CCT Internal e-Tax Update
Income Tax and GST Legislations, and Public Rulings Update – 13 May 2018
Table of Contents
- Income Tax and GST Legislations, Public Rulings And Guides Update. 3
Direct Taxation. 3
- AMENDMENTS TO GUIDELINES FOR INCOME TAX TREATMENT OF MALAYSIAN FINANCIAL REPORTING STANDARDS (MFRS) 5: NON-CURRENT ASSETS HELD FOR SALE AND DISCOUNTINUED OPERATIONS 3
- AMENDMENTS TO PUBLIC RULING NO. 4/2013 ACCELERATED CAPITAL ALLOWANCE (BAHASA MALAYSIA VERSION) 3
- IRB issues PR on tax incentive for returning expert programme, 07 May 2018. 4
- IRB issues new tax audit framework, 02 May 2018. 5
- Income Tax and GST Legislations, Public Rulings And Guides Update. 6
- Indirect Taxation. 6
- Amendment of GST rate and revocation of GST Orders, 17 May 2018. 6
- Income Tax and GST News. 8
- Credit ratings companies cautious over removal of GST, 18 May 2018. 8
- Economists react to 0% GST, 18 May 2018. 8
- RMCD releases FAQs on handling the transition from 6% to 0%, 18 May 2018. 8
- MoF: SST to be reintroduced, 18 May 2018. 9
- Tax experts weigh in on 0% GST, 18 May 2018. 9
- Dr M directs MoF to review Budget for potential savings, 17 May 2018. 11
- MoF: GST at zero-rate from 1 June 2018, 17 May 2018. 11
- Council of Eminent Persons on GST removal, 16 May 2018. 12
- GST to SST: Tax experts expect short-term transitional issues, 16 May 2018. 13
- Stakeholders react to announcement of GST removal, 16 May 2018. 14
- Prime Minister: Malaysia has enough revenue to remove GST, 16 May 2018. 15
- Important dates. 16
Income Tax and GST Legislations, Public Rulings And Guides Update
Direct Taxation
AMENDMENTS TO GUIDELINES FOR INCOME TAX TREATMENT OF MALAYSIAN FINANCIAL REPORTING STANDARDS (MFRS) 5: NON-CURRENT ASSETS HELD FOR SALE AND DISCOUNTINUED OPERATIONS
Please be informed that the Inland Revenue Board of Malaysia (LHDNM) has issued the above amendments to the Guidelines of MFRS 5: Non-Current Assets Held for Sale and Discontinued Operations (as reported in our e-CTIM TECH 68/2013 on 12 June 2013).
The amendments are made to Scenario 3: Disposal in subsequent basis period (sale completed in more than 1 year but not within the following year of assessment) (page 6 of 7 of the originally issued guideline) and Asset reclassified back to PPE (page 7 of 7 of the originally issued guideline) .
AMENDMENTS TO PUBLIC RULING NO. 4/2013 ACCELERATED CAPITAL ALLOWANCE (BAHASA MALAYSIA VERSION)
Paragraph 11.2 of the above Public Ruling (PR) was amended on 27 March 2018. The original PR (Bahasa Malaysia version) was issued by LHDNM on 15 April 2013. The amendments are highlighted in yellow as follows:
11.2 Apabila sesuatu loji dan jentera Sekiranya aset dilupuskan pada bila-bila masa dalam tempoh 2 dua tahun dari tarikh pembelian aset itu, EMD semua elaun yang telah dibenarkan dalam tahun EMD diberi, diberikan akan ditarik balik dalam tempoh asas bagi tahun taksiran di mana pelupusan dilakukan sama ada jualan tersebut adalah di antara pihak yang berkaitan atau yang tidak berkaitan dengan atau tanpa balasan. Jumlah EP dan ET akan ditarik balik dengan mengenakan kenaan imbangan dalam tahun pelupusan aset tersebut.
Members may view the amended PR (in Bahasa Malaysia) at the websites of the Institute and the LHDNM.
Kindly note that the English version of the PR was reported to members in our e-CTIM TECH 55/2013 dated 22 April 2013.
IRB issues PR on tax incentive for returning expert programme, 07 May 2018
The Inland Revenue Board (IRB) has published a public ruling (PR) on “Tax Incentive for Returning Expert Programme” (PR No 2/2018) dated 2 May 2018.
The PR explains the tax treatment in respect of tax incentives with regard to the Returning Expert Programme. It is a programme used to attract Malaysian citizens who are working overseas as professionals to return to work in Malaysia.
Kindly refer to the IRB website for further details.
Source: IRB website, 3 May 2018
IRB issues new tax audit framework, 02 May 2018
The Inland Revenue Board (IRB) has issued a new tax audit framework (Malay language) dated 1 April 2018.
