EY Tax Alert. Malaysian developments. Vol Issue no May Case law on an application for leave to commence judicial review

Transcription

1 EY Tax Alert Vol Issue no May 2018 Malaysian developments Case law on an application for leave to commence judicial review 2018 Tax Investigation Framework Remission of tax and stamp duty Malaysian developments Case law on an application for leave to commence judicial review Overseas developments New Zealand proposes offshore supplier registration system from 1 October 2019 for GST on low-value imported goods Australia issues Federal Budget In Keysight Technologies Malaysia Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri (2018) MSTC , the High Court (HC) delivered a judgment in favour of the Inland Revenue Board (IRB) and dismissed the taxpayer s application for leave to proceed with a judicial review. The HC held that the taxpayer s application for judicial review was premature. The taxpayer was dissatisfied with a letter issued by the IRB. However, the IRB s letter merely stated the findings of the IRB arising from a tax audit, and could not be regarded as a decision within the meaning of Order 53 of the Rules of Court The taxpayer should have waited for the issuance of the notice of additional assessment (Form JA) before it filed the application for judicial review. Even if the IRB s letter is a decision within the meaning of Order 53, the HC was also of the view that there were no exceptional circumstances which warranted a judicial review, when there was an alternative remedy of appeal as provided under Section 99 of the Income Tax Act 1967 (ITA). An overview of the case is set out below. Overview The taxpayer was incorporated in In 2008, upon entering into a manufacturing services management with Agilent Technologies International Sarl, Switzerland (ATIS), the taxpayer EY Tax Alert Vol. 21 Issue no May

2 ceased to operate as a full-fledged manufacturer and converted into a contract manufacturer. Following this, the taxpayer no longer owned any marketing and manufacturing intangibles as these rights had been sold and transferred to ATIS. On 30 August 2013, the IRB commenced an audit on the taxpayer for the years of assessment (YA) 2010 to The chronology of events thereafter is as follows: Between 2013 to 2017 Multiple correspondence between the IRB and taxpayer 9 March 2017 The IRB issued a letter to the taxpayer seeking clarification on the sale of intellectual property rights by the taxpayer to ATIS 28 March 2017 The taxpayer responded to the IRB s query On 9 June 2017, the IRB issued a letter outlining its findings, which included the following: IRB s opinion of the tax treatment for the transfer of technical know-how arising from the transfer pricing audit: The IRB s view was the profit from the transfer of technical know-how should be a revenue receipt and taxable as other income pursuant to Section 4(f) of the ITA. The taxpayer clarified that the transfer of technical know-how to a related company was an outright sale and the profit from the transfer was a capital receipt. The profit from the transfer was to compensate for the loss of revenue due to the restructuring that converted the function of the company from a full-fledged manufacturer to a contract manufacturer. This resulted in a sharp decline in the taxpayer s profit margin. However, the IRB disagreed with the taxpayer that the characteristic or function of the company had changed due to the restructuring process, as the "technical know-how" was still employed by the taxpayer and the sudden drop in its profit margin was not valid. IRB s finding on withholding tax issues in respect of royalty payments for YAs and its request for evidence of payment Revised tax computation Notification to the taxpayer that an assessment for additional taxes will be raised with penalties On 20 June 2017, the taxpayer filed its application for judicial review against the letter dated 9 June On the same day, the taxpayer received the Form JA dated 13 June 2017, seeking additional taxes of about RM311 million. An appeal under Section 99 was subsequently filed against the Form JA on 10 July The taxpayer s grounds of application, amongst others, were that the IRB had committed manifest errors of law and fact. Further, the taxpayer contended that an appeal to the Special Commissioners of Income Tax (SC) under Section 99 of the ITA was not feasible as the alleged sum of additional tax payable would cause such irreparable harm to the taxpayer s business that it would be forced to cease business operations should the sum have to be paid. The HC found that the letter issued by the IRB merely stated the findings of the IRB and could not be regarded as a decision which would result in the taxpayer being aggrieved. In quoting the case of Ketua Pengarah Hasil Dalam Negeri v Mudah.My Sdn Bhd (2017) MSTC , the CA held that: For a decision to be quashed on judicial review or susceptible to the court s reviewing powers, there must first be a decision by a decision maker, and that decision must affect the aggrieved party by either altering the rights or obligations or depriving him of the benefits which he has been permitted to enjoy. 2

