We would like to wish everyone a very Happy Chinese New Year!! May this year fill everyone with abundant joy and blessings! Please note that our office will be closed from 8th of February to 12th of February 2016. We will reopen on 15th of February 2016.
In this issue of our Newsletter, we present to you a summary of the relevant changes from the 2016 budget summary. In section 2, we also summarise the key points from the revised budget announced on the 28th of January 2016 last week. WE would also like to take this opportunity to inform you on our second MPERS awareness seminar. The seminar is designed to give our clients an awareness of the upcoming changes so that you will know how it will affect your accounts. We are offering at a very cheap price and the seminar will be held on the 19th February 2016, in Niniq Bistro, Setia Tropika. Please refer to details below.
MALAYSIA 2016 BUDGET (Enacted)
Once again, we present to you a brief of the 2016 Budget updates which we believe are most relevant to our clients – specifically updates that affect the tax legislation and how it will affect you.
We summarise what we think are the most important updates for our clients and our opinion on the impact.
Tax rate increase for income earned in excess of RM600,000. Highest band of tax – applicable to those with income exceeding RM1 million increased to 28%. Non-resident income tax rate has also been increased to 28% (w.e.f. YA 2016)
Our Analysis: Faced with criticisms that GST will impact the middle class the most, increase is meant to increase the tax burden on the rich and foreigners. The widening gap between high income band/non-resident tax rate and company tax rate means it is important to plan owner-management’s compensation in a Sdn Bhd Company. There will be tax planning benefits in planning remuneration versus dividends split in drawing money from the company.
Changes Affecting Companies and Unincorporated Businesses:
1) Advance income received for services to be rendered orfor the use of any property will be tax in the period received. (w.e.f. YA2016)
Our Analysis: This may impact the cash flow property investing companies and service providers significantly. Even security deposits received in advance will be taxed as income on receipt and deducted in the year of refund. Businesses who are affected must also estimate their CP204 tax estimation properly. In addition, on advances received after 1/1/2016 will be affected, further complicating the tracking process.
2) Deductibility of GST expenses:
Any input tax paid that is not allowed to be claimed under GST Act 2014 will be allowed as a tax deduction.
Input tax on Blocked Capital Expenditure (e.g. passenger motor cars), can be included as qualifying expenditure to claim capital allowance or reinvestment allowance
Persons liable to be registered but not registered will not be allowed to deduct input tax not claimed as tax deductions. Input tax on capital expenditure will also not be allowed as qualifying capital expenditure.
If a business is entitled to claim input tax but fails to claim, the GST expense will not be allowed as a tax deduction. Input tax on capital expenditure will also not be allowed as qualifying capital expenditure.
Output tax paid on behalf of the recipient (e.g. Gift Rule, GST absorbed by supplier) will not be allowed as a tax deduction.
Our Analysis: For purposes of income tax computations, businesses must analyse and plan properly the nature of input tax expenses so that your tax agent can apply the proper treatment. There is also uncertainty on tax invoices received without proper formats – if the company chooses not to claim the input tax whether the input tax expense is tax deductible or not.
1) For companies that have exhausted their 15-years Reinvestment Allowance claim, a special Reinvestment Allowance incentive is made available for a period of 3 years of assessment starting YA 2016.
Our Analysis: Extension of Reinvestment Allowance is certainly welcomed, but it seems a bit unfair that the extension is only for a limited period. Companies that have not finished claiming their initial RA from before YA2019 will not enjoy this extension.
2) For SMEs, the minimum value added to qualify for Allowance for Increased Export Incentive (AIE) has been decreased to 20% (previously 70%). (YA2016 to 2018).
Our Analysis: Reduction in the minimum value added percentage means more export based businesses will qualify for tax incentives on increased exports.
Tax Administration and Penalties
1) Tax estimation for companies (CP204), LLPs, trust body and cooperative societies must now all be filed electronically. Manual submission will not be accepted from YA 2016.
