2009 Malaysia Tax Update
Budget 2009
The Prime Minister and Minister of Finance YAB Dato' Seri Abdullah Bin Hj. Ahmad Badawi unveiled the Malaysian Budget for the year 2009 ("Budget") on 29 August 2008.
The theme of the Budget is "A Caring Government".
The three main strategies focus in the Budget are namely, ensuring the well being of Malaysians, developing quality human capital and strengthening the nation's resilience.
We set out below the highlights of the Budget:
1. Corporate Tax
1.1 Reduction of Co-operative Income tax
In order to streamline with income tax rates for individuals, the co-operative income tax rates for the chargeable income group exceeding RM20,000 to RM30,000 would be reduced from 3% to 2%.
Additionally, the tax rate for the chargeable income group exceeding RM500,000 would be reduced from 28% to 27%.
The above proposals are effective from Year of assessment ("YA") 2009.
1.2 Increasing the limit for tax deduction on contribution
Currently, contributions made by companies are given deduction for the purpose of tax computations up to 7% of aggregate income on contributions made in form of:
i. cash to approved institutions, organizations or funds for charitable purposes;
ii. cash and cost of contributions in form of goods for sports activities approved by the Minister of Finance or Sports Commissioner; and
iii. cash or cost of contributions in the form of goods for projects of national interests approved by the Minister of Finance.
To further increase companies' contribution for charitable purposes, sports activities and projects of national interest, it is proposed that the limit for tax deduction for purpose of tax computation be increased from 7% to 10% of aggregate income effective from YA 2009.
1.3 Deduction on expenses for recruitment of workers
Generally, cost of recruitment of workers is allowed as deduction for the purpose of tax computation. To reduce the cost of doing business and to ensure that the company obtains excellent human capital, the Budget 2009 proposes that the recruitment cost incurred before the commencement of operations be allowed as a deduction for the purpose of tax computation. Such cost includes expenses incurred in participation in job fairs, payment to employment agencies and head hunters. This deduction is effective from YA 2009.
1.4 Enhancing group relief
Currently, the tax treatment which allows losses of a company to be set-off against the income of another company within the same group is limited up to 50% of the current year unabsorbed losses. It is proposed that effective from YA 2009, the rate of the current year losses be allowed to be set-off in group relief treatment be increased from 50% to 70%.
1.5 Tax Incentive for Small and Medium Enterprises ("SMEs")
Currently, expenses incurred on plant and machinery are given capital allowances to be claimed within 6 years. For expenses incurred on assets valued less then RM1,000 ("small value assets"), capital allowance can be claimed within one year. However, the total value of small value assets is limited to RM10,000. For expenses on certain asset eligible for Accelerated Capital Allowance such as Information and Communication Technology ("ICT") equipment, capital allowance claimed would depend on the accelerated period specified.
Under the Budget 2009, in order to improve the cash flow and enhance the competitiveness of the SMEs, it is proposed that:
i. SMEs be given Accelerated Capital Allowances on expenses incurred on plant and machinery acquired in YA 2009 and YA 2010. The allowance is to be claimed within 1 year that is in the YA the asset is fully acquired; and
ii. SMEs be not subject to the maximum limit of RM10,000 for capital allowance on small value assets.
Proposal (i) is effective for YA 2009 and YA 2010 whilst proposal (ii) is effective from YA 2009 onwards.
1.6 Incentive for listing of foreign companies and foreign products in Bursa Malaysia
The 2009 Budget has proposed to reduce the cost of corporate advisors to attract foreign companies and direct product listing in Bursa Malaysia. Effective from YA 2009 to YA 2013, it is proposed that income tax exemption be given on fees received by corporate advisors for primary listing, dual listing or cross listing of:
i. corporations with predominantly foreign based operations;
ii. Exchange Traded Funds and Real Estate Investment Trust with foreign based assets;
iii. foreign listed securities; and
iv. foreign financial instruments.
The proposal is subject to listing conditions approved by the Securities Commission.
1.7 Improvement of Reinvestment Allowance
Currently, Reinvestment Allowance ("RA") is given to companies engaged in manufacturing, processing and selected agriculture activities that reinvest for the purposes of expansion, automation, modernization or diversification on condition that such companies have been in operation for at least 12 months. The RA can be claimed for 15 consecutive years from the first YA the first claim is made.
