deloitte taxmax the 44 series · proposal current position no time limit to carry forward the...

Chee Pei Pei & Thin Siew Chi | 27 November 2018

Deloitte TaxMax – The 44th seriesCorporate and Other Taxes, Incentives

Corporate Tax

© 2018 Deloitte Tax Services Sdn Bhd 3

Tax Compliance Issues

Corporate Tax

Compliance Rate

(Individuals)

Compliance Rate

(Companies)

14.9 million

(100%)

1,199,852

(100%)

LabourForce

Registered with CCM2.27 million

(15.24%)

Paying Taxes

5.03 million

(33.76%)

Not Paying Taxes

7.6 million

(51.00%)

Not Registered

195,216

(16.27%)

Registered & Paying Taxes

1,004,636

(83.73%)

Registered But Not Paying Taxes


Unexplained Extraordinary Wealth

Corporate Tax

Internal &

Third Party

Information

Means Test/

Capital

Statement

Undeclared

Income?

Audit/

Investigation

Unexplained extraordinary wealth? VOLUNTARY DISCLOSURE

Automatic Exchange of Financial Account Information

Reporting Financial

Institutions

Domestic tax authorities

Foreign tax authorities

in countries of Account

Holders and Controlling

PersonsReporting

Exchange of

information

Due

Diligence

Entity Account

Holders

Controlling

Person(s)

Individual Account

Holders

Reporting

under FATCA

How does it work?

5© 2018 Deloitte Tax Services Sdn Bhd

• FIs to review & identify reportable accounts (based on tax residency of account holders/

controlling parties)

• FIs to report on reportable accounts to the domestic tax authority

• Domestic tax authority will share information with foreign tax authorities

Based on Reportable Jurisdiction list


10%

Special voluntary disclosure program (SVDP) with lower penalties

Corporate Tax

SVDP covers voluntary disclosure by taxpayers on:

Effective: 03 November 2018 until 30 June 2019

Income not declared/under declared, expenses over

claimed / not allowed, reliefs / deductions / rebates over

claimed

Proposed Penalty rate on tax payable

• Also applies to cases under tax audit / tax investigation and transfer pricing issues

• Penalty rate for transfer pricing issues – in accordance with existing Transfer Pricing Audit Framework

• Not applicable for withholding tax (penalty stays the same at 10% throughout)

Gains on disposal of real properties and shares in real

property companies

Stamping of instruments not previously stamped

Disclosure and settlement period

15%

03.11.2018 31.03.2019 30.06.2019

80% to 300%

Upon expiry of SVDP


Special voluntary disclosure program (SVDP) with lower penalties (Cont’d)

Corporate Tax

Offences Penalty Rate

03.11.2018 –31.03.2019

01.04.2019 –30.06.2019

Failure to submit return on time; or

10% 15%Failure to report the correct income/ gains on disposal of assets

Failure to pay stamp duty on instrument 10%or min RM50

15%or min RM100

Due Date for Payment 01.04.2019 01.07.2019

1IRBM will accept in good faith all voluntary disclosures made during the

Special Program period.

Further review will not be made on the reported information.

2Taxpayer has to provide a letter of full disclosure.

3



Corporate Tax

Failure to

submit tax

return on time

What are the existing penalties?

As a matter of practice, the IRB will impose

penalties ranging from 20% to 35% of the tax

payable for late filing of tax returns.

(Income Tax)

Failure to report

the correct

income

Disclosure/ Discovery

Period from the prescribed deadline

of submission

Rate

Voluntary disclosure before case is selected for audit

≤ 60 days>60 days to ≤6 months> 6 months

10%15.5%35%

Non-disclosure (Discovery of omissionduring audit)

100% or as directed by the DGIR,45% for the 1st offence

SVDP:

(03.11.2018 –31.03.2019)

or

(01.04.2019 –30.06.2019)

10%

15%



Corporate Tax

Failure to pay stamp duty on instrument

What are the existing penalties?

