Wednesday, October 15, 2014

Answering some of your questions on Budget 2015

PwC's Budget 2015 Q&A team. (Foreground from left) managing consultants Nora Aida Sulaiman and Suzanna Kavita. (Background from left) executive director Benedict Francis, manager Siti Aishah Ismail, managing consultant Woo Sue Anne and executive director Tai Weng Hoe.
My wife and I are Malaysians and we have never owned a residential property. We intend to purchase a house at a price of RM480,000 before the end of this year. This is the first property which we will own. Are we eligible for stamp duty exemption as this is our first residential property?

Fifty per cent stamp duty exemption is currently available on the instrument of transfer and loan agreement for the purchase of a first residential property but the exemption is only available for properties priced at not more than RM400,000.

In view of the rising cost of ownership of residential property, the Government has proposed for the price ceiling of the first residential property to be increased from RM400,000 to RM500,000 to enable more people to qualify for the exemption.

The new price ceiling of RM500,000 is applicable in respect of sale and purchase agreements executed from Jan 1, 2015 to Dec 31, 2016 and the stamp duty exemption only applies to Malaysians who have never owned a residential property.

As the price of the house that you intend to purchase is above RM400,000 but below RM500,000, you may wish to enter into the sale and purchase agreement after Jan 1, 2015 to take advantage of the stamp duty exemption.

I own a business of manufacturing plastic household wares and products. We have claimed the Reinvestment Allowance incentive in the past but the incentive expired last year. The Prime Minister announced a capital allowance incentive for automation in his Budget 2015 speech. How can I claim this incentive?

The Government has proposed for an automation capital allowance incentive to encourage automation in the manufacturing sector. The incentive will be given in the form of capital allowance of 200%, which effectively means that you can claim a deduction twice the amount of capital expenditure incurred to automate your manufacturing process.

High labour-intensive industries such as rubber products, plastics, wood, furniture and textiles will be entitled to 200% automation capital allowance on the first RM4mil expenditure incurred within the period 2015 to 2017 whereas for other manufacturing industries, the 200% automation capital allowance will be provided on the first RM2mil expenditure incurred within the period 2015 to 2020.

I am a disabled taxpayer. My child, aged 20, who is studying in Universiti Malaya was also disabled due to an accident. How much total relief will I be eligible, given the current circumstances?

The reliefs that you would be entitled to as a disabled taxpayer are as follows:

● Personal relief of RM9,000;

● Additional relief of RM6,000 as a disabled taxpayer;

● Relief of RM6,000 instead of RM5,000 for your disabled child (with effect from year of assessment 2015);

● Additional relief of RM6,000 for the child pursuing tertiary education at local university;

● A relief for purchase of basic equipment for yourself as a disabled taxpayer and your disabled child of RM6,000 instead of RM5,000 (with effect from year of assessment 2015)

Please note that you and your child would have to be certified by the department of social welfare as disabled persons before you can claim the additional reliefs due to both your respective disabilities.

I am a Malaysian citizen. I acquired a property in March 2010 and will be disposing of the property in 2014. The sale andpurchase agreement to effect the disposal has just been signed on Sept 21, 2014. What is my real property gains tax (RPGT) obligation and what else do I need to be aware of in view of the recent Budget 2015 announcement?

As the disposal is in the fifth year, the gain will be subject to RPGT at the rate of 15%. In addition, the buyer is required under law to retain 2% of the total value of the purchase price and pay it to the Government within 60 days.

Once the RPGT return is submitted, any underpayment or overpayment (between the 2% retained by the buyer and the actual RPGT payable) will be payable by you or refunded to you.

For example, if you acquired the property at RM350,000 and sold it for RM540,000 (assuming there are no other costs involved), the RPGT will be RM28,500 (15% of the gain of RM190,000). The buyer would have retained and paid RM10,800 (2% of the purchase price of RM540,000) to the Government. As such, you would need to pay the balance of RM17,700 (RM28,500 less RM10,800) once the Notice of Assessment is issued to you.

Following the recent Budget announcement, with effect from Jan 1, 2015, the buyer has to retain 3% (as opposed to 2% currently) of the total value of the purchase price and pay it to the Government. In addition, RPGT will come under the Self-Assessment System from the year 2016 onwards.

This means that under the Self-Assessment System, the seller will need to pay the balance RPGT, i.e. the difference between the RPGT liability and the 3% retained for remittance to the Government once the disposal is completed and not at the point when the Notice of Assessment is issued (which is the current practice).

Will there be any difference for goods and services tax (GST) if I buy medicine from the hospital or the pharmacy located outside of the hospital?

Some medicine specified in The National Essential Medicine list used to treat 30 types of diseases, including heart failure, diabetes, hypertension, cancer and fertility treatment, will not be subject to GST. Both hospitals and pharmacies outside of the hospitals should not be charging any GST on those medicine.