Generally, RA is given at 60% on the qualifying capital expenditure incurred within a YA and it is allowed to be set-off against up to 70% statutory income. Companies situated in promoted areas that achieve a certain level of productivity based on a process efficiency ratio are allowed to set-off the RA against 100% of the statutory income.
To further improve the RA, it is proposed that certain criteria and conditions of this incentive be amended to enable the tax inventive to operate more efficiently. Effective from YA 2009, it is proposed that the criteria and conditions of this incentive be amended as follows:
i. manufacturing activity be given a more specific and clear definition under Schedule 7A of the ITA;
ii. the condition that a company must be in operation for at least 12 months to be eligible to claim RA be extended to at least 36 months;
iii. a company purchasing an asset from a related company within the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset; and
iv. provision to claw back RA for assets disposed off within a period of 2 years from the date of purchase of the asset be extended to 5 years.
2. Individual
2.1 Reduction of Income tax rates for residents
Under the Budget 2009, a reduction of income tax rates as well as increase in tax rebates for certain chargeable income groups are proposed. This proposal is introduced as a measure to ensure the individuals' income tax rates remains competitive and to increase the disposable income of the citizen.
An additional amount of tax rebate of RM50 is given to individuals falling within the chargeable income group of RM35,000 to RM50,000 recording an increase from the previous rebate of RM350 to RM400. Additionally, the Budget proposes that the tax rate for the same chargeable income group is reduced from 13% to 12%.
It is further proposed that the tax rate for the chargeable income group exceeding RM250,000 be reduced from its current rate of 28% to 27%.
2.2 Tax reduction rates for non resident individuals
In order to streamline with the reduced rates of a resident individuals, it is proposed that the tax rate for non-resident individuals be reduced from 28% to 27% with effect from YA 2009.
2.3 Tax exemption on interest from deposits
Currently, interest income received from monies deposited in all institutions approved to take deposits is taxed at 5%. Interest income derived from certain deposits i.e., Lembaga Tabung Haji, Bank Simpanan National etc. is exempted from tax. To increase the disposable income, it is proposed that tax interest income received by individuals from monies deposited in all institutions approved to take deposits be fully exempted from tax. This proposal is effective from 30 August 2008.
2.4 Review of income tax treatment on allowance, benefit in kind and perquisites.
Currently, allowances, benefit in kind and perquisites received by employees are subject to tax. However, perquisite in the form of excellent service, safety and long service awards are given tax exemptions of up to RM1,000 a year. To encourage employers to provide more benefit to their employees and to assist in reducing the cost of living, it is proposed that employees be given tax exemption on allowances, benefits in kind and perquisites received from employers for the following:
i. petrol card or petrol allowance or travel allowance between the home and work place up to RM2,400 a year;
ii. petrol card or petrol allowances or travel allowances and toll card for official duties of up to RM6,000 a year;
iii. allowance or fee for parking;
iv. meal allowance;
v. allowance or subsidies for childcare of up to RM2,400 a year;
vi. telephone and mobile phones, pager, personal date assistant (PDA) and internet subscription;
vii. employers' own goods provided free of charge or at a discounted value where the value of the discount does not exceed RM1,000 at year;
viii. employers' own service provided free or at a discount provided such benefits are not transferable;
ix. subsidies on interest on loans totaling up to RM300,000 for housing, passenger motor vehicle and education (the exemption will be given to existing and new loans);
x. medical benefits exempted from tax be extended to include expenses on maternity and traditional medicines such as ayurvedic and acupuncture; and
xi. existing perquisites be extended to awards related to innovation, productivity and efficiency such as the Six Sigma Award and the exemption be increased from RM1,000 to RM2,000 a year.
These expenses on allowances, benefits in kind and perquisites provided would be given full deduction notwithstanding such benefits are not stipulated in the service contract of the employee. The above proposals are effective from YA 2008 save for proposal (i) which is effective from YA 2008 to YA 2010.
