HIGHLIGHTS OF THE 2017 BUDGET AND FINANCE …...HIGHLIGHTS OF THE 2017 BUDGET AND FINANCE BILL...

HIGHLIGHTS OF THE2017 BUDGET AND

FINANCE BILLFebruary 2017

Copyright © February 2017 by the Malaysian Institute of Accountants (MIA). All rights reserved.

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HIGHLIGHTS OF THE 2017 BUDGET AND FINANCE BILL

Introduction

On 21 October 2016, The Honourable Prime Minister and Minister of Finance, YBhg. Dato’

Seri Najib Tun Razak tabled the 2017 Budget with the theme of ‘Ensuring Unity and

Economic Growth, Inclusive Prudent Spending, Wellbeing of the Rakyat’ in Parliament.

The 2017 Budget outlined five strategies:

Rakyat first

Accelerating economic growth

Empowering human capital

Strengthening inclusive development

Improving public service delivery

To this extent, the Government has announced various tax initiatives and some of the key

measures are as below:

Introduction of three new tax reliefs for individual taxpayers;

Reduction of corporate income tax rate of 1% on the first RM500,000 chargeable income

for SMEs;

Extension of several tax incentives;

Increase in stamp duty rate on instruments of transfer for property value exceeding RM1

million;

Streamlining of GST treatment in Free Zones and Warehousing Scheme; and

New offences and penalties for failure to furnish the income tax return.

The purpose of this publication is to provide MIA members with an update on the tax

proposals introduced.

This publication contains a summary of the tax proposals of the 2017 Budget and the

Finance Bill, divided into the following key areas:

1. Personal Tax

2. Corporate Tax

3. Tax Incentives

4. Stamp Duty

5. Real Property Gains Tax (RPGT)

6. Goods and Services Tax (GST)

7. Tax Administration

8. Others (Petroleum Income Tax and Labuan)

CONTENTS

Page

Personal Tax 1

Corporate Tax 3

Tax Incentives 10

Stamp Duty 13

Real Property Gains Tax (RPGT) 15

Goods and Services Tax (GST) 16

Tax Administration 21

Others (Petroleum Income Tax and Labuan) 24


1

1. PERSONAL TAX

Proposals Summary Statutory Reference

Effective Date

Computation of Gross Employment Income where Output Tax is Borne by Employer

Any gross income from employment income will include any amount of output tax under the Goods and Services Tax Act 2014 (GSTA 2014) which is borne by the employer.

Section 13(1A) of the Income Tax Act 1967

(ITA 1967)

Year of Assessment (YA) 2015

Review of Spouse (Husband/ Wife) Tax Relief

The existing relief of RM4,000 will not apply if the husband or wife has any income derived from sources outside Malaysia and the gross income from such sources exceeds the amount of relief. However, this would not be applicable to a husband or wife who is disabled.

Section 45A(2) of the ITA 1967

Section 47(6) of the ITA 1967

YA 2017

Tax Relief for Lifestyle The existing tax relief for the purchase of reading materials, computer and sports equipment are now combined into a new tax relief known as a lifestyle relief which is limited to RM2,500 per year. The scope of this relief is expanded to include: a. purchase of printed daily newspapers; b. purchase of smartphone or tablet; c. gymnasium membership fees; and d. internet subscription.

Section 46(1)(p) of the ITA 1967

YA 2017

Tax Relief for the Purchase of Breastfeeding Equipment

New tax relief of RM1,000 introduced to female taxpayers with children aged up to 2 years for the purchase of breastfeeding equipment. The purchase can be made either in a complete set or separate parts consisting of breast pump (manual or electric), cooler bag, containers for collection and storage.

Section 46(1)(q) of the ITA 1967

YA 2017


2


Effective Date

Tax Relief for Fees Paid to Child Care Centres and Kindergartens

New tax relief of up to RM1,000 where the taxpayer (either parent of the children) who enrol their children aged up to 6 years in child care centres or kindergartens registered with the Department of Social Welfare or the Ministry of Education.

Section 46(1)(r) of the ITA 1967

YA 2017


3

2. CORPORATE TAX


Effective Date

Reduction of Corporate Tax Rates based on the Increase in Chargeable Income

Currently, the following companies and entities are taxed at a fixed rate of 24%: a. A company with paid-up capital of more than RM2.5 million or a Limited

Liability Partnership (LLP) with total contribution of capital more than RM2.5 million;

b. A company with paid-up capital of up to RM2.5 million or a LLP with total contribution of capital of up to RM2.5 million on the chargeable income more than RM500,000; and

c. Trust body, executor of an estate of an individual who was domiciled outside Malaysia at a time of his death and receiver appointed by the court.

