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2016 BUDGET HIGHLIGHTS 1

2016 BUDGET

HIGHLIGHTS


CONTENTS

A.

Income Tax – Changes Affecting Individuals

B. Income tax – Changes Affecting Companies

and Unincorporated Businesses

C. Tax Administration

D. Investment Incentives

E. Goods and Services Tax

F. Real Property Gains Tax

G. Stamp Duty


2016 BUDGET HIGHLIGHTS

A. INCOME TAX – CHANGES AFFECTING INDIVIDUALS

No. Subject Current Legislation Proposed Legislation

1.

Review of individual’s income tax rates

(A) Tax resident

Chargeable Income (RM)

Tax rate (%)

600,001 – 1,000,000

25

Exceeding 1,000,000

25

(B) Non-resident individual

Income tax rate is at 25%

(A) Tax resident

Chargeable Income (RM)

Tax rate (%)

600,001 – 1,000,000

26

Exceeding 1,000,000

28

(B) Non-resident individual

Income tax rate be increased by 3% from 25% to 28%

Effective date

YA 2016 onwards

2.

Increase in tax reliefs

Types of reliefs

Current Legislation (Prior to Budget 2016)

Proposed Legislation

(Budget 2016)

Spouse

RM3,000 RM4,000

Children below 18 years of age

RM1,000 per child RM2,000 per child

Children studying at tertiary (over 18 years of age)


Disabled children studying at tertiary level (over 18 years of age)


Tertiary education (self)

RM5,000 RM7,000

Contribution to SOCSO (new)

- RM250

Effective date YA 2016 onwards

3.

Tax relief for parental care

Eligible to claim a maximum relief up to RM5,000 on medical treatment and care for parents.

New relief of RM1,500 per parent and can be shared with other siblings provided that the total relief claimed shall not exceed RM1,500 for each parent. Conditions:- a) Taxpayer does not claim the relief for

expenses incurred on medical treatment and care of parents;

b) Parents are legitimate natural parents and foster parents in accordance to the law subject to a maximum of 2 persons;

c) Parents are aged 60 years and above; d) Parents are resident in Malaysia in the

current YA; and e) Parents have annual income not

exceeding RM24,000 per annum for each parent.

Effective date YA 2016 until YA 2020



A. INCOME TAX – CHANGES AFFECTING INDIVIDUALS (CONT’D)


4.

Gratuity payment

Sums received by way of gratuity on retirement from employment is exempted from tax under Schedule 6 Paragraphs 25, 25A, 25B or 30A of the ITA 1967.

Exemption of not exceeding RM1,000 be given for every completed year of service of that individual for 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 that Schedule. Effective date

YA 2016 onwards

5.

Basis period to which gross income from an employment is related

Only bonuses and directors’ fees are taxed in the year the payments are received regardless of the period in which they are attributed to.

All employment income receivable for any particular period will be deemed received and taxed in the year of receipt. Gross income receivable from an employment for departing taxpayers for the relevant year or following year is deemed to have been received for the relevant basis period unless taxpayer made written request for income to be assessed on received basis in the following period. Effective date

YA 2016 onwards

B. INCOME TAX – CHANGES AFFECTING COMPANIES AND UNINCORPORATED BUSINESSES


1.

Debts arising from services to be rendered or the use or enjoyment of property

Debt owing in respect of stock in trade in or before the relevant period, services rendered or the use of property at any time in the business, treated as gross income from the business for the relevant period.

A debt owing or in the case when no debt is owing to a relevant person that arises in respect of services to be rendered, or the use or enjoyment of any property to be dealt with shall be treated as gross income

of that person for the relevant period. If the sum is refunded, such refund amount shall be allowed a deduction from the gross income. Effective date YA 2016

2.

Deduction for interest on money borrowed

Interest payable allowed as deduction when

it is due to be paid.

Taxpayers are required to notify the Director General in writing not later than 12 months from the end of the basis period for the YA when the interest expense is due to be paid to qualify for the deduction. Effective date

YA 2016



B. INCOME TAX – CHANGES AFFECTING COMPANIES AND UNICORPORATED BUSINESSES (CONT’D)


3.

