Budget seminar 2014

LOH BOON HOW,
CHARTERED ACCOUNTANT
Malaysia Budget
2014 Highlight

B.H. Loh & Associates
Real Property Gain
Tax
Act (RPGT)1976

RPGT Penalty
Current provision (Sec 14 & 15, RPGT 1976)
 If disposer provides incorrect notification (CKHT 3)
to acquirer resulting in no retention made, penalty
will be charged at 10% of tax payable,
Proposal (Sec 14(5), 15(4) & 29(4), RPGT 1976)
 Tax payable means amount of tax charged on
chargeable gain excluding allowable loss.
(Coming into operation of this Act)

RPGT calculation
RM RM
Sales 180,000
Purchase cost 100,000
Incidental cost 30,000 (130,000)
Net profit 50,000
Waiver (RM10,000 or 10%,
whichever the higher)
(10,000)
Chargeable gain 40,000

Purchase of property
 Raise the minimum price of property that can be
purchase by foreigner to 1 million ringgit from
RM500,000.
 Prohibited developers from implementing projects
that have features of Developer Interest Bearing
Scheme (DIBS) to prevent developers from
incorporating interest rates on loans in house
prices during the construction periods.

Director’s liabilities
Director’s liabilities (Para 5(4)(b), Sch 1 RPGT)
Current provision
 Company director with more than 50% ownership
jointly liable for company’s tax or debt.
Proposal
 Company director with not less than 20% ownership
jointly liable. (W.e.f coming into operation of this
Act)

Real Properties RPGT current rates
Companies Citizen
Individua
l
Non-
citizen
Individua
l
Within 2th years 15% 15% 15%
In 3th years 10% 10% 10%
In the 6th year
and subsequent
years
0% 0% 0%

Real Properties RPGT proposed
rates
Companies Citizen
Individual
Non-
citizen
individual
Within the 3rd
years
30 30 30
In the 4th year 20 20 30
In the 5th year 15 15 30
In the 6th year and
subsequent years
5 0 5
W.e.f 1st Jan 2014

Good And Service
Tax (GST)

Good and Service Tax (GST)
 The GST will be effective from 1 April
2015 and fixed at 6%. GST replaces current
sales tax (10%) and service tax (6%).
Exemption
 The GST will not impose on basic food items
such as rice, sugar, salt, piped water supply,
200 units of electricity /month.

Good and Service Tax (GST)
 The GST will not impose on the issuance of
passports, licenses, health services and
transportation service such as bus, train,
LRT, Taxi and highway tolls.
 Sales, purchase and rental of resident
properties and selected financial services are
exempted from GST.

Incentive to accommodate GST
1. The deduction allowed (w.e.f 2015)
 Secretarial fees up to RM5,000
 Tax filing fees up to RM10,000
2. Further deduction for resident company on
expenses in relation to training of full-time
employee in accounting and ICT for the
implementation of GST. (W.e.f YA 2014 – YA
2015)

Incentive to accommodate GST
 Accelerated capital allowance on capital
expenditure incurred on ICT equipment
used for business. (W.e.f YA 2014 – YA 2016)
(Initial allowance 20% and annual allowance
80%)
 One-off assistance of RM300.00 to households who
are BR1M recipients to cope with GST.

Income Tax Act 1967
(Corporate tax)

Basis period of business
Basis period of business(Sec 21A(3) ITA 1967)
Current provision
 Basis period may be directed by DGIR if
taxpayer with 12 months accounts ending on
other than 31st December fails to make up
account on the same day the following year.

Proposal
 Direction on basis period applicable to all 12 months
account which fails to close account at normal date.
(W.e.f YA 2014)
Current provision (Sec 21A(4))
 Taxpayer commences operation in basis year and
makes up 12 months accounts ending other than 31
December, shall have no basis period for the first
year. (W.e.f YA 2014)

Proposal
 Accounting period shall be the basis period for the
first year of assessment where the account prepared
for :
Period < 12 months ending in that basis year
Any period of months ending in the following basis
year,
Period > 12 months ending in the following 2 basis
years (W.e.f YA 2014)

Basis period of business (First commence)
More that 12
months
YA months Filing
deadline
1/2/13 – 30/4/14 2014 15 30/11/14
1/5/14 – 30/4/15 2015 12 30/11/15
Less that 12
months
YA Months Filing
deadline
1/5/13 – 31/3/14 2014 11 31/10/14
1/4/14 – 31/3/15 2015 12 31/10/15