The salient changes to the Framework include the following:
- Added new provisions of the Income Tax Act 1967 that are applicable to tax audits — s 97A(2) and 112.
- Clarified their procedures for examination of records, settlement of audit and Monitoring Deliberate Tax Defaulters Programme.
- Added guidance on voluntary disclosure.
- Updated its guidance on appeals.
The Framework comes into force on 1 April 2018 and replaces the Tax Audit Framework dated 1 May 2017.
Kindly refer to the IRB website for further details.
Source: IRB website, 14 March 2018
Income Tax and GST Legislations, Public Rulings And Guides Update
Indirect Taxation
Amendment of GST rate and revocation of GST Orders, 17 May 2018
Change in GST rate
The GST (Rate Of Tax) (Amendment) Order 2018 [P.U. (A) 118/2018] has been gazetted on 16 May 2018.
The abovementioned Order amends the GST (Rate Of Tax) Order 2014 [P.U. (A) 184/2014] to amend the GST rate from 6% to 0%.
The abovementioned Order comes into operation on 1 June 2018, subject to it being laid before the Dewan Rakyat.
Revocation of GST Orders
The following Revocation Orders have been gazetted:
- GST (Zero-Rated Supply) (Revocation) Order 2018 [P.U. (A) 119/2018] revokes the GST (Zero-Rated Supply) Order 2014 [P.U. (A) 272/2014]
- GST (Relief) (Revocation) Order 2018 [P.U. (A) 120/2018] revokes the GST (Relief) Order 2014 [P.U. (A) 273/2014]
- GST (Imposition Of Tax For Supplies In Respect Of Free Zones) (Revocation) Order 2018 [P.U. (A) 121/2018] revokes the GST (Imposition Of Tax For Supplies In Respect Of Free Zones) Order 2016 [P.U. (A) 373/2016]
- GST (Application To Government) (Revocation) Order 2018 [P.U. (A) 122/2018] revokes the GST (Application To Government) Order 2014 [P.U. (A) 185/2014]
- GST (Imposition Of Tax For Supplies In Respect Of Designated Areas) (Revocation) Order 2018 [P.U. (A) 123/2018] revokes the GST (Imposition Of Tax For Supplies In Respect Of Designated Areas) Order 2014 [P.U. (A) 187/2014]
The abovementioned Orders come into operation on 1 June 2018, subject to them being laid before the Dewan Rakyat.
Source: Federal Gazette Portal of the Attorney General’s Chambers, 16 May 2018
Income Tax and GST News
Credit ratings companies cautious over removal of GST, 18 May 2018
Credit ratings companies are viewing Malaysia’s removal of GST with caution. Their key concern is whether the loss of revenue from the removal of GST will be offset by other revenue-raising methods.
Economists and credit-rating companies are taking a “wait-and-see” approach until more details are released on the government’s spending plans.
Source: The Edge Markets, 17 May 2018
Economists react to 0% GST, 18 May 2018
The act of zero-rating GST with effect from 1 June 2018 should theoretically reduce prices. However, other factors such as currency exchange and administrative cost will affect the price movement of goods and services.
Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said that the move will generally lower price of goods and services. However, he pointed out there are traders who will refuse to reduce prices following the lowering of the tax rate, which will present a challenge to keep prices low.
MIDF Amanah Investment Bank chief economist Dr Kamaruddin Mohd Nor opined that the move will boost consumer spending, which will in turn improve the domestic economy.
Mydin Mohamed Holdings Bhd (Mydin) managing director Datuk Ameer Ali Mydin said the move could translate into higher corporate tax collection, and some of the revenue loss could be negated through higher corporate tax revenue when people spend more.
Source: New Straits Times, 16 May 2018
RMCD releases FAQs on handling the transition from 6% to 0%, 18 May 2018
The Royal Malaysian Customs Department (RMCD) has released FAQs on transitioning from 6% to 0% GST which covers the following issues:
- Status of GST
- Registration
- Deregistration
- Tax invoicing
- Input tax credit
- Returns
- Change of rate
- Impact on schemes
- Disallowance on input tax
- Designated areas
- Free zones
- Public ruling / Advance ruling / DG decision / Decision made by RMCD
- Bill of demand / Investigation / Prosecution / Appeal to Tribunal / Compound
- Blacklisting
- Tax agents
- Audits.
Kindly visit the RMCD website for further information.
Source: RMCD website, 17 May 2018
MoF: SST to be reintroduced, 18 May 2018
The Ministry of Finance (MoF) has released a statement informing that the fiscal reform initiative is in the works.
The shortfall arising from the reduction of GST to 0% will be cushioned by specific revenue and expenditure measures which will be announced soon.
