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As the first quarter of 2019 has drawn to a close, we are pleased to highlight some of the notable tax changes in the period.

Finance Act 2018, Income Tax (Amendment) Act 2018 and Labuan Business Activity Tax (Amendment) Act 2018

PU Orders

Return Form Filing Programme for the Year 2019

MIRB’s Public Rulings

MIRB’s Guidelines

MIRB’s Media Release

Malaysian Investment Development Authority (“MIDA”)’s New and Revised Guidelines

Frequently Asked Questions (“FAQs”) on Labuan International Business and Financial Centre’s New Tax Framework

Revised Guidelines on the Establishment and Operations of Labuan Leasing Business

Amendments to Sales Tax and Service Tax (“SST”) Acts, Regulations and Orders, Customs Act and Excise Act

Service Tax - Imported Taxable Service and B2B Exemption

Excise Duty on Sugar Sweetened Beverages

Finance Act 2018, Income Tax (Amendment) Act 2018 and Labuan Business Activity Tax (Amendment) Act 2018

The Finance Act 2018, Income Tax (Amendment) Act 2018 and Labuan Business Activity Tax (Amendment) Act 2018 (“Acts”) have been gazetted on 27 December 2018 with no changes from the amended Finance Bill 2018, Income Tax (Amendment) Bill 2018 and Labuan Business Activity Tax (Amendment) Bill 2018.  The Acts come into operation on 28 December 2018.

(Click here for our earlier e-Announcement for more information).

PU Orders

Numerous amendment/exemption/remission/revocation orders, regulations and rules in respect of the Income Tax Act 1967, Labuan Business Activity Tax Act 1990, Promotion of Investments Act 1986, Real Property Gains Tax 1976 and Stamp Act 1949 have been gazetted.

Below are the summary of the topics that have been covered earlier:

1

Harmful Tax Practices and Changes to Tax Incentives
Tax Incentives for Economic Development Regions

In order to be compliant with the Forum on Harmful Tax Practices (“FHTP”), Malaysia has made amendments to a number of tax incentives that it offers. 

(Click here and here for our earlier Highlights for more information)

2

Exemption Orders and Remission Orders Relating to 2019 and 2018 Budget

A number of stamp duty remission and exemption orders as well as real property gains tax exemption orders relating to 2019 Budget proposals and announcements made by the Ministry of Finance have been gazetted.

An income tax exemption order on the income from providing fund management services for Sustainable and Responsible Investment relating to 2018 Budget proposal has also been gazetted.

(Click here for our earlier Highlight for more information).

3

Amendments to the Income Tax Exemption Orders on Principal Hub Incentives

The following Amendments Orders have been gazetted to amend the Income Tax Exemption Orders issued earlier on Principal Hub incentives:

(a)    Income Tax (Exemption) (No. 6) 2018 (Amendment) Order 2019 – covering companies already operating in Malaysia.

(b)    Income Tax (Exemption) (No. 7) 2018 (Amendment) Order 2019 – covering companies which do not have an existing entity or related entity in Malaysia which carries on any qualifying services in Malaysia prior to the prescribed application period.

(c)    Income Tax (Exemption) (No. 8) 2018 (Amendment) Order 2019 – covering companies with an approved operational headquarters, an international procurement centre or a regional distribution centre status with or without approved tax incentive.

(Click here for our earlier Tax Whiz for more information)

4

Stamp Duty Remission for Purchase of First Residential Property

Stamp Duty (Remission) Order 2019 provides stamp duty remission of RM5,000 on the instrument of transfer executed for the purchase of first residential property, subject to meeting the prescribed conditions.

(Click here for our earlier Tax Whiz for more information)

5

Income Tax and Stamp Duty Exemptions in relation to Malaysia Japanese Yen Bonds – Series A (2019)

Income Tax (Exemption) Order 2019 and Stamp Duty (Exemption) Order 2019 provide income tax and stamp exemptions on qualifying income and instruments respectively in respect of Malaysia Japanese Yen Bonds – Series A (2019) guaranteed by Japan Bank for International Cooperation (for qualified institutional investor only) (Tekikaku Kikan Toshika Gentei) issued by the Government of Malaysia.

