Budget Malaysia 2010

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hi,

The Malaysian 2010 budget will be tabled in Parliament on Friday, 23rd October 2009.

I've started this as a new topic so that we can keep track of the budget items which could include a statement on any proposed VAT/GST/IVA tax.

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hi,

The budget speech ends about 5.45 pm today.

I'll check through the newspapers tomorrow and post more information. Here's a few thing that I noted. I watched the proceedings on RTM2. They kindly provided an English translation. Unfortunately they forgot to turn down the Bahasa Malaysia speech from the PM and it's quite an earful listening to 2 voices concurrently.

1). MM2H was mentioned in the context of the Tourism department with additional funds for promoting the scheme overseas.
2). Interestingly, PR will be simplified for highly talented individuals.
3). PR status for foreign men married to Malaysian women.
4). Max. rate of Income tax to be reduced to 26% from 27%.
5). Special rate of income tax of only 15% for foreign knowledge workers in the Iskandar Development Region.
6). 5% tax for disposal of property. (need to check on this one)
7). AP to cost RM10,000 wef 1st Jan 2010.
8). Extra cash to be spent on broadband penetration (South Korea has 95%, Singapore 84%, USA 60%, but Malaysia 25%).

Overall :

1). Government spending to be reduced by 11.2%
2). No GST (VAT) just yet. More study needed.
3). No changes to current petrol/diesel, food subsidies.

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Budget 2010: Fuel subsidies only for the deserving
KUALA LUMPUR, Oct 23 – The government will implement a fuel subsidy management system in early 2010 to ensure subsidies only benefit the targeted groups, Prime Minister Datuk Seri Najib Tun Razak announced today.
http://www.themalaysianinsider.com/index.php/malaysia/41260-fuel-subsidies-only-for-the-deserving-by-next-year
Question how high are the fuel subsidies anyway?

Tax relief for ‘green buildings’
KUALA LUMPUR, Oct 23 - The government today proposed tax exemption for building owners who obtain the new Green Building Index (GBI) certificate.
http://themalaysianinsider.com.my/index.php/malaysia/41249-tax-relief-for-green-buildings

Budget 2010: Easy PR status for skilled expats
KUALA LUMPUR, Oct 23 - The government said today it will simplify the granting of permanent residence (PR) status to talented and skilled expatriates in a bid to drive the economy forward.
http://www.themalaysianinsider.com/index.php/malaysia/41250-easy-pr-status-for-skilled-expats

Goods and services tax still on hold
DESPITE much anticipation that the Government would announce the implementation of the goods and services tax (GST), Budget 2010 did not provide any date for the new tax.
http://thestar.com.my/news/story.asp?file=/2009/10/24/budget2010/4969882&sec=budget2010

Property gains tax makes comeback
THE Government has proposed to reimpose real property gains tax (RPGT) for gains arising from property disposal.
http://thestar.com.my/news/story.asp?file=/2009/10/24/budget2010/4970584&sec=budget2010

This one I don't understand what is an approved permit?
Impact of RM10,000 fee for open AP ‘minimal’
THE imposition of a RM10,000 fee for each approved permit (AP) on open AP holders in 2010 is positive, but the impact will be minimal, motor analysts and observers say.
http://thestar.com.my/news/story.asp?file=/2009/10/24/budget2010/4969380&sec=budget2010

RM50 service tax for card holders
A SERVICE tax of RM50 will be imposed on each principal credit card every year beginning Jan 1.
http://thestar.com.my/news/story.asp?file=/2009/10/24/budget2010/4969248&sec=budget2010

Budget 2010 proposals at a glance
http://malaysia-update.blogspot.com/2009/10/budget-2010-proposals-at-glance.html

M'sia to slash spending, bring back real property gains tax
Fuel subsidies may be re-examined, too, as Najib tries to cut budget deficit
http://www.businesstimes.com.sg/sub/news/story/0,4574,356089,00.html

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 Wow a variable rate capital gains tax on property only three years after it was abolished.
The impact will be interesting. It penalises short term sales so there goes my idea of picking up a new condo soon after OC. Nobody will be selling for at least three plus years!
Amazing 

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Indeed very interesting. Here in Penang there are a lot who pick-up property of plan with no intention to go and actulay live there. They are betting on getting a higher price back in the subsale market. I wonder what will happen now: either the developers will have more trouble getting their units sold or subsale prices go up to make up for the extra tax

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I've spent the last half hour trying to find the actual budget papers but to no avail.
It seems that the capital gains tax will only apply to sales made after 1 January 2010. If this is right which beggars belief, there could be some extreme bargains in the next two months. I am also assuming the tax will be retrospective and apply to property bought before the budget.
I must say that most reports talk only of 5% and make no mention of the much higher rates applying in the first four years.
Very strange

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There is one line in the speech at paragraph 88.
The details are in Appendix 15 of the budget papers.
What appears to have happened is that they have removed the exemption from tax that was introduced in 2007/8 and thus the relevant Tax Act applies.
Appendix 15 does talk about sales after 1 January 2010.
Here are the links:
http://thestar.com.my/budget/attachment10.pdf
http://thestar.com.my/budget/budget10.pdf

What a mess!

