exchange
Agreements
was developed by the OECD Global Forum Working Group on Effective
Exchange of Information. The purpose of this Agreement is to promote
international co-operation in tax matters through exchange of
information.
Free zone means any part of Malaysia declared under the provisions of subsection
3(1) of the Free Zones Act 1990 to be a free commercial zone or a free
industrial zone.
Input Tax as defined under Section 2 of the GSTA:-
(a) Tax on any supply of goods and services to a taxable person; and
(b) Tax paid or to be paid by a taxable person on any importation of
goods,
and the goods and services are used or are to be used for the purposes of
any business carried on or to be carried on by the taxable person:-
provided that where the goods or services are used or are to be used
partly for the purposes of any business carried on or to be carried on by
the taxable person and partly for other purposes, tax on the supply and
importation shall be apportioned so that only so much as is attributable to
the purposes of his business is counted as his input tax.
Output Tax as defined under Section 2 of the GSTA means tax on any taxable supply
of goods or services made by a taxable person in the course or
furtherance of his business in Malaysia.
REITs
a unit trust which is approved by the SC as REITs or Property Trust
Fund.
DEFINITIONS
(iii)
SME A SME is defined as 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).
1. TAX SYSTEMS AND ADMINISTRATION
1
1.1
Notification of
Change in
Accounting
Period and
Penalty for Non-
compliance
Present The requirement to notify the DG on the change of an accounting period
by a company, limited liability partnership, trust body or co-operative
society is contained in the Public Ruling No. 7/2011 (Notification of
Change in Accounting Period of a Company, Trust Body/ Co-operative
Society) but not in the Act.
Proposed
(I) Notification of change in accounting period
A new subsection 21A(3A) is introduced to provide that a company,
limited liability partnership, trust body or co-operative society shall
notify the DG in the prescribed form of any change in its accounting
period by the following prescribed due date:
First accounting period for
new accounts upon change
Due date to notify the DG
Less than 12 months
30 days before the end of the
new accounting period
More than 12 months
30 days before the end of the
old accounting period
(II) Non-compliance penalties
Where the taxpayer fails to notify the DG on the change of
accounting period by the prescribed due date, it is proposed:
(a) New Section 107C(11B)
Any amount of penalty imposed for failure to pay any tax
instalment or under estimation of tax payable under Section
107C based on the accounting period prior to the new accounts
shall continue to be recoverable.
(b) New Section 112(3A)
Any late filing penalty that has been imposed under Subsection
112(3) based on the accounting period prior to the new accounts
shall continue to be recoverable.
(c) New Section 120(1)(i)
Non-compliance of the notification requirement is an offence,
and the taxpayer shall on conviction be liable to a fine of not less
than RM200 and not more than RM20,000 or to imprisonment
for a term not exceeding 6 months or to both.
Effective
(i) The provision in Items I, II(a) and II(b) are effective from year of
assessment 2019.
(ii) The provision in Item II(c) is effective upon coming into operation of
the Finance (No.2) Act 2017.
1. TAX SYSTEMS AND ADMINISTRATION
2
1.2
Basis Period
for a Year of
Assessment of
Limited
Liability
Partnership in
respect of
Certain
Deduction on
Approved
Donation
Present
Deduction shall be made from the aggregate income of a relevant person on an
approved donation/gift made by him in the basis year pursuant to the following
subsections:-
Subsection Approved donation / gift
44(6)
any gift of money to the Government, a State Government, a
local authority or an institution or organization or an approved
fund
44(6A)
of any gift of artefact, manuscript or painting to the Government
or State Government
44(8)
gift of money made for the provision of library facilities which
are accessible to the public, to public libraries and libraries of
schools and institutions of higher education, not exceeding
RM20,000.
44(11)
any gift of painting to the National Art Gallery or any state art
gallery.
Subsection 44(12) of the Act provides that references to the basis year in relation
to a company, trust body or co-operative society for the above purposes shall
be construed as references to the basis period for the year of assessment of that
company, trust body or co-operative society.
Proposed
Subsection 44(12) be amended to include a limited liability partnership (LLP).
Effective
Upon coming into operation of the Finance (No.2) Act 2017
1.3
Failure to
Furnish
Country-by-
Country
Report
(CbCR)
Present
It is an offence where a person fails to comply with the following requirements
to implement or facilitate the operation of the mutual administrative assistance
arrangement under Section 132B. Penalties for the offence are as follows:
Section Offence Penalty
112A Failure to furnish CbCR. Fine of not less
than RM20,000
and not more than
RM100,000 or to
imprisonment for a
term not exceeding
6 months or to
both.
113A Make an incorrect return, information return
or report, or giving incorrect information.
119B Failure to comply with rules (CbCR, CRS,
FATCA) made under Section 154(1)(c) on
Mutual administrative assistance .
Proposed
The punitive provisions under Section 112A, 113A and Section 119B of the Act
be expanded to include non-compliance of the rules made under Section
154(1)(c) of the Act to implement and facilitate the operation of double taxation
arrangements under Section 132 and tax information exchange arrangements
under Section 132A of the Act.
Effective
Upon coming into operation of the Income Tax (Amendment) Act 2017
2. TAXATION - INDIVIDUALS
3
2.1
Reduction of
Income Tax Rates
for Resident
Individuals
Proposed
The income tax rates of tax resident individuals shall be revised on the
following chargeable income bands.
