2011 Budget Highlights

October 20, 2010 2 Comments

As always, October is a much awaited month of the year. You and I will always hope for tax and other financial goodies. I was hoping to see a lower tax rate for both individual as well as corporate but too bad.. we don’t get to see that this year :-(

On 15th October 2010, the 2011 Budget was tabled before the Parliament by our Prime Minister. This time around, the emphasis is on transforming Malaysia into a high-income nation with a nice sounding budget theme “Transformation Towards a Developed and High-Income Nation“. The four key strategies to achieve the objectives are as follows:-

1) Reinvigorating Private Investment;

2) Intensifying Human Capital Development;

3) Enhancing Quality of Life of the Rakyat; and

4) Strengthening Public Service Delivery

By and large, according to the papers published, many believe that the 2011 Budget is a realistic one which will sustain economic growth for many years to come although many were caught by surprise of the increase in the service tax rate, from current 5% to 6%. This increase of rate caught me thinking ~ will the long proposed and discussed GST ever reach the Malaysian shore? Only time will tell.

If GST is going to implement any sooner, the present sales and service tax will be abolished all together. Perhaps then it is least expected that there will be any increase in the service tax rate. In any case, as our Prime Minister said “We are not dreamers. We are realists. We want to build a nation where every rakyat will be able to enjoy the benefits of development”. Clearly, the ability of the Government to collect additional revenue is crucial in the nation building ..well, I suppose so.

There are so many areas announced in the budget, but I am only interested to share the key changes that will affect individuals :-


Income Tax – Changes Affecting Individuals

1. Abolishment of Rebate on Fees :-(

• The rebate given in respect of fees paid to the Government for the issuance of employment pass, visit pass or work pass shall be abolished

• Effective year of assessment YA 2011

 

2. Tax Treatment on Pensions and Other Periodical Payments Received by Widower :-(

• Pensions and other periodical payments received by a widower from his deceased spouse’s former employer or successor of his former employer be deemed as his gross income and subject to tax

• On the other hand, tax exemption be given on pensions paid under an approved scheme to widower

• Effective YA 2011

 

3. Expansion of Relief on Medical Treatment and Care for Parents :-)

• Relief of up to RM5,000 on medical expenses for parents be extended to include expenses relating to care and special needs for parents

• Conditions:-

o The claim must be evidenced by certification of a medical practitioner that the parents require medical treatment, special needs or carer

o Supported by a receipt on amount expended for medical treatment or special needs, or supported by written certification or receipt from, or work permit of, the carer

o The carer shall not include the taxpayer claiming the relief, the spouse and the children of the taxpayer

• Effective YA 2011

 

4. Abolishment of Relief on Annuity Premium Purchased via EPF Annuity Scheme :-(

• Relief of up to RM1,000 in respect of annuity premium paid by a resident individual for the purchase of annuity scheme determined by the Employees Provident Fund Board be abolished

• Effective YA 2011

 

5. Exemption of Stamp Duty on Instruments of Transfer of Ownership of Residential Properties :-) :-)

• Stamp duty exemption of 50% be given on instruments of transfer of ownership of a residential property (includes terrace house, condominium, apartment and flat)

• The price threshold of residential property for the stamp duty exemption of 50% has been increased from RM250,000 to RM350,000

• The exemption is only given to a Malaysian citizen who purchases the first residential property, i.e. in a situation where an individual does not own any residential property (or does not own a part of a residential property in the case of joint ownership) in his name at the time he applies for the exemption

• Each Malaysian citizen is only eligible for one exemption

• Effective for sale and purchase agreements executed from 1st January 2011 to 31st December 2012. Hence, please make sure you plan your 1st house purchase within the given time flame.