Basis period of business (First commence)
More that 12 months YA Months Filing
deadline
1/11/13 – 30/4/15 2015 18 30/11/2015
1/5/15 – 30/4/16 2016 12 30/11/2016
Overlapping period
(change of accounting)
YA Filing
deadline
1/1/13 – 31/12/13 2013 31/07/2013
1/1/14 – 31/12/14 2014 31/03/2016
1/10/14 – 30/9/15 2015 31/03/2016

Basis period of business (Change of accounting
period)
Less that 12
months
YA months Filing
deadline
1/1/13 – 31/12/13 2013 12 31/07/2014
1/1/14 –
30/09/14
2014 9 30/04/2015
1/10/14 –
30/9/15
2015 12 30/04/2016

Business income
Current provision (Sec 24(1), ITA 1967)
 Business income arises from any stock in trade sold
(or disposed of by requisition or compulsory
acquisition),
Proposal (Sec 24(1)(aa)
 Debt owing from any stock in trade parted with by
any element of compulsion including on
requisition or compulsory acquisition shall be
treated as gross business income. (W.e.f YA
2014)

Interest obtainable on demand
Interest obtainable on demand (Sec 29(3) ITA 1967)
Current provision
 Interest receivable shall be treated as income when
received,
 Interest income treated as being received when
obtainable on demand,
Proposal
Loan between related parties –
 Interest deemed obtainable on demand when
interest is due to be paid (W.e.f YA 2014)

Deductible expenses
1) Minimum wage (Income tax rules)
 Further deduction to employer who pays minimum
wage to employee
 The employer includes SME and cooperative society,
 The difference between wage paid (For example) in
Jan 2014 and Dec 2013.
 Full time employee but excluding domestic servant.
(W.e.f 1/1/2014 – 31/12/2014)

Deductible expenses
Minimum wage for employee in Peninsular Malaysia
is RM900.00. Further deduction for employee in
Selangor who pays minimum wage to employee A.
RM
Wage paid on 31st Jan 2014 900.00
Less : Wage paid on 31st December 2013 550.00
Amount of further deduction for 1
month
350.00
Total amount of further deduction for a year is
RM350 x 12 = RM4,200

Deductible expenses
2) Flexible work arrangement (FWA) (Income tax
rules)
 Further deduction for company on expenses incurred
for
(a) training program for employee (FWA)
(b) consultation for preparation structure (FWA)
 Malaysia resident company approved as FWA status
by the Talent Corporation Malaysia Berhad.

Deductible expenses
 Effective for applications received by Talent
Corporation Malaysia Berhad from 1/1/2014 –
31/12/2016.

Deductible expenses
3) Entertainment (Sec 18, ITA 1967)
 The definition of entertainment previously as
provision of food, drink, recreation and hospitality
of any kind and accommodation or travel,
 The definition of entertainment expanded to any
expenses incurred for the promotion of a
business with or without consideration. The
deduction would be 100% or 50%. (W.e.f 2014)

Deductible expenses
4) Interest obtainable on demand (Sec 33(4), ITA
1967)
Current provision
 Deduction allowed includes any sum payable by
way of interest in arriving at adjusted business
income.
Proposal
 Interest payable shall be deducted when it is due to
be paid,
 Deduction to be given in the respective YA. (W.e.f
YA 2014)

Deductible expenses
5) Approved organisation (Sec 44(6) & 44(7))
Current provision
 Deduction is allowed on donation made to an
approved building fund used for construction,
improvement or maintenance of building,
Proposal
 Deduction is extended to fund for the purchase of
a building, (W.e.f 2014)

Double deduction
1. Venture development program (VDP) (Income Tax
Rules)
 VDP is a structured program to develop new vendor
or strengthening existing vendor company at
domestic and international level,
 Double deduction given to anchor company on
operational expenses in related to VDP for 3 YAs,
(1/1/2014 – 31/12/2016)

Double deduction
 Expenditure must be verified by MITI and incentive
shall not exceed RM300,000 each year,
 Qualifying expenses : product development, R & D,
innovation, quality improvement, capacity
improvement and human capital development.
(W.e.f 1/1/2014 – 31/12/2016)

