May 2017 – Newsletter 3/2017

Dear valued clients and business associates,

Thank you for your continued support. There are many important updates to take note of recently. We would also like to remind our clients of the expanded scope of withholding tax announced in the last budget which means remittances to foreign suppliers from 16th January 2017 would most likely be subject to withholding tax. 

There has also been great interest in e-commerce recently, and to support our clients further, we will have a team researching in this area. To assist our clients further, we have written an article on what we know about the Digital Free Trade Zone.:

• Human Resources Development Fund (HRDF)
• What is Digital Trade Free Zone (DFTZ)?
• Expanded Scope of Withholding Tax
• Income Tax Penalty
• Remission of Penalty Under Goods and Services Tax Act 2014

Please refer to the sections below for detailed information concerning the subjects or click on the subjects above to be redirected to the respective topic.

Enjoy reading! Please do let us know if you have any comments!

With compliments from,
M.S.Wong & Co.

As of 1 April 2017, company that currently employs more than 10 local employees are mandated to register with Pembangunan Sumber Malaysia Berhad (PSMB).

A registration grace period of 6 months is implemented spanning from 1 April 2017 to 30 September 2017.

The amendment to the First Schedule is as shown below (taken from employer’s circular No. 2/2017):

Employers who register during the registration grace period are exempted from paying arrears of levy. The exemption only applies to employers who fulfill the following conditions:

• are not required to register with the Corporation before 1 April 2017 but is required to register within the grace period.
• is not involved in any industry as specified in Part I of the First Schedule to the Act and has ten or more employees at the time of registration which is made within the grace period.

Digital Free Trade Zone (DFTZ) was launched by our Prime Minister in collaboration with Alibaba group and Malaysia Digital Economy Corporation on 22 March 2017. DFTZ was specifically launched to achieve the following objectives:

• Help SME’s (Small and Medium-Sized Enterprise) to export their products with ease.
• Enable global marketplaces to source from Malaysian manufacturer/sellers.
• Make Malaysia the regional fulfillment hub for global brands to reach ASEAN buyers.
• Nurture an ecosystem to drive innovation in e-commerse and internet economy.
• To be able to focus on export-oriented growth and enable local manufacturers to penetrate the global market if successful.

The diagram below shows the components of DFTZ and their purposes. (source: DFTZ homepage)

Please refer to the article in the link below for more information. If you would like to find out more about tax incentives or DFTZ, do write to us.

On 16 January 2017, the Finance Act 2017 was enacted, incorporating significant changes to the Malaysian Withholding Tax (WHT) treatment of royalty and payments for services made to non-residents. The changes effective from 17 January are:

• The definition of royalty has been significantly expanded (for example, use of software was added);

• special classes of income shall be subject to WHT irrespective of whether services are performed in Malaysia or outside Malaysia (previously, only performed in Malaysia are subject to WHT).

The expanded scope of WHT is expected to cause great uncertainty and increase costs and the changes are effected immediately without transitional provisions. Businesses should clarify contractually with counterparties on who to bear the WHT and specify services carefully and for larger sums, good defence strategies should be formulated.
 
For the full article, please refer to link below.

During a press conference on 12 April 2017, Inland Revenue Board of Malaysia (IRB) has announced that tax dodgers will be penalised 100% of their total arrears in year 2018. The penalties implemented for omission or underpayment of taxation are normally 45% of underpayments following a tax audit currently.

The trend of increasing penalties in IRB and other regulatory bodies should encourage other businesses to take a more cautious and prudent stand in compliance. 

The following links redirect to each of the respective company headline page about this particular news:

Following an update on TAP recently, many sole proprietors received penalties on their TAP. This was because payment was made in the trading name rather than the name of the sole proprietor.

You should pay for the penalties when you have received notification of the penalty charged. Due this widespread issue of no fault of the sole proprietor, customs announced on how to appeal for the penalties 

The appeal can be submitted to the controlling station. The payment slip or receipt of payment for online transaction have to be attached to the application as proof of payment.

Remission of penalty is subject to approval by the Director General of Customs Department.