Replacement of part of an asset

Expenditure to replace damaged part in part of plant or machinery allowed as repair and replacement expenses under Section 33 of the ITA 1967.

Where any part of an asset (with significant value) is replaced with a new part (which is depreciated separately in accordance with generally accepted accounting principles), such part is deemed to have been disposed of in the basis period for that YA. Allowance for new part will be calculated based on normal treatment. Effective date YA 2016

4.

Deductibility of goods and services tax (GST)

Not applicable

(i) Any GST input tax incurred by a person

is disallowed as a deduction if: - He is liable to be registered under

the GST Act 2014 but he has failed to do so; or

- He is entitled to the input tax credit under the GST Act 2014

(ii) Any GST that is an output tax borne by a person who is registered or liable to be registered under the GST Act 2014 is also not allowed as a deduction.

Effective date YA 2015

5.

Redefinition of small and medium enterprise (SME) for special allowances for small value assets (SVA)

100% capital allowance applicable for SVA (value of each asset not more than RM1,300) without restriction on total amount of qualifying plant expenditure for company with paid-up capital not more than RM2.5 million.

SME is redefined as a company which is resident and incorporated in Malaysia. SVA is only applicable to resident company incorporated in Malaysia. Effective date YA 2016 onwards

6.

Filing of employer’s return (Form E) via e-filing

Employer has the option to furnish the Employer’s Return via the prescribed form or via e-filing.

Employer’s Return must be submitted by way of an electronic medium or electronic transmission. Effective date

YA 2016 onwards

7.

Deductibility of payments made to public entertainers

Remuneration paid for services performed in Malaysia by public entertainer from outside Malaysia is subject to withholding tax under Section 109A. No provision under ITA, 1967 to govern the non-deductibility of such expenses for non-compliance of withholding tax provision.

If a person fails to remit the withholding tax and penalty in respect of payments made to public entertainer for services performed or rendered in Malaysia, a claim for tax deduction shall not be allowed. Effective date 1 January 2016 onwards



B. INCOME TAX – CHANGES AFFECTING COMPANIES AND UNICORPORATED BUSINESSES (CONT’D)


8.

Adjustments of input tax on assets

Not applicable

Where there is any adjustment made under the GST Act 2014 to which the input tax relates to a qualifying expenditure of an asset, a corresponding adjustment will be need to be made to the residual expenditure of the asset for income tax purposes. The timing of adjustment will be in the YA in which the period of adjustment as provided under GST Act 2014 ends, except in the case of disposal, such adjustment is to be made in the YA the disposal is made. Effective date

YA 2015

9.

Section 108 Balance

During YA 2008 until YA 2013, if a) Tax charged for YA 2000 is discharged

or remitted; or b) Tax paid for YA 2001 until YA 2007 is

refunded, Section 108 balance will be reduced by the amount of tax discharged, remitted or refunded. If amount reduced exceeds Section 108 balance, the excess shall be a debt due to the Government.

Where in the basis period for a YA 2016 or any subsequent basis period: a) Tax charged on a company for YA 2000

on current year basis and prior YA is discharged or remitted; or

b) Any amount of tax paid which has been taken into account for the purpose of computing the Section 108 balance is refunded,

the Section 108 balance shall on the day the tax discharged, remitted or refunded, reduced by the amount discharged, remitted or refunded (“revised 108 balance”). - Where the revised 108 balance exceeds

the 108 balance, or revised 108 balance as at 31.12.2013, DG shall serve the requisition notice calling the company to pay the excess

- 10% increase will be imposed if any excess due and payable is not paid within 30 days after the notice is served.

Effective date Upon coming into operation of Finance Bill 2015



C. TAX ADMINISTRATION


1.

Enhancement of penalty for non-submission of income tax return

Penalty for convicted person for failure to furnish tax return without reasonable excuse: - Fine not less than RM200 and not more

than RM20,000; or - Imprisonment not exceeding 6 months,

or both

Existing penalty is applicable for single offence. Penalty for serious offences (2 YAs or more) (i) A fine not less than RM1,000 and not

more than RM20,000 or imprisonment for a term not exceeding 6 months or to both; and

(ii) A special penalty equal to treble amount of tax charged on the chargeable income of a taxpayer as determined by the DG to the best of his judgement.