Chargeable income
Present Proposed Tax
Savings Tax
rate
**Tax
payable
Tax
rate
**Tax
payable
(RM) (%) (RM) (%) (RM) (RM)
0 - 5,000 0 0 0 0 0
5,001 - 20,000 1 *0 1 *0 0
20,001 - 35,000 5 *500 3 *200 300
35,001 - 50,000 10 2,400 8 1,800 600
50,001 - 70,000 16 5,600 14 4,600 1,000
70,001 - 100,000 21 11,900 21 10,900 1,000
100,001 - 250,000 24 47,900 24 46,900 1,000
250,001 - 400,000 24.5 84,650 24.5 83,650 1,000
400,001 - 600,000 25 134,650 25 133,650 1,000
600,001 - 1,000,000 26 238,650 26 237,650 1,000
Above 1,000,000 28 28
*After tax rebate of RM400 for chargeable income up to RM35,000
** Cumulative
Effective
Year of assessment 2018
2.2
Tax Exemption on
Rental Income
from Residential
Homes received by
Resident
Individuals
Present
Rental income received by a resident individual is subject to income tax
under Section 4(d) of the Act.
Proposed
50% income tax exemption is given on rental income received by
Malaysian resident individuals, subject to the following conditions:-
(a) Rental income received does not exceed RM2,000 per month for
each residential home;
(b) The residential home must be rented under a legal tenancy
agreement between the owner and the tenant; and
(c) Tax exemption is given for 3 consecutive years of assessment.
Effective
Years of assessment 2018 to 2020
2.3
Tax Exemption on
Earnings for
Women Returning
to the Workforce
Proposed
Individual income tax exemption is given on employment income up to a
maximum of 12 consecutive months to women who return to the
workforce after a career break of at least 2 years as at 27 October 2017.
The tax exemption is applicable for years of assessment 2018 to 2020.
Effective
Applications submitted to Talent Corporation Malaysia Berhad from 1
January 2018 to 31 December 2019
2. TAXATION - INDIVIDUALS
4
2.4
Extension of Tax
Relief Period on
Savings in Skim
Simpanan
Pendidikan 1
Malaysia
(SSP1M)(formerly
known as Skim
Simpanan
Pendidikan
Nasional)
Present
Tax relief up to RM6,000 is given to a resident individual on his net
savings deposited into SSP1M. The tax relief is applicable for the years
of assessment 2012 to 2017.
Proposed
The above tax relief be extended for another 3 years.
Effective
Years of assessment 2018 to 2020
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
5
3.1
Deduction of tax on
the Distribution of
Income of a Real
Estate Investment
Trust (REIT) or
Property Trust
Funds (PTF)
Present
Any income which is exempt from tax by virtue of Section 127 shall be
disregarded for the purposes of the Act except for provisions in relation
to deduction of withholding tax under Section 107A, Section 109 and
Section 109B and any tax deduction under Section 107A, 109 or 109B
from any such income shall be refunded under Section 111.
Proposed
Subsection 127(5) of the Act be amended to provide for refund of
withholding tax on income distributed by REIT or PTF under Section
109D to unit holders where the unit holders are exempted from tax.
Effective
Upon coming into operation of the Finance (No.2) Act 2017
3.2
Determining the
Residual
Expenditure of an
Asset which is
Classified as Asset
Held for Sale
Present
Where an asset (qualifying capital expenditure) is classified as asset held
for sale in accordance with generally accepted accounting principles,
such asset is deemed to be disposed in the following basis period
(whether or not the asset is sold).
The residual expenditure of such asset for that following basis period is
determined by –
the total qualifying expenditure incurred by that person,
reduced by an amount of annual allowance which would have been
made to him for that following basis period as if the asset had
been in use in that following basis period for the purpose of
business.
Proposed
Subparagraph 61A (5) under Schedule 3 of the Act be amended to clarify
that where in determining the residual expenditure of the asset which is
classified as asset held for sale, it shall be the qualifying expenditure
reduced by –
(a) any of the initial allowance in relation to that asset for any year of
assessment;
(b) any of the annual allowance in relation to that asset for any year of
assessment; and
(c) an amount of annual allowance which would have been made to that
person for the basis period in which the asset was classified as
held for sale as if the asset had been in use in that basis period for
the purpose of a business.
Effective
Upon coming into operation of the Finance (No.2) Act 2017
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
6
3.3
Removal of Section
140A(4) (Thin
Capitalization
Provisions)
Present
Thin Capitalization Rules (TCR) was introduced during the 2009 budget,
but its implementation has been deferred until 31 December 2017.
Subsection 140A(4) of the Act contains provisions relating to thin
capitalization that empowers the DG to disallow as a deduction,
excessive interest on financial assistance between associated person.
Proposed
Provisions under Section 140A(4) of the Act relating to thin
capitalization for financial assistance between associated persons is
removed. It is proposed that Earning Stripping Rules (ESR), as advocated
by the OECD be implemented to replace the TCR, to control excessive
deductibility of interest expense on loan between related parties.
Under the ESR, interest deduction on loans between related companies
within the same group will be limited to a ratio as determined by a
country’s tax authority, ranging from 10% to 30% of the company’s
profit before tax either using the Earnings Before Interest and Taxes
(EBIT) or the Earnings Before Interest, Tax, Depreciation, and
Amortization (EBITDA).
Effective
1 January 2018 (Removal of Section 140A(4))
1 January 2019 (Introduction of ESR)
3.4
Determining the
Income which is
Exempt from Tax –
Inconsistencies in
the Definition of
Public Entertainer
Removed
Present
The income of a non-resident individual from an employment exercised
by him in Malaysia is exempted from tax if he satisfied the “not
exceeding 60 days” rules under Paragraph 21, Schedule 6 of the Act.
