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2015 BUDGET HIGHLIGHTS
10 October 2014
Executive Summary
•
Reduction of individual income tax rates of 1% to 3% across various income bands
from Year of Assessment (“YA”) 2015. The maximum individual tax rate is reduced
from 26% to 25%, with the 25% rate applying to chargeable income in excess of
RM400,000.
•
Reduction of the standard corporate tax rate from 25% to 24%. For small and medium
enterprises, the tax rate for chargeable income of up to RM500,000 is proposed to be
reduced to 19%, with the remaining chargeable income subject to tax at 24%. These
changes will be effective from YA 2016.

The due date for monthly instalments for income tax and petroleum income tax has
been revised to the 15th day of the calendar month.

The time limit for the Director General to raise an assessment or additional assessment
for income tax and petroleum income tax has been increased to 7 years for non arm’s
length transactions entered into between associated persons.

The maximum penalty upon conviction shall be increased from RM2,000 to RM20,000
for the failure to furnish a return or give notice of chargeability, or attempting to leave
Malaysia without payment of tax, amongst others.

Tax deductions are given on training expenses incurred by companies for their
employees to obtain industry recognized certifications and professional qualifications
from approved training programmes.

Double deductions are given to companies awarding scholarships and implementing
structured internship programmes for eligible Malaysian students pursuing vocational
and technical courses.

100% income tax exemption for 3 years is given on profits earned by individual
investors from certain investments made through the Investment Account Platform
(“IAP”), a new funding model to finance projects and venture companies based on
Syariah principles.

Tax exemption equivalent to a100% investment tax allowance for 5 years is given to
companies engaging in expansion, modernization or refurbishment where such
companies provide healthcare facilities to qualified healthcare travellers who make up
at least 5% of their total patients.

Additional items have been identified as not being subject to Goods and Services Tax
(“GST”).

Retail sale of petrol (RON 95), diesel and Liquefied Petroleum Gas (“LPG”) are given
relief from payment of GST.

Price watch teams will be jointly set up with consumer associations. The GST
Enforcement Unit, Price Monitoring Unit and Consumer Squads will be strengthened.

50% stamp duty exemption on instruments of transfer and loan agreements executed
by Malaysians for the purchase of their first residential property has been extended to
31 December 2016 for properties not exceeding RM500,000.
2015 BUDGET HIGHLIGHTS
10 October 2014