3. Islamic
3.1 Tax exemption on income of Corporate Advisors on the issuance and trading of Sukuk
Under the 2009 Budget, effective from YA 2009 to 2011, it has been proposed that income tax exemption be given on:
i. fees earned by qualified institutions in undertaking activities related to the arranging, underwriting and distributing of non-ringgit sukuk issued in Malaysia and distributed outside Malaysia; and
ii. profits received by qualified institutions from the trading of non-ringgit sukuk issued in Malaysia.
4. Tax Administration
4.1 Implementation of Advance Pricing Arrangement
Advance Transfer Pricing Arrangement ("APA") is a mechanism to predetermine prices of goods and services to be transacted in the future between a company and its related companies for a specific period. Currently, APA is not included in the scope of Advance Rulings under the Income Tax (Advance Ruling) Rules 2007 which was introduced on 1 January 2007. Effective from 1 January 2009, it is proposed that companies be allowed to apply for APAs to the Director General of Inland Revenue Board. The objective of establishing APAs is to determine transaction prices for income tax purposes.
4.2 Tax treatment on Bonus and Directors' fees
Income tax on bonus and directors' fees is based on the year such incomes are receivable. However, generally bonus and directors' fees are received in the following year. Hence, the tax payer will declare the bonus and directors' fees in the year such incomes are received. In line with the Self Assessment System, with effect from YA 2009, it is proposed that bonus and directors' fees be taxed in such year such incomes are received.
4.3 Provision to determine and collect tax on other income of non-resident
Currently, the Income Tax Act 1967 ("ITA") does not have clear provisions to determine and collect tax on other income of non-residents under Section 4(f) of the ITA. Incomes under Section 4(f) of the ITA are gains and profits not covered under Section 4(a) to 4(e) of the ITA.
To enhance transparency, equity and effective of the tax system, it is proposed that the provisions to determine the tax liability of non-residents be established as follows:
i. if responsibility for the payment of gains and profits lies with the Federal Government, State Government or local authorities; or
ii. if responsibility for the payment of gains or profits lies with the resident; or
iii. if such payment is charged as an outgoing or expenses in the accounts of such business carried on in Malaysia.
Effective from 1 January 2009, it is proposed that the income under Section 4(f) of the ITA will be taxed at the rate of 10% from the gross income. The collection of tax from the income of non-residents be implemented under the withholding tax mechanism.
4.4 Withholding tax on technical fees
Technical fees paid to non-residents are subject to income tax of 10% on the gross income and the responsibility to pay tax lies with the person who pays the technical fees through the withholding tax mechanism. To reduce the cost of technical services provided by non-residents, it is proposed that reimbursements relating to hotel accommodation in Malaysia be not included in the computation of gross technical fees for the purpose of withholding tax. This proposal is effective from 1 January 2009.
4.5 Self amendment for additional assessment of Income Tax
Under the Self Assessment System, a taxpayer declares his income and computes tax payable in the income tax form. When the taxpayer commits an error by under-declaring his income or claiming excessive deductions or expenses, the existing provisions do not allow him to make amendments to the self-assessed return. Therefore, it has been proposed that a new provision to be introduced in the ITA to allow the taxpayer to make self amendments for the taxpayer to make additional assessment. Effective from YA 2009, the amendment can be made provided the following conditions are met:
i. amendments allowed are in respect of errors resulting in increased assessments such as errors committed in reporting income or claims on deductions or expenses;
ii. self amendment be allowed only once for each year of assessment;
iii. self amendment be allowed within a period of 6 months from due date of furnishing the tax form; and
iv. taxpayer who makes self amendment in specified form.
The taxpayer who makes self amendment will not be subject to a penalty for the under-declaration of income or excessive claim, deduction or expenses. A penalty would be imposed on a late payment equivalent to the penalty imposed on the taxpayer who files a correct return but defaults in paying tax within the stipulated time.
4.6 Widening the scope of appeal to Special Commissioners of Income Tax
Under the 2009 Budget, the government has proposed widening the scope of appeal to the Special Commissioners of Income Tax. Previously, the ITA only allow the taxpayer to file an appeal only when an assessment issued by the Director General of Inland Revenue ("DGIR") involves income tax liability. Thus, a taxpayer with no liabilities (including loss cases) is not allowed to file an appeal when an assessment is issued in the future.