Not deductible expenses
Deduction not allowed (Sec 39(1A), ITA 1967)
 The deduction not allowed if information required by
DGIR under Sec 81 – power to call for information is
not furnished within specified or extended time.
(W.e.f YA 2014)

Capital expenditure
Accelerate Capital Allowance (ACA)
 A person incurs capital expenditure to purchase ICT
equipment to be used in his business is entitle to
claim an initial allowance 20% & annual allowance
80%.
 Effective for YA 2009 – YA 2013, to extend the
incentive for another 3 YAs. (W.e.f – YA2014 –
YA2016)

Capital expenditure
Conversion to Limited Liability Partnership (LLP)
Proposal
1) Para 38B and 40 Sch 3, ITA 1967
 Control transfer provisions apply on assets
transferred,

Capital expenditure
2) Para 76A, Sch 3, ITA 1967
 LLP is not entitled to claim allowances for the YA in
which conversion takes place unless no allowance
has been claimed by the partners or the company for
that YA. (W.e.f coming into operation of this act)

Permitted expenses
Permitted expenses (Sec 60F, 60H and 63B)
Current Provision
 Deduction allowed on fraction of expenses incurred
by company in accordance with a specified formula
:
Permitted expenses = A x B / 4C
“C” in the formula differs from one section to
another.

Permitted expenses
Proposal
To clarify the gross income in “C” as mentioned in the
formula refers to gross income whether exempt or not.
(W.e.f YA 2014)

Estimation of tax payable
Estimation of tax payable (Sec 107C(4A))
Current provision
 Upon commencement SME need not submit
estimate of tax payable (CP 204) for 2 years,
Proposal (Sec 107C(4A)(c))
Where company has no basis periods for 1st and
following YA : -
 Estimate of tax payable is not required for first
3 YAs and

Estimation of tax payable
 Paid up capital of company is not more than
RM2.5M at commencement date and at beginning of
2 following YAs. (W.e.f YA 2014)

Return of income
Return of income (Sec 77A, ITA 1967)
Current provision
 Company must furnish tax return within 7
months after closing of account either
manually or through E-filing.
Proposed
 E-filing of tax return compulsory for
company
 Tax return must be based on audited
accounts (W.e.f YA 2014)

Corporate Tax rates
 Corporate income tax rate be reduced by 1% from
25% to 24%,
 Income tax rate for small and medium companies
will be reduced by 1% from 20% to 19%. (W.e.f YA
2016)

Right of appeal
Right of appeal (Sec 99, ITA 1967)
Current provision
 An appeal can be made on any assessment by way of
Form Q,
Proposal
 Not applicable to :
Deemed assessment and
Deemed amended assessment

Right of appeal
 Except where the taxpayer is appealing against a
deemed assessment on the issue of a tax treatment in
Public Ruling. (W.e.f coming into operation of this
act)

Disposal of appeal
Disposal of appeal (Sec 102, ITA 1967)
Current provision
 Appeal via Form Q and Mutual Agreement
Procedure (MAP) may be made concurrently,
Proposal
 Appeal via Form Q will be suspended if applicant
invokes MAP on the same issue

Disposal of appeal
 Taxpayer may request to forward Form Q to SCIT
within 1 month after determination of MAP,
 Form Q will be forwarded to SCIT within 3
months after the request. (W.e.f coming into
operation of this Act)

Power to disregard transaction
Power to disregard transaction (Sec 140(2A), ITA
1967)
Current provision
 DGIR has power to disregard or vary transaction and
make adjustment to counter effect of such
transaction by issuing assessment or additional
assessment.

Power to disregard transaction
Proposal
 DGIR may also demand payment of withholding
tax by way of notice.

Income Tax Act 1967
(Individual tax)

Fund Manager Of REIT and BT
Proposal
 Exemption from tax on fee received by a fund
manager approved by the Securities Commission
who manages shariah compliant investment of Real
Estate Investment Trust (REIT) and Business Trust
(BT)

Monthly tax deduction (MTD)
Monthly tax deduction (Sec 77C, ITA 1967)
MTD as final tax and individual taxpayer may elect not
to submit tax return if :
1. He has only one source of income i.e employment
income (without BIK and living accommodation)
2. Tax deducted by his employer in accordance with
Income Tax (Deduction From Remuneration)
Rules 1994

3. He was employed by the same employer for 12
months,
4. His tax liability not borne by employer,
5. Spouse did not elect for combine assessment. (w.e.f
YA 2014)