I am a university student. Do I need to pay GST when I buy books and stationeries?

It has been proposed that only reading materials such as reference books, text books, dictionaries, religious books and exercise books will not be subject to GST. Therefore, you will have to pay GST on stationeries that you buy.

With the implementation of GST nearing next year, as a family man (with two school going children) earning an annual employment income of RM120,000, is there a reduction in the individual tax rates?

As announced in advance during last year’s budget, the new individual tax rates will take effect from 2015. An individual taxpayer can now enjoy a 1% to 3% reduction over several chargeable income bands before hitting the top tax rate of 25% upon earning a taxable income exceeding RM400,000 a year. The threshold at which an individual begins paying income taxes has also increased to an estimated monthly income of RM4,000.

Under the new tax rates and broadened income tax bands, you would have a tax saving of RM1,950 from an estimated annual income of RM120,000. Your tax liability on taxable income of RM100,000 (after claiming reliefs of RM20,000) will be approximately RM11,900 as compared with RM13,850 under the current individual tax rates.

Did the Government introduce any tax incentives specifically for SMEs in the recent Budget?

The Government has proposed to further enhance one of the tax incentives for SMEs under the funding model of Investment Account Platform (IAP).

The IAP model was introduced to attract participation from both individual and corporate investors to boost development of SMEs as well as entrepreneurs via a funding system which is efficient, simple and transparent. However, this has not taken off as the Government had envisaged.

To further enhance the IAP, the Government has proposed in Budget 2015 that profits earned by individual investors from investments made through IAP be given income tax exemption for three consecutive years commencing from the first year profit is earned, subject to conditions. The proposed operational date of IAP is from Sept 1, 2015 to Aug 31, 2018.

With this, the Government hopes to attract cash-rich individuals to invest funds into SMEs for project financing to help propel SMEs to the next phase of growth and development.

With GST being introduced in 2015, as an individual, what tax goodies can I look forward to in Budget 2015?

Under the reviewed individual tax rates announced in the Budget 2014, an individual taxpayer can now enjoy a 1% to 3% reduction over several chargeable income bands before hitting the top tax rate of 25% upon earning a taxable income exceeding RM400,000 per year.

There are no other significant incentives introduced in the form of reliefs or tax rebates for a normal individual in Budget 2015. However, the Government has also widened the goods that will not be subject to GST and this extends to fruits, bread, coffee, newspaper and medication, among things.

How does the Government plan to control unnecessary price hikes with the introduction of GST?

As an overall measure, the Price Control and Anti-Profiteering Act 2011 has been introduced to ensure businesses do not hike prices of goods indiscriminately. This Act is also intended to cover the implementation of GST.

The Government is also expected to disseminate a shoppers’ guide to enable consumers to compare prices before and after the GST implementation. About 354 goods and services may experience some price increase and selected types of goods and services will be listed in the shoppers’ guide.

Will petrol be subject to GST?

The retail sale of RON95 petrol, diesel and LPG will be given relief from the payment of GST.

When is the last day to register my business for GST?

Businesses with estimated annual turnover exceeding RM500,000 from April 1, 2015, must be registered by Dec 31, 2014. Registration can be made online via the Customs GST portal, at the kiosk located at Customs Offices or through manual submission. Late registration is an offence and is subject to a fine.

My company has made full payment for services, with 6% service tax, for services to be rendered after April 2015. Do I still have to pay GST?

No, because the GST law has transitional provisions that do not require GST to be paid on services where service tax has been charged by the supplier.

I am an employee and I only receive income from my employment with XYZ Bhd. My company provides me with a car and housing accommodation. Am I eligible to elect for the tax deducted from my monthly pay as final tax?

Effective from year of assessment 2014, you may elect for the taxes which are deducted and remitted under the Malaysian Monthly Tax Deduction(MTD) system as the final tax, subject to the following conditions:

● you only receive cash-based employment income;

● tax is deducted and remitted under the MTD system;

● you have been serving under the same employer for a period of 12 months in a calendar year;

● your taxes are not borne by your employer; and

● you did not elect for joint assessment with your spouse.

However, effective from year of assessment 2015, the election to treat MTD as final tax would include employees who receive benefits in kind.

Additionally, you do not need to have an employment period of 12 months in a calendar year.

For this, you would need to complete the “Form PCB TP2 (1/2013) Claim Form of Benefits-in-Kind and Value of Living Accommodation Provided by the Employer” (which is available on the IRB’s website http://www.hasil.gov.my/pdf/pdfborang/TP32013.pdf) for your employer to include the benefits in kind and living accommodation as part of the monthly MTD deductions.

Please note that this is also subject to your employer’s agreement to the deductions.
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