Effective from 1 January 2009, to enable a taxpayer with no tax liability to file an appeal, it is proposed that the scope of appeal to the SCIT be widened by allowing such taxpayer to file the appeal by using the Notification of Non-Chargeability instead of the notice of assessment. The appeal is to be filed through the DGIR using Form Q.
4.7 Tax Treatment on Clubs
Currently, there are no tax treatment provided under that ITA. To enhance transparency in tax treatment, it is proposed, effective from YA 2009 that specific provisions to be introduced.
i. income derived from transaction with members be not subject to tax while income derived from transactions with non members be subject to tax;
ii. income from investment and external source being non-mutual receipts be subject to tax; and
iii. deductions be only allowed on expenses incurred in the production of chargeable income and limited only on the portion attributable to non members.
The proposed tax treatment would also be applicable to institutions similar to institutions similar to clubs.
4.8 Tax treatment on Professional Associations
Professional Associations have always been regarded as trade association for the purposes of income tax computation and are given the same income tax treatment. To enhance transparency in the tax treatment of professional associations, it is proposed that with effect from YA 2009, professional associations be incorporated in the definition of trade association.
4.9 Tax treatment on cost of dismantling and removing assets as well as restoring the site
Currently, the cost of dismantling and removing assets including plant and machinery as well as restoring the site where the asset was located do not qualify for allowance under Schedule 3 of the ITA since this expenditure is not deemed as cost of the asset. Conversely, the Financial Reporting Standards 116 ("FRS 116") stipulates that cost of an asset includes the estimated cost required to be incurred relating to the obligation to dismantle and remove the asset and to restore the site on which the asset was located.
To streamline the different tax treatment between the ITA and FRS, it is proposed that effective from YA 2009, the ITA should provide for balancing allowance on such costs provided:
i. the eligibility for such tax treatment only applies where the obligation to carry our works on dismantling and removing the plant and machinery as well as restoring the site is provided under any written law or agreement; and
ii. such plant and machinery is not allowed to be used by that person in another business or used in the business of another person.
The total balancing allowance is determined by adding the cost of dismantling and removing the plant and machinery as well as restoring the site to the balance of expenditure on plant and machinery at the time of the disposal of the asset.
4.10 Application of Arm's length principle on business transaction carried out between related companies
Related companies tend to be carried out at non-arm's length prices as a means to reduce income and thereby tax to be paid ("transfer pricing"). Transfer pricing usually occurs in respect of cross border transactions by multinational companies relating to the supply of goods and services as well as financing involving thin capitalization.
Currently, there are no specific provisions under the ITA to address the issue of transfer pricing and thin capitalization issues. It is proposed, effective from 1 January 2009, that Section 140A would be inserted into the ITA to enable the DGIR to disregard or vary transactions of goods, services or financial assistance carried out between related companies based on arm's length principle.
5. Incentives for Other Sectors
5.1 Enhancing tax incentive for rearing of chicken and ducks using closed house system
Chicken and duck rearers operating in Kelantan, Terengganu, Pahang and district of Mersing, Perlis, Sabah and Sarawak ("Promoted Areas"), who undertake new investment are given the following incentives:
i. Pioneer Status with tax exemption of 100% on statutory income for 5 years; or
ii. Investment tax allowance of 60% on qualifying capital expenditure incurred within 5 years. The allowance is to be set-off against 100% of the statutory income for each year of assessment.
Chicken and duck rearers who reinvest for the purpose of shifting from open house system to closed house system are given RA for 15 years consecutively as follows:
i. Project located in the Promoted Areas is given RA of 60% on qualifying capital expenditure. The allowance is to be set-off against 100% of the statutory income of each year of assessment;
ii. Project located outside the Promoted Areas is given RA of 60% on qualifying capital expenditure. This allowance is to be set-off against 70% of the statutory income for each year of assessment.
The incentive is given subject to certain minimum conditions being met. The above RA is given until YA 2010.