Effective date Upon coming into operation of Finance Bill 2015

2.

Penalty for failure to furnish the correct particulars in income tax return form

Not applicable

Any person who without reasonable excuse fails to furnish the correct particulars in a tax return required by the DG, shall be guilty of an offence and shall, on conviction, be liable to a fine not less than RM200 and not more than RM20,000 or to imprisonment for a term not exceeding 6 months or both. Effective date Upon coming into operation of Finance Bill 2015

3.

Electronic submission of tax estimates

Estimate or revised estimate of tax payable for each YA can be furnished by way of manual filing or electronic filing to the DG.

Compulsory to file estimate or revised estimate of tax payable for each YA to the DG on an electronic medium or by way of electronic transmission. Effective date YA 2016 onwards

4.

Assessment for adjustments made on input tax on assets [Qualifying capital expenditure(QCE)]

Not applicable

Where adjustment is made to the input tax paid or to be paid under the GST Act 2014 of an asset (QCE), the DG may issue assessment or reduced assessment as appropriate. The assessment or reduced assessment will be issued for the YA to which the adjustment relates, or if such year cannot be ascertained, for the YA in which the DG discovers the adjustment. Effective date YA 2015



D. INVESTMENT INCENTIVES


1.

Industrial Building Allowance (IBA)

IBA may be claimed by a person who has incurred qualifying expenditure and is the owner of the building which was used as an industrial building at the end of the basis period for a YA.

The following buildings would not qualify for IBA if the building or part of the building is used for letting purposes: a) Licensed private hospital, maternity

home, nursing home; b) Building used for research; c) Building used for warehouse; d) Building used for approved service

project; e) Building used for hotel; f) Airport; g) Motor racing circuit; h) Building used as living accommodation

of employees of persons carrying on manufacturing, hotel or tourism business or approved service project;

i) Building used for the provision of child care facilities for individual employed by him for his business; and

j) Building for a school or an educational institution approved by the Minister of Education or Minister of Higher Education or any relevant authority.

Effective date YA 2016

2.

Extension of tax incentives for tour operating companies

The following tax incentives are available to tour operating companies licensed under the Tourism Industry Act 1992: 1. 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

2. 100% tax exemption on statutory income derived from the business of operating tour packages to Malaysia participated by not less than 750 foreign tourists per year.

The incentive is given from YAs 2013 to 2015.

The tax incentives be extended for another 3 years until YA 2018. Effective date YA 2016 to YA 2018



D. INVESTMENT INCENTIVES (CONT’D)


3.

Special Reinvestment Allowance (RA) incentive

A company that reinvests for the purposes of expansion, modernization, automation or diversification is eligible for RA for 15 consecutive YAs beginning from the YA the claim for allowance was first made.

The terms “automating”, “diversifying”, “expanding”, “machinery”, “modernising” and “plant” are not defined in Schedule 7A of the ITA 1967.

Companies whose RA incentive period has expired be allowed a special claim of RA on capital expenditure incurred. Where the period of 15 consecutive YAs for claiming the RA ended in:

- YA 2015 or other preceding YA, allowance allowed for expenditure incurred in period for YA 2016, 2017 and 2018

- YA 2016, allowance allowed for expenditure incurred in period of YA 2017 and 2018

- YA 2017, allowance allowed for expenditure incurred in period for YA 2018

Effective date YAs 2016 to 2018 Schedule 7A of the ITA 1967 has been expanded to include the following definitions:

Qualifying Project

Definition

Automating Process whereby manual operations are substituted by mechanical operations with minimal or reduced human intervention

Diversifying Enlarge or vary the range of product of a company related to the same industry

Expanding Increase of product capacity or expansion of factory area

Modernizing Upgrading of manufacturing equipment and process

Plant Apparatus used in respect of manufacturing activity, which is directly used in carrying out that activity in a factory.

Machinery

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

Effective date YA 2016 onwards





4.