It is proposed that reductions in the income tax rate based on the percentage of increase in chargeable income as compared to the immediate preceding year of assessment be given to the above entities that fulfil the criteria that will be specified in an exemption order. The reduction of the income tax rate is as follows:

Percentage of increase in chargeable income as

compared to the immediate preceding YA

Percentage point reduction

Income tax rate after reduction

(%)

Less than 5.00 Nil 24

5.00 – 9.99 1 23

10.00 – 14.99 2 22

15.00 – 19.99 3 21

20.00 and above 4 20

To be gazetted by way of

statutory order.

YA 2017 & YA 2018

Review of Corporate Income Tax Rate for Small and Medium Enterprises (SMEs)

Currently, companies with paid-up capital of up to RM2.5 million or a LLP with total contribution of capital of up to RM2.5 million are categorised as SMEs for the purpose of income tax and subject to income tax rate of 19% on chargeable income up to RM500,000.

Paragraphs 2A and 2D,

Schedule 1 of the ITA 1967

YA 2017


4


Effective Date

It is proposed that the tax rate for the above entities be reduced by 1% from 19% to 18% on chargeable income up to RM500,000.

Review of Derivation of Special Classes of Income

Section 15A of the ITA 1967 is to be amended where special classes of income under Section 4A(i) and (ii) of the ITA 1967 shall be deemed to be derived from Malaysia irrespective of whether the services were performed in Malaysia or outside Malaysia. Thus payments to non-residents falling under Section 4A(i) and (ii) of the ITA 1967 will be subjected to withholding tax.

Section 4A(i) and (ii) of the ITA 1967

Section 15A of the ITA 1967

Section 109B(1)(a) & (b) of the ITA 1967

Upon coming into operation

of the Finance Act.

Redefinition of “Malaysia “ The term “Malaysia” is redefined as the territories of the Federation of Malaysia, the territorial waters of Malaysia and the sea-bed and subsoil of the territorial waters, and the airspace above such areas, and includes any area extending beyond the limits of the territorial waters of Malaysia, and the sea-bed and subsoil of any such area, which has been or may hereafter be designated under the laws of Malaysia as an area over which Malaysia has sovereign rights or jurisdiction for the purposes of exploring and exploiting the natural resources, whether living or non-living.



of the Finance Act.

Redefinition of Public Entertainer for Withholding Tax purposes

“Public entertainer” is redefined to include: a. a compere, model, circus performer, lecturer, speaker, sportsperson, an

artiste or individual exercising any profession, vocation or employment of a similar nature, or

b. an individual who uses his intellectual, artistic, musical, personal or physical skill or character in,

carrying out any activity in connection with any purpose through live, print, electronic, satellite, cable, fibre optic or other medium, for film or tape, or for television or radio broadcast, as the case may be.



of the Finance Act.


5


Effective Date

Expansion of the Scope of Royalty

The existing definition of “royalty” under Section 2 of the ITA 1967 is amended with the following new definition: “royalty” includes any sums paid as consideration for, or derived from— a. the use of, or the right to use in respect of any copyrights, software, artistic

or scientific works, patents, designs or models, plans, secret processes or formulae, trademarks or other like property or rights;

b. the use of, or the right to use tapes for radio or television broadcasting,

motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights;

c. the use of, or the right to use know-how or information concerning technical,

industrial, commercial or scientific knowledge, experience or skill; d. the reception of, or the right to receive, visual images or sounds, or both,

transmitted to the public by— i. satellite; or ii. cable, fibre optic or similar technology;

e. the use of, or the right to use, visual images or sounds, or both, in

connection with television broadcasting or radio broadcasting, transmitted by— i. satellite; or ii. cable, fibre optic or similar technology;

f. the use of, or the right to use, some or all of the part of the radiofrequency

spectrum specified in a relevant licence; g. a total or partial forbearance in respect of—

i. the use of, or the granting of the right to use, any such property or right as is mentioned in paragraph (a) or (b) or any such knowledge,



of the Finance Act.


6


Effective Date

experience or skill as is mentioned in paragraph (c); ii. the reception of, or the granting of the right to receive, any such visual

images or sounds as are mentioned in paragraph (d); iii. the use of, or the granting of the right to use, any such visual images or

sounds as are mentioned in paragraph (e); or iv. the use of, or the granting of the right to use, some or all such part of the

spectrum specified in a spectrum licence as is mentioned in paragraph (f); or

h. the alienation of any property, know-how or information mentioned in

paragraph (a), (b) or (c) of this definition.