(Click here for our earlier Tax Whiz for more information)

6

Income Tax Exemption on Rental Income from Residential Property Received by Malaysian Resident Individuals

Income Tax (Exemption) (No. 2) Order 2019 provides a 50% tax exemption on rental income received by Malaysian resident individuals, subject to meeting the prescribed conditions.

(Click here for our earlier Tax Whiz for more information)

7

Stamp Duty Exemptions for Purchase of Residential Property under the National Home Ownership Campaign 2019

Stamp Duty (Exemption) (No. 2) Order 2019 and Stamp Duty (Exemption) (No. 3) Order 2019 provide stamp duty exemptions on loan agreement and instrument of transfer executed for the purchase of residential property with value of more than RM300,000 but not exceeding RM2,500,000 under the National Home Ownership Campaign 2019, subject to meeting the prescribed conditions.  In respect of exemption on the instrument of transfer, it is restricted to residential property valued up to RM1,000,000 and the residential property valued in excess of RM1,000,000 until RM2,500,000 is subject to stamp duty rate of 3%.

The above stamp duty exemptions shall only apply for sale and purchase agreement executed from 1 January 2019 to 30 June 2019 by an eligible Malaysian citizen with a property developer.

Return Form Filing Programme for the Year 2019

The Malaysian Inland Revenue Board (“MIRB”) has issued its return form filing programme for the year 2019

(Click here for the our earlier e-Announcement for more information)

Source for the Filing Programme: Official portal of MIRB

MIRB’s Public Rulings

The MIRB has issued the following Public Rulings:-

1/2019: Professional Indemnity Insurance (“PII”)

This Public Ruling explains:

(a)    the deductibility of premium paid for a PII policy; and

(b)    the tax treatment on insurance proceeds received and compensation paid in relation to a PII policy.

It replaces the Public Ruling No. 8/2017 dated 19 December 2017.

2/2019: Director’s Liability

This Public Ruling explains the liabilities of a company director in respect of the company’s tax i.e.:

(a)    any tax that is due and payable by a company; and

(b)    any debt that is due and payable by the company as an employer in relation to tax deductions from emoluments and pensions under the Monthly Tax Deduction.

Source for the Public Rulings: Official portal of MIRB

MIRB’s Guidelines

The MIRB has issued Guidelines relating to the following application for stamp duty relief (available in Malay language only):

  1. Reconstructions or amalgamations of companies under Section 15 of the Stamp Act 1949; and
  2. Transfer of property between associated companies under Section 15A of the Stamp Act 1949.

 

Click here for our earlier Tax Whiz for more information.

Source for the Guidelines: Official portal of MIRB

MIRB’s Media Release

The MIRB has issued media releases relating to Special Voluntary Disclosure Programme (“SVDP”):

 

1

 

Taxpayers who have received letters or e-mails regarding the SVDP from the MIRB are required to register as taxpayers and declare their income if they:

(a)    Have a monthly employment income of RM4,000 and above; or

 

 

(b)    Carry on a business other than a private limited company with annual income of RM48,000 (or RM4,000 a month) after deducting approved operational expenses and capital allowances.

2

 

Individuals who have income kept in overseas bank accounts deriving from sources in Malaysia but have yet to be declared to the MIRB are urged to provide clarification to the MIRB and subsequently partake in the SVDP, if necessary.

The SVDP offers a reduction in the penalty rate from 300% to 10% if the declaration and the tax are made in the first phase which runs from 3 November 2018 until 31 March 2019 and subsequently 15% if the declaration and the tax are made in the second phase from 1 April 2019 to 30 June 2019.

Malaysian Investment Development Authority (“MIDA”)’s New and Revised Guidelines

The MIDA has revised the following guidelines:

1

Guideline for Principal Hub Incentive

The changes made to the Guideline are mainly to reflect the recommendations of Action 5 (“Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance”) of the Organisation for Economic Co-operation and Development (“OECD”)’s Base Erosion Profit Shifting initiatives, which deal with identification of preferential tax regimes that can be categorised as harmful tax practices.  It focuses on ensuring that preferential tax regimes align taxation with substance.

Principal hub incentive is one of the incentives identified for FHTP evaluation and has been categorised under the Intellectual Property regime. 

