SECTION 2 : Corporate Tax
2.1 Tax incentives for bus and taxi operators
2.2 Extending the scope of tax deduction on community projects
2.3 Increasing the limit for tax deduction on contributions
2.4 Deduction on expenses for recruitment of workers
2.5 Tax incentives to enhance training in selected fields
2.6 Enhancing group relief
2.7 Tax incentive to enhance the use of ICT
2.8 Enhancing tax incentives for hotels in Sabah and Sarawak
2.9 Tax Incentives for Small and Medium Enterprises
2.10 Incentive for listing of foreign companies and foreign products in Bursa Malaysia
2.11 Tax exemption on income of corporate advisors on the issuance and trading of sukuk
2.12 Costs of dismantling and removing assets as well as restoring the site
2.13 Capital allowance claim on cost of services for installation or operation of a plant and machinery
2.14 Industrial building allowance – building used for research or training
2.15 Exemption of shipping profits
2.16 Implementation of Advance Pricing Arrangement (APA)
SECTION 2 : Corporate Tax
2.1 Tax incentives for bus and taxi operators.
Existing
Currently, expenses incurred on the purchase of buses and buses using natural gases are eligible for capital allowance claim at various rates. The current road tax rates for buses and taxis vary based on fuel type and engine capacity.
Proposed
a. New bus purchases be given Accelerated Capital Allowance to be claimed within one year.
b. Road tax on all buses, taxis and hired cars be reduced to RM20 a year.
Effective Date
a. Buses purchased from YA 2009 until YA 2011
b. From 1 September 2008
Comments
This is to enhance the public transport services in Malaysia.
2.2 Extending the scope of tax deduction on community projects
Existing
Tax deduction is allowed for contributions made towards charitable or community projects relating to education, health, housing, infrastructure and information and communication technology.
Proposed
The scope of such projects would be extended to include projects related to increase the income of the poor as well as for the conservation or preservation of the environment.
Effective Date
From YA 2009
Comments
To further enhance a culture of corporate social responsibility amongst corporations.
2.3 Increasing the limit for tax deduction on contributions
Existing
Approved contributions made by companies are given tax deductions up to 7% of aggregate income.
Proposed
The limit for tax deduction would be increased from 7% to 10% of aggregate income. This proposal is however not extended to companies under the Petroleum (Income Tax) Act 1967.
Effective Date
From YA 2009
Comments
This is to motivate and encourage companies to increase their contributions for charitable purposes.
2.4 Deduction on expenses for recruitment of workers
Existing
Cost of recruitment of workers is allowed as tax deduction unless such expenses are incurred before the commencement of operations.
Proposed
Recruitment costs incurred before the commencement of operations would be tax deductible. Such costs will include expenses incurred in participation in job fairs, payment to employment agencies and head-hunters.
Effective Date
From YA 2009
Comments
This is to reduce the cost of doing business and to ensure that companies obtain excellent human capital.
2.5 Tax incentives to enhance training in selected fields
Existing
Expenses incurred for the training of employees at approved training institutions are eligible for double deduction.
Proposed
Double deduction is to be given on expenses incurred by employers in training their employees in the following fields:
· post graduate courses in information communication and technology (ICT), electronics and life sciences;
· post basic courses in nursing and allied health care; and
· aircraft maintenance engineering courses
Effective Date
From YA 2009 to YA 2012
Comments
This is to further encourage the private sector to train Malaysians in ensuring a sufficient pool of skilled manpower and to strengthen the competitiveness of Malaysian professionals.
2.6 Enhancing group relief
Existing
Only 50% of current year unabsorbed losses is allowed to be set-off against the income of another company in the same group.
Proposed
The rate of current year losses allowed to be set-off under the group relief provisions would be increased from 50% to 70%.
Effective Date
From YA 2009
Comments
This is to further strengthen the competitiveness of companies.
2.7 Tax incentive to enhance the use of ICT
Existing
Information technology equipment (ICT) currently qualify for accelerated capital allowance (ACA) which enables the cost incurred to be claimed within 2 years.
Proposed
It is proposed that the ACA claim be shortened from 2 years to 1 year.
Effective Date
From YA 2009 to YA 2013.
Comments
This is to encourage private sector investment in the latest ICT equipment.
2.8 Enhancing tax incentives for hotels in Sabah and Sarawak
Existing
Current incentives for hotel operators in Sabah and Sarawak are as follows:-
a. New investments for 1 to 3 star hotels:
i. PS with tax exemption of 100% of SI (5 years); OR
ii. ITA of 100% on QCE incurred to be set-off against 100% of SI (5 years)
b. Reinvestment for the purpose of expansion, modernization and renovation of 1 to 5 star hotels are given incentives as in (i) and (ii) above. These incentives are given for 2 rounds.
Note
SI – Statutory income
QCE – Qualifying capital expenditure
PS – Pioneer status
ITA – Investment tax allowance
Proposed
Hotel operators undertaking new investments in 4 and 5 star hotels in Sabah and Sarawak be given PS or ITA incentives as above.