For real property gains tax purposes, where the consideration for a chargeable asset
consists wholly or partly of money, the purchaser is required to withhold and remit to
the Inland Revenue Board (“IRB”) the whole of that money or 3% of the total value of
the consideration, whichever is lower.
2015 BUDGET HIGHLIGHTS
10 October 2014
Overview and Commentary
The Honorable Prime Minister, YAB Dato’ Sri Mohd. Najib Tun Haji Abdul Razak, tabled the 2015 Budget
on Friday, 10 October 2014.
The 2015 Budget carries the theme “People Economy” and once again underlines the Government’s
commitment to ensure that the National Budget is crafted with the intention to promote the well-being of
the rakyat.
Our economy grew by 6.3% in the first half of 2014, the highest amongst ASEAN countries. In line with
this, the 2015 Budget contains an allocation of RM223.4 billion for operating expenditure and RM50.5
billion for development expenditure. The Federal Government expects to fund this expenditure with
revenue of RM235.2 billion.
These prudent Government fiscal policies should therefore result in a further contraction of our fiscal
deficit to 3% of GDP in 2015.
Notwithstanding the above, the Government recognises that with the impending introduction of GST, the
rakyat may suffer from increased costs of living in some areas. In view of this, various incentives and
schemes have been and are still being designed with the rakyat in mind to help ease them into the GSTera.
Malaysia’s 56th Budget outlines seven main strategies as follows:
•
Strengthening Economic Growth;
•
Enhancing Fiscal Governance;
•
Developing Human Capital and Entrepreneurship;
•
Advancing Bumiputra Agenda;
•
Upholding Role of Women;
•
Developing National Youth Transformation Programme; and
•
Prioritising Well-Being of the Rakyat.
In line with the above, some of the significant measures proposed in the 2015 Budget are:
2015 BUDGET HIGHLIGHTS
10 October 2014
Goods and Services Tax
The Government continues to recognise the
need to support the rakyat, especially the lower
income group, so that they will be less burdened
by the imposition of GST. The list of products and
services not subject to GST has therefore been
expanded to cover additional basic food items and
services as well as RON95 petrol, diesel and LPG.
A host of other incentives
and financial assistance
programmes have also been
announced to prepare the
nation for GST
implementation.
It is crucial that businesses be
ready to embrace GST in view
of its approaching
implementation date of 1 April
2015. Businesses that have yet
to consider the GST impact on
their operations, or register for
GST, may find themselves
unprepared to meet the financial
impact and compliance
requirements of a GST regime.
Incentive for the Manufacturing
Sector
The Government remains keen to
encourage our manufacturing sector
to de-emphasise labour intensive
processes. An incentive is now being
introduced in the form of enhanced
capital allowances on automation
expenditure to encourage automation
in this sector.
2015 BUDGET HIGHLIGHTS
10 October 2014
Individual Tax
The Government’s objective to reduce the tax burden on the rakyat is clear with the following measures
being introduced for individuals:
(i)
Individual income tax rates to be reduced by 1 to 3% which will result in 300,000 individual
taxpayers no longer paying income tax.
(ii)
Increase of allowance for working disabled persons from RM300 to RM350 and financial
assistance for non-working disabled persons to be increased from RM150 to RM200.
(iii)
Increase tax relief for each disabled child from RM5,000 to RM6,000.
(iv)
To reduce the burden of medical expenses and treatment of serious diseases, the Government
proposes the existing tax relief be increased from RM5,000 to RM6,000 per year.
These and the other key changes that have been announced are outlined in the following pages.
Should you have any queries relating to the Highlights or any other tax matters, please feel free to
contact your usual KPMG consultant or send us an email at www.kpmg.com/my
Tai Lai Kok
Executive Director – Head of Tax
KPMG Tax Services Sdn Bhd
2015 BUDGET HIGHLIGHTS
10 October 2014
SUBJECT
BUDGET PROPOSALS
CORPORATE TAX
Review of
Corporate Income
Tax
The corporate tax rate is proposed to be reduced to 24%.
For small and medium enterprises, the tax rate for chargeable income of up
to RM500,000 is proposed to be reduced to 19%. The remaining chargeable
income is proposed to be subjected to tax at a rate of 24%. This preferential
tax rate is also proposed to be limited to a company resident and
incorporated in Malaysia.
The proposals are effective from YA 2016.
Limited Liability
Partnership (LLP) –
Review of Tax
Rates
The tax rate for chargeable income of a LLP resident in Malaysia (which has a