Proposal
 The individual deemed to have made an election
not to submit return if no return is furnished by
30 April,
 MTD deemed as tax payable for that year of
assessment,
 DGIR may raise assessment under Sec 90(3) -
assessment or Sec 91 – additional assessment and
the deemed final tax will be disregarded (W.e.f YA
2014)

Middle Income Individual
Middle income individual (Income tax rules)
 The exemption given to an individual who is resident
in Malaysia from the payment of income tax,
 His aggregate income shall not be more than
RM96,000,
 RM2,000 chargeable income is exempt, (w.e.f YA
2013 only)

Loan to director
Loan to director (Sec 140B, ITA 1967)
 A company which gives loans / advances from
internal funds to a director is deemed to derived
interest income from such loan.
 Interest income is the aggregate sum of monthly
interest determined by the formula :
1 /12 x A x B

Loan to director
Where A = amount loan / advances outstanding
at end of month,
B = average lending rate (ALR) at end of
month,
 Where interest is charged on the loan, and
1) Total interest payable is more than deemed
interest, the deemed interest is disregarded,
2) Total interest payable is less than deemed
interest, the interest payable is disregarded
(w.e.f YA 2014)

Deemed interest
 Gentlemen Sdn. Bhd. has provided an advance of
RM30,000 to director A on 1/3/2014,
 The calculation of interest income deemed received
by Gentleman Sdn. Bhd. for the year of assessment
2014 is based on the average lending rate published
by Bank Negara Malaysia (Example : 3% throughout
2013)

Deemed interest
Month Monthly interest Deemed interest
March 100,000 x 3% x 1/12 250
April (100,000 – 10,000) x 3% x 1/12 225
May 90,000 x 3% x 1/12 225
Jun 90,000 x 3% x 1/12 225
July 90,000 x 3% x 1/12 225
August 90,000 x 3% x 1/12 225
Sept (90,000 + 30,000) x 3% x 1/12 300
Oct 120,000 x 3% x 1/12 300
Nov 120,000 x 3% x 1/12 300
Dec 120,000 x 3% x 1/12 300
Total interest income under 4(c) 2,575

Director’s liabilities
Director’s liabilities (Sec 75A, ITA 1967)
Current provision
 Company director with more than 50% ownership
jointly liable for company’s tax or debt.
Proposal
 Company director with not less than 20% ownership
jointly liable. (W.e.f coming into operation of this
Act)

Deferred Annuity And PRS
Deferred Annuity And PRS (Sec 2, Para 6(1)(l))
Current provision
 Maximum deduction RM3,000 given on payment for
any deferred annuity or Private Retirement Scheme
(PRS) ,
 Withholding tax on withdrawal before 55 years old of
contribution to PRS except due to death or leaving
Malaysia.

Proposal
 To define deferred annuity as those with Retirement
Saving Standard (RSS) features set by BNM,
 To extend withholding tax to withdrawal of
deferred annuity,
 To extend non-application of withholding tax to
permanent total disablement, serious disease
and mental disability (w.e.f YA 2014)

Deferred Annuity and PRS (Amendment Para 6(1),
Sec 109G and Part XVI, Sch 1)
 To extend deduction for deferred annuity to include
deferred annuity on life of spouse. (w.e.f coming
into operation of this act)

 A relief a one-off incentive of RM500 within a
year for those who age from 20 to 30 years, has
invested at least RM1,000 in PRS fund and the
incentive for 5 years. (W.e.f 1/1/2014)

Personal tax rate
 Personal income tax rates be reduced by 1% to 3%
for all tax payers,
 Chargeable income subject to the maximum rate
will be increased from exceeding RM100,000 to
exceeding RM400,000,
 Current maximum tax rate at 26% to 24%. (W.e.f
YA 2015)

Stamp Act 1949

Person to compound duty
Person to compound duty (Sec 9, ITA 1967)
Current provision
 Banker, dealer, insurer, ROC and TNB authorized to
compound duty on documents like cheques, contract
notes, policies and Article of Association.

Person to compound duty
Proposal
 The authorized person shall keep and retain books,
records and documents in connection with the
authorization for 7 years.

Thank You

Budget seminar 2014

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Budget seminar 2014

Similar to Budget seminar 2014 (20)

More from B.H. Loh & Associates

More from B.H. Loh & Associates (20)

Recently uploaded

Recently uploaded (20)

Budget seminar 2014