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Content

Tax Information (Budget 2014)

1. Personal Income Tax

2. Corporate Tax

3. Co-operative Society

4. Real Property Gains Tax (“RPGT”)

5. Tax Incentives

6. Monthly Tax Deduction as Final Tax

7. Goods and Services Tax (“GST”)

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October 2013

Tax Information (Budget 2014)

Malaysia’s Prime Minister and Finance Minister, YAB Dato’ Sri Mohd Najib Tun Haji Abdul

Razak tabled the 2014 Budget proposals on 25 October 2013. The theme of the 2014

Budget was “Strengthening Economic Resilience, Accelerating Transformation and Fulfilling

Promises”.

The five main thrusts of the Budget are:

First Thrusts: Invigorating Economic Activity

Second Thrusts: Strengthening Fiscal Management

Third Thrusts: Inculcating Excellence in Human Capital

Fourth Thrusts: Intensifying Urban and Rural Development; and

Fifth Thrusts: Ensuring Well-Being of the Rakyat

Of course, this year budget also being label as GST budget where the long awaited GST

finally being proposed and tabled in 2014 budget. Malaysia now joining the other 160

countries to implement value added tax which proven to be a transparent, effective and

fair tax system.

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The following are some of the key proposed changes in tax in the 2014 Budget:-

1. Personal Income Tax

Effective from Proposals

YA 2013

special tax relief of RM2,000 be given to tax payers with a monthly income up to RM8,000

YA 2015

Refer Table 1

Reduction in income tax rates by 1% to 3%

Individual income tax structure will be reviewed

The chargeable income subject to the maximum rate will be increased from exceeding RM100,000 to exceeding RM400,000

The current maximum tax rate at 26% will be reduced to 24%, 24.5% and 25%

YA 2015

Non-resident individuals income tax rate is reduced by 1% from 26% to 25%

Table 1

*after RM400 rebate

CURRENT PROPOSED TAX SAVINGS

Chargeable Income

Tax Rate

Tax withou

t Rebate

Tax Paid

Tax Rate

Tax withou

t Rebate

Tax Paid

RM % RM RM % RM RM RM %

1 – 5,000 0 0 0 0

0 *0 0 *0 - -

5,001 – 20,000 2 300 1 150

300 *0 150 *0 - -

20,001 – 35,000 6 900 5 750

1,200 *800 900 *500 300 37.5

35,001 – 50,000 11 1,650 10 1,500

2,850 2,850 2,400 2,400 450 15.8

50,001 – 70,000 19 3,800 16 3,200

6,650 6,650 5,600 5,600 1,050 15.8

70,001 – 100,000 24 7,200 21 6,300

13,850 13,850 11,900 11,900 1,950 14.1

100,001 – 250,000 26 39,000 24 36,000

52,850 52,850 47,900 47,900 4,950 9.4

250,001 – 400,000 26 39,000 24.5 36,750

91,850 91,850 84,650 84,650 7,200 7.8

Exceeding 400,000 26 25

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2. Corporate Tax

Effective from Proposals

YA 2016

income tax rate is reduced by 1% from 25% to 24%

Income tax rate for small and medium enterprises (SME) will be reduced by 1% from 20% to 19%

3. Co-operative Society

Effective from Proposals

YA 2015

Refer Table 2

Reduction in income tax rates by 1% to 2%

Table 2

Chargeable

Income

(RM)

Current Proposed Tax Savings

Tax

Rate

(%)

Tax

Paid

(RM)

Tax

Rate

(%)

Tax

Paid

(RM) (RM) (%)

1 – 30,000 0 0 0 0

0 0 - -

30,001 – 60,000 5 1,500 5 1,500

1,500 1,500 - -

60,001 – 100,000 10 4,000 10 4,000

5,500 5,500 - -

100,001 – 150,000 15 7,500 15 7,500

13,000 13,000 - -

150,001 – 250,000 20 20,000 18 18,000

33,000 31,000 2,000 6.1

250,001 – 500,000 22 55,000 21 52,500

88,000 83,500 4,500 5.1

500,001 – 750,000 24 60,000 23 57,500

148,000 141,000 7,000 4.7

Exceeding 750,000 25 24

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4. Real Property Gains Tax (“RPGT”)

To further curb speculative activities which exert pressure on property prices, it is

proposed that RPGT rates on the disposal of properties and shares in real property

companies be reviewed as follows:

Disposal

Proposed RPGT Rates (effective from 1 January 2014)

Companies

Individuals (Citizens & Permanent Residents)

Individuals (Non

Citizens)

Within 3 years 30% 30% 30%

In the 4th year 20% 20% 30%

In the 5th year 15% 15% 30%

In the 6th and subsequent years 5% 0% 5%

Existing RPGT rate

Holding period from date of acquisition

Companies / Individuals (Citizens & Permanent Residents) / Individuals

(non-citizens)

Up to 2 years 15%

Exceeding 2 years and up to 5 years

10%

Exceeding 5 years 0%

In addition, the minimum price of property that can be purchased by non-citizens has been increased from RM500,000 to RM1,000,000.