The MoF also announced that the Sales and Services Tax (SST) will be reintroduced. The statement informed that the reduction of expenditure will begin with rationalisation, efficiency measures and reduction in wastages. Apart from that, oil prices are significantly higher than the USD52 per barrel estimated for Budget 2018, which will provide fiscal buffers for the immediate future.
Source: MoF website, 17 May 2018
Tax experts weigh in on 0% GST, 18 May 2018
Yong Poh Chye of Tax Advisory and Management Services Sdn Bhd
Since consumers will not be charged GST and suppliers do not have to bear this tax, prices should drop by 6% or more.
Amarjeet Singh of Ernst & Young Tax Consultants Sdn Bhd
The zero-rating move has allowed the government to fulfil its promise of removing GST with minimal disruption to businesses and gives the government time to plan and reintroduce SST.
Unnamed
The move of zero-rating will see the removal of the GST portion from the prices of goods and services. However, it remains to be seen if the actual prices will reduce. The government should consider having a mechanism to ensure that prices actually reduce.
Alan Chung of Grant Thornton Malaysia
The zero-rating move represents the least cost to the business community. It will also allow transitional issues to be smoothened out, depending on how long the government maintains the GST legislation.
Dr Veerinderjeet Singh of Axcelasia Inc
A better but lengthier approach would be to design the SST model first, pass the law for its implementation and then only zerorise the GST rate. The GST legislation can then be repealed following the enactment of the SST law. Under the current situation, prices may reduce for now but will increase again upon the implementation of SST.
The government should also review the existing tax system to ensure its relevance for the next few decades and also help in generating surplus budgets. This requires input from all stakeholders, with views from the professional accounting, and tax bodies and chambers of commerce. The review should be led by the private sector with the MoF providing secretariat support.
Datuk Michael Kang of SME Association of Malaysia
This should reduce compliance costs for small and medium enterprises.
S.M. Thanneermalai of Thannees Tax Consulting Services
The effects of a new system needs about three months to materialise, even if it reverts to the previously used SST regime. In the meantime, reduction in leakages would help to provide revenue.
Anand Chelliah of Baker Tilly Malaysia
It looks like the government is easing GST out from the economy. The first step is to make it 0%, next is repealing of the GST Act, then the enactment of the SST Act. He pointed out that since Malaysia used to have a Sales Tax Act and Service Tax Act, the government has a framework to work on.
Dr Zakariah Abdul Rashid of Malaysian Institute of Economic Research
There must be some form of indirect tax as it is instrumental for stabilising the economy. The government should use the GST experience to formulate a better tax system than the old SST regime.
Source: The Sun Daily, 16 May 2018, The Star Online and The Edge Financial Daily, 17 May 2018
Dr M directs MoF to review Budget for potential savings, 17 May 2018
Prime Minister Tun Dr Mahathir Mohamad informed that his administration will conduct a mid-term review of Budget 2018 to see if potential savings and reduction in government expenditure can be made.
Source: Malay Mail Online, 14 May 2018
MoF: GST at zero-rate from 1 June 2018, 17 May 2018
The Ministry of Finance has released a statement that the following goods and services which are currently subject to the standard GST rate of 6% will be set at 0% from 1 June 2018:
- All supplies of goods and services that are made in Malaysia
- All supplies of goods and services that are imported from outside Malaysia.
This will be implemented nationwide until further announcement is made.
However, this decision does not include goods and services listed in the Goods and Services Tax (Exempt Supply) Order 2014, which remain exempted from GST.
All registered businesses must follow the decision of the zero rate now. At the same time, registered businesses are still subjected to all current regulations, such as issuance of invoice, submission of GST returns and input tax claims. Businesses would need to ensure that the price of goods and services conform to the Price Control and Anti-Profiteering Act 2011 at all times.
Source: Ministry of Finance website, 16 May 2018
Council of Eminent Persons on GST removal, 16 May 2018
Zeti: Malaysia can meet revenue requirement without GST
Tan Sri Dr Zeti Akhtar Aziz said that Malaysia can meet revenue requirements after removing GST, through the prioritisation of projects, avoidance of wastage, increasing the efficiency of the public sector and exploring new sources of revenue.
Source: The Star Online, 14 May 2018
Daim: Fuel subsidies and removal of GST will not affect Malaysian economy
The government will ensure that the removal of GST and reintroduction of fuel subsidies will not negatively affect the Malaysian economy.
According to Tun Abdul Daim, the Council will analyse GST and fuel subsidies. Upon the removal of GST, it will reduce corruption and wastage, and become more efficient. He also said that they have reassured fund managers that the removal of GST will not increase the country’s debt level.
