Expansion of Relief on Medical Expenses for Own Parents

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1 flash International Executive Alert A Publication for HR and Professionals by KPMG s International Executive Services Practice October 20, 2010 MALAYSIA S 2011 BUDGET PRESENTED BY PRIME MINISTER by KPMG, Kuala Lumpur (KPMG in Malaysia is a KPMG International member firm) In this Issue: * Expansion of Relief on Medical Expenses for Own Parents * Abolishment of Relief on Annuity Premiums or Annuities Purchased through Employees Provident Fund Annuity Scheme * Abolishment of Rebate on Fee in Respect of Issuance of Work Permit * Extension of Exemption on Pension to Widowers * Relief for Contribution to Private Pension Funds * Transfer of Residential Property * Individual Income * Service Malaysia s Prime Minister (who is also the Minister of Finance) presented the 2011 Budget tax proposals on 15 October Some of the changes affecting individuals and their employers are briefly outlined below. (For coverage of last year s budget, please see, Flash International Executive Alert , 26 October 2009.) Expansion of Relief on Medical Expenses for Own Parents Presently, the medical expenses relief for one s own parents of MYR 5,000 claimable by an individual resident taxpayer is limited to treatment in clinics and hospitals, treatment in nursing homes, and dental care excluding cosmetic dental treatment. To reduce the cost of financing expenses on medical treatment and care for parents, it is proposed that the above relief be extended to include expenses to care for parents suffering from diseases or with physical or mental disabilities who require regular treatment as evidenced by certification of a qualified medical practitioner. The treatment and care provided include those provided at home, day care centres, or home care centres. The proposed qualifying expenses are: i. treatment and medical expenses supported with receipts issued by registered medical centres, pharmacies, or licensed medical stores; ii. iii. expenses for care of parents supported by receipts or written certification by care-givers (not including the taxpayer claiming the relief, the spouse, and the children) certifying that the care was provided and the total payment involved. Foreign-hired care-givers are required to possess valid visa/special work permits for the care of parents of taxpayers; or expenses for special needs for parents that are certified by qualified medical practitioners and supported by receipts as proof of purchase. The proposal is effective from Year of Assessment ( YA ) KPMG Services Sdn Bhd., a company incorporated under the Malaysian Companies Act, 1965 and a member

2 Abolishment of Relief on Annuity Premiums or Annuities Purchased through Employees Provident Fund ( EPF ) Annuity Scheme At present, the annuity premium on an annuity purchased though EPF annuity scheme relief of MYR 1,000 is claimable by an individual resident taxpayer. It is proposed that the above relief be abolished with effect from YA Abolishment of Rebate on Fee in Respect of Issuance of Work Permit Presently, an expatriate individual is eligible for a rebate on any fee paid to the government for the issuance of an employment pass, visit pass, or work pass. It is proposed that the above rebate be abolished with effect from YA Extension of Exemption on Pension to Widowers At present, pensions granted to widows and orphans pensions for the benefit of the widow, child, or children of a deceased contributor to the approved scheme are tax exempt. It is proposed that the exemption be extended to those received by widowers. The proposal is effective from YA Relief for Contribution to Private Pension Funds To revitalize capital market activities, the government will launch a Private Pension Fund in 2011 to the benefit of the private sector employees and the self-employed. The existing income tax relief of up to MYR 6,000 for the employee s contributions to EPF will extend to contributions made to the Private Pension Fund, including the self-employed. 2

3 Transfer of Residential Property To encourage ownership of a first residential property and to reduce the cost of home ownership, it is proposed that instruments of transfer and loan agreements executed for the purchase of a residential property not exceeding MYR 350,000 be given a 50-percent stamp duty exemption. This exemption is granted on the first residential property purchased by a Malaysian citizen and eligible to be claimed once only within the exemption period. The proposal is effective for sales and purchase agreements executed from 1 January 2011 to 31 December Individual Income Rates/Thresholds : No Changes (See Appendix 1) Service Presently, the service tax on all taxable services is at 5 percent. It is proposed that the service tax on all taxable services be increased from 5 percent to 6 percent. The scope of tax will also be extended to cover paid television broadcasting services. The service tax will be chargeable on monthly subscription fees on these services. The proposals are effective from 1 January Footnote: 1 The Budget speech and related budget documents can be found on the Web site for Malaysia s Ministry of Finance: They can also be found at the Malaysian Inland Revenue Board s Web site at: * * * * For further information, please contact your local IES professional, or Pauline Tam (tel. +60 (3) ), with the KPMG International member firm in Malaysia. MYR 1 = USD 0.32 ; MYR 1 = EUR

4 Appendix 1: Comparison Between Current and Proposed Individual Income Rates Rate % YA 2010 YA 2009 Payable MYR Rate % Payable MYR First 2, Next 2, On 5, Next 15, On 20, Next 15, , ,050 On 35,000 1,525 1,525 Next 15, , ,800 On 50,000 3,325 3,325 Next 20, , ,800 On 70,000 7,125 7,125 Next 30, , ,200 On 100,000 14,325 14,325 Exceeding 100,

5 KPMG s International Executive Services practice has put together a Localization Survey which explores the various elements of localization policies and practices and how various organizations implement them. We invite you to take the survey, which should take approximately 20 minutes and will give you instant results upon completion. Please see below for instructions to access the survey. To Access KPMG's Localization Survey 2010 Survey Instructions: Please go to If you have taken a KPMG LINK Survey before or are a current KPMG LINK user, please proceed to User-name and log-in. If this is your first time taking a KPMG LINK Survey, click on Need Help. You ll be asked to select a KPMG account type. Choose Administrator or Program Manager Account and click Continue. On the next page, headed Get Help on KPMG LINK, select I do not have a KPMG LINK account. Fill out and submit a registration form. You ll be asked why you need an account. Here, type KPMG s Localization Survey You will be sent log-in information please allow 24 hours for us to respond during normal business hours. Please log on to the site and take the survey. Click on Benchmarking Center. Click on Take a Survey. Under Long-Term Surveys, click on KPMG S Localization Survey 2010 and begin to take the survey. Once you have submitted your survey responses, the results will be displayed with your responses highlighted. Please note, it is necessary to complete the survey in order to view results. Upon completion of the survey, you will receive immediate results based on the number of participants at that time, and you can continue to log back in to see if the results have changed as participants increase. Thank you for your time, and if you have any questions, please contact US-KPMG- GMAS@kpmg.com. The information contained in this newsletter was submitted by the KPMG International member firm in Malaysia. The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser. Flash International Executive Alert is an IES publication of KPMG LLP s Washington National practice. To view this publication or recent prior issues online, please click here. To learn more about our IES practice, please visit us on the Internet: click here or go to 5