2017 BUDGET HIGHLIGHTS (INCORPORATING FINANCE BILL 2016)

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Philomena Simpson
5 years ago
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Proposal 1 Review of corporate income tax for SME 2 Reduction of corporate income tax rate based on the increase in chargeable business income Description Currently, for all SMEs the tax rate on

Currently, the following companies and entities are taxed at a fixed rate of 24% as follows: I. Company with paid-up capital of more than RM2.

1 Proposal 1 Review of corporate income tax for SME 2 Reduction of corporate income tax rate based on the increase in chargeable business income Description Currently, for all SMEs the tax rate on chargeable income up to the first RM500,000 is proposed to reduce from 19% to 18% effective from year of assessment Currently, the following companies and entities are taxed at a fixed rate of 24% as follows: I. Company with paid-up capital of more than RM2.5 million or a Limited Liability Partnership (LLP) with total capital contribution of more than RM2.5 million; Company with paid-up capital of up to RM2.5 million or a LLP with total capital contribution of up to RM2.5 million on the chargeable income exceeding RM500,000; Trust body; and executor of an estate of an individual who was domiciled outside Malaysia at a time of his death and receiver appointed by the court. However, it is proposed for YA 2017 & 2018 for the below reduction in tax rate: Percentage of increase in chargeable business income as compared to immediate proceeding YA Percentage point reduction Below 5% 0% 5% to below 10% 1% 10% to below 15% 2% 15% to below 20% 3% 20% and above 4% 4.00% 3.00% 2.00% 1.00% 0.00% Percentage point reduction 5% to below 10% 10% to below 15% 15% to below 20% 20% and above

2 Based on the example given in budget speech, the above reduction of tax rate is only applicable to incremental chargeable business income portion only.eg. If a company s (non-sme) chargeable business income for year of assessment 2016 is RM10 million and increase to RM12 million in year of assessment 2017, the income tax imposed for the first RM10 million is 24% or RM2.4 million. Whereas the difference of RM2 million increased in year of assessment 2017 will be taxed at 20% equal to RM400,000. This means there will be a total tax saving of RM80, Extension of income tax incentives for new 4 and 5 stars hotels Currently, hotel operators undertaking investment in NEW 4 and 5 stars hotel are eligble for pioneer status or investment tax allowance for 5 years. The applicaton for said tax incentive is proposed to extend to 31 December Extension of tax incentive for Structured Internship Programme (SIP) Currently, companies that participate in the (SIP) are eligible for a double deduction on expenses incurred in implementing the programme. This programme is made available for Malaysian students pursuing full-time degree and diploma courses in institutions of higher learning or for equivalent vocational level (Malaysian Skills Certificate Level 4 and 5) as follows :- I. Degree Level YA 2012 to YA 2016 ; and Diploma and Vocational Level YA 2015 to YA 2016 It is proposed that the programme be extended until 2019 and expanded to include Malaysian Skills Certificate Level 3 5 Increase in the limit of tax deduction for sponsoring Arts, Cultural and Heritage activities It is proposed that the deduction limit for expenditure incurred by a company in a basis period to sponsor arts, cultural or heritage activities approved by the Ministry of Tourism and Culture is to be increased from RM500,000 to RM700,000, where the deduction limit allowed for sponsoring foreign arts, cultural and heritage activities be increased up from RM 200,000 to RM 300, Introduction of tax relief for fees paid to child care centres and kindergartens A new tax relief up to RM 1,000 is proposed to be provided from YA 2017 to individual tax payers (either parent of the children) who enroll their children aged up to 6 years, in child care centres or kindergartens. 7 Introduction of tax relief for the purchase of breastfeeding equipment A proposed new tax relief up to RM 1,000 be provided to women tax payers with children aged up to 2 years for the purchase of breast pump, cooler bag, containers for collection and storage. This relief can be claimed once in 2 years from YA 2017

