Highlights Prospering an Inclusive Economy

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Walter Johnston
6 years ago
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Highlights The Prime Minister wh is als the Finance Minister delivered the 2018

The Malaysian ecnmy, the furth largest amngst Suth East Asian natins, shwed

Amidst cncerns ver glbal uncertainties, Malaysia s ecnmy is expected t grw

The Gvernment deficit is targeted at 3.0% f GDP fr 2017 and 2.

services sectr becming an imprtant cntributr t grwth, making up 54.3% f GDP.

1 Highlights The Prime Minister wh is als the Finance Minister delivered the 2018 budget prpsals n Friday 27 Octber The Malaysian ecnmy, the furth largest amngst Suth East Asian natins, shwed particular resilience. Amidst cncerns ver glbal uncertainties, Malaysia s ecnmy is expected t grw between 5.2% -5.7% in 2017 and between 5% -5.5% in The Gvernment deficit is targeted at 3.0% f GDP fr 2017 and 2.8% in 2018 due in part t an increase in expected tax revenue frm bth cmpanies and individuals. The aim is t gradually reduce the deficit twards achieving a near- balanced budget in Private investment will re-emerge as amngst the drivers f ecnmic grwth with the services sectr becming an imprtant cntributr t grwth, making up 54.3% f GDP. The 2018 budget allcatin will be at RM billin up frm RM billin in In line with the theme f the budget - Prspering an Inclusive Ecnmy - measures were intrduced t benefit targeted interest grups rather than the mainstream business sectrs. Therefre, apart frm thse listed hereunder, n tax measures were cntained in this years prpsals.

Crprate Tax The Gvernment annunced its cmmitment t fulfil the Organisatin fr Ecnmic Cperatin and Develpment ( OECD ) Base Ersin and Prfit Shifting Actin Plans.

2 Crprate Tax The Gvernment annunced its cmmitment t fulfil the Organisatin fr Ecnmic Cperatin and Develpment ( OECD ) Base Ersin and Prfit Shifting Actin Plans. These include: Streamlining f tax incentives t be in line with the Frum n Harmful Tax Practices criteria befre 1 January 2019; and Implementatin f the Autmatic Exchange f Infrmatin incrprating the Cmmn Reprting Standard, cmmencing September Deductibility f interest The Earning Stripping Rules ( ESR ) is t replace Thin Capitalisatin Rules (which were due t be implemented by the end f this year) frm 1 January 2019 t address leakages due t excessive interest claims n lans made between related cmpanies. Under the ESR, the interest deductin n lans between related cmpanies within the same grup will be limited t a pre-determined rati, ranging frm 10% t 30% f the cmpany s prfit befre tax. With effect frm the year f assessment ( YA ) 2018, a further deductin is granted t the emplyer f emplyees wh have been affected by accidents/critical illness and are able t secure suitable emplyment (t be certified by the Scial Security Organisatin). The Gazette Order granting capital allwance n qualifying expenditure incurred n the purchase f Infrmatin and Cmmunicatin Technlgy ( ICT ) equipment and cmputer sftware packages which had expired in the YA 2016 has been renewed frm YA 2017 nwards. Hwever, the capital allwance rate has been reduced t a 20% initial allwance rate and a 20% annual allwance rate. Previusly, the annual allwance rate was 80% resulting in a ne year write-ff f the expenditure. With effect frm YA 2018, expenditure incurred n the develpment f custmised sftware cmprising cnsultatin fee, licensing fee and incidental fees related t sftware develpment will qualify fr capital allwances at 20% (initial allwance)/ 20% (annual allwance). This is clearly a psitive measure as such expenses were previusly regarded as nn-qualifying fr capital allwance purpses pursuant t Public Ruling 12/2014. Incentives Accelerated capital allwance and autmatin equipment allwance t be claimed fr the first RM10 millin qualifying capital expenditure incurred in YA 2018 t YA 2020 fr the adptin f advanced technlgy, cmmnly knwn as Industry 4.0. This applies t applicatins received by the Malaysian Investment Develpment Authrity ( MIDA ) frm 1 January 2018 t 31 December Extensin f the fllwing incentives: Accelerated capital allwance and autmatin equipment allwance fr labur intensive industries (i.e. rubber, plastic, wd and textile prducts) t YA 2020 fr applicatins received by MIDA frm 1 January 2018 t 31 December 2020.