 

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I've spent the last half hour trying to find the actual budget papers but to no avail.

I found this:
http://www.treasury.gov.my/index_bi.html
http://www.treasury.gov.my/data/speech/bs10.pdf
http://www.treasury.gov.my/data/speech/appendices10.pdf

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As I said what a mess! It now appears that it is 5% FULL STOP!

From today's Star which admits it got it wrong (well almost).

5% property gains tax stays irrespective of year of sale, says minister

IPOH:The real property gains tax, effective Jan 1 next year, is only 5% irrespective of the year when the property is disposed, says Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah.

“The real property gains tax for the first year is 5% and is the same for the second, third, fourth and fifth year,” he said when clarifying a news report in the business page of The Star yesterday.

He said the real property gains tax as announced by Prime Minister Datuk Seri Najib Tun Razak when tabling the 2010 Budget in Parliament on Friday provided exemption for the sale of a residential property for the first time and transfer of properties among family members like father to children.

Star’s BizWeek had reported that the Government proposed to re-impose the real property gains tax for monetary gains from property disposals.

The report said that based on the Finance Bill, disposal within two years of acquisition would be taxed 30%, 20% in the third year and 15% in the fourth year while disposal after five years and beyond would still be subjected to 5%.

On the non-payment of bonus for civil servants, Ahmad Husni said the country’s financial situation did not allow for bonuses to be given out.

He was responding to cries of disappointment in the civil sector over the RM500 special contribution given out only to officers in Grade 54 and below instead of a bonus across the board.

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hi,

I also read the Star Biz Week Saturday 24th October 2009 which states :

"It was merely four short sentences in the 2010 Budget speech. However, that short reference to RPGT carried a knock-out punch, Lim (Deloitte Malaysia country tax-leader) said in a statement yesterday.

He pointed out that from the speech itself, many would have thought that a low rate of tax of 5% would apply to most gains arising from disposals of real property.

"Be prepared for a shock - this is not the case and the highest rate of RPGT will be 30%," he said.

Most rates of RPGT from January 21010 will be restored to those prevailing after the fifth year of acquisition has been removed.

"Even where a property was purchased over 20 years ago, a gain on dosposal from 2020 will attract 5% RPGT (without any indexation of acquisition price to reflect current purchasing power of the ringgit)." he said, adding that a flurry of property transactions could be expected soon.

The article also says that disposal within 2 years will be taxed 30%, in the 3rd year it's 20%, in the 4th year it's 15%, and 5% thereafter.

So it's really 5% irrespective of purchase/sale year. The previous RPGT, the one that was suspended, had zero tax after 5 years.

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On one of the links it mentioned a one time lifetime exemption.  So, if you are buying your first property in Malaysia, then decide to sell, you will pay no Capital Gains tax?

Then if you buy a second property, you need to make damn sure you really like it, or wait 5 years and cough up 5 per cent capital gains tax?

Have I got that correct?

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Answering my own question:
In January 2008 crude oil was about $100 a barrel. According to this (http://biz.thestar.com.my/news/story.asp?file=/2008/1/14/business/19952483&sec=business) article the actual market price at that time was estimated at RM3.5 per litre. Price at the gasstation in January 2008 was RM 1.92
Now oil is at $80 a barrel 20% less so market price should be around 80% of RM 3.5 = RM2.8? Current price at the gasstation is RM 1.8
I wasn't aware that fuel was so heavily subsided, where I come from it was they other way around it is very heavily taxed. Current price is 1.45 EURO which equals RM7.37.
I do understand why the government wants to come to a more balanced fuel subside system, it takes a huge bite out of the budget.

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hi,

I have the Sunday Star article in front of me.

It's headlined : 5% Property Gains Tax - Percentage stays irrespective of year of sale, says Minister.

"The real property gains tax for the first year is 5% and is the same for the second, third, fourth and fifth year," he said when clarifying a news report in the business page of the Star yesterday.

Interesting. Does this mean that beyond year 5 there is no tax to pay. After all, that's what the RPGT was before it was exempted a few years ago.

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Hi
It's 5% of the gain whenever you sell subject to some minor exceptions including the once in a life time disposal exemption which only applies to the disposal of residential property by a citizen or permanent resident of Malaysia.

The reference to years one to five is a reference to the old scheme where in years one to five the taxes were much much higher than 5%. It was the re-introduction of those rates that the newspaper wrongly reported the previous day.
While no tax is a great tax this one in the scheme of things is relatively benign when compared with other fiscal regimes around the world.

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Hi
although the property tax of 5% of the gain is not an overwhelming impost there was one aspect of its introduction that concerned me and is perhaps of overall concern in the way that Malaysia approaches existing taxation laws.
In many countires there is a fundamental doctrine that taxes are not to be applied retrospectively. This means that if you acquire an asset you are entitled to assume that the taxation consequences applying to that asset will remain unchanged. Such certainty is considered necessary to allow an informed investment to be made. On this basis the property tax would only apply to properties acquired after announcement. By applying the tax to all sales the tax is being applied retrospectively.
It leads one to question the confidence that an investor can have in acquiring assets in Malaysia if tax rates and laws can be changed retrospectively.
Cheers