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Group Fin533 Important Taxation

This document discusses the importance of taxation and provides an overview of recent tax policy changes in Malaysia. It explains that taxes are primarily used to generate government revenue to fund essential public services like healthcare, education, infrastructure, and governance. Recent Malaysian budget initiatives have tightened exemptions on foreign source income, imposed a 2% withholding tax on certain agent payments, and introduced various new tax incentives. Tax relief measures for individuals were also expanded to provide more deductions for things like childcare, electric vehicle charging, and personal electronics. Stamp duty exemptions were extended to peer-to-peer financing and loan restructurings as well.

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37 views

Group Fin533 Important Taxation

This document discusses the importance of taxation and provides an overview of recent tax policy changes in Malaysia. It explains that taxes are primarily used to generate government revenue to fund essential public services like healthcare, education, infrastructure, and governance. Recent Malaysian budget initiatives have tightened exemptions on foreign source income, imposed a 2% withholding tax on certain agent payments, and introduced various new tax incentives. Tax relief measures for individuals were also expanded to provide more deductions for things like childcare, electric vehicle charging, and personal electronics. Stamp duty exemptions were extended to peer-to-peer financing and loan restructurings as well.

Uploaded by

nurul affida
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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GROUP FIN533

IMPORTANT TAXATION

Taxation is the imposition of compulsory levies on individuals or entities by governments in


almost every country of the world. Taxation is primarily used to generate money for
government spending, though it can also be used for other things. A fundamental method for
nations to produce public revenues that enable them to support investments in human capital,
infrastructure, and the provision of services for citizens and businesses is through the
collection of taxes and levies. The most important purpose of taxation is to raise resources for
governments to deliver essential public services. Many essential components of well-
functioning societies around the world, including health care, society, education, governance,
and business, are financed by taxes. Charges are levied by governments against its people and
enterprises to generate cash that is then used to fund their spending priorities. This includes
financing government and public projects as well as making the business environment in the
country conducive for economic growth.

Next importance of taxes in Health is without taxes, government contributions to the health
sector would be impossible. Health services including social healthcare, medical research,
social security, and other things are paid for by taxes. Importance of Taxes in education. One
of the most deserving uses of tax funds can be education. The development of human capital
is highly valued by governments, and education is essential to this development. Money
from taxes is channeled to funding, furnishing, and maintaining the public education system.

Importance of Taxes in Governance. Poor governance would have a negative impact on


every aspect of the nation, particularly its ability to thrive economically. The use of tax
revenue for the benefit of the nation's citizens is ensured by good governance. Additionally,
police officers, members of parliament, the postal service, and other entities are paid with this
money. In fact, there won't be any effective public interest protection in the absence of an
efficient system of governance. Last but not least, taxes are important to businesses. For
business to flourish in the country, there has to be good infrastructure such as roads,
telephones, electricity, etc. Governments or entities with direct government engagement
create this infrastructure. Governments invest the tax revenue they receive in building this
infrastructure, which in turn encourages growth in the nation's economy.
Taxes help raise the standard of living in a country. The higher the standard of living, the
stronger and higher the level of consumption most likely is. When there is a need for their
goods and services, businesses thrive. Businesses would be guaranteed of a higher domestic
consumption with an improved level of living. Taxes are essential and every citizen is meant
to reap benefits of these taxes. This is why it's important that individuals make an effort to
pay their taxes and understand that they're intended to be more than just a "money grab" by
the government.

CURRENT ISSUE TAXATION

In the budget, there have been initiatives introduced to minimize the economic
effects of the Covid-19 pandemic, among other important changes to Malaysia's tax structure
in 2022. Among them is tightening the exemption of foreign source income (FSI). Any
person's income earned in Malaysia from sources outside of Malaysia since the year of
assessment (YA) 1995 is free from the foreign source income exemption (FSI) tax.
Accordingly, tax residents, whether individuals or companies, will be taxed on their foreign
source income received in Malaysia, initially at a flat rate of 3% on the gross amount
received from 1 January 2022 to 30 June 2022 and thereafter at the current income tax rate.

Additionally, as of January 1, 2022, a 2% withholding tax will be applied to any


financial payments made by businesses to their authorised agents, dealers, or distributors in
connection with sales, transactions, or schemes executed by Agents. If the Agent is a tax
resident individual and the total of payments received by the Agent from the firm resulting
from sales exceeds 100,000 Malaysian ringgit in the preceding year, the company is required
to withhold tax.

Budget 2022 includes a few new tax incentives, such as the Digital Ecosystem
Acceleration Scheme. This applies to digital technology providers and digital infrastructure
providers who apply to the Malaysian Investment Development Authority (MIDA) between
30 October 2021 and 31 December 2025. This incentive takes the form of investment tax
deductions for capital expenditures that are for eligible activities within 10 years, as well as a
lower tax rate of 0%–10% for technology suppliers for a period of 10 years. Tax incentives
for end-of-life asset projects for the upstream petroleum industry were also introduced,
including a petroleum income tax rate of 25%, an accelerated capital allowance within two
years, carrying back losses from decommissioning activities to be deducted against income
for the two YAs immediately preceding the YA, and exemption from export duty on
petroleum products. Approved between 1 January 2020 and 31 December 2029, the necessary
production sharing contract.

For a period from 1 January 2022 to 31 December 2025, additional incentives


include the exemption of import duty on components for locally manufactured electric
vehicles as well as the exemption of excise duty and sales tax for entirely disassembled
electric vehicles. Malaysian Green Technology Corporation are each eligible for green
investment tax allowance and green investment tax exemption, at the prescribed rates. MIDA
will accept applications from 1 January 2022 through 31 December 2023. Tax incentives in
Malaysia must remain up-to-date and continue to be sustainable to attract new domestic and
foreign direct investment into the country following the changing investment landscape
caused by COVID-19.

Following the negative economic impacts of the Covid-19 pandemic, tax relief for
individuals has been improved under Budget 2022, providing relief and deductions or
expenses. Among the following, childcare fees paid to childcare center or registered
kindergartens for individual children aged six years and below can continue to be deducted
up to a maximum amount of 3,000 ringgit for YA 2020 to 2023. For YA 2022 to 2023, fees
for installation, rental, purchases including hire purchase of equipment or subscriptions for
the use of electric vehicle charging facilities for specific vehicles and which are not used for
business purposes can also be written off, up to a maximum of 2,500 ringgit for each base
year. The same goes for purchases of personal computers, phones, tablets, or smart phones
that are not made for use in a business and are made solely for personal use. The closing date
for this deduction is now December 31, 2022.

Exemption from stamp duty will be offered for the following instruments,
including loan or financing agreements executed from January 1 2022 to December 31 2026
in relation to peer-to-peer financing made through a registered peer-to-peer platform and the
restructuring or rescheduling of loan and financing agreements executed from January 1 2022
to December 31 2022 between borrowers and financial institutions, provided that the original
loan and financing agreement. Additionally, it was affirmed that for the time period from
January 1, 2022, to December 31, 2026, the maximum stamp duty on contract notes for the
sale or purchase of shares listed on Bursa Malaysia will be restricted at 1,000 ringgit per
contract note.

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