Pursuant to paragraph 22, Schedule 6 of the Act, such exemption does
not apply to the income from an employment exercised by a non-resident
public entertainer (that is to say, any professional entertainer, artiste,
athlete or other individual who entertains whether in public or private for
profit on stage, radio or television, at a stadium or sports ground, or
otherwise) and no part of that income is paid out of the public funds of
the government of a country outside Malaysia.
Proposed
The description of public entertainer as set out in paragraph 22 Schedule
6 of the Act above (in italics) be deleted and the definition of public
entertainer shall refer to those as defined under Section 2 of the Act.
Effective
Upon coming into operation of the Finance (No.2) Act 2017
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
7
3.5 Tax Treatment for
Takaful Business -
Extension of Scope
of Deductible
Management
Expenses and
Computation of the
Amount to be
Deducted
Present
Pursuant to Section 60AA subparagraph 9(b)(iii) and 10(b)(iii), the tax
deduction on management expenses for shareholders’ fund of a takaful
operator is restricted to an amount in connection with general takaful
business carried out with the principle of wakalah.
Proposed
I. Section 60AA subparagraph 9(b)(iii) and 10(b)(iii) are respectively
substituted by the following subsections to extend the scope of
deduction on the management expenses as follows:-
Revised section 60AA(9)(b)(iii) and 60AA(10)(b)(iii)
The amount of management expenses incurred by him in that period
in connection with:
A. Wakalah fee receivable in relation to the general fund, inward
retakaful fund, offshore fund or family retakaful fund;
B. Any other fee receivable in relation to the general fund, inward
retakaful fund, offshore fund or family retakaful fund; or
C. Any other fee receivable in relation to an investment fund from
the family fund.
II. A new subsection 60AA(10B) be introduced to provide a formula
for the computation of management expenses to be deducted from
any other fee receivable (in respect of B and C under the above
proposal) as follows:
A x C
B
Where
A : is the total amount of gross income for that period in
respect of any other fee receivable in connection with
the general fund, inward re-takaful fund, offshore fund
or family re-takaful fund or any other fee receivable in
respect of an investment fund from the family fund
excluding the amount of gross income in respect of
wakalah fee;
B : is the total amount of gross income for that period in
respect of any other fee receivable in connection with
the general fund, inward re-takaful fund, offshore fund
or family re-takaful fund or any other fee receivable in
respect of an investment fund from the family fund
excluding the amount of gross income in respect of
wakalah fee for commission; and
C : is the total management expenses incurred.
Effective
Year of assessment 2018
3. TAXATION – COMPANIES & UNINCORPORATED BUSINESSES
8
3.6
Capital Allowance
for
Information and
Communication
Technology (ICT)
Equipment
and Software
Present
Effective from years of assessment 2009 until 2016, expenses incurred in
purchasing ICT equipment and software are eligible for Accelerated
Capital Allowance (ACA). The allowance is fully deductible in the year
of purchase with initial allowance (IA) of 20% and annual allowance
(AA) of 80%.
The expenditure incurred on the development of customized software
comprising consultation fee, licensing fee and incidental fee related to
software development is regarded as non-qualifying expenditure.
Proposed
Item Qualifying Expenditure Effective
from: CA Rates
(i)
Expenditure incurred on the
purchase of ICT equipment and
computer software packages.
Year of
assessment
2017
IA: 20%
AA: 20%
(ii)
Expenditure incurred on the
development of customized
software comprising
consultation fee, licensing fee
and incidental fee related to
software development.
Year of
assessment
2018
4. TAX INCENTIVES
9
4.1
Tax Exemption on
the Green
Sustainable and
Responsible
Investments (Green
SRI) Sukuk Grant
Present
The Securities Commission (SC) provides the Green SRI sukuk grant to
the Green SRI sukuk issuers to finance external review expenditure
incurred up to a maximum amount of RM300,000. Such grant is taxable
in the hands of the recipient.
Proposed
Tax exemption is given to the recipients of the Green SRI sukuk grant.
Effective
Applications received by the SC from 1 January 2018 to 31 December
2020
4.2
Tax Exemption on
Management Fee
Income for
Sustainable and
Responsible
Investment (SRI)
funds
Present
A resident company incorporated in Malaysia that provides management
services of Shariah-compliant funds certified by the SC is exempted from
income tax on the statutory income derived from the business of
providing fund management services to the following:-
(a) foreign investors in Malaysia;
(b) local investors in Malaysia; and
(c) Business Trusts or REITs in Malaysia.
Proposed
Tax exemption be extended to management fee income from management
of conventional and Shariah-complaint SRI fund approved by the SC.
Effective
Years of assessment 2018 to 2020
4.3
Review of Tax
Incentives for
Automation in
Manufacturing
Present
Manufacturing companies are eligible for accelerated capital allowance
(ACA) and Automation Equipment Allowance (AE) on the purchase of
automation equipment (Qualifying expenditure):-
Industries Qualifying expenditure (QE)
High labour intensive
industries (such as rubber,
plastic, wood, and textile
products)
ACA of 100% and AE of 100% on the
first RM4 million qualifying
expenditure incurred from years of
assessment 2015 to 2017.
Others
ACA of 100% and AE of 100% on the
first RM2 million qualifying
expenditure incurred from years of
assessment 2015 to 2020.
Proposed
The above tax incentives for high labour intensive industries be extended
for another 3 years and this allowance is fully claimable within 1 year.
Effective
Applications received by MIDA until 31 December 2020
4. TAX INCENTIVES
10
4.4
Extension of Tax
Incentive for Hiring
the Disabled
Present
Double deduction on the salary paid is given to the employers who
employ disabled persons, certified by the Department of Social Welfare
(JKM).