3 As such, the HC was of the view that the taxpayer s application to review the letter was premature, as until the Form JA was issued by the IRB, there was no decision, omission or action which had adversely affected the taxpayer. The HC also found that the taxpayer s circumstances were not exceptional circumstances which warranted the case to be reviewed by the HC, and that the appeal process as provided under Section 99 of the Income Tax Act 1967 (ITA) ought to have been adhered to. In addition, given that the taxpayer had filed an appeal to the SC, it would be an abuse of the HC to maintain the application. In view of the above, the application for leave was dismissed Tax Investigation Framework The Inland Revenue Board (IRB) has issued on its website the updated Tax Investigation Framework (TIF) in Bahasa Malaysia, titled Rangka Kerja Siasatan Cukai. The 17-page TIF takes effect from 15 May 2018 and replaces the previous TIF that was effective from 1 October 2013 (see Tax Alert No. 21/2013). The contents of the new TIF are broadly similar to those of the earlier framework; it outlines the IRB s procedures and practices in conducting tax investigations, as well as the rights and responsibilities of the IRB, the taxpayer and the tax agent in a tax investigation situation. Some of the important changes are as follows: Paragraph 3.2 Investigation activity The new TIF specifies that IRB officers can now obtain clarification / documents from anyone relevant to the case investigated, to assist with the investigation activity. Paragraph 7.3 Record statement The new TIF provides that an accredited lawyer can be present during the recording of statements from persons relevant to the case investigated. Paragraph 7.4 Finalization of investigation After completion of the investigation procedures, the IRB would issue an official settlement or conclusion letter to the taxpayer. If the taxpayer accepts the settlement, the taxpayer will either sign an agreement or a letter of undertaking. The investigation is considered finalized and concluded after the case is approved by the Director General of Inland Revenue and an assessment is raised. The new TIF states that taxpayers who have been subjected to investigation will be placed under the IRB s monitoring program. However, the new TIF does not provide any explanation of the monitoring program and it is not indicated whether this monitoring program is similar to the Monitoring Deliberate Tax Defaulter Programme contained in the 2018 Tax Audit Framework issued in April The new TIF also specifies that in cases where the taxpayers disagree with the findings of the investigation, the IRB may raise an assessment with penalty, on the DGIR s best judgment basis. Paragraph Taxpayer The new TIF does not specifically state that taxpayers have the right to appoint qualified spokespersons / advisers at any time, or lawyers during the investigation and/or prosecution (unlike the earlier framework - see Paragraphs and 8.2.4). Paragraph 10 Failure to furnish return or give notice of chargeability The updated TIF reflects the increased penalty for default under Section 112 of the ITA. 3