total contribution of capital not exceeding RM2.5 million at the beginning of
the basis period for a YA) of up to RM500,000 is proposed to be reduced to
19%. The remaining chargeable income is proposed to be subjected to tax
at a rate of 24%.
The proposal is effective from YA 2016.
Co-operative
Society – Review of
Tax Rates
It is proposed that income tax rates for co-operatives be reduced by 1% to
2% for chargeable income exceeding RM150,000.
Tax Estimates
Currently, small and medium enterprises are relieved from furnishing tax
estimates for a period of two YAs beginning from the YA the company
commences operation if certain requirements are met. This relief is
proposed to be limited to a company resident and incorporated in Malaysia.
The proposal is effective from YA 2015.
The proposal is effective on the coming into operation of the Finance Act.
Income Deemed
Obtainable on
Demand
It is proposed that income (i.e. gross income from employment, interest,
discount, rent, royalty or any pension, annuity or other periodical payment)
accruing in or derived from Malaysia is deemed obtainable on demand in the
basis period immediately following the basis period when it becomes due.
This applies to transactions:
i.
Between persons one of whom has control over the other;
ii.
Between individuals who are relatives of each other; or
iii.
Between persons both of whom are controlled by some other person.
2015 BUDGET HIGHLIGHTS
10 October 2014
The proposal is effective from YA 2015.
Payment Of Tax By
Instalments
It has been proposed under both the Income Tax Act 1967 (ITA) and
Petroleum (Income Tax) Act 1967 (PITA) that the due date for monthly
instalments be revised from the 10th day of the calendar month to the 15th
day of the calendar month.
The proposals are effective from 1 January 2015.
Set Off for Tax
Charged on
Actuarial Surplus
Under Takaful
Business
To avoid double taxation, it is proposed that where actuarial surplus from the
family fund of a Takaful operator is transferred to the shareholders’ fund, any
amount of tax charged on that portion of the actuarial surplus shall be
allowed as a set-off against the tax charged on the chargeable income of the
Takaful operator in respect of its shareholders’ fund from family business.
The proposal is effective from YA 2015.
Life Fund,
Shareholders’
Fund, General
Business
It is proposed that for the purposes of ascertaining the adjusted income of
the life fund, shareholders’ fund or general business, the expenses incurred
in managing any investments or rights shall be included in the cost of
acquiring and realizing those investments or rights. A formula is provided to
determine the deductible expenses.
The proposal is effective from YA 2015.
Extension of the
Definition of a
Company that
Establishes a
Special Purpose
Vehicle (“SPV”)
At present, where a company incorporates an SPV solely for the issuance of
approved Islamic securities, the SPV is accorded tax transparent status. The
SPV must be incorporated under the Companies Act 1965 or the Labuan
Companies Act 1990.
It is proposed that the definition of “company” (i.e. the entity holding the
SPV) in this context be extended to include a unit trust approved by the
Securities Commission as a Real Estate Investment Trust or Property Trust
Fund.
The proposal is effective from YA 2015.
Chargeability to
Tax on Conversion
from a Partnership
or a Company to an
LLP
It is proposed that:
i.
Where a partnership is converted into an LLP in a YA every partner of
the partnership shall continue to be personally assessable and
chargeable to tax in respect of his chargeable income for that YA (and
previous YAs before the conversion).
ii.
Where a company is converted into an LLP in a YA: The LLP shall be
assessable and chargeable to tax in respect of the chargeable income
2015 BUDGET HIGHLIGHTS
10 October 2014
of the company for that YA (and previous YAs before the conversion) in
the same manner and for the same amount as the company would
have been assessed and charged to tax prior to the conversion.
The proposal is effective on the coming into operation of the Finance Act.
Time Bar For
Assessments
It has been proposed under both the ITA and PITA that the time limit for the
Director General to raise an assessment or additional assessment be
increased to 7 years for transactions entered into between associated
persons not at arm’s length.
The proposals are effective on the coming into operation of the Finance Act.
Increased Penalties
for Various
Offences
Under the proposed amendments to the ITA, the maximum penalty upon
conviction shall be increased from RM2,000 to RM20,000 for the following
offences:
i.
Failure to furnish a return or give notice of chargeability;
ii.