Proposed
Employers who employ workers affected by accidents/critical illnesses
are eligible for double deduction on condition that the employees are able
to work within their capabilities as certified by The Medical Board of the
Social Security Organization (SOCSO).
Effective
Year of assessment 2018
4.5 Extension of Tax
Incentives for Angel
Investors
Present
An angel investor is exempted from income tax on his aggregate income
for an amount equivalent to the value of his investments in ordinary
shares made in an investee company.
The claim of the incentive is applicable to:-
(a) an angel investor—
(i) who is a resident in Malaysia and whose sources of income is
not derived solely from business;
(ii) who has made an application to the Minister on or after 1
January 2013 but not later than 31 December 2017 to make an
investment in an investee company;
(iii) who does not have a parent, including a parent in law, a child,
including a step child, or child adopted in accordance with any
law, a brother or sister, or a grandparent or grandchild, or a
spouse, who makes any investment in the investee company;
(iv) whose investment is for the sole purpose of financing the
activities of the investee company as approved by the Minister;
and
(v) whose investment shall not be more than 30% of the total paid-
up share capital of the investee company; and
(b) an investee company—
(i) incorporated under the Companies Act 1965 and a resident in
Malaysia;
(ii) which at least 51% of its issued ordinary share capital is directly
owned by a shareholder (other than an angel investor) who is a
citizen; and
(iii) which carries on activities as approved by the Minister.
Proposed
The applications period of the tax incentive above be extended for another
3 years.
Effective
Applications submitted to the MOF from 1 January 2018 to 31 December
2020
4. TAX INCENTIVES
11
4.6
Review of Tax
Incentives for
Venture Capital
Present
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 the statutory income derived from the
share of profits from a Venture Capital Company (VCC) on any
investment made by the VCC.
(b) VCC
A VCC which has at least 70% of the funds invested in a Venture
Company (VC) or at least 50% of the funds invested in a VC in the
form of seed capital 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 10 years or the life span of the fund established
for investment in the VC, whichever is shorter.
(c) Investment in a 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.
Proposed
(a) VCMC
The income tax exemption be expanded to include management fees
and performance fees received in managing VCC funds.
(b) VCC
The minimum investment limit of 70% in the form of seed, start-up
and early stage fund in the VC be reduced to 50% and the 50%
balance is allowed for other investments.
(c) 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.
Tax exemption be given for the period of 5 years from the year of
assessment 2018 to year of assessment 2022.
Effective
Applications received by the SC from 1 January 2018 to 31 December
2018.
Definition:-
Seed capital financing – a financing provided by a VCC to a VC for the
purposes of research, assessment and development of an initial concept or
prototype.
4. TAX INCENTIVES
12
4.6
Review of Tax
Incentives for
Venture Capital –
Cont’d
Definition:-
Start-up financing – a financing provided by a VCC to a VC for product
development and initial marketing.
Early stage financing – a financing provided by a VCC to a VC as:-
(i) capital expenditure or working capital to initiate commercialization
of a technology or product,
(ii) additional capital expenditure or additional working capital to
increase production capacity, marketing or product development, or
(iii) an interim financing for the purpose of being listed on the official list
of a stock exchange.
4.7
Tax Incentive for
Transformation to
Industry 4.0
Proposed
To encourage companies to adopt advanced technology, known as
Industry 4.0 which includes the following technology drivers:-
(a) big data analytics;
(b) autonomous robots;
(c) simulation;
(d) industrial internet of things;
(e) cyber security;
(f) horizontal and vertical system integration;
(g) cloud computing;
(h) additive computing;
(i) augmented reality; and
(j) artificial intelligence,
It is proposed that the 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.
Effective
Applications received by MIDA from 1 January 2018 to 31 December
2020
4. TAX INCENTIVES
13
4.8
Extension of Tax
Incentives for
Medical Tourism
Present
A company that provides private healthcare facilities to qualified
healthcare travellers will be given exemption on income equivalent to
ITA of 100% of qualifying capital expenditure for a period of 5 years in
its expansion, modernization and refurbishment undertaking subject to the
conditions that for each year assessment:-
(a) at least 5% of the total patients are qualified healthcare travellers;
and
(b) at least 5% of the company’s gross income is derived from qualified
healthcare travellers.
Eligible companies must be:-
(i) Licensed by the Ministry of Health; and
(ii) Registered with the Malaysian Healthcare Travel Council.
A Qualified healthcare traveller is as follows:-
(i) Malaysia My Second Home participant and his dependents;
(ii) Expatriate holding a Malaysian work permit and his dependents; or
(iii) Non-Malaysian citizen who visits and receives treatment from
private healthcare facilities in Malaysia.
Applications are to be submitted to MIDA by 31 December 2017.
Proposed
The existing incentive is to be extended for another 3 years with revised
conditions that for each year of assessment:-
(a) at least 10% of the total patients are qualified healthcare travellers;
and
(b) at least 10% of the company’s gross income is derived from
qualified healthcare travellers.
Effective
Applications submitted to MIDA from 1 January 2018 to 31 December
2020
4.9
Review of Tax
Incentives for Export
of Private
Healthcare Services
Present
Private healthcare companies exporting healthcare services to foreign
patients either in Malaysia or from Malaysia qualify for tax exemption of
50% on the value of increased exports of services to be set off against
70% of the statutory income for a year of assessment.
Proposed
The percentage of tax exemption be increased to 100% of the value of
increased exports of services to be set off against 70% of the statutory
income for a year of assessment subject to the following conditions:-
(a) At least 10% of the total number of patients receiving private
healthcare services comprise qualified healthcare travellers for each
year of assessment; and
(b) At least 10% of the company’s gross income is derived from
qualified healthcare travellers for each year of assessment.