Amendment on Entitlement to Industrial Building Allowance (IBA) on Certain Buildings

The claim for IBA on the buildings specified under Paragraph 16B, Schedule 3 of the ITA 1967 which are used for the purpose of letting of property is as follows:

Floor area of the building used for the purpose of

letting of property

Expenditure that qualifies as industrial building

Less than 1/10 of the floor area of the whole building

The whole building qualifies for IBA

More than 1/10 of the floor area of the whole building

The IBA will only be allowed on the floor area on the part of the building which is not used for the purpose of letting of property

The buildings specified under Paragraph 16B, Schedule 3 of the ITA 1967 has been extended to include buildings used for industrial, technical or vocational training approved by the Minister.

Paragraphs 16B, 16B(2) and

16B(3), Schedule 3 of the ITA 1967

YA 2016

Review of Deduction for Approved Donations

Extended to cash contribution to a fund approved by the Director General and held by an institution or organisation.


YA 2017


7


Effective Date

Contributions are restricted to cash contributions made to any sports activities approved by the Minister of Finance.

“Fund” means a fund administered and augmented by an institution or organisation in Malaysia for the sole purpose of carrying out the objectives for which the fund is established or held and that fund is not established or held primarily for profit.

Section 44(11B) of the ITA 1967


Review of Tax Exemption of Approved Institutions

The tax exemption given to approved institutions will be: a. extended to income received by a fund which has been approved for the

purposes of Section 44(6) of the ITA 1967, and b. given to any contributions received for charitable purposes by a religious

institution or organisation established in Malaysia exclusively for the purpose of religious worship or the advancement of religion and not operated or conducted primarily for profit.

Section 44(7A) of the ITA 1967

Section 44(7B) of the ITA 1967

Paragraphs 13(1)(a) and 13(1)(b), Schedule 6 of the ITA 1967

YA 2017

Increase in the Limit of Tax Deduction for Sponsoring Arts, Cultural and Heritage Activities

To encourage arts, cultural and heritage activities in Malaysia, the existing tax deduction limits have been increased for companies that sponsors such activities, approved by the Ministry of Tourism and Culture:

Activities Existing RM

Proposed RM

Local arts, cultural and heritage activities in Malaysia

500,000 per year 700,000 per year

Foreign arts, cultural and heritage activities in Malaysia

200,000 per year 300,000 per year

Section 34(6)(k) of the ITA 1967

YA 2017

Amendments to Exemption of Interest Income Paid or Credited to a Non-Resident

Paragraph 33A, Schedule 6 of the ITA 1967 provides income tax exemption in respect of interest paid or credited to non-resident companies from the following: a. securities issued by the Government; or

Paragraphs 33A and 33A(2),


YA 2017


8


Effective Date

Company b. sukuk or debenture issued in Ringgit Malaysia, other than convertible loan stock, approved or authorised by, or lodged with, the Securities Commission.

The above exemption shall not apply to interest paid or credited to a company in the same group.

Expenses in relation to Exempt Dividend

Currently, expenses incurred in relation to single-tier dividend are disregarded in computing adjusted income. The above has been widened to refer to deductions instead of expenses in relation to single-tier dividend shall now be disregarded in arriving at chargeable income.

Paragraph 12B, Schedule 6 of the ITA 1967

YA 2017

Extension of Income Tax Exemption for Islamic Banking and Takaful Businesses

Another 4 years exemption is extended to Islamic banking and takaful businesses transacted in foreign currencies.


statutory order.

YA 2017 to YA 2020

Amendment to exemption of interest received by a unit trust

Income derived by a unit trust from Malaysia and paid or credited by any bank or financial institution licensed under the Islamic Financial Services Act 2013 or an Islamic bank licensed under the Islamic Financial Services Act 2013 or any development financial institution regulated under the Development Financial Institutions Act 2002 shall be exempted from income tax. Provided that in the case of a unit trust which is a money market fund, the exemption shall only apply to a wholesale fund which complies with the relevant guidelines of the Securities Commission.

Paragraph 35A, Schedule 6 of the ITA 1967

YA 2017

Amendments to exemption of interest income from sukuk

The exemption under Paragraph 33B of Schedule 6 on interest paid or credited to any person in respect of sukuk originating from Malaysia (other than convertible loan stock) issued in any currency other than Ringgit; and approved or authorised by, or lodged with, the Securities Commission, or approved by the

Paragraphs 33B and 33B(2),


YA 2017


9


Effective Date

Labuan Financial Services Authority shall not apply to: a. interest paid or credited to a company in the same group; b. interest paid or credited to:

i. a bank licensed under the Financial Services Act 2013; ii. an Islamic bank licensed under the Islamic Financial Services Act 2013;

or iii. a development financial institution prescribed under the Development

Financial Institutions Act 2002.

