NST 2009 Post Budget 2010 - Impact on Corporate

The national budget of 2010 included changes that affect the corporate. It will be sub-divided into 2 sections: Direct Impacts on Existing Rules and some (not all) Indirect Impacts that Companies should be prepared for. Enjoy your reading as following. 

Direct Impact on Existing Rules

1. The tax treatment accorded to Special Purpose Vehicle (SPV) established under the Companies Act 1965 be extended to SPV established under the offshore companies act 1990 electing to be taxed under the Income Tax Act 1967. Further details can be obtained from this article http://sc.com.my/ENG/HTML/bondmkt/bonres_FAQ_oABDS1.html.
2. Under current provision, the employer is required to deliver return in prescribed form (borang E) to Director General of IRB within 30 days from date of gazzette the statutory order. The proposal will be no more gazzetting of statutory order and employer is required to complete the submission by 31st March of every year. The employer is required to distribute out EA/EC form or salary statement to its employees by last day of February.
3. Deduction of Tax from Emoluments and Pensions - It is proposed that the withholding of last month salary for employee who ceased employment and leaving Malaysia for more than 3 months will be debt due to the Diretor General of IRB and payable from the employer and if there is a failure to do so civil suit can be instituted against the employer. The amount withheld was not a tax due under current provision therefore civil suit cannot be instituted.
4. When there is a failure to furnish estimate to the IRB, it is proposed that no directions will be given by Director General of IRB, no prosecution under Ssection 120 and tax payable on submission of return. However, the current penalty was calculated if the estimate is lower than actual tax in excessive of 30%, 10% increase will be imposed on the difference. It is proposed that the penalty be calculated as total tax payable increased by 10% if no estimate furnished by taxpayer.
5. Tax rates for Co-operative Society for Chargeable Income (CI) exceedubg RM500,000  is reduced to 26% w.e.f. YA 2010.
6. There are some amendments on PITA (Petroleum Income Tax Act), the details will be interpreted further in my next post.
7. Patent and Trademark are now qualifying expenditures if it was registered in Malaysia. The amount will be deemed incurred when certificate is obtained and can be deducted from Gross Income (GI).
8. The current provision promotion of Malaysia as international Islamic financial centre whereby additional deduction is given to deduct from Gross Income, effective in between YA 2008 - 2010, has now be extended to YA 2015.
9. Export of Private Healthcare Services - The proposal focus on enhancement for deduction (YA 2010 - 2014) , the rate of deductible is now being increased to 100% of the value by less than or equal to 70% of Statutory Income. The exclusion will be not-Malaysian citizen who participating in Malaysia My 2nd Home programme & dependents, with student pass & dependents, and with work permit & dependents. Malaysian who live abroad & dependents are excluded as well.
10. For insurance & Takaful Companies - exemption of 5 consecutive Year of Assessments exemption beginning earlier or at the same of 3rd year. Conditions are as following:
• Companies are licensed insurer, and
• Are registered takaful operator
• For branch / investee companies, it must be located outside Malaysia and commence within 2 years from date of approval by Bank Negara Malaysia (BNM).
• The application to BNM from 24/10/2009 - 31/12/2015.
11. Green Buildings:
• Features:-
• Conservation of energy and resources
• Recycling of materials and greenery
• Minimizing toxic emission
• Impact:-
• Efficient use of resources
• Significant operational savings
• increases workplace productivity
• Process:-
• Application to be submitted to Greenbuildingindex Sdn Bhd
• Board of Architect will approve and issue GBI Certificate
• Cost relating to green building will be indicated in the Certificate.
• Proposed Tax Incentive:-
• Qualifying expenditure = Cost / Incremental Cost certified by Board of Architect
• Deduction from 100% Statutory Income (SI) on obtaining certificate
• Unabsorbed amount can be carried forward until fully utilized.
• Certificate will be awarded in between 24/10/2009 and 31/12/2014
• Person qualified:-
• Owner - individual, company and body of persons
• Having business source of income.
12. Approved Forest Plantation Project
• Incentive has been announced in stimulus package
• Application can be submitted to Ministry of Plantation Industries and Commodity
• With effective from 21/5/2003, proposed application to be submitted latest by 31/12/2011.
13. Approved Consolidation of Management of Smallholding & Idle Land Project:-
• Incentive has been announced in Budget 2003.
• Application to be submitted to Ministry of Plantation Industries and Commodity
• With effective from 1/1/2003, proposed application to be submitted latest by 31/12/2011.
14. Preparation of Corporate Knowledge Based Master Plan:-
• Incentive is announced in Budget 2003.
• Company undertakes -
• Strategic Knowledge - intensive activity under PIA 1986.
• Application to be submitted to MIDA
• With effective from 21/2/2002, proposed application to be submitted latest by 31/12/2011.
15. Stamp Duty Exemption Order:
• Green Building - Subject to Conditions of ANY Building:
• Purchase from developers
• First owner & once only
• S&P agreement executed from 24/10/2009 to 31/12/2014
• Method to compute the duty exempted: (purchase proce - cost per GBI Cert) @ ad volorem.
16. Instrument of Islamic Financing:-
• Extension of remission period from 2/9/2006 - 31/12/2009 to 31/12/2015.

