Budget 2010 – Updated!

Last update: 11th November 2009 – By BERNAMA & BTIMES.

The Economy

• Malaysia economy to grow 2-3 per cent in 2010
• Mining to grow 1.1 per cent, manufacturing sector 1.7 per cent, agriculture 2.5 per cent, construction 3.2 per cent and service 3.6 per cent.
• Private consumption expand 2.9 per cent while private investment 3.4 per cent
• Per capita income to increase by 2.5 per cent to RM24,661
• Federal Government revenue in 2010 to decline by 8.4 per cent to RM148.8 billion.
• Budget deficit at 5.6 per cent of GDP compared with 7.4 per cent in 2009.

In Finance

1. “The stock market will be further liberalised to enhance its efficiency as well as attract domestic and foreign investment. For this purpose, the government will undertake the following measures: First, liberalise the commission sharing arrangements between stockbrokers and remisiers in 2 stages to encrouage retail participation in the stock market. The first stage, which takes effect immediately, allows flexible brokerage sharing at a minimum rate of 40 percent for remisiers. The commission sharing will be fully liberalised in the second stage, effective 1 January 2011.
2. “Allow 100 per cent foreign equity participation in corporate finance and financial planning companies compared with the present requirement of at least 30 per cent local shareholding.
3. “Islamic banking assets account for 18.8 per cent of Malaysia’s total banking assets while takaful industry assets contribute 7.7 per cent of total insurance and takaful industry assets. To ensure rapid development of financial services, particulalrly in Islamic finance, the government proposes that the existing tax incentives be extended to 2015.

In Community, Halal, Training and Agriculture

1. Government to allocate RM899 million to intensify tourism industry.
2. 1Malaysia Development Bhd (1MDB) will establish a corporate social responsibility fund totalling RM100 million as a start to finance community activities
3. Formulate Halal Act in collaboration with State Islamic Religious Councils.
4. To corporatise the Halal Industry Development Corporation as an agency under MITI
5. Intensify Halal Certification by the Islamic Development Department of Malaysia (JAKIM) by collaborating with international institutions to obtain standards certification such as HACCP ad GMP.
6. To provide RM24 million to develop halal products anti-smuggling system at three entry points and three main ports.
7. Allocate RM82 million to modernise aquaculture industry and conduct entrepreneurship training scheme for aquaculture breeders with focus on production of fish fry and ornamental fish.
8. Effective Jan 1 2010, government agrees to allow agencies to retain 50 per cent of rentals received while the remaining 50 per cent will be remitted to the government as revenue.

For Education

Bai’ah, or more commonly known as the “New Deal” (linguistically, bai’ah signifies bartering or exchanging commodities, making a covenant, a compact, an agreement or the like), will be introduced for appreciating the contribution and performance of principals and head teachers in high performance schools. 20 schools have been identified, and the Malaysian government plans to appraise at least 100 or more in 2010.

In higher studies, the National Higher Education Fund Corporation loans are able to be converted into scholarships beginning 2010, if student performances graduate with first class honours.

Early childcare & education in Malaysia: RM100mil allocation, Permata programme as a recognition of the importance of early childcare and education in Malaysia, by Datin Seri Rosmah Mansor. (Children’s age for PERMATA programme: < 5 years old)

Effort to increase children count in pre-schools: Training, tax relief and government loans to those who’re setting up kindergartens. (Under RM30 billion budget allocation – No exact sum quantified, through the implementation of the national key result areas (NKRA).

For Property & Development Projects

Updated: 11th November 2009

• Government provides RM41 million to improve income and quality of life of the Orang Asli Community by implementing various projects.
• Government allocates RM2.3 billion to build and upgrade infrastructures in rural areas.
• RM14.8 billion is allocated to manage, build and upgrade hospitals and clinics.
• Allocate RM137 million to upgrade and improve drainage and irrigation infrastructures in paddy fields involving 180,000 farmers.
• TNB to spend RM5 billion to implement electricity generation, transmission and distribution projects in 2010.
• To provide RM70 million to build the Paya Peda Dam Project in Terengganu to increase water supply capacity to paddy irrigation scheme in Besut.
• Public-private collaborations to include an integrated immigration, customs and quarantine complex in Bukit Kayu Hitam, construction of six UiTM campuses and the development of MATRADE centre

Budget 2010 allocations totalled RM191.5 billion, of which RM138.3 billion is for operating expenditure and RM53.2 billion for development expenditure.

