Best governance for service agility Improving people’s living standards Restructuring economy to boost growth 1
Presented By : AdrianYeo Tax Sdn Bhd 2
Content • Overview • Individual Tax Highlights • Corporate Tax Highlights • Capital Gains Tax • Tax Incentives • Stamp Duty • Indirect Tax Highlights • E-Invoicing • Others
Overview
Federal Government Budget Deficit 2024 2023 2022 2021 2020 - - - - - In RM million - - - - - Income 307,600 303,200 294,357 233,752 225,076 Operating expenditure 303,800 300,140 292,693 231,516 224,600 Development expenditure 89,200 96,300 70,167 63,265 50,101 COVID-19 Fund - - 30,979 37,711 38,019 - - - - - - - - - - - - - - - - - - - - - - - - - Deficit 85,400 93,240 99,482 98,740 87,644 24 years consecutive budget deficit Reduce deficit to % of GDP 2022 -5.6% 2023 -5.0% 2024 -4.3
Component RM Billion 2023 2024 (Budget) Revenue - Company Income Tax 98 96 31% - Individual Income Tax 40 35 11% - Petroleum Income Tax 21 18 6% - Sales and service Tax (SST) 31 33 11% Other direct and indirect tax 114 125 41% Total revenue 303 307 Operating expenditure 300 304 Net Development expenditure 96 89 Total expenditure 396 393 Yearly deficit (93) (85) Sources from : Federal Government Revenue By MOF Federal Government Financial Position
UK Malaysia Tax system - citizen Worldwide income M’sia income Income tax Yes (25,40% or 45%) Yes (1% - 30%) Corporation tax Yes (Higher) Yes (Lower) Capital Gain Tax - Property Yes Yes (PRGT) - Shares Yes (All) Yes (Unlisted) - Art, gold, Antiques Yes No Consumption Tax - GST Yes No - SST - Yes - Luxury Tax - Yes (Year 2024) Inheritance Tax Yes No Tax System
Taxpayer’s Money “The state has no source of money, other than the money people earn themselves If the state wishes to spend more it can only do so by borrowing your savings, or by taxing you more. There is no such thing as public money. There is only taxpayer’s money.” Margaret Thatcher’s speech in Oct 1983 (Prime Minister of UK)
Shadow Economy Year 2000 - 2009 2010 - 2019 Size of shadow economy 30% of gross GDP 21% of gross GDP GST implemented 2015-2018 * Implementation of GST is effective in tackle shadow economy.
Shadow Economy • Shadow economy in Malaysia is estimated to be 18% of GDP in Year 2019 (Source: EY report Nov 2022) • Roughly translates to RM250 billion in todays’ term. • Malaysia’s shadow economy is formed by non-registered business, under-reporting business income. • Government has taken initiative to create Tax Identification Number (TIN) and e-invoicing to replace GST, in overcoming revenue leakage & reduce the size of “shadow economy” in Malaysia
Individual Tax Highlights
Expansion of Scope on Medical Treatment Expenses Effective: Year of Assessment 2024 生效期 ： 2024 课税年 Scope Current - RM10,000 Proposed - RM10,000 Serious illness for taxpayer, spouse or child Fertility treatment Vaccination for taxpayer, spouse or child Full medical checkup (Including mental health checkup, COVID-19 detection tests) Diagnostic & rehabilitation treatment for children with learning disabilities Dental examination & treatment expenses RM10,000 RM10,000 Max RM1,000 Max RM1,000 Max RM4,000 N/A RM10,000 RM10,000 Max RM1,000 Max RM1,000 Max RM4,000 Max RM1,000
Expansion of Scope on Medical Treatment Expenses (Parents) Scope Current - RM8,000 Proposed - RM8,000 Medical treatment in clinics and hospitals Treatment at nursing homes Dental treatment not including cosmetic dental treatment Treatment and home care nursing and daycare centres Full medical check-up for parents (limited to RM1,000) Max RM8,000 Max RM8,000 Effective: Year of Assessment 2024 生效期 ： 2024 课税年
