October 2014
                                                                                     KEY CHANGES
The 2015 Budget was tabled in Parliament on 10 October 2014 by the
honourable Prime Minister and Minister of Finance YAB Datuk Seri Najib Tun            GOODS & SERVICES TAX
Razak with the theme “Budget 2015 : People Economy” which focused on
seven main strategies:                                                                CORPORATE TAX
1.   Strengthening Economic Growth
2.   Enhancing Fiscal Governance                                                      PERSONAL TAX
3.   Developing Human Capital and Entrepreneurship
4.   Advancing Bumiputera Agenda                                                      REAL PROPERTY GAINS TAX
5.   Upholding Role of Women
6.   Developing National Youth Transformation Programme                               STAMP DUTY
7.   Prioritising Well-Being of the Rakyat
                                                                                      INCENTIVES
The 2015 Budget allocates RM273.9 billion, which is 3.5% higher than the
allocation for 2014, for development and operating expenditure. The
Government revenue collection in 2015 is estimated at RM235.2 billion which
is an increase of RM10.2 billion from 2014. Revenue from implementation of
Goods and Services Tax (“GST”) is expected to be RM23.2 billion in 2015. The
Government is committed to reduce the fiscal deficit to 3.5% of GDP (from
3.9% last year).

Whilst continuing to focus on its fiscal transformation agenda, the Government
has taken further steps to relieve the burden on the Rakyat in view of the
implementation of GST on 1 April 2015. As such, the proposed list of zero rated or
exempted items has been widened to further control the post-GST cost on basic

The Government has also restated its commitment to reduce of income tax by 1%
for companies (effective year of assessment 2016), and by 1% to 3% for individuals
(effective year of assessment 2015). This is in line with making Malaysia more
competitive in the region and the trend of gradually shifting from income tax to
consumption tax.

With only 5 years remaining to become a high income nation by 2020, the 2015
Budget marks the end of the 10th Malaysia Plan. The 11th Malaysia Plan, which is
expected be launched in May 2015, is expected to have a new approach where the
focus will be to embark on selected high impact projects without over-straining
its resources.
2         2015 Malaysian Budget Highlights

Outlined below are some of the key tax changes.

                                     BUDGET 2015 PROPOSALS                                                    COMMENTS
                                                     GOODS & SERVICES TAX (GST)

    Additional          The Government has widened the scope of items that will not be             It is not clear which of these
    items not           subject to GST which includes:                                             items are zero-rated or exempt.
    subject to GST      (i)     All types of fruits whether local or imported;                     Items (i) to (iv) are likely to be
                                                                                                   zero-rated to be consistent with
                        (ii)    White bread and wholemeal bread;                                   other basic food items.
                        (iii)   Coffee powder, tea dust and cocoa powder;                          As newspapers are zero-rated in
                                                                                                   the UK, it is possible that
                        (iv)    Yellow mee, kuey teow, laksa and meehoon;
                                                                                                   newspapers will also be zero-
                        (v)     The National Essential Medicine covering almost 2,900 medicine     rated in Malaysia to avoid price
                                brands. These medicines are used to treat 30 types of diseases     increases.
                                including heart failure, diabetes, hypertension, cancer and
                                                                                                   No definitive classification for
                                fertility treatment;
                                                                                                   GST can be determined until the
                        (vi)    Reading materials such as children’s coloring books, exercise      final zero-rated and exempt
                                and reference books, text books, dictionaries and religious        supply orders are released.
                                books; and
                        (vii)   Newspapers.

    Supply of           The Government has also agreed to increase the zero-rated supply           The objective of this is to
    electricity         threshold of electricity for domestic households from the first 200        benefit 70% of households.
                        units to 300 units for a minimum period of 28 days.

    Relief from         The Government has agreed that the retail sale of RON95 petrol,            It is not clear how the relief will
    GST                 diesel and LPG will be given relief from the payment of GST for            be applied and who is to be
                        consumers and targeted groups.                                             included in the targeted groups.