RM25 or 5% of the amount

of the deficient duty,

whichever is greater

< 3 months

> 3 months but

< 6 months

RM50 or 10% of the

amount of the deficient

duty, whichever is greater

> 6 months

RM100 or 20% of the

amount of the deficient

duty, whichever is greater

SVDP:

(03.11.2018 –31.03.2019)

or

(01.04.2019 –30.06.2019)

10% or

min RM50

15% or

min RM100


Time limit to carry forward losses and allowances

Corporate Tax

Effective: Year of assessment 2019

7 consecutive YAs from that YA

(Not applicable for dormant companies with substantial change in shareholdings)

7 consecutive YAs upon expiry of qualifying period

7 consecutive YAs upon expiry of incentive period

Reinvestment

allowance /

investment

allowance for

services

Business

losses /

capital

allowances

Pioneer losses

/ Investment

tax allowance

Proposal

Current Position

No time limit to carry forward the losses and

allowances

• Transitional provision: Accumulated losses and allowances until year of assessment 2018 to be carried forward up to year of assessment 2025.


Time limit to carry forward unabsorbed losses and allowances

Corporate Tax

Transitional provision

Any carry forward losses and allowances up to YA 2018 can be carried forward for up to 7 years

YA 2018 2019 2020 2021 2022 2023 2024 2025 2026

Accumulated losses and allowances until YA2018

1 2 3 4 5 6 7 Unabsorbed losses and allowances will be disregarded in YA 2026

Losses and CA for YA 2019 onwards

YA 2019 2020 2021 2022 2023 2024 2025 2026 2027

Current year losses and CA c/f

1 2 3 4 5 6 7

Losses and CA c/f from YA2019

Unabsorbed losses and CA for YA 2019 will be disregarded in YA 2027


Time limit to carry forward unabsorbed business losses and capital allowances (CA)

Corporate Tax

Example

XYZ Sdn Bhd (“XYZ”) started its business operation in year 2016. In YA 2019, XYZ has unabsorbed business losses c/f of RM600,000 from YA 2018.

Business 1: Current year adjusted loss RM(300,000)

Unabsorbed business losses b/f RM(600,000)

Rental income: Statutory income RM250,000

Tax Computation

RM RM

Adjusted business income (Current year loss: RM300,000) Nil

Statutory business income Nil

Statutory rental income 250,000

Aggregate income 250,000

Less: Current year business loss (250,000)

Chargeable income Nil

Unabsorbed business loss c/f (RM300,000 – RM250,000) 50,000

Add: YA 2018 unabsorbed business losses b/f 600,000

Unabsorbed business loss c/f 650,000

Until YA 2026

Until YA 2025


Time limit to carry forward losses and allowances

Corporate Tax

Neighbouring countries Restriction to carry forward

Philippines 3 years

Indonesia 5 years (extended to 10 years for certain industries and for operations in remote area)

Thailand, Vietnam, China 5 years

Korea 10 years

Singapore, Hong Kong, Australia No restriction

Likely effects and implications

Restriction on the carry forward of unabsorbed business losses of neighbouringcountries (at a glance):

Deter potential investment in Malaysia as compared to Singapore, Hong Kong and etc as Malaysia may be seen as less favourable

Impact industries with long profit gestation periods as the investment may not generate returns within 7 years after the expiry/end of the incentive period

Increase compliance burden, i.e. to keep track of the year of assessment in which the losses and allowances arose


Change of tax treatment for group relief

Corporate Tax


Current position No Limits

1. Transfer of losses only applies to start-up companies.

2. Surrendering of losses is restricted to 3 consecutive YAs starting:

• Immediately after the basis period of 1st

YA company in operation, provided that the basis period of the 1st YA is a complete 12 months; or

• Immediately after the YA for the 2nd basis period of a complete 12 months, if the basis period for the YA the company started operation is other than 12 months.

3. No Group Relief is eligible if there is still carry forward ITA/ unabsorbed PS loss.

Proposed Amendment

1st YA commence

its operation

YA lossescan be

surrendered

2015 2019

2016 2019 & 2020

2017 2019 - 2021

Transitional

Provision



Corporate Tax

Example 1: A company commences its operation on 1 January 2019 and closes its accounts on 31 December 2019

2019 2020 2021 2022 2023

Closes accounts: 31.12.2019 31.12.2020 31.12.2021 31.12.2022 31.12.2023

1st YA 2nd YA 3rd YA 4th YA 5th YA

1st Basis Period(12 months)

Group relief of 3 consecutive YAs

Losses can no longer be surrendered from the 5th YA onwards

Commences

operation:

01.01.2019

1st basis period (first commences operations) consists

of a period of 12-months



Corporate Tax

Example 2: A company commences its operation on 1 July 2019 and closes its accounts on 31 December 2019

2019 2020 2021 2022 2023

01.01.2019Closes accounts: 31.12.2019 31.12.2020 31.12.2021 31.12.2022

1st YA 2nd YA 3rd YA 4th YA 5th YA

1st Basis Period(6 months)

Group relief of 3 consecutive YAs

31.12.2023

2nd Basis Period(12 months)

Losses can no longer be surrendered from the 6th YA onwards

Commences

operation:

01.07.2019

1st basis period (first commences operations) consists a

period of less or more than 12-months, and the 2nd basis

period consists of a period of 12-months.


