Malaysia's New Indirect Tax Rules Should Boost Foreign Investment

by Mary Swire, Tax-News.com, Hong Kong

12 May 2003

The Malaysian government's decision to reform and simplify the country's indirect taxation system will act as an incentive to foreign investment and help foster more international trade a local tax expert said last week.

The new rules ensure a more transparent system and bring Malaysia in line with globally accepted practices with regard to indirect taxes such as customs duties. Prior to the changes, the system was based on open market value which caused much uncertainty, with taxpayers rarely knowing exactly how much they owed.

Huang Shi Yang, a manager at accounting firm Ernst and Young, described the new system as being similar to self assessment in other countries, with taxpayers required to calculate their own tax bills.

Speaking at E&Y's indirect tax briefing last week, Huang said the new structure will be more easily understood by foreign firms, and therefore should lead to an increase in interest from overseas investors.

"For international trade to succeed, all laws and taxes should be harmonised so that foreign investors will feel comfortable to trade with Malaysia. They should be very transparent," Huang told the briefing.

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