Source: The Malaysian Reserve, 14 May 2018
Zeti: Malaysia GST strategy to be announced in 100 days
Tan Sri Dr Zeti Akhtar Aziz said that a strategy for the removal of GST will be announced within 100 days, where it will clarify what the government wants to do and how.
Source: The Edge Markets, 15 May 2018
GST to SST: Tax experts expect short-term transitional issues, 16 May 2018
Tax experts expect short-term transitional issues as the new government works on removing GST and bringing back sales and services tax (SST).
Raja Kumaran of PricewaterhouseCoopers Taxation Services Malaysia (PwC)
The government needs to put rules in place during the transition period. The transition period should take into account the fact that GST covers everyone, ie retailers and traders, where else sales tax only covers manufacturers and services tax covers certain prescribed services.
Apart from there, existing GST issues such as liabilities to be settled which may make the transition more challenging and drawn out.
The government also needs to ensure that it keeps its expenditure under control to maintain the shortfall in revenue.
Anand Chelliah of Baker Tilly Malaysia
The transition from GST to SST will increase time spent and cost for businesses that had only recently invested in GST-compliant accounting software.
It is worth noting that the shift from GST to SST would be beneficial to those in the B40 income group. Although GST is one of the most efficient methods of tax collection, it has inevitably resulted in a cost-push effect on prices of goods and services despite the many exempt and zero-rated items.
However, the question remains whether the removal of GST will result in a downward adjustment of prices, and in what manner.
Perhaps it is also time to review of the Consumer Price Index and the sample basket of goods in Malaysia to ascertain actual inflation levels affecting the man on the street.
SM Thanneermalai of Thannees Tax Consulting Services
SST used to contribute about RM17b to the government before GST came into force. In 2017, GST contributed RM44b to the government’s coffers. However, the shortfall may not be huge this year as there is still about six months of GST to be collected. Oil prices are also higher than 2015, which could pad the shortfall.
The government could consider increasing revenue by widening the scope of services that is subject to service tax.
Source: The Edge Markets, 14 May 2018
Stakeholders react to announcement of GST removal, 16 May 2018
Retail association to support GST removal initiative
The Malaysia Retailers Association (MRA) said that it will support the government initiative to remove GST. Its president, James Loke informed that it needs time, as retailers would need to change the point of sales system (POS) and the price tags, amongst others. However, he assured that it is not seen as a problem, so long there is proper engagement and discussion on the implementation.
Source: New Straits Times Online, 13 May 2018
Nissan: Car prices may increase under SST
Edaran Tan Chong Motor Sdn Bhd said that prices of vehicles may increase when the sales and services tax (SST) is reintroduced. Its sales and marketing director said that car prices may increase if the return to SST is based on the previous calculation formula in the Service Tax Regulations 1975.
Source: New Straits Times Online, 14 May 2018
RAM Ratings: There are methods to cope with revenue shortfall
RAM Ratings opined that the re-introduction of the sales and service tax, higher oil prices and a temporary halt to government-linked projects will be used to plug the revenue shortfall that will arise from the abolishment of GST and reintroduction of fuel subsidies, etc.
Source: The Star Online, 15 May 2018
GST removal may boost retail sentiment
PPB Group Bhd expects the retail sentiment to improve when GST is removed because theoretically, prices will fall and people will have more disposable income.
Source: The Edge Markets, 15 May 2018
Prime Minister: Malaysia has enough revenue to remove GST, 16 May 2018
Prime Minister Tun Mahathir Mohamad has dismissed claims that Malaysia’s revenue will decrease if GST is abolished, saying that the lack of funds is due to misuse rather than insufficient income.
Tun Daim Zainuddin, the leader of the Group of Eminent People, said that the Group tackled issues such as the ringgit, subsidies, GST and the 1MDB scandal during its first meeting.
Source: The Straits Times, 14 May 2018
Important dates
| 15 May 2018 | Due date for PCB payments |
| 15 May 2018 | Due date for monthly instalments |
| 15 May 2018 | 15 days grace period for Form BE 2017 Submission via E-filing only |
| 31 May 2018 | Tax estimates for companies with June year-end (30 June 2019) |
| 31 May 2018 | 6th month revision of tax estimates for companies with November year-end (30 November 2018) |
| 31 May 2018 | 9th month revision of tax estimates for companies with August year-end (31 August 2018) |
| 15 June 2018 | Due date for PCB payments |
| 15 June 2018 | Due date for monthly instalments |
| 30 June 2018 | Tax estimates for companies with July year-end (31 July 2019) |
| 30 June 2018 | 6th month revision of tax estimates for companies with December year-end (31 December 2018) |
| 30 June 2018 | 9th month revision of tax estimates for companies with September year-end (30 September 2018) |
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