Current Position Proposed Tax relief of RM2,500: • Purchase of for books, magazines, newspapers • Subscribe of e-books, e-newpapers • Personal computers, smartphones or tablets • Sport equipment & gym memberships fee • Internet subscriptions Scope of tax relief RM2,500 is restructured as below: • expanded to include fees for self-skills enhancement course • Sports equipment & gym memberships fee will be removed from the scope Additional tax relief of RM500 on: • Purchase of sports equipments • Rental/entry fees to sports facilities • Registration fees for participating in sports competitions Review of lifestyle relief Effective: Year of Assessment 2024 生效期 ： 2024 课税年 • Sport training fee Specific tax relief be introduced – Sports Equipment And Activities limited to RM1,000: • Purchase of sports equipment • Gym memberships fee • Rental/entry fees to sports facilities • Registration fees for participating in sports competition
Extension of Time for up-skilling and self-enhancement courses fees Tax relief up to RM2,000 for fees spent for attending up-skilling or self-enhancement courses. (Included in Education fee relief of RM7,000) Current tax relief period: 1 Jan 2022 – 31 Dec 2023 Condition : Courses that recognized by the Department of Skills Development under the Ministry of Human Resources. (Courses can be checked from www.myspike.my) Proposed: Extended for 3 years Effective from YA 2024 to YA 2026
Extension of Time on Cost Related to EV Charging Facilities Tax relief up to RM2,500 on the cost of installation, rental, purchasing, including hire-purchasing of equipment, or subscription for use of EV charging facility Current tax relief period: 1 Jan 2022 – 31 Dec 2023 Proposed: Extended for 4 years Effective from YA 2024 to YA 2027
Income Tax Exemption for Childcare Allowance under Perquisites from Employment Effective: Year of Assessment 2024 生效期 ： 2024 课税年 Current Position Proposed Tax exemption granted to an employee on childcare allowance received up to RM2,400 per year. The exemption will be increased to RM3,000 per year.
Tax Incentive for Women Career Comeback Programme Current Position Proposed Women in career break and return to the workforce qualify for a 12-months income tax exemption on employment income received. The criteria for eligibility are as follows: (i) Women returning to work after a break of at least 2 years before or up to 27 October 2017; and (ii) Employment income received in YA 2018 until YA 2024. Applications must be submitted to Talent Corporation Malaysia Berhad by 31 December 2023 The eligibility criteria have been improved to: • Women returning to work after a career break of at least 2 years before the application date received by Talent Corporation Malaysia Berhad. • Employment income received during the YA2025 to YA2028. (This revision is applicable for applications received by Talent Corporation Malaysia Berhad from 1 January 2024 to 31 December 2027)
Personal relief YA2023 PERSONAL DEDUCTIONS Individual Disable Individual Disable Spouse Husband/ Wife/ Alimony Payments Education Fees – Self (Master & Doctorate level) RM9,000 RM6,000 RM5,000 RM7,000 RM4,000 INSURANCE & CONTRIBUTIONS Life insurance/ Takaful (Self & Spouse) Educational & Medical Insurance (Self, spouse & Children) Net deposit in SSPN EPF SOCSO & EIS PRS RM3,000 RM3,000 RM8,000 RM4,000 RM350 RM3,000 56 Extended to YA2024
Personal relief YA2023 CHILD RELIEF & DEDUCTION Child Relief Child Relief Disable Child - Unmarried Childcare Centre & Kindergarten Disable Child (additional) RM2,000 RM8,000 RM6,000 RM8,000 RM3,000 -Pursuing Diploma/ Higher qualification - Unmarried - Above 18 years - Pursuing Diploma/ Higher qualification - Unmarried - Below 18 years - Unmarried - Child aged up to 6 years - Registered under MOE/ Social Welfare 57
