CCT Internal e-Tax Update
Table of Contents
- Income Tax and GST Legislations, Public Rulings And Guides
- Update. 3
- Direct Taxation. 3
- IRB issues new tax investigation framework, 28 May 2018. 3
- SC releases revised guidelines on tax exemption for wholesale money market funds, 28 May 2018 4
- Income Tax and GST News. 5
- Government to earn RM4b in SST in 2018. 5
- Daim: SST implementation method report to be submitted to government in two weeks. 5
- Short-term benefit to consumers with zero-rating of GST. 5
- Beware of GST scammers, 01 June 2018. 6
- News: Transitioning from GST to SST, 31 May 2018 Hybrid GST and SST system ideal for replacing GST 6
- Clear timeframe needed for transition. 7
- SMEs to benefit from removal of GST. 7
- Operations to monitor GST transition. 8
- Time for tax reforms to take place, 31 May 2018. 8
- [PM: SST reintroduced in September] PM: SST reintroduced in September, 30 May 2018. 10
- RMCD: Reduce prices with zero-rating of GST, 28 May 2018. 10
- RMCD issues another revised FAQ on GST transition, 25 May 2018. 10
- News: Transitioning from GST to SST, 23 May 2018. 11
- Fiscal deficit target can be met despite GST removal 11
- RMCD releases revised FAQs on handling the transition from 6% to 0%, 23 May 2018. 12
- Zero per cent GST may not reduce living costs significantly, 22 May 2018. 12
- News: Transitioning from GST to SST, 21 May 2018. 13
- EY: Maintain records post-GST. 13
- Tax experts call for guidelines for business. 13
- Important dates. 15
Income Tax and GST Legislations, Public Rulings And Guides Update
Direct Taxation
IRB issues new tax investigation framework, 28 May 2018
The Inland Revenue Board (IRB) has issued a new tax investigation framework (Malay language) dated 15 May 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.
- Clarified their procedures for investigation procedures.
- Updated the rights and responsibilities of taxpayers as well as offences and penalties.
- Updated its guidance on payment procedures and appeals.
The Framework comes into force on 15 May 2018 and replaces the Tax Investigation Framework dated 1 October 2013.
Kindly refer to the IRB website for further details.
Source: IRB website, 18 May 2018
SC releases revised guidelines on tax exemption for wholesale money market funds, 28 May 2018
The Securities Commission Malaysia (SC) has released its revised Guidelines on Tax Exemption for Wholesale Money Market Funds [SC-GL/3-2016 (R1- 2018)] on 24 April 2018.
Kindly visit the SC website for further information.
Source: SC website, 24 April 2018
Income Tax and GST News
Government to earn RM4b in SST in 2018
Finance Minister Lim Guan Eng said that the reintroduction of SST will earn the government RM4b in revenue. He added that SST revenues will only be fully realised from November onwards, as a bi-monthly tax collection mechanism for local manufacturers will be implemented.
Source: Malay Mail Online, 31 May 2018
Daim: SST implementation method report to be submitted to government in two weeks
Tun Daim Zainuddin, Chairman of the Council of Eminent Persons, informed that the report on the SST implementation method will be submitted to the government within two weeks. It will “somewhat be an updated version”, with the aim of lowering the price of goods and services for the people.
Daim said that there is no immediate need to introduce any new taxes or increase income tax rates at this point. He further added that the SST is able to bring in enough revenue to cover the shortfall from the removal of GST, as oil prices are increasing steadily.
When asked on whether goods and services would be cheaper after the reintroduction of SST, he said the value of ringgit would impact the price of goods, as the bulk of it are imported.
Source: New Straits Times Online, 31 May 2018
Short-term benefit to consumers with zero-rating of GST
Associate Prof Dr Nurhaizal Azam Arif of International Business and Multinational Enterprise at Hiroshima City University in Japan said that with the zero-rating of GST, there will be a short-term increase in the purchasing power of consumers before SST kicks.
Once the SST is reintroduced, the purchasing power of consumers will be determined by structure of the tax. He pointed out that prices of goods and services could be affected by other factors such as foreign exchange rates and changes in production costs.
He urged the government to develop an effective mechanism to ensure that prices of goods and services, especially essential ones like food, transport and housing, remain under control.
Prof Dr Mohamad Hanapi Mohamad of Picoms International University College said that enforcement is important in ensuring that prices of goods and services are not increased after the zero-rating of GST.
Source: Borneo Post Online, 31 May 2018
Beware of GST scammers, 01 June 2018
Police have received reports over scammers posing as Customs officers and telling their targets that they owe money for unpaid GST for mobile phones and baby formula. If the victims refuse to pay, the call would be forwarded to a “police officer” who would accuse them of committing a crime. The “police officer” would then instruct the victim to transfer funds to a bank account to prevent their account from being frozen, assuring them that the money will be returned after the investigation.
