Malaysia 2014 National Budget-Tax updates

The 2014 National Budget with the theme “Strengthening Economic Resilience, Accelerating Transformation and Fulfilling Promises” was tabled on 25 October 2013 by our Prime Minister, YAB Dato’ Sri Mohd. Najib Tun Haji Abdul Razak. 

Five key thrusts of the Budget is: 

• Invigorating economic activity, 

• Strengthening fiscal management, 

• Inculcating excellence in human capital, 

• Intensifying urban and rural development, and 

• Ensuring the people’s well-being, 

The government revealed that a total of RM264.2bil would be allocated under Budget 2014 to implement programmes and projects for national development, with RM217.7bil for operating expenditure and RM46.5bil for development expenditure. 

The Federal Government fiscal deficit will further decline from 4% of GDP in 2013 to 3.5% in 2014. This indicates the Government’s commitment towards fiscal consolidation to further strengthen the financial position of the nation, and as part of the Government’s fiscal consolidation measures, Najib also announced the implementation of goods and services tax (GST) from April 1, 2015, at 6% to replace the existing sales and services tax. 

The 2014 Budget tax highlights are as follows:

Real Property Gains Tax (RPGT) 

Effective from 1 January 2014: 

• For gains on properties disposed within the holding period of up to 3 years, RPGT rate is increased to 30%. 

• For disposals within the holding period up to 4 and 5 years, the rates are increased to 20% and 15%, respectively. 

• For disposal made in 6th and subsequent years no RPGT was imposed on citizens, whereas companies are taxed at 5%. 

• Non-citizens will be subjected to RPGT at a flat rate of 30% for disposals within 5 years and 5% thereafter. 

Goods and Sales Tax (GST) 

• Sales Tax and Service Tax to be abolished and to be replaced by GST at the rate of 6% from 1 April 2015. 

• Basic food items, transportation services, highway tolls, water and first 200 units of electricity for domestic users per month to be exempted from GST. 

• Sale, purchase and rental of residential properties as well as selected financial services are exempted from GST. 

• Training grant of RM100 million will be provided to businesses that send their employees for GST training in 2013 and 2014. 

• Financial assistance amounting to RM150 million will be provided to small and medium enterprises for the purchase of accounting software in 2014 and 2015 

Corporate Tax 

Effective from YA 2016 

• Corporate income tax rate be reduced by 1 percentage from 25% to 24%. 

• Income tax rate for small and medium companies will be reduced by 1 percentage point from 20% to 19%. 

• Accelerated Capital Allowance (ACA) with an initial allowance of 20% and an annual allowance of 80% on information technology and communication (ICT) equipment is extended to YA2016. 

Personal Tax 

• Special tax relief of RM2,000 for tax payers with monthly income of up to RM8,000 (aggregate income up to RM96,000 a year) received in 2013. 

• Individuals who have been subjected to monthly tax deduction (“MTD”) are not required to file tax return if such MTD constitute their final tax from YA2014. 

• Reduction of resident individual tax rate of 1% to 3% across various income bands from YA 2015 

• The maximum resident individual tax rate on chargeable income exceeding RM400,000 from YA 2015 

• Non-resident individuals income tax rate is reduced by 1% from 26% to 25% from YA 2015

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