Will GST implementation be announced in Budget 2011?

Many have concerned whether the Malaysia Government will announce the implementation of the Goods and Services Tax (GST) in Budget 2011, which has drawn mixed views.

KPMG tax partner Tan Eng Yew said the platform for GST implementation had been set; people are just waiting for the implementation date, which could be announced any time, not necessarily in the budget.

Affin Investment Bank chief economist Alan Tan said: “While we do not expect a specific date to be mentioned for GST implementation in this budget, we do expect some focus on the rationale for the country’s tax reform.”

An economist said it was hard to predict if the Government would announce the GST implementation in the coming budget but noted it was definitely another area that could boost revenue and help reduce the budget deficit.

The Government gave the assurance that GST is expected to have little impact on inflation. In a study by the Government, prices of certain goods such as shoes and clothing could be actually drop by about 2.7 per cent as the rate under the GST is only 4 percent compared to the 5 per cent and 10 per cent under the goods and sales taxes, respectively. However, services such as recreation, private health care and education would increase by about 2 percent.

To ensure the traders do not profit from the reduction in the costs of goods due to lower GST rates, Domestic Trade and Consumer Affairs Ministry is the midst of drafting the Anti Profiteering Law in counter for this.

Source: The Star Business News, Royal Malaysian Customs

Looking for Malaysia Company Law for details?

Are you looking for official Malaysia Company Law online?

Yes, you may access to Malaysia Companies Act, 1965 which is available online on the website of Companies Commission of Malaysia.

Visit Malaysia Companies Act, 1965.

The FACTS : set up and form a company in Malaysia

How to set up and form a limited company in Malaysia?
What are the requirements?
What are documents needed?
We provide some of the basic facts and information for setting up and forming a limited company in Malaysia.

Visit the FACTS for setting up and forming a company in Malaysia.

Are you ready for GST in Malaysia?

The Government of Malaysia proposed the Goods and Services Tax (GST) in November 2009 and tabled the Goods and Services Tax Bill 2009 for first reading in Parliament in December 2009. Second reading was scheduled in March 2010 but it was postponed as the Government needed more time to gather feedback from the Rakyat and enable the Government to educate the public on the proposed GST as well as to allow businesses more time to prepare themselves for GST implementation.

The impact of GST implementation can be extensive to a business. Additional book-keeping requirements and changes to the treatment of business’s products and services.

To better understand the proposed GST, visit FAQ - Goods and Services Tax in Malaysia.

Real Estate Investment Trust (REIT) in Malaysia

REIT may consider as good as EPF on its tax exemption status, as all the rental, interest and other investment income earned by REIT are exempted from tax, provided that the REIT distributes at least 90% of its total taxable income to its unitholders in a particular year (note that property revaluation gain is not considered as realised income even though it is reported in the income statement, thus it is not taxable and not distributable).

Tax treatment of Unitholders:-

Where 90% or more of the REIT’s total taxable income is distributed, dividends paid by REIT to its Unitholders will be subject to a withholding tax as follows:-

1. 10% withholding tax – all individuals and non-corporate investors such as institutional investors (regardless of whether they are tax resident or not)
2. 25% withholding tax – non-resident company (incorporated body)

The withholding tax will be withheld by REIT before paying out the dividends to unitholders. In other words, unitholders will be receiving dividends, net of withholding tax.

The withholding tax is a final tax. Individuals and non-corporate investors are not required to declare REIT dividend income in their tax filing/returns. As such, you are not allowed to claim tax refund or tax offset in your tax returns, as opposed to other dividend income (provided you are receiving taxable dividend or non single tier dividend from your share investments).

      3.  No withholding tax – tax-resident company investors. REIT dividend will be taxed in their tax computation.

The reduced withholding tax of 10% on individual and non-corporate investors is only available up to 31 Dec 2011. REIT dividends received after 31 Dec 2011 will be taxed at original 15%. It is hope that the reduced withholding tax of 10% will be extended, if not further reduced (as in NIL withholding tax in Singapore) in coming Budget 2011.