Review of tax incentive for food production projects

Presently, tax incentives are given to both the company which invests in a subsidiary company engaged in an approved food production project (AFPP) and its subsidiary company undertaking the AFPP. The tax incentives given are as follows: 1. Deduction equivalent to cost of

investment made in a subsidiary carrying out new food production project

2. Income tax exemption for companies carrying out new food production project

3. Income tax exemption for companies carrying out expansion of an existing food production project.

The above incentives are given to applications received by the Ministry of Agriculture and Agro-based Industry until 31 December 2015.

It is proposed that: a) The incentives are extended to

applications received until 31 December 2020

b) Qualifying approved food production projects be extended to include planting of coconuts, mushrooms and cash crops; rearing of deer; cultivation of seaweed; rearing of honey (bees and kelulut) and planting of animal feed crops as determined by the Ministry of Agriculture and Agro-Based Industry and approved by the Ministry of Finance.

Effective date Applications received by the Ministry of Agriculture and Agro-Based Industry from 1 January 2016 to 31 December 2020

5.

Tax incentives for the establishment of independent conformity assessment bodies(ICAB)

ICAB is a company that offers independent conformity assessment services to its clients to test their products, materials, systems or services for conformance to international specifications or safety standards and other conformities. Presently, there is no tax incentive for companies carrying out independent conformity assessment activities.

The following incentives be given:

Existing ICAB

New ICAB

Investment Tax

Allowance

Allowance of 60% on qualifying capital expenditure for a period of 5 years to be set off against 100% of statutory income

Allowance of 60% on qualifying capital expenditure for a period of 5 years to be set off against 100% of statutory income

Income tax exemption

- Exemption of 100% on statutory income from qualifying activities for a period of 5 years

The above incentives are given to the following sectors:

1. Machinery and equipment; 2. Electrical and electronic; 3. Chemicals; 4. Aerospace; 5. Medical services; and 6. Fresh and processed food

Effective date For applications received by Malaysian Investment Development Authority (MIDA) from 1 January 2016 until 31 December 2018





6.

Automatic double deduction for Research and Development (R&D) project

Companies that carry out R&D projects are entitled to claim a double deduction on R&D project expenditure under Section 34A of the ITA 1967. Must obtain an approval for the R&D project from the IRB to qualify for double deduction.

Companies with paid-up capital not exceeding RM2.5 million be allowed to claim a double deduction automatically for R&D project expenditure up to RM50,000 for each YA. However, companies are required to submit R&D project application to the IRB. Effective date From YA 2016 to YA 2018

7.

Allowance for increased exports incentive to SMEs

A tax exemption is given for manufacturing and agriculture companies on: - Statutory income equivalent 10% value of

increased exports for manufacturers if goods exported attain at least 30% value added

- Statutory income equivalent to 15% value of increased exports for manufacturers if goods exported attain at least 50% value added

- Statutory income equivalent to 10% value of increased exports for companies exporting agricultural product.

The tax exemption is restricted to 70% of statutory income for each YA

Manufacturing companies with paid-up capital not exceeding RM2.5 million will be given revised value added criteria in order to qualify for increased exports incentive:

Tax exemption on statutory income

equivalent to

Value added of goods exported attain

at least

10% of the value of the increased exports

20%

15% of the value of the increased exports

40%

The tax exemption is restricted to 70% of statutory income for each YA. Effective date YA 2016 to YA 2018

E. GOODS AND SERVICES TAX


1.

Amendment to the National Essential Medicines List (NEML)

A total of 4,215 brands of medicine and medical gases in the NEML issued by the

Ministry of Health and approved by the Minister of Finance which are embalmed in measured doses or in the form of packaging for retail sale are subject to GST at zero rate. These include 321 chemical entities for treatment of over 30 diseases including heart disease, diabetes, hypertension, cancer, hepatitis and fertility treatment.

The list of zero rated medicines to be extended to include the following: i. All types of Controlled Drugs in the

Poisons Groups A, B, C and D under the Poisons Act 1952 [Act 366]. The number of drugs has been increased from 4215 items to 8630 items;

ii. Over the Counter Medicine

registered by the Drug Control Authority, expanded from 1,013 brands of drugs to 1,105 brands of drugs; and

iii. Drugs under NEML classified as medical devices are expanded from

125 brands to 128 brands. Effective date 1 January 2016



E. GOODS AND SERVICES TAX (CONT’D)


2.