Review of Definition of Special Classes of Income

Corporate Tax

Effective: Upon coming into operation of Finance Act 2018

Withholding tax exemption on fees paid for

offshore services still apply!

(ii) amounts paid in consideration of technical advice, assistance or

services rendered in connection with technical management or administration of any scientific, industrial or commercial undertaking,

venture, project or scheme;

The scope of Section 4A(ii) of the Income Tax Act 1967 for special classes of income for non-resident will be amended as follows:-


Clarification on Derivation of Business Income

Corporate Tax


Place of extraction (natural resources)

A Place of

Business

Branch/office

Factory

Workshop

Warehouse

Place of management

Proposed – Expansion of Section 12

If that person –

a) carries on supervisory activities in connection with a building or worksite, or a construction, an installation or an assembly project;

b) has another person acting on his behalf who – habitually concludes contract, or

habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification;

habitually maintains a stock of goods/merchandise – delivers goods & merchandise

regularly fills orders

Farm/Plantation

Building site/ Construction


Review of corporate income tax rate for small and medium enterprise (SME)

Corporate Tax

Chargeable income Current income taxrate (%)

Proposed income tax rate (%)

Up to RM500,000 18 17

Exceeding RM500,000 24

SME:

Resident company incorporated in Malaysia with paid up capital (ordinary shares) ≤ RM2.5 million

Limited Liability Partnership (LLP) resident in Malaysia with total contribution ≤ RM2.5 million

Such company and LLP – not related to another company or LLP with paid up capital (ordinary shares) / capital contribution of more than RM2.5 million


Tax

saving of

RM5,000


Restriction of Excessive Interest between Related Parties

Earning Stripping Rules

Country A Country B

Excessive Interest

Loan, interest bearing trade credit, advance, debt or provision of any security or guarantee

• Interest on all form of debts

• Payment economically equivalent to interest (excluding expenses incurred in connection with raising of finance)

Effective: 1 January 2019

Controlled Transaction

Restriction - % of Tax-EBITDA


a) Intellectual PropertyBusiness operations depends on the proprietary rights, such as patents, non-patented technological know-how, trademarks, or copyrights, provided by the other person/ third person

b) Business operationBusiness activities (e.g. purchases, sales, receipts of services, provision of services) are specified by the other person, and the prices and other conditions relating to the supply are influenced by such other person

c) Appointment of BODOne or more of the directors or members of the board of directors are appointed by the other person or a third person

Control in Transfer PricingCorporate Tax

Holding

company

Company A

Country A

Country B

> 50%

shareholding

Control

test

Holding

company

Company A

Country A

Country B

> 20%

shareholding

Control

test


CurrentProposed

The existing > 50% shareholding requirement is lowered to ≥ 20% shareholding, if -

a) Intellectual Property

b) Business operation; or

c) Appointment of BOD



Bank licensed under Financial Services Act 2013

Islamic bank licensed under Islamic Financial Services Act 2013

Development financial institution under the Development Financial Institutions Act 2002

Interest WMMF

Tax Exemption on Income Received by a Company from Wholesale Money Market Fund (WMMF)

Corporate Tax

Interest

Company

Other than a Company, e.g. Individual, Partnership

Interest WMMF Interest

Exempt

Exempt

Current

Proposed

A wholesale fund invests primarily in short-term money instrument and/or placement in short term deposit.

WMMF

A unit trust scheme offered exclusively to sophisticated investors (e.g. high-net-worth individual, high-net-worth entity, accredited investor).

Wholesale fund

Other than a Company, e.g. Individual, Partnership


Tax Deductions for Employer

Corporate Tax

Employer

Double Deduction

Further tax

deduction for

employers hiring

senior citizens and

ex-convicts

Provided the monthly

remuneration does

not exceed RM4,000.

