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Malaysia Hikes Personal Income Tax In 2016 Budget

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

30 October 2015


Malaysia's Prime Minister and Minister of Finance, Datuk Seri Najib Razak, has announced new rates of tax on those receiving high incomes and new tax measures designed to boost private investment in the 2016 Budget.

Under existing tax rules, resident taxpayers in Malaysia are taxed on a sliding scale from 0 percent on the first MYR5,000 (USD1,170) of taxable income, up to 25 percent for income exceeding MYR400,000. Budget 2016 introduces two new rates as follows: 26 percent for income between MYR600,001 to MYR1m; and 28 for income exceeding MYR1m.

However, in a measure designed to boost innovation and entrepreneurship, small- and medium-sized enterprises that incur expenditure on research and development projects up to MYR50,000 will be eligible for an automatic double tax deduction for year of assessment 2016 to 2018.

In order to stimulate Malaysia's capital market, the Budget also introduces a tax deduction for the issuance of "Sustainable and Responsible Investments" sukuk (a form of Islamic finance bond) and exempts, from the 20 percent stamp duty, Shariah-compliant loan instruments used to finance the purchase of houses.

In addition, to promote Malaysia's tourism industry, the 100 percent income tax deduction for tour operators will be extended from year of assessment 2016 to 2018. Tax incentives will be also be extended for the food production sector until 2020, and the scope of the incentive extended to include the rearing of deer, the production of honey, the cultivation of mushrooms, coconuts and seaweed, and the cultivation of animal feed crops.

Budget 2016 additionally seeks to improve the Goods and Services Tax (GST) regime by zero-rating all types of controlled medicines and certain food items.

Introduced on April 1, 2015, the GST replaced the sales and services tax and is intended to support exporters' competitiveness while improving the efficiency of the tax system. According to Najib, almost 400,000 companies have registered for GST, with more than 90 percent of these firms having submitted GST returns.

TAGS: Finance | tax | investment | entrepreneurs | goods and services tax (GST) | food | Malaysia | individual income tax | services | research and development | Investment | Invest | Investment | Tax

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