RM200 million (RM200, 000, 000) will be allocated to refurbish and revive low & medium cost housing projects. 41 development projects have been identified. This is a one-time funding allocation.

For Rural Development Projects

RM2.3 billion (RM2, 300, 000, 000) will be allocated to various rural development projects, distribution for tender projects under the Rural and Regional Development Ministry starting 2010.

Budget 2010 on Fiscal Updates

1. The Government will issue 1Malaysia Sukuk totalling RM3 billion.
2. “The government needs to ensure that the Malaysian tax system is equitable and able to generate revenue for development purposes. In line with this, the government proposes that a tax of five per cent be imposed on gains from the disposal of real property from 1 January 2010. (RPGT)
3. “The government is currently at the final stage of completing the study on the implementation of goods and services tax (GST), particularly to identify the social impact of GST on the people. The purpose of this study is to ensure that if GST needs to be implemented to stabilised Government finance, it will not burden the population. “If the government implements GST, it will replace the current sales tax and service tax as well as exemption will be granted to the low income group. The GST rate to be imposed will be lower than the current sales tax and service tax rates.
4. Government to enhance tax incentives for healthcare service providers who offer services to foreign health tourists with income tax exemptions of 100 per cent on the value of increased exports from 50 per cent previously.

In equity markets, the Malaysian government has decided to reduce the budget deficit from 7.4% this year (2009) to 5.4% next year (2010). This fiscal consolidation may see improvement of stock volumes, as it promotes value for money, high-return investments for investors.

Budget 2010 on Real Property Gains Tax (RPGT)

On Real Property Gains Tax (RPGT) for companies, the Malaysian government issued a capping limit of 5%, where RPGT is imposed on gains from real property disposal irrespective of holding periods and owner categories. Schedule 5 of Real Property Gains Tax 1976 shouldn’t be applicable anymore. This move is effective 1st January 2010.

The Real Property Gains Tax is reported to be the tax base of the nation – In other words, revenue.

RPGT for individuals and non-corporate entities will also stand at 5%, where level of exemption increases from RM5,000 to RM10,000 or 10% of chargeable gains (whichever is higher), disposal of residential property once in a lifetime and exemptions to gifts between parent to child, husband to wife, grandparent to grandchild (family).

In 2009, year of disposal vs. date of acquisition was at 30% for the 2nd year, 20% for the third year (for non-citizens, non permanent residents, still 30% for 3rd year), 15% for the 4th year (still 30% for non-citizens), 5% on the 5th year (30% for non-citizens) and for the 6th year thereafter, 5% for companies and none for individuals and non-corporate entities, 5% for non-citizens.

So in this case if you’re selling a house 5 years after you’ve bought it, the Budget 2010 will reap 5% off even 6 years or thereafter – In 2009 and before, there is no tax imposed on this. Another new rule you will see is the acquirer will remit considerable amount to the Inland Revenue Board (IRB) 60 days from the date of disposal (layman version: Sale).

For Cigarettes

On cigarettes excise duty in Malaysia, an increment of 1% is seen, going  up to 5.6%. Excise duties on beer remained unchanged.

For Individuals Tax

1. The Government proposes existing personal tax relief of RM6,000 for EPF contributions and life insurance premiums be raised to RM7,000.
2. The Government proposes the maximum income tax rate to be further reduced to 26 per cent from 27 per cent effective from the 2010 year of assessment.
3. Individual tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012.
4. Individual taxpayers to be given tax relief on broadband subscription fee up to RM500 a year from 2010 to 2012
5. Government to launch a scheme in January 2010 that enables EPF contributors to utilise current and future savings in Account 2 to promote house ownership.
6. The Government will establish the 1Malaysia Retirement Scheme to be administrated by EPF.
7. Employees EPF contributions will be raised again to 11 per cent on a voluntary basis with immediate effect. However, from Jan 1, 2011 employees’ EPF contribution will revert to 11 per cent.
8. Civil servants are eligible to apply for computer loans once in every three years and up to a maximum of RM5,000 from the government once in every five years

Individual tax is to be seen reduced to 26%. Personal tax relief for budget 2010 will be increased by RM1,000. In 2009, it’s RM8,000 and in 2010, it’ll be RM9,000.