Tax deduction for

settlement of

employee’s PTPTN

loan

Provided the amount

is not recovered from

the employee.

Effective: Years of assessment 2019 to 2020

Effective: For payments made between 1 January 2019 and 31 December 2019


Donation

National SchoolsPublic institutions of

higher learning (IPTA)

All donations to national schools and IPTA registered with the Ministry of Education for the purposes of upgrading infrastructure are tax deductible.

The tax deductibility for donations to other schools and institutions of higher learning registered with the Ministry of Education will be evaluated on a case-by-case basis.


Tax deduction on donations to national schools and IPTA

Corporate Tax


Current

Deduct from aggregate income (net of current year loss) in arriving at total income:-

An amount equal to any gift of money to the Government, a State Government, a local authority or an institution or organization or a fund approved by the Director General on the application of the institution or organization concerned, not exceeding

a) 7% of aggregate income for any person other than a company;

b) 10% of aggregate income for a company.

Proposed

It is proposed that social enterprises be added to the list of the approved organizations, institutions and funds.

The definition of “social enterprises” is to be confirmed.

Effective: To be confirmed

Sub-section 44(6)

Tax Deduction for Contribution to Social Enterprises

Corporate Tax


Definition of Research and Development (“R&D”)

Corporate Tax


No definition of R&D in the ITA.

“R&D” means any systematic, investigative and experimental study that involves novelty or

technical risk carried out in the field of science and technology with the object of acquiring new knowledge or using the results of the study for the production or improvement of materials, devices, products, produce, or processes, but does not include –

(a) Quality control or routine testing of materials, devices or products;

(b) Research in the social sciences or the humanities;

(c) Routine data collection;

(d) Efficiency surveys or management studies;

(e) Market research or sales promotion;

(f) Routine modifications or changes to materials, devices, products, processes or production methods; or

(g) Cosmetic modifications or stylistic changes to materials, devices, products, processes or production methods

Application:

Public Ruling No. 5/2004 applies definition of R&D as per Promotion of Investment Act 1986

Current Proposed

Malaysia’s Participation in Forum of Harmful Tax Practices (FHTP) by OECD


Malaysia’s Participation in Forum of Harmful Tax Practices (FHTP) by OECD

Identified jurisdiction which provide preferential regimes for mobile geographical services related to IP and non-IP

Labuan @ Identified for FHTP evaluationForum on

Harmful Tax Practice (FHTP)Malaysia Signed Inclusive Framework –

Jan 2017

Related legislation to be gazetted by 31 Dec 2018

What is Harmful Tax

Practices ?

Ring Fencing – no distinction on tax treatment including transaction

and currency restrictions between residents and non-residents

Transparency – Incentives that comply with FHTP’s requirement

must be gazette by 31 Dec 2018

Substantial Activities i. Adequate investment amount or annual business operating

expenses incurred in Malaysia; andii. Adequate number of full-time job employment in Malaysia

1

2

3


Changes relating to FHTP requirement


Proposed

Abolishment of current conditions and

allowed to conduct transactions:

o in Ringgit Malaysia

o with residents of Malaysia

Labuan

Trading

Activity

3% of audited

net profit

RM20,000

or

Current

Subject to the following conditions: Transactions in currencies other

than Ringgit Malaysia Transactions are restricted to be

carried out between :o Labuan entity and non-

resident; oro Labuan entity and other

Labuan entity Certain exceptions are available,

e.g Labuan leasing companies, banks and Labuan insurance companies

Taxed at:

Fixed Tax Rate/ Labuan Entity & Labuan Business Activity

Abolishment of election to be taxed

at RM20,000

Labuan

Trading

Activity

3% of audited

net profit

RM20,000

New requirement imposed

Adequate number of full time employees in Malaysia

Adequate amount of annual operating expenses in Malaysia


“Intellectual Property Right” means –

A right arising from any patent, utility innovation and discovery, copyright, trade mark and service mark, industrial design, layout-design of integrated circuit, secret processes or formulae and know-how, geographical indication and the grant of protection of a plant variety, and other like rights, whether or not registered or registrable.

