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The Malaysia Budget 2014 was tabled on 25 October 2013 by the Prime Minister of Malaysia, Najib Tun Razak. Every year, the Finance Minister will present a report on the Malaysia’s finances, as well as certain fiscal policies that the government intends to undertake in next year. So, the Malaysia Budget 2014 is tabled in October 2013 and spells out how the government will change any tax and spending policies for the year 2014.
Goods and Services Tax According to Malaysia Budget 2014, the goods and services tax (GST) at 6% will be instead current sales and services tax to be effective from 1 April 2015.
GST registration threshold The threshold for purpose of registration under GST is an annual sales value of RM500,000. This meant that any business with annual sales of RM500,000 and above is required to be registered under the GST legislation. Businesses below the threshold are not required to register but may register on a voluntary basis.
Scope of GST
- GST is to be charged on goods and services from production.
- GST is to be charged on goods and services supplied within the country or imported into the country.
- GST charged on all business inputs such as raw materials and capital assets is known as input tax and GST also charged on all supplied made is known as output tax. For eligible businesses, the input tax incurred is fully recoverable from the government input tax mechanism.
- Supplies made by the government are not within the scope of GST.
Essential goods and services not subject to GST GST will not be imposed on:
- Basic food items such as rice, sugar, cooking oil, salt, flour and etc.
- Water supply, and the first 200 units of electricity per month for domestic consumers
- Service provided by government such as the issuance of passports, licenses, health services and school education.
- Transportation services such as LRT, bus, train, taxi, highway tolls, ferry and boat.
- Sale, purchase and rental of residential properties as well as selected financial services.
Standard-rated supplies Standard-rated supplies are taxable supplies of goods and services which will be subject to the proposed rate of 6%. A taxable person who is registered to collect GST on such supply is also entitled to claim input tax credit on his business inputs in making taxable supplies.
Zero-rated supplies Zero-rated supplies are taxable supplies of goods and services which are subject to a GST rate of 0%. So, businesses will not collect any GST on such supplies but are still entitled to claim a tax credit used in the course or furtherance of the business.
Exempt supplies Exempt supplies are supplies of goods and services which are not subject to GST. Businesses will not collect any GST on the such supplies and no input tax credit can be claimed in respect of exempt supplies.
Assistance and support measures for implementation of the GST For Malaysia citizens Upon implementation of the GST, the government will provide various forms of assistance and support to help the citizen to cope with the GST during the transition period as follows:
- One-off cash assistance of RM300 to households who are BR1M recipients.
For businesses To ensure smooth implementation of the GST by businesses, the government proposes the following additional packages:
- Training grants of RM100m will be provided to businesses that send their employees for GST training in 2013 and 2014. In addition, financial assistance amounting to RM150m will be provided to SMEs for the purchase of accounting software in 2014 and 2015.
- Secretarial fees and tax filing fees are allowed as tax deductions.
Reason for the implementation The GST implementation is part of the government’s tax reform programme to enhance the capability, effectiveness and transparency of tax administration and management. And it also will cause the economy of Malaysia more greater than now.
Benefits for the implementation
- For business The GST is not a cost to business as the GST paid on the business inputs can be claimed as tax credit. As such, it will decrease the cost of doing business equals to cost saving. The reduction in the business costs will make the local products and services more competitive in the domestic and international markets. In additional, the GST is expected to improve tax compliance and is easier to administer due to its self-policing feature.
- For Malaysia citizens Based on the GST implementation, it is expected that will cause the price reduction of goods and services. With the price reduction, the citizens will benefit from the cheaper goods and services such as basic food, transport, communication, housing, water, electricity, gas and fuel. The tax burden borne by citizen is expected to be lower compared with current tax system.
Possible problems to be encounter after implementation All the accounting department workers may not so efficiency and effectiveness on their job, because of the new implementation of GST, they need some time to fit it. And some training costs of the companies claimed by the government may not enough to send all of their employees to training to learn about GST. This implementation also will cause the higher inflation in 2015.