The scammers use VoIP technology to replicate telephone numbers of genuine institutions. The police have open investigations, with victims suffering losses up to RM51,300.
Police have advised public not to reveal banking details to anyone and call the bank and/or police if they receive such calls.
Source: The Star, 30 May 2018
News: Transitioning from GST to SST, 31 May 2018 Hybrid GST and SST system ideal for replacing GST
Malaysia’s GST will be zero-rated with effect from 1 June 2018, paving the way for Sales and Services Tax (SST) to return.
According to Ivy Ling of Lee Hishammuddin Allen & Gledhill, a hybrid tax system of SST and GST would be the best avenue to replace GST. She predicts that the return of SST will mostly affect service industries such as restaurants and legal and accounting firms. However, immediate impact could been seen in retail industries as they would need change their display prices to exclude GST.
The Ministry of Finance announced that it will reduce expenditure through “rationalisation, efficiency measures, and reduction in wastages”. Robert Teo of RSM Malaysia opined that the government could defer large procurement contracts, making their tenders more transparent and also shrink its bureaucracy to reduce its costs.
Kularaj Kulathungam of KR Tax Consultants Sdn Bhd advised taxpayers to retain their tax files, even with GST rate at zero, as there may be practical accounting, transaction-related or administrative issues during the transition period.
Source: Bloomberg BNA, 22 May 2018
Clear timeframe needed for transition
Federation of Malaysian Manufacturers (FMM) president Datuk Soh Thian Lai called for the authorities to provide a clear timeframe to enforce the transition from GST to SST, to ensure that the necessary regulations and procedures are in place.
Soh noted that the previous SST regime at various sales tax rates as well as a service tax. He suggested for the Government adopt a low and broad uniform rate to ease administrative burden for businesses and also allow authorities to effectively enforce the new tax. He also suggested that the authorities should monitor software vendors to ensure that they do not profiteer excessively from the reintroduction of SST.
SME Association of Malaysia president Datuk Michael Kang said that it will submit a proposal to minimise the cost of change as businesses would need to change the point of sale (POS) system to adapt to SST.
Source: The Star, 30 May 2018
SMEs to benefit from removal of GST
Small and medium-sized enterprises (SMEs) will benefit from the removal of GST as the cash used for input tax and output tax purposes can be utilised as working capital, said Klang Chinese Chamber of Commerce and Industry president Tan Sri Lim Kuang Sia. Apart from that, the buying power of consumers will improve which will benefit domestic consumer-based businesses.
Source: The Star, 30 May 2018
Operations to monitor GST transition
Both the Royal Malaysian Customs Department (RMCD) and Ministry of Domestic Trade, Consumerism and Cooperatives (KPDNKK) will be conducting operations to ensure that GST is not charged to consumers.
RMCD director-general Datuk Subromaniam reminded traders not to take advantage of consumers. He said that there are no issues for GST-registered traders as they would be able to claim input tax credit on stocks purchased prior to 1 June 2018. As for non-registered GST traders (who are unable to claim input tax credit), he suggested that the traders average out their cost based on the new stock that will be acquired tax free.
KPDNKK enforcement director said that 6% GST must be deducted at the cash register and reflected in the receipt, if they are unable to change the old price tags for the time being. He said that businesses would be given a grace period to update the price tags but did not specify how long. He also advised customers to check that they are not charged with GST.
Source: The Star, 30 May 2018
Time for tax reforms to take place, 31 May 2018
Tax reforms are not just about changing tax laws but also about how such laws are administered.
Income Tax
Recently, astronomical tax assessments were imposed on taxpayers — RM2.07b against TNB, RM80.77m against an MK Land Holdings Bhd subsidiary, RM476.5m against Magnum Bhd and its subsidiary, and RM96.82m against Aeon Credit Service (M) Bhd, to name a few. It has created an environment of fear, and apart from that, a record number of cases are being litigated.
If a taxpayer does not agree with an assessment made by the IRB, the taxpayer needs to submit an appeal with the Special Commissioners of Income Tax (SCIT) using the Form Q. However, due to the number of cases, there is a growing backlog. It could take four to give years to obtain a decision. Should the case go to the High Court and Court of Appeal, it could take another two to three years. Generally, in appeal cases, IRB takes the view that the Income Tax Act 1967 and the Real Property Gains Tax Act 1976 require a taxpayer to pay up all taxes first. However, the courts have not always agreed with this.