Effective Date
Applications received by the Malaysian Industrial Development Authority (MIDA) from 30 August 2008 to 31 December 2013.
Comments
The above will encourage development of the Corridors in Sabah and Sarawak as well as to increase tourism activities.
2.9 Tax Incentives for Small and Medium Enterprises
Existing
Proposed
Definition of an SME
Company resident in Malaysia with paid up capital of ordinary shares of RM2.5 million or less at the beginning of the basis period of a YA.
Additional condition -
Not controlled by another company with paid up capital exceeding RM2.5 million.
Accelerated capital allowance (ACA) granted to an SME
ACA claimed on plant and machinery depends on the accelerated period specified.
ACA on plant and machinery to be claimed within 1 year.
Capital allowance claim on small value assets (cost of less than RM1,000 each) granted to an SME
Capital allowances on such assets are claimed subject to a limit of RM10,000.
The limit of RM10,000 has been removed.
Effective Date
ACA – for YA 2009 and YA 2010
Capital allowance claim on small value assets – from YA 2009
Comments
The above proposals aim to improve the cash flow and enhance the competitiveness of SMEs.
2.10 Incentives for listing of foreign companies and foreign products in Bursa Malaysia
Existing
Corporate advisors are currently not motivated to attract foreign companies and foreign product listings due to high marketing costs.
Proposed
Income tax exemption is to be given on fees received by corporate advisors for primary listing, dual listing or cross listings of:
i. corporations with predominantly foreign based operations;
ii. Exchange Traded Funds and Real Estate Investment Trusts with foreign based assets;
iii. foreign listed securities; and
iv. foreign financial instruments.
This is subject to listing conditions approved by the Securities Commission.
Effective Date
From YA 2009 to YA 2013
Comments
This proposal seeks to reduce the cost of corporate advisors and to attract foreign companies and foreign product listings in Bursa Malaysia.
2.11 Tax exemption on income of corporate advisors on the issuance and trading of sukuk
Existing
None
Proposed
Income tax exemption be given on:
i. fees earned by qualified institutions in undertaking activities related to the arranging, underwriting and distributing of non-ringgit sukuk issued in Malaysia and distributed outside Malaysia; and
ii. profits from the trading of non-ringgit sukuk issued in Malaysia, received by qualified institutions.
Such sukuk and institutions must be approved by the Securities Commission
Effective Date
From YA 2009 to YA 2011
Comments
To strengthen Malaysia’s position in the global sukuk market and to promote the issuance of non-ringgit sukuk in Malaysia.
2.12 Costs of dismantling and removing assets as well as restoring the site
Existing
Costs of dismantling and removing plant and machinery as well as restoring the site where the asset was located do not qualify for capital allowance.
Proposed
Balancing allowance is provided on such costs subject to the following conditions:
i. where the obligation to carry out such is provided for under any written law or agreement; and ii. such plant and machinery is not allowed to be used by that person in another business or used in the business of another person.
Effective Date
From YA 2009
Comments
To streamline tax treatment and accounting treatment under FRS 116.
2.13 Capital allowance claim on cost of services for installation or operation of a plant and machinery
Existing
N/A
Proposed
Where the withholding tax requirements in relation to the cost of services for installation or operation of a plant or machinery have not been complied with, these costs would not be eligible for capital allowance claim.
Effective Date
From YA 2009
2.14 Industrial building allowance - building used for research or training
Existing
A building used for research or training may qualify as an industrial building and hence is eligible for industrial building allowance.
Proposed
It is proposed that a building used for –
- research undertaken by a company participating in industrial adjustment approved under Section 31A of the Promotion of Investments Act 1968; or
- industrial training or training undertaken by the aforementioned company in respect of its employees
shall no longer qualify as an industrial building.
Effective Date
From YA 2009
Comments
Restricts eligibility for claim of industrial building allowance.
2.15 Exemption of shipping profits
Existing
The statutory income of a shipping company from the business of –
- transporting passenger or cargo by sea on a Malaysian ship; or
- letting out on charter a Malaysian ship owned by him on a voyage or time charter basis
is exempt from tax.
Proposed
It is proposed that capital allowance is deemed to have been claimed in arriving at the statutory income of a shipping company in respect of the abovementioned activities even if the taxpayer has not made any claim for it.
Effective Date
From YA 2009.
Comments
This will minimise the exempted statutory income as well as amount available for distribution as tax exempt dividend.
2.16 Implementation of Advance Pricing Arrangement (APA)
Existing
APA is not included in the scope of Advance Rulings under the Income Tax (Advance Ruling) Rules 2007 which come into effect on 1 January 2007. APA is a mechanism to predetermine prices of goods and services to be transacted in the future between a company and its related companies for a specified period.
Proposed
That companies be allowed to apply for APAs to the Director General of Inland Revenue Board. The objective of establishing APAs is to determine transaction prices for income tax purposes.
Effective Date
1 January 2009
Comments
This is to manage transfer pricing issues more effectively and efficiently compared to transfer pricing audit.
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