Real Estate Investment Trust or Property Trust Fund

The definition of “unit trust” is amended to mean a unit trust which is approved by the Securities Commission as a Real Estate Investment Trust or Property Trust Fund listed on Bursa Malaysia.

Section 61A(2) of the ITA 1967

YA 2017


10

3. TAX INCENTIVES


Effective Date

Extension of Income Tax Incentives for New 4 and 5 Star Hotels

The following existing tax incentives for Hotel Operators undertaking investments in new 4 and 5 star hotels are extended for another 2 years on the following:

Peninsular Malaysia Sabah & Sarawak

Pioneer status

Exemption of 70% of statutory income for a period of 5 years.

Exemption of 100% of statutory income for a period of 5 years.

Investment tax allowance

Allowance of 60% on the qualifying capital expenditure incurred within a period of 5 years. This allowance can be set-off against 70% of statutory income for each year of assessment.

Allowance of 100% on the qualifying capital expenditure incurred within a period of 5 years. This allowance can be set-off against up to 100% of statutory income for each year of assessment.


statutory order.

Applications received by Malaysian

Development Authority

from 1 Jan 2017 to 31 Dec 2018

Expansion of the Scope of Halal Products Eligible for Incentives for Halal Industry Players

The following existing incentives for Halal Industry Players operating in Halal Parks, promoted by Halal Development Corporation (HDC) are as follows: a. Full income tax exemption on qualifying capital expenditure for a period of

10 years; or income tax exemption on increase of export sales for a period of 5 years;

b. Import duty exemption on raw materials used for the development and production of promoted halal products; and

c. Double deduction on expenses incurred in obtaining international quality standards certification such as HACCP, GMP Codex Alimentarius (food standards guidelines of FAO and WHO), Sanitation Standard Operating Procedures and regulations for compliance for export markets such as Food and Traceability from farm to fork.


statutory order.

Applications received by

HDC from 22 Oct 2016


11


Effective Date

The qualifying halal products are as follows: a. Speciality processed food; b. Pharmaceuticals, cosmetics and personal care; c. Livestock and meat products; and d. Halal ingredients. The existing incentives will be extended to include production of nutraceutical and probiotic products by Halal Industry Players in Halal Parks.

Extension of the Period and Expansion of Scope of Double Deduction for the Structured Internship Programme (SIP)

Currently, double deduction is given on expenses incurred by companies that participate in SIP approved by TalentCorp. The programme is made available for Malaysian students pursuing full-time degree and diploma courses in institutions of higher learning that are registered with the Ministry of Education or for equivalent vocational level as recognized by Malaysian Qualifications Agency or Department of Skills Development as follows: a. degree level – from YA 2012 to YA 2016; and b. diploma and vocational level – from YA 2015 to YA 2016. The current incentive is extended for a period of 3 years and the programme will also be expanded to include Malaysian students pursuing full-time vocational level.


statutory order.

YA 2017 to YA 2019

Extension of Double Deduction for Anchor Companies under Vendor Development Programme (VDP)

Currently, anchor companies that develop local vendor under the VDP and have signed the Memorandum of Understanding (MOU) with the Ministry of International Trade and Industry (MITI) from 1 January 2014 to 31 December 2016 are given double deduction for the following operating expenses: a. cost of product development, R&D, innovation and quality improvement; b. cost of obtaining ISO/Kaizen/5S certifications, evaluation programme and

business process reengineering for the purpose of increasing vendor capabilities; and


statutory order.

For MOUs signed

between anchor

companies and MITI

from 1 Jan 2017 to

31 Dec 2020


12


Effective Date

c. cost of vendor skills training, capacity building, lean management system and financial management system.

The qualifying criteria for the double deduction are as follows: a. the qualifying operating expenses must be certified by MITI before the

anchor companies can claim the deduction; b. qualifying operating expenses are capped at RM300,000 per year; and c. deduction is given for 3 years of assessment. To further encourage the participation of anchor companies in developing more competitive local vendors, the incentive for anchor companies that implement VDP will be extended for another 4 years.


13

4. STAMP DUTY


Effective Date

Extension of Stamp Duty Exemption for the Purchase of First Residential Property

Stamp duty exemption will be given as follows:

Property Price Stamp Duty Exemption

RM300,000 and below

100% stamp duty exemption on instrument of transfer and loan agreement

RM300,001 to RM500,000

100% stamp duty exemption on instrument of transfer and loan agreement for value of the property up to RM300,000. The remaining value of the property is subject to the prevailing rate of stamp duty.


statutory order.

For sale and purchase

agreements executed

from 1 Jan 2017 to 31 Dec 2018.

