Finance Bill 2023 : What are the highlights and benefits to us?
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Finance Bill 2023: What are the highlights and benefits to us? [Part 2] --fotoBERNAMA (2023) HAK CIPTA TERPELIHARA
Finance Bill 2023 : What are the highlights and benefits to us?
This TaxLetter is a continuation of our WordPress – Budget 2023: What are the highlights and benefits to us?
In the the WordPress – Budget 2023: What are the highlights and benefits to us?, we focus on Budget Proposals announced by the Prime Minister’s Budget Speech and Tax Appendices. However in this WordPress, we are going to discuss the highlights of the key proposals tabled in the Finance Bill 2023.
Individual Tax and Relief
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Medical Treatment Expenses
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Current Position : YA 2022 |
Tax Appendices and Finance Bill 2023 |
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Medical Treatment up to RM8,000 is given on:-
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It is proposed that the scope of income tax relief for medical treatment expenses under Section 46(1)(g) of the Malaysia Income Tax Act 1967 (“MITA”) be increased from RM8,000 to RM10,000. Expenses be expanded to include intervention expenditure for Autism, Attention Deficit Hyperactivity Disorder (ADHD), Global Development Delay (GDD), Intellectual Disability, Down Syndrome and Specific Learning Disabilities. A new Section 46(1)(ha) be provided for personal deduction of up to a maximum of RM4,000 for expenses expended or deemed expended by an individual on his child who is aged 18 years old and below in respect of the following:-
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- EPF and Life Insurance
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Current Position : YA 2022 |
Tax Appendices and Finance Bill 2023 |
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To further voluntary contribution to increase savings in preparation for old age, it is proposed : |
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RM4,000 |
RM4,000 |
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RM3,000 Voluntary Contribution of EPF only for Civil Servant |
RM3,000 Voluntary Contribution of EPF expand to include Private Sectors [shall not include the amount of deduction for voluntary contribution to the EPF under Section 49(1)(b)]. Effective YA 2023. |
- SSPN Relief
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Current Position : YA 2022 |
Finance Bill 2023 |
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Income Tax Relief up to RM8,000 is given on net annual savings in the National Education Savings Scheme (“SSPN”). |
No extension given effective YA 2023 On 29 March 2023, Prime Minister announced an extension of SSPN Relief until 2024. The initiative has yet to be reflected in the Finance Bill 2023. |
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Tax Instalments for Self Employed Person (CP500)
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Current Position : YA 2022 |
Finance Bill 2023 |
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Based on taxpayers’ previous income tax payable, a tax estimate (CP500) instalment scheme will be issued to the self-employed taxpayer. Taxpayer is required to remit payments according to the bi-monthly instalment plan, which will due within 30 days from the payment date. Taxpayer can revise his/her tax estimate once by submitting a CP502 by 30 June of the Basis Year. |
It is proposed that the taxpayer will be allowed to revise his/her tax estimate twice during the Basis Year. First Revision : by 30 June Effective YA 2023 . |
Corporate Tax
- Income Tax Rate for Micro, Small and Medium Enterprise
Effective YA 2023, the income tax rate for Micro, Small and Medium Enterprises (“MSME”)** on chargeable income for the first RM150,000 be reduced by 2%. The income tax rates summary are as follows:-
Chargeable Income
YA 2022
First RM600,000
RM102,000
RM600,001 and above
24%
Chargeable Income
YA 2023
First RM150,000
RM22,500
RM150,001 to RM600,000
RM76,500
RM600,001 and above
24%
** MSME herein refers to a company with paid up capital in respect of ordinary shares of not more than RM2.5 million or a Limited Liability Partnership with total contribution not more than RM2.5 million; and gross business income not more than RM50 million.
Effective YA 2024, the reduction in tax rate is NOT applicable to:
• Company
with more than 20% paid-up capital in respect of ordinary shares are owned directly or indirectly by a company or more companies incorporated outside Malaysia; or a person or more who are non-Malaysian Citizen; or• Limited Liability Partnership
with more than 20% capital capital contribution (whether in cash or in kind) owned directly or indirectly contributed by a company or more companies incorporated outside Malaysia or a person or more who are non-Malaysian Citizen.Tax Implication : With effect from YA 2024, Companies or Limited Liability Partnerships (“LLPs”) which are 20% or more foreign owned, no longer enjoys the preferential rate under MSME.
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Mandatory e-Filing of Tax Return Form
Effective YA 2024, E-filing is to be mandatory for the following categories of taxpayers:-
Income Tax Return Form
Current e-Filling
Finance Bill 2023 Proposed e-Filling
Income tax return form other than Employer’s return form (Form E)
Companies and LLPs
All categories of taxpayers
Amended income tax return form
N/A
Companies, LLPs, Trust Bodies, and Co-Operative Societies
Employer’s return form ( Form E)
Companies
LLPs, Trust Bodies, and Co-operative Societies
- Extension of Scopefor Application for Relief
Current Position : YA 2022
Finance Bill 2023
A taxpayer may make an application for relief under Sections 97A and 131A of the MITA in respect of other error or mistake in the income tax return made by him.
The relief application of other than error or mistake allowed include cases in which a deduction was disallowed in respect of payment not due to be paid under withholding tax provisions on the day the income tax return is furnished.