Person voluntarily leaving or attempting to leave Malaysia without
payment of tax; and
iii.
Miscellaneous offences.
The proposal is effective on the coming into operation of the Finance Act.
TAX INCENTIVES
Sukuk
To expand the sukuk market at the international level, it is proposed that the
deduction for expenses incurred for the issuance of sukuks under the
principles of Ijarah and Wakalah be extended for another 3 years.
The proposal is effective from YA 2016 to YA 2018.
Scholarships
At present, companies are given double deduction on scholarships awarded
to Malaysian students pursuing diploma or bachelor degree courses at
specified local institutions of higher learning.
To develop further human capital in vocational and technical fields, it is
proposed that the double deduction incentive be extended to companies
awarding scholarships to eligible Malaysian students studying in these fields
in institutions recognised by the Government.
The double deduction is given on allowable expenses as follows: i.
Fee on course of study required by the institutions recognised by the
Government; and
2015 BUDGET HIGHLIGHTS
10 October 2014
ii.
Educational aid and cost of living expenses throughout the student’s
period of study at the institutions recognised by the Government.
The proposal is effective from YA 2015 to YA 2016.
Double deduction –
Structured
Internship Program
(SIP)
Currently, companies are given double deduction on expenses incurred to
implement SIPs approved by Talent Corporation Malaysia Berhad for
Malaysian students.
To encourage companies to extend the SIP to full time students pursuing
training at the vocational and diploma levels, it is proposed that expenses
incurred in implementing SIP for eligible Malaysian students in vocational and
diploma courses be given double deduction.
The double deduction is given on the following expenses: i.
Minimum monthly allowance of not less than RM500;
ii.
Expenditure incurred for the provision of training to the students;
iii.
Meals, transport and accommodation allowances; and
iv.
Payment to the appointed third party to run the SIP.
The proposal is effective from YA 2015 to YA 2016.
Tax Incentive for
Medical Tourism
Currently, resident companies licensed by the Ministry of Health and
registered with the Malaysian Healthcare Travel Council that provide private
healthcare facilities services to qualified healthcare travellers are given a tax
exemption equivalent to Investment Tax Allowance of 100% of qualifying
capital expenditure incurred for a period of 5 years. The incentive is given to
new companies as well as existing ones that are engaged in expansion,
modernization or refurbishment.
Qualified healthcare travellers are any of the following:i.
Malaysia My Second Home participant and his dependents;
ii.
Expatriate holding a Malaysian work permit and his dependents; or
iii.
Non-Malaysian citizen who visits and receives treatment from private
healthcare facilities in Malaysia.
The above tax incentive is applicable for applications received by the
Malaysian Investment Development Authority (MIDA) by 31 December 2014.
To stimulate the growth of Malaysia as a medical tourism hub, it is proposed
that the above incentive be extended to new companies or existing
companies engaged in expansion, modernization or refurbishment that
provide private healthcare facilities to qualified healthcare travellers who
2015 BUDGET HIGHLIGHTS
10 October 2014
make up at least 5% of their total patients.
The proposal is effective for applications received by MIDA from 1 January
2015 to 31 December 2017.
Tax Incentives for
Promotion and
Development of
Less Developed
Areas
It is proposed that the special incentive packages under the Economic
Corridors are to be enhanced to include more areas that are less developed.
To encourage private sectors to maintain public facilities and infrastructure, it
has been proposed that the following incentives be given:i.
100% income tax exemption for a period of 5 years for companies that
manage, maintain and upgrade industrial estates in less developed
areas;
ii.
70% income tax exemption for a period of 5 years for companies that
manage industrial estates in other areas.
Currently, details of the proposed incentives and their proposed effective
dates have not been released.
Capital Allowance
to Increase
Automation
To encourage automation in the manufacturing sector, the following has
been proposed:i.
For high labour intensive industries (such as rubber products, plastics,
wood, furniture and textiles), an automation capital allowance of 200%
be given on the first RM4 million of capital expenditure incurred; and
ii.
For other industries, an automation capital allowance of 200% be given
on the first RM2 million of capital expenditure incurred.