Revision in Stamp Duty Rates

The rate of stamp duty on instruments for conveyance, assignment or transfer of any property (except stock, shares or marketable securities) valued at more than RM1 million will be increased from 3% to 4%. The new rates are as follows:

Value RM

Rate Duty payable

RM

On the first 100,000 RM1 per RM100 or part thereof 1,000

On the next 400,000 RM2 per RM100 or part thereof 8,000

On the next 500,000 RM3 per RM100 or part thereof 15,000

1,000,000 24,000

In excess of 1,000,000 RM4 per RM100 or part thereof

Item 32(a) of First Schedule of the Stamp

Act 1949

1 Jan 2018


14


Effective Date

Extension of Stamp Duty Exemption for Islamic Banking and Takaful Business

The existing full stamp duty exemption is given on the instruments for transactions in foreign currencies relating to Islamic banking or takaful activities executed between an International Currency Business Unit (ICBU) and a resident customer or a non-resident customer from 1 January 2007 to 31 December 2016. The stamp duty exemption is extended for another 4 years.


statutory order.

For instruments executed

from 1 Jan 2017 to 31 Dec 2020.


15

5. REAL PROPERTY GAINS TAX (RPGT)


Effective Date

Submission of RPGT returns by a nominee

Section 13(4) of the RPGT Act 1976 is amended by deleting the words “in Kuala Lumpur”. A nominee shall furnish the return to any of the offices of the Director General of Inland Revenue in Malaysia where the nominee has no place of business or abode in Malaysia.

Section 13(4) of the RPGT Act

1976


of the Finance Act.

Redefinition of Islamic Bank

The definition of “Islamic bank” has been amended following the enactment of the Islamic Financial Services Act 2013 and the repeal of the Islamic Banking Act 1983. “Islamic bank” means a licensed Islamic bank under the Islamic Financial Services Act 2013.

Paragraph 1(1), Schedule 2 of the RPGT Act

1976

30 June 2013

Input Tax Adjustment on Expenditure relating to Acquisition or Disposal of Asset

Where the input tax relates to the incidental cost or excluded expenditure for the acquisition or disposal of a chargeable asset which is subject to any adjustment made under the GSTA 2014, the corresponding amount shall be determined in accordance with the amount of adjustment made to such input tax in the year of assessment the disposal is made or at the end of the adjustment period as allowed under the GSTA 2014, whichever is earlier.

Paragraphs 6(1A) and 7,

Schedule 2 of the RPGT Act

1976

YA 2015

Disposal by way of gift Any disposal of a chargeable asset by way of a gift (where the donor and recipient are husband and wife, parent and child or grandparent and grandchild) shall be deemed to have received no gain no loss, provided a donor is a citizen.

Paragraph 12(2), Schedule 2 of the RPGT

Act 1976

1 Jan 2017


16

6. GOODS AND SERVICES TAX (GST)


Effective Date

Review of GST Relief for Disabled Persons

The list of equipment that is eligible for the GST relief has been widened to include the following: a. Calipers; b. Artificial prosthetic and orthotic; c. Motorised wheelchair; d. Home care/ hospital bed; e. Braille display; f. Vibrating alarm indicators; g. Flashing/ signaling device; h. Magnifier; i. Special lenses; j. Optical character recognition (OCR) equipment; k. Medical cushion; l. Ripple mattress; m. Walking frame; n. Crutches and rubber ends; o. Vehicle wheelchair lift and restraints; p. Portable ramps; q. Hand controls for driving; r. Shower chair; s. Commode chair; and t. Teletypewriter.


statutory order.

1 Jan 2017

Definition of Free Zone The definition of free zone is amended to follow the meaning in Section 2(1) of the Free Zones Act 1990.

Section 2 of the GSTA 2014

1 Jan 2017

Supply of Imported Services

The time of supply of imported services to be at the earlier of payment made or invoice received from the supplier.

Section 13(4)(b) of the GSTA

2014

1 Jan 2017


17


Effective Date

Liability to be Registered Section 20(6)(a) of the GSTA 2014 is amended to exclude the sale of capital assets due to cessation of business when computing the taxable turnover.

Section 20(6)(f) of the GSTA 2014 is introduced to exclude the supplies of goods made within or between free zones when computing the taxable turnover, unless specified under Section 163(1) of the GSTA 2014.

Section 20(6) of the GSTA 2014

1 Jan 2017

Issuance of Tax Invoice Any registered person shall not issue any invoice containing an element of GST for a supply which is not a taxable supply or zero-rated supply.

Any unregistered person, except auctioneers under Section 65(4) or persons empowered to sell business assets of a taxable person in satisfaction of a debt owed by the taxable person under Section 65(5), shall not issue any invoice which purports to be a tax invoice or contains an element of GST.