Imposition of new

conditions

Labuan activities carried out in Labuan is subject to substantive conditions as determined by a

committee

Income from intellectual property assets held by a Labuan entity is subject to tax at prevailing

corporate tax rate under the Income Tax Act 1967

A resident of Malaysia who transacts with a Labuan entity is only entitled to a tax deduction of

3% of the allowable expenditure



Labuan Entity & Labuan Business Activity


Limitation of Expenses Incurred by Resident in relation to Payment to Labuan Entity


Likely tax effects and implications

Adverse impact on industries such as banks and insurance companies who have significant transactions with their Labuan branches or entities

Impact on leasing companies structuring leases via Labuan

Labuan entity

Resident of

Malaysia

Profits of Labuan entity taxed at

3% of audited net profits

Tax deduction on expenditure paid to Labuan entity

restricted to 3%of the allowable expenditure

Reduced the tax deduction by 97%


New tax rate

Inward Reinsurance & Inward Retakaful/ Offshore insurance & Takaful


5%

Tax rate

Current Proposed

24%

General Reinsurance

Standardization of tax rate of Reinsurance/ Retakaful

Inward Reinsurance & Inward Retakaful

General Reinsurance

8%

Life Insurance

Inward Reinsurance/ Retakaful

8% Life Insurance


3%

16%

Reason for the change

Ring-fencing – unequal treatment due to special tax treatment to offshore risk only

Absence of substantial activity requirement

1

2

5%

Offshore Insurance & Takaful

24%

Offshore insurance &

takaful

19%

Abolishment of preferential tax rate for offshore insurance/ takaful


Foreign Fund Management (FFM) Companies


Tax rate

Current Proposed

Abolishment of preferential tax rate for FFM companies

24%


10%

FFM in respect of income from fund

management services provided

to foreign investors

14%

10%

YA 2019 – YA 2020

YA 2021 onwards

FFM in respect of income from fund

management services provided

to foreign investors


Contract Research & Development Companies (“R&D”)


Contract R&D

A company which provides R&D

services in Malaysia only to a company

other than its related company

Income received

in relation to

exploitation of

intellectual

property right

will be taxed @

24%

Non-IP

Regime

o Companies

granted PS on

or before

16/10/2017 –

new conditions

apply starting

1/7/2021

o Companies

granted PS

after

16/10/2017 –

new conditions

apply starting

1/1/2019

Grandfathering

period

For issuance of

Pioneer Status

Certificate – to include

substantive activity

New requirement

Substantive activity

Adequate number of full time job employment in Malaysia

Adequate investment amount or annual business operating expenses incurred in Malaysia


Tax Incentive


Tax incentives

2019 Budget – Key Tax Proposals

Tax Reforms

Reviewing the existing reliefs and incentives under the various tax acts to make them relevant and cut down leakages

Reviewing the over 130 types of fiscal schemes to support investments with the intention to expire incentives which are no longer relevant or are duplicates


Tax incentive for INDUSTRY4WRD Policy

Tax Incentive

Type of tax deduction Criteria Effective date

Deduction on expenses incurred for I4.0 RA

Paid to Malaysian Productivity Corporation

Capped at RM27,000

YAs 2019 to 2021

Income tax incentive for Industry 4.0 (I4.0) readiness assessment (I4.0 RA)

Income tax incentive for Industry4WRD Vendor Development Program (VDP)


Further deduction on qualifying operating expenses (QOEs) incurred by Anchor Companies to implement industry4WRD VDP

The QOEs refer to expenses foro Product developmento Upgrading capabilities of

vendorso Skills training of vendors

The QOEs have to beo Verified by the MITIo Capped at RM1,000,000 per

year for 3 consecutive YAs

For Memorandum of Understanding signed between the Anchor Company and MITI from 01.01.2019 to 31.12.2021



Tax Incentive


Double deduction on scholarship provided by companies to students pursuing studies at technical and vocational levels, diplomas and degrees in the fields of engineering and technology

“Student” refer to o A full time student who is a

Malaysian and resident in Malaysia

o Has no means on his own; and

o Whose parents or guardian have total monthly income not exceeding RM8,000 per month

YAs 2019 to 2021

Double deduction on expenses incurred by companies participating in the National Dual Training System Training Scheme for I4.0

The program has to be approvedby the Ministry of Human Resources

For programs implemented from 01.01.2019 to 31.12.2019

Income tax incentive for Human Capital Development



Tax Incentive


Single deduction on expenses incurred byPrivate Higher Education Institutions for development of new I4.0 technology and engineering courses