2

Guidelines on Application for Manufacturing Licence, Incentive Application for Manufacturing Project and Application for Exemption from Manufacturing Licence

The original ‘Guideline and Procedures for Application for Manufacturing Licence and/or Pioneer Status/Investment Tax Allowance and/or Expatriate Posts’ has been replaced by 2 Guidelines and the salient changes are as follows:

(a)    Guideline on Application for Manufacturing Licence

 

(i)     Inclusion of definition of ‘Manufacturing activity’ in accordance with the Industrial Coordination Act 1975.

 

(ii)    Inclusion of additional eligibility criteria.

 

(b)    Guideline on Incentive Application for Manufacturing Project

No major changes noted.

In addition, a ‘Guideline on Application for Exemption from Manufacturing Licence’ has also been issued, which may be applicable to companies with shareholders’ fund not exceeding RM2.5million and employing not more than 75 full-time paid employees.  The project undertaken must be consistent with the national economic and social objectives and promotes an orderly development of manufacturing activities in Malaysia.

3

Guideline on Application for Permit under the Petroleum Development Act 1974

The Petroleum Regulations 1974 requires any person to apply for permit to commence or continue any business of processing or refining of petroleum or manufacturing of petrochemical products from petroleum under Section 6(1) of the Petroleum Development Act 1974.

The revised Guideline sets out the list of qualifying products for the purpose of the above application.

4

Guideline on Application for Incentive by Contract Research & Development (“R&D”) Companies or R&D Companies; or Application for the Fulfillment of Definition as Contract R&D Companies and R&D Companies under the Promotion of Investments Act 1986

The Guideline has been revised to take into account the new definition of research and development introduced through the Finance Act 2018.  The exclusion list for R&D activities has also been expanded.

For companies that are granted approval from 16 October 2017 without the substantial activities requirements, they can only enjoy the existing incentive until 27 December 2018 i.e. the gazette date of the Finance Act 2018.  If the companies wish to continue enjoying the incentive, they are required to comply with the substantial activities requirements and submit their applications to the MIDA.

The Guideline is effective from 27 December 2018 and supersedes the previous Guideline.

 

5

Guideline and Procedures for Less Developed Areas Incentive

An additional eligible criteria relating to the application of stamp duty exemption on transfer or lease of land or building used for development in manufacturing and services activities has been included in the revised Guideline.

The above application must be made prior to the transfer or lease of land or building and no payment of stamp duty (on the value of duty imposed) has been made in advance.

Application for the exemption will not be considered if the company has made a payment prior to decision from the Ministry of Finance.

The relevant legislation has yet to be gazetted as at the date of this publication.

 

Source for the Guidelines: Official portal of MIDA

Frequently Asked Questions (“FAQs”) on Labuan International Business and Financial Centre’s New Tax Framework

The Labuan Financial Services Authority (“LFSA”) has issued FAQs on Labuan International Business and Financial Centre’s New Tax Framework on 31 January 2019 relating to the Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2018 (“Labuan Regulations”). The Labuan Regulations set out the substantial activities requirements imposed on Labuan entity carrying on a Labuan business activity in respect of the minimum number of full time employees and annual operating expenditure in Labuan.

The FAQs provide clarifications on entities that are subject to the Labuan Regulations as well as the substantial activities requirements and amendments to the Labuan Business Activity Act 1990.

Source for the FAQs: Official portal of LFSA

Revised Guidelines on the Establishment and Operations of Labuan Leasing Business

The LFSA has issued revised Guidelines on the Establishment and Operations of Labuan Leasing Business on 5 March 2019.  The revised Guidelines came into effect on 1 January 2019 and would remain effective and applicable unless amended or revoked.  It supersedes the earlier Guidelines issued on 29 December 2017.

The purpose of the Guidelines is to clarify the application procedure, operational and regulatory requirements for Labuan companies carrying out leasing business in the Labuan International Business and Financial Centre.

Source for the Guidelines: Official portal of LFSA

Amendments to Sales Tax and Service Tax (“SST”) Acts, Regulations and Orders, Customs Act and Excise Act

On 31 December 2018, numerous Amendment to SST Regulations and Orders were gazetted.  Amongst others, a new Service Tax Regulation in respect of B2B exemption was gazetted i.e. Service Tax (Persons Exempted from Payment of Tax) Order 2018.  These Regulations and Orders come into operation on 1 January 2019.

