Sandglass

Crowe Chat (Special Budget Edition) Part 2

Highlights of Budget 2021

18/11/2020
Sandglass
Introduction
This Crowe Chat (Special Budget Edition) Part 2 is prepared based on the Finance Bill 2020. This Part 2 discusses the proposed changes mentioned in the Finance Bill 2020 which were not covered in our Crowe Chat (Special Budget Edition) Part 1.

Highlights at a Glance

Corporate Tax
  • R&D expenditure

    Introduction of additional conditions for tax deductions on research and development expenditure.

  • Group relief

    Redefinition of “related companies” for the purpose of claiming group relief.

  • Labuan entities

    Restriction on tax deductions for payments of allowable expenditure applies to all Labuan entities.

  • REITs

    Withholding tax on distribution of Real Estate Investment Trust (REIT) income will be deemed as a final tax.

  • Transfer pricing documentation

    Introduction of penalties for failure to furnish contemporaneous transfer pricing documentation.

  • Structure for TP and surcharge

    The DGIR is empowered to disregard and make adjustments to the structure of a transaction and impose a surcharge of not more than 5% on the total transfer pricing adjustments.

  • Remit surcharge

    The Director General of Inland Revenue (DGIR) is empowered to remit surcharge imposed.

  • Tax rebate of RM20,000

    Tax rebates equivalent to the operating expenditure or capital expenditure, capped at RM20,000 per year of assessment (YA) will be given to companies and LLPs for three (3) consecutive YAs, effective from YA 2021.

  • LLP tax returns

    LLPs are required to submit Income Tax Return Form (ITRF) electronically effective

    YA 2021.

  • Taxpayers to settle tax first

    Taxpayers are required to settle the tax payable raised under any assessment within the statutory deadline, notwithstanding the institution of any proceedings under any

    written law.

  • Electronic notification

    The DGIR is allowed to issue an electronic notification to the Commissioner of Police or Director of Immigration Department for the purpose of recovery of tax due from a person leaving Malaysia.

  • Plant

    The word “plantis now defined in the schedule on capital allowances and charges.

  • Remit penalty

    The DGIR is no longer allowed to remit the whole or part of the penalty arising from the self amended return whilst taxpayers are allowed to a make a plea to the Court under a civil proceedings for recovery of tax due arising from the self amended return.

  • Consequential amendments

    Consequential amendments are made to align the Income Tax Act, 1967 (ITA) and the Companies Act, 2016.

Individual Tax
  • Notification by employer

    The notifications for employer’s tax obligations must be made within 30 days to the Inland Revenue Board of Malaysia (IRBM). This includes death cases, whereby the employer is required to notify the IRBM within 30 days after being informed of the death.

  • Lifestyle relief

    The lifestyle relief is reviewed to include a one-off special relief of up to RM2,500 for the purchase of computer, smartphone or tablet from 1 June 2020 to 31 December 2020 whilst the existing lifestyle relief is increased from RM2,500 to RM3,000.

Real Property Gains Tax
  • Remit sum imposed

    The DGIR is empowered to remit all or part of any sum imposed on any person due to failure to retain and remit part of consideration.

  • 7% retention sum

    An executor of the estate of a deceased person who is not a citizen and not a permanent resident is subject to 7% retention sum.

  • Electronic notification

    The DGIR is allowed to issue an electronic notification to the Commissioner of Police or Director of Immigration Department for the purpose of recovery of RPGT due from a person leaving Malaysia.

  • Taxpayers to pay first

    Taxpayers are required to settle the tax payable raised under any assessment within the statutory deadline, notwithstanding the institution of any proceedings under any written law.

  • Furnishing of RPGT returns electronically

    Tax agents, advocates and solicitors are authorised to furnish the RPGT returns on behalf of taxpayers via electronic medium.

  • Societies

    Societies registered under the Societies Act, 1966 are subjected to the same RPGT rates as companies.

Stamp Duty
  • Duly stamped instruments

    The definition of “duly stamped” instruments is expanded to include an instrument which is stamped by means of digital stamping.

  • Impressed stamp and digital stamping

    Impressed stamp and digital stamping are now legislated as additional modes of payment of stamp duty.

  • Duplicates and counterparts

    Digital stamping on duplicates or counterparts of an instrument is accepted as a means to deem that duplicates and counterparts have been duly stamped.

  • Penalties denoted on instruments

    Any payment of penalties can be denoted on instruments by way of digital stamping and shall be certified by the DGIR.

  • Recovery of stamp duties

    The DGIR and the employees of the IRBM authorised by the DGIR are empowered to recover the stamp duties due to the Government.

  • Electronic notification

    The DGIR is allowed to issue an electronic notification to the Commissioner of Police or Director of Immigration Department for the purpose of recovery of duties, penalties or other sums due from person leaving Malaysia.

  • Power of Minister

    The Minister is empowered to exempt, reduce or remit duties in relation to any instruments, or all instruments in relation to any schemes, which would be chargeable or charged with stamp duty.

  • Power of DGIR

    The DGIR is empowered to remit stamp duties, wholly or partly, on grounds of poverty.

  • Adjudication fees

    The provision of the Stamp Act 1949 has been amended to reflect the current stamping practice of no longer imposing adjudication fees.

  • Means of digital stamping

    The Minister is empowered to prescribe the means of digital stamping for the payment of stamp duty and to provide for the matters relating to the issuance and validity of digital stamping.

Labuan Business Activity Tax
  • Business activity

    The Labuan business activity definition is expanded to provide clarity on the substance requirements between a Labuan entity carrying on a Labuan trading activity and a Labuan non-trading activity.

  • Chargeable profits

    The definition of chargeable profits of a Labuan entity is introduced to facilitate the preparation of its tax return.

  • Extension of time

    The DGIR is empowered to allow an extension of time to Labuan entities to make an irrevocable election to be taxed under the ITA.

  • Appeal

    A Labuan entity may appeal against a notice of additional assessment raised.

  • Settlement of tax

    Taxpayers are required to settle the tax payable at the time of furnishing of tax returns to the IRBM.

  • Legal proceedings

    Taxpayers are required to settle the tax payable raised under any assessment within the statutory deadline, notwithstanding the institution of any proceedings under any written law.

  • Confidential information

    A minimum fine of RM20,000 will be imposed on a person that contravenes the treatment of confidential information received for the purpose of the LBATA as well as the restriction on the usage of such information.

  • Compound offences

    The DGIR is empowered to compound offences with regards to Country-by-Country Reporting (CbCR) and Common Reporting Standards (CRS) compliances.

Details of Proposed Measures, Effective Date and Commentary

Find out more

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