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The 2019 Budget…Briefly

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The 2019 Budget...Briefly

The 2019 Budget was unveiled by the Finance Minister, Lim Guan Eng, on 2 November 2018 and was passed by the Dewan Rakyat on 6 December 2018. The theme of the Budget was “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society”.  In this article, we brief our readers on the highlights of the Budget 2019.

TAX The Goods and Services Tax is zero-rated and has been replaced with the Sales and Services Tax (SST) on 1 September 2018. The Government, starting from 1 January 2019, will grant exemptions for specific business-to-business transactions between service tax registered persons. Imported services will also be subjected to service tax.

Online services such as downloaded software, music, video or digital advertising of foreign service providers will be required to register with the Royal Malaysian Customs and thereafter charge and remit the relevant service tax. A credit system for sales tax deduction will be introduced to assist small manufacturers who purchase manufacturing inputs from importers instead of other registered manufacturers.

SPECIAL VOLUNTARY DISCLOSURE PROGRAM The Special Voluntary Disclosure Program encourages taxpayers to voluntarily declare any unreported income, including offshore accounts, in exchange for reduced penalty rates from 3 November 2018 to 30 June 2019. Penalty for disclosures made between 3 November 2018 and 31 March 2019 is 10% of the tax-payable while the penalty for disclosures between 1 April 2019 and 30 June 2019, is 15%. After 30 June 2019, penalty rates will range from 80% to the maximum 300% as provided under existing laws.

REAL PROPERTY GAINS TAX (“RPGT”) The RPGT rate will be revised for disposals of properties or shares in property holding companies after the fifth year. The RPGT rate for companies and foreigners has increased from 5% to 10% while for Malaysian individuals, an increment from 0% to 5%. However low-cost, low-medium cost and affordable housing with prices below MYR200,000 will be exempted.

STAMP DUTY The stamp duty on transfer of property valued at more than MYR1 million will increase from 3% to 4%. Stamp duty charges will also be waived for 6 months only, effective January 2019, for first-time home purchases valued between MYR300,001 and MYR1 million. This is part of a National Home Ownership Campaign whereby developers are expected to offer a minimum price discount of 10% for these residential properties.

FINANCIAL AID The Bantuan Sara Hidup (BSH) grants for the B40[1] households will be continued. Beginning January 2019, every household with a monthly income of MYR2,000 and below will receive MYR1,000, those with a monthly income between MYR2,001 and MYR3,000 will receive MYR750 and those earning MYR3,0001 to MYR4,000 monthly will receive MYR500. An additional MYR120 will be given to every child below 18 years old, with an exception to the disabled, with a maximum of four children.

EMPLOYMENT Policies will be introduced to encourage employment for those who have passed the retirement age of 60. Effective 1 January 2019, the employer portion of the Employment Provident Fund (EPF) contributions will be reduced to 4% from the current 6%. The mandatory employee contribution will also be zeroed, in order to boost disposable income of working retirees. Further, an additional tax deduction to employers will be given to those who employ them at a minimum monthly salary of MYR4,000. An Industrial Appeals Court will also be set up in order to expedite the resolution of industrial disputes between employers and employees. The Employment Insurance Scheme (EIS) will also be implemented effective 1 January 2019 to assist those who have lost employment. Housewives will be placed under EPF i-SURI contribution scheme where husbands are given incentives to contribute to their wives’ retirement savings. The Government will contribute MYR40 a month for husbands who contribute at least MYR5 monthly.

DOMESTIC TOURISM In a bid to encourage domestic tourism, the Government has proposed to impose a departure levy for all outbound travelers by air effective 1 June 2019. The rate proposed is MYR20 for outbound travelers to ASEAN countries and MYR40 to countries other than ASEAN.

MINIMUM WAGE The minimum wage will be raised to MYR1,100 per month for Malaysia effective 1 January 2019.

SODA TAX In an effort to tackle obesity, ‘sugar sweetened beverages’ will be subjected to excise duty. The duty proposed is MYR0.40 per litre, effective 1 April 2019, for non-alcoholic beverages and fruit or vegetable juice containing added sugars of more than 5gm and 12gm per 100ml respectively.

AFFORDABLE HOUSING A fund amounting to MYR1 billion will be established by the Central Bank of Malaysia to assist first time buyers earning less than MYR2,300 monthly to purchase affordable homes priced up to MYR150,000. The fund will be available from 1 January 2019 for two years or until exhausted, at participating financial institutions through a concessionary financing rate as low as only 3.5% per annum.

First time home-buyers purchasing residential properties priced up to MYR500,000 will be exempted from stamp duty of up to MYR300,000 on sale and purchase agreements as well as loan agreements for a period of two years until December 2020. Construction and building materials will also be exempted from SST in order to secure commitment from the Real Estate Housing Developers Association (REHDA) for a reduction of 10% in the price of houses. The Government will also provide an alternative source of financing for first time buyers via “Property Crowdfunding” platforms, regulated by the Securities Commission under the peer-to-peer financing framework.

SMALL MEDIUM ENTERPRISES (SME) A MYR4.5 billion SME Loan Fund will be made available via commercial financial institutions with a 60% guarantee from Skim Jaminan Pembiayaan Perniagaan including MYR1 billion for Bumiputera SMEs. The corporate income tax rate will also be reduced from 18% to 17% on the first MYR500,000 of chargeable income for SMEs with less than MYR2.5 million in paid up capital. There will also be a MYR1 billion SME Syariah Compliant Financing Scheme with a subsidy of 2% profit rate, MYR200 million by Permodalan Usahawan Malaysia Berhad for wholesale and retail industry including the purchase of business premises to be rented to Bumiputera SMES, and MYR100 million to TEKUN Nasional to finance small entrepreneurs.
 
[1] Refers to the bottom 40% of households with a monthly income of MYR3,900 and below
 

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