Effective
Years of assessment 2018 to 2020
4. TAX INCENTIVES
14
4.10
Extension of Tax
Incentives for
Principal Hub (PH)
Present
Income tax exemption is given to a Principal Hub (PH) (a locally
incorporated company that uses Malaysia as a base for conducting its
regional and global businesses and operations to manage, control and
support its key functions) according to 3 tier preferential tax rates of 0%,
5% or 10% based on the certain criteria, among others:-
(i) Minimum paid-up capital of RM2.5 million;
(ii) Minimum annual sales of RM300 million;
(iii) Monitoring and providing services to at least 3 related companies
locating and operating outside of Malaysia;
(iv) Carrying out qualifying services activities including strategic
services such as financial and talent management services; and
(v) Acquire local professionals and local financial services.
For applications received by MIDA from 1 May 2015 to 30 April 2018.
Proposed
The above tax incentives be extended for another 3 years to 31 December
2020.
Effective
Applications received by MIDA from 1 May 2018 to 31 December 2020
4.11
Expansion of the
Scope of Double
Deduction Incentive
for Expenses
Incurred in
Obtaining
Certification for
Quality System and
Standard
Present
The companies registered with the Malaysian Healthcare Travel Council
(MHTC) that provide private healthcare services are given double
deduction on expenses incurred in obtaining certification for quality and
standards from the following 5 approved certification bodies:-
(i) Malaysian Society for Quality in Health – Malaysia;
(ii) Joint Commission International – United States of America;
(iii) CHKS accreditation Unit – United Kingdom;
(iv) The Australian Council on Health Care Standard – Australia; and
(v) Accreditation Canada – Canada.
Proposed
The above tax incentive be extended to companies registered with MHTC
that provides dental and ambulatory healthcare services.
Effective
Year of assessment 2018
4. TAX INCENTIVES
15
4.12
Extension of
Incentives for New 4
and 5 Star Hotels
Present
Hotel operators undertaking new investments in 4 and 5 star hotels in
Malaysia are given the following tax incentives:-
(a) Peninsular Malaysia
(i) Pioneer Status (PS) with income tax exemption of 70% of
statutory income for 5 years; or
(ii) Investment Tax Allowance (ITA) of 60% on the qualifying capital
expenditure incurred within a period of 5 years and to be set off
against 70% of the statutory income for each YA.
(b) Sabah and Sarawak
(i) PS with income tax exemption of 100% of statutory income for 5
years; or
(ii) ITA of 100% on the qualifying capital expenditure incurred
within a period of 5 years and to be set off against 100% of the
statutory income for each YA.
The above incentives are available for applications received by MIDA
until 31 December 2018.
Proposed
The above incentives be extended for another 2 years.
Effective
Applications received by MIDA until 31 December 2020
4.13
Extension of Tax
Incentives for Tour
Operating
Companies
Present
Resident tour operators licensed under the Tourism Industry Act 1992 to
carry on a tour operating business are given the following tax incentives
up to the year of assessment 2018 :-
(a) 100% income tax exemption on statutory income derived from group
inclusive tours participated by not less than 750 tourists from outside
Malaysia per year; and
(b) 100% income tax exemption on statutory income derived from
domestic tours participated by not less than 1,500 local tourists per
year.
“Group inclusive tour” means a tour package to or in Malaysia or any
place within Malaysia undertaken by tourists from outside Malaysia,
inclusive of transportation by air, land or sea and accommodation.
“Domestic tour” means a tour package for travel within Malaysia
undertaken by local tourists inclusive of transportation by air, land or sea
and accommodation.
Proposed
The above tax incentives be extended for another 2 years.
Effective
Years of assessment 2019 to 2020
5. REAL PROPERTY GAINS TAX
16
5.1
Review of RPGT Rates
for an Executor of the
Estate of a Deceased
Person Who was not a
Citizen and not a
Permanent Resident
Present
The RPGT rates for an executor of the estate of a deceased person
who was not a citizen and not a permanent resident are between 0%
to 30% depending on the holding period of real properties, as
follows:-
Category of disposal Rate of tax
Disposal within 3 years after the date of
acquisition of the chargeable assets
30%
Disposal in the 4th year after the date of
acquisition of the chargeable asset
20%
Disposal in the 5th year after the date of
acquisition of the chargeable asset
15%
Disposal in the 6th year after the date of
acquisition of the chargeable asset or thereafter
Nil
Proposed
The RPGT rates on the gains from disposal of real properties for an
executor of the estate of a deceased person who was not a citizen
and not a permanent resident are to be revised as follows:-
Category of disposal Rate of tax
Disposal within 5 years after the date of
acquisition of the chargeable assets
30%
Disposal in the 6th year after the date of
acquisition of the chargeable asset
5%
Effective
1 January 2018
5.2
Review of Retention Rate
by Acquirer on Disposal
by Non-Citizen and Non-
Permanent Resident
Present
Section 21B of the RPGTA provides that the acquirer of a real
property or shares in a real property company is required to retain a
sum not exceeding 3% of the total value of the consideration, and
(whether or not that amount is so retained) remit the sum withheld
to the DG within 60 days from the date of disposal.
Proposed
A new Subsection 21B(1A) be introduced that where the disposer
in a disposal referred to the above is not a citizen and not a
permanent resident, the acquirer shall retain a sum not exceeding
7% of the total value of the consideration, and (whether or not that
amount is so retained) remit the sum withheld to the DG within 60
days from the date of disposal.