Personal relief YA2023 Electronic Vehicle Charging Facilities Basic Supporting Equipment RM2,500 RM6,000 RM1,000 - For disabled self, spouse, child or parents Breastfeeding Equipment - Working women - With child under 2 years old - Once every 2 years - Including Installation, rental, Hire-purchase of equipment or subscription fees LIFESTYLE, MEDICAL, EQUIPMENTS & OTHERS 58
Personal relief YA2023 LIFESTYLE, MEDICAL, EQUIPMENTS & OTHERS Lifestyle Medical Expenses for Parents RM2,500 RM8,000 RM10,000 • Care & treatment (certified by medical practitioner) • Dental treatment • Book, magazines, • E-newspaper • Sport equipments • Computer, tablets & smartphones • Broadband internet • Gym membership fee Medical Expenses On Serious Diseases • Fertility treatment for self & spouse • RM1,000: Complete medical check-up & COVID-19 test expenses • RM1,000: Vaccination expenses • Expenditure for children with learning disabilities Lifestyle (additional) RM500 • Sport equipment • Rental fees for sports facilities • Registration fees for sports competition 59
Corporate Tax Highlights
Limitation on utilization of funds & expenditure for institutions/organisations/funds approved under Subsection 44(6) of ITA 1967 Subsection 44(6) : - Income tax exemption to institutions, organizations or funds that carry out charitable activities and operate not solely for profit - Donors eligible for tax deduction restricted to 10% of the aggregate income Proposed: The entities may choose ANY of the following options to continue receiving the subsection 44(6) incentives benefits: Option Utilisation of Accumulated Funds - business purpose Threshold of Annual Charitable Activity Expenditure 1 Up to 25% At least 50% 2 > 25% and up to 35% At least 60% Can taxpayer interchange the options??? -> To Be Confirm !! Effective: Year of Assessment 2024 生效期 ： 2024 课税年
Review of Capital Allowances (CA) on ICT Equipment and Computer Software Qualifying Expenditure Capital Allowance Rate Current Proposed Purchase of ICT equipment and computer software packages Initial Allowance: 20% Annual Allowance: 20% Initial Allowance: 40% Consultation, licensing and Annual Allowance: 20% incidental fees related to customized computer software development *With the revised rate, the capital allowance claim period shall be reduced from 4 years to 3 years. Effective: Year of Assessment 2024 生效期 ： 2024 课税年
Micro, Small and Medium Enterprises (MSME) Criteria for preferential tax rate Existing criteria Paid-up capital in respect of ordinary shares or total capital contribution up does not exceed RM2.5 million; Gross income from business sources not exceeding RM50 million; and Does not (directly or indirectly) hold more than 50% the paid-up capital in respect of ordinary shares or total capital contribution in its related company/LLP which has a paid-up capital exceeding RM2.5 million in respect of ordinary share. Additional criteria (effective Year of Assessment 2024) Paid up capital (directly or indirectly) hold by foreigners / foreign companies does not exceed 20%. Effective: Year of Assessment 2024 生效期 ： 2024 课税年 63
Up to YA2023 Proposed Alpha Sdn Bhd (Paid up capital : RM 2m) Beta Sdn Bhd (Paid up cap: RM 2m) Delta Ltd (HK)* (Paid up cap: RM 2.3m) Alpha Sdn Bhd (Paid up capital : RM 2m) Beta Sdn Bhd (Paid up cap: RM 2m) Delta Ltd (HK)* (Paid up cap: RM 2.3m) 75% 25% 75% 25% 64
Alpine Sdn Bhd (Paid up capital : RM 2m) Super Ltd (HK)* (Paid up cap: RM 3.6m) Meta Sdn Bhd (Paid up cap: RM 2m) 55% 45% Alpine Sdn Bhd (Paid up capital : RM 2m) Super Ltd (HK)* (Paid up cap: RM 3.6m) Meta Sdn Bhd (Paid up cap: RM 2m) 55% 45% Up to YA2023 Proposed 65
