Wolters Kluwer recently hosted the 2023 Revised Malaysia Budget webinar with Dr Veerinderjeet Singh to tackle key points from the Budget as well as the impacts and opportunities for businesses. This article summarises the main topics of discussion, which includes a budget analysis and key tax measures for the corporate sector to note.
Budget analysis
The 2023 Budget allocation of RM388.1 billion is the largest ever in the country’s history. The allocation is as follows:
- Operating expenditure — RM289.1 billion.
- Development expenditure — RM97 billion.
- Contingency savings — RM2 billion.
The government’s effort to spur growth in the economy and increase domestic spending has resulted in new and existing incentives that were introduced and extended respectively for individuals and businesses. Among the beneficiaries are:
- Manufacturers of EV charging equipment.
- Companies undertaking carbon capture and storage technology.
Environment, social and governance initiatives will be an ongoing agenda by the government and will be a feature in future budgets. Green business activities are encouraged, together with making progress on conservation activities and preservation of wildlife. The rakyat’s well-being is also looked into where cash aids and government contribution into the Employees Provident Fund are given to those in need. The reform of government agencies and public service institutions is also part of the agenda in the 2023 Budget.
To increase the government’s revenue, the following measures are proposed:
- Reintroduction of the Voluntary Disclosure Program that will run from 1 June 2023 to 31 May 2024.
- Introduction of capital gains tax on sales of shares from unlisted companies.
- Introduction of luxury goods tax.
Key tax measures for the corporate sector
Global Minimum Tax
- Global Minimum Tax (GMT) is recommended under Pillar 2 of BEPS 2.0.
- GMT would apply to all multinational enterprises with annual consolidated group revenue of at least €750 million where they would be subject to tax at 15% in the jurisdictions that they operate.
- The imposition of top-up tax on the ultimate parent entity of the multinational enterprise group if the minimum effective tax rate is below 15%.
- Malaysia looks to implement GMT and Qualified Domestic Minimum Top-Up Tax which will allow Malaysia to collect top-up tax on low-taxed income from Malaysian entities before top-up tax is imposed in other jurisdictions based on GMT rules.
- Expected to be implemented in 2024.
Voluntary Disclosure Program
- The Inland Revenue Board of Malaysia (IRBM) and the Royal Malaysian Customs Department (RMCD) will reimplement the Voluntary Disclosure Program which covers both direct and indirect taxes.
- There will be 100% remission of penalties if the disclosure and payment of taxes/duties are made during the period from 1 June 2023 to 31 May 2024.
Capital gains tax
- Gains on disposal of unlisted shares by companies will be subject to tax at a low rate beginning 2024.
- Further details to be announced by the authorities.
Luxury goods tax
- The government proposes to introduce luxury goods tax with a minimum rate.
- Details to be announced in due course.
- Expected to be implemented in 2023.
E-invoicing
- Moving in the direction of digitalisation and utilisation of technology of tax administration, the IRBM looks to introduce e-invoicing as early as 2024.
- E-invoicing will allow authorities to have real-time information and counter tax evasion.
- More details are expected in time to come.
Tax Identification Number
- With effect from 2023, citizens or permanent residents aged 18 and above will automatically be assigned with a Tax Identification Number (TIN).
- Taxpayers are required to disclose their TIN in documents for:
- Transfer of real estate
- Transfer of shares
- Transfer of business ownership
- In due course, the implementation will also include:
- Financial/banking transactions
- Business invoices
Definition of plant
- “Plant” is currently defined in para 70A, Sch 3 of the Income Tax Act 1967 as:
“An apparatus used by a person for carrying on his business but does not include:- A building;
- An intangible asset; or
- Any asset used and that functions as a place within which a business is carried on.”
- It is proposed that the definition of “plant” is amended to:
“An apparatus used by a person for carrying on his business but does not include:- A building;
- Any asset used and that functions as a place within which a business is carried on; or
- Any asset prescribed by the Minister.”
In his closing, Dr Veerinderjeet advises that tax governance and compliance will be increasingly important, as the development of taxation has drastically changed over the years. Corporations need to keep abreast of the latest developments by the authorities and ensure that they are not caught by surprise. Corporations can do this by watching out for announcements by the authorities on their websites and continuously learning through their tax advisors or attending various seminars organised by the authorities and professional bodies.
If you missed the webinar, you may access the recording below.
