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Malaysia's 2018 Budget Includes Various Tax Relief Changes

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

03 November 2017


The Malaysian Government in its Budget 2018 announced numerous tax changes, including an income tax cut, incentives for women to return to work, and tax relief for property investors and venture capital firms.

Introduced on October 27, the Budget proposes to cut individual income tax rates by two percentage points for those earning between MYR20,000 (USD4,725) to MYR70,000 a year. The five percent rate on income up MYR35,000 will be reduced to three percent; the 10 percent rate on income up to MYR50,000 will be lowered to eight percent; and the 16 percent rate on income up to MYR70,000 will be cut to 14 percent.

Women entering the workforce after at least two years on a work break will be exempt from income tax for a 12-month period.

To encourage property investment, the new Budget offers a stamp duty exemption for loan agreements and letters of consent to transfer, as well as a 50 percent tax concession for rental income of up to MYR2,000 per month.

A few business incentives were introduced, including an extension to the Accelerated Capital Allowances incentive for automation equipment to 2020, a new allowance of up to 200 percent for the manufacturing sector, and a new Capital Allowance Incentive for information and communications technology (ICT) firms from 2018-2020.

To expand tourism, a tax incentive for investment in four- and five-star hotels has been extended for a further two years, while the tax incentive for tour operators was also extended to 2020, as was the investment tax allowance for medical tourism.

A double tax deduction was introduced for expenditure on dental and ambulatory care services, while the special tourism healthcare incentive was increased from 50 to 100 percent.

A number of tax incentives for the capital market and asset management industries were also introduced. These include:

  • A three-year exemption on stamp duty for exchange-traded funds (ETFs) and structured warrants;
  • Tax relief for venture capital companies equivalent to the amount of initial investment;
  • Tax deductions for angel investors in venture capital projects;
  • Income tax deductions for environmentally and socially responsible Islamic bond issuers; and
  • Income tax exemptions for fund managers of conventional socially responsible funds (already applicable to Islamic funds).

Further changes include tax deductions for firms hiring persons with disabilities; individual tax relief for participants in the 1Malaysia Education Saving Scheme; and goods and services tax (GST) relief for certain sectors including cruise operators, education, and religious building construction, and for oil and gas equipment imports and "big ticket" imports such as planes and ships.

TAGS: tax | investment | business | value added tax (VAT) | tax incentives | goods and services tax (GST) | oil and gas | agreements | education | manufacturing | venture capital | tax rates | stamp duty | Malaysia | construction | trade | individual income tax | services | Education | Education | Tax

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