4 Section 112(1) Penalty for default (effective from 31 December 2014) Section 112(1A) Offence and penalty (effective from 31 December 2015) Fine of not less than RM200 and not more than RM20,000, or to imprisonment for a term not exceeding six months, or both Fine of not less than RM1,000 and not more than RM20,000, or to imprisonment for a term not exceeding six months, or both The penalties as provided for under Section 112(3) and Section 113(2) are also highlighted therein. Paragraph 11 Payment procedures The new TIF stipulates that tax payments and penalties are to be remitted on a once-off payment basis. However, taxpayers may apply to settle the payments on an instalment basis. If approved, the first payment (which must be a minimum of 25% of the total tax payable and penalties) will have to be remitted on the date of the agreement, with the balance to be remitted in accordance to the instalment plan approved by the IRB, subject to certain conditions being adhered to. It is also highlighted that higher penalty rates would be imposed in cases with a longer instalment payment periods as opposed to cases with full payments or a shorter instalment periods. Paragraph 12.1 Appeal against notice of assessment The new TIF clarifies that appeals against a notice of assessment raised as a result of a tax investigation will need to be made pursuant to Section 97A(2) and Sections 99 to 102 of the ITA. Paragraph 13.2 Investigation under Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) The criminal charges and fines discussed in the new TIF have been updated to reflect the amendments to Sections 4 and 34 of the AMLATFPUAA, which were gazetted on 28 December 2017: Upon conviction of money laundering offence under Section 4 of the AMLATFPUAA (Offence of money laundering) Upon conviction under Section 34 of the AMLATFPUAA (Obstruction to exercise powers of an investigating officer), for failure to comply with Paragraph 13.5 of the new TIF Imprisonment for a term not exceeding 15 years, and fine of not less than 5 times the sum or value of the proceeds of an unlawful activity or instrumentalities of an offence at the time the offence was committed, or RM5 million, whichever is higher (Earlier framework: Fine not exceeding RM5 million or to imprisonment for a term not exceeding 5 years, or both) Fine not exceeding RM3 million, or to imprisonment for a term not exceeding 5 years, or both. In the case of continuing offence, he shall be liable to a further fine not exceeding RM3,000 for each day or part thereof during which the offence continues to be committed. (Earlier framework: Fine not exceeding RM1 million, or to 4

5 imprisonment for a term not exceeding 1 year, or both. In the case of a continuing offence, he shall be liable to a further fine not exceeding RM1,000 for each day during which the offence continues after conviction.) Remission of tax and stamp duty The Loans Guarantee (Bodies Corporate) (Remission of Tax and Stamp Duty) (No. 4) Order 2018 [P.U.(A) 113] was gazetted on 7 May The Order provides that any tax payable under the ITA and any stamp duty payable under the Stamp Act 1949 in relation to the following, shall be remitted in full: Sukuk Murabahah issued or to be issued by MyHSR Corporation Sdn Bhd pursuant to the Sukuk Murabahah Programme in nominal values up to RM1 billion; and Guarantee provided or to be provided by the Government of Malaysia in relation to the Sukuk Murabahah Overseas developments New Zealand proposes offshore supplier registration system from 1 October 2019 for GST on low-value imported goods On 1 May 2018, the New Zealand Government launched proposals for offshore suppliers of lowvalue goods to New Zealand consumers to collect and remit Goods and Services Tax (GST) on those goods with effect from 1 October This is consistent with the introduction of GST on remote services in New Zealand, effective from 1 October Under the proposals: Offshore suppliers will be required to register, collect and remit GST on supplies of goods to New Zealand consumers if the value of each individual supply of goods is NZ$400 or less. Customs duty and cost recovery charges will no longer be collected on goods valued at or below this value. Customs will continue to impose customs duty, GST and other charges on consignments valued above NZ$400. A mechanism to prevent double taxation has yet to be determined. Double taxation can arise for multiple transactions of low-value goods that are shipped in a single consignment that exceeds NZ$400 in value. Goods supplied to GST-registered businesses would be excluded unless the offshore supplier decides to zero-rate the supply for the purposes of recovering GST input tax credits. Offshore suppliers would be required to charge GST unless the recipient identified itself as a GST-registered business or provided its GST registration number or New Zealand Business Number. We note there is no public register of GST registrations in New Zealand. A reverse charge (recipient of the goods accounts for the GST) would apply to GSTregistered recipients that use goods for nontaxable purposes (such as private purposes). Offshore suppliers would be required to register for GST if their total sales to New Zealand consumers in a 12-month period exceed $60,000. This is the same threshold that applies to domestic businesses and to offshore suppliers of cross-border services. Offshore suppliers would not be required to collect GST on goods supplied to GST-registered businesses. A simplified pay only registration will apply to those offshore suppliers who will not be claiming any input tax credits. Quarterly GST returns will apply to offshore suppliers. 5

