1.Introduction
The Honourable, The Prime Minister and Minister of Finance, YAB Dato' Sri Mohd. Najib Tun Abdul Razak, presented the 2010 Budget proposals on 23 October 2009.
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 2010 Budget Strategy
The 2010 Budget Strategies cover three specific areas:-
A) Driving the Nation towards a High-Income Economy.
B) Ensuring Holistic and Sustainable Development; and
C) Focusing on Well-being of the Rakyat.
3.Income Tax Changes Affecting Individuals
A) Reduction in Individual Income Tax Rates for Resident
Present Position-
Resident individual income tax rates are progressive and range between 0% to 27%
Proposed Change-
It is proposed that the resident individual income tax rate for chargeable income group exceeding RM100,000 be reduced by 1 percentage point from 27% to 26%.
Effective: Year of Assessment 2010
B)Reduction in Individual Income Tax Rates for Non-Resident
Present Position-
Non-resident individuals are taxed at a fixed rate of 27%
Proposed change-
It is proposed that the tax rate for non-resident individuals be reduced by 1 percentage point from 27% to 26%
Effective: Year of Assessment 2010
C) Increase in Personal Relief
Present Position-
Resident individual are allowed personal relief of RM8,000 per year.
Proposed Change-
It is proposed the personal relief be increased from RM8,000 to RM9,000.
Effective: Year of Assessment 2010
D) Increase in Relief for Employees Provident Fund and Life Insurance premiums
Present Position-
Resident individuals are allowed tax relief of RM6,000 on contribution to Employees Provident Fund and on life insurance premium.
Proposed Change-
It is proposed the tax relief of RM6,000 be increased to RM7,000 on contribution to Employees Provident Fund and on life insurance premium.
Effective: Year of Assessment 2010
E) Tax Incentive for Knowledge Workers in Iskandar Malaysia
Present Position-
Presently, there is no incentive for Malaysian of foreign knowledge workers residing in Iskandar Malaysia.
Proposed change-
It is proposed that employment income of Malaysian and foreign knowledge workers residing in Iskandar Malaysia and working in qualifying activities be taxed at 15% indefinitely.
Effective: For those who apply and commence employment in Iskandar Malaysia between 14 October 2009 and 31 December 2015.
F) Individual Tax Relief on Broadband Subscription Fee
Present Position-
No tax relief is given on broadband subscription fees.
Proposed change-
It is proposed that individual tax payers be given tax relief on broadband subscription fees up to RM500 per year.
Effective:From Year of Assessment 2010 to Year of Assessment 2012.
4) Income Tax changes Affecting Companies and Unincorporated Business
A) Tax Incentive for Small and Medium Enterprises to Register Patents and Trademarks
Present Position-
Expenses incurred on the registration of patents and trademarks in the country are capital in nature and not allowed as deduction for purposes of income tax computation.
Proposed Change-
It is proposed that expenses incurred in the registration of patents and trademarks in the country be allowed as a deduction for the purpose of income tax computation.
Effective:From the Year of Assessment to the Year of Assessment 2014.
B) Extension and Expansion of Tax Incentives for Export of Financial Services
Present Position-
Taxation on banking, insurance and takaful sectors is based on worldwide income scope. This means that income from operations overseas is subject to tax even if such income is not remitted back to Malaysia.
In the 2007 Budget, banking institutions are given tax exemption on:
i) profits of newly established branches overseas;or
ii) income remitted by new overseas subsidiaries.
The incentives are subject to the following conditions:
i) applications to establish new branches or subsidiaries overseas must be submitted to Bank Negara Malaysia from 2 September 2006 until 31 December 2009; and
ii) the branches or subsidiaries have to commence operations within a period of 2 years from the date of approval by Bank Negara Malaysia.
The tax exemption is given for a period of 5 years from the commencement of operations of the branches or subsidiaries.
Proposed change-
It is proposed that:
i) the tax incentives given to banks be extended to insurance companies and takeful companies;
ii) the effective period for the 5-year tax exemption be given flexibility to be deferred from the date of commencement of operations to begin not later than the third year of operations; and
iii) the incentive is extended on condition that applications to establish new branches or subsidiaries overseas be received by Bank Negara Malaysia not later than 31 December 2015.
Effective: For applications received by Bank Negara Malaysia not later than 31 December 2015.
Friday, October 23, 2009
Friday, August 29, 2008
2009 Malaysian Budget
2009 Malaysian Budget Commentary
1.Introduction
The Honourable, The Prime Minister and Minister of Finance, YAB Dato' Seri Abdullah Badawi, presented the 2009 Budget Proposals on 29 August 2008.