The new courses have to be verified by the Ministry of Education

YAs 2019 to 2021

Double deduction on expenditure incurred by companies on training program to upgrade and develop their employees’ technical skills in I4.0 technology

The training programs have to be approved by the MIDA

For companies participating in the Readiness Assessment Intervention Plan from 01.01.2019 to 31.12.2019

Income tax incentive for Human Capital Development (Cont’d)



Tax Incentive


Double deduction on expenditure incurred by companies in conducting internship program for undergraduate students in the fields of engineering and technology

The internship program has to be approved by the Ministry of Human Resources

YAs 2019 to 2021

Single deduction on equipment and machinerycontributed by companies to Skills Development Centres, Polytechnics or Vocational Colleges

The contributions have to be certified by the Ministry of Human Resources or the Ministry of Education

For contributions made from 01.01.2019 to 31.12.2021

Income tax incentive for Human Capital Development (Cont’d)


Tax incentive for production of environmentally friendly plastics

Tax Incentive


• Pioneer status 70% exemption of statutory income

• Investment tax allowance – 60% on qualifying capital expenditure

Companies which produce

environmentally friendly plastics

based on bio-resin and biopolymer be

granted tax incentives for 5 years


Tax incentive for GITA

Tax Incentive


Expand to 40 green assets in the MyHijau Directory

Green

Technology

Assets

Investment Tax Allowance (ITA) of

100% of qualifying capital

expenditure incurred on green

technology asset from the year of

assessment 2013 until 2020.

Green Technology Investment Allowance (GITA)

The purchase of green technology assets as listed in MyHijau Directory can qualify for this tax incentive.


Enhancement of tax incentive for Principal Hub

Tax Incentive


Existing Principal Hub tax incentive

A company that uses Malaysia as a base for conducting its regional and global business operations serving at least 3 to 5 countries outside Malaysia may qualify for income tax exemption on statutory income for a period of 5 years (with extension of another 5 years)

Proposed enhancement

The companies already participating in the Principal Hub will be charged a

concessionary 10%income tax rate on

the overall statutory income

related to Principal Hub activities for a

period of 5 years

Reduced corporate tax rate of 0%, 5% or 10% for Tier 1, 2 and 3 companies respectively (based on level of commitment)

New companies

Full tax exemption on Value Added income

Existing companies


Clawback of Investment Tax Allowance (ITA)

Tax Incentive

Effective: Year of Assessment 2019

Where capital expenditure is

incurred on acquisition of any

asset and such asset is

disposed of at any time

within a period of 2 yearsfrom the date of acquisition,

the ITA for such capital

expenditure shall be deemed

to have not been given to the

company to which it would

otherwise be entitled.

5 years

Section 30A of PIA, 1986

Proposed


Extension of tax incentive for issuance of Sukuk Ijarah, Sukuk Wakalah, Retail bond and Retail Sukuk

Tax Incentive

Income Tax (Deduction for Expenditure on Issuance of Sukuk) Rules 2015

Deduction for issuance cost of sukuk under the principles of Ijarah and Wakalah and a further deduction on additional issuance costs incurred on such sukuk.

Income Tax (Deduction for Expenditure on Issuance of Retail Debenture and Retail Sukuk) Rules 2016

Double deduction on additional issuance costs of retail bonds and retail sukuk under the principles of Mudharabah, Musyarakah, Istisna’, Murabahahand Bai’ Bithaman Ajil based on Tawarruq.

Current Position

The above incentives are applicable for years of assessment 2016 to 2018.

Proposed Extended for another 2 years (YA2019-2020)


Extension of period for application on venture capital tax incentive

Tax Incentive

Venture

Company

(VC)

Individuals

Companies

Venture Capital Company (VCC)

Invest

Venture capital management corporation (VCMC)

Manage on behalf

Tax exemption available

Tax exemption available

Tax deduction available

Tax deduction available

All of the above incentives are given for application received by the SC from 1 January 2018 until 31 December 2018.