Individuals earning less than RM24,000/annum (RM2,000/mo) will be free of income tax.

On life insurance premiums & EPF contribution for budget 2010, existing personal tax relief of RM6,000 will be increased to RM7,000 from January next year for people with annuity schemes.

For Malaysian individual tax, which is seen at <RM2,500 (first time) at 0% chargeable tax, RM2,501 – RM5,000 to be at 1% (also next RM2,500) and RM5,001 – RM10,000 (and next RM5,000) to be at 3% in 2009, dropping 1% in 2009 from 2008; in the categories of RM35,001 – RM50,000/p.a. and amount exceeding RM250,000/p.a.

Iskandar Development region knowledge workers at a number of sectors who work and reside in Iskandar Johore will be subjected to a flat 15% on chargeable income. These sectors include education services, biotechnology, green technology, healthcare, financial advisory and consultancy services, creative industry, logistic services and tourism.

For Petroleum Tax

1. The Government will implement fuel subsidy management system in early 2010.

In petroleum tax, the Malaysian government plans to speed up tax collection by requiring petroleum companies to pay taxes in the same financial year. This move may see a number of good and bad governing factors, but the good one being fast tax collection. In previous years tax collections are often forwarded to the next financial year.

For Tax & Finance

The Accounting Digest wrote about “Recommended Budget 2010 for Tax“, giving pointers on Withholding Tax System, Taxation Fees, Tax Losses and Group Relief.

Among some of the listed recommendations (CIMB , PWC, etc.) for corporate tax codes and another financials include:

1. Tax incentives for ‘installers’ or ‘bringers’ of green technology.
2. Reduce import duty on environment-friendly vehicles such as hybrid cars.
3. Introduce potential subsidy for biodiesel programmes.
4. Tax credit for R&D that supports fundamental and applied research.
5. Allow companies to take 30-40% tax credit in expenditure on research and experimentation, global standards setting, branding and workforce training.
6. Reduce holding costs for property developers of unsold bumiputra property units six months after the project launch.
7. Real estate investment trust – Reduction in withholding tax.
8. Bumiputra discount ONLY FOR housing properties below RM250,000.

Budget 2010 – The RM470 billion

In March 28th, 2009, our dear Prime Minister Mr. Najib announced an extra RM200 billion allocation under Budget 2010, as he expects revenue generated in return to double up to RM470 billion in the period of 2 years. These four packages totaling at RM470 billion is seen to ’sustain’ Malaysia from the economic turmoil from middle towards the end of 2008, all the way up to-date.

The Statistics Department of Malaysia reports highly interesting statistics on the GDP, however. As much as its growth rates has sharply plummeted starting 2008, figures weren’t looking so good in 2009 either.

In Quarter 2 of 2008, the GDP growth rates were at 6.6%, Quarter 3 at 4.8% and a sudden drop of 0.1% to -6.2% in Quarter 1 of 2009. In between Quarter 4 of 2008 – Quarter 1 of 2009, these are when public and private sectors are well aware of the mass media’s attention towards economic downturns that are affecting a number of MNC companies worldwide.

‘National’ bailouts of AIG, Fannie Mae and Freddie Mac, fall of Lehman Brothers and so forth. Although drastically improved, Quarter 2 of 2009 sees an improvement of 2.3%, which brings it to -3.9% in Quarter 3.

GDP current prices were at RM155 billion at Quarter 1 of 2009 and RM161 billion at Quarter 2. GDP constant 2000 prices were at RM121 billion at Quarter 1 of 2009 and RM126 billion at Quarter 2 of 2009. In 2008, GDP current prices were at RM738 billion and 2000 constant prices at RM528 billion.

According to the Malaysian Insider, Mr. Najib also allocated RM27.9 billion in the form of subsidies including for petrol, diesel, cooking gas, wheat, bread, sugar, flour, rice, text books, scholarships, education, health, welfare and highway toll.

Can Budget 2010 achieve balance?

The Malaysian government’s aim to reduce operational expenses (as heard from approx. December 2008 until today) has seen to not have much effect at insiders’ points of view. Unproductive, underperformance or largely inflated operational expenses which can sometimes be masked behind