Real Property Gain Tax (RPGT) in Malaysia

With effect from 1 January 2010, RPGT of 5% flat will be applicable on gains on disposal of real properties in Malaysia or disposal of shares in real property companies within 5 years from the date of purchase. The scale rates from 5% to 30% depending on year of possession is no longer applicable.
However, RPGT is exempted or no RPGT is levied for disposal of real property or shares in real property companies held for more than 5 years. You are tax free to sell in 6th year onwards.
Some tax exemptions are available for individuals, even though they are disposed of within the first 5 years from the date of purchase:-

1. Disposal of a residential property once in a lifetime by an individual.
   
2. Transfer as gifts between parent and child, husband and wife, grandparent and grandchild (transfer between sibling/brothers or sisters is not applicable); and
   
3. Exemption of RM10,000 or 10% of the chargeable gain, whichever is greater, for each disposal of a property by an individual. Chargeable gain is generally meaning sale proceeds less purchase cost.

	Example:
	Sale proceeds	500,000
	Less: original purchase cost	(300,000)
	Chargeable gain	200,000
	Less: exemption of RM10,000 or 10%	(20,000)
	Taxable amount	180,000
	RPGT tax at 5%	9,000

MASB defers IC Interpretation 15 Agreements for the Construction of Real Estate (30 Aug 2010)

Malaysian Accounting Standards Board (MASB) announced to defer the effective date of IC Interpretation 15 Agreements for the Construction of Real Estate (IC 15) from 1 July 2010 to 1 January 2012.

IC 15 is a copy-and-paste identical from IFRIC 15 except for the effective date. IFRIC 15 was issued by the International Accounting Standards Board (IASB) in July 2008 with an effective date of 1 January 2009. In Hong Kong, HKICPA also issued an identical Interpretation, HK(IFRIC) 15, with the same effective date (i.e. 1 January 2009). In Singapore’s context, the Accounting Standards Council (ASC) issued INT FRS 115 with an effective date of 1 January 2011.

It was a bold step for Malaysia to put in an effective date of 1 July 2010, however it is now deferred to allow more time for Malaysian developers to be well prepared to this significant change in revenue/profits reporting from percentage of completion (POC) method to completed method.

Apart from keeping up to pace with IFRS standards, Hong Kong has adopted the same effective date 1 Jan 2009 issued by IASB, and it is believed that the effect of change in reporting method by HK or China Mainland developers is minimal, given China developers have been practicing completed method all this while.

In Singapore, the industry players and accounting body were previously concluded to prefer keeping POC method, while keeping an eye on the development of proposed IFRIC 15. In order to align with IFRSs, Singapore developers will also have change their reporting to completed method, but with a year later from IFRIC 15. Malaysia context is pretty much similar to Singapore.

The reason for the deferment is to allow stakeholders in Malaysia, to continue to deliberate its implementation and to provide opportunity to give feedback through MASB on a proposed new Standard on Revenue from Contracts with Customers, that is anticipated to subsume the requirements of IFRIC 15 upon issuance, expected to be in mid 2011.

What is GST ? Is GST a new consumption tax?

Good & Services Tax (GST) is a consumption tax based on the value-added concept. GST is imposed on goods and services at every production and distribution stage in the supply chain including importation of goods and services.

GST will replace the present consumption tax comprising the sales tax and the service tax (SST). The difference between GST and the present consumption tax is in terms of its scope of charge which is more comprehensive, inclusive of the manufacturing and distribution stages as well as providing a tax credit claim for GST paid on business inputs. When compared with the present consumption tax system, the sales tax is imposed only at the manufacturing stage that is at the time when the goods are manufactured or when the goods are imported. On the other hand, service tax is imposed on specific services at the time when the services are provided to the consumer.

(source: MoF Malaysia)

What is Authorised Capital?

What is authorised capital for a company registered in Malaysia? or we are more commonly called it authorised share capital?

Every company need to register its authorised capital upon its incorporation with Suruhanjaya Syarikat Malaysia (SSM). The amount of authorised capital will be stated in the Memorandum of Association of every Company.

It is quite common to see a number of new incorporations is in the form of private limited (liability) company, or Sendirian Berhad (Sdn. Bhd.)

Sooner or not, the concept of authorised share capital will be removed following one of the recommendations proposed by Corporate Law Reform Committee (CLRC) of The Companies Commission of Malaysia in their Final Report – Review of the Companies Act 1965 published in November 2008. However, those recommendations in the Final Report have not coming together with Draft Companies Bill, which is to effect the amendments to the Company Law in Malaysia. We will wait and see when those recommendations will be adopted in company law amendments.

http://www.nbc.com.my/authorised-capital.html