6 Special rules are envisaged for online marketplaces and re-deliverers as follows: If an offshore supplier sells goods through a marketplace, the marketplace (and not the supplier) would be required to register and account for the GST on the goods. Re-deliverers are used by consumers when the supplier or marketplace does not offer shipping to New Zealand. The goods are instead shipped to an overseas hub or mailbox, which then ships the goods to New Zealand. Under the proposals, re-deliverers would be required to register and return GST in respect of goods that they re-deliver to a New Zealand address. The $60,000 GST registration threshold would also apply to marketplaces and redeliverers. Penalties will apply to consumers who falsely represent that they are registered for GST. Inland Revenue will use data matching with other government agencies to identify noncompliant suppliers and consideration is being given to a joint registration system with Australia to assist with this. Submissions on the proposals can be made to the New Zealand tax authorities by 29 June Australia issues Federal Budget On 8 May 2018, Australia s Federal Treasurer, Scott Morrison, delivered the Australian Federal Budget, Federal Budget 2018 punting on growth. Accelerating growth has seen tax revenues exceed forecasts while spending has maintained a steady path. Cautious growth forecasts underpin future reform plans and the path to surplus. This Tax Alert focuses on the key tax measures announced and foreshadowed. Key business tax measures announced include: Changes to the tax treatment of research and development (R&D) expenditure with positive and negative impacts to companies. An intensity test introduced for larger companies will see improved incentives of up to 12.5% for R&Dintensive companies, but reduced to 4% for the least R&D-intensive companies. These compare with the current 8.5% and (previously) 10% incentives for larger companies. A consultation paper to be released in the next few weeks covering Australia s participation in the G20 countries review of digitization of business and changes required to tax systems Numerous integrity measures to be introduced will impact businesses and forward-planning for financing and tax compliance purposes. These include: Establishing thin capitalization integrity measures to align the valuation of intangible and internally-generated assets for tax and financial reporting purposes, and closing access to thin capitalization tests intended only for outbound investors Removing the ability of Managed Investment Trusts and Attribution Managed Investment Trusts to apply capital gains tax discounts at the trust level Launching transparency initiatives to expand significant global entity definitions Instituting numerous future black economy measures including denial of deductions for some payments where there has not been compliance with Pay As You Go (PAYG) rules Providing major funding for the Australian Taxation Office (ATO) s big data compliance initiatives to create greater ATO data analytics, which will require corporate readiness Indirect tax and customs duty measures saw changes also. This Tax Alert outlines the key proposed tax measures, categorized into changes affecting: Businesses, including international businesses 6

