GST is to be charged on goods and services at all levels starting from production, manufacture, wholesale and retail.

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1 BUDGET 2014: TAX HIGHLIGHTS Tax & GST Practice Budget 2014 Issue October 2013 Goods and Services Tax ( GST ) GST shall be effective from 1 April Standard rate of GST shall be 6%. GST is to be charged on goods and services at all levels starting from production, manufacture, wholesale and retail. GST is to be charged on goods and services supplied within the country or imported into the country. Supplies made by the Federal and State Government department are not within the scope of GST except for some services to be prescribed by the Minister of Finance. List of zero-rated supply is available at Appendix A1 of the Prime Minister s 2014 Budget Speech. List of exempt supply is available at Appendix A2 of the Prime Minister s 2014 Budget Speech. The threshold for GST registration is annual sales worth of RM 500, Service Tax and Sales Tax Service tax and sales tax will be abolished. Level 16 Menara Tokio Marine Life 189, Jalan Tun Razak Kuala Lumpur 1

2 Tax incentives Application date for pioneer status and investment tax allowance incentives for 4 and 5 star hotels is extended from 31 December 2013 to 31 December Tax incentive for complying with the minimum wage policy whereby the difference between the original salary and the minimum wage paid is deductible. Tax deduction for the implementation of flexible work arrangements ( FWA ) such as expenses incurred to train employees and consultancy fees to design an appropriate FWA. Double tax deduction for anchor companies to implement the Vendor Development Programme. Accelerated capital allowance (with initial allowance of 20% and an annual allowance of 80%) on the capital expenditure incurred for the purchase and installation of ICT equipment and software. Tax deduction for secretarial and tax filing fee. Tax deduction for GST related accounting and ICT training for employees. Tax deduction for companies that invest to acquire technology platform in bio-based industry. 2

3 Exemption on import duty on R&D equipment for companies that invest in pilot plants for the purpose of precommercialisation in Malaysia. The following incentives for SMEs under the Green Lane Policy: (i) stamp duty exemption for loan agreements under the soft loan incentive scheme; and (ii) tax deduction for expenses incurred to obtain 1- innocert certification. Investment tax allowance for the purchase of green technology equipment. Income tax exemption on the use of green technology services and system. Personal income tax Special tax relief of RM2,000 for taxpayers with a monthly income of up to RM8,000. Personal income tax rates for resident s will be reduced by 1% to 3% at each tax bracket effective from Top personal income tax bracket is restructured to 3 additional brackets: (i) RM 100,000 to RM 250,000; (ii) RM 250,001 to RM 400,000 and (iii) exceeding RM 400,000. 3

4 Corporate Income Tax Corporate income tax rate is reduced to 24% effective from For companies with paid-up capital of less than RM 2.5 million, the corporate income tax rate for the first RM 0.5 million chargeable income is reduced to 19% effective from Tax administration Taxpayers with employment income and subjected to the Monthly Tax Deduction system are not required to submit tax returns. Real Property Gains Tax Effective 2014, the real property gains tax rate for gains arising from the disposal of real property and shares in Real Property Company is: Disposal By: Company Individual (citizens & Individual (non-citizens) PRs) The first 3 years 30% 30% 30% 4 th year 20% 20% 30% 5 th year 15% 15% 30% 6 th years and onwards 5% 0% 5% 4

5 Co-operative Income Tax Co-operative income tax rate shall be reduced to 2% effective from The Tax & GST Practice is brought to you by the firm s Tax, GST & Private Clients Practice Group. The practice group consists of experienced lawyers who represent their clients in virtually all direct and indirect tax areas. Our tax lawyers frequently represent taxpayers before the Special Commissioners of Income Tax, High Court, Court of Appeal and Federal Court. They also represent taxpayers in discussions and negotiations with the Inland Revenue Board, Royal Malaysian Customs and Ministry of Finance. Particular areas of expertise include tax litigation, tax planning & advisory, transfer pricing, thin capitalisation, tax audit & investigation, cross-border transactions, withholding tax, real property gains tax, stamp duty, anti-dumping duty, GST, sales & service tax, customs duty and excise duty. If you have any queries, please do not hesitate to contact: Datuk D.P. Naban Partner DID : Fax : / tax@lh-ag.com S. Saravana Kumar Partner DID : Fax : / tax@lh-ag.com Editorial team: Siti Fatimah Mohd Shahrom Ashley Lee Si Han Jason Tan Jia Xin Kho Chin Chau Kellie Alison Yap Chng Keng Lung Michelle Wong Published by the Tax, GST & Private Clients Practice Group.. All rights reserved. The views and opinions attributable to the authors or editor of this publication are not to be imputed to the firm,. The contents of this publication are intended for purposes of general information and academic discussion only. It should not be construed as legal advice or legal opinion on any fact or circumstance. 5