With respect to item i, the proposal is effective for capital expenditure
incurred within the period from 2015 to 2017.
With respect to item ii, the proposal is effective for capital expenditure
incurred within the period from 2015 to 2020.
Training incentive
To strengthen the development of human capital, it is proposed that a further
deduction be given on training expenses incurred by companies for their
employees to obtain industry recognised certifications and professional
qualifications such as in the field of accounting, finance and project
management from training programs that are approved by agencies
appointed by the Minister of Finance.
The proposal is effective from YA 2015.
Tax Incentive under
IAP is a new funding model based on Syariah principles to be introduced by
2015 BUDGET HIGHLIGHTS
10 October 2014
Investment
Account Platform
(IAP)
the Government with the aim of financing projects and venture companies.
The objective of IAP is to attract participation from individual and institutional
investors to boost development of small and medium enterprises (SMEs) as
well as entrepreneurs.
It is proposed that profit earned by individual investors from investments
made through IAP be given an income tax exemption.
The incentive is subject to the following conditions:
i.
Tax exemption for 3 consecutive years starting from the first year profit
is earned;
ii.
The investment is made for a period of 3 years starting from the
operation date of IAP;
iii.
Tax incentive shall be accorded for investment activities in Malaysia, in
venture companies owned by Malaysian or locally incorporated
companies;
iv.
Tax exemption shall be accorded for investments made in SMEs and
venture companies in any sectors; and
v.
Definition of SMEs is as per the latest definition issued by SME
Corporation Malaysia.
The proposal is effective from the operation date of IAP scheduled to be
from 1 September 2015 to 31 August 2018.
Tax Incentives for
Promotion of HighQuality and
Focused
Investments
To promote high-quality and focused investments, it is proposed that a more
specialised tax incentive package be offered for investment projects that are
based on technology, innovation and knowledge involving highly qualified and
knowledgeable employees with high salaries.
Extension of the
Partial Stamp Duty
Exemption for the
Purchase of First
Residential
Property
At present, instruments of transfer and loan agreements executed by
Malaysians for the purchase of their first residential property not exceeding
RM400,000 are given a 50% stamp duty exemption. The exemption can only
be claimed once.
Currently, details of the proposed incentive and its proposed effective date
have not been released.
To encourage further home ownership for first-time buyers, it is proposed
that the abovementioned stamp duty exemption be extended to 31
December 2016. In addition, the ceiling price of the property is increased to
RM500,000.
This proposal is effective for sale and purchase agreements executed from 1
2015 BUDGET HIGHLIGHTS
10 October 2014
January 2015 to 31 December 2016.
INDIRECT TAX
Additional Items
Not Subject to GST
It is proposed that the following items are not subject to GST:
i.
All types of fruits whether local or imported;
ii.
White bread and wholemeal bread;
iii.
Coffee powder, tea dust and cocoa powder;
iv.
Yellow mee, kuey teow, laksa and meehoon;
v.
The National Essential Medicine covering almost 2,900 medicine
brands. These medicines are used to treat 30 types of diseases
including heart failure, diabetes, hypertension, cancer and fertility
treatment;
vi.
Reading materials such as children’s coloring books, exercise and
reference books, text books, dictionaries and religious books;
vii. Newspapers; and
viii. Supply of the first 300 units of electricity to a domestic household.
GST - Fuel
It is proposed that the retail sale of RON95 petrol, diesel and LPG be given
relief from the payment of GST.
GST Impact on
Prices of Goods
and Services
The prices of 532 items in the basket of goods of the Consumer Price Index
(“CPI”) are expected to reduce by up to 4.1%. Among the goods are
medicines, electrical appliances such as refrigerators and washing machines,
textile products, plastic products such as pails and plates, shoes and slippers,
household furniture, baby diapers, soap, meat, chicken eggs, cooking oil,
seafood, rice and vegetables.
About 354 goods and services may experience some price increase but less
than 5.8%. The Government will disseminate shoppers’ guide to enable
consumers to compare prices before and after the implementation of GST.
GST – Incentives
and Assistance
To assist businesses in the successful implementation of GST, the following
incentives and assistance will be provided:
i.