To ensure an environmental friendly rearing system and to ensure sufficient supply of chicken and duck mean, it is proposed that rearers who reinvest in expending closed house system approved by the Ministry of Agriculture and Agro-Based Industry be given the following incentives:
i. Projects located in the Promoted Areas be given RA of 60% on qualifying capital expenditure. The allowance is to be set-off against 100% of the statutory income for each year of assessment; and
ii. Project located outside the Promoted Areas be given RA of 60% on qualifying capital expenditure. The allowance is to be set-off against 70% of the statutory income for each year of assessment.
This proposal is effective from YA 2009 to YA 2010.
5.2 Tax incentives to enhance training in selected fields
Under the Malaysia's current tax regime, expenses incurred by employers to train their employees are eligible for deduction. Examples of expenses incurred for the training of employees at approved training institutions i.e., International Centre for Education in Islamic Finance are eligible for double deduction.
To encourage the private sector to train Malaysians, to ensure a sufficient pool of skilled manpower and to strengthen the competitiveness of Malaysian professional, it is proposed that:
A. a double deduction be given on expenses incurred by employers in training their employees in the following fields:
i. post graduate courses in information communication and technology ("ICT"), electronics and life sciences;
ii. post basic courses in nursing and allied health care; and
iii. aircraft maintenance engineering courses.
This proposal is effective from YA 2009 to YA 2012.
B. Withholding tax exemption be given to non-resident on income received by providing technical training services in the aforementioned skills effective from 30 August 2008 until 31 December 2012.
5.3 Enhancing tax incentives for Hotels for Sabah and Sarawak
Currently, 1 to 3 star Hotel operators are given:
i. Pioneer Status with income tax exemption of 100% of statutory income for a period of 5 years; or
ii. Investment Tax Allowance of 100% on qualifying capital expenditure incurred within a period of 5 years. The allowance is to be set-off against 100% of statutory income for each year of assessment.
Reinvestment for the purpose of expansion, modernization and renovation for 1 to 5 star hotel are also given the incentives above. These incentives are given for two rounds.
To support the development of the Corridors in Sabah and Sarawak and to increase tourism, the pioneer status hotel operators undertaking new investments in 4 and 5 star hotel in Sabah and Sarawak would also be given Pioneer Status or Investment Tax Allowance incentives as above. The proposal is only effective for applications received by the Malaysian Industrial Development Authority ("MIDA") from 30 August 2008 to 31 December 2013.
5.4 Tax incentive for Venture Capital Industry ("VCC")
One of the tax incentives for VCC to enjoy is income tax exemption for 10 years subject to the investment conditions as follows:
i. at least 50% of funds invested in venture companies must be in seed capital; or
ii. at least 70% of funds invested in venture capital must be in start-up or early stage financing.
Effective from 30 August 2008 to 31 December 2013, VCC investing in venture companies with at least 30% of its funds in seed capital, start-up or early stage financing be given income tax exemption for 5 years. An application must be made by the VCC to the Securities Commission to enjoy such tax exemption.
5.5 Tax incentive for the Generation of Energy from Renewable Sources
To widen the usage of energy from renewable sources, it is proposed that import duty and sales tax exemption on solar photovoltaic system equipment for the usage by third parties be given to importers including photovoltaic service providers approved by the Energy Commission; and sales tax exemption on the purchases of solar heating system equipment from local manufacturers.
This proposal is effective for application received by the Ministry of Finance from 30 August 2008 until 31 December 2010.
5.6 Tax incentive for Energy Conservation
The current tax incentive for energy conservation (Energy Efficient) ("EE activities") are as follows:
A. Companies providing energy conservation services
i. Pioneer status with income tax exemption of 100% of statutory income for 10 years; or
ii. Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. The allowance to be set-off against 100% of the statutory income for each year of assessment; and
iii. Import duty and sales tax exemption on energy conservation equipment on energy conservation equipment that are not produced locally and sales tax exemption on the purchase of equipment from local manufacturers.
B. Companies which incur capital expenditure for energy conservation for own consumption
i. Investment Tax Allowance of 100% of the qualifying capital expenditure incurred within 5 years. The allowance to be set-off against 100% of statutory income for each year of assessment; and
ii. Import duty and sales tax exemption on energy conservation equipment that are not produced locally and sales tax exemption on the purchase of equipment from local manufacturers.