3 Investment tax allwance fr medical turism fr the expansin, mdernisatin r refurbishment f private healthcare services fr applicatins submitted t MIDA by 31 December and 5 star htels and Principal Hub fr applicatins received by MIDA until 31 December Tur perating cmpanies with tur packages within Malaysia participated by nt less than 1,500 lcal turists and 750 freign turists annually (frm YA 2019 t YA 2020). Tax exemptin equivalent t the amunt f investment made by an angel investr in investee cmpanies (fr applicatins submitted t the MOF frm 1 January 2018 t 31 December 2020). Cmpanies registered with the Malaysia Healthcare Travel Cuncil that prvide dental and ambulatry healthcare services are granted duble deductin fr expenses incurred in btaining certificatin fr quality systems and standards frm pre-apprved certificatin bdies (frm YA 2018). Tax exemptin n incme derived frm the exprt f healthcare services t freign clients either in Malaysia r frm Malaysia is increased frm 50% t 100% f the value f increased exprts f services and t be set ff against 70% f statutry incme (frm YA 2018 t YA 2020). Tax exemptin given t each recipient f the Green Sustainable and Respnsible Investment ( Green SRI ) grant t finance external review expenditure incurred. This incentive is available tr applicatins received by the Securities Cmmissin f Malaysia ( SC ) frm 1 January 2018 t 31 December Fund managers managing SRI funds apprved by the SC are granted tax exemptin n management fee incme frm managing cnventinal and Shariah-cmpliant SRI funds. This is applicable frm YA 2018 t YA Tax treatment in relatin t venture capital fr applicatins received by the SC frm 1 January 2018 t 31 December 2018 frm YA 2018 t YA 2022: Expanded incme tax exemptin given t Venture Capital Management Crpratins t include management and perfrmance fees received by a venture capital management cmpany. Cmpanies r individuals investing in venture capital cmpanies are granted a tax deductin equivalent t the amunt f investment made in the venture cmpanies, limited t a maximum f RM20 millin annually.

4 Gds and Services Tax With effect frm 1 January 2019, the Custms Appeal Tribunal ( CAT ) and the Gds and Services Tax Appeal Tribunal will be merged. All appeals n custms and GST matters are t be submitted t CAT. The GST treatment f the fllwing has been revised Magazines, jurnals, peridicals and cmics are regarded as zer rated supplies (w.e.f. 1 January 2018). Prvisin f management and maintenance services including cst recvery f grup insurance, quit rent and assessment f stratified residential buildings by husing develpers are treated as exempt supplies (w.e.f. 1 January 2018). Supplies made by Lcal Authrities are regarded as ut f scpe supply and hence, nt subject t GST. GST relief will be given t Lcal Authrities n the acquisitin f all gds excluding petrleum, cmmercial buildings r land and n the imprtatin f mtr cars. (w.e.f. 1 April 2018 r 1 Octber 2018 as pted by the Lcal Authrity). GST relief is prvided n: Cnstructin services fr schl buildings and places f wrship financed thrugh public dnatins (subject t certain cnditins). This applies fr applicatins submitted t the Ministry f Finance ( MOF ) frm 27 Octber Imprtatin f big ticket items such as aircraft, ships and il rigs by cmpanies in the aviatin, shipping and il and gas industries. The list f big ticket items and the terms and cnditins f apprval are t be stipulated by the MOF. (w.e.f. 1 January 2018). Imprtatin f gds under lease agreements frm Designated Areas (i.e. the duty-free islands f Labuan, Langkawi and Timan) t Malaysia fr the il and gas industry. The list f gds and the terms and cnditins f apprval are t be stipulated by the MOF. (w.e.f. 1 January 2018). Handling services prvided by sea prt peratrs t cruise ship peratrs frm 1 January 2018 t 31 December 2020.

