1 Sep 2008: Malaysia Budget 2009: The Highlights

Theme: A caring government

Total Budget Allocation:
RM207.9 billion

Operating expenditure: Allocation of RM154.2 billion, of which RM86.3 billion is for fixed charges and grants, RM38 billion for emoluments, RM26.5 billion for supplies and services, RM2.4 billion for purchase of assets, and RM1 billion for other expenditures.

Development expenditure: Allocated RM53.7 billion of which RM27.8 billion is for economic sector, RM17.8 billion for social sector, RM4.1 billion for security sector, RM2.1 billion for administration and RM2 billion as contingencies.

Three Main Strategies

  • Ensuring the well-being of Malaysians

  • Developing quality human capital

  • Strengthening the nation's resilience

Personal Tax Incentives

  • Top personal tax rate reduced by one percentage point to 27%

  • Tax rebate for chargeable income up to RM35,000 increased from RM350 to RM400

  • Tax rebate for chargeable income exceeding RM35,000 to RM50,000 reduced by one percentage point to 12%

  • Tax exemption on interest from deposits in all institutions

  • Taxpayer who makes self amendment not subject to penalty for under-declaration of income

  • Appeal by taxpayer can be filed to the Special Commissioners of Income Tax using notification of non-chargeability

  • Bonus and director fees be taxed in the year such income are received

Employee Benefits

Employees given tax exemption on allowances, benefits in kind and perquisites from employer as follows:

  1. Petrol card or petrol allowance or travel allowance from home to work up to RM2,400 a year

  2. Petrol card, petrol or travel allowance and toll card for official duties up to RM6,000 a year

  3. Allowance or fees for parking

  4. Meal allowance

  5. Allowance or subsidies for children up to RM2,400 a year

  6. Telephone, mobile phone, phone bills, pager, PDA and Internet subscription

  7. Employers' own goods provided free of charge or at discounted value not exceeding RM1,000 a year

  8. Employers' own services provided free or at discount provided that such benefits are not transferable

  9. Subsidies on interest on loans up to RM300,000 for housing, motor vehicles and education

  10. Medical benefits exempted from tax to include expenses on maternity and traditional medicines

  11. Existing perquisites extended to awards related to innovation, productivity and efficiency with tax exemption increased from RM1,000 to RM2,000 a year

Corporate Sector and Tax Incentives

  • Current year losses set-off against income of another company in the same group increased from 50% to 70%

  • Companies allowed to apply for advance pricing arrangement from Director-General of Inland Revenue (DGIR) to determine transaction prices for income tax purposes

  • Accelerated capital allowance on security equipment extended to all business premises

  • Special provision for DGIR to make adjustments on transaction of goods, services or financial assistance between related companies based on arm's length principle

  • Companies allowed to apply for advance pricing arrangement to DGIR to determine transaction prices for income tax purposes

Cooperative Tax Incentives

  • Tax rate for chargeable income exceeding RM20,000 to RM30,000 reduced one percentage point to 2%

  • Tax rate for chargeable income exceeding RM500,000 reduced one percentage point to 27%

Transport

  • Projects to enhance the capacity of existing rail services, build new tracks, increase number of buses and provide better infrastructure facilities

  • LRT system in Klang Valley extended by 30 km; 15km for Kelana Jaya and Ampang lines, respectively

  • Commuter rails services of KTMB will be upgraded

  • Road tax on private saloon and non-saloon diesel vehicles reduced and equated with petrol vehicles

  • Sales tax exemption for bus operators on purchase of locally assembled buses, including air-conditioners

  • Expenses incurred in purchasing new buses given accelerated capital allowance

  • Road tax reduced to RM20 a year on buses, taxis and hire cars

  • Franchise holder of hybrid cars given 100% import duty and 50% excise duty exemptions on new CBU hybrid cars

Hotel and Tourism

  • Pioneer status or investment of tax allowance incentives to hotel operators undertaking new investments in 4 and 5-star hotels in Sabah and Sarawak

  • Reimbursement relating to hotel accommodation excluded in the computation of gross technical fees for purpose of withholding tax

Incentives for Foreign Investors/Listings

  • Five-year tax exemption to venture capital companies that invest in companies with at least 30% of funds in seed capital, start-up or early stage financing

  • To reduce cost of corporate advisers to attract foreign companies and listings, the fees received by corporate advisers for primary, dual or cross listings are exempted

Small and Medium Enterprises (SME)

  • SMEs given accelerated capital allowance on expenses incurred on plant and machinery acquired in 2009 and 2010

  • SMEs not subject to maximum limit of RM10,000 for capital allowance on small valued assets

Islamic Financial Services

  • Tax exemption on fees earned by institutions in activities related to arranging, underwriting and distributing of non-ringgit sukuk issued in Malaysia but distributed outside

  • Tax exemption on profits by institution from trading of non-ringgit sukuk issued in Malaysia

Stamp Duty

  • 50% stamp duty exemption on loan agreement instruments executed for purchase of residential properties of up to RM250,000.