Amendment to the GST (zero-rated) supply order 2014

The following food items are currently subject to GST at zero rate (GST 0%):- i. Lentils (Dhal) under tariff code

0713.40 000

ii. Vegetables

All kinds of vegetable products under tariff code 07.01 until 07.14

iii. Spices

Tamarind, white pepper, black pepper, clove, cardamom, star anise, turmeric powder, cinnamon, cumin, aniseed, fenugreek and nutmeg

iv. Sugar

All kinds of white sugar extracted from cane including icing, coarse, castor, fine and rock sugar; and in various forms of packaging

v. Noodle products

All types of rice noodles (dry), noodles (fresh), laksa (wet) and kuey teow (wet)

vi. Infant milk

Milk for infant and children from age 0 to 36 months, covering all kinds of flavors.

To extend the following food items to be subject to GST at zero rate: i. Dhal bean to include Chickpeas

(Garbanzos), green and white bean (Beans of the species Vigna mungo) Hepper or Vigna radiate, Wilczek, lentils and Pigeon peas (Cajanus cajan);

ii. Vegetables to include lotus root and

water chestnut; iii. iv. Spices to include mustard seeds;

v. Sugar to include the jaggery powder

(brown sugar);

vi. Noodle products to include mi kolok

(dry). vii. Milk for infant and children for ages 0

to 36 months to include: a. Organic based milk for infant and

children; and

b. Soy bean-based milk for infant and children;

and comply with the requirements under the Food Regulations 1985, Food Act 1983 [Act 281];

Effective date

1 January 2016

3.

Amendment to the GST (exempt supply) order 2014

Domestic air transportation services for passengers are subject to GST at 6%.

This includes domestic air transportation services for passengers under the Rural Air Services in Sabah and Sarawak including Labuan.

Domestic air transportation services for passengers within and between Sabah, Sarawak and Labuan for economy class passengers under the Rural Air Services to be treated as an exempt supply.

Therefore, no GST is payable on airfares for economy class passengers. Effective date 1 January 2016





4.

Amendment of Approved Trader Scheme (ATS)

The ATS under Section 71, Goods and Services Tax Act 2014 [Act 762] allows the suspension of GST payment on imported goods by any registered entity which fulfils the stipulated criteria. The entity is required to be registered under Section 20 of the Goods and Services Tax Act 2014 and fulfils any of the following criteria: i. Licensed under Section 65A of the

Customs Act 1967;

ii. Operates in a free industrial zone under paragraph 10(1)(b) of the Free Zones Act 1990 [Act 438];

iii. Approved by the Director General of Malaysian Investment Development Authority as an international procurement centre or regional distribution centre;

iv. Annual sales turnover exceeding RM25 million and making at least 80% zero-rated supplies;

v. A toll manufacturer other than a recipient of goods under the Approved Toll Manufacturer Scheme under Section 72 of the Goods and Services Tax Act 2014;

vi. Approved jeweller under the Approved

Jeweller Scheme under Section 73 of the Goods and Services Tax Act 2014; or

vii. Person or class of persons as determined by the Minister.

ATS to be extended to companies in aerospace industry undertaking maintenance, repair and overhaul services (MRO), subject to the following

conditions: i. Obtains a valid approval from the

Organisation of Aircraft & Components issued by the Department of Civil Aviation under Section 2B Civil Aviation Act 1969 [Act 3]; or

ii. Having valid approval from: a. Design Authority of Original

Equipment Manufacturer; and/or b. Design Organisation Approval.

Effective date 1 January 2016

5.

Relaxation for small farmers under Flat Rate Scheme (FRS)

A small farmer may seek for an approval under the flat rate scheme with the following conditions i. Turnover is below the GST threshold

of RM500,000; and ii. Achieves the minimum entry turnover

of RM100,000; and iii. Keeps full and true records of all

transaction in relation to supply under the scheme

The flat scheme registration threshold is to be reduced from RM100,000 to RM50,000 and the requirements to

maintain records will also be simplified.





