Tightening measures for corporates in the 2019 budget: PwC

KUALA LUMPUR: There are no significant new taxes which directly impact corporations, but the 2019 Budget introduces several tightening measures such as a seven-year limitation on carry-forward of losses, capital allowances and unabsorbed incentives, according to PricewaterhouseCoopers (PwC) Malaysia Tax Leader Jagdev Singh.
Sector-wise, he said companies in the gaming sector would have to bear additional duties, while Malaysian companies with Labuan transactions (particularly Labuan leasing companies) would also have to review the feasibility of the current structures, given the new measures imposed on such transactions.
On a positive note, those companies involved in Industry 4.0 and the broader tech sector stand to gain from additional funding to promote growth in this sector, he said.
He pointed out that the government had heard the requests to make the tax system more business-friendly.
"The service tax exemption for business-to-business (B2B) transactions between registered companies makes perfect sense in eliminating the cascading effect of tax, resulting in lower costs to such businesses.
"This will certainly reduce administrative burdens on businesses which would have, otherwise, needed exemptions on a case-by-case basis. SMEs will also see their corporate tax rates reduced by 1% on their first RM500,000 of income," he explained.
As for tax amnesty programmes, Jagdev said these were not new as similar programmes were implemented in 2015 and 2016.
However, the rates offered during this budget appear more attractive compared to previous numbers which only offer a reduction of 10 to 20% from the original rates, he said. The 2019 Budget also puts in place penalties post the special voluntary disclosure period which are far more punitive.
Although this is a good move to encourage taxpayers to come forward, the punitive rates need to be applied with caution as these should only be applied on taxpayers who have willfully or intentionally under-declared or have not declared taxes, he pointed out.
"Taxpayers who have adopted reasonable positions which may not necessarily be agreed to by the tax authorities should not fall under this category of punitive rates," he said.
On the expansion of the list of services under the Sales and Service Tax (SST) regime to include import services, he said this was necessary to ensure a level playing ground, especially when services could be sourced locally.
He noted that Budget 2019 had also introduced service taxes on digital services.
Although this is a good move in ensuring that imported services are not provided preferential treatment, the budget still does not tackle the issue which plagues many developing and developed countries, that is, the taxing of the digital economy itself, Jagdev said.
As for the impact on the people on the street, he said whilst there were no changes in tax rates or reliefs (other than the reliefs provided for EPF contributions and life insurance premiums), there were a number of initiatives to assist the lower and middle-income groups.
In continuing the previous trend, there are a number of measures to help people get onto the home ownership ladder.
For instance, subsidies will be more targeted going forward and cash handouts in the form of Bantuan Sara Hidup are to continue.
It is also timely to see specific measures on employing those above 60 years old, Jagdev said.
Overall, Budget 2019 casts a wide-sweeping net in announcing measures to address the ballooning levels of debt, the need for prudent spending, and the urgency to increase other sources of revenue to replace the Goods and Services Tax income, he added. — Bernama