SME COMPANY Detail SME with > 20% FS YA2023 onwards First RM150,000: 15% RM150,001 – RM600,000: 17% RM600,001 and subsequent balance: 24% Tax rate YA2024 onwards 24% No restriction CA for SVA (Asset < RM2,000) Wef YA2024 to YA2027 Restricted to RM20,000 Eligible New company – exemption from filing tax estimates for first 2 YAs Wef YA2024 to YA2027 Not Eligible SME and SME with >20% foreign shareholding
CURRENT PROPOSEDRevised of Tax estimation 6th month revision 9th month revision 6th month revision 9th month revision 11th month revision Effective: Year of Assessment 2024 生效期 ： 2024 课税年
YA 2024 Tax estimation submission due date YA 2025 FYE 2024 Initial 6th 9th 11th Initial January 31-12-22 31-07-23 31-10-23 31-12-23 31-12-23 February 30-01-23 31-08-23 30-11-23 31-01-24 31-01-24 March 28-02-23 30-09-23 31-12-23 29-02-24 29-02-24 April 31-03-23 31-10-23 31-01-24 31-03-24 31-03-24 May 30-04-23 30-11-23 29-02-24 30-04-24 30-04-24 June 31-05-23 31-12-23 31-03-24 31-05-24 31-05-24 July 30-06-23 31-01-24 30-04-24 30-06-24 30-06-24 August 31-07-23 29-02-24 31-05-24 31-07-24 31-07-24 September 31-08-23 31-03-24 30-06-24 31-08-24 31-08-24 October 30-09-23 30-04-24 31-07-24 30-09-24 30-09-24 November 31-10-23 31-05-24 31-08-24 31-10-24 31-10-24 December 30-11-23 30-06-24 30-09-24 30-11-24 30-11-24 85% restriction
Capital Gains Tax
Capital Gain Tax Capital Gain Tax on the sale of unlisted shares by companies/LLP will be introduced from 1 March 2024. Under Income Tax Act 1967. Shares Acquisition date CGT rate Before 1 March 2024 Taxpayers may choose: - 10% on the net profit of the disposal OR - 2% on the gross sales value From 1 March 2024 10% on the net profit of disposal
Capital Gain Tax a) Companies b) Limited Liabilities Partnership c) Corporate Body d) Trust Body Who are the taxpayers? Individuals RPGT on RPC shares When & how to submit and pay? - Through e-filing - Within 60 days from the date of disposal.
Capital Gain Tax Allowable expenses Losses Expenses related to the acquisition or disposal of capital assets: Stamp duty Legal fees Broker fees Commission fees Allowed deductions from the same source ONLY (sales of shares) Unabsorbed capital losses can be carried forward for a limited period of 10 years
Capital Gain Tax - EXCEPTIONS - a. Initial Public Offering (IPO) approved by Bursa Malaysia b. Restructuring within the same group
Capital Gain Tax
Real Property Company (RPC) 1. A controlled company; 2. Owned property OR RPC shares in another RPC or both; and 3. Defined value (i.e. market value) of the property or shares in other RPC or both is not less than 75% of the value of its total tangible assets. Total tangible assets 1. Fixed / non-current assets such as land, buildings, vehicles, P&M, OE, FF and etc 2. Current assets such as stocks, debtors, receivables, bank balances, cash balances and other current assets; and 3. InvestmentIntangibles such as patents, copyrights and trademarks What is RPC?
ABC Holdings Sdn. Bhd. YA2022 NON-CURRENT ASSETS Property, plant and equipment N1 9,069,115 Intangible assets 300 9,069,415 CURRENT ASSETS Trade receivables 2,000 Other receivables 50,000 Current tax assets - Cash and bank balances 20,000 72,000 TOTAL ASSETS 9,141,415 Note 1 RM Furnitures, fixtures and equipment 55,130 Leasehold land and buildings 8,593,362 Machinery, tools and equipment 34,785 Motor vehicles 290,667 Renovation and building improvements 95,171 9,069,115 Leasehold land and buildings = 8,593,362 Total tangibles asset 9,141,115 = 94% ABC Holdings Sdn. Bhd. is a RPC company.