  • Full exemption on all instruments including loan agreements for purchase of low cost houses

  • Loan agreement and service agreement instruments subject to ad valorem stamp duty rates of RM5 for every RM1,000 (Education loans fixed at RM10)

Real Estate Investment Trusts

  • Final withholding tax on foreign institutional investors reduced to 10%

  • Withholding tax rate on non-corporate investors reduced to 10%

Corporate Social Responsibility

  • Charitable projects eligible for deduction for the purpose of tax computation to include projects related to increase the income of the poor as well as preservation of environment

  • Limit for tax deductions on contributions for purpose of tax computation increased from 7% to 10% of aggregate income

Agriculture

  • Provide 220,000 farmers with incentives to increase padi output

  • Cost of living allowance to benefit 100,000 fishermen and fishing boat owners

  • Chicken and duck rearers who reinvest to expand closed-house system given reinvestment allowance of 60% on qualifying capital expenditure

Human Capital

  • Recruitment cost incurred before the commencement of operations allowed as deduction for the purpose of tax computation

  • Double deduction given on expenses incurred by employers in training their employees in post graduate courses such as ICT, electronics, life sciences, allied health care and aircraft maintenance engineering

  • Withholding tax exemption to non-resident experts on income received on training in selected fields

Information and Communication Technology (ICT)

  • Period to claim accelerated capital allowance on expenses incurred on ICT equipment accelerated from two years to one year

Energy

  • Import duty and sales tax exemption on solar system equipment system for usage by third parties be given to importers

  • Sales tax exemption on purchase of solar heating system equipment from local manufacturers

  • Exemption of import duty and sales tax given on energy efficiency equipment

Tobacco

  • Excise duty for a 20-stick pack of cigarettes increased by 60 sen

  • Excise duty for cigars, cheroots and cigarillos increased to RM180 per kg and 20%

Trade Liberalisation

  • Import duty on ground nuts, sardines and fruit juices abolished

  • Import duty on electric goods and components abolished

  • Import duty on fertilisers and pesticides abolished

  • Import duty between 10% and 30% on coffee paste, tomato sauce and monosodium glutamate reduced to between 5% and 15%

  • Import duty between 15% and 30% on blenders, rice cookers, microwave ovens and electric kettles reduced to between 5% and 20%

  • Import duty between 10% and 30% on rubber mats, rubber tubes and plastic bottles reduced to between 5% and 20%

  • Import duty of 20% on port cranes reduced to 5%

  • Import duty of between 25% and 60% on carpets and glassware reduced to between 20% and 30%

  • Import duty on vermicelli, biscuits, mixed fruit juice and sweet corn exempted

Civil Servants and Pensioners

  • Civil servants to get one-month bonus or at least RM1,000 for 2008, to be paid in two instalments

  • Civil servants given free return airfares to their home states every year between Peninsular Malaysia and Sabah and Sarawak

  • Civil servants with monthly household income of RM3,000 to receive subsidy of RM180 towards Taska fees for their young children

  • Pensioners who served at least 25 years upon retirement be given pension of not less than RM720 per month

Eradicating Poverty

  • Households with monthly electricity bills of RM20 or less will not have to pay electricity for one year

  • Allocation to build 1,400 new houses and repair 1,000 houses with priority given to senior citizens, disabled, single parents with many dependents and victims of natural disasters

  • Measures to increase income and enhance quality of life of Malaysians

Less Fortunate

  • Monthly allowance of RM150 to the disabled who are unable to work

  • Monthly allowance for disabled students in special education schools increased from RM50 to RM150

  • Teaching assistants in special education schools provided incentive payments of RM200 a month

Other changes

  • Specific provisions in the Income Tax Act 1967 to be introduced on tax treatment of clubs

  • Professional associations to be incorporated in the definition of trade associations

  • Special provision to be introduced to provide balancing allowance of cost of dismantling and removing plant and machinery as well as site restoration

  • Reinvestment allowance on manufacturing activity given more specific and clear definition under Schedule 7A, Income Tax Act 1967

  • Provision to claw back reinvestment allowance for assets disposed within two years from the date of purchase be extended to five years


Source: www.theedgedaily.com