Effective
1 January 2018
5. REAL PROPERTY GAINS TAX
17
5.3
Disposal Price is Deemed
Equal to Acquisition
Price
Present
Pursuant to Schedule 2 Paragraph 3(b) of the RPGTA, the disposal
price shall be deemed equal to the acquisition price on the transfer
of assets between spouses or the transfer of assets owned by an
individual, by his wife or by an individual jointly with his wife or
with a connected person to a company (whether or not resident in
Malaysia) controlled by the individual, by his wife or by the
individual jointly with his wife or with a connected person for a
consideration consisting of shares in the company, or for a
consideration consisting substantially of shares in the company and
the balance of a money payment.
Proposed
A new Paragraph 3(2) is introduced to provide that the above shall
only apply to transfers of assets between spouses or to a company
where it involves an asset owned by a citizen.
Effective
1 January 2018
5.4
RPGT - Conditional
Contracts
Present
Pursuant to Schedule 2 Paragraph 16 of the RPGTA, if a contract
for the disposal of an asset is conditional and the condition is
satisfied, the acquisition and disposal of the asset will be considered
as taking place at the time the contract was made, unless –
(a) The acquisition or disposal requires the approval by the
Government or a State Government or an authority or
committee appointed by the Government or a State
Government, the date of disposal shall be the date of such
approval; or
(b) The approval referred to in subparagraph (a) is conditional the
date of disposal shall be the date when the last of all such
conditions is satisfied.
Proposed
Schedule 2 Paragraph 16 is amended to exclude the approval from
an authority or committee appointed by the Government or a State
Government as highlighted in (a) above.
Effective
1 January 2018
6. STAMP DUTY
18
6.1
Extension of Stamp Duty
Exemption to Revive
Abandoned Housing
Projects
Present
Stamp duty exemption is given for the revival of abandoned
housing projects to the following parties:-
(a) Rescuing contractors who is appointed or approved by the
Minister of Housing and Local Government to carry on
rehabilitation works for an abandoned project in respect of:-
(i) Any loan instrument or loan agreement approved by the
bank and financial institution to finance the abandoned
project; and
(ii) Any instrument of transfer for the purpose of transferring
revived residential property in relation to the abandoned
projects.
(b) Original purchaser that is a purchaser whose name is stated in
the Sale And Purchase Agreement in relation to an abandoned
project in respect of:-
(i) Any loan instrument or loan agreement approved by the
bank and financial institution for the purpose of financing
the revived residential property in relation to the
abandoned project; and
(ii) Any instrument of transfer for the purpose of transferring
the revived residential property in relation to the
abandoned project.
The above exemptions are applicable to instruments executed since
1 January 2013 until 31 December 2017.
Proposed
The above stamp duty exemption be extended for another 3 years.
Effective
Instruments executed up to 31 December 2020
6.2
Stamp Duty Exemption
for Trading of Exchange
Traded Funds (ETF) and
Structured Warrants
(SW)
Present
Stamp duty is charged on contract notes at the rate of RM1.00 for
every RM1,000 and part thereof for trading of shares of listed
companies on Bursa Malaysia subject to a cap of RM200 for each
contract.
Proposed
Exemption of stamp duty be given on contract notes for trading of
ETF and SW by investors.
ETF is an open-ended investment fund listed and traded on a stock
exchange and which invests in a basket of securities.
SW is a security instrument listed on a stock exchange that gives
right to buy or sell the underlying instrument in the future for a
fixed price.
Effective
Contract notes executed from 1 January 2018 to 31 December 2020
7. GOODS & SERVICES TAX
19
7.1
Additional Reading
Materials subject to GST
at Zero Rate
Present
GST (Zero-rated Supply) Order 2014 and GST (Zero-rated Supply)
(Amendment) (No.2) Order 2015 provide for certain newspapers,
journals and periodicals and certain online services with regards to
newspapers, journals and periodicals to be zero-rated.
Proposed The list of zero rated supplies with respect to reading materials be
extended to include magazines, journals, periodicals and comics.
Effective 1 January 2018
7.2
GST Treatment on
Management and
Maintenance Services of
Stratified Residential
Buildings
Present The supply of services of the management and maintenance
including recovery of group insurance cost, assessment tax and quit
rent by the Joint Management Body and Management Corporation
to the owners of a building for residential purposes held under a
strata title is treated as exempt supply under the GST (Exempt
Supply) (Amendment) Order 2015 and 2016.
Proposed The GST exemption on the above supply of services be extended to
housing developers.
Effective
1 January 2018
7.3
Review of the GST
Treatment for Local
Authorities
Present Section 64 of GSTA provides that any supply made by the Local
Authorities in respect of regulatory and enforcement functions is
not subject to GST (out of scope supply).
Local authorities which make taxable supplies other than the above
is required to register under the GSTA 2014 and eligible to claim
input tax credit in respect of its supplies.
Proposed It is proposed that all supplies made by Local Authorities be treated
as supplies not subject to GST (out of scope supply).
As the Local Authorities are no longer required to be registered
under the GSTA 2014 and not eligible to claim input tax credit,
GST relief will be given to Local Authorities on the acquisition of
all goods excluding petroleum, commercial buildings or land and
on the importation of motor cars.
Effective 1 April 2018 or 1 October 2018 as opted by the Local Authorities
7. GOODS & SERVICES TAX
20
7.4
GST Relief on
Construction Services for
School Buildings and
Places of Worship
Present Government schools, Government-aided schools and Chinese
independent high schools have been given 50% GST relief on
construction services for the construction of school building
including hall and sport facilities. The GST relief is granted only
for construction projects approved by the respective authorities.
The GST relief is subject to construction contracts signed before 1
April 2015. This date was extended to 31 March 2017.
There is no specific GST relief given for construction services in
respect of places of worship.