training grant of RM100 million provided to businesses for their
employees to attend GST courses;
ii.
financial assistance amounting to RM150 million provided to small and
medium enterprises for the purchase of accounting software;
2015 BUDGET HIGHLIGHTS
10 October 2014
GST Enforcement
Export duty
exemption for
crude palm oil
(CPO)
iii.
accelerated capital allowance on the purchase of information and
communication technology (ICT) equipment and software; and
iv.
expenses incurred for training in accounting and ICT relating to GST will
be given an additional tax deduction.
The Government is committed to implementing various initiatives to ensure
traders do not raise prices indiscriminately to burden the Rakyat. The
measures that will be implemented include:
i.
setting up a price watch team comprising of consumer associations; and
ii.
strengthening the GST Enforcement Unit with 2,270 personnel, Price
Monitoring Unit with 1,300 personnel and Consumer Squads with
202,800 volunteers as well as involving 579 mukim and village heads.
The export duty exemption for CPO will be extended until December 2014.
PERSONAL TAX
Review of
Individual Income
Tax
To reduce the tax burden of the Rakyat, it is proposed that the income tax
rates for resident individuals be reduced by 1% to 3%.
The comparison between the current and proposed individual income tax
rates are as set out below:
Current
Chargeable
Income
(RM)
1 - 5,000
Tax
Without
Rebate
Tax
liability
Tax
Rate
Tax
Without
Rebate
Tax
liability
(%)
(RM)
(RM)
(%)
(RM)
(RM)
(RM)
(%)
0
0
0
0
0*
-
-
0*
-
-
500*
300
37.5
2
6
11
1,650
0
1
0*
900
1,200
35,001 – 50,000
0*
300
300
20,001 – 35,000
Tax Savings
Tax
Rate
0
5,001- 20,000
Proposed
150
150
5
800*
750
900
10
1,500
2015 BUDGET HIGHLIGHTS
10 October 2014
2,850
50,001 – 70,000
19
3,800
6,650
70,001 – 100,000
24
26
250,001 – 400,000
26
13,850
52,850
91,850
26
15.8
5,600
1,050
15.8
11,900
1,950
14.1
47,900
4,950
9.4
84,650
7,200
7.8
36,000
47,900
24.5
450
6,300
11,900
24
2,400
3,200
5,600
21
39,000
91,850
Exceeding 400,000
6,650
39,000
52,850
2,400
16
7,200
13,850
100,001 – 250,000
2,850
36,750
84,650
25
*after personal tax rebate of RM400 for chargeable income up to RM35,000.
Non-resident individuals income tax rate is reduced by 1% from 26% to
25%.
The proposal is effective from YA 2015.
Special Child Relief
Currently, an individual taxpayer with an unmarried child who is proven to be
physically or mentally disabled is eligible for a child relief of RM5,000 for
each child.
To alleviate the cost of living of an individual taxpayer with a disabled child, it
is proposed that the tax relief be increased to RM6,000 for each child.
The proposal is effective from YA 2015.
Purchase of
Supporting
Equipment
At present, an individual taxpayer is given tax relief of up to RM5,000 for the
purchase of any necessary basic supporting equipment if he is a disabled
person for his own use or for the use of his spouse, child or parent who is a
disabled person. Basic supporting equipment includes haemodialysis
machines, wheelchairs, artificial limbs and hearing aids.
It is proposed that the above tax relief be increased from RM5,000 to
RM6,000.
The proposal is effective from YA 2015.
Medical Expenses
for Serious Illness
Currently, a tax relief of RM5,000 is given to an individual taxpayer on
medical expenses incurred for the treatment of serious diseases for the
taxpayer, or spouse or child. Eligible expenses are for the medical treatment
of serious diseases such as cancer, kidney failure, heart disease, acquired
2015 BUDGET HIGHLIGHTS
10 October 2014
immune deficiency syndrome, Parkinson’s disease and leukemia.
To reduce the burden of medical expenses and treatment of serious
diseases, it is proposed that the relief be increased to RM6,000.
The proposal is effective from YA 2015.
MISCELLANEOUS
Real Property Gains
Tax (RPGT)
At present, where the consideration for the acquisition of a chargeable asset
consists wholly or partly of money, the purchaser is required to withhold and
remit to the IRB the whole of that money or 2% of the total value of the
consideration, whichever is the lower.
It is proposed that the retention sum withheld be increased from 2% to 3%.
The proposal is effective from 1 January 2015.
RPGT - Technical
Amendments in
Relation to
Disposals of Assets
of Deceased
Persons and Gifts
It is proposed that technical amendments be made to the RPGT Act 1976 in
relation to the deemed market value (for the purposes of ascertaining the
acquisition price) for the following:
i.
Assets acquired prior to 1 January 1970 and disposed of by deceased
persons; and
ii.
Assets disposed of by way of gifts.
The proposals are effective from 1 January 2015.
2015 BUDGET HIGHLIGHTS
10 October 2014
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