Some Indirect Impacts

1. The Government will also allocate a sum of RM350 million to SME Corp of which RM200 million is for SME soft loans, RM100 million for capacity enhancement, while the balance is for branding and promotion. The interest rate on soft loans offered by SME Corp will be similar to rates offered by development finance institutions.
2. In addition, there are 6 SME funds administered by Bank Negara Malaysia totalling RM13.4 billion. These funds have benefitted 46,000 SMEs with approved total financing of RM20 billion. To ensure faster and easier disbursement of funds, the Government wil ensure financial institutions approve micro financing at an average of 6 days and disbursements at an average of 4 days.
3. To promote green technology, the Government will establish a fund amounting to RM1.5 billion. This fund will provide soft loans to companies that supply and utilise green technology. For suppliers, the maximum financing is RM50 million and for consumer companies RM10 million. The government will bear 2% of the total interest rate. In addition, the government will provide a guarantee of 60% on the financing amount, with the remaining 40% by banking institutions. Loan applications can be made through the National Green Technology Cerntre. This scheme will commence on 1 January 2010 and is expected to benefit 140 companies.

I hope the above will benefit your companies in the foreseeable future of 2010, to relief some of the financial pressure of the recent economic crisis. Although it is not as good as what we have expected for, government has allowed some exemption and extension of incentive period.

NST 2009 - Post Budget 2010 - Impact on Individual

This is my first participation in the annual National Seminar of Taxation conducted by LHDN, a very comprehensive and informative seminar after the announcement made to the Budget 2010 last Friday.

1. Personal Relief of RM8,000 has been increased to RM9,000 w.e.f Year of Assessment (YA) 2010. So for next year filing of return, it will remain as RM8,000 because we are doing Previous Year Return.
2. Subscription of Broad Band is now a relief that you can deduct a maximum of RM500 from your Chargeable Income (CI). The officer has clarified further for individual to be eligible for this relief, there are several conditions:-
• Monthly bill under individual name for separate assessment, and either one of the individual name for joint assessment is eligible for the relief. The amount of relief is restricted to billed amount and up to the maximum of RM500.
• Expended / deemed expended in basis year. For individual, basis year would be starting from 1st January and ending at 31st December of every year. As prudent concept in Accounting, all bills that billed for the month within the basis year (i.e. 1st December 2010) although it is not paid, is deemed expended in the basis year.
• With effect from YA 2010 - 2012.
• Eventhough the subscription fee was paid by the company as a tax-free allowance, individuals can still utilize this relief as long as it is billed to the individual name.
3. The current provision of relief on EPF, Life Insurance and Annuity were up to a maximum of RM6,000 and now has been increased to RM7,000 w.e.f. YA 2010. However, the additional RM1,000 is only eligible for the payment of New Annuity (upgraded or new contract on or after 1st January 2010), a private pension scheme that offered by Insurance Companies. For example, if Mr. A has contributed RM7,000 of EPF, RM2,000 of Life Insurance, and RM800 for New Annuity in YA 2010, he will be eligible to claim [(EPF + Life = RM9,000) Restricted to RM6,000 + (New Annuity = RM800) = RM6,800. Mr. A will not able to utilize the balance RM200 for his EPF and Life Insurance balance after the maximum amount of RM6,000.
4. Tax rates for Non-Resident Individual has been decreased 1% from 27% to 26% w.e.f. YA 2010.
5. For Resident Individual the top band of scale tax rate has been decreased 1% from 27% to 26% w.e.f. YA 2010, other lower bands remain unchanged.
6. A proposal of tax rate for selected resident individual whom is a knowledge worker working in specified region of Iskandar Malaysia and engaged in qualified activity will enjoy a flat rate of 15% w.e.f. YA 2010. The eligibility will be determined by Director General of Inland Revenue Board and further details will be announced later.
7. To promote prudent spending, the government also proposes that service tax of RM50 per year be imposed on each principle credit card and charge card, including those issued free of charge. The government also proposes that service tax of RM25 a year be imposed on each supplementary card. The charges will start be with effect from 1st January 2010. The officer has clarified that this measure is included in those cards being issued prior than 1st of January 2010.
8. There is some amendments in Real Property Gain Tax (RPGT) w.e.f. YA 2010:-
• Submission of Return - both CKHT1 & 2 are required to submit within 60 days from date of disposal. Current provision is Disposer to submit CKHT1 and Acquirer to submit CKHT2 within 1 month from date of disposal.
• Retain and Pay part of Consideration - under current provision, the acquirer is required to retain amount of 5% from consideration (payment for such property) and wait for Director General of Inland Revenue Board to issue requisition to Acquirer and instruct the Acquirer to pay whole / part sum retained within a time specified in the requisition letter. It is proposed that Acquirer to retain & pay Director General of Inland Revenue Board 2% from consideration within 60 days from disposal date. Any failure to payment of such sum will be penalized for additional 10% of the sum. If Acquirer failed to retain the amount from consideration then he/she will need to fork out from his/her own pocket as it is considered due to the IRB. There will be no requisition issued.
• Chargeable Gains & Allowable Losses on Disposal of property: current provision of allowable losses @ appropriate rate which is being deducted as tax rebate to be replaced by a deduction of allowable loss from chargeable gains. Unabsorbed allowable losses can be carried forward.
• Incidental costs - Acquisition price excludes interest paid on capital employed.
• Exemption for individuals - Increased from RM5,000 to RM10,000 or 10% of chargeable gain; whichever is greater..
• During the transition, for all tax rebate unabsorbed till YA 2007 (ending 31st March 2007), can still be deducted from total tax assessed from YA 2010 till fully utilized.
• A flat Tax Rate of 5% is applicable to disposal in 5th year and above after the date of acquisition, calculated as [(Disposal price - Acquisition price - Exemption - Allowable Loss B/F) x 5%]
9. Safeguarding welfare of students - Netbook with free broadband service to be offered to promote broadband services amongst university students for RM50 per month for 2 years. As a start, Telekom Malaysia will offer this package to 100,000 local university students effective from 1st January 2010. Priority will be given to first year students and those from low-income families.
10. Restructuring of Fuel Subsidy Scheme - The fuel subsidy is currently enjoyed by all motorists, including luxury vehicle owners and foreigners which is a strain on Government finance. The government is implementing a fuel subsidy management system in early 2010 to promote a more people-friendly system utilizing MyKad and the existing infrastructure. This approach will ensure the subsidy provided to the targeted groups and also for other commodities.

