Malaysia's Finance Act 2019 (Act 823) was published in the Federal Gazette on 31 December 2019, which includes certain measures of the 2020 Budget and others. The measures include the following changes to the Income Tax Act 1967:
- An increase in the general restriction on the deduction of any gift of money made by a company to any approved institution, organization or fund from 5% of the aggregate income of the company in the relevant year to 10%, as well as certain other related amendments;
- A change in the penalty for tax or additional tax payable as a result of an amended return to a flat 10% increase of the amount of such tax or additional tax, instead of a varied penalty depending on the timing of an amended return;
- The amendment of rules on assessments and additional assessments in certain cases with the addition of the provision that the Director General may at any time make an assessment or additional assessment, as the case may be, for a year of assessment based on the amount or additional amount of chargeable income and tax resulting from a mutual agreement procedure under a tax treaty (similar provision added to the Petroleum (Income Tax) Act 1967);
- Changes in the rules for extensions of time for an appeal to provide that a person seeking to appeal against an assessment may apply for an extension of the period to make an appeal within seven years after the standard appeal limit expired (generally 30 days after assessment notice) - under the prior rules, no particular time limit to apply was given (similar provision added to the Petroleum (Income Tax) Act 1967);
- The introduction of a new 30% personal income tax band for taxable income exceeding MYR 2 million, resulting in the following bands/rates:
- up to MYR 5,000 - 0%
- MYR 5,001 - 20,000 - 1%
- MYR 20,001 - 35,000 - 3%
- MYR 35,001 - 50,000 - 8%
- MYR 50,001 - 70,000 - 14%
- MYR 70,001 - 100,000 - 21%
- MYR 100,001 - 250,000 - 24%
- MYR 250,001 - 400,000 - 24.5%
- MYR 400,001 - 600,000 - 25%
- MYR 600,001 - 1,000,000 - 26%
- MYR 1,000,001 - 2,000,000 - 28%
- over MYR 2,000,000 - 30%
- An increase in the tax rate for non-resident individuals from 28% to 30%;
- An increase in the qualifying income for the reduced corporate tax rate for SME's (17%) from the first MYR 500,000 to the first MYR 600,000 of chargeable income, which applies for companies with paid-up capital of not more than MYR 2.5 million and income of not more than MYR 50 million (24% rate applies for chargeable income exceeding MYR 600,000); and
- The amendment of the special allowance (current year write-off) for qualifying plant expenditure on small value assets is amended, including:
- an increase in the eligible individual asset costs from MYR 1,300 to MYR 2,000;
- an increase that maximum total claim per year is increased from MYR 13,000 to MYR 20,000; and
- a change in the provision exempting SMEs from the maximum total limit to include reference to the SME income limit of MYR 50 million in addition to the paid-up capital limit of MYR 2.5 million.
The Finance Act 2019 also includes amendments to the Sales Tax Act for the introduction of the Approved Major Exporter Scheme. The Scheme provides an exemption for qualifying persons from the payment of sales tax that may be charged and levied on taxable goods imported, transported from designated areas or special areas, or purchased from a registered manufacturer, provided that:
- The taxable goods will be exported or transferred to designated areas or special areas; or
- The taxable goods are used as raw materials, packing and packaging materials, or components to be manufactured, which will be subsequently exported, or transported to designated or special areas as goods exempted from sales tax pursuant to an order made under the Sales Tax Act.
Where any person has been granted approval for the Scheme and fails to comply with prescribed conditions, any sales tax that was exempted will become due and payable.
Further to the Finance Act 2019, Malaysia has also published the Income Tax (Amendment) Act 2019 and the Petroleum (Income Tax) Amendment Act 2019. Both Acts include similar amendments concerning the hearing of appeals by Special Commissioners and new rules on appeals to the Higher Court regarding questions of law in proceedings before the Special Commissioners.
The measures generally apply from year of assessment 2020, although the changed penalty for amended returns and the seven-year limit for requesting an appeal extension are effective specifically from 1 January 2020 and the Approved Major Exporter Scheme will apply from a date to be appointed by notification in the Gazette.