Budget 2009 (Part 1)

Budget 2009

table of content

SECTION 1 : Personal Tax

1.1 Review of individual income tax

1.2 Tax exemption on interest from deposits

1.3 Review of income tax treatment on allowances, benefits-in-kind and perquisites

1.4 Review of road tax on private vehicles owned by individuals

1.5 Tax incentives to enhance training in selected fields

1.6 Tax Treatment on Bonus and directors’ fees

1.7 Residence status for individual

1.8 Employee share option scheme - Calculation of the value of living accommodation

SECTION 1 : Personal Tax

1.1 Review of individual income tax

Existing

Resident individuals are taxed at progressive rates of between 0% to 28%. Tax rebate of RM350 are given to resident individuals with chargeable income not exceeding RM35,000.Non-resident individuals are taxed at a fixed rate of 28%.

Proposed

Resident individuals· Tax rebate be increased from RM350 to RM400 for chargeable income not exceeding RM35,000· Tax rate be reduced from 13% to 12% for chargeable income range between RM35,001 to RM50,000· Tax rate be reduced from 28% to 27% for chargeable income exceeding RM250,000Non-resident individuals· Tax rate be reduced from 28% to 27%

Effective Date

From YA 2009

Comments

These proposals are aimed at increasing the disposable income and streamlining the non-resident individual tax rates with the reduced tax rates for resident individual.


1.2 Tax exemption on interest from deposits

Existing

Interest income received from moneys deposited in all institutions approved to take deposits is taxed at 5% with the exception of –
i. savings account in Lembaga Tabung Haji and Bank Simpanan Nasional;ii. fixed deposit account up to RM100,000 in banking and financial institutions approved under the Banking and Financial Institutions Act 1989, Islamic Banking Act 1983, Bank Pertanian Malaysia Berhad, Bank Kerjasama Rakyat Malaysian Berhad, Bank Simpanan Nasional, Borneo Housing Mortgage Finance Berhad and Malaysia Building Society Berhad;iii. fixed deposit account exceeding 12 months in institutions in paragraph (ii) above.

Proposed

Tax on interest income received by individuals from moneys deposited in all institutions approved to take deposits will be fully exempted.

Effective Date

From 30 August 2008

Comments

The tax burden on individuals would be reduced.


1.3 Review of income tax treatment on allowances, benefits-in-kind and perquisites

Generally, allowances, benefits-in-kind and perquisites received by employees are taxable.

Now, in addition to existing tax exemptions, the following would exempted from tax:-

Proposed

i. petrol card / allowance or travel allowance between the home and work place up to RM2,400 a year;

ii. petrol card / allowance or travel allowance and toll card for official duties up to RM6,000 a year;

iii. allowance or fees for parking;

iv. meal allowance;

v. allowance or subsidies for childcare of up to RM2,400 a year;

vi. telephone and mobile phone, telephone bills, pager, personal data assistant (PDA) and internet subscription;

vii. employers’ own goods provided free of charge or at discounted value where the value of the discount does not exceed RM1,000 a year;

viii. employers’ own services provided free or at a discount provided such benefits are not transferable;

ix. subsidies on interest on loans totaling up to RM300,000 for housing, passenger motor vehicles and education. The exemption be given to existing and new loans;

x. medical benefits exempted from tax be extended to include expenses on maternity and traditional medicines such as ayurvedic and acupuncture;

xi. existing perquisites be extended to awards related to innovation, productivity and efficiency such as the Six Sigma Award and the exemption be increased from RM1,000 to RM2,000 a year.

(The above exemptions are not extended to directors of CONTROLLED COMPANIES, sole proprietors and partnerships)

Expenses on allowance, benefits in kind and perquisites provided by employers be given full deduction even though such benefits are not stipulated in the service contract of the employee.

Effective Date

i – From YA 2008 until YA 2010

ii to xi – From YA 2008

1.4 Review of road tax on private vehicles owned by individuals

Existing

Private saloon and non-saloon diesel vehicles owned by individuals are subject to higher road tax compared to petrol vehicles (except in Sarawak).

Proposed

Reduction of road tax imposed on these individuals to equal that of petrol vehicles. In addition, current road tax treatment on green diesel vehicles (which is 50% lower than diesel vehicles in the whole of Malaysia) will be withdrawn.

Effective Date

From 1 September 2008

Comments

This is to mitigate the impact of rising prices on consumers.

1.5 Tax incentives to enhance training in selected fields

Proposed

Withholding tax exemption be given to non-resident experts on income received by providing technical training services in the following fields:-

i. post graduate courses in information communication and technology (ICT), electronics and life sciences;

ii. post basic courses in nursing and allied health care; and

iii. aircraft maintenance engineering courses.

Effective DateFrom 30 August 2008 to 31 December 2012

Comments

This is to further strengthen the competitiveness of Malaysia in these fields and to facilitate greater investments.

1.6 Tax Treatment on Bonus and directors' fees

Existing

Income tax on bonus and directors’ fees is based on the year such income are receivable. However, generally such income is received in the following year and hence resulting in a review of income tax for previous years of assessment.

Proposed

Bonus and directors’ fees are to be taxed in the year of receipt.

Effective Date

From YA 2009

1.7 Residence status for individual

Existing

The residence status of an individual is quantitatively determined by reference to an individual's physical presence. An individual is resident in Malaysia for a basis period if he meets any one of 4 criterias as provided Section 7(1) of the Income Tax Act, 1967.

Proposed

Notwithstanding Section 7(1), it is proposed that an individual is deemed to be a resident for that basis year and for subsequent basis years when he is not in Malaysia for the following reasons:-

a. the individual is a citizen of Malaysia and is employed in the public services or service of a statutory authority; and

b. he is not in Malaysia at any day in the basis year due to:

i. having and exercising his employment outside Malaysia; or

ii. attending any course of study in any institution or professional body outside Malaysia which is fully-sponsored by the employer.

It is also proposed that the non-resident citizen relief be abolished.

Effective Date

From YA 2009

Comments

This widens the scope of the determination of residence status.

1.8 Employee share option scheme - Calculation of the value of living accommodation

Existing

None

Proposed

The gross income in respect of any right to acquire shares in a company shall be excluded from the formula to determine the value of living accommodation and/or hotel accommodation provided by an employer which is subject to tax.

Effective Date

From YA 2009