Meanwhile, the Finance Act 2018, Amendments to SST Acts, Customs Act and Excise Act as well as Customs Duties Order were also gazetted.

(Click here for our earlier e-Announcement for more information)

Service Tax - Imported Taxable Service and B2B Exemption

Imported Taxable Service

Effective 1 January 2019, Service Tax is applicable on imported taxable service at the time when payment is made or invoice is received, whichever earlier.

Imported taxable service is subject to Service Tax, whether or not the recipient is registered or liable to be registered for Service Tax (“a taxable person”).  The prescribed Forms to account for Service Tax on imported taxable service is SST-02 for a taxable person and SST-02A for a person other than a taxable person.

B2B Exemption

Effective 1 January 2019, subject to meeting conditions, certain taxable persons are exempted from payment of Service Tax on prescribed taxable services.

Any registered person providing such taxable service to another registered person who is entitled to the above B2B exemption shall issue an invoice containing additional prescribed particulars and declare the value of taxable service exempted from Service Tax in the SST-02 Form.

(Click here for our earlier Tax Whiz for more information)

Excise Duty on Sugar Sweetened Beverages

Excise Duty on Sugar Sweetened Beverages which was proposed to take effect on 1 April 2019 has been postponed to 1 July 2019, to give both businesses and the Royal Malaysian Customs Department sufficient time to prepare and ensure a smooth implementation.

(Click here for our earlier Tax Whiz for more information)

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Contact KPMG

Should you have any questions or require further clarification, please do not hesitate to contact any of our Executive Directors, Directors, Associate Directors or Managers whom you are accustomed to dealing with or who are responsible for the tax affairs of your organisation at the following telephone numbers for respective offices:

Petaling Jaya Office

Tai Lai Kok
Executive Director –
Head of Tax and Head of Corporate Tax
ltai1@kpmg.com.my
+ 603 7721 7020

Long Yen Ping
Executive Director –
Head of Global Mobility Services yenpinglong@kpmg.com.my
+ 603 7721 7018

Bob Kee
Executive Director –
Head of Transfer Pricing
bkee@kpmg.com.my
+ 603 7721 7029

Ng Sue Lynn
Executive Director –
Head of Indirect Tax
suelynnng@kpmg.com.my
+ 603 7721 7271

Soh Lian Seng
Executive Director –
Head of Tax Risk Management
lsoh@kpmg.com.my
+ 603 7721 7019

Nicholas Crist
Executive Director –
Corporate Tax
nicholascrist@kpmg.com.my
+ 603 7721 7022

Dato’ Leanne Koh
Executive Director – 
Corporate Tax
leannekoh@kpmg.com.my
+ 603 7721 7026

Neoh Beng Guan
Executive Director – 
Corporate Tax
bneoh@kpmg.com.my
+ 603 7721 7025

Ong Guan Heng
Executive Director – 
Corporate Tax
guanhengong@kpmg.com.my
+ 603 7721 7027

Chang Mei Seen
Executive Director – 
Transfer Pricing
meiseenchang@kpmg.com.my
+ 603 7721 7028

Ivan Goh
Executive Director – 
Transfer Pricing
ivangoh@kpmg.com.my
+ 603 7721 7012

 

 

 

Evelyn Lee 
Executive Director –
Penang Tax
evewflee@kpmg.com.my
+604 238 2288 (ext. 312)

Regina Lau
Executive Director –
Kuching & Miri Tax
reglau@kpmg.com.my
+6082 268 308 (ext. 2188)

Titus Tseu
Executive Director –
Kota Kinabalu Tax
titustseu@kpmg.com.my
+6088 363 020 (ext. 2822)

Ng Fie Lih
Executive Director –
Johor Bahru Tax
flng@kpmg.com.my
+607 266 2213 (ext. 2514)

Crystal Chuah Yoke Chin
Tax Manager –
Ipoh Tax
ycchuah@kpmg.com.my
+605 253 1188 (ext. 320)