    GST impact on       Of the 944 goods and services in the basket of goods of the CPI, the       This indicates that the
    pricing             prices of 532 items (56%) are expected to reduce by up to 4.1%. On         Government has done some
                        the other hand, 354 goods and services may experience some price           preliminary pricing studies.
                        increase but less than 5.8%.
                        The Government will disseminate a shoppers’ guide to enable                Depending on the information in
                        consumers to compare prices before and after the implementation of         the guide, this may assist
                        GST.                                                                       consumers to assess the
                                                                                                   reasonableness of pricing post-

    Incentives and      To assist businesses in the successful implementation of GST, the          These incentives and financial
    financial           following incentives and assistance will be provided:                      assistance were also announced
    assistance                                                                                     in last year’s Budget.
                        (i)     Training grant of RM100 million will be provided to businesses
                                for employees to attend GST courses.
                        (ii)    Financial assistance amounting to RM150 million will be
                                provided to SMEs for the purchase of accounting software.
                        (iii)   Accelerated Capital Allowance on ICT equipment and software.
                        (iv)    Expenses incurred for training in accounting and ICT relating to
                                GST will be given additional tax deduction.
3         2015 Malaysian Budget Highlights

                                       BUDGET 2015 PROPOSALS                                                  COMMENTS
                                                               CORPORATE TAX

    Review of            The corporate tax rate for a company will be reduced by 1% to 24%.        The corporate tax rate and the
    Corporate            This rate also applies to the following entities:                         income tax rate for SMEs will be
    Income Tax           (i)    a trust body;                                                      reduced by 1%. This is to support
                                                                                                   the smooth implementation of
                         (ii)      an executor of an estate of an individual who was domiciled     GST.
                                   outside Malaysia at the time of his death;
                                                                                                   This proposal has previously
                         (iii)     a receiver appointed by the court; and
                                                                                                   been announced in Budget 2014.
                         (iv)      a limited liability partnership.

                         The income tax rate for SMEs (i.e. companies with paid-up capital of
                         up to RM2.5 million) will be reduced by 1% as follows:
                         (i)   19% on chargeable income up to RM500,000; and
                         (ii)      24% on the remaining chargeable income.
                         (Effective YA 2016)

    Review of Co-        The chargeable income tax bands and income tax rates for co-              The objective of this proposal is
    Operative            operatives are amended and reduced as follows:                            to support the smooth
    Income Tax                                                                                     implementation of GST.
                                 Chargeable Income           Proposed Tax Rates
                                       (RM)                                                        The reduction in the income tax
                                                                                                   rate for co-operatives will give
                                     1 – 30,000                       0%                           tax savings of RM7,000 to co-
                                                                                                   operatives with chargeable
                                  30,001 – 60,000                     5%                           income in excess of RM750,000.

                                  60,001 – 100,000                    10%                          This proposal has previously
                                                                                                   been announced in Budget 2014.
                                 100,001 – 150,000                    15%

                                 150,001 – 250,000                    18%

                                 250,001 – 500,000                    21%

                                 500,001 – 750,000                    23%

                                 Exceeding 750,000                    24%

                          (Effective YA 2015)

    Extension of Tax     Tax deduction on expenses incurred for the issuance of Sukuk under        The objective of this proposal is
    Incentive for        the principles of Ijarah and Wakalah to be extended for another 3         to expand the Sukuk market at
    Issuance of          years to YA 2018.                                                         the international level.
                         (Effective from YA 2016 to YA 2018)

    Tax incentive        A double deduction is currently given on scholarships awarded by          The proposal is to encourage
    for Scholarships     companies to students pursuing diploma or bachelor degree courses         companies to provide
                         at higher educational institutions. This is further extended to           scholarships in vocational and
                         scholarships in the field of vocational and technical fields in           technical fields.
                         institutions recognised by the Government.
                         (Effective from YA 2015 to YA 2016)

    Tax Incentive        Double deduction given on expenses incurred by companies that             Companies are encouraged to
    for Structured       participate in the SIP programme implemented by the Ministry of           extend SIP programme to full
    Internship           Higher Education in collaboration with TalentCorp is further              time students pursuing training
    Programme            extended to full time students pursuing training at the vocational        at the vocational and diploma
    (SIP)                and diploma levels.                                                       levels.
                         The eligibility criteria for students and conditions to be satisfied by
                         companies under the current SIP programme will be maintained.
                         (Effective from YA 2015 to YA 2016)
4         2015 Malaysian Budget Highlights

                                    BUDGET 2015 PROPOSALS                                                   COMMENTS

    Tax Incentive        Currently a deduction is given on training expenses incurred by         The proposal’s objective is to
    for Training         companies for training programs approved by agencies appointed by       support the Government’s effort
                         the Ministry of Finance.                                                to strengthen the development
                                                                                                 of human capital.
                         This deduction is extended to training expenses incurred by
                         companies for employees to obtain industry recognised certifications
                         and professional qualifications such as in the field of accounting,
                         finance and project management.
                         (Effective from YA 2015)