6.

Amendment to the time of supply for imported services Section 13(4) of the GST Act 2014

The time of supply of imported services shall, to the extent covered by any payment by the recipient, be treated to have been made when the supplies are paid for.

The time of supply of imported services shall now be treated to have been made at the earlier of the following dates:

i. The date when any payment is

made by the recipient; or

ii. The date when any invoice is

issued by the supplier who belongs

in a country other than Malaysia or who carries on business outside Malaysia.

Effective date

1 January 2016

7.

Amendment to Section 41 of the GST Act 2014 – furnishing of returns and payment of tax

Any person liable to GST fails to pay the amount due or payable, will be subject to a penalty:-

i. Not exceeding RM50,000.; or ii. Imprisonment for a term not exceeding

3 years; or iii. Both of the above upon conviction.

(1) The penalty for failure to pay the

amount due or payable by a person liable to GST has been revised to the following before any prosecution has been instituted:

Number of days due after stipulated deadline

Percentage of penalty on the amount of tax due or payable

First 30 days

5%

31 days to 60 days

15%

61 days to 90 days

25%

(2) Prosecution may be instituted after

expiry of the above penalty table. (3) The court will have the authority to

instruct the person liable to GST to settle the penalty before any appeal in court is made

(4) No prosecution will be instituted if the

amount due and penalty is paid in accordance to the above table.






8.

Amendment to Section 43(1) and (8) of the GST Act 2014 – power to assess

(1) Where any taxable person—

(a) fails to apply for registration under section 21;

(b) fails to furnish a return under section 41; or

(c) furnishes a return which to the Director General appears incomplete or incorrect,

the Director General may assess to the best of his judgement the amount of tax due and payable from the taxable person and shall forthwith notify him of the assessment in writing.

(8) Where an amount has been assessed

and notified to any person under subsection (1), (2), (5) or (7), it shall be deemed to be an amount of tax due and payable from him and may be recovered accordingly and the amount of tax shall be paid by the person, whether or not that person appeals against the assessment, to the Director General unless or except to the extent that the assessment has been withdrawn or reduced.

Inclusion of the newly introduced penalty scheme as per amendment made to Section 41 above by inserting the following sentence ‘and the penalty under subsection 41(8), if any,’ in Section 43(1) and the following sentence ‘and penalty, if any’ to Section 43(8)


9.

Amendment to Section 51 of the GST Act 2014 – payment by instalments

The Director General may allow any tax or penalty to be paid by instalments, under the prescribed circumstances in such amounts and on such dates as the Director General may determine.

Where the tax is allowed to be paid by instalments, the penalty under subsection 41(8) shall be ceased to be calculated from the date the Director General allows the payment by instalments.


10.

Amendment to Section 69(5)(c)(ii) of the GST Act 2014 – joint venture

The venture operator acquires any taxable supply of goods or services for the joint venture, the venturer shall claim the

deduction of input tax on acquisitions made by him in respect of the joint venture. Note: Applicable for oil & gas upstream joint venture agreement only)

Replacement of the work ‘venturer’ to ‘venture operator’ in Section 69(5)(c)(ii) of

the GST Act 2014. Effective date 1 January 2016





11.

Amendment to Section 70(1) of the GST Act 2014 – Warehousing Scheme

In relation to goods that have been imported and deposited in the warehouse and for which tax would be chargeable on the imported goods, there shall be a scheme to be known as the “Warehousing scheme” which allows supplies of goods made within the warehouse to be disregarded except for the last of such supplies of goods which are removed before the duty point.

Section 70(1) has been amended to clarify the GST treatment of transactions made under the warehousing scheme as follows:- (a) Supply of imported goods deposited

in the warehouse to be disregarded for GST;

(b) supplies of goods made between the warehouses to be disregarded; and

(c) supplies of goods made within the

warehouses to be disregarded except when the goods are

removed for supply to local market. Effective date

1 January 2016

12.

Amendment to Section 86(2) of the GST Act 2014 – return or disposal of movable goods

Whenever any movable goods are returned or disposed under subsection (1), document purporting to be a certificate in accordance with subsection 112(1) shall

be issued by the senior officer of goods and services tax.