Tax incentives
Extension of Time - Tax Incentive for Rental of Electric Vehicle (EV) Extend 2 years Companies that rent non- commercial EV are given tax deduction up to RM300,000 Effective period: YA 2023 to YA 2025 Effective: Until Year of Assessment 2027 生效期 ：至 2027 课税年 CURRENT PROPOSED
Incentive for Re-investment under New Industrial Master Plan (NIMP) 2030 Current Proposed Manufacturing & agricultural companies undertaking expansion, diversification, automation and modernization projects are eligible for Reinvestment Allowance (RA): 1. 60% of the capital expenditure incurred; and 2. Set-off against up to 70% of statutory income for 15 consecutive YAs. No prior application required New requirement: Application to MIDA For existing companies that have exhausted their RA eligibility period, it is proposed tax incentives be given as follows: Eligible RTA rates will be determined by outcome-based approach. ITA Tier 1 Tier 2 Qualifying capital expenditure 100% 60% Statutory income to be set-off 100% 70% Effective: For applications received by MIDA from 1 January 2024 until 31 December 2028 生效期 ： 呈交申请于 2024年1月1日 至 2028年12月31日期间
Expansion of Scope - Automation Capital Allowance (ACA) in Manufacturing, Services and Agriculture Sectors on automation equipment Criteria Current Proposed The scope of tax incentive i. Labour-intensive Industry (rubber plastic, wood, furniture and textile products) ii. Industries other than (i) including the services sector iv. Agriculture sector Scope of ACA be expanded to include the commodity sector (such as palm oil, rubber, timber, cocoa, pepper, kenaf and tobacco) under the Ministry of Plantation and Commodities (MPC) Threshold of qualifying cost expenditure (100%) RM10 million RM10 million Application Period Application received by MIDA and MAFS from 01.01.2023 – 31.12.2027 Applications received by MIDA, MAFS and Ministry of Plantation and Commodities from 14/10/2023 until 31/12/2027
Automation Capital Allowance vs Reinvestment Allowance Automation CA RA Automation/modernization ONLY [YA2015 to YA2027] Expansion/automation/modernization/ diversification [15 Consecutive YAs] + 3 + 5 Prior APPROVAL from SIRIM and MIDA Prior approval not required i) ACA - 100% QCE ii) ITE on automation equipment – 100% QCE (up to 70% of Statutory Income) i) CA - 20% + 14% (until 100% fully claim) ii) RA - 60% QCE (up to 70% of Statutory Income) RM10 mil on QCE No limit on QCE Carried forward indefinitely Unutilised RA to be c/f up to 7 years 200% 160%
Automation Capital Allowance (ACA) in Manufacturing, Services and Agriculture Sector on automation equipment #Assuming no Hire purchase 68 Assume RM1million qualifying ACA:-
Stamp Duty
Stamp Duty for Transfer of Property Ownership by Renunciation of Rights Current Position Proposed Transfer of properties involving inheritance property is subject to a fixed stamp duty of RM10 if the ownership is transferred from administrator to an eligible beneficiary. If the eligible beneficiaries relinquish its right to other eligible beneficiaries or non- beneficiary, ad valorem duty of 1% to 4% will be imposed If the transfer of property ownership involves the eligible beneficiary who renunciates his/her right to another eligible beneficiary will only subject to a fixed duty of RM10, instead of ad valorem duty. (Effective for the instrument of property ownership transfer executed from 1 January 2024) Effective: 01.01.2024 生效期 ：01.01.2024
Stamp Duty for Property Ownership by Non -Citizen & Foreign -owned Companies Current Position Proposed Transfer of property owned by foreign companies and non-citizen individuals are subjected to ad valorem rate as follows: A flat stamp duty rate of 4% be imposed on the transfer instrument of real estate executed by foreign-owned companies and non-citizen individuals (except Malaysian permanent residents) (Effective for instrument of property ownership transfer executed from 1 January 2024) Sales Price / Market value (Whichever is higher) Stamp Duty (%) First RM100,000 1% RM100,001 to RM500,000 2% RM500,001 to RM1,000,000 3% RM1,000,001 & above 4% Effective: 01.01.2024 生效期 ：01.01.2024
Indirect Tax Highlights
Expansion of Service Tax Scope Group A - Accomodation Group B - Food and beverages Group C - Night clubs, Dance Halls, Cabarets, Health and Wellness Centres, Massage Parlours, Public Houses, Beer Houses Group D- Private Clubs Group E - Golf Club and Golf Driving Range Group F - Betting and Gaming Group G – Professionals Group H - Credit Card and Charge Card Group I - Others CURRENT PROPOSED To include:- 1. Group C - Karaoke centre services 2. Group I - Logistics services 3. Group I – Delivery services (except F&B) 4. Group I – Brokerage & underwriting for non-financial services Effective: 01.03.2024 生效期 ：2024年3月1日 Threshold – RM500,000