MALAYSIA BUDGET 2011 ANNOUNCEMENTS AND TAX PROPOSALS

 


malaysia budget 2011

 






















 

 

 

 Budget 2011: 1Malaysia, Generating Transformation

 

The Malaysia Budget 2011 was delivered and tabled by Prime Mnister / Finance Minister on Oct 15, 2010.

 


Summary and Highlights - Tax Changes and Proposals

EPF relief scope extended but limit not increased

Existing EPF relief of maximum RM6,000 is extended to include employees’ contributions to Private Pension Fund (PPF) to be set up by the government in 2011. Employers are allowed for tax deductions for contributions made to the Private Pension Fund. In other word, apart from mandatory contribution to EPF, employees and employers (including self-employed) can now opt to make additional contributions to Private Pension Fund set up by the government.

 

This benefits the lower income group as most of the medium to high income group may already claiming up to the maximum relief of RM6,000 as the relief of RM6,000 is also include the life insurance premium, apart from employees’ own EFP contributions. For employers, this may open up an additional tax planning for tax deductions on such contributions to PPF while rewarding the employees or better structuring the staff remuneration package, as there is a cap or limit allowed for tax deductions in respect of employers’ EPF contributions for staff. Presently, employer contributions to the approved schemes (eg. EPF) in excess of 19% of the employee's remuneration will be disallowed as tax deductions. However, employer contributions to this new PPF will be allowed for tax deductions and will not count towards the 19% cap.

 

However, will the employers happy to subscribe to this new PPF? They can always increase the employer (portion) EPF contribution as long it is not exceeding the 19% tax deduction limit. The structure, investment policies as well as return to the new PPF are unknown, compared to the well-established EPF. For those employees who are already claimed at the maximum limit of RM6,000, would they willing to contribute to PPF, in additional to the current mandatory EPF contribution, which may reduce their disposable income but no tax efficiency will be achived as tax relief claimed may already at the maximum limit.

 

How this new PPF will benefit self-employed persons? If a person carried out a business under the sole proprietorship or partnership (referred to as "business" herein), the EPF contributions made by the business are not allowed as tax deductions but instead the contributions will be added back and form part of the profit derived from the business by that person and assess for individual tax accordingly (due to sole proprietorship and partnership are not a separate legal entity). But on the other hand, the proprietor or partner can claim EPF relief of up to RM6,000 under his personal capacity as an individual taxpayer. With the introduction of new PPF, contributions made by the business will be allowed for tax deductions.

 

Parent medical tax relief extended to care for parents expenses

Current individual tax relief of up to RM5,000 for parents’ medical expenses be extended to cover expenses to care for parents with effect from year of assessment 2011. These expenses are for parents who suffer from diseases or with physical or mental disabilities and who need regular treatment certified by a qualified medical practitioner. This include treatment and care at home, day care centres or home care centres. Currently the tax relief of up to RM5,000 medical expenses for parents are for treatment in clinics and hospitals, treatment in nursing homes and dental treatment (exclude cosmetic dental treatment).

 

50% stamp duty exemption on housing S&P and loan agreements

First-time Malaysian citizen house buyers will be given stamp duty exemption of 50% on (1) instruments of transfer (i.e sale and purchase agreement) and (2) loan agreement on a residential house price not exceeding RM350,000 during 1 Jan 2011 to 31 Dec 2012. Residential property include a terrace house, condominium, apartment or flat. Question here is – would serviced apartments erected on commercial land be scope out? Clarifications need to be sought from IRB.

 

Service tax increase to 6% from 5%

Service tax rate will be increased from 5% to 6% with effect from 1 Jan 2011. This will impact quite a number of service industry as well as individual consumptions. This may be a temporary measure to increase government revenue while pending the implementation of Goods and Services Tax (GST).  You may probably feel the effect of service tax increase, although some said marginal, in 2011 when you visit to the restaurants, or when you pay your telephone bills.

 

ASTRO fee will be subject to service tax 6%

ASTRO monthly subscription fee will be increased by a service tax of 6% with effect from 1 Jan 2011. Service tax of 6% will be imposed on paid satellite broadcasting services in which this service was not subject to service tax previously.

 

 

The Budget is more focusing on a macro economy and it appears not too many announcements or tax proposals that are affecting the individuals and companies directly.

 

No new taxes were introduced. No new policies announced on tackling the speculative buying of real properties, in particular the loan to value cap ratio at 70% or 80%.

 

No tax reductions for individuals and corporate. There was no announcement on withholding tax on dividend income from Real Estate Investment Trust (REIT). Nothing was announced on bonus for civil servants. We also not seeing many tax incentives or tax exemptions announced.

 

This Budget is very plain and there was not many tax changes or proposals.

