1. The Special Voluntary Disclosure Program (SVDP) for indirect taxes was announced in the pre-budget statement. How does this program apply to taxpayers?
The SVDP is a first for indirect taxes, the previous one being executed only for income taxes. While we would expect specific details to be released in the 2022 budget, it is likely to cover all taxes administered by the Royal Malaysian Customs Department (RMCD), including the Sales and Services Tax (SST ), the old goods and services tax (GST), customs and excise duties and the tourist tax.
Currently, if a business makes a mistake in its return and underpays indirect tax, it can face significant penalties, in addition to the refund of tax owed. A reduction or waiver of penalties is based on the merit of each case. Due to the uncertainty surrounding waivers, this creates a chilling effect on voluntary disclosure. The SVDP serves to encourage businesses to become more compliant as the risk of penalties is removed.
2. What initiatives can the government put in place to help homebuyers who want to buy a property as well as those who are struggling to keep their homes?
Various measures are already in place to help home buyers, such as exemptions from real estate gains tax and stamp duties on sale and purchase contracts as well as loan contracts. The Home Ownership Campaign (HOC), available until December 31, could be extended to stimulate the real estate market.
The current HOC only applies to new properties registered as part of the campaign by specific developers. The government may consider extending this campaign to secondary markets, thereby offering a wider range of properties to homebuyers.
For those who are struggling to repay their home loans, the government might consider giving tax relief on the interest accrued on those loans after the moratorium period ends. For those in category B40, the government could consider encouraging financial institutions to forgo accrued interest by offering additional tax deductions.
3. As an individual taxpayer, are there any freebies I can expect?
To provide some financial relief, the government may consider additional tax relief for expenses incurred during the pandemic, such as Covid-19 self-test kits, PCR or Antigen testing, ‘work from home’ installation costs. ”Or a one-off special tax. RM 2,000 relief that was introduced in the 2015 valuation year.
We also hope that the government will give due consideration to any exempt allowances or benefits received, where employers have provided financial assistance to employees or their family members for the costs of Covid-19 treatment and medical supplies for the purposes of virus prevention.
4. How to review the taxation of insurance for the benefit of the rakyat?
One possibility is to expand the tax break for life insurance to give relief to parents when they buy insurance for their children. Currently, relief is only granted to the taxpayer and his or her spouse. This is in line with the government’s goal of expanding insurance protection for the rakyat. It is also appropriate to consider dividing the tax break for medical insurance and education insurance into separate reliefs to encourage better purchase of medical coverage. This way, they won’t have to choose between protecting their health and saving for their children’s education.
5. Transfer pricing (TP) seems to be the hot topic these days. Are there any changes or new compliance requirements planned in this budget? Can we expect concessions from TP compliance for SMEs?
Three major changes to TP were instituted by the 2020 Finance Act, which signify and improve the compliance standards expected by the Inland Revenue Board (IRB). While we do not anticipate any new compliance requirements, TP continues to be an area of focus for the IRB and tax authorities around the world. The IRB is aware of the plight of SMEs due to the pandemic. Thus, recent clarifications have been made on the requirement to keep contemporary documentation. To improve taxpayer tax compliance, we hope that costs such as professional fees incurred to ensure TP compliance will receive full tax deduction with no thresholds.
6. We have heard of a global minimum tax (GMT) agreement. What impact will this have on businesses in Malaysia?
On October 8, 2021, a statement endorsed by several member jurisdictions was released by the OECD / G20 Inclusive Framework on Base Erosion and Profit Shifting. While there is an agreement in principle for a GMT rate, the statement recognizes that all countries are sovereign and can decide their own tax policies. However, harmful tax competition and aggressive tax planning must end. If a Malaysian company is part of a global multinational enterprise (MNE) and its effective tax rate is less than 15% due to tax incentives, then it is likely that the EMN group will be subject to additional tax covering its activities in Malaysia under the jurisdiction of its headquarters. This would represent an overall increase in taxation for the group, thus canceling out the incentive benefits.
Given that the top-up tax would likely be collected by tax authorities in other jurisdictions, it remains to be seen whether Malaysia will introduce rules that would ensure that such top-up tax is paid in Malaysia instead and whether other measures would be. planned to preserve Malaysia’s attractiveness as an investment destination. Either way, there will be formal substance exclusion rules on tangible assets and payroll to recognize the importance of economic substance. This would mitigate the impact of the additional tax in other jurisdictions.
7. There is a perception that financial institutions can do more to help businesses recover from the pandemic. What are your thoughts?
The pandemic has taken its toll on businesses, and as businesses shut down, credit is deteriorating and banks grapple with the loss. Banks cannot recover the capital they have used and this has a ripple effect on future loans. The government should consider how tax rules can help cushion this blow, perhaps by incentivizing business bailout funding, in the same way that the financial bailout of abandoned housing projects was instigated several years ago, and perhaps by giving a special tax credit equal to losses incurred as a result of bad debt.
Tax incentives can also be used to encourage lending and investment in specific projects and market segments in line with government objectives, such as tax breaks for investors in strategic infrastructure projects that improve internet connectivity, environmentally friendly projects and projects that support the B40 community.
This article was written by tax experts at Deloitte Malaysia.