2) Taxpayer fails to furnish a tax return in any year of assessment for more than 2 years, upon conviction, shall be liable to a fine for in between RM1,000 and RM20,000 or imprisonment for not more than 6 months or both and a special penalty equal to treble the amount.3) Taxpayer who fails to furnish the correct particulars in its tax returns, shall be guilty of an offence and shall upon conviction, shall be liable for a fine between RM200 and RM20,000 or imprisonment not more than 6 months or both.Goods and Services Tax
1) The scope of zero-rated items on certain foodstuffs, medicines and medical devices has been increased.
2) The time of supply for imported services has been changed. The reverse charge must be applied on the earlier of payment receivedorinvoice received.3) Penalties for late payment of GST has been enacted.
For full details of the Malaysia 2016 Budget, please read over here.
MALAYSIA 2016 BUDGET (Revised)
Key relevant points:
1) Special tax relief is granted for individuals who are drawing monthly income of RM8,000 and below for YA 2015 (Revised budget Jan 2016). A good news for low and mid-income earners.
2) Statutory EPF minimum Contribution for employees to be reduced from 11% to 8% from March 2016 to December 2017. EPF Contribution for employers remain unchanged. It has been much reported on social media that this may increase to higher taxable income. This is certainly true for high income earners who have PCB deducted monthly but it will provide more disposable income. We will provide further analysis on this, as well as guiding you on how to maintain employee contribution at 11% if the employee wishes to do so, in the next issue of our newsletter.3) Domestic Trade, Cooperatives and Consumerism Ministry (“KPDNKK”) ordered to increase enforcement and action against unethical traders. The actions of KPDNKK in cracking down on profiteering businesses had been a subject of great controversy and debate in last year. Retailers have been subject court action for deemed unfair prices and many businesses could not claim the full amount on their special refund. In environment of depreciating ringgit and inflation, retailers have to be careful in justifying their prices.4) To reduce cost of living, government to liberalise approved permits (“APs) for agricultural products, including coffee beans and meats.5) “The present rate of Goods and Services Tax (“GST”) will also be retained at 6%. The Government has no plan to increase this,” said Najib at the Putrajaya International Convention Centre (“PICC”).
SEMINAR – MALAYSIAN PRIVATE ENTITIES REPORTING STANDARD (“MPERS”)
w.e.f. 1 Jan 2016
The new Malaysian Private Entities Reporting Standards (MPERS) will replace the existing Private Entities Reporting Standards (PERS) for financial periods beginning on or after 1st January 2016. We are expecting many private entities in Malaysia to be affected with the new standards. The purpose of adopting the MPERS is to allow the financial statements of private entities in Malaysia will be comparable to the financial statements of SMEs in many countries across the globe. PERS is no longer allowed for private entities with financial periods begin on or after 1st of January 2015.
This article first appeared on The Star on 27th October 2015
We will be conducting our second training on MPERS in order for our clients to embrace the new accounting standards. The training will be held on the 19th of February 2016, and it will be held in Niniq Bistro at Taman Setia Tropika, from 9.00am. to 6.00pm.
a general recap of accounting treatments and concepts on the latest development of the transition from PERS to MPERS; and
comparison between PERS and MPERS;
guidance to participants to present a better financial statements.
We will also provide examples and case studies to the participants for a clearer understanding.
We also welcome practical questions faced by participants. We are expecting that the move to adopt MPERS should smoothen cross-border investment and trade between SMEs, and bring us to a more international level.
If you have further query, please do not hesitate to contact our staff:
– Swee Ann (firstname.lastname@example.org)
– Iris (email@example.com) – Carmen (firstname.lastname@example.org)
Please look out for our next newsletter.
With compliments from,
M.S. Wong & Co.
Disclaimer: The newsletter above is issued by M.S. Wong & Co. Whilst every care has been taken in compiling this newsletter, we make no representation or warranty of the information for any purpose. M.S. Wong & Co and its employees disclaim all responsibility for the consequences of anyone acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. You are advised to seek professional advice as the case may be.