    Due date for         Currently the due date for the estimate of tax payable instalment
    instalment           payments is the tenth day of a calendar month. With the proposed
    payments under       amendment, the due date is extended to the fifteenth day of a
    Section 107C         calendar month.
                         (Effective 1 January 2015)

    Introduction of      With the introduction of the new subsection, the Director General       The implication of this change is
    new subsection       (DG) may raise an assessment or an additional assessment in a           to extend the timeframe for non-
    91(5)                particular year of assessment or within 7 years after the end of that   arm’s length transfer pricing
                         year of assessment in relation to a transaction entered into between    adjustments to 7 years which is
                         associated person, which is not at arm’s length.                        over the 5 year time bar period.
                         (Effective upon the coming into operation of the Finance Act)

    Increase in          Currently the maximum fine for the following offences is RM2,000:
    maximum fine         (i)   Section 112 – Failure to furnish return or give notice of
    for offences               chargeability
    under Section
    112, Section 115     (ii)  Section 115 – Leaving Malaysia without payment of tax
    and Section 120      (iii) Section 120 – Other offences
                         The maximum fine for the above offences is now increased from
                         RM2,000 to RM20,000.
                         (Effective upon the coming into operation of the Finance Act)

    Interest income      With the introduction of the new subsection of 29(3), interest on       With this amendment, interest
    from loan            loan transactions between related parties is deemed obtainable on       income in respect of related
    transactions         demand when the interest is due to be paid.                             parties loan will be taxable when
    between              (Effective Year of assessment 2014)                                     the interest is due to be paid.
    related parties

    Manner in which      Currently only the income which is subject to withholding tax under     This is to avoid double taxation
    chargeable           Section 109C or Section 109E is excluded for the purpose of             for income which is already
    income is to be      ascertaining chargeable income.                                         subjected to withholding tax.
                         The proposed amendment provides that any amount received which
                         is subject to withholding tax under Section 109G, (i.e. income
                         derived from withdrawal of a deferred annuity or a private
                         retirement scheme) shall also be excluded in arriving at chargeable
                         (Effective Year of assessment 2015)
5         2015 Malaysian Budget Highlights

                                      BUDGET 2015 PROPOSALS                                                COMMENTS

                                                            PERSONAL TAX

    Reduction in        The income tax rates of resident individuals are to be reduced by 1%    With the impending
    Income Tax          to 3% as follows:                                                       implementation of GST, this
    Rates for                                                                                   proposal aims to reduce the cost
    Resident                    Chargeable       Current      Proposed    Reduction             of living and increase the
    Individuals                Income (RM)       Tax Rate     Tax Rate       (%)                disposable income of resident
                                                   (%)           (%)                            individuals.

                         1–5,000                    0            0             -                This proposal was already
                                                                                                announced in the 2014 Budget.
                         5,001-20,000               2            1             1

                         20,001-35,000              6            5             1

                         35,001-50,000              11           10            1

                         50,001-70,000              19           16            3

                         70,001-100,000             24           21            3

                         100,001-250,000            26           24            2

                         250,001-400,000            26          24.5          1.5

                         Exceeding                  26           25            1

                        (Effective YA 2015)

    Reduction in        Income tax rate for non-resident individuals are to be reduced by 1%,   The reduction is in line with the
    Income Tax          from 26% to 25%.                                                        proposed reduction in the
    Rate for Non-       (Effective YA 2015)                                                     maximum income tax rates for
    Resident                                                                                    resident individuals.
                                                                                                This proposal was already
                                                                                                announced in the 2014 Budget.

    Monthly Tax         Employees whose total income tax equals to the amount of MTD, such      Apart from lifting the
    Deduction           taxpayers no longer need to submit tax returns. This proposal is        administrative burden of
    (MTD) as Final      extended to the following:                                              taxpayers from filing their tax
    Tax                                                                                         returns to the IRB, this
                        (i)     employees who receive employment income prescribed under        exemption would also mean that
                                section 13 of the Income Tax Act 1967; and                      the taxpayers who fall under this
                        (ii)    employees serving under the same employer in the same year of   category would not be exposed
                                assessment.                                                     to penalties for late submission
                                                                                                of tax returns which are
                        (Effective upon the coming into operation of the Finance Act)           currently ranging at the rate of
                                                                                                20% to 35%.