7 Financial services and real estate Indirect taxes For companies with under $20m aggregated annual turnover (eligible for refundable offsets): Business tax measures R&D offset significant changes The Government s response to the 2016 Review of the R&D Tax Incentive proposes significant changes to the R&D offsets (incentives). The changes will apply for income years starting on or after 1 July For companies with over AU$20m aggregated annual turnover (eligible for non-refundable offsets): A sliding rate offset, to replace the current fixed offset, will vary with the claimant s R&D Intensity. The R&D intensity will be a ratio of R&D expenditure divided by total expenditure for the year, though further details are to be released (EY has opened discussions with the Treasury) The final offset benefit will be tiered with the potential for an effective benefit rate between 34% and 42.5% (assuming a 30% corporate income tax rate) R&D Intensity tier Marginal R&D premium Added to claimant tax rate (at 30%) gives 0 2% 4.0% 34.0% 2 5% 6.5% 36.5% 5 10% 9.0% 39.0% > 10% 12.5% 42.5% Offset rate will be a premium of 13.5% above the company tax rate (from a fixed 43.5% offset) Cash refunds will be capped at $4m annually with the balance carried forward to future income years as non-refundable tax offsets. Clinical trials will not be counted towards this cap. Other general R&D changes include: increased integrity measures including increased funding for the ATO and regulators, improved guidance material, a public findings register, and R&D Tax administrative and technical changes New transparency measures, including publication of company names and amounts of R&D expenditure claimed During the consultation process, impacted businesses can provide feedback directly to the Government. Alternatively, EY will make a submission to the Government and we would welcome input from impacted businesses. Significant global entity companies The definition of significant global entities (SGEs) is to be broadened for income years commencing on or after 1 July Broadly, an SGE is currently defined as either a global parent entity with an annual global income of $1b or more, or an entity that is a member of a group of entities containing a global parent entity and the annual global income of the group is $1b or more. Increase in the R&D expenditure threshold from $100m to $150m annually Many large global and domestic-based companies will now only receive 4% support for every $1 of R&D expenditure. Only 18 months ago, this same level of R&D expenditure by these companies received 10% support. The SGE definitions are proposed to include (in addition to the current groups headed by a company required to provide consolidated financial statements) members of large groups headed by private companies, trusts, partnerships and also by investment entities (e.g., private equity funds). This broader range of companies will be subject to SGE higher tax penalties, obligations for general purpose financial statements and Country-by-Country 7

8 reporting, and will need to adjust compliance and reporting processes. Transparency, black economy and ATO Big Data The full Government response to the Black Economy Taskforce Report is expected to bring in $5.3 billion over the next four years. From broadly 1 July 2019, key measures include: Business deductions Businesses will not be able to claim deductions for employee payments without withholding PAYG Deductions will also be disallowed for payments to contractors without any PAYG withheld and where the contractor does not provide an Australian Business Number (ABN) Cash payments made to businesses will be limited to $10,000 maximum Transparency measures Businesses seeking to tender for Australian Government procurement contracts over $4 million (including Goods and Services Tax (GST)) must provide an ATO statement indicating that they are generally compliant with their tax obligations. Illegal phoenixing Measures to combat illegal phoenixing of companies include: Expanded ATO powers to retain tax refunds where there are outstanding tax filings Extending the director penalty provisions to make directors personally liable for some GST, luxury car tax and wine equalization tax debts These measures are to be supported by the introduction of specific offenses and Corporations Law changes to limit directors ability to resign to avoid liability and related creditors rights to vote on the appointment of external administrators. No express start date has been announced Taxable payments reporting Security and investigation services, road freight transport and computer system design services will fall under the taxable payments reporting system (TPRS) requiring payers to report payments to contractors to the ATO Other Designing a new regulatory framework for the ABN system in ; developing options for improving how businesses interact with the government to be considered in the Budget New funding to support small businesses with fewer than 20 employees during the transition to Single Touch Payroll Reporting from 1 July 2019 New funding to the Tax Practitioners Board (TPB) The ATO receives significant funding under the black economy, R&D, superannuation and other initiatives, including $318.5 million over the next four years for new ATO mobile strike teams, increased audit presence, black economy hotline, improved data analytics and educational activities. Businesses can expect significantly increased ATO activities including data analytics and systems reviews, and should prepare for efficient response management. Small business instant asset write-off for assets under $20,000 extended The instant asset write-off for assets under $20,000 for small businesses with aggregated annual turnover of less than $10m will be extended yet again for assets first used or installed ready for use by 30 June The write-off was due to expire 30 June

