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Budget 2016: Changes to Corporate and Individual Income Tax

This article provides an overview of the income tax changes affecting companies and individuals in Budget 2016, including tax incentives, reinvestment allowances, and changes to the GST.

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Budget 2016: Changes to Corporate and Individual Income Tax

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  1. BUDGET 2016 Chua Tia Guan 25.10.2015

  2. Corporate & Individual Income Tax

  3. Corporate & Individual Income Tax

  4. Income tax changes affecting Companies

  5. Tax incentives

  6. Reinvestment allowance (RA) • Current • 60% qualifying project for 15 years beginning from 1st year RA claimed • Proposed • Special RA for companies for 3 years after expiration of 15 years • From Year of Assessment 2016 to 2018

  7. Increased export allowance • Current • Exemption equivalent to • 10% value of increased exports with ≥ 30% value added • 15% value of increased exports with ≥ 50% value added • Proposed • For SME : • 10% value of increased exports with ≤ 20% value added • 15% value of increased exports with ≤ 40% value added • From year of assessment 2016 to 2018

  8. R&D project • Current • Double deduction on R&D expenditure subject to IRB approval • Proposed • SME – double deduction up to RM50,000 per year without approval requirement • From year of assessment 2016 to 2018

  9. Food production projects • Current • Vegetables, fruits, kenaf, herbs, spices, cows, buffaloes, goat, sheep, acquaculture , deep sea fishing • Investment in subsidiary is given a tax deduction • New - 100% income tax exemption for 10 years • Expansion - 100% income tax exemption for 5 years

  10. Food production projects • Proposed • Extension of 5 years • Scope widen to include planting of coconuts, mushrooms & cash crops, rearing of deer, seaweed cultivation, rearing of honey, animal feed crops • From 1 Jan 2016 to 31 Dec 2020

  11. Tour operating companies • Current • 100% income tax exemption for tour packages within Malaysia by ≥ 1,500 local tourists per year • 100% income tax exemption for tour packages to Malaysia by ≥ 750 inbound tourists per year • Proposed • Extension of 3 years • From year of assessment 2016 to 2018

  12. Establishment of Independent Conformity Assessment Bodies (ICAB) ICAB – Co that offers independent conformity assessment services to test products, materials, systems or services for conformance to international specifications or safety standards & other conformities Previously, labs testing medical devices given tax incentive.

  13. Establishment of Independent Conformity Assessment Bodies (ICAB) • Current • Nil • Proposed • New ICAB – 100% statutory income tax exemption on qualifying activities for 5 years; or • New ICAB – Investment tax allowance (ITA) of 60% on qualifying capital expenditure for 5 years offset against 100% of statutory income • Existing ICAB – ITA of 60% on qualifying capital expenditure for 5 years offset against 100% of statutory income • From 1 Jan 2016 to 31 Dec 2018

  14. Establishment of Independent Conformity Assessment Bodies (ICAB) • Qualifying Sectors • Machinery & equipment • Electrical & electronics • Chemicals • Aerospace • Medical devices • Fresh & processed food • Eligible activities • Testing laboratories • Calibration • Certification • Inspection • Good laboratory

  15. Establishment of Independent Conformity Assessment Bodies (ICAB) • ICAB accreditated by : • Department of Standards Malaysia • Accreditation bodies recognised by International Laboratory Accreditation Cooperation • International Accreditation Forum • OECD Good Laboratory Practice Mutual Acceptance Data

  16. Withholding tax of 10% • Current • Withholding tax of 10% on profit distribution from listed REITs for foreign institutional investors & individuals • Proposed • Extension of 3 years • From 1 January 2017 to 3 December 2019

  17. Funding

  18. SME Funding • Shariah-compliant SME Financing Scheme • RM1billion • Subsidy of 2% of financing profit rate • SME Blueprint • RM107m – funds for entities for business development • Entrepreneurs Acceleration Scheme, and SME Capacity and Capability Enhancement Scheme • RM60million

  19. SME Funding • SME Technology Transformation Scheme • RM200million under SME bank • Softloan at 4% interest • Small Retailer Transformation Programme (TUKAR) & Automotive Workshop Modernisation (ATOM) • RM18million

  20. Other Funding • MATRADE • RM235 million • 1Malaysia Promotion Program • Service Export Fund • Export Promotion Fund • IBS Promotion Fund • RM500million – Industrial Building System • Agriculture • RM450million • High impact projects • Fruit & vegetable cultivation • Matching grants for herbal products, fish cage farming