3 8 Introduction of Lifestyle tax relief Currently individual tax payer can only eligible to claim tax relief as follows : I. Tax relief of up to RM 1,000 for the purchase of reading materials (excluding newspapers); Tax relief of up to RM300 for the purchase of sports equipment; Tax relief of up to RM 3,000 for the purchase of a computer. Effective YA 2017, these relief is proposed to be combined into a new Lifestyle relief with a limit of up to RM 2,500 and expanded to include : a. Purchase of printed daily newspaper; b. Purchase of smartphone and tablet; c. Internet subscription; and d. Gym membership fee 9 Extension of stamp duty exemption for the purchase of first residential home It is proposed that Malaysian citizens who purchase first residential home during the period 1 January 2017 to 31 December 2018 are eligible to the following : Price < RM 300, % stamp duty exemption be given on instrument of transfer and loan agreement RM 300,001 - RM 500,000 RM 500,001 & above 100% stamp duty exemption be given on instrument of transfer and loan agreement up to RM 300,000. The remaining balance of the value of the home is subject to the prevailing rate of stamp duty. Not eligible 10 Revision of stamp duty for transfer of real estate It is proposed that the rate of stamp duty on instruments of transfer of real estate worth more than RM1 million, will be increased from 3% to 4% effective 1 January GST output tax paid by employer A new subsection 13(1A) has been inserted whereby employment income will include any amount of output tax under the GST Act which is borne by the employer. For example, where the employer pays the car insurance on behalf of the employee, the GST output tax included therein shall constitute gross income from employment and shall be taxable on the employee. Effective : Year of assessment 2015

4 12 Review of derivation of special classes of income 13 Expansion of the scope of royalty" The proviso of Section 15A of Income Tax Act 1967 is removed and the special classes of income under subsections 4A(i) and (ii) shall be deemed to be derived from Malaysia irrespective of whether the services were performed in Malaysia or outside Malaysia. The definition of royalty has been expanded significantly to include items such as software and communications via satellite. The existing Section 2 for 'royalty' is amended by substituting for the definition of royalty the following definition: royalty includes any sums paid as consideration for, or derived from: I. the use of, or the right to use in respect of any copyrights, software, artistic or scientific works, patents, designs or models, plans, secret processes or formulae, trademarks or other like property or rights; IV. the use of, or the right to use tapes for radio or television broadcasting, motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights; the use of, or the right to use know-how or information concerning technical, industrial, commercial or scientific knowledge, experience or skill; the reception of, or the right to receive, visual images or sounds, or both, transmitted to the public by: a. satellite; or b. cable, fibre optic or similar technology; V. the use of, or the right to use, visual images or sounds, or both, in connection with television broadcasting or radio broadcasting, transmitted by: a. satellite; or b. cable, fibre optic or similar technology; VI. V the use of, or the right to use, some or all of the part of the radiofrequency spectrum specified in a relevant licence; a total or partial forbearance in respect of: a. right as is mentioned in paragraph (a) or (b) or any such knowledge, experience or skill as is mentioned in paragraph (c); b. the reception of, or the granting of the right to receive, any such visual images or sounds as are mentioned in paragraph (d); c. the use of, or the granting of the right to use, any such visual images or sounds as are mentioned in paragraph (e); or

5 d. the use of, or the granting of the right to use, some or all such part of the spectrum specified in a spectrum licence as is mentioned in paragraph (f); or e. the use of, or the granting of the right to use, any such property or V the alienation of any property, know-how or information mentioned in paragraph (a), (b) or (c) of this definition;. 14 Establishment of the Collection Intelligence Arrangement A proposed establishment of the Collection Intelligence Arrangement under the Ministry of Finance will involve the Malaysian Inland Revenue Board, the Royal Malaysian Customs Department and the Companies Commission of Malaysia for the information sharing to enhance efficiency in tax collection and compliance.

Finance 1 FINANCE BILL 2016

Finance 1 FINANCE BILL 2016 ARRANGEMENT OF CLAUSES Chapter I PRELIMINARY Clause 1. Short title 2. Amendment of Acts Chapter II AMENDMENTS TO THE INCOME TAX ACT 1967 3. Commencement of amendments to the