IRB tends to initiate debt recovery proceedings in the courts when taxes are unpaid. As this does not need to go through the SCIT, it can move quickly. Therefore, taxpayers have to pay taxes first and wait for years for the appeal to be resolved. If there is a refund, the wait for such refund could take time as well.
An alternative method to dispute an additional tax assessment is for judicial review to be brought to the High Court. This process is faster as it allows one to bypass the SCIT. However, it requires leave of the court. The IRB regularly challenges the use of this procedure and many taxpayers have failed to get leave of court. The Courts tend to grant leave where there is obvious illegality or irrationality.
Dispute resolution in tax matters need to be quicker. Short term, the SCIT should increase its panel members as currently, there are only four members. Long term, the entire tax appeal system should be re-evaluated.
Apart from that, we should also examine why there is a need for so many appeals, and the IRB needs to reconsider its aggressive position, for example, retrospective changes in positions and heavy penalties.
Perhaps the IRB can work with the private sector and eminent individuals to develop a more progressive approach to the administration of taxes. As the IRB is a board established under the Inland Revenue Board of Malaysia Act 1995, one way would be to appoint persons of standing and experience in financial, commercial, tax or legal matters to the board. Apart from that, committees could be established under the same Act that could help develop a progressive tax administration.
Reforming the IRB could also reduce the trend of taxpayers approaching the Minister of Finance 1 and 2 whenever they are dissatisfied with a tax issue.
Good and services tax (GST)
The removal of GST can be done but there should be focus on transitional issues such as outstanding GST refunds, stock held at hand on the date of the repeal of GST, contracts that straddle pre-GST, GST and post-GST as well as ongoing appeals before the GST Appeal Tribunal?
On 16 May 2018, a gazette order was issued to zero-rate GST with effect from 1 June. It is an effective way to begin the process of removing GST, as there will be no GST but the system and law still remains in place, allowing the GST cycle to end in an orderly manner.
With the zero-rating, prices are expected to drop, and the Ministry of Finance, through a media release, has reminded businesses to comply with the Price Control and Anti-Profiteering Act 2011. It is worth noting that the anti-profiteering provisions only apply to food and beverages, non-durable household goods and personal care products (excluding cosmetics). Apart from GST, other factors such as foreign exchange fluctuations also affects pricing. However, consumer sentiment would compel businesses to reduce prices and not profiteer.
The repeal of GST and reintroduction of SST will require legislation to be passed by parliament. Transitional issues and the review of the past SST system are factors that need to be considered before the legislation can be formed.
Source: The Edge Markets, 26 May 2018
[PM: SST reintroduced in September] PM: SST reintroduced in September, 30 May 2018
Prime Minister Tun Dr Mahathir announced that the sales and services tax (SST) will be reintroduced in September to reduce the shortfall in government revenue. However, the legislation needs to be enacted in Parliament first.
Source: The Star Online, 30 May 2018
RMCD: Reduce prices with zero-rating of GST, 28 May 2018
The Royal Malaysian Customs Department (RMCD) informed that businesses are required to pass on savings from the zero-rating of GST to consumers in the form of lower prices. The government will be taking steps to ensure that prices comply with the Price Control and Anti-Profiteering Act 2011.
Source: The Edge Markets, 27 May 2018
RMCD issues another revised FAQ on GST transition, 25 May 2018
The Royal Malaysian Customs Department (RMCD) has uploaded its latest version of the FAQs on transitioning from 6% to 0% GST on 24 May 2018.
The previous FAQs dated 17 May 2018 and 22 May 2018 have been cancelled.
Kindly visit the RMCD website for further information.
Source: RMCD website, 24 May 2018
News: Transitioning from GST to SST, 23 May 2018
Rating agencies cautious over GST removal
Moody’s Investors Service said that Malaysia’s removal of GST is credit negative, as will strain fiscal strength by increasing the government’s reliance on oil-related revenue and narrowing the tax base.
Moody estimates the revenue loss from the abolishment of GST at 1.9% of GDP this year. However, it estimates that the revenue loss could narrow to 1% if SST takes effect in July. The revenue loss could be further brought down to 0.6% if the price of oil increases from the assumption that was used in the 2018 Budget, ie USD52 per barrel, to an average USD70 per barrel this year.
However, beyond 2018, Moody expects a revenue shortfall of 1.7% of GDP, even with the reintroduction of the SST. It has not taken into account of the rationale that the elimination of GST will boost private consumption and economic growth as it does not expect a sizeable multiplier effect.
It points out that in 2017, the GST revenue of RM44.3b or 3.3% of GDP. Moody’s credit rating for Malaysia was last set at A3 with a stable outlook.