Section 33(10A) of the GSTA 2014

1 Jan 2017

Prescribed Registered Person to Provide Information on Supply Made and Payment Received

The new Section 34A of the GSTA 2014 is introduced to allow the Royal Malaysian Customs Department (RMCD) to install a prescribed device in a registered person’s premises to obtain information regarding supplies made and payments received by such person.

The RMCD may approve any person to install, service or inspect the prescribed device and the registered person to allow the approved person to do so. Failure to comply is proposed to commit an offence.

Section 34B of the GSTA 2014 is also introduced to provide that any person who has access to the information on the prescribed device is not allowed to disclose such information unless allowed under the GSTA or by any court or for the performance of his duties of powers under the GSTA. Any unauthorised disclosure is proposed to commit an offence.

Section 34A of the GSTA 2014

Section 34B of the GSTA 2014

1 Jan 2017


18


Effective Date

Furnishing of Returns and Payment of Tax

a. Section 41(8) of the GSTA 2014 is amended to:

increase the maximum penalty amount from 25% to 40%, and

clarify that the penalty will now apply on the tax remaining unpaid instead of the amount of tax due and payable.

The incremental penalty have been increased as follows:

First 30 days 10%

31 – 60 days Additional 15%

61 – 90 days Additional 15%

b. The same provisions have been incorporated into Section 42(4) of the

GSTA 2014 which applies to person other than a taxable person.



1 Jan 2017

1 Jan 2017

Recovery of Tax from Persons Leaving Malaysia

Section 49(1)(b) of the GSTA 2014 is amended to allow the RMCD to prevent a person from leaving Malaysia if he is unable to recover unpaid monies and penalties payable under Sections 41 and 42 of the GSTA 2014.

Section 49(1)(b) of the GSTA

2014

1 Jan 2017

Payment by Instalments Where the tax is allowed to be paid by instalments, the penalty under Sections 41(8) or 42(4) of the GSTA 2014 shall cease to be calculated from the date the Director General allows payment by instalments.


1 Jan 2017

Review of GST Treatment in Free Zones

To streamline the GST treatment in the free zones which consist of Free Industrial Zone (FIZ) and Free Commercial Zone (FCZ), the GST treatment will be determined as follows: a. GST is not chargeable on the supply and removal of goods made within

and between FCZ; b. GST shall not be due and payable on the goods imported into the FIZ; c. GST is not chargeable on the supply and removal of goods made within

and between FIZ; d. GST is not chargeable on the supply and removal of goods made within

FCZ and FIZ, vice versa; e. GST is suspended on the removal of goods from free zone to Designated


1 Jan 2017


19


Effective Date

Areas i.e. Langkawi, Labuan and Tioman, vice versa; and f. GST is suspended on the removal of goods from free zone to an

approved warehouse under the Warehousing Scheme, vice versa. The above GST treatment shall not be applicable on the following supplies: a. Goods as prescribed under the Free Zones (Exemption of Goods and

Services) Order 1998; b. Goods and services as prescribed under Goods and Services Tax

(Imposition of Tax for Supplies in Respect of Designated Areas) Order 2014; and

c. Any other goods prescribed by the Minister of Finance.

Review of GST Treatment under the Warehousing Scheme

To streamline GST treatment between imported goods and goods from Principal Customs Area (PCA) and to facilitate the GST administration under the Warehousing Scheme, no GST shall be charged on the goods from PCA which consist of the Licensed Manufacturing Warehouse, Excise Warehouse and FIZ that are deposited into and supplied within and between warehouses under the Warehousing Scheme.


1 Jan 2017

Approved Toll Manufacturer Scheme

The supply of the treated or processed goods shall be regarded as taking place at whichever is the earlier of: a. whenever a payment is made; or b. whenever the recipient receives an invoice.


1 Jan 2017

Approved Jeweller Scheme

The prescribed supply of goods shall be treated as taking place at whichever is the earlier of: a. whenever a payment is made; or b. when the approved jeweller receives a tax invoice.


1 Jan 2017

Goods or Services Imported Into or Supplied To or From Designated Area

Section 156(a) of the GSTA 2014 is amended to prescribe any transfer of goods including goods under a lease agreement from a designated area through Malaysia to another designated area or to Malaysia is deemed as an import.

Section 156(a) of the GSTA 2014

1 Jan 2017


20


Effective Date

Section 156(aa) of the GSTA 2014 is introduced, which allows GST to be suspended on any goods removed from a designated area through Malaysia to another designated area, to a Free Zone or to a warehouse under Section 70 of the GSTA 2014.