Amendments made to replace the Section quoted from ‘Section 112(1)’ to ‘Section 105(2)’ of the GST Act 2014.

Effective date

1 January 2016

13

Amendment to Section 94(b) of the GST Act 2014 – penalty for offences by authorized and unauthorized persons

Any person who – Not being authorized under this Act to do so collects or attempts to collect any tax under this Act, Commits an offence and shall, on conviction, be liable to a fine not exceeding RM50,000 or to imprisonment for a term not exceeding 3 years or to both.

Amendment made to Section 94(b) to include the words ‘or penalty’. Insertion of

the word ‘or penalty’ to give power to the DG to impose a fine for penalty not paid. Effective date 1 January 2016

14.

Amendment to Section 122(1) of the GST Act 2014 – court order

Where any person is found guilty of an offence under this Act, the court before which the person is found guilty shall order the person to pay to the Director General the amount of tax due and payable under this Act, if any, as certified by the Director General and the tax shall be recoverable in the same manner as a fine as provided under Section 283 of the Criminal Procedure Code.

Amendment made to Section 122(1) to include the words ‘or penalty’. Insertion of

the word ‘or penalty’ to give power to the DG to impose a fine for penalty not paid. Effective date 1 January 2016





15.

Amendment to the GST (relief) order 2014

Private educational institutions for child care, pre-school, primary and secondary schools and private higher educational institutions have been given relief from payment of GST on procurement of

teaching materials and equipment as follows: i. Multimedia equipment directly used as

teaching aids;

ii. Equipment for science and linguistic laboratories;

iii. Tools and equipment for technical or vocational studies; and

iv. Chemicals, solution and gas for the use in science laboratories.

This GST relief is to be extended to procurement of teaching materials and equipment by skills training providers

that conduct approved and accredited programs under National Skills Development Act 2006 [Act 652]. The list

of teaching materials and equipment are subject to MOF’s approval. Effective date

1 January 2016

16.

Rebate of GST on prepaid cards

The Government has taken the view that the prepaid cards are inclusive of GST. Therefore, telcos should not have charged an additional 6% for the prepaid service.

Malaysian prepaid cards users will still be charged GST on the top-up amount, however they will receive a credit equivalent to the amount of GST paid.

The credit will be credited directly into the customer’s prepaid accounts. Effective date 1 January 2016 to 31 December 2016

F. REAL PROPERTY GAINS TAX


1.

Amendment to Section 29 of Real Property Gains Tax Act 1976 (RPGT Act)

Subsection 29(3) of RPGT Act provides that where a chargeable person, who fails to make a return or make declaration within 60 days pursuant to subsection 13(5) is liable to fine:

not more than RM5,000; or

imprisonment not exceeding 12 months upon conviction.

In the case of no prosecution, DGIR may impose penalty treble amount of tax payable.

Section 29(5) of RPGT Act to empower DGIR to impose additional penalty in respect of additional tax payable for a YA if taxpayer fails to furnish return. Reference New Section 29(5) of the RPGT Act. Effective date Upon coming into operation of the Finance (No. 2) Act 2015.



F. REAL PROPERTY GAINS TAX (CONT’D)


2.

Amendment to Paragraph 6 of Schedule 2 of RPGT Act

Subparagraph 6(1) of Schedule 2 of the RPGT Act provides that, for the purposes of computing the acquisition price and disposal price, the incidental costs of the acquisition or disposal of a chargeable asset shall consist of expenditure wholly and exclusively incurred by the disposer for the purposes of the acquisition or (as the case may be) the disposal, being: (a) fees, commission or remuneration paid

for the professional services of any surveyor, valuer, accountant, agent or legal advisers;

(b) costs of transfer (including stamp duty);

(c) in the case of an acquisition, the cost of advertising to find a seller; and

(d) in the case of a disposal, the cost of advertising to find a buyer and costs reasonably incurred for the purposes of the RPGT in making any valuation or in ascertaining market value.

