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BUDGET 2008
LEMBAGA HASIL DALAM
NEGERI MALAYSIA
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BUDGET 2008
THREE MAIN STRATEGIES
1.Enhancing the nation’s competitiveness
2. Strengthening human capital
development
3. Ensuring the well-being of all Malaysians
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Overview of Presentation
1. Amendments to Legislation
- Income Tax Act 1967
- Petroleum Income Tax Act 1967
- Stamp Act 1949
- Labuan Off Shore Business Activity Tax Act (LOBATA 1990)
2. Rules
3. Exemption Orders
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PART 1
AMENDMENTS TO
INCOME TAX ACT 1967
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5
Offshore Business Activity
Current provision – subsec. 44(11A)
– sec. 3B
• Offshore business activity not subject to
tax under ITA 1967
Proposal
• Offshore company may make irrevocable
election under LOBATA charged to tax
under ITA
• Zakat deduction from aggregate income
wef YA 2008
6
Special Deduction for Business
Current provision – para. 34(6)(e)
• Special deduction in ascertaining the
adjusted income of a business.
• Provision of equipment to assist disabled
person
• Deduction = amount of expenditure
cont.
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Special Deduction for Business
Proposal – para. 34(6)(e)
• Deduction extended to alteration or
renovation of premises to assist disabled
person
• No more deduction or allowance under
section 33 or schedule 3 in respect of the
same expenditure
wef YA 2008
8
Special Deduction for Business
• RM5,000 – renovation of restroom
• RM10,000 – walkway (capitalized as part
of cost of factory building &
not claimed IBA)
RM15,000 qualifies for deduction
Example 1
Kilang Maju S/B expended the following for its disabled workers
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9
Special Deduction for Business
Proposal – new para. 34(6)(ha)
• Expenditure on infrastructure related to
business and available for public use
• No charges imposed
• Approved by Minister of Finance
wef YA 2008
10
Charitable Institution or Organization
Proposal – new subsec. 44(6B)
• Rejection by DGIR as an approved
institution / organization under sec. 44(6)
• Appeal made to Minister within 30 days
• Minister empowered to decide status as
approved institution / organization
wef operation of Act
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Deduction for Individual
Current provision – para. 46(1)(f)
• Deduction for further education up to
tertiary level in selected courses of study
• Recognized institution or professional
body in Malaysia
• Maximum deduction of RM5,000
Proposal – para. 46(1)(f) (amended)
• Deduction for all courses of study at
Masters or Doctorate levelwef YA 2008
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Deduction for Individual
Proposal – new para. 46(1)(k)
• Relief given to parents for savings in
Skim Simpanan Pendidikan Nasional
(SSPN)
• Maximum amount RM3,000 each parent
who contributes for the child / children
wef YA 2007
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Deduction for Individual
Example 4
2008 Mawi Saliha
cont.
4,5002,000balance c/f
nil500withdrawal
4,5002,500contribution
nilnilbalance b/d
Eligible 2,000 3,000
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Deduction for Individual
Example 4
2009 Mawi Saliha
5,0001,500balance c/f
1,5001,500withdrawal
2,0001,000contribution
4,5002,000balance b/d
Eligible Nil 500
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Deduction for Individual
• Defined under Sports Development Act 1997
• Maximum relief RM300
• Evidenced by receipt
wef YA 2008
Proposal – new para. 46(1)(l)
Deduction for amount expended on purchase
of sports equipment
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Deduction for Individual
Proposal – deletion of sec. 46A
• Deduction for interest expended to
finance the purchase of a first residential
property for YAs 2003 – 2005
• Period for deduction has ceased
wef YA 2006
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Deduction for Individual
Current provision – sec. 44(6)
• Donation to approved institutions /
organizations by companies restricted to
7% of aggregate income
Proposal
• 7% restriction extended to donation made
by persons other than companies
wef YA 2008
18
Takaful Business
Current provision – sec. 60AA
• No specific tax treatment in ITA 1967
• Provisions of conventional insurance
applied mutatis mutandis to takaful
cont.
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Takaful Business
Current provision – sec. 60AA
Issues
• Management expenses
• Participant’s share of profit
• Wakalah fee
• Qardul Hassan (qard)
cont.
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Takaful Business
Proposal – sec. 60AA (substituted)
• A specific tax treatment accorded to
takaful business
• Take into consideration unique features
of takaful business
cont.