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5. Tax incentives

5.1 EXTENSION OF TAX INCENTIVES FOR NEW 4 & 5 STAR HOTELS

Effective from Proposals

The applications received by the Malaysian Investment Development Authority on or before 31 December 2016

The following tax incentives currently given to investors undertaking new investments in 4 and 5 star hotels be extended for another 3 years until 31 December 2016:- Peninsular Malaysia Pioneer Status (“PS”) with income tax exemption of 70% of statutory income for a period of 5 years; OR Investment Tax Allowance (“ITA”) of 60% on the qualifying expenditure incurred within a period of 5 years to be set off against 70% of statutory income for each year of assessment Sabah and Sarawak PS with income tax exemption of 100% of statutory income for a period of 5 years; OR ITA of 100% on the qualifying expenditure incurred within a period of 5 years to be set off against 100% of statutory income for each year of assessment

5.2 TAX INCENTIVE FOR IMPLEMENTATION OF MINIMUM WAGES

Effective from Proposals

The incentive is given for a period of one year from 1 January 2014 to 31 December 2014

the difference between the original salary and the minimum wages paid by SMEs, cooperatives, associations and organizations employers be given further deduction

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5.3 TAX INCENTIVE FOR FLEXIBLE WORK ARRANGEMENTS (“FWA”)

Effective from Proposals

For FWA status application received by Talent Corporation Malaysia Berhad from 1 January 2014 to 31 December 2016

The expenses incurred in the training of employees, supervisors and managers as well as consultancy fees to design an appropriate FWA to be implemented by the employer be given further deduction for a period of 3 years of assessment

The eligible expenses include costs for training in:

i) optimizing a work- life balance;

ii) technology orientation; iii) managing a flexible

workforce; and; iv) helping managers embrace

flexible work alternatives.

Must obtaining FWA status from Talent Corporation Malaysia Berhad

5.4 EXTENSION OF ACCELERATED CAPITAL ALLOWANCE ON

INFORMATION TECHNOLOGY AND COMMUNICATION EQUIPMENT

Effective from Proposals

YA 2014 – YA2016

expenses on the purchase and installation of ICT equipment and software be given Accelerated Capital Allowance (“ACA”) with an initial allowance of 20% and an annual allowance of 80%

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5.5 SECRETARIAL FEE AND TAX FILING FEE ARE ALLOWED AS TAX

DEDUCTIONS

Effective from Proposals

YA 2015

Secretarial fee up to RM 5,000 and tax filing fee up to RM 10,000 be given tax deductions

6. Monthly Tax Deduction as Final Tax

Effective from Proposals

YA 2014

Employees with total income tax equivalent to Monthly Tax Deductions (“MTD”) be exempted from filing of annual tax returns

The proposal is only applicable to: i) employees who receive employment income prescribed under section

13 of the Income Tax Act 1967;

ii) employees whose MTD are made under the Income Tax (Deduction from Remuneration) Rules 1994; and

iii) employees serving under the same employer for a period of 12 months

in a calendar year.

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7. Goods and Services Tax (“GST”)

To implement GST effective from 1 April 2015 Approximately 17 months from now for businesses to get prepare

Current sales tax (since year 1972) and service tax (since year 1975) will be

abolished

GST rate is fixed at 6%, the lowest among ASEAN countries

The threshold for purpose of registration under GST is the annual sales value of RM500,000

Expenses for GST related training of employees in accounting and ICT be given further deduction for year of assessment 2014 and 2015

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In view of the above, are you prepared for implementation?

For further clarifications please do not hesitate to contact us.

Ang Heng Ann (Tax) - hengann.ang@ecovis.com

Esther Choy (Business - esther.choy@ecovis.com Development)

A member of ECOVIS International tax advisors accountants auditors lawyers in Argentina, Australia, Austria, Belarus, Belgium, Brazil, Bulgaria, China, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Great Britain, Hong Kong, Hungary, India, Indonesia, Ireland, Italy, Japan, Republic of Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Republic of Macedonia, Malaysia, Malta, Mexico, Netherlands, Norway, Poland, Portugal, Qatar, Romania, Russia, Serbia, Singapore, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Taiwan, Tunisia, Turkey, Ukraine, Uruguay, USA (associated partners) and Vietnam.

ECOVIS International is a Swiss association. Each Ecovis Member Firm is an independent legal entity in its own country and is only liable for its own acts or omissions, not those of any other entity. ECOVIS AHL is a Malaysia Member Firm of ECOVIS International.