    Penalty for         The maximum penalty amount for failure to furnish tax return has        The proposal is to deter
    Failure to          been increased from RM2,000 to RM20,000.                                taxpayers from defaulting in
    Furnish Return                                                                              furnishing the tax returns.
                        (Effective upon the coming into operation of the Finance Act)

    Penalty for         The maximum penalty amount for taxpayers leaving Malaysia without       The proposal is to deter
    Leaving             paying tax, where the certificate has been issued in respect of him     taxpayers from leaving Malaysia
    Malaysia            under Section 104 of the Income Tax Act 1967 has been increased from    without paying tax.
    without             RM2,000 to RM20,000.
    Payment of
    Tax                 (Effective upon the coming into operation of the Finance Act)
6         2015 Malaysian Budget Highlights

                                    BUDGET 2015 PROPOSALS                                                    COMMENTS

    Tax Incentive        IAP is a new funding model based on Syariah principle with the aim to    This proposal is aimed to
    under               finance projects and venture companies. Profit earned by individual       facilitate the provision of
    Investment          investors from investments made through IAP will be accorded income       funding for the benefit of both
    Account             tax exemption. This proposal is subject to the following conditions:      parties namely investors and
    Platform (IAP)                                                                                SMEs as well as entrepreneurs
                        (i) Tax exemption shall only be accorded for 3 consecutive years          through effective projects
                            starting from the first year profit is earned;                        financing.
                        (ii) The investment is made for a period of 3 years starting from the
                             operation date of IAP;
                        (iii) Tax incentive shall only be accorded for investment activities in
                              Malaysia, in venture companies owned by Malaysian or locally
                              incorporated companies;
                        (iv) Tax exemption shall only be accorded for investment made in SMEs
                             and venture companies in any sectors; and
                        (v) Definition for SMEs is as per the latest definition issued by SME
                            Corporation Malaysia.
                          (Effective from the operational date of IAP scheduled to be from
                          1 September 2015 to 31 August 2018)

     Personal Tax        Personal tax relief on medical expenses for serious diseases for         This proposal is to reduce the
     Relief on           individual, spouse or child is to be increased from RM5,000 to           burden of medical expenses and
     Medical             RM6,000 per annum.                                                       treatment of serious diseases.
     Expenses for
     Serious             (From YA2015)

     Personal Tax        Personal tax relief for disabled child is to be increased from RM5,000   This proposal aims to alleviate
     Relief for          to RM6,000 per annum.                                                    the cost of living of taxpayer
     Disabled                                                                                     with disabled child.
     Child               (From YA2015)

     Personal Tax        Personal tax relief for purchase of basic supporting equipment for the   This proposal is to reduce the
     Relief for          disabled is to be increased from RM5,000 to RM6,000 per annum.           cost of living of taxpayer.
     Purchase of
     Basic               (From YA2015)
     for the

                                                   REAL PROPERTY GAINS TAX (RPGT)

    Self-assessment      Taxes on gains from disposal of chargeable assets are to be self-        This is to modernise the tax
    system for RPGT      assessed by the taxpayer.                                                system in Malaysia.
                         (Effective tentatively from 2016)

    Increase in          The retention sum which the acquirer is required to retain from the      This increases the amount
    retention sum        consideration which consists wholly or partly of money is increased      collected in advance by the
    on disposal of       from 2% to 3%.                                                           Government.
    asset                (Effective from 1 January 2015)
7          2015 Malaysian Budget Highlights

                                     BUDGET 2015 PROPOSALS                                                     COMMENTS

    Review of the         Where the donor is a citizen or permanent resident of Malaysia, the       Arising from this amendment,
    treatment of          recipient shall be deemed to have acquired the asset at the               where the donor is a citizen or
    gifts of              acquisition price plus permitted expenses of the donor only if the gift   permanent resident and the gift
    chargeable            is made within 5 years after the date of acquisition by the donor.        is made 5 years after the date of
    assets                                                                                          acquisition by the donor, the
                          However, if the donor is not a citizen or permanent resident, the         recipient is deemed to have
                          recipient shall be deemed to have acquired the asset at the               acquired the asset at market
                          acquisition price plus permitted expenses of the donor irrespective of    value at the time of the gift.
                          the length of time the donor has owned the asset.                         This may potentially be
                          (Effective from 1 January 2015)                                           beneficial to the recipient.