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Takaful Business
Proposal - new sec. 109E & Part XI Sch. 1
Withholding tax on participants’ share of
profit from takaful business - investment
income portion only
• To be remitted by operator
• Individuals – 8%
• Non-resident companies – 26%
wef 01/01/2008
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Access to documents, etc
Current provision – sec. 80(1) & 80(2)
DGIR has power-
• to access to lands, buildings and places
• to inspect, copy or make extracts from any such books or document
• to take possession of books and documents
Proposal – sec. 80(1) & 80(2) (amended)
• To extend effective power of DGIR, to take
possession of objects, articles, materials and things
wef operation of Act
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Small & Medium companies
Proposal – new subsec. 107C(4A)
SME commences operation in a YA -
• Need not furnish an estimate
• Need not pay monthly instalments for 2 YAs
• Tax payable to be paid on due date
wef YA 2008
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Actuarial Surplus
Current provision – sec. 60
• Actuarial surplus transferred from life fund to shareholders’ fund – taxed twice
Proposal – new sec. 110B
• Deduction be given against tax charged on shareholders’ fund
• Amount of deduction based on formula
prescribed by Minister
• Unabsorbed amount disregarded
cont.
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Actuarial Surplus
Proposal – new subsec. 110B
Formula: A x B x D
C
A : actuarial surplus transferred
B : gross taxable income
C : total gross income of life fund
D : current tax rate of life fund
wef YA 2008
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Notification of Repayment
Current provision – subsec. 111(1A)
• Deeming provision to returns furnished
under section 77A
• Notification for repayment applicable to
company, trust body or co-operative
society
Proposal – subsec. 111(1A) (amended)
• Deeming provision extended to returns
furnished under section 77(1) - individualwef YA 2008
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Admissibility of electronic record
Proposal – new sec. 142A
• Prescribed form / documents by
electronic medium / transmission to DGIR
• Copy / print-out of electronic record
admissible as evidence in court
• Electronic medium – process where data,
text, images or any other information is
stored, received or communicated by
electronic, magnetic, optical, imaging or
other data processing devicewef operation of Act
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e-Filing by Tax Agent
Current provision – sec.152A
• Prescribed form filed by any person on
his own
• Filing through electronic medium /
electronic transmission
cont.
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e-Filing by Tax Agent
Proposal – sec. 152A (amended)
• A person may authorize a tax agent to file his return
• Written authorization from the person
• Person deemed to be cognizant of its contents
• Person & tax agent have to make declaration in prescribed forms
cont.
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e-Filing by Tax Agent
Proposal – sec. 152A (amended)
• Hard copy of e-filed return to be signed by the
person
• Hard copy be retained for 7 years by the
person & tax agent
• Forms deemed furnished on the
acknowledgement date
wef operation of Act
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Tax Agent
Current provision – subsec. 153(6)
• Renewal of approval for tax agent –
24 months
Proposal
• Minimum period 24 months
• Extended period approved by the Minister
wef 21 Feb 2007
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Tax Rate
2
1 & 3
Group
26% (YA 2008)
25% (YA 2009 et seq)
27% (YA 2007)
26% (YA 2008)
25% (YA 2009 et seq)
CI > RM500K
27% (YA 2007)
ProposalCurrent
1. Company, trust body, executor and receiver
– para. 2 Sch. 1
2. Company with paid up capital not more than RM2.5m
– para. 2A Sch. 1
3. Withholding tax NR company receives income from REIT
– subpara. 1(b), Part X Sch. 1
wef YA 2008
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Disposal of Industrial Building
Proposal – new para. 38A Sch. 3
Company disposes industrial building to
REIT / property trust fund
• Para. 39 & 40 Sch. 3 apply
• No BC / BA
• RE of Co = QE of REIT
wef YA 2008
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Hearing of Appeals
Current provision – Sch. 5
• Only one hearing of appeal by the Special
Commissioners (SCIT) may be heard at any one
time (para.1(3))
• No provision to continue hearing if term of
SCIT expired or other reason
• No authority to dismiss appeal (subsubpara
17(1)(b) & 17(2)(a))
cont.
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Hearing of Appeals
Proposal – Sch. 5 (amended)
• More than one hearing of appeal by the
SCIT can be heard concurrently (para
(1)(3))
• Hearing continued or heard afresh (new
para 1A)
• Extend authority of SCIT to dismiss
appeal (subsubpara 17(1)(b) & 17(2)(a))
wef operation of Act
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Exemption on Gratuity
Current provision – subsubpara. 25(1)(c) Sch.6
• Partial exemption of gratuity received by private
sector employee on reaching retirement age at
the age of 50 but less than 55 years
• RM6,000 for every year of completed service
Proposal – subsubpara. 25(1)(c) Sch.6 (amended)
• Full exemption on gratuity received by private
sector employee on reaching retirement age
wef YA 2007
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Exemption on Interest
Current provision – para. 33A Sch. 6
• Exemption of interest received by non
resident company from Islamic securities
or debenture issued in Ringgit, other than
convertible loan stock, approved by SC
cont.