9 Eligible entities will welcome the further time to access this concession. Retailers and suppliers of assets to small businesses will also benefit. Private group integrity measures Tax integrity announcements aimed at private groups include: Unpaid present entitlements (UPE) of companies From 1 July 2019, UPEs to trust income conferred on a private company beneficiary without then being paid will be treated as loans for tax purposes under the Division 7A private company tax integrity regime. This will codify existing ATO administrative treatment of such UPEs. The Division 7A concessional changes announced in the 2017 Budget have been deferred until 1 July Income to individuals from image rights From 1 July 2019, individuals (typically high profile persons) will no longer be able to alienate income from image or brand rights that are disposed of or licensed to a related entity. Such income will be assessable to the relevant individual. Testamentary trusts From 1 July 2019, an integrity measure will be introduced to ensure income and gains derived from non-estate assets are not subject to concessional taxation when distributed to minors. In such cases, the income will be subject to the existing higher tax regime applying to minors deriving investment income. Circular trust distributions From 1 July 2019, an anti-avoidance measure will apply to family trusts using a circular trust distribution strategy to reduce or avoid tax. Such distributions will be taxed at the highest marginal tax rate plus Medicare levy. Partnership Everett Assignment changes From Budget night (8 May 2018), the small business Capital Gains Tax (CGT) concessions will no longer be available to partners who derive a capital gain on disposing part of their partnership interest to a related party (commonly referred to as an Everett Assignment). While the general CGT discount will still be available, such assignments are likely to be less tax effective. International tax Thin capitalization rules integrity changes Valuation of assets to align the value of assets for thin capitalization purposes with the value included in their financial statements The Government will tighten Australia s thin capitalization rules by requiring entities to align the value of their assets for thin capitalization purposes with the value included in their financial statements. Companies will no longer be able to revalue assets for the purpose of the safe harbor thin capitalization test if the asset value is not contained in their financial statements. This places the onus on those preparing financial statements and their auditors to ensure that valuations adopted are appropriate and in accordance with accounting standards. This measure applies to income years commencing on or after 1 July 2019 and suggests that valuations before the Budget will be accepted. However valuations undertaken after Budget Night cannot be included in this intervening period unless adopted in the entity s financial statements. These measures may adversely impact entities that hold assets which have an accounting value that is significantly less than market value, and also where there is reluctance to revalue assets on their accounting balance sheets. Asset valuations for thin capitalization purposes have recently been contentious, with several ATO Tax Alerts and a number of significant ATO audit processes and disputes. The acceptance of valuations before the Budget will be a positive development in the management of outstanding matters. This change will impact many sectors including not only services groups but also infrastructure and 9

10 resources. Mining and exploration companies will need to consider the impact of the above in conjunction with the soon-to-be-released ATO guidance on the classification of mining, quarrying and prospecting right assets. The thin capitalization arm s-length debt test remains available and may be a potential option for some. Inbound investors closing access to thin capitalization tests intended only for outbound investors Foreign controlled Australian consolidated entities and multiple entry consolidated groups that control a foreign entity will be treated as both outward and inward investment vehicles. This measure will ensure that inbound investors cannot access tests (such as the worldwide gearing test for outward investors) that were only intended for outward investors. This change is applicable for income years commencing on or after 1 July Income tax base for international digital companies The Treasurer stated in the Budget speech that the next big challenge is to ensure big multinational digital and tech companies pay their fair share of tax and he has been working with the G20 to bring the digital economy into the global tax net. In a few weeks he will release a discussion paper that will explore options for taxing digital business in Australia. EY supports the issue of a paper to inform and engage the community that: There is now global action by governments to address the perceived problem of cross-border digital business, with an Organisation for Economic Co-operation and Development and G20 process to develop proposals by Australia has already introduced measures such as the Multinational Anti Avoidance Law and Diverted Profits Tax to increase digital companies and other multinational enterprises income tax, as well as measures that arose from the global action to counter base erosion and profit shifting. There is no need to act in haste and if Australia is to introduce a digital tax, it should be done in consultation with other G20 members the approach of the United Kingdom. The European Commission s recent recommendations show the risks of moving out of line with other countries. Digital economy companies need to prepare for consultation. Businesses with a digital presence in Australia need to assess the potential future implications of a broader digital transactions tax. Financial services and real estate Removing the CGT discount for MITS and AMITs Managed Investment Trusts (MITs) and Attribution MITs (AMITs) will no longer be eligible to apply the 50% CGT discount at the trust level from 1 July MITs and AMITs will still be able to distribute a capital gain that can be discounted in the hands of the beneficiary, when entitled. Given this measure will only apply to MITs and AMITs, it is likely to create significant complexity and system development costs for custodians and administrators to comply with CGT rules as they apply to various types of investment entities. Further, in relation to beneficiaries that have investments in non-mit trusts, MITs and AMITs, this will increase the complexity of their tax affairs. The proposed changes align to the treatment of capital gains in the proposed Corporate Collective Investment Vehicle rules and for Listed Investment Companies. These further proposals, impacting the funds and asset management industry, will warrant careful review and involvement in consultation as they develop, given the significant complexity and systems issues for participants. 10