Section 156(aa) of the GSTA 2014

Land Supplied to Government for the Purposes of Providing Public Amenities and Public Utilities

Paragraph 8 to be introduced in the Second Schedule of the GSTA 2014 to provide that any supply of land to the Federal Government, a State Government, a local authority or any other person in compliance with the requirement of any written law for the purpose of providing public amenities and public utilities (for no consideration or at nominal value) shall be treated as neither a supply of goods nor services, and therefore, not subject to GST.

Paragraph 8, Second

Schedule of the GSTA 2014

1 Jan 2017


21

7. TAX ADMINISTRATION


Effective Date

Appeals and Notification of Non-Chargeability

Amendments are to be made in respect of Section 97A of the ITA 1967 which include the following: a. where a person is aggrieved by the public ruling made under Section 138A

of the ITA 1967 or any practice of the Director General generally prevailing at the time when the return is furnished, that return shall be deemed to be a notification made by the Director General on the day the return is furnished and that person shall be deemed to have been notified by the Director General on the said day.

b. the aggrieved person may appeal against the notification within a time or such other extended period as specified in the subsections and the provisions relating to appeal under the ITA 1967 shall apply accordingly with necessary modifications.

c. Sections 97A(5), (6), (7) and (8) of the ITA 1967 will provide for a person to

appeal against a return furnished in accordance with Sections 77 or s 77A(1) of the ITA 1967 that has no chargeable income within a specified period and subject to requirements under the subsection if the person alleges that there is an error or a mistake in the amount computed in the return.

d. provide that a person may apply for relief when a person alleges that the

amount computed in the return is inaccurate where the reason is that the person is not being eligible to claim any exemption, relief, remission, allowance or deduction at the time such return is furnished as the law relating to such relief has not been published in the Gazette or the claim for that relief has not been approved by the Director General of Inland Revenue.

e. provide that the person may appeal against the amount computed in the

return which he alleges to be excessive for not being eligible to claim a


1 Jan 2017


22


Effective Date

deduction for withholding tax incurred under Sections 107A(2), or 109(2), 109A, 109B(2) or 109F(2) of the ITA 1967 on the day the return is furnished by such person.

Submission of Tax Estimates by Limited Liability Partnership, Trust Body or Co-operative Society

A limited liability partnership, trust body or co-operative society must furnish the estimate of tax payable (Form CP204) and revised estimate tax payable (Form CP204A) to the IRB on an electronic medium or by way of electronic transmission.

Subsection 107C(7A) of the

ITA 1967

YA 2019

Penalty for Failure to Furnish Country-By-Country Report (CbCR)

A new provision is introduced whereby a penalty of not less than RM20,000 and not more than RM100,000, or imprisonment for a term not exceeding 6 months, or both, will be imposed in the event of failure to furnish CbCR as required under rules specified in Section 154(1)(c) of the ITA 1967. In case of any prosecution, the burden of proof shall be upon the accused person, and the court may require the convicted person to comply with the relevant provision of the rules within 30 days or such other specified period.



of the Finance Act.

Penalty for Making Incorrect Returns, Information Returns or Reports

A new provision is introduced whereby a penalty of not less than RM20,000 and not more than RM100,000, or imprisonment for a term not exceeding 6 months, or both, will be imposed for making incorrect return, information return or report by omitting the information or incorrect information as required under rules specified in Section 154(1)(c) of the ITA 1967, on behalf of himself or another person. No penalty shall be imposed if the taxpayer can satisfy the court that the incorrect return, information return or report or incorrect information was made in good faith.



of the Finance Act.

Penalty for Failure to Comply with Rules made under Section 154(1)(c) for

A new provision is introduced whereby a person who fails to comply with rules on mutual administrative assistance as required, that person shall be guilty of an offence and on conviction be liable to a fine of not less than RM20,000 and

Section 119B of the ITA 1967


of the


23


Effective Date

Mutual Administrative Assistance Arrangement

not more than RM100,000 or imprisonment for a term not exceeding six months or both. Where a person has been convicted of an offence, the court may make a further order that the convicted person shall comply with the relevant provision of the rules under which the offence has been committed within 30 days or such other period as the court deems fit, from the date the order is made.

Finance Act.

Relief Other than in respect of Error or Mistake

A new provision is introduced where a person can apply for a relief if he has paid tax on an assessment and he alleges that the amount in a return furnished is excessive by reason of:

Reasons Timeline for submitting application to the

Director General (*)

Any exemption, relief, remission, allowance or deduction is approved or granted for that year of assessment under the ITA 1967 or any other written law published in the Gazette after the year of assessment in which the return is furnished.