These incentives are only given to companies providing energy conservation services to other companies or for their own consumption. Companies importing or purchasing locally manufactured EE equipment are not eligible to the tax incentives.
Under the 2009 Budget, it is proposed that, (i) the exemption of import duty and sales tax be given to EE equipment such as high efficiency motors and insulation materials to importers including authorized agents approved by the Energy Commission, and (ii) sales tax exemption be given on the purchase of locally manufactured EE consumer goods such as refrigerator, air conditioner, lightings, fan and television. These incentives offered are only effective for applications received by the Ministry of Finance from 30 August 2008 until 31 December 2010.
5.7 Tax incentive for Hybrid Cars
To promote Malaysia as a regional hub for hybrid cars and as an incentive for local car manufacturers and assemblers to prepare Hybrid cars domestically, it is proposed that franchise holders of hybrid cars be given 100% exemption on import duty and 50% exemption of exercise duty on new Completely Built Unit ("CBU") hybrid cars. This exemption is for application received by the Ministry of Finance from 30 August 2008 until 31 December 2010.
The above exemption is subject to the following criteria and conditions:
i. hybrid cars should comply with the United Nations' definition as "a vehicle with at least 2 different energy converters and 2 different energy storage systems (gasoline and electric) on-board the vehicle for the purpose of vehicle propulsion;
ii. limited to new CBU hybrid passenger cars with engine capacity below 2000 cc;
iii. engine specification of at least Euro 3 technology;
iv. hybrid cars certified by Road Transport Department, obtaining Vehicle Type Approval certified to have achieved not less then a 50% increase in the city-fuel economy or not less than a 25% increase in combined city-highway fuel economy relative to a comparable vehicle that is an internal combustion gasoline fuel; and
v. emission of carbon monoxide of then 2.3 gram per kilometre.
5.8 Stamp duty on Loan Agreements and Service Agreements
At present, there are differing rates of stamp duty on loan agreements and service agreement. In order to simplify assessment, it is proposed that all loan agreement and service agreement instruments except for education loans, be subject to ad valorem stamp duty rates of RM5 for every RM1,000 or part thereof. For Education loan agreement, the stamp duty is fixed at RM10. This proposal is effective from 1 January 2009.
6. Other Incentives and Proposals
6.1 Review of Road Tax on private vehicles owned by individuals and companies
Currently, private and non-saloon diesel vehicles owned by individuals and companies are subject to higher road tax compared to petrol vehicles (except for Sarawak). To provide an equitable road tax treatment, it is proposed that road tax imposed on private saloon and non-saloon diesel vehicle owned by individuals and companies be reduced to be equated with petrol vehicles. This proposal is effective from 1 September 2008.
In line with this proposal, the current road tax treatment on green diesel vehicles which is 50% lower then diesel vehicles in the whole of Malaysia be withdrawn effective from 1 September 2008.
6.2 Tax incentives for Bus and Taxi operators
Locally assembled buses including air conditioners installed in buses are subject to 10% sales tax. As sales tax is a consumption tax, it is borne by the purchasers i.e., bus operators. Expenses incurred in the purchase of buses are also eligible for capital allowances to be claimed within a period of 4 years whereas buses using natural gas are eligible for capital allowances to be claimed within 2 years.
In the 2009 Budget measures have been proposed to reduce the operational cost of buses and taxi operator. It has been proposed that:
i. bus operators be given sales tax exemption on the purchase of locally assembled buses including air-conditioners. This proposal is for application received by the Ministry of Finance from 30 August 2008 until 31 December 2011;
ii. expenses incurred in the purchase of new buses be given Accelerated Capital Allowance to be claimed within one year. This is effective for buses purchased from YA 2009 until YA 2011; and
iii. road tax be reduced to RM20 a year on all types of buses, taxis and hired cars including limousines and hire and drive vehicle.
This proposal is effective YA 2011.
Additionally, in line with this proposal, the current road tax treatment in green diesel vehicle which is 50% lower than diesel vehicle in while of Malaysia be withdrawn.