 

6. Exemption of Stamp Duty on Loan Agreements for Residential Properties :-) :-)

• Stamp duty exemption of 50% be given on loan agreement instruments for a residential property (includes terrace house, condominium, apartment and flat)

• The price threshold of residential property for the stamp duty exemption of 50% has been increased from RM250,000 to RM350,000

• The exemption is only given to a Malaysian citizen who purchases the first residential property, i.e. in a situation where an individual does not own any residential property (or does not own a part of a residential property in the case of joint ownership) in his name at the time he applies for the exemption

• Each Malaysian citizen is only eligible for one exemption

• Effective for sale and purchase agreements executed from 1st January 2011 to 31st December 2012

7. Increase in Service Tax Rate :-( :-(

• Service tax on all taxable services be increased from 5% to 6% L  Per a tax expert, the government is likely to rake in some RM 800 million next year from just this one percent increase in service tax.

• Effective 1st January 2011

 

8. Service Tax on Paid Television Broadcasting Services :-( :-(

• Paid television broadcasting services be included as taxable services. So, your Astro monthly fees increased by 6% with effect from next year. Hope their service justifies the extra money paid then.

• The relevant subscription fees be subject to 6% service tax

• Effective 1st January 2011

 

9. New Sales Tax Exemption on Mobile Phones :-)

• Sales tax exemption be given on ordinary mobile phones

• Effective 4.00 p.m. 15th October 2010

 

10. Abolishment of Import Duty on Tourism Products and Daily-Use Products :-) :-)

• Import duty be abolished on the following items:-

o Tourism products (with duty of between 5% and 20%):-

- Handbags, wallets, suitcases, briefcases, apparels, footwear and hats;

- Jewellery, costume jewellery and ornaments; and

- Toys such as dolls and small scale recreational models

(So, does that mean the branded goods are cheaper now !!)

o Daily-use products (with duty of between 10% and 20%):-

- Talcum powder, face powder and shampoo; and

- Bedspreads, blankets, curtains and table cloth

• Effective 4.00 p.m. 15th October 2010

11.  Enhancement of Import Duty and Excise Duty Exemption for New CBU Hybrid and Electric Cars and Motorcycles :-)

• The import duty and excise duty exemption of 100% and 50% respectively given to franchise holders of new completely-built-up [“CBU”] hybrid cars be increased to full exemption

• The above 100% exemption of import duty and excise duty be extended to electric cars, hybrid motorcycles and electric motorcycles

• Effective for applications made to the MOF from 1st January 2011 until 31st December 2011

 

12. Enhancement of Excise Duty Exemption on National Vehicles for Disabled Persons :-) :-) :-)

• Excise duty exemption on the purchase of a national vehicle by a disabled person with certain physical disabilities, namely handicapped limbs be increased from 50% to 100%

• The exemption is further extended to disabled persons who have hearing and speaking disabilities

• Conditions:-

o Applicant must be a registered disabled person and possess a Registration Certificate from the Social Welfare Department

o Applicant must have a valid driving licence

o Vehicle bought must be from the stock of unpaid duty and tax

o Vehicle should not be sold or its ownership transferred until the expiry of 5 years except with a written approval from the MOF

o Exemption is given only for one vehicle within a period of 5 years

• Effective for applications made to the MOF from 18th October 2010

 

13.  Private Pension Fund (errr….)

• The Government will be launching a Private Pension Fund in 2011. The purpose of this fund is to boost retirement savings.

• Existing tax relief of up to RM6,000 for an employee’s contributions to the EPF be extended to the contributions made to the Private Pension Fund which will benefit the private sector employees and self-employed individuals

• Employers be given tax deduction on contributions made on behalf of their employees, subject to the current restriction of 19% of the employee’s remuneration

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2 Comments to “2011 Budget Highlights”
  1. cindy koh says:

    Hi Jean, thanks for the Budget summary. Would like to ask your opinion if Islamic banks/investments will provide us better interests or returns compared to other banks, and is it open to non-muslims? Thanks again!

  2. jeanchai says:

    Yes. Islamic banks/Investments are open for non-muslim as well

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