5 Persnal Tax Individual incme tax rates will be revised dwnwards by 2% fr three chargeable incme bands between RM20,001 t RM70,000 with effect frm YA This measure will result in tax savings ranging frm RM300 t RM1,000. Fr YAs 2018 t 2020, a 50% incme tax exemptin is granted n rental incme received by Malaysian resident individuals, subject t the fllwing cnditins: Rental incme received des nt exceed RM2,000 per mnth fr each residential hme; and The residential hme must be rented under a legal tenancy agreement between the wner and the tenant. The tax relief granted t resident individuals fr net savings int Skim Simpanan Pendidikan Nasinal fr a child f up t RM6,000 which was due t expire in YA 2017 has been extended fr anther 3 years (i.e. up t YA 2020). Tax exemptin n emplyment incme up t a maximum f 12 cnsecutive mnths frm YA 2018 t YA 2020 fr wmen wh return t the wrkfrce after being n a career break fr at least 2 years n 27 Octber Applicatins are t be submitted t Talent Crpratin Malaysia Berhad frm 1 January 2018 t 31 December Others Pulau Pangkr declared as a duty free island. Hwever, the duty free status excludes prducts such as alchlic beverages, tbacc and mtr vehicles. Establishment f a Digital Free Trade Zne which cmprises e-fulfilment Hub, Satellite Services Hub and e-service platfrm t stimulate grwth in electrnic trade. In this regard the de minimis value f imprts is increased frm RM500 t RM800 t establish Malaysia as the reginal e- cmmerce hub. Existing stamp duty exemptins granted t rescuing cntractrs and riginal huse purchasers f abandned prjects n lan agreements and memrandums f transfer which was due t expire n 31 December 2017 has been extended until 31 December 2020 fr abandned husing prjects certified by the Ministry f Urban Wellbeing, Husing and Lcal Gvernment. Stamp duty exemptin n cntract ntes fr the trading f Exchange Traded Funds and Structured Warrants executed frm 1 January 2018 t 31 December 2020.

readily signed n t the internatinal initiatives against what is termed base-ersin. This prgressive trend will inevitably make cmpliance with tax bligatins, particularly by crprates, mre nerus.

6 Cnclusin The 2018 Budget prpsals in their varius distributive measures are designed t have brad-based and wide-ranging sci-ecnmic benefits. Frm a business perspective, the intrductin f the Earning Stripping Rules ( ESR ), and the adptin f Multilateral Agreements fr the exchange f infrmatin fr tax purpses indicate that Malaysia has readily signed n t the internatinal initiatives against what is termed base-ersin. This prgressive trend will inevitably make cmpliance with tax bligatins, particularly by crprates, mre nerus. Date: 15 Nvember 2017 Htel Istana, KL Venue: Time: 8.30am 4.30pm 2018 Budget Updates Panel Discussins Tax Audit Develpments Recent GST and Tax Develpments Featuring sessins by Senir IRB and RMCD fficials Fr further details, click here Cntact Us Crprate Tax and Advisry Transfer Pricing GST Thang Mee Lee mlee@axcelasia.cm Lim Kah Fan lkf@axcelasia.cm Lew Mui Lee lml@axcelasia.cm Vivian New vnlw@axcelasia.cm Dat Peter Tang dpt@axcelasia.cm Brynner Chiam bczh@axcelasia.cm Individual Tax Thang Mee Lee mlee@axcelasia.cm Shiranee Niles smn@axcelasia.cm Tax Audit and Investigatin Lim Kah Fan lkf@axcelasia.cm Thisha Gunasilan tg@axcelasia.cm Knwledge Management Vivian New vnlw@axcelasia.cm Shiranee Niles smn@axcelasia.cm Sarah Chew chl@axcelasia.cm

A key concern is the Government's fiscal deficit but a clear commitment has been made to reduce the projected 2014 deficit of 3.5% to 3% in 2015.

A key concern is the Government's fiscal deficit but a clear commitment has been made to reduce the projected 2014 deficit of 3.5% to 3% in 2015. 2015 MALAYSIAN BUDGET HIGHLIGHTS The 2015 Budget prpsals were presented t Parliament n 10 Octber 2014 by the Prime Minister. The 2015 Budget utlined seven main strategies: Strengthening ecnmic grwth Enhancing