Application extended

for another year

Administrative Matters


Notice of Appeal


Current Position

Appeal must be done by submitting Form Q

Proposed Amendment

Appeal must be done by submitting Form Q + Income Tax Return Form

In the case of a person who has not furnish a return [Section 90(3)]

Timeline? - Not later than 30 days after the notice of assessment is received



Requirement of Audited Accounts by IRBM



CurrentThe return furnished by a company shall be based on accounts audited by a professional accountant [Section 77A(4)]

Companies Act

2016

Certain private

companies are

eligible to elect for

audit exemption

Examples:

Dormant, zero-

revenue and

threshold-qualified

private companies

Proposed Amendment

Unaudited accounts for companies under audit exemption


Person Responsible to Act for Limited Liability Partnership and Business Trust


Current Position

Compliance Officer

i. Appointed amongst the partners; or

ii. Any one or all of the partners (if no compliance officer is appointed)

Proposed Amendment

Compliance Officer

i. Appointed amongst the partners or person qualified to act as Secretaries under Companies Act 2016

ii. Any one or all of the partners (if no compliance officer is appointed)

Effective: Upon coming into operation of Income Tax (Amendment) Act 2018

The responsibility for doing all acts and things required to be done by or on behalf of a limited liability partnership (Section 75B):


Penalty for Breach of Confidence


Current (Section 117)

Any classified person who in contravention of Section 138-

a) communicates classified material to another person; or

b) allows another person to have access to classified material,

shall be guilty of an offence and shall, on conviction, be liable to a fine not exceeding four thousand ringgit or to imprisonment for a term not exceeding one year or to both.

Effective: Upon coming into operation of Income Tax (Amendment) Act 2018

Proposed AmendmentExpanding definition of “classified person” -

Any person receiving the classified material and uses it or exposes the classified material to other person.

Real Property Gains Tax


Review of Real Property Gains Tax (RPGT) rate

Real Property Gains Tax

Period of disposal Company Others Non-citizen and non-PR

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

10% (5%)

5%

5% (5%)

0%

10% (5%)

5%


Not applicable for disposal of low cost, medium low and affordable residential home valued RM200,000 and below

Stamp Duty


Re-definition of “Banker” and “Small and Medium Enterprise”

Stamp Duty


Banker Any person licensed under the

Islamic Banking Act 1983 [Act 276] or the Banking and Financial Institutions Act 1989 [Act 372] to carry on the business of banking in Malaysia

Any person licensed under:

(a) Financial Services Act 2013 [Act 758]

(b) Islamic Financial Services Act 2013 [Act 759]

(c) A development financial institution prescribed under Development Financial Institution Act 2002 [Act 618]

Sm

all a

nd

Mediu

m

Ente

rpri

se Manufacturing activities:

• Full-time employees ≤ 150 people; or

• Annual turnover ≤ RM25 million

Services and other sectors:

• Full-time employees ≤ 50 people; or

• Annual turnover ≤ RM5 million

Manufacturing activities:

•Full-time employees ≤ 200 people; or

•Annual turnover ≤ RM50 million

Services and other sectors:

•Full-time employees ≤ 75 people; or

•Annual turnover ≤ RM20 million

Current Proposed Amendment


Authorized person to compound instrument

Stamp Duty


Current

Suruhanjaya Syarikat Malaysia (SSM), Tenaga

Nasional

Bank, stock broker companies, insurance

companies

Duty payers

Collector

Collect payment

from

Remit to

Any authorized person by the notification of Gazette

Proposed amendment


Relief from stamp duty – reconstructions or amalgamations of companies

Stamp Duty


Existing

company

Transferee

company

Reconstruction, amalgamation, liquidation or Government Policy

on capital participation

ConsiderationAcquisition / undertaking / Shares

Current

Existing company/ Transferee should remain as beneficial owner of shares issued/acquired for at least 2 years

Proposed amendment

Existing company/ Transferee should remain as beneficial owner

of shares issued/acquired for at least 3 years



Stamp Duty


Transferee

company

Scheme of reconstruction or amalgamation

Current

Shall be treated as if it has increased its nominal share capital pursuant to subsection 15(2)

Proposed amendment

Subsection 15(2) – deleted

Substitution of “Nominal Share Capital” with “Issued Share Capital” – in line with changes to the Companies Act

Issued any unissued share

capital



Stamp Duty


Existing

company

Transferee

company

Responsibility to notify the Collector

Notify the Collector

within 30 days from the date the breach has

occurred

No more the beneficial owner

of the 90% shares so

issued/acquired within 3 years

1) Declaration or other evident furnished in support of the claim is untrue

2) No more the beneficial owner


Relief from stamp duty – transfer of property between associated companies

Stamp Duty


Stamp duty relief

Current

Transfer of property between associated companies (90% shareholding) will be exempted from stamp duty