The Malaysian Rating Corp Bhd (MARC) expects the impact of the GST removal to be neutral on private consumption in 2018, stating that actual consumer spending trend will depend on the movement of general prices. It expects “price stickiness” issues as businesses may be reluctant to reduce prices. MARC said that alternative mechanisms may be needed to handle the price stickiness.
Source: The Edge Markets, 23 May 2018
Fiscal deficit target can be met despite GST removal
Alliance Bank Malaysia Bhd chief economist Manokaran Mottain said that if the government can plug leakages, especially in the procurement process, the revenue shortfall could be eliminated eventually.
The government had said that it targets cost savings amounting to RM20b or 1.4% of GDP. Manokaran describes the target as ambitious but believes savings close to the target could be achieved.
AmBank Group chief economist Anthony Dass estimates that up to 5% of the government’s operating expenditure or RM11b can be saved on the back of fiscal expenditure reforms.
The savings, combined with higher crude oil prices and the SST revenue, could help offset the shortfall after the removal of the GST.
Source: The Star Online, 23 May 2018
RMCD releases revised FAQs on handling the transition from 6% to 0%, 23 May 2018
The Royal Malaysian Customs Department (RMCD) has released revised FAQs on transitioning from 6% to 0% GST on 22 May 2018.
The FAQ dated 17 May 2018 is cancelled.
Kindly visit the RMCD website for further information.
Source: RMCD website, 23 May 2018
Zero per cent GST may not reduce living costs significantly, 22 May 2018
The move to set GST at 0% will not lead to a significant decrease in living costs, said Institute for Democracy and Economic Affairs (IDEAS).
IDEAS CEO Ali Salman pointed out that most food items and supplies that form a major part of household expenses for the B40 income group are already zero-rated, hence the cost of living may not reduce significantly. Different baskets of the consumer price index (eg, food, beverages, education, health, transport, etc.) have shown continued increase over the past five years but GST is not the single most important factor.
The government needs to implement more substantial measures to reduce the cost of living, but invest on policies to help people increase their income and also safeguard against rise in fiscal deficit.
Anushka Shah of Moody’s Investor Service Inc says that should the plan to remove GST is implemented without adjusting measures will be a credit negative.
Source: The Malaysian Reserve, 18 May 2018
News: Transitioning from GST to SST, 21 May 2018
Malaysians to enjoy tax holiday
Tun Daim Zainuddin, chairman of the Council of Eminent Persons, said the SST will be introduced between two to three months as they need time to work on the mechanism. Hence, Malaysians would enjoy a “tax holiday” until the SST is introduced.
Source: The Star Online, 19 May 2018
EY: Maintain records post-GST
Companies should continue maintaining records, after the removal of GST as tax audits may be conducted upon deregistration, and may occur up to seven years from the time of supply, said Ernst & Young Advisory Services Sdn Bhd. Apart from that, the transition would need to be managed carefully.
It also anticipates future policy changes, which includes a comprehensive review of tax policies and framework as the government considers its social and development plans, while keeping tax rates competitive.
Source: The Sun Daily, 19 May 2018
Tax experts call for guidelines for business
Tax experts are requesting for the government to provide guidelines to help business deal with the change of GST rate, and the transition from GST to SST.
Raja Kumaran of PwC Malaysia said there must be proper enforcement when the SST comes into effect, to ensure that prices are not raised again. He said that some of the reasons prices increased when GST was introduced was poor enforcement on prices, delays on input tax refunds, which saw base prices of goods and services increasing, on top of the 6% tax. He says that businesses should be given at least six months to prepare for the reintroduction of SST and expects that the SST will be enforced only after September this year.
Datuk Tan Theng Hooi of Deloitte Malaysia also calls for clear guidance for the reintroduction of the SST, as many businesses have probably removed their SST systems. He also says the adoption of a SST system should be a priority to enable a smooth transition. He also cautioned that not all prices will reduce by 6% once SST is introduced, depending on SST rates and list of taxable items, suggesting that an in-depth analysis be made on which items will see prices going up or down post-SST implementation and be made known to the public, so that expectations can be managed.
Yeo Eng Ping of Ernst & Young hopes that the SST will be introduced in a manner that is mindful of business operations, resources and cost, given that its transition is happening with a relatively short timeframe.
Source: The Star Online, 19 May 2018
Important dates
| 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) |
| 15 July 2018 | Due date for PCB payments |
| 15 July 2018 | Due date for monthly instalments |
| 15 July 2018 | 15 days grace period for Form B 2017 Submission via E-filing only |
| 31 July 2018 | Tax estimates for companies with August year-end (31 August 2019) |
| 31 July 2018 | 6th month revision of tax estimates for companies with January year-end (31 January 2019) |
| 31 July 2018 | 9th month revision of tax estimates for companies with October year-end (31 October 2018) |
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