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Exemption on Interest
Proposal – para. 33A Sch. 6 (amended)
• NR company - exemption extended to interest from Islamic securities issued in any currencies
Proposal – new para. 33B Sch. 6
• NR individual - exemption of interest on Islamic securities issued in non Ringgit, other than convertible loan stock, approved by SC
wef YA 2008
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Reinvestment Allowance
Current provision – subpara. 8(d) Sch. 7A
• Qualifying project – opened house to closed
house system for chicken and ducks
Proposal
• RA will not be applicable for the above
project effective YA 2011
wef operation of Act
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THE BIG BANG!!!
Proposal – amendment of sec. 110 &
deletion of sec. 108
– new transitional provision
Single Tier Corporate Tax System
Move over – Imputation Tax System
Sayonara - Our dear old friend
since 1947
wef YA 2008
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• Tax paid by companies
not final tax
• Tax paid pass to s/holders
as tax credit
• S/holders taxed on gross
dividend & credit sec.110
given
• sec.108 account
mechanism
Imputation vs Single Tier System
• Tax paid by companies is
final tax
• Dividend exempt in s/holders’
hand (single tier dividend)
• No sec.108 & sec.110
• Effective from YA 2008
• Unutilized sec.108 account ?
Imputation System Single Tier System
cont
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Single Tier Tax System
Consequential amendments
• subsec. 54A(3), 67(4), sec. 110A, 110B,
111A, 120 & 127
• subpara. 13(1), para. 17 & 26 – sch. 6
• subpara. 5(7) – sch. 7A
wef YA 2008
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AMENDMENTS TO
PETROLEUM INCOME TAX 1967
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PITA 1967
Proposal – subsec.16(7A) (amended)
• Deduction extended to alteration /
renovation of premises to assist disabled
person
Proposal – new subsec. 16(7BA)
• Expenditure on infrastructure for business
available for public use
• No charges imposed
• Approved by Minister of Finance
wef YA 2009
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PITA 1967
Proposal – subsec. 33(1) & 33(2) (amended)
• To extend DGIR’s power to take possession of objects, articles, materials and things
Proposal – subpara. 1(3) Sch. 3
• More than one hearing of appeal by the Special Commissioners (SCIT) can be heard concurrently
wef operation of Act
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PITA 1967
Proposal – new para. 1A ,
– subpara.15(b) Sch. 3
• Appeals not concluded due to - term of appointment of the SCIT expires or other reason (hearing continued or heard afresh)
• Extend authority of SCIT to dismiss appeal
wef operation of Act
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AMENDMENTS TO
STAMP ACT 1949
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Stamp Act 1949
Proposal – new sec. 36A
Initial duty –
• Option for purchaser
• Based on private valuation report
• Pay initial duty
• Submit bank guarantee
cont..
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Stamp Act 1949
Proposal – new sec. 36A and 36B
Value of bank guarantee :
A - B
where
A is the duty chargeable using variance (market value per report x 100/65)
B is the initial dutycont..
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Stamp Act 1949
Proposal – new sec. 36B
Additional duty –
• Proper amount of duty higher than initial
duty = Additional Duty
• Notice of additional assessment
cont
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Stamp Act 1949
Proposal – new sec. 36B
Increase on additional duty –
Failure to pay additional duty within 30 days
notice of assessment served
• sum increased by 10%
Difference between proper amount of duty
and (amount of initial duty + bank
guarantee), exceeds 30%
• sum increased by 10% cont..