Proposed amendment

Additional conditions:

Has to achieve greater efficiency in operation

Transferee company must be

incorporated in Malaysia

Must remain associated for 3 years

Must hold the property for 3 years

Company A

Company B Company C

Transfer of property

90% 90%


Standardise treatment and requirement of Section 15 with 15A

Stamp Duty


1Companies that are granted relief under this Section, if declaration is found to be

untrue will be charged with duty & interest of 6% per annum

2Make mandatory for the companies who are enjoying

the relief to notify the Collector if any changes in subsection 15(5) in a period of 30 days from the date of the changes

3Requirement for statutory declaration to be submitted to the Collector by:

- Advocate & Solicitor (Peninsular Malaysia)

- Advocate of High Court (Sabah & Sarawak)


Consequential amendment to Companies Act 2016 –introduction of Item 29A, First Schedule

Stamp Duty


First Schedule

Item 10 Articles of Association – RM100

Item 53 Memorandum of Association – RM100

Item 29A Constitution of a Company – RM200

Deleted

New addition


Clarification of stamp duty treatment for Item 22(1), First Schedule

Stamp Duty


First Schedule, Item 22

(1) Being the only or principal or primary security for any annuity (except upon the original creation thereof by way of sale or security, and except a superannuation annuity), or for any sum or sums of money at stated periods, not being interest for any sum secured by a duly stamped instrument, nor rent reserved by a lease or tack -

(a) For definite and certain period so that the total amount to be ultimately payable can be ascertained

(b) For the term of life or any other indefinite period –

For every RM100 and also for any fractional part of RM100 of the annuity or sum periodically payable

Proper stamp duty

The same ad valorem duty as a charge or mortgage for such total amount

RM1.00


Duty to be imposed on Hire Purchase Agreement

Stamp Duty


• No specific provision to charge hire purchase (conventional) agreement under this Act

Hire Purchase

Agreement

Being the security for securing the payment or repayment of money for the purchase of goods (within the meaning given) under the First Schedule of the Hire Purchase Act 1967 in accordance with Conventional Hire Purchase and SyariahPrinciple

RM10

Current

Proposed amendment


Stamp duty rates on value of real property in excess of RM1 million

Stamp Duty


Price / Market value of real property Current Proposed

First RM100,000 1% 1%

RM100,001 – RM500,000 2% 2%

RM500,001 – RM1,000,000 3% 3%

RM1,000,001 and above 3% 4%

Stamp duty rates


Stamp duty exemption for purchase of first residential home

Stamp Duty

Value of first residential home

Sale and purchaseagreement executed in the period

Type of instrument

Stamp duty exemption

Up to RM300,000 01.01.2019 – 31.12.2020 Instrument of transfer & loan

agreement

100%

RM300,001 – RM1,000,000(purchase from housing

developer)

01.01.2019 – 30.06.2019 Instrument of transfer

100%

RM300,001 – RM500,000 01.07.2019 – 31.12.2020 Instrument of transfer & loan

agreement

• 100% (on first RM300,000 of the price of home)

• Balance subject to stamp duty at prevailing rate


Stamp duty exemption for purchase of first residential home

Stamp Duty

Example:

• Value of residential property: RM400,000

• Stamp duty exemption: o 100% (on first RM300,000 of the price of home) o Balance subject to stamp duty at prevailing rate

Price / Market value of real property

Stamp duty rate

Stamp duty chargeable(RM)

Stamp duty exemption on first RM300,000

(RM)

First RM100,000 1% 1% x RM100,000 = RM1,000 1,000

RM100,001 – RM500,000 2% 2% x RM300,000 = RM6,000 RM200,000 / RM300,000 x RM6,000 = RM4,000

Total RM7,000 RM5,000

Stamp duty payable = RM2,000


Stamp duty exemption for Perlindungan Tenang products

Stamp Duty

Effective: For policies / certificates issued from 1 January 2019 to 31 December 2020

Insurance

policiesPerlindungan Tenang

products

• Launched in 2017

• Yearly premium / contribution not

exceeding RM100 Takaful

certificates

Stamp duty

exempted

Proposed amendment

Currently, insurance policy and Takaful Certificates are subjected to stamp duty of RM10. The stamp duty is exempted for policies less than RM5,000.

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