  21. GST changes

  22. GST update Number of registrants – by Customs Administration

  23. GST update Number of registrants – by Entity

  24. GST update Number of registrants – by Sector

  25. Zero rated • Food items - addition • Proposed • Organic-based milk for infant & children • Soy bean based milk for infant & children • Dhal bean include chickpeas and green & white bean • Vegetables include lotus root and water chestnut • Spices include mustard seeds • Sugar include jaggery powder • Noodle products include “mi kolok” • From 1 January 2016

  26. Zero rated • Drugs / medicine addition • Proposed • All types of Controlled Drugs in Poison Groups A,B, C & D under Poisons Act 1952 • Expansion of Over the Counter Medicine from 1,013 brand of drugs to 1,105 • Medical devices under NEML expanded from 125 brands to 128 • From 1 January 2016

  27. Zero rated • Domestic air transport - addition • Proposed • Domestic air transportation for passengers within and between Sabah, Sarawak & Labuan • From 1 January 2016

  28. GST special scheme • Flat rate scheme - farmers • Current • Threshold for registration- RM100,000 • Proposed • Threshold for registration- RM50,000 • From 1 January 2016

  29. GST incentive – GST relief • Reimportation of goods temporarily exported for promotion, research or exhibition • Proposed • Relief from GST payment • From 1 January 2016

  30. GST incentive – GST relief • Reimportation of goods temporarily exported for rental & lease • Proposed • Relief from GST payment • From 1 January 2016

  31. Income tax changes affecting Individuals

  32. Review of income tax rate From Year of Assessment 2016

  33. Review of income tax rate From Year of Assessment 2016

  34. Tax relief • Spouse relief • Current • RM3,000 where spouse has no income • Proposed • RM4,000 where spouse has no income • From Year of Assessment 2016

  35. Tax relief • Alimony to former wife • Current • RM3,000 • Proposed • RM4,000 • From Year of Assessment 2016

  36. Tax relief • Parental care relief • Current • RM5,000 for medical treatment & care of parents • Proposed • RM1,500 each* for parental care • From Year of Assessment 2016 until 2020

  37. Tax relief • Parental care relief • * Conditions • No claim for parents’ medical care relief • Parents are natural parents or foster parents by law subject to a maximum of 2 parents • Parents aged 60 years and above • Parents reside in Malaysia in current year of assessment; and • Parents have an annual income <RM24,000 per annum each

  38. Tax relief • Relief for children below 18 years old • Current • RM1,000 for each child • Proposed • RM2,000 for each child • From Year of Assessment 2016

  39. Tax relief • Relief for children studying at tertiary level • Current • RM6,000 for each child • Proposed • RM8,000 for each child • From Year of Assessment 2016

  40. Tax relief • Relief on fees for tertiary education • Current • RM5,000 • Certificate/Diploma/Degree : law, accounting, Islamic finance, vocational, technical, industrial, scientific & technological skills or qualification • Master / Doctorate : all fields • Proposed • RM7,000 • From Year of Assessment 2016

  41. Tax relief • Relief on contribution to SOCSO • Current • Nil • Proposed • RM250 • From Year of Assessment 2016

  42. Other changes

  43. Stamp duty • Exemption on revived abandoned housing • Current • Instruments of loan agreement for financing • Instruments of transfer of title • From 1 January 2013 to 31 December 2015 • Proposed • Extension of 2 years • Effective from 1 Jan 2016 to 31 Dec 2017

  44. Stamp duty • Exemption on Shariah financing • Current • 20% exemption on housing financing instruments • From 2 September 2006 to 31 December 2015 • Proposed • Extension of 2 years • Effective from 1 Jan 2016 to 31 Dec 2017

  45. Thank You

  46. Vision2020 = RAKYAT + quality of life High Income, Inclusiveness, Sustainability • 11th MP= Anchoring Growth on People • Enhancing inclusiveness towards an equitable society • Improve well being for all • Accelerate human capital development for an advance nation • Pursuing green growth sustainability and resilience • Re-engineering economic growth for great prosperity Budget 2016 Prospering The Rakyat

  47. Financial target of 2020

  48. Rationalising operating expenditure • Value for money • Open tender --- eProcurement, e-Bidding • Outcome based budgeting : –operating + development

  49. Rationalising public sector for greater productivity & performance • Execution is the key : • Reducing overlapping roles • Rightsizing the public service • Exit policy for under performers

  50. Lower education allocation for 2016 ** development expenditure

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