Within 5 years after the end of the year the exemption, relief, remission, allowance or deduction is published in the Gazette or approval is granted, whichever is the later.

A deduction not allowed in respect of withholding tax on payment not due to be paid under Sections 107A(2) or 109(2), 109A, or 109B9(2) or 109F(2) on the day a return is furnished.

Within a year after the end of the year the payment is made.

(*): The application for amendment or relief shall be made in writing.


1 Jan 2017

Fees for Advance Pricing Arrangements

The Minister is empowered to make rules to prescribe fees charged in relation to any Advance Pricing Arrangement made under Section 138C of the ITA 1967.

Section 154(1)(ec) of the ITA 1967


of the Finance Act.


24

8. OTHERS [PETROLEUM INCOME TAX AND LABUAN]


Effective Date

PETROLEUM INCOME TAX

Redefinition of Malaysia The term “Malaysia” is redefined as the territories of the Federation of Malaysia, the territorial waters of Malaysia and the sea-bed and subsoil of the territorial waters, and the airspace above such areas, and includes any area extending beyond the limits of the territorial waters of Malaysia, and the sea-bed and subsoil of any such area, which has been or may hereafter be designated under the laws of Malaysia as an area over which Malaysia has sovereign rights or jurisdiction for the purposes of exploring and exploiting the natural resources, whether living or non-living.

Section 2 of the Petroleum

(Income Tax) Act 1967 (PITA

1967)


of the Finance Act.

Redefinition of Secondary Recovery

The term of “secondary recovery” is redefined as a project which has as its object the production of quantities of hydrocarbons by the application of external energy to the underground reservoir for the purpose of additional and accelerated recovery of those hydrocarbons which is carried out subsequent to the earlier recovery process.

Section 2 of the PITA 1967

YA 2017

Notification of Non-Chargeability

The existing equivalent provisions under the PITA 1967 shall be aligned to those under the ITA 1967.

Section 41A of the PITA 1967

1 Jan 2017

Relief Other than in respect of Error or Mistake

The existing equivalent provisions under the PITA 1967 shall be aligned to those under the ITA 1967.

Section 66A of the PITA 1967

1 Jan 2017


25


Effective Date

LABUAN

Labuan Non-Trading Activity

The definition of ‘Labuan non-trading activity’ is amended to provide that the holding of investments in properties by a Labuan entity must be in properties situated in Labuan.

Section 2 of the Labuan

Business Activity Act,

1990


of the Finance Act.

Labuan Business Activity The definition for ‘Labuan business activity’ is amended to provide that a Labuan entity may hold shares in a domestic company which may be with residents and in Ringgit Malaysia.

Section 2 of the Labuan

Business Activity Act,

1990


of the Finance Act.

Power to Minister to Make Regulations

The Minister is empowered to make regulations to implement or facilitate any arrangement under Section 132B of the ITA 1967 and to prescribe penalties for any failure to comply with the regulations.

Section 21 of the Labuan Business

Activity Act, 1990

22 Oct 2016

Chartered Accountants Malaysia and MIA

The Chartered Accountant Malaysia or “C.A.(M)” is a designation conferred by the Malaysian Institute of Accountants (“MIA”) to a professional in accountancy, business and finance with a recognised accountancy qualification and relevant work experience. C.A.(M) are the industry captains, corporate leaders and decision makers that play significant roles in nation building.

MIA was established under the Accountants Act 1967 as the statutory accountancy body that regulates, develops, supports and enhances the integrity and status of the profession while upholding the public interest.

Working closely alongside strategic business partners and stakeholders, MIA connects its members to a wide range of continuous professional development programmes, updates and networking opportunities. Presently, there are over 33,000 members making their strides across all industries in Malaysia and around the world.

Vision

To be a globally recognised and renowned institute of accountants committed to nation building.

Mission

To develop, support and monitor quality and expertise consistent with global best practices of the accountancy profession in the interest of stakeholders.

Objectives

1. Develop and enhance the competency of accountancy professionals to meet market demand;

2. Advance and enhance the status of members and the accountancy profession in Malaysia;

3. Support the practice of the accountancy profession in Malaysia consistent with global standards and best practices; and

4. Regulate the practice of the accountancy profession in Malaysia consistent with global standards.

Dewan AkauntanUnit 33-01, Level 33, Tower A, The VerticalAvenue 3, Bangsar South CityNo. 8, Jalan Kerinchi,59200 Kuala LumpurMalaysia[phone] +603 2722 9000 [fax] +603 2722 9100[web] www.mia.org.my [email] [email protected]

HIGHLIGHTS OF THE 2017 BUDGET AND FINANCE …...HIGHLIGHTS OF THE 2017 BUDGET AND FINANCE BILL...

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