Proposed It is proposed that 100% GST relief be given on construction
services for the construction of school buildings and places of
worship financed through public donations.
The GST relief is restricted to construction services for which the
invoice has not been issued and subject to the following conditions:
(a) the approval under Section 44(6) of the Act for their
construction fund has been obtained;
(b) the approvals for development and constructions by Local
Authorities, the Ministry of Education Malaysia or State
Religious Councils (for surau or mosques) have been
obtained;
(c) construction of school building including hall and sport
facilities are directly used for teaching and learning purposes;
(d) the relief does not apply to the purchase of commercial
buildings; and
(e) construction services contract signed on or after 1 April 2017.
Effective Applications submitted to the MOF from 27 October 2017
7.5
GST Relief on the
Importation of Big Ticket
Items
Present
Importations of big ticket items such as aircrafts, ships and oil rigs
by companies in aviation, shipping and oil and gas industries are
subject to GST of 6%.
Proposed It is proposed that companies carrying out activities in aviation,
shipping and oil and gas industries be given relief from paying GST
on the importation of big ticket items. The list of big ticket items
and the terms and conditions of approvals are to be stipulated by
the MOF.
Effective 1 January 2018
7. GOODS & SERVICES TAX
21
7.6
Relief from Payment of
GST on Importation of
Goods under Lease
Agreements from
Designated Areas to
Malaysia
Present Goods under lease agreements removed from a designated area to
Malaysia are subject to GST of 6%.
Proposal It is proposed that the relief from payment of GST be given to
companies involves in the oil and gas industry on the importations
of goods under lease agreements from designated area to Malaysia.
The list of goods and the terms and conditions of approvals are to
be stipulated by the MOF.
Effective 1 January 2018
7.7
GST Relief on Handling
Services rendered to
Operators of Cruise Ships
Present Loading, unloading, handling services and storage of goods carried
or to be carried in a ship or aircraft in a port by a port operator or an
aircraft operator is determined as zero-rated supply under Second
Schedule of GST (Zero-Rated Supply) Order 2014.
"Ship" is defined under the Item 2, Goods and Services Tax (Zero-
Rated Supply) Order 2014, to include every description of vessel
used in navigation not propelled by oars as provided under the
Merchant Shipping Ordinance 1952 including any vessel owned or
operated by the Government of a foreign state but does not include
any vessel which is designed or adapted for recreation, pleasure or
other than freight transportation or passenger transportation.
Cruise ships are categorised as "ship" used for recreation and
pleasure are not eligible for zero-rated treatment for handling
services provided by sea port operators.
Proposed It is proposed that cruise ship operators are given relief from
payment of GST on handling services provided by sea port
operators in Malaysia.
Effective 1 January 2018 to 31 December 2020
7.8 Second Schedule - Matter
to be treated as neither a
Supply of Goods nor a
Supply of Services
Present
Any contribution made to the pension, provident or social security
fund under any written law shall be treated as neither a supply of
goods nor a supply of services.
Proposed
It is extended to any levy made under the Pembangunan Sumber
Manusia Berhad Act 2001 [Act 612].
Effective
Upon coming into operation of the Finance (No.2) Act 2017
7. GOODS & SERVICES TAX
22
7.9
The Merger of Customs
Appeal Tribunal and
Goods and Services Tax
Appeal Tribunal
Present Any person aggrieved by the decision of the DG of Customs on
matters relating to customs and GST may appeal to the Customs
Appeal Tribunal (CAT) and the GST Appeal Tribunal (GSTAT)
separately.
Both tribunals are independent judicial bodies to hear and decide
appeals filed against the decision of the DG of Customs. The CAT
began operating on 1 June 2007 and its authority covers appeals
against all the decision of the DG of Customs under the Customs
Act 1967, the Excise Act 1976, Sales Tax Act 1972 and the Service
Tax Act 1975 except matters relating to compound and seizure of
goods.
GSTAT began operating on 1 April 2015 and its authority covers
appeals against the decision of the DG of Customs relating to GST,
except those stipulated under the Fourth Schedule, Goods and
Services Tax Act 2014.
Proposed Both the tribunals be merged and all appeals relating to the decision
of the DG of Customs to be heard by a single tribunal which is
CAT. Through this merger, taxpayers or companies aggrieved by
the decision of the DG of Customs on customs and GST matters
may submit their appeal to CAT.
Effective 1 January 2019
7.10
Determining the Value of
Supplies for Cessation of
Liability to be registered –
Supplies to be excluded
Present
In determining the value of any taxable person’s supplies for the
purposes of cessation of liability to be registered, the following
supplies shall be excluded:-
(a) Supplies of goods that are capital assets of the business in the
course or furtherance of which they are supplied or to be
supplied;
(b) Supplies of imported services;
(c) Supplies made in accordance with the Warehousing Scheme
under Section 70;
(d) Supplies made by a person who belongs in a country other
than Malaysia or a recipient, in accordance with the
Approved Toll Manufacturer Scheme under Section 72; or
(e) Supplies made within or between designated areas under
Section 155 except where such supply is subject to an order
under Section 160(1).
Proposed
For the purpose of determining the value of supplies, the exclusion
under Item (a) above will only be applicable if the supplies are due
to cessation of business.
Effective
Upon coming into operation of the Finance (No.2) Act 2017
7. GOODS & SERVICES TAX
23
7.11
Power of DG to Raise
Assessment under the
GSTA
Present
Section 43 provides that where any taxable person-
(a) fails to apply for GST registration;
(b) fails to furnish a GST return within the stipulated due date; or
(c) furnishes a return which to the DG appears incomplete or
incorrect,
the DG may assess amount of tax and penalty under Section 41(8)
and to the best of his judgement the amount shall be due and
payable, whether or not that person appeals against the assessment.