It concludes that the government is actually working towards to ensure recovery of national economic by lowering the tax rates. However, personally I still think that it is not really good enough to help the public as 1% does not consider a lot in reduction. The increase and newly introduced reliefs are actually great approach to help lower down the tax payable for individuals. In contrast of the imposed of RPGT at the flat rate of 5% can be interpret as a revenue recoupment from the reliefs and reduce in tax rates for the government.


Do share with us if there is any additional information that you might know and that will benefit all of us as Rakyat of Malaysia.

Productivity of Meeting - Is it Achieved, Boss?

Meeting can be a way to sort things out right and to gather opinions from people who is having specialized knowledge with. It is supposingly conducted to improve effective communication within the departments. However, the HOD meetings (or the recently-changed-name as Divisional Meeting) that are being held by my company regulary on Monday morning, are indeed a failure to the purpose.

In such autocratic environment, decisions are made by one person - the boss. There is no room for different opinion; no way to improve things if the concept of improvement is against the boss will; and the boss will treat whatever opinion as 'reference' only as he always came out with decision that was totally different from what we have discussed to show his power over matters. Therefore, no one is paying attention to the topic that he brought up; people do whatever he instructed, and that is it.

So now, if this is the case, why he still conducting the weekly meeting if he can make all the decision by himself? If this question was to be posted to me, I would answer it this way: it is not the solution he comes after, but the feeling of control, the pride that he can make all the decision especially when people disagree with him, are on top of the purpose of meeting.

In fact, the participants are getting quiet. Silent flows with feelings of 'don't care' flooded. One is standing infront of the stage, talking excitedly with saliva flying around. He is seemed as a fool to the staffs underneath (and he still yet to know about this, of course!). We smiled to each other wishing the time past as fast as it can. Time for lunch though!

Hi everyone! Wish you enjoy reading all time!

I think, a brief introduction of mine should be sufficient for now.

I am currently working in a Financial Planning Firm in Malaysia (quite a pioneer company) selling Life Insurance, General Insurance, Investment, Wealth Preservation and Planning, Family Office Advisory, and so on. The account department of this company was previously outsourced. I was hired to design and implement the proper account department to handle not only for Accounting purposes but also Human Resource, Operation and IT Management.

In another hand, I am also pursuing ACCA expect to be graduated by year of 2011. I have taken F2 -Management Accounting, F3 - Financial Accounting, F5 - Performance Management, F6 - Taxation; all passed in first attempt (and hopefully the luck will continue) and F1 - Accountant in Business exempted. In this term of December 2009 exam I have only taken one paper: F8 - Audit & Assurance.

Let me share my thoughts, knowledge, experience, and whatsoever that may benefit you, and do leave me questions and I will try my best to solve it for you. Learning is a process that never-ever end, let's learn and grow ourselves together!