                                                              STAMP DUTY

    Extension of          Malaysians are eligible for 50% stamp duty exemption on the               The Government is continuing its
    stamp duty            instrument of transfer and loan agreement for the purchase of their       policy of helping the Rakyat to
    exemption for         first residential property priced not exceeding RM500,000.                own a home by reducing the cost
    the purchase of                                                                                 of buying a house.
    first residential     (Effective for sales and purchase agreements executed from 1
    property              January 2015 to 31 December 2016)

    Youth Housing         Under this scheme for married youths aged between 25 and 40 years         This is part of a scheme to
    Scheme                with household income not exceeding RM10,000, the Government will         address the issue of youths being
                          give a 50% stamp duty exemption on the instrument of transfer             unable to purchase a house due
                          agreements and loan agreements for a first home not exceeding             to the high costs.
                          (Effective date to be announced)


    Extension of tax      New and existing companies engaged in expansion, modernization            This is an extension of the
    incentive for         and refurbishment for private healthcare facilities to at least 5%        earlier incentive which
    medical tourism       healthcare traveler shall be given exemption on income equivalent to      encourages growth in the
                          Investment Tax Allowance of 100% for qualifying capital expenditure       medical tourism industry.
                          for a period of 5 years.
                          This incentive is for applications received by MIDA from 1 January
                          2015 to 31 December 2017.

    Incentives for        Private sectors undertaking management, maintenance and                   The incentive is proposed to
    management of         upgrading of industrial estates in less developed areas shall be given    encourage the private sector to
    industrial            incentive of 100% income tax exemption for a period of 5 years. An        invest in management of
    estates               incentive of 70% income tax exemption for the same period is being        industrial estates.
                          proposed for managing industrial estates in other areas.
                                                                                                    The definition of ‘less developed
                                                                                                    areas’ and ‘other areas’ is yet to
                                                                                                    be made available.

    Capital               Incentive for the manufacturing sector in the form of capital             This is a new incentive to
    Allowance for         allowance on automation expenditure are given according to the            encourage labour intensive
    automation            following categories:                                                     industries to invest in industrial
    expenditure in                                                                                  automation to improve
    labour-               First Category: For high labour intensive industries (such as rubber      productivity and reduce reliance
    extensive             products, plastics, wood, furniture and textiles), an automation          on human labour.
    industries            capital allowance of 200% will be provided on the first RM4 million
                          expenditure incurred within the period from 2015-2017; and
                          Second Category: For other industries, automation capital allowance
                          of 200% will be provided on the first RM2 million of expenditure
                          incurred within the period from 2015-2020.
8         2015 Malaysian Budget Highlights

                                    BUDGET 2015 PROPOSALS                                                     COMMENTS

    Extension of         Currently, double deduction is given for training expenses incurred       The extension of the incentive is
    double               by Government-linked Companies (GLCs) and private companies that          to encourage more companies to
    deduction on         participate in the SL1M scheme to provide soft skills training and on-    participate in the training
    training             the-job training to unemployed graduates. Applications are subject        programme and increase the
    expenses             to approval of the Ministry of Finance and the double deduction is        number of jobs for graduates from
    incurred on          given for training expenses within 1 year from the date of approval.      low-income households and rural
    training                                                                                       areas.
    programmes           The types of qualifying training expenditure are as follows:
    under the Skim       (i) Payment of monthly allowance at a minimum of RM1,000 for
    Latihan                  each trainee for a maximum period of 12 months;
    (SL1M)               (ii) Expenses incurred to provide soft skills training to the trainees;
                         (iii) Fees paid to training providers to conduct soft skills programmes
                               to enhance skills and to increase employability of the trainees
                         Total training expenses for items (2) and (3) that qualify for double
                         deduction are restricted to RM5,000 for each trainee per year of
                         Currently it is effective for applications made between 1 June 2012
                         to 31 December 2016. It is proposed that the double deduction is
                         extended to 31 December 2020.


    12th Floor Menara Uni.Asia, 1008 Jalan Sultan Ismail, 50250 Kuala Lumpur, Malaysia
    Tel: +603 2616 2888     Fax: +603 2616 3195
    Email:      Website:


    BEH TOK KOAY                    DAVID LAI                         ONG ENG CHOON                         WOON YOKE LEE
    Senior Advisor                  Head of Tax Advisory              Executive Director                    Executive Director                                   

    CHRISTOPHER LOW                 PHILIP YEOH                       BERNICE TAN                           LEE BOON HOOI
    Executive Director              Executive Director                Executive Director                    Executive Director                        


    MOK CHEW YIN                    GAN HOCK SOON                     NG SWEE WENG                          CHRIS JENKINS
    Executive Director              Executive Director                Senior Advisor                        Executive Director                                       

    JEFF O’CONNELL                  ANG AH LECK                       WOON TAI HAI                          TAN SIN HUAT
    Executive Director              Executive Director                Executive Director                    Advisor                                     
9        2015 Malaysian Budget Highlights

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