The assessment shall not be made more than 6 years from the date
on which the tax was due and payable or from the date on which
the refund was made, as the case may be, except where in the
opinion of the DG any form of fraud or wilful default has been
committed by or on behalf of any person in connection with or in
relation to tax.
Proposed
A new Section 43(1A) is introduced to extend the power of the DG
to make assessment to any person other than a taxable person who:-
(a) fails to furnish a declaration under Section 42; or
(b) furnishes a declaration which to the DG appears incomplete or
incorrect.
Effective
Upon coming into operation of the Finance (No.2) Act 2017
2017 – SELECTED TAX CASES AND DECISIONS
24
SPECIAL COMMISSIONERS OF INCOME TAX
Case Issue / Decision In favor of
DHTI Sdn Bhd v Ketua
Pengarah Hasil Dalam
Negeri (2017) MSTC 10058
The taxpayer was entitled to claim capital allowance on
the capital expenditure incurred on the telecommunication
towers. The telecommunication towers indeed functioned
as the apparatus for the taxpayer’s business and not
merely a place of business.
Taxpayer
HIGH COURT
Case Issue / Decision In favor of
Ketua Pengarah Hasil Dalam
Negeri v Kualiti Alam Sdn
Bhd (2017) MSTC 30139
The DGIR was correct in rejecting the reinvestment
allowance claims as the taxpayer did not manufacture or
process any product that had value to be sold, and
therefore the investments had not been made in
connection with a “qualifying project” within the meaning
of paragraph 8 of the Schedule 7A of the Act.
Tax
authorities
Ketua Pengarah Hasil Dalam
Negeri v United Malacca
Berhad (2017) MSTC 30140
The late payment charge that had been paid by the Land
Administrator to the taxpayer following a compulsory
acquisition of the taxpayer’s land was capital in nature.
The reimbursement of retrenchment benefits paid by the
taxpayer to its former employees who had to be made
redundant as a consequence of the compulsory acquisition
was not subject to income tax.
Taxpayer
Sastep Sdn Bhd v Ketua
Pengarah Hasil Dalam
Negeri (2017) MSTC 30143
The taxpayer had failed to exhibit any documents to
establish the equipment rental transactions with the debtor
which was a related party. It also failed to take action to
recover the debts and to repossess the equipment. The
taxpayer only took legal action against the debtor after it
was time barred. The DGIR was right in disallowing the
claim for bad debts and raise additional assessment plus
penalty of 45% on the basis of incorrect return.
Tax
authorities
Chantika Kelang Beras Sdn
Bhd v Ketua Pengarah Hasil
Dalam Negeri (2017) MSTC
30145
Both High Court and the Special Commissioners found
that despite the word “subsidy” used in the Ministry of
Agriculture’s document to the taxpayer, the real character
of the payment received was compensation to cover the
costs for having to sell paddy seedlings and ST15 rice at
lower prices than the market and hence the income tax
exemption given on grant and subsidy received from the
Federal or the State Government is not applicable on the
payment received.
(The Court of Appeal allowed the Taxpayer’s appeal.
There is no ground of judgment made available by the
Court of Appeal.)
Tax
authorities
2017 – SELECTED TAX CASES AND DECISIONS
25
HIGH COURT
Case Issue / Decision In favor of
Ketua Pengarah Hasil Dalam
Negeri v Rapid Growth
Technology Sdn Bhd (2017)
MSTC 30148
Following the successful claim of reinvestment allowance
(RA) by other taxpayers for non-production area, the
taxpayer submitted an appeal against its own assessment
(which was made based on the prevailing public ruling)
under Section 131 of the Act for review of its RA claim.
The taxpayer is estopped by Section 131(4) of the Act
from seeking relief for error or mistake as it did not
challenge the interpretation of the Act in the then
prevailing public ruling.
Tax
authorities
COURT OF APPEAL
Case Issue / Decision In favor of
Ketua Pengarah Hasil Dalam
Negeri v Mudah.My Sdn
Bhd (2017) MSTC 30137
It was evident that the payments made by the taxpayer to
the non-resident companies were for the “right to use”,
thus, falling very well within the scope of the definition of
“royalty” under Section 2 of the Act and accordingly,
were subject to withholding taxes.
Tax
authorities
Society of La Salle Brothers
v Ketua Pengarah Hasil
Dalam Negeri (2017) MSTC
30138
The decision of the DGIR in issuing the notices of
assessment was illegal as it has failed to take into account
the taxpayer’s vested right under the 1947 Ordinance
which has not been shown to have been impaired by the
amendments effected to the Act. The taxpayer continues
to be entitled to the tax exemption.
Taxpayer
FEDERAL COURT
Case Issue / Decision In favor of
Positive Vision Labuan
Limited v Ketua Pengarah
Hasil Dalam Negeri & Other
Appeals (2017) MSTC
30136
A taxpayer who has made an irrevocable election to be
taxed under the Act, would only not be entitled to enjoy
the benefit as provided under the Income Tax (Exemption)
Order (No. 22) Order 2007 from the date of its election.
Taxpayer
Kerajaan Malaysia v Mudek
Sdn Bhd (2017) MSTC
30149
A taxpayer who was aggrieved of the RPGT assessment
should have lodged an appeal to the Special
Commissioners. On the service of notice of assessment on
a person, the RPGT assessed is payable, whether or not
the person appeals against the assessment, and can be
recovered by the Government by civil proceedings. On
such proceedings, the court has no power to entertain any
plea that the amount recoverable is excessive, incorrectly
assessed, under appeal or incorrectly increased.
Tax
authorities
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