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Stamp Act 1949
Consequential amendments -
sec 2, 37, 38, 38A and 39
• Sec. 2- definition “duly stamped” includes
concept of “initial duty”;
• Sec. 37 - indorsement of instrument as
“duly stamped”
• Sec. 38 - consequential amendment
• Sec. 38A and 39 – extend right of appeal to
additional assessment wef 01/01/2008
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AMENDMENTS TO
LABUAN OFFSHORE BUSINESS
ACTIVITY TAX ACT 1990
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LOBATA 1990
Proposal – new para. 2(3)(d) and sec. 3A
• Offshore company makes irrevocable
election chargeable to ITA 1967 in respect
of its offshore business activity
• Election in prescribed form 3 months
before commencement of the basis period
for a YA
• Election for YA 2008 – before 01/02/2008
wef YA 2009
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PART 2
INCOME TAX RULES
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Security Control and Surveillance
EquipmentsCurrent law
Normal capital allowance
• Initial allowance 20% & annual allowance 14%
Proposal
• Initial allowance 20% & annual allowance 80%
• Qualifying equipments determined by Minister
wef YA 2008-2012
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Personal Computer
Current law
Gift of new personal computer (p/c) to
employee
• Deduction given previously from YA
2001 – 2003 (Income Tax Rules
[P.U. (A) 504/2000])
cont
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Personal Computer
Proposal
Gift of new p/c and broad band
subscription fee to employee
Deduction
• One new computer per employee
• Amount of deduction
= cost of computer + subscription fee
wef YA 2008-2010
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Contribution of used computers
Current law
• No deduction for contributing used
computers to school
Proposal
Deduction:
• RM200 per computer
• Computer used in a business not more than
4 years
• Through PINTAR secretariat under
Khazanah Bhd wef YA 2008-2010
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Rubber Wood Cultivation
Current law
Accelerated Agriculture Allowance
• IA = 20% and AA= 80%
• Qualifying agriculture expenditure (Sch.3)
• At least 10% of area planted with rubber
wood tree
• Verified by Ministry of Plantation Industries
and Commodities
Proposal
• Claimable until YA 2010 wef YA 2003-YA 2010
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Renewable Energy
Current law
• ACA (within 1 year)
IA – 20% & AA – 80% (Income Tax Rules [P.U.(A) 88/2005])
Proposal
• Investment tax allowance of 100% on plant & machinery used in the business
• Within 5 years determined by MOF
• Deducted against 100% of statutory income
• Existing ITR is revoked from 8/9/2007.
Application to MIDA from 8/9/07-31/12/2010
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Last mile Current law
Allowance For Service Sector (Sch 7B)
• 60% of qualifying capital expenditure
• Incurred within 5 years
• Deducted up to 70% of SI
Proposal
• Co. provides broadband infrastructure
• 100% of qualifying capital expenditure
• Incurred within 3 years
• Deducted against 70% of SI
Application to MOF from 8/9/07-31/12/2010
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PART 3
INCOME TAX EXEMPTION ORDERS
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Industry Excellence Awards
Current law
Export Excellence Award (Merchandise)
• Exemption on SI = value of increased exports and restricted to 70% of SI (Exemption Order [P.U.(A) 158/2005])
Proposal
Exemption extended to:
• Export Excellence Award (Services)
• Brand Excellence Award
wef YA 2008
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ExpatriatesCurrent law
Exemption:
• Expatriate employed by Operational Headquarters (OHQ) or regional office (RO)
• Portion of employment income
• Exercised outside Malaysia
(Exemption Order 2003 [P.U.(A) 382])
Proposal
Exemption extended to expatriates employed by-
• International Procurement Centre (IPC)
• Regional Distribution Centre (RDC)
wef YA 2008
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Gift of new personal computer
Current law
Personal computer and broad band
subscription fee received by employee
• Perquisite chargeable to tax
Proposal
Perquisite is exempted
• One computer during exemption period
• Monthly broad band subscription fee paid by employer
wef YA 2008 - 2010
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Certified Emission Reduction (CER)
Proposal
Company awarded CER certificate
• Participate in project that reduces Green
House Gas
• Verified by Ministry of Natural Resources
and Environment
• CER certificate may be traded
• Exemption on income from trading of
CER
wef YA 2008 - 2010
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Fund Management Company
Current law
Exemption
• Fee from managing Islamic fund for
foreign investor (Exemption Order
[P.U.(A) 199/2007])
• Approved by Securities Commission
Proposal
Exemption is extended to fee from local
investor wef YA 2008 - 2016
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Islamic Finance Expert
Proposal
Non-application
• Withholding tax on income received
by a non-resident Islamic finance expert
• Verified by MIFC
• Sec 109B
wef 08/09/2007-31/12/2016
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STAMP DUTY EXEMPTION ORDERS
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Stamp Duty
Mergers of Petronas vendors
Proposal
• 100% remission on all instruments related
to mergers of Petronas vendors
• Approved by Petronas from 08/09/2007 –
31/12/2010
• Mergers to be completed by 31/12/2011
wef 08/09/2007-31/12/2010
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Stamp Duty
Purchase of residential property
Proposal
• 50% stamp duty remission
• Residential house < RM250,000
• Once in a life time
• Also applicable to shared property
wef 08/09/2007-31/12/2010
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Stamp Duty
Disposal between husband and wife
for love and affection
Current provision
• 50% remission
Proposal
• 100% remission wef 08/09/2007
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Stamp Duty
Mergers & Acquisitions (M & A) of public
listed companies approved by SC
Current provision
• 100% remission on instruments of M & A
approved from 01/10/2005 – 31/12/2007
Proposal
• Remission extended to M & A approved
by SC from 01/01/2008 – 31/12/2010
wef 01/01/2008-31/12/2010
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SALAM PERCUKAIAN