6.3 Stamp duty exemption on Loan Agreement for residential properties
To reduce the cost of home ownership, loan agreement instruments executed for the purchase of residential properties priced up to RM250,000 be given 50% stamp duty exemption. This proposal is effective for the sale and purchase agreement executed from 30 August 2008 to 31 December 2010 and the exemption is only extended to Malaysian citizen and limited to the purchase of one residential property only.
6.4 Tax incentive to enhance the use of Information and Communication technology ("ICT")
Accelerated Capital Allowance given on ICT equipment including computer and software can be claimed within 2 years. In line the government's efforts to encourage the private sector to invest in the latest ICT, the period to claim Accelerated Capital Allowance on expenses incurred on ICT equipment including computer and software be accelerated from 2 years to 1 year effective from YA 2009 to YA 2013.
6.5 Tax incentive to enhance security control
Presently, Accelerated Capital Allowance that can be claimed within 1 year is given on security equipment installed in the factory premises of companies licensed under the Industrial Coordination Act 1975.
Besides factory premises, other business premises such as hotel and banks also installed security control equipment. In support of the efforts of companies to enhance the security of their businesses, it is proposed that Accelerated Capital Allowances in security equipment is extended to all business premises effective from YA 2009 to YA2012. The security control equipment eligible for the allowance are:
i. anti-theft alarm system;
ii. infra-red motion detection system;
iii. siren;
iv. access control system;
v. closed circuit television;
vi. video surveillance system;
vii. security camera;
viii. wireless camera transmitter; and
ix. time lapse recording and video motion detection equipment.
6.6 Review on Excise Duty on Cigarettes
Under the 2009 Budget, the specific excise duty rates on Cigars, cheroots, cigarillos and cigarettes of tobacco or of tobacco substitutes has been increased by 3 cents per stick since 29 August 2008 from 4 pm.
6.7 Import liberalization on selected products
In line with the trade liberalization, import duty on most goods have been abolished, reduced or exempted. This attempts to lower and to eventually abolish import duties introduced with the aim of reducing the cost of doing business. As a continuous measure to reduce tariff in stages, it is proposed that:
i. import duty between 2% and 25% on good products such as ground nuts;
ii. import duty between 5% and 50% on electric goods/components such as voice recorders, generators and washing machine components be abolished;
iii. import duty of 5% and 25% on fertilizers and pesticides be abolished;
iv. import duty between 10% and 30% on food products such as coffee paste, tomato sauce, monosodium glutamate be reduced to between 5% to 15%;
v. import duty between 15% and 30% on electrical goods such as blenders, rice cookers, microwave ovens and electric kettles be reduced between 5% and 20%;
vi. import duty from between 10% and 30% on petrochemical and polymer industrial goods such as rubber mars, tubes made of rubber and plastic bottles be reduced between 5% and 20%;
vii. import duty of 20% on port cranes be reduced to 5%;
viii. import duty from between 25% and 60% on textiles such as carpets and glassware be reduced to between 20% and 30%; and
ix. import duty from between 5% and 20% on food products such as vermicelli, biscuits, mixed fruit juice and sweet cord in air tight containers be fully exempted.
The reduction or exemption is effective on 29 August at 4 pm.
7. Conclusion
The 2009 Budget focuses on providing more relief for the citizens of Malaysia. The main focus of the Budget is to increase the disposable income of Malaysians. The tax cut for a few tax brackets is welcomed. Furthermore, the generous incentives given to public transport operators is evidence of the Government's attempt to provide relief to citizens.
In comparison with the previous years, there have been lesser attention given to the corporate sector. Nevertheless, there has been some generous proposal for example, current year losses within a group of companies is allowed to set-off 70% from 50% of their losses. We have also seen attempts of the Government attempting to increase their competitiveness by introducing a few proposals in relation to transfer pricing issues. Generally, the attempt to provide such laws is welcomed. However, as it is very new, there is an element of uncertainty as to how it would exactly work or be implemented.
Another interesting note is the increase in tax administration proposals contained in the Budget 2009. This may be attributable to the dim forecast of the global economic outlooks which may have caused the Government to propose clearer tax administration provisions in the ITA. By doing so, this would help establish more clarity and possible aiding revenue collection for the Government.
Given these incentives, we are hopeful that Malaysia would be in a better position to face the increase in the economic situation.
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