The Honourable, The Prime Minister and Minister of Finance, YAB Dato' Sri Mohd. Najib Tun Abdul Razak, presented the 2011 Budget proposals on 15 October 2010.
Details of how the proposed tax changes affect the individuals and businesses are summarised in the following sections.
It is intended to provide a general guide and hence should not be acted upon without seeking professional advice on any specific areas and matters.
2.The 2011 Budget Strategy
The 2011 Budget Strategies cover four specific areas:-
A) Reinvigorating Private Investment
B) Intensifying Human Capital Development
C) Enhancing Quality of Life of the Rakyat; and
D) Strengthening Public Service Delivery
3.Income Tax Changes Affecting Individuals
A) Tax Relief on Medical Expenses and Care for Parents
Present Position-
Tax relief of up to RM5,000 is claimable by individual taxpayers on medical expenses for parents limited to the following:
- treatment in clinics and hospitals;
- treatment in nursing homes; and
- dental treatment excluding cosmetic dental treatment
It is proposed that the existing tax relief be extended to include expenses to care for parents, who suffer from diseases or with physical or mental disabilities and who need regular treatment certified by a qualified by a qualified medical practitioner. Such treatment and care provided include treatment and care at home, day care centres or home care centres.
Qualifying expenses related to the treatment and cares are as follows:
- treatment and medical expenses supported with receipts issued by registered medical centres, pharmacies or licensed medical stores; or
- expenses for the care of parents supported with receipts or written certification by carers (does not include the tax payer claiming the relief, the spouse and the children) certifying that the care was provided and the total payment involved. Foreign hired carers are required to posses valid visa/special work permit for the care of parents of taxpayers; or
- expenses on special needs for parents certified by qualified medical practitioner and supported by receipts as proof purchase.
B) Tax Relief for Contribution to Private Pension Fund
Present Position-
Currently, tax relief of RM6,000 is given to contributions made to the Employees Provident Fund or an approved scheme.
Proposed Change-
It is proposed that the existing tax relief be extended to contributions made to the Private Pension Fund to be launched by the Government in 2011.
Effective:Year of Assessment 2011
C) Withdrawal of Rebate for Levy on Employment Pass or Work Pass
Present Position-
An individual is eligible to claim a tax rebate on:
-employment pass
-visit pass (temporary employment)
-work pass.
Proposed Change-
It is proposed that the above rebate on levy be withdrawn
Effective: Year of Assessment 2011
4) Income Tax changes Affecting Companies and Unincorporated Business
A) Tax Incentive for the Issuance of Islamic Securities
Present Position-
Expenses incurred in the issuance of Islamic securities issued under the principles of Mudharabah, Musyarakah, Ijarah and Istisna' or other Syariah principles approved by the Minister of Finance are eligible for tax deduction if the issuance of such Islamic securities are approved by the Securities Commission or the Labuan Fiancial Services Authority.
The incentive is given from year of assessment 2003 until year of assessment 2015
Proposed Change-
To promote transactions in Bursa Suq al-Sila, it is proposed that the expenses incurred in the issuance of Islamic securities under the principles of Murabahah and Bai' Bithaman Ajil based on tawarruq be given deduction for the purpose of income tax computation.
Effective:Commencing from Year of Assessment 2011 until Year of Assessment 2015.
B) Tax Incentive on Export Credit Insurance Premium Based on Takaful concept
Present Position-
The Government has given double tax deduction on payment of conventional insurance premium for export credit to companies approved by the Minister of Finance. The deduction is given from year of assessment 1986
Proposed Change-
It is proposed that payments of insurance premium for export credit based on takaful concept be given double tax deduction.Insurance premium based on takaful concept must be purchased from takaful operators approved by the Minister of Finance
Effective:Commencing from Year of Assessment 2011
C) Extension of Application Period for Tax Incentives for The generation of energy from Renewable sources
Present Position-
i) Companies generating energy from renewable sources:
- Pioneer status with income tax exemption of 100% of statutory income for 10 years; or
- Investment Tax allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. The allowance can be set-off against 100% of statutory income fro each year of assessment; and
- Import duty and sales tax exemption on equipment used to generate energy that is not produced locally and sales tax exemption on equipment purchased from local manufacturers.
- Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. The allowance can be set-off against 100% of statutory income for each year of assessment; and
- Import duty and sales tax exemption on equipment used to generate energy that is not produced locally and sales tax exemption on equipment purchased from local manufacturer
- Import duty and sales tax exemption on solar photovoltaic system equipment for the usage by third parties given to importers including photovoltaic service providers approved by the Energy commission; and
- Sales tax exemption is given on the purchase of solar heating system equipment from local manufacturers.
Proposed Change-
It is proposed that the current tax incentive application period for the generation of energy from renewable sources be extended
Effective:
a) Incentive (i) and (ii) be extended for applications received until 31 December 2015; and
b) Incentive (iii) be extended for applications received until 31 December 2012.
D)Extension of Application Period for Tax Incentives for Energy conservation
Present Position-
i) Companies providing energy conservation services:
- Pioneer status with income tax exemption of 100% of statutory income for 10 years; or
- Investment Tax allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. The allowance can be set-off against 100% of statutory income fro each year of assessment; and
- Import duty and sales tax exemption on energy conservation equipment that are not produced locally and sales tax exemption on the purchase of locally produced equipment.
- Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. The allowance can be set-off against 100% of statutory income for each year of assessment; and
- Import duty and sales tax exemption on energy conservation equipment that are not produced locally and sales tax exemption on equipment purchased from local manufacturer
- Import duty and sales tax exemption on EE equipment such as high efficiency motors and insulation materials given to importers including authorized agents approved by the Energy Commission; and
- Sales tax exemption is given on the purchase of EE consumer goods such as refrigerator, air conditioner, lightings, fan and television which are produced by local manufacturers.
Proposed Change-
It is proposed that the current tax incentive application period for energy conservation be extended
Effective:
a) Incentive (i) and (ii) be extended for applications received until 31 December 2015; and
b) Incentive (iii) be extended for applications received until 31 December 2012.
E) Extension of Tax Incentive Period for Reduction of Greenhouse Gas Emission
Present Position-
Malaysia is committed in reducing greenhouse gas (GHG) emission and had introduced an incentive to reduce GHG emission by granting tax exemption on income received from the sale of Certified Emission reductions (CERs) from Clean Development Mechanism (CDM) projects approved by the Ministry of Natural resources and environment. The income exempted is equal to the gross income from sale of CDM less the cost of expenditure (not being capital expenditure) to obtain the CERs.
The exemption period is for 3 years from the year of assessment 2008 until uear of assessment 2010.
Proposed Change-
It is proposed that the tax exemption period on the income from the sales of CERs be extended fro another 2 years
Effective:Year of Assessment 2011 until year of assessment 2012