Real Property Gain Tax Accordance with Malaysia Budget 2014, the rates for RPGT has been increased. RPGT is a tax imposed on gains from disposal of all types of properties such as residential and commercial buildings, land and shares of real property companies. RPGT is imposed on the net gains from disposal of property after deducting the following costs:-
- Acquisition price
- Stamp duty
- Legal fees
- Renovation costs
- Commission for sales and administrative payment
For Malaysia citizens and permanent residents, RPGT is exempted for the disposal of one residential property once in their lifetime.
The following RPGT exemptions which were implemented under the previous regime continue to be available:
- RPGT exemption on gains from the disposal of one residential property once in a lifetime to individuals.
- RPGT exemption of up to RM 10,000 or 10% of the net gains, from the disposal of real property by individuals.
- RPGT exemption on gains arising from the disposal of real property between family members such as husband and wife, parents and children, and grandparents and grandchildren.
The current RPGT rates vary from 0% to 30%, depending on the holding period. The holding period refers to the period between the acquisition date and the disposal date of the property.
To further curb speculative activities, the RPGT rates on disposal of properties and shares in real property companies effective 1 Jan 2014 shall be as follow:-
Increase in Threshold for Foreign Acquisition of Real Property Accord to Malaysia Budget 2014, the budget has proposed to increase the minimum price of property that can be purchased by foreign from RM500,000 to RM1,000,000.
Reasons for the implementation Reason of this implementation is mainly to reduce speculative activities on housing prices and real estate market. Government believes that hiking up RPGT enables Malaysia citizens to purchase affordable new houses. However in long term, hike in RPGT rates will slow down the sales of the secondary markets and also might reduce property investments by local and foreign property investors.
Benefits of the implementation This implementation will reduces the foreign investors to protect the property market and to benefit genuine house buyers. And it also will help to stabilize house prices, so the house price won’t be so high and Malaysia citizens are able to purchase.
Possible problems to be encounter after this implementation This implementation won’t really be all that effective against speculative because RPGT is a tax on profit, not a tax on chargeable income. RPGT just raises the bar on what that breakeven point might be, but does not eliminate it entirely.
Individual Tax In the Malaysia Budget 2014, there were several changes in income tax rates and policies for individuals. This policy only affects income tax earners in 2015 (filing in 2016). With effect from year 2014, employees whose total income tax is equivalent to the amount of monthly tax deductions made in the assessment year are no longer required to submit tax returns. The amount of monthly tax deduction is considered as the final tax paid.
A decrease in income tax rates across the board from assessment year 2015 onwards, this means that the households earning around RM 4,000 a month and below no need pay the income tax.
For Resident The income tax rates for resident individuals will be reduced by 1% to 3% for all chargeable income bands. The current maximum tax rate at 26% will be reduced to 25%.
For Non-Resident The income tax rates for non-resident individuals will be reduced by 1% from 26% to 25%.
If the chargeable income band exceeding RM 100,000 will be structured as follows:-
Reasons for the implementation Implementing individual tax is want to protect economic of Malaysia. Because of nowadays, expatriates working in Malaysia is increasing. If Malaysia do not implement individual income tax on expatriates, it will cause Malaysia’s economic benefit spillover. This implementation is wants to reduce the burden in the group of low-income.
Benefits of the implementation This implementation will expand the state’s financial, so that the country can use that money to upgrade some public measures. For example, maintenance the road, upgrade the hospital of government and etc. So, Malaysia will gain some benefits on this implementation. This can avoid Malaysia citizens spent some money on the basic item such as expenditure of hospital and also the group of low-income can claim assistance from government.
Possible problems to be encounter after implementation This implementation will cause some people deliberate fraud on their personal information. So, they can avoid to pay the income tax or pay less about income tax and claim some assistance from government.
