Malaysia: 2015 Budget tax implications

The 2015 Budget was tabled by our Prime Minister cum Finance Minister Dato’ Sri Najib Tun Razak in Parliament on 10 October 2014. 

The last Budget under the 10th Malaysia Plan, it addresses key issues to promote fiscal sustainability and ease the transition to GST for businesses and consumers, while placing the nation on a firmer growth trajectory towards Vision 2020. 

Here are the summary of tax implications of 2015 Budget: 

Corporate Income Tax 

Effective from YA 2016 

• Tax rate for a company is reduced by 1% from 25% to 24%. This applies to a trust body, an executor of an estate, a receiver appointed by the court and a limited liability partnership. 

• Income tax rate for companies with a paid-up capital of up to RM2.5m and a limited liability partnership resident in Malaysia which has total contribution of capital of RM2.5m will be reduced by 1% from 20% to 19% 

Effective from YA 2015 

• Further deduction be given on the training expenses incurred by companies for the employees to obtain industry-recognized certifications and professional qualifications such as in the field of accounting, finance and project management. Training programmes are those approved by agencies appointed by the Ministry of Finance. 

• Internship programme be extended for full-time students pursuing courses at the vocational and diploma levels and will be given double deduction for YA 2015 and 2016. 

• The statute of limitation in respect of assessment or additional assessment in connection with transfer pricing to be 7 years as opposed to 5 years under the general case. 

With effect from 1 January 2015, the due date for the estimate of tax payable instalment payments is extended from the tenth day of a calendar month to the fifteenth day of a calendar month. 

Personal Income tax 

With effect from YA 2015 

• Reduction of individual tax rates of 1% to 3% across various income bands. The maximum individual tax rate is reduced from 26% to 25%, with the 25% rate applying to income in excess of RM400,000. The income tax rate for non-resident individuals be reduced by 1% from 26% to 25%. 

• The relief for medical expenses incurred for serious diseases, purchase of basis supporting equipment for the disabled and disabled child be increased from RM5,000 to RM6,000. 

• Currently, interest on loan transactions between related companies is deemed obtainable on demand when the interest is due to be paid and shall be taxed in the relevant period. It was proposed that this treatment be extended to loan transactions between individuals who are relatives of each other. 

• Where a person is entitled to receive any gross income (such as gross income from employment, interest, discount, rent, royalty or any pension, annuity or other periodical payment) from a Malaysian source and where such amount first becomes receivable to the person in the relevant period arising from controlled transactions and transactions between relatives any such amount which first becomes receivable in the relevant period shall be deemed to be obtainable on demand in the following basis period. 

• For person leaving Malaysia without payment of tax, the maximum penalty will be increased from RM2,000 to RM20,000 

• Income derived from withdrawal of a deferred annuity or private retirement scheme received by a person which is subject to deduction of withholding tax of 8% be excluded for the purpose of ascertaining his chargeable income. 

Stamp Duty 

• The existing 50% stamp duty exemption on instruments of transfer and loan agreements be extended to the purchase of the first residential property priced not exceeding RM500,000. This is for sales and purchase agreement executed from 1 January 2015 to 31 December 2016. 

Real Property Gains Tax 

• With effect from 1 January 2015, 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. 

• Tax on gains from the disposal of real property be self-assessed by taxpayers with effect from the year 2016. 

Goods and Services Tax 

• The Goods and Services Tax (GST) will replace the current Sales Tax and Service Tax from 1 April 2015. The Goods and Services Tax Act 2014 was gazetted on 19 June 2014, a tax rate of 6% will be adopted while businesses with an annual taxable turnover of more than RM500,000 must register for the GST.

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