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 2009 Budget Strategy
The 2009 Budget Strategies cover three specific areas:-
a) Ensuring the well being of Malaysians;
b) Developing quality human capital; and
c) Strengthening the nation's resilience.
3.Income Tax Changes Affecting Individuals
A)Increase of Tax Rebate
Present Position-
Resident individual with chargeable income not exceeding RM35,000 are given tax rebate of RM350.
Proposed Change-
The tax rebate be increased from RM350 to RM400
Effective: Year of Assessment 2009
B)Reduction in individual Income Tax Rates.
Present Position-
Resident individual income tax rates are progressive and ranges between 0% and 28%
Proposed Change-
It is proposed the tax rate be reduced ( i) from 13% to 12% for chargeable income exceeding RM35,000 to RM50,000; and (ii) from28% to 27% for chargeable income exceeding RM35,000 to RM50,000.
Effective: Year of Assessment 2009
C) Tax Exemption on Interest from Deposits
Present Position-
Interest income received from money deposit with approved institutions is taxed at 5% at source. Subject to the following exemption ( i) savings account in Lembaga Tabung Haji and Bank Simpanan; (ii) fixed deposit account up to RM100,000; and (iii) fixed deposit account exceeding 12 months.
Proposed Change-
Tax on interest on interest income received from approved institutions be fully exempted.
Effective: 30 august 2008
D) Tax Exemption on allowances/ perquisites/gifts/benefits provided to employees
Proposed Change-
It is proposed that tax exemption be given to employees on allowances, perquisites, gifts and benefits-in-kind as follows:
a) Petrol card, petrol allowance or travel allowance between the home and work place of up to RM2,400 per annum;
b) Petrol card, petrol allowance or travel allowance and toll card for official duties of up to RM6,000 per annum;
c) Allowance or fees for parking;
d) Meal allowance;
e) Allowance or subsidies for chilcare in respect of children of up to RM2,400 per annum;
f) Telephone, mobile phone. pager and personal data assistant (PDA), and the bills thereof, registered in the name of the employee or employer;
g) Employers' own goods provided free of charge or at discounted value of up to RM1,000 per annum;
h) Employers' own services provided free or at a discount provided such benefits are not transferable;
i) Medical benefits exempted from tax are extended to include maternity expenses and traditional medicines such as ayurvedic and acupuncture;
j) Interest subsidies for loans up to RM300,000 in respect of housing, motor vehicle and education loans. The exemption will be given to existing and new loans.
Effective:Year of Assessment 2008 (for all proposal except (a) above); and YA 2008 to YA2010 ( for proposal (a) ).
Comment:
a) The above exemptions are not applicable to employees having control over the company (eg. directors of controlled companies), sole proprietors or partners of partnerships.
b) The above allowances, perquisites, gifts and benefits provided by employers are fully deducted.
c) The above provide areas of personal tax planning, for both local employees and foreign employees with local tax resident, to redesign their remuneration packages by shifting portion their monthly salary to allowance and benefits-in-kind.
E) Tax exemption on perquisite.
Present Position-
Perquisite (whether in money of otherwise) provided to employee pursuant to his employment in respect of:-
a) past achievement award;
b) service excellence award;
c) long service award provided that the employee has exercised an employment for more than 10 years with the same employer.
The exemption is limited to RM1,000 per employee per annum.
Proposed change-
i) The exemption on excellent service awards will be extended to all awards relating to innovation and productivity; and
ii) The exemption be increased from RM1,000 to RM2,000.
Effective: Year of Assessment 2008
F) Tax Treatment on Bonus and Directors' Fees
Present Position-
Income tax on bonus and directors' fees is based on the year such incomes are receivable. However, generally bonus and directors' fees are received in the following year. The tax payer will declare the bonus and directors' fees in the year such incomes are received.
Proposed change-
It is proposed that bonus and directors' fees be taxed in the year such incomes are received.
Effective: Year of Assessment 2009
Comment:
i) The proposal allowed companies to declare and accrued the directors' fees and bonuses in 2008 and paid in the following year in 2009;and
ii) Employees need only to declared the 2008 directors' fees and bonuses in Form EA 2009 and Form B or B 2009 , based on receipt basis in 2009;
iii) This would eliminate the administrative work of the DG of inland revenue from issuing Form JA 2008.