11 Updated list of Information Exchange Countries Effective from 1 January 2019, the Exchange of Information (EOI) countries will be expanded. Fiftysix countries to be added include Austria, Lichtenstein, Luxembourg, the Philippines and Switzerland, but not Hong Kong. The updated list in the regulations will allow investors to benefit from lower MIT withholdings. Deductions denied for vacant land Deductions for expenses associated with holding vacant land will be denied to address concerns that these expenses, such as interest costs, are being improperly claimed where the land is not genuinely held for the purpose of earning assessable income. We understand that this measure, applicable from 1 July 2019, is not intended to apply to landholders who carry on a business of property development. Thus it may have limited application. Indirect tax, customs and trade-related measures GST online hotel bookings Following the extension of the GST to digital products and other services provided by offshore suppliers from 1 July 2017 and to low-value imported goods from 1 July 2018, the GST will be extended to offshore sellers of hotel accommodation in Australia from 1 July The impact of the measure will be that offshore sellers of Australian hotel accommodation will pay GST on the mark-up over the wholesale price of the respective accommodation. It will ensure the same tax treatment of Australian hotel accommodation, whether booked through an offshore company or an Australian company. Alcohol excise refund scheme and concessional excise changes to benefit craft brewers and distillers As previously announced, the alcohol excise refund scheme cap will increase from $30,000 a year to $100,000 for all brewers and distillers, and the concessional draught beer excise rate will be extended to smaller kegs typically used by craft brewers and distillers. This applies from 1 July Illicit tobacco taskforce and tobacco duty measures As previously announced, the Government will further crack down on the illicit tobacco trade with a new Illicit Tobacco Taskforce, a new framework to protect tobacco duty, and further resources to combat illegal domestic production. Importers must have permits and pay all duty and tax liabilities when tobacco enters the country, rather than when it leaves a licensed warehouse and enters the domestic market, from 1 July New levy on sea cargo A new levy is to be imposed on port operators from 1 July 2019 in relation to sea cargo. The levy will be payable on a quarterly basis calculated at $10.02 per twenty foot container (or equivalent) and $1 per ton for non-containerized cargo. Relevant costs can be expected to be passed on to importers and should be taken into account in pricing and budgeting decisions. Removal of customs duty related to clinical trials From 1 July 2018, customs duty will no longer be payable on placebos and clinical trial kits imported into Australia, hence simplifying the import process associated with conducting clinical trials in Australia. 11

12 Extension of benefits for trusted traders Importers accredited under the Australian Trusted Trader Program are set to benefit from the removal of the requirement to produce country of origin documentation under certain free trade agreements. It is unclear when this benefit will commence and which free trade agreements it will impact. Accreditation under the Australian Trusted Trader Program is becoming increasingly attractive for importers and exporters. Parties involved in international trade should assess the potential benefits of pursuing accreditation. 12