The scope covered under these provisions include the following payments which are subject to withholding tax:-
a. Contract payment;
b. Interest and royalty;
c. Income of a public entertainer; d. Special classes of income; and e. Other gains or profits.However, payment made to agent, dealer or distributor which are subject to withholding tax under Section 107D of the MITA is not covered in the current provision.
It is proposed that the scope of application for relief will be expanded to include payment by a Company to agent, dealer or distributor which are subject to withholding tax under Sections 97A and 107D of the MITA.
Effective 1 January 2023.
- Definition of “Plant”
Current Position : YA 2022
Finance Bill 2023
The definition of “Plant” under Schedule 3 of the MITA refers to:-
An apparatus used by a person carrying on his business but does not include:-
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- Building
- Intangible Asset *
- Any other asset used and functions as a place within which a business is carried on
* Clarifications are given for “definition of software” gazette under PUA 358/2008 and PUA 217/2014.
It is proposed that the definition of ”Plant” be amended to:-
An apparatus used by a person carrying on his business but does not include:-
1. Building
2. Intangible Asset
3. Any other asset used and functions as a place within which a business is carried on.
Pursuant to Paragraph 70A(2) of Schedule 3 to the MITA, the Minister may prescribe any other assets as assets that are excluded from the definition of “Plant”.
The removal of exclusion of intangible assets as plant means that the Government’s recognition the importance of capital expenditure on intangible as main driver for economic growth.
Effective YA 2023.
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- Deadline for Remittance of Withholding Tax on Payments made to Agents, Dealers, and Distributors
Current Position : YA 2022
Finance Bill 2023
Pursuant to Section 107D of the MITA, 2% Withholding Tax shall be deducted and remitted to the Inland Revenue Board within 30 days after paying or crediting the payment to a resident individual agent, dealer or distributor.
All payments made by a Company to a resident individual agent, dealer or distributor that is subject to Withholding Tax shall remit the deduction of tax form to the Malaysian Inland Revenue Board (“MIRB”) not later than the last day of the following calendar month.
Payment Date
Due Date
01.01.2023 – 31.01.2023
28.02.2023
01.02.2023 – 28.02.2023
31.03.2023
- Instalment Payments on Tax Arising from Deemed Assessment
Current Position : YA 2022
Finance Bill 2023
Taxpayer is allowed to pay instalments if there is tax payable arising from the assessment that are raised formally.
However, there is no specific provision in the MITA for MIRB to grant instalment payments for tax arising from deemed assessment, including best judgement assessments.
The Director General is given the power to grant instalment payments for tax arising from deemed assessments.
Reference : Section 103(7) of MITA.
Effective YA 2023.
Stamp Duty
- Stamp duty on Following Instrument Entered by Small and Medium Enterprises
Current Position
Finance Bill 2023
Pursuant to the First Schedule of the Stamp Act 1949, stamp duty on the following instruments imposed at a fixed duty of RM10:-
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- A charge or a mortgage on or an assignment by way of security of accounts receivables to a bank, merchant bank or finance company licensed under the Banking and Financial Institutions Act 1989 or under the Islamic Banking Act 1983 or a scheduled institution as defined under section 2 of the Banking and Financial Institutions Act 1989, pursuant to an agreement for discounting invoices or hire purchase receivables.
- On the absolute sale of any accounts receivables or book debts to a bank, merchant bank, or finance company licensed under the Banking and Financial Institutions Act 1989 or under the Islamic Banking Act 1983 or a scheduled institution as defined under section 2 of the Banking and Financial Institutions Act 1989, pursuant to a factoring agreement.
The scope of the fixed duty of RM10 to include similar instrument which entered by small and medium enterprise in relation of discounting invoices or hire purchase receivables or factoring agreement entered with:
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- Any statutory body; or
- Agency of the Government or of the State Government; or
- Any Company in which the Government or the State Government has interest, which provides financing to a small and medium enterprise.Effective from coming into operation of the Finance Act.
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Real Property Gains Tax
- Transfer of Real Property to a Former Spouse
Current Position
Finance Bill 2023
At present, the treatment “no gain, no loss”, i.e. the transferor’s disposal price for a real property is deemed to be equal to his/her acquisition price, is available for a transfer of real property between spouses where the transferor is a Malaysian citizen.
Divorce cases under Court Order will subject to RPGT as per Schedule 5 of the Real Property Gains Tax Act Act (“RPGTA”) 1976.
It is proposed that the “no gain, no loss” treatment is extended to transfers of real property between former spouses pursuant to an order of any court in consequence of the dissolution or annulment of their marriage.
Reference : Section 3(1)(b)(ia) of RPGTA.
Effective from the coming into operation of the Finance Act.
- Transfer of Chargeable Asset to a Company by an Individual
Current Position
Finance Bill 2023
At present, transferring real property owned by an individual into a company that is controlled by the individual for a consideration that consists of at least 75% of shares in that company, the individual is deemed to have transferred the real property at a “no gain, no loss”, i.e. the disposal price is deemed to be equal to the acquisition price.
It is proposed that the “no gain, no loss” treatment is only applicable to company incorporated in Malaysia.
Reference : Section 3(1)(b)(ii) of RPGTA.
Effective from the coming into operation of the Finance Act.
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