1.Introduction
The Honourable, The Prime Minister and Minister of Finance, YAB Dato' Seri Abdullah Badawi, presented the 2009 Budget Proposals on 29 August 2008.
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 2009 Budget Strategy
The 2009 Budget Strategies cover three specific areas:-
a) Ensuring the well being of Malaysians;
b) Developing quality human capital; and
c) Strengthening the nation's resilience.
3.Income Tax Changes Affecting Individuals
A)Increase of Tax Rebate
Present Position-
Resident individual with chargeable income not exceeding RM35,000 are given tax rebate of RM350.
Proposed Change-
The tax rebate be increased from RM350 to RM400
Effective: Year of Assessment 2009
B)Reduction in individual Income Tax Rates.
Present Position-
Resident individual income tax rates are progressive and ranges between 0% and 28%
Proposed Change-
It is proposed the tax rate be reduced ( i) from 13% to 12% for chargeable income exceeding RM35,000 to RM50,000; and (ii) from28% to 27% for chargeable income exceeding RM35,000 to RM50,000.
Effective: Year of Assessment 2009
C) Tax Exemption on Interest from Deposits
Present Position-
Interest income received from money deposit with approved institutions is taxed at 5% at source. Subject to the following exemption ( i) savings account in Lembaga Tabung Haji and Bank Simpanan; (ii) fixed deposit account up to RM100,000; and (iii) fixed deposit account exceeding 12 months.
Proposed Change-
Tax on interest on interest income received from approved institutions be fully exempted.
Effective: 30 august 2008
D) Tax Exemption on allowances/ perquisites/gifts/benefits provided to employees
Proposed Change-
It is proposed that tax exemption be given to employees on allowances, perquisites, gifts and benefits-in-kind as follows:
a) Petrol card, petrol allowance or travel allowance between the home and work place of up to RM2,400 per annum;
b) Petrol card, petrol allowance or travel allowance and toll card for official duties of up to RM6,000 per annum;
c) Allowance or fees for parking;
d) Meal allowance;
e) Allowance or subsidies for chilcare in respect of children of up to RM2,400 per annum;
f) Telephone, mobile phone. pager and personal data assistant (PDA), and the bills thereof, registered in the name of the employee or employer;
g) Employers' own goods provided free of charge or at discounted value of up to RM1,000 per annum;
h) Employers' own services provided free or at a discount provided such benefits are not transferable;
i) Medical benefits exempted from tax are extended to include maternity expenses and traditional medicines such as ayurvedic and acupuncture;
j) Interest subsidies for loans up to RM300,000 in respect of housing, motor vehicle and education loans. The exemption will be given to existing and new loans.
Effective:Year of Assessment 2008 (for all proposal except (a) above); and YA 2008 to YA2010 ( for proposal (a) ).
Comment:
a) The above exemptions are not applicable to employees having control over the company (eg. directors of controlled companies), sole proprietors or partners of partnerships.
b) The above allowances, perquisites, gifts and benefits provided by employers are fully deducted.
c) The above provide areas of personal tax planning, for both local employees and foreign employees with local tax resident, to redesign their remuneration packages by shifting portion their monthly salary to allowance and benefits-in-kind.
E) Tax exemption on perquisite.
Present Position-
Perquisite (whether in money of otherwise) provided to employee pursuant to his employment in respect of:-
a) past achievement award;
b) service excellence award;
c) long service award provided that the employee has exercised an employment for more than 10 years with the same employer.
The exemption is limited to RM1,000 per employee per annum.
Proposed change-
i) The exemption on excellent service awards will be extended to all awards relating to innovation and productivity; and
ii) The exemption be increased from RM1,000 to RM2,000.
Effective: Year of Assessment 2008
F) Tax Treatment on Bonus and Directors' Fees
Present Position-
Income tax on bonus and directors' fees is based on the year such incomes are receivable. However, generally bonus and directors' fees are received in the following year. The tax payer will declare the bonus and directors' fees in the year such incomes are received.
Proposed change-
It is proposed that bonus and directors' fees be taxed in the year such incomes are received.
Effective: Year of Assessment 2009
Comment:
i) The proposal allowed companies to declare and accrued the directors' fees and bonuses in 2008 and paid in the following year in 2009;and
ii) Employees need only to declared the 2008 directors' fees and bonuses in Form EA 2009 and Form B or B 2009 , based on receipt basis in 2009;
iii) This would eliminate the administrative work of the DG of inland revenue from issuing Form JA 2008.
Subscribe to:
Posts (Atom)