Subparagraph 6(1)(e) of Schedule 2 of the RPGT Act to include GST expense (paid or payable) as part of the incidental costs if: (a) The disposer is not liable to

register under GST Act; or

(b) The disposer is registered under the GST Act but not entitled to credit that amount as input tax

Reference Paragraph 6(1) of Schedule 2 of the RPGT Act. Effective Date YA 2015 onwards.

3.


Paragraph 2 of Schedule 4 of the RPGT Act provides that where a chargeable asset is in partially disposed, exemption is to be partially allowed using the specified formula as follows: A/B x C 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 or 10% of the chargeable gain, whichever is greater.

Amendment to be made on the formula for calculating the exemption amount for partial disposal as follows: A/B x C 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; Or 10% of the chargeable gain, whichever is greater. Reference Paragraph 2 of Schedule 4 of the RPGT Act. Effective Date Upon coming into operation of the Finance (No. 2) Act 2015.



F. REAL PROPERTY GAINS TAX (CONT’D)


4.


Paragraph 7 of Schedule 2 of the RPGT Act provides that the following shall not be taken into account in computing the acquisition price or disposal price of a chargeable asset:- (a) Any outgoings and expenses

allowable as a deduction in

computing any adjusted income or adjusted loss for income tax purposes;

(b) Any outgoings and expenses which would have been allowable for income tax purposes, but for an exemption or insufficiency of gross income; and

(c) Any outgoings and expenses

which, if the asset on or in respect of which they were incurred was and had at all times been held or

used as part of the fixed capital of a business the profits or gains of which were chargeable with income tax, would be allowable as a deduction in computing the adjusted income or adjusted loss of the business for income tax purposes.

Subparagraphs 7(d) and (e) of Schedule 2 of the RPGT Act to exclude from acquisition price if: (a) Disposer fails to register though

liable under GST Act; (b) Disposer is entitled to credit that

amount as input tax; and

(c) Output tax paid or to be paid borne by the disposer if he

registered or liable to be registered.

Reference Paragraph 7 of Schedule 2 of the RPGT Act. Effective Date YA 2015 onwards.

G. STAMP DUTY


1.

Extension of stamp duty exemption on Shariah financing instruments

20% stamp duty exemption for Shariah financing for home owner executed from 2 September 2006 to 31 December 2015.

To extend the current 20% stamp duty exemption for Shariah financing for home owner to 31 December 2017. Effective date Principal or primary instruments of housing financing in accordance to the principles of Shariah executed from 1 January 2016 to 31 December 2017.



G. STAMP DUTY (CONT’D)


2.

Extension of stamp duty exemption to revive abandoned residential property projects

Existing stamp duty exemption is available to revive abandoned residential property projects as follows: i. Rescuing Contractors

a. On instruments of loan agreements to finance the completion of abandoned housing projects; and

b. On instruments of transfer of title for land and houses in abandoned housing projects.

ii. Original house purchasers in the

abandoned project

a. On instruments of loan agreements for additional financing; and

b. On instruments of transfer of houses. The above stamp duty exemption is given on the above instruments executed from 1 January 2013 to 31 December 2015. The abandoned project must be certified by the Ministry of Housing and Local Government to be eligible for the above tax incentives.

To extend the current exemption to 31 December 2017. Effective date For loan agreements and instruments of transfer executed from 1 January 2016 to 31 December 2017 for abandoned residential property projects approved by Ministry of Housing and Local Government.

CONTACT

PKF TAX SERVICES SDN BHD (127975- P)

Tel +603-6203 1888 ● Fax +603-6201 8880 ● Email: [email protected] ● Web: www.pkfmalaysia.com

Level 33 ● Menara 1MK ● Kompleks1 Mont’ Kiara ● No. 1, Jalan Kiara ● Mont’ Kiara ● 50480 Kuala Lumpur ● Malaysia

M.B.GATHANI LIM AI CHEN LEE YIING TING

[email protected] [email protected] [email protected]

PKF Tax Services Sdn Bhd is a member firm of PKF International Limited network of legally independent firms and does not accept any

responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Please be advised that the

information contained herein is for general guidance only. Any reader intending to base a decision on information contained in this

publication is advised to consult us before proceeding.

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