 

Download the Malaysia Budget 2011 Speech, Appendices and Finance Bill (tax law amendments):

 

 

Budget 2011 Speech

Budget 2011 Appendices

Economic Report 2010/2011

Finance (No. 2) Bill 2010

 

 


 

Budget 2012 : Transformational Budget for All Malaysians newpromo

 


 

Budget 2011: Sales Tax Exemptions on Mobile Phones

Ordinary mobile phones are subject to sales tax of 10% whereas Personal Digital Assistant (PDA) with Global System Mobile (eg. smart phones) which may function as a mobile phone is given sales exemption. 

 

In order to streamline the discrepancy in sales tax treatment between ordinary phones and smart phones, the Malaysia government is now proposed that all mobile phones including smart phones be exempted from sales tax, with immediate effect from Oct 15, 2010.

 

PDA or smart phones are gaining popularity nowadays and potential buyers to these products may not feel the price differential as PDA or smart phones are already exempted from sales tax. As such, the price packages for iPhone 4 offered by Maxis and DiGi may remain the same and no change. 

 

Budget 2011: Cheaper imported clothes, handbags, footwear, jewellery, perfumes, toys and 300 goods more

In order to boost the local tourism industry and to make Malaysia as a shopping haven for branded goods at competitive prices, the government proposes to abolish import duty range from 5% to 20% on about 300 goods favoured by tourists and locals, with immediate effect from Oct 15, 2010.

 

Visit luxury shops like Louis Vuitton (LV), PRADA or Gucci to check out their prices. However, the prices may not immediately effected for such import duty abolishment as there will need a lead time from import to selling on the shelves to you.

 

What are the 300 goods items list to which import duty will be abolished?

Although the Budget Appendix stated there is a detailed list of those products as in Appendix A, but it was not found in the Budget Appendix nor the Budget Speech itself. The detailed list is also not published in the government official websites, e.g. www.customs.gov.my or www.treasury.gov.my.

 

Update: Detailed list of abolished products

 

Royal Malaysian Customs feedback to us that you may get a copy of the Embargo from :-

   Percetakan Nasional Berhad

  Jalan Chan Sow Lin

  50554 Kuala Lumpur

  Tel: 03-92366888 

 

 

Budget 2011: Reform Insolvency Law in Malaysia

During the recent economic crisis, a number of businessmen and individuals who faced financial problems and some of them were declared bankrupt. They were also blacklisted and not able to conduct businesses or apply for loans.

 

To help these individuals, the new Insolvency Act will consolidate the Bankruptcy Act 1967 and Part 10 of the Companies Act 1965, including introduction of provision relating to relief mechanism for companies and individuals with financial problems. The review will also involve amending the current minimum bankruptcy limit of RM30,000.

 

No further details were given in the budget announcement.

 

 

Budget 2011: Electricity Rebate RM20 Continues

Since 2008, the Government will bear your electricity bill if the bill amount is less than RM20 and Tenaga Nasional will collect the rebate RM20 from the Government instead of from you. Do you remember when was your last bill paid by the Government? When you were on a month outstation?

 

The Government said this rebate has benefited more than 1 million consumers nationwide. The Government will continue this rebate programme with an allocation of RM150 million to ease the burden of the low-income group.

 

Budget 2011: 100% loan for first house buyers

The Malaysian government is aware of the difficulties faced by low income group and fresh graduates who just joined the workforce in buying a house.

 

To assist this group of people, the government will introduce Skim Rumah Pertamaku through Cagamas Berhad which will provide a guarantee on down payment of 10% for houses below RM220,000. This scheme is available for first time house buyers with household income less than RM3,000 per month. In other words, these house buyers will obtain a 100% loan without having to pay the 10% down payment.

 

One thing need to be clarified is the determination of household income less than RM3,000 per month. If only the husband is buying the house and register under his name alone, would the wife’s income be included in the household income threshold?

 

Until the details of Skim Rumah Pertamaku is made available, another area may need to be clarified is that, if a house is jointly purchased by husband and wife, where only one of them is first time buyer and the other is not, would this purchase qualified under this Skim and entitle to the down payment guarantee by Cagamas?

 

Besides, first time house buyers can enjoy a 50% stamp duty exemptions on sale and purchase agreements and loan agreements for buying a house not more than RM350,000.

 

 


 

Official site of Malaysia Budget 2011

Ministry of Finance www2.treasury.gov.my

Inland Revenue Board http://www.hasil.gov.my/

Securities Commission http://www.sc.com.my/

Central Bank of Malaysia http://www.bnm.gov.my/

 

 

Budget 2012 : Transformational Budget for All Malaysians newpromo

 

 http://www.nbc.com.my/malaysia-tax-summary-budget-2012

 

 

Other related information - our blog posts:-

Budget 2011: Sales Tax Exemptions on Mobile Phones

Budget 2011: 100% loan for first house buyers

Budget 2011: Electricity Rebate RM20 Continues

Budget 2011: Reform Insolvency Law in Malaysia

Budget 2011: Cheaper imported clothes, handbags, footwear, jewellery, perfumes, toys and 300 goods more

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Malaysia Budget 2011 Summary and Highlights

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