13 EY Indirect Tax Talk: Preparing for Malaysia s new Indirect Tax Landscape On 16 May 2018, the Goods and Services Tax (Rate of Tax) (Amendment) Order 2018 [P. U. (A) 118] and five other Orders were gazetted to reduce the standard 6% GST rate to 0%, effective 1 June In light of this and other significant changes to the Malaysian Indirect Tax environment, businesses are required to urgently analyse the impact these changes will have on their business operations, as well as their dealings with customers, vendors, key stakeholders inside and outside the organization, and ultimately, with the Royal Malaysian Customs Department ( RMCD ). Join us for this Talk, where we will discuss key areas relating to expectations and impact, given this shift in Malaysia s indirect tax landscape. These include: An analysis of the key impacted areas for businesses A summary of the key actions that you and your team need to take An overview of the implications to your ongoing GST compliance activities A practical approach on how to address transitional issues An understanding of the key conceptual differences between the current GST and the previous Sales and Service Tax (SST) regime in operation prior to 1 April 2015, as well as potential enhancements when introduced to replace the GST The value of a clear communication policy with customers, vendors, key stakeholders and RMCD Clarification on the guidance issued by RMCD This shift in the indirect tax landscape will require a careful review of systems, processes and procedures to ensure compliance. All related business and operational decisions must incorporate a proper assessment of the impact arising from the changes. Event details Sessions will be held on the following dates: Wednesday, 23 May 2018 Thursday, 24 May 2018 Friday, 25 May 2018 Time: 9:30 a.m. 12:30 p.m. (Registration will start from 8:30 a.m.) Venue: Menara Milenium Pusat Bandar Damansara Speakers: Yeoh Cheng Guan Partner and Malaysia Indirect Tax Leader Ernst & Young Tax Consultants Sdn Bhd Aaron Bromley Partner, Indirect Tax Ernst & Young Tax Consultants Sdn Bhd Registration fee per person (inclusive of GST): RM188 Closing date for registration: 22 May

14 Our Talks are designed to provide a conducive environment to interact informally with the presenters as well as other participants. Register now by completing and returning the attached form. We look forward to the receipt of your registration, and to sharing our insights on Malaysia's new Indirect Tax landscape. For more information: Natalie Chen Tel: Natalie.Chen@my.ey.com 3 CPE hours HRDF applications may be made by registered employers under the Skim Bantuan Latihan, subject to the approval by of Pembangunan Sumber Manusia Berhad. 14

15 Contact details Principal Tax contacts Yeo Eng Ping Amarjeet Singh Global Compliance and Reporting Simon Yeoh Julian Wong Datuk Goh Chee San (based in Sabah) Janice Wong Julie Thong Lee Li Ming (based in Johor) Liew Ai Leng People Advisory Services Tan Lay Keng Irene Ang Christopher Lim Business Tax Services Amarjeet Singh Asaithamby Perumal Farah Rosley Robert Yoon Wong Chow Yang Transaction Tax Services Yeo Eng Ping Sharon Yong International Tax Services Anil Kumar Puri Transfer Pricing Sockalingam Murugesan Vinay Nichani Hisham Halim Indirect Tax Yeoh Cheng Guan Aaron Bromley Financial Services Bernard Yap

16 Important dates 31 May th month revision of tax estimates for companies with November year-end 31 May th month revision of tax estimates for companies with August year-end 31 May 2018 Statutory deadline for filing of 2017 tax returns for companies with October year-end 15 June 2018 Due date for monthly instalments 30 June th month revision of tax estimates for companies with December year-end 30 June th month revision of tax estimates for companies with September year-end 30 June 2018 Statutory deadline for filing of 2017 tax returns for companies with November year-end EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com Ernst & Young Tax Consultants Sdn. Bhd. All Rights Reserved. APAC no ED None. This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax or other professional advice. Please refer to your advisors for specific advice. Publisher: Ernst & Young Tax Consultants Sdn. Bhd. Level 23A Menara Milenium Jalan Damanlela, Pusat Bandar Damansara Kuala Lumpur Tel: Fax: