2016 Malaysia Budget Speech Tax Highlights

Transcription

1 2016 Malaysia Budget Speech Tax Highlights Crowe Horwath Kuala Lumpur Users are reminded that the information contained herein is for general use only and should not be relied on without seeking separate professional advice. Crowe Horwath Malaysia hereby disclaims all and any liability by anyone from the reliance on the contents herein. 1

2 A few words from the Managing Partner Almost 7 months has passed since the implementation of GST on 1 April Kudos to the Malaysian Government for doing a good job in implementing the GST regime. To-date, the Government has collected RM39 billion from GST and this collection could cushion the loss in revenue collection from oil companies. Back in October 2013 when GST implementation was announced, perhaps only a soothsayer could have predicted the downward spiraling drop in crude oil prices from USD115 per barrel in June 2014 to USD45 per barrel today. So, on hindsight, the Government HAS made the right decision to implement GST as what YAB Dato Sri Mohd Najib has rightly said in his recent Budget Speech. Poon Yew Hoe Managing Partner (CA (M), FCCA, CPA) It is not surprising though that in this year s budget, proposals were made with the welfare of the people in mind. With the escalating costs of living, hardship is creeping up even to those of the middle income group. On account of this, the Government has offered two new personal reliefs and increased the relief amount for some of the existing reliefs. Furthermore, GST exemptions have been given on items such as food products, medicine, teaching materials, domestic flights under Rural Air Services, etc. Amidst these offerings came a startling proposal to increase the income tax rates for high income individuals! OTHER MAJOR TAX CHANGES As for the rest of the taxpayers, there isn t much in the Budget for them. A special reinvestment allowance for 3 years is given to taxpayers whose reinvestment allowances incentive period of 15 consecutive years has expired. Some considerations were given to the small medium enterprises in terms of the allowance for increased exports, and the tourism industry could celebrate the continuation of the tour incentives given for local and inbound tour packages. Clarifications were given on the treatment of input and output tax from the income tax and real property gains tax perspectives. And finally, to tighten compliance, it is now a criminal offence if the taxpayer fails to file tax returns for 2 years of assessment or more. PERSONAL REMARKS Perhaps the present pertinent issues like our depreciating ringgit and decreasing foreign direct investments could have been addressed. But just as the haze continues to cloud visibility, we remain unclear as to what the Government is going to do or is doing with regards to these issues. Nevertheless, we shall remain vigilant and be ready to play our part towards making our beloved country a successful nation. Have a good year ahead and may you continue to be blessed in your undertakings! With warm regards Poon Yew Hoe 23 October

3 Contents Major highlights 1.1 Improvements to Goods and Services Tax 1.2 Increase in individual tax rates and reliefs 1.3 Extension of tax exemption for gratuity on retirement from employment 1.4 New offences and penalties for failure to furnish return New Tax incentives and revision to existing tax incentives 2.1 Tax incentive for Independent Conformity Assessment Bodies (ICAB) 2.2 Allowance for increased exports (AIE) incentive for SMEs 2.3 Special reinvestment allowance incentive 2.4 Assets held for sale for the purpose of reinvestment allowance 2.5 New definitions and revision of definitions for reinvestment allowance incentive 2.6 Redefinition of SME for special allowance for small value assets 2.7 Review of industrial building allowance for buildings rented out 2.8 Extension of tax incentives for tour operating companies 2.9 Review of tax incentives for food production projects 2.10 Automatic double deduction for research and development project 2.11 Tax incentive for issuance of sustainable and responsible investment (SRI) sukuk 2.12 Extension of tax incentive for the issuance of retail bond and retail sukuk 2.13 Extension of tax exemption on incentive from managing Shariah-compliant funds 2.14 Extension of tax incentive period for REITs 3

4 Contents Tax Technical issues 3.1 Assessment of debt arising and sum received in respect of services to be rendered or use of property to be dealt with 3.2 Written notification to the IRB for deduction of interest expense 3.3 Tax treatment for part of an asset ceased to be used in a business 3.4 Changes to basis period to which employment income is related 3.5 Deductibility of payments made to public entertainers and penalties for incorrect return 3.6 Income tax treatment for Goods and Services Tax 3.7 Real Property Gains tax treatment for Goods and Services Tax 3.8 New offence and penalty for failure to file RPGT return 3.9 Revision in computation of exemption for individual disposer Administrative tax issues and other taxes 4.1 Filling of employer s return (Form E) via electronic medium 4.2 Submission of tax estimate or revised tax estimate via electronic medium 4.3 Extension of stamp duty exemption to revive abandoned housing project 4.4 Extension of stamp duty exemption on Shariah Financing instruments Goods and Services Tax 5.1 Rebates for prepaid card users 5.2 New penalties and amendment to time of supply 4

5 01 MAJOR HIGHLIGHTS 5

6 1.1 Improvements to Goods & Services Tax (GST) After taking into consideration the feedback received from various segments of society and to ensure that the implementation of GST does not burden the citizen, the Government has proposed several changes on the GST treatments effective 1 January 2016: Additional medicines to be zero-rated All types of controlled medicines under the Poison List drugs in category A, B, C & D (which include treatment for 30 types of illness such as cancer, diabetes, hypertension and heart disease). Additional basic necessities to be zero-rated Formula milk (soybean and organic based) for infant and children Lotus root and water chestnut Dhal Mustard seeds Jaggery powder Dry mee kolok Improvement on Flat Rate Scheme The threshold for registration for farmers to participate in this scheme is to be reduced from RM100,000 to RM50,000. The Flat Rate Addition is to be increased from 2% to 4%. 6

7 1.1 Improvements to Goods & Services Tax (GST) Cont d Approved trader scheme for aerospace industry Companies involved in maintenance, repair and overhaul (MRO) activities in the aerospace industry are allowed to participate in the Approved Trader Scheme. GST relief for re-importation of goods Relief extended for goods exported temporarily for the purpose of promotion, research or exhibition. Relief extended for equipment exported temporarily for the purpose of rental and lease. Among the eligible equipment are equipment used in the upstream oil and gas industry. GST relief on teaching materials and equipment Relief extended for importation of teaching materials and equipment to skills and vocational training providers conducting approved programmes under the National Skills Development Act GST relief on domestic economy class flights Passengers do not need to pay GST for domestic economy class airfares under Rural Air Services between Sabah, Sarawak and Labuan. 7

8 1.2 Increase in individual income tax rates and reliefs In order to develop the progressivity of the individual income tax structure, the Government has proposed the following measures with effect from YA 2016: Increase in resident individual income tax rates for high income earners Increase in resident individual income tax rates whose chargeable income ranges from RM600,001 to RM1,000,000 and exceeding RM1,000,000 by 1% and 3% respectively as follows: Chargeable income (RM) Present tax rates Proposed tax rates Increase (%) 600,001 1,000, Exceeding 1,000, Increase in non-resident individual income tax rate Increase in non-resident individual tax rate by 3% from 25% to 28%. Introduction of relief on employees' contribution to social security protection scheme Presently, no relief is given to individual taxpayers who are employees in the private sector and contribute to the social security protection scheme. The Government has proposed that a relief up to a maximum of RM250 per year be given on the contributions made by the employees to the Social Security Organisation (SOCSO) pursuant to the Employees Social Security Act

9 1.2 Increase in individual income tax rates and reliefs Cont d Enhancement of tax reliefs for individual taxpayer whose spouse who has no income and/or pays alimony to former wife, children below 18 years of age, children studying at tertiary level and fees for tertiary education The tax reliefs for taxpayer whose spouse who has no income and/or pays alimony to former wife, children below 18 years of age, children studying at tertiary level and fees for tertiary education are increased as follows: Type of Relief Present (RM) Proposed (RM) Spouse who has no income 3,000 4,000 Per child (below 18 years of age) 1,000 2,000 Per child (over 18 years of age) Overseas universities, colleges or similar establishments Local universities, colleges or similar establishments Disabled child pursuing tertiary education Fees for acquiring technical, vocational, industrial, scientific, technological, law, accounting, Islamic financing, skills or qualifications at tertiary level or any course of study at postgraduate level 6,000 8,000 5,000 7,000 9

10 1.2 Increase in individual income tax rates and reliefs Cont d Introduction of relief for parental care Presently, a taxpayer is eligible to claim relief on medical expenses for parents up to RM5,000 a year. In order to assist individual taxpayers in caring for the elderly, the Government has proposed a new relief of RM1,500 each for a mother and a father respectively for YAs 2016 to 2020, subject to the following conditions: i. The taxpayer does not claim expenses on medical treatment and care of parents; ii. Parents are the legitimate natural parents and foster parents in accordance with the respective law subject to a maximum of 2 persons; iii. Parents aged 60 years and above; iv. Parents reside in Malaysia in the current YA; and v. Parents have an annual income not exceeding RM24,000 per annum for each parent. This relief can be shared amongst siblings provided that the total relief claimed shall not exceed RM1,500 for a mother and RM1,500 for a father. 10

11 1.3 Extension of tax exemption for gratuity on retirement from employment Presently, tax exemptions are given on sums received by way of gratuity on retirement from an employment or termination of a contract of employment under Paragraphs 25, 25A, 25B and 30A of Schedule 6 of the Income Tax Act 1967 (ITA). A new Paragraph 25D under Schedule 6 of the ITA is introduced with effect from YA 2016 to deal with gratuity received by those who opt for early retirement or termination of a contract of employment. According to Paragraph 25D of Schedule 6 of the ITA, any sums received by way of gratuity on retirement from an employment under any written law or termination of a contract of employment other than under Paragraphs 25, 25A, 25B or 30A of Schedule 6 of the ITA be given tax exemption. The amount exempted is restricted to RM1,000 for every completed year of service for that individual. 11

12 1.4 New offences and penalties for failure to furnish return In an effort to ensure compliance by the taxpayers, the Government has proposed to introduce new laws and amend existing laws under the Income Tax Act 1967 as follows: Offence Existing penalty Proposed penalty Failure to furnish return [S77(1), S77A(1)] in respect of any one year of assessment Fine ranging from RM200 to RM20,000 or six (6) months imprisonment or to both [S112(1)] If there is no prosecution, the penalty is up to 3 times the amount of tax [S112(3)] No change Failure to furnish return [S77(1) and S77A(1)] in respect of any year of assessment for two (2) years or more None Fine ranging from RM1,000 to RM20,000 or six (6) months imprisonment or to both [S112(1A)(a)] The penalty of 3 times the amount of tax of that person for those years of assessment [S112(1A)(b)] Failure to furnish correct particulars as required by the Director General [S77(4)(b) or S77A(3)(b)] None Fine ranging from RM200 to RM20,000 or six (6) months imprisonment or to both [S120(1)(h)] 12

13 02 NEW TAX INCENTIVES AND REVISION TO EXISTING TAX INCENTIVES 13

14 2.1 Tax incentive for Independent Conformity Assessment Bodies (ICAB) ICAB is defined as a company providing independent conformity assessment services that ensure conformance to international specifications or safety standards and other conformities. No tax incentive is presently given to companies undertaking independent conformity assessment services in Malaysia. In order to encourage the growth of ICAB in Malaysia, the Government has proposed the following tax incentives: For a new ICAB, either: a. 100% income tax exemption on statutory income arising from qualifying activities for a period of 5 years; or b. Investment Tax Allowance of 60% on qualifying capital expenditure (QCE) incurred for a period of 5 years with the allowance to be offset against 100% of statutory income. For existing ICAB, an Investment Tax Allowance of 60% on QCE incurred for a period of 5 years for additional qualifying activities with the allowance to be offset against 100% of statutory income. This incentive is given to ICAB that fulfils the following criteria: Qualifying sectors Qualifying activities Accredited by Machinery and equipment, electrical and electronics, chemicals, aerospace, medical devices or fresh and processed food Testing laboratories, calibration laboratories, certifications, inspections or good laboratory practice Department of Standards Malaysia; Accrediting bodies recognised by the International Laboratory Accreditation Cooperation under Mutual Recognition Arrangement; International Accreditation Forum under Multi-Lateral Arrangement; or OECD Good Laboratory Practice Mutual Acceptance Data This incentive is available for applications received by MIDA from 1 January 2016 to 31 December

15 2.2 Allowance for increased exports (AIE) incentive for SMEs In the effort to support small medium enterprises (SMEs) to expand their export markets to international markets, the Government has proposed to lower the value added criteria in respect of the AIE incentive for SMEs from the YAs 2016 to 2018 as follows: Exemption of statutory income (% on the value of increased exports) for manufacturing companies Present value added criteria Proposed value added criteria SME & Non-SME Non-SME SME 10% of the value of increased export 30% 30% 20% 15% of the value of increased export 50% 50% 40% 2.3 Special reinvestment allowance incentive Presently, a company is eligible for Reinvestment Allowance (RA) for 15 consecutive years beginning from the year of assessment the RA was first claimed on the qualifying expenditure for the purpose of expansion, modernization, automation or diversification of manufacturing activities and selected agriculture activities. The Government has proposed a special RA which will be given from YAs 2016 to 2018 as shown below: RA period ended Special RA is given in respect of the capital expenditure incurred by a company in the YAs specified below In YA 2015 or prior to YA 2015 YAs 2016, 2017, 2018 In YA 2016 YAs 2017and 2018 In YA 2017 YA

16 2.4 Assets held for sale for the the purpose of Reinvestment Allowance Reinvestment allowance (RA) given to a taxpayer will be withdrawn in the year of disposal if the relevant asset is disposed of within 5 years from the date of acquisition. It is proposed that effective from YA 2016, the definition of disposed of in Paragraph 9 of Schedule 7A of the Income Tax Act 1967 (ITA) be amended to include the words ceased to be used. The definition of ceased to be used is also proposed whereby it shall relate to an asset classified as held for sale under Paragraph 61A of Schedule 3 of the ITA. This is effective from YA New definitions and revision of definitions for Reinvestment Allowance incentive in Paragraph 9 of Schedule 7A Proposed new definitions for reinvestment allowance purposes effective YA 2016 Automating refers to a process whereby manual operations are substituted by mechanical operations with minimal or reduced human intervention. Diversifying means to enlarge or vary the range of product of a company related to the same industry. Expanding refers to an increase of a product capacity or expansion of factory area. Machinery means a device or apparatus consisting of fixed and moving parts that work together to perform function in respect of a manufacturing activity, which is directly used in carrying out that activity in a factory. Modernizing means an upgrading of manufacturing equipment and process. Plant means an apparatus used in respect of a manufacturing activity, which is directly used in carrying out that activity in a factory. Proposed revised definitions for reinvestment allowance purposes effective YA 2016 In the definition of manufacturing, the words size, shape are to be deleted. The definition of simple is to be read as generally describes an activity which does not need special skills, special machines, special apparatus or special equipments especially produced or installed for carrying out that activity. 16

17 2.6 Redefinition of SME for special allowance for small value assets Small medium enterprises ( SMEs ) are entitled to claim 100% capital allowance for small value assets, where the value of each asset does not exceed RM1,300, and there is no restriction on the total qualifying expenditure of small value assets that they can claim in a year of assessment. With effect from YA 2016, it is proposed that this exemption be given to only resident SMEs which are incorporated in Malaysia. 2.7 Review of industrial building allowance for buildings rented out A new Paragraph 16B of Schedule 3 of the Income Tax Act 1967 has been introduced to prevent building owners from claiming industrial building allowance on their industrial buildings which are solely or partly used for the purpose of letting out. This will also apply to those who are in the business of letting of properties. Property owners who may be affected are those who let out their buildings to tenants who, in turn, use the buildings as licensed private hospitals, maternity homes, nursing homes, a place to carry out research, warehouses, a place to provide services for approved service projects, hotels, airports, motor racing circuits, staff living accommodation, schools, and educational institutions. 17

18 2.8 Extension of tax incentives for tour operating companies 2.9 Review of tax incentive for food production projects In order to incentivize the tour operating companies to promote Malaysia as a preferred destination and boost domestic tourism, the Government has proposed to extend the current tax incentives for another 3 years up to YA 2018: 100% tax exemption on statutory income derived from the business of operating tour packages within Malaysia participated by not less than 1,500 local tourists per year; and 100% tax exemption on statutory income derived from the business of operating tour packages to Malaysia participated by not less than 750 inbound tourists per year. To support the development and continuous growth of the agro-food and agro-based sectors, the Government has proposed to extend the current tax incentive for food production projects for another 5 years up to YA 2020: Companies that invest in subsidiaries that undertake new food production project are given tax deduction equivalent to the amount invested; Companies that undertake new food production projects are given 100% income tax exemption of statutory income for 10 years of assessment; and Companies undertaking expansion of existing food production projects are given 100% income tax exemption of statutory income for 5 years of assessment. Additionally, the scope of the incentive will be widen to include planting of coconuts, mushrooms and cash crops, rearing of deer, cultivation of seaweed, rearing of honey bees and planting of animal feed crops as determined by the Ministry of Agriculture and Agro-based Industry (MOA) and approved by the Ministry of Finance. Effective Date: Application received by the MOA from 1 January 2016 to 31 December

19 2.10 Automatic double deduction for research & development (R&D) project Currently, companies carrying out R&D projects are entitled to claim a double tax deduction on its R&D expenditure under Section 34A of the Income Tax Act 1967 incurred for R&D projects approved by the IRB. To encourage R&D activities among the small medium enterprises, it is proposed that companies with paid-up capital not exceeding RM2.5 million will be allowed to claim a double deduction automatically for R&D project expenditure up to RM50,000 for each year of assessment. The companies are required to submit R&D project application to the IRB. This incentive is given for YAs 2016 to

20 2.11 Tax incentive for issuance of Sustainable and Responsible Investment (SRI) Sukuk 2.12 Extension of tax incentive for the issuance of retail bond and retail sukuk SRI Sukuk refers to the financing of projects that considers environmental, social and corporate governance. In line with its efforts to encourage issuance of SRI Sukuk and establish Malaysia as a regional issuance hub for SRI Sukuk, the Government has proposed that an income tax deduction be given for 5 years (from YAs 2016 to 2020) on expenses incurred on issuance of SRI Sukuk which is approved by, or authorised by or lodged with the Securities Commission of Malaysia. In order to invigorate the capital market, the Government has proposed that a double deduction or further deduction on additional issuance costs for retail bonds and retail sukuk be extended for another 3 years until YA

21 2.13 Extension of tax exemption on income from managing Shariahcompliant funds Presently, full income tax exemption is given on management fees received by a company providing fund management services to foreign investors, local investors and business trusts or REITs in Malaysia. In order to further promote business management activities of Shariah-compliant funds, it is proposed that the full income tax exemption be extended for another 4 years to YA Extension of tax incentive period for REITs Based on current legislation, foreign institutional investors (particularly pension funds and collective investment funds) and non-corporate investors (both resident and non-resident individual investors, and other local entities) receiving dividends from REITs listed on Bursa Malaysia are subject to final withholding tax at 10% from 1 January 2012 until 31 December The above tax incentives have been extended for another 3 years until 31 December

22 03 TAX TECHNICAL ISSUES There is something bigger coming your way, you just haven t seen it yet. A Relationship You Can Count On 22

23 3.1 Assessment of debt arising and sum received in respect of services to be rendered or use of property to be dealt with The present Section 24(1)(b) and (c) of the Income Tax Act 1967 provides that when a debt owing to a relevant person arises in respect of any services rendered at any time in the course of carrying on a business; or the use or enjoyment of any property dealt with at any time in the course of carrying on a business, the amount of the debt shall be treated as gross income of the relevant person from the business for the relevant period. It is proposed that when a debt owing to a relevant person arises in respect of any services rendered or to be rendered at any time in the course of carrying on a business; or the use or enjoyment of any property dealt or to be dealt with at any time in the course of carrying on a business, the amount of the debt shall be treated as gross income of the relevant person from the business for the relevant period. In addition, a new Section 24(1A) was introduced whereby any sum received by a relevant person in the course of carrying on a business in respect of any services to be rendered or the use or enjoyment of any property to be dealt with, shall be treated as the gross income of the relevant person from the business for the relevant period even though no debt is owing to that person in respect of such services or such use or enjoyment. Another new section, i.e. Section 34(7A), states that if an amount in respect of the above sum received is later on refunded, the amount refunded shall be allowed as a deduction from the gross income of the relevant person. The above changes take effect from YA

24 3.2 Written notification to the IRB for deduction of interest expense Section 33(4) of the Income Tax Act, 1967 provides that any interest expense payable for a basis period for a year of assessment (YA) which is not due to be paid in that period, is only deductible when it is due to be paid. In the new Section 33(5), it is proposed that with effect from YA 2016, where such sum is due to be paid in any following year of assessment, the taxpayer is required to notify the IRB in writing for a deduction of that sum not later than 12 months from the end of the basis period for the YA when the sum is due to be paid. Upon receipt of the notice, the IRB may reduce the assessment that has been made in respect of such sum. A summary of the above is as follows: YA 2014 YA 2015 A sum of interest expense of RM50,000 is accrued and it is not due to be paid in YA It is only due to be paid in YA The above RM50,000 is due to be paid in YA This sum is not deductible in YA 2014 pursuant to Section 33(4). This sum is not automatically deductible in YA 2015 pursuant to the new Section 33(5). A written notification has to be made to the IRB for a deduction within 12 months from the end of YA

25 3.3 Tax treatment for part of an asset ceased to be used in a business A new Paragraph 61B of Schedule 3 of the Income Tax Act 1967 (ITA) was introduced to accord tax treatment for part of an asset which ceased to be used in a business. It is proposed that where any part of an asset ceases to be used for the purposes of a business in a basis period for a year of assessment (YA) due to replacement with a new part and that new part is depreciated separately in accordance with the generally accepted accounting principles, that part of an asset is deemed to have been disposed of in that basis period for that YA. The qualifying expenditure of the part of the asset deemed disposed of shall be taken to be the amount as determined in accordance with the generally accepted account principles. The residual expenditure in respect of the part of the asset disposed shall be the qualifying expenditure of the part of an asset disposed reduced by the amount of allowance that have been made or would have been made under Schedule 3 prior to the disposal of that part of the asset. Provisions in Schedule 3 of the ITA shall apply to the new part of the asset. The above changes take effect from YA

26 3.4 Changes to basis period to which employment income is related Section 25 of the Income Tax Act 1967 (ITA) has been amended to be in line with the Government s initiative to simplify the tax administration for individual taxpayers with effect from YA According to the amended Section 25 of the ITA, any gross income from an employment which is receivable in any YA shall be treated as gross income for the respective YA when it is received. 3.5 Deductibility of payments made to public entertainers and penalty for incorrect return A new Subsection 39(1)(q) of the ITA is introduced with effect from 1 January 2016 to govern the deductibility of payments made to public entertainers. According to Subsection 39(1)(q) of the ITA, any payment made to a public entertainer in respect of the services performed or rendered in Malaysia is not tax deductible if the payer fails to remit the withholding tax under Section 109A of the ITA and penalty under Section 109(2) of the ITA, if applicable, to the Director General (DG). Further, the DG is empowered to impose a penalty for incorrect return under Section 113(2) of the ITA if a deduction on the above expense is made in the tax return and the withholding tax and penalty relating to such expense are not paid by the due date for submission of the tax return. 26

27 3.6 Income tax treatment for Goods and Services Tax (GST) Tax treatment for input and output tax with effect from YA 2015 The tax treatments for: a. input GST paid or payable by a taxpayer who is liable to be registered under the Goods and Services Tax Act 2015 (GSTA) but has failed to do so or if he is entitled to the input tax credit under the GSTA; and b. output GST paid or payable which is borne by a taxpayer who is registered or liable to be registered under the GSTA are provided in the Income Tax Act (ITA) as follows: Provision in the ITA Type of GST Tax treatment Subsections 39(1)(o) and 39(1)(p) Input / Output GST Not tax deductible Paragraph 2E of Schedule 3 Input GST Not to form part of QE Paragraph 1D(1) of Schedule 7A and Paragraph 1A(1) of Schedule 7B Input GST Not to form part of CE Tax treatment for adjustments of input tax with effect from YA 2015 Where the input tax on an asset is subject to any adjustments made under the GSTA, the tax treatments for the adjustments of input tax credit affecting the qualifying expenditure (QE) under Schedule 3 and capital expenditure (CE) under Schedule 7A and Schedule 7B of the ITA of an asset are as follows: a. Any upward adjustment of QE and CE shall be deemed to be part of the expenditure incurred and the tax written down value (TWDV) shall include that additional amount. b. Any downward adjustment of QE and CE shall reduce the expenditure incurred and the TWDV should exclude that reduced amount. Any excess amount claimed shall form part of the statutory income of a business source. The above adjustments shall also apply to controlled transfer assets and should be made at the end of the period of adjustment as allowed under the GSTA. However, in the case of a disposal of the asset, the adjustment shall be made in the basis period for the YA in which the disposal is made. 27

28 3.7 Real property gains tax treatment for Goods and Services Tax (GST) A new Subsubparagraph 6(1)(e) of Schedule 2 of the Real Property Gains Tax Act 1976 (RPGTA) is introduced with effect from YA 2015 to provide for any input GST paid or payable by the disposer to form part of the incidental cost of acquisition or a disposal of a chargeable asset in arriving at the acquisition price or disposal price of that asset if the disposer is not liable to be registered under the Goods and Services Tax Act 2014 (GSTA) or if the disposer is a registered person and is not entitled to the input tax credit under the GSTA. Similarly, the tax treatments for: a. input GST paid or payable by a disposer who is liable to be registered under the GSTA but the disposer has failed to do so or the disposer is entitled to the input tax credit under the GSTA; and b. output GST paid or payable which is borne by the acquirer who is registered or liable to be registered under the GSTA are explained in the new provisions in the RPGTA with effect from YA 2015 as follows: Provision under the RPGTA Type of GST Tax treatment Subparagraph 7(d) of Schedule 2 Input GST Not to form part of the acquisition price or Subparagraph 7(e) of Schedule 2 Output GST disposal price of a chargeable asset 28

29 3.8 New offence and penalty for failure to furnish RPGT return A new Subsection 29(5) of the Real Property Gains Tax Act 1976 (RPGTA) is introduced which empowers the Director General to impose additional penalty on the taxpayer in respect of additional tax payable for a year of assessment where no return has been furnished by the taxpayer. 3.9 Revision in computation of exemption for individual disposer Presently, exemption is given to an individual disposer on a chargeable gain for the disposal of a chargeable asset in accordance with Paragraph 2 of Schedule 4 of the RPGTA. The Government has proposed that the formula in computing the exemption be revised as follows: i. A x C B ii. Or 10% of the chargeable gain, whichever is greater. where A is part of the area of the chargeable asset disposed; B is the total area of the chargeable asset; C is RM10,000 The amended formula allows the taxpayer who disposes part of a chargeable asset to claim a portion of the exemption of RM10,000 as proportionate to the part of the chargeable asset disposed or 10 percent of the chargeable gain from the disposal, whichever is greater. 29

30 04 ADMINISTRATIVE TAX ISSUES AND OTHER TAXES 30

31 4.1 Filling of employer s return (Form E) via electronic medium Presently, employers have the option to furnish the Employer s Return (Form E) either manually or via e-filing submission. The Government has now proposed that with effect from YA 2016, where the employer is a company, the Employer s Return must be furnished on an electronic medium or by way of electronic transmission. 4.2 Submission of tax estimate or revised tax estimate via electronic medium Starting from the year of assessment (YA) 2016, a company shall file its estimate or revised estimate of tax payable for each YA to the IRB via an electronic medium or by way of electronic transmission in accordance with Section 152A of the Income Tax Act Currently, companies have the option to file the estimates either by way of manual filing or electronic filing to the IRB. 31

32 4.3 Extension of stamp duty exemption to revive abandoned housing project 4.4 Extension of stamp duty exemption on Shariah Financing Instruments Stamp duty exemption provided to rescuing contractor or developer: i. on instruments of loan agreements to finance the completion of abandoned housing projects; and ii. on instruments of transfer of revived residential property of abandoned projects. Stamp duty exemption provided to original house purchaser of abandoned project: i. on instruments of loan agreements for financing the revived residential property of abandoned projects; and ii. on instruments of transfer of revived residential property of abandoned projects. It is proposed that the above stamp duty exemption be extended for the loan agreements and memorandum of transfer executed from 1 January 2016 to 31 December Presently, 20% stamp duty exemption on the principal or primary instrument of financing approved by the Shariah Advisory Council of the Bank Negara Malaysia or the Shariah Advisory Council of the Securities Commission Malaysia is given with effect from 2 September 2006 until 31 December In order to encourage the Shariah financing and reduce the cost of home ownership, the Government has proposed that the above stamp duty exemption be extended to approved housing financing instruments executed from 1 January 2016 to 31 December

33 05 GOODS AND SERVICES TAX 33

34 5.1 Rebates for prepaid card users Consumers will receive rebates equivalent to the amount of GST paid, which will be credited directly to their prepaid accounts. This is effective from 1 January 2016 to 31 December New penalties and amendment to time of supply New penalties Amendments were proposed to be made to Section 41 of the Goods and Services Tax Act When the taxes due are not paid and no prosecution is instituted, the following penalties will be imposed: Late payment period Penalty rates Cumulative (days) % 5% % 10% 61 or more 10% 25% No prosecution for the penalty of maximum RM50,000 or 3 years imprisonment or to both shall be instituted if the above late payment penalties is paid. Amendment to time of supply The time of supply for imported services is to be revised to be the earlier of: Date of payment made to overseas supplier; or Date when the invoice is issued by the overseas supplier. 34

35 For more information, please contact: KUALA LUMPUR Level 16, Tower C, Megan Avenue II, 12, Jalan Yap Kwan Seng, Kuala Lumpur Main Fax MUAR 8, Jalan Pesta 1/1, Taman Tun Dr Ismail 1, Jalan Bakri, Muar, Johor Main Fax KUCHING (Petanak) 1st Floor, No. 96, Jalan Petanak, Kuching, Sarawak, P.O. Box 1819, Kuching, Sarawak Main Fax MIRI 1st & 2nd Floor, Lot 2942 Faradale Garden, Jalan Bulan Sabit, Miri, Sarawak, P.O. Box 258, Miri, Sarawak Main Fax SHAH ALAM Suite 50-3, Setia Avenue, No. 2, Jalan Setia Prima S U13/S, Setia Alam, Seksyen U13, Shah Alam Main / Fax PENANG Level 6, Wisma Penang Garden, 42, Jalan Sultan Ahmad Shah, Penang Main Fax MELAKA 52, Jalan Kota Laksamana 2/15, Taman Kota Laksamana, Seksyen 2, Melaka Main Fax JOHOR BAHRU E-2-3, Pusat Komersial Bayu Tasek, Persiaran Southkey 1, Kota Southkey, Johor Bahru, Johor Main Fax KOTA KINABALU Damai Plaza 3, 3rd Floor C11 South Wing, Jalan Damai, P.O. Box 11003, Kota Kinabalu Main Fax KUCHING (Brighton Square) 2nd Floor Lots , Brighton Square, Jalan Song, Kuching, Sarawak Main Fax BINTULU 1st Floor, 53 Medan Sepadu, Jalan Abang Galau, Bintulu, Sarawak, P.O. Box 3555, Bintulu, Sarawak Main Fax SIBU 1st & 2nd Floor, No. 1 Lorong Pahlawan 7A2, Jalan Pahlawan, Sibu, Sarawak, P.O. Box 505, Sibu, Sarawak Main Fax LABUAN Lot 36, Block D, Lazenda Centre, Jalan OKK Abdullah, Wilayah Persekutuan Labuan, P O Box 81599, Wilayah Persekutuan Labuan Main Fax

36 About Crowe Horwath Crowe Horwath AF 1018 is the 5 th largest accounting firm in Malaysia and a member of Crowe Horwath International which is a top 10 global accounting network. The firm in Malaysia is represented in 12 locations, employs 950 staff, serves mid-to-large companies that are privately-owned, publicly-listed and multinational entities, and is registered with the Audit Oversight Board in Malaysia and the Public Company Accounting Oversight Board in US. Crowe Horwath International has 205 member firms covering 726 offices in more than 125 countries around the world. Crowe Horwath taps on its global resources and strategic competencies in audit, tax and advisory to become the leading firm of choice for fast growing businesses looking for high quality, a market driven approach and personalised service. Crowe Horwath AF 1018 Level 16 Tower C Megan Avenue II 12 Jalan Yap Kwan Seng Kuala Lumpur Malaysia main fax info@crowehorwath.com.my Kuala Lumpur Shah Alam Penang Johor Bahru Melaka Muar Kuching Sibu Bintulu Miri Kota Kinabalu Labuan