Our Group Tax Department and BDO Tax Services, Malaysia organised a talk on the 2012 Budget which was tabled by the Prime Minister and Finance Minister, YAB Dato’ Sri Mohd Najib Tun Abdul Razak on 7 October 2011.
The following are some of the notable proposed changes announced in the budget:
A. Companies
1. Rationalisation of Tax Incentive for Shipping Companies
- Income tax exemption be reduced from 100% to 70% of statutory income.
2. Tax Deduction on Franchise Fee
- Franchise fee paid by franchisee to undertake the franchise business for local franchise brands be given tax deduction.
3. Extension of Tax Incentive Period for Real Estate Investment Trusts (REITS)
- Rate be extended for another 5 years to 31/12/2016.
4. Tax Incentive for Structured Internship Programme
- Double deduction for expenses incurred by companies that implement a structured internship programme. The qualifying criteria are:
i. Full time undergraduate students from public or private higher education institutions; and
ii. A minimum period of 10 weeks with a monthly allowance of not less than RM500.
5. Incentive for Awarding Scholarships
- Double deduction for scholarships awarded by private companies to Malaysian students pursuing diploma or bachelor’s degree in approved local institutions of higher learning. The qualified students must be:
i. Full time undergraduate students
ii. Have no source of income
iii. Total monthly income of parents or guardian does not exceed RM5,000.
6. Incentive for Companies to Participate in Career Fairs Abroad
- Double deduction for expenses incurred by companies participating in career fairs abroad endorsed by Talent Corporation Malaysia Berhad.
7. Review of the Definition of Contract R&D Company and R&D Company
- Double deduction be given only for payments made for the use of the services of a contract research and development company subject to conditions specified by the relevant ministry.
B. Tax Incentives
1. Reinvestment Allowance (RA)
- For investments located in promoted areas (Sabah, Sarawak, Labuan, Perlis and Eastern Corridor), Reinvestment Allowance of 60% of the qualifying expenditure can be utilised against 70% of their statutory income. | - RA shall not apply to a company for “that basis period” when it is enjoying incentives on ITA, Industrial Adjustment Allowance and Investment Tax Credit.
2. Tax Incentives for Treasury Management Centre (TMC)
- 70% tax exemption on statutory income for 5 years is given to an approved Treasury Management Centre providing qualifying treasury services to its related companies. Applicable to applications received by the Malaysian Investment Development Authority (MIDA) from 8/10/2011 until 31/12/2016.
3. Tax Incentive for New 4 and 5 - Star Hotel In Peninsular Malaysia
- Pioneer status or investment tax allowance is accorded to investors undertaking new investments in 4 and 5 star hotels in Peninsular Malaysia. Applicable to applications received by MIDA from 8/10/2011 until 31/12/2013.
4. Tax Incentive for Providers of Industrial Design Services in Malaysia
- Pioneer status with income tax exemption of 70% on statutory income for 5 years be given to industrial design service providers (registered with Malaysian Design Council). Applicable to applications received by MIDA from 8/10/2011 until 31/12/2016.
5. Tax Incentive for Kuala Lumpur International Financial District
- 100% income tax exemption for 10 years for Kuala Lumpur International Financial District status companies.
C. Indirect Taxes/Real Property Gain Tax
1. Extension of Tax Incentives for Hybrid Cars
- Extension of 100% import duty and excise duty exemption for new completely-built-up hybrid and electric cars to 31/12/2013. Applicable to applications received by the Ministry of Finance from 01/10/2012 to 31/12/2013.
2. Review of Real Property Gains Tax (RPGT)
- Real Property Gains Tax at the revised rate of 10% is imposed on disposals within 2 years of acquisition. Effective for disposal of properties from 1/1/2012.
D. Individuals
1. Preferential Tax Rate Under Returning Expert Programme
- Employment income of an approved resident individual be taxed at flat rate of 15% for period of 5 years.
2. Tax Treatment for Private Retirement Scheme
- Tax relief of up to RM3,000 for contributions by individuals to SC approved Private Retirement Schemes.
E. Compliance & Administration
1. Enhancing Administration System and Tax Compliance
- Information such as total income, Monthly Tax Deductions (MTD) and employee’s contribution to the Employees Provident Fund (EPF) be “pre-filled” by the Inland Revenue Board (IRB) based on information provided by employers to reduce the time spent by individuals in completing their e-filing.
2. Compensation for Late Refund of Income Tax
- Late tax refunds by the IRB are subject to compensation of 2%, calculated on a daily basis commencing one day:
i. After 90 days from due date for e-filing; or
ii. 120 days from the due date for manual tax filing due.
3. Time Bar for Tax Audit
- Tax audit time bar is reduced from 6 years to 5 years from the date of assessment except for cases of false declaration, wilful late payment and negligence. Records shall continue to be kept for 7 years. |