Corporate Tax In Malaysia, the corporate tax rate is a tax collected from companies. Its amount is based on the net income companies obtain while exercising their business activity. Revenues from the corporate tax are an important source of income for the government of Malaysia. Accordance to Malaysia Budget 2014, the corporate tax for a company is reduced by 1% from 25% to 24% and it will be effective from year 2016. Similarly, income tax rate for companies with a paid-up capital of up to RM 2.5m will be reduced by 1% from 20% to 19% in respect of chargeable income up to RM 500,000 and the remaining chargeable income will be taxed at 24%. With effect from year 2015, the income tax for cooperatives on chargeable income above RM 150,000 will be reduced by 1% to 2%. After implementing this corporate tax, secretarial fee up to RM 5,000 and tax compliance fee up to RM 10,000 will be tax deductible. Besides that, expenses incurred for training in accounting and information and communication technology (ICT) relating to the implementation of GST also will be given further tax deduction for year 2014 to 2015. This implementation also increased deduction for salaries, employee work-place benefits, and employee training provided by certain employers. After this implementation, there is no need tax filing for PCB employees. Income tax return submission was previously compulsory for taxpayers, but under the new policy, employees in private and public sector will now not be required to submit tax forms if they are paying tax through their companies PCB deduction system.
Reason for the implementation Because those companies do businesses in Malaysia, so Malaysia need to imposed the corporate tax from those companies to maintain the economy of Malaysia. If not to imposed the corporate tax from those companies, that will cause our country funds outflows because most of those companies are multinational corporation, they will use our country money to run their businesses between another country. It will cause our country money devalued.
Benefits of the implementation This implementation is reduced the corporate tax rates, it will attracts another foreign companies invest in our country. It will cause our country’s economy greater than before. And also our country money value will increase.
Possible problems to be encounter after implementation It will cause many foreign companies invested in our country, but it also will cause local companies in a more competitive environment. It also will cause our country’s funds outflows to another country.
Cash Handout In the Malaysia Budget 2014, as per the previous 2 years, there were various cash handouts for the lower income group, students and more.
Bantuan Rakyat 1 Malaysia (BR1M) was introduced in 2011 at an amount of RM 500 for households earning RM 3,000 / month and below, and with BR1M 2.0 in 2012 an additional amount of RM 250 was introduced for singles above the age of 21 who earn less than RM 2,000 a month.
According to the Malaysia Budget 2014, BR1M 3.0 will increased the amount cash handout to Malaysia citizens. Every household who’s earning RM 3,000 per month and below will get the cash handout about RM 650, and RM 300 to singles over 21 years old who earn less than RM 2,000 per month. In additional, RM 450 will be given to households with income between in RM 3,000 to RM 4,000 per month.
Additionally, RM 50 of income protection insurance will be given to all households with their income below RM 4,000 per month. Whose income is RM 3,000 and below per month will get RM 700, and RM 500 for whose income is RM 3,000 – RM 4,000 per month.
And this implementation has other cash and voucher handouts to Malaysia citizens, such as:-
- Schooling Assistance – RM 100 for primary and secondary school students A continuation of Budget 2012’s and Budget 2013’s policies, with RM 100 to be disbursed to all primary and secondary level students.
- BB1M – RM 250 vouchers to university students for books and study materials
- Civil servant bonuses – one off half-month bonus A half-month’s bonus for all government staff was announced to be given on January 2014.
- RM 250 one off payment to retirees
Reasons for the implementation This implementation is want to help the group of lower income and reduce their burden. This also will balance the economy in Malaysia. It will help all the families have the ability send their children to accept education.
Benefits of the implementation This will avoid the outflow of talent because of government given the benefits to Malaysia citizens are better than foreign countries, so that our country’s talent will not go other countries for working. This will cause our country has ability to competitive with other countries. This will help the national development.
Possible problems to be encounter after implementation Some people maybe will fraud on their personal information to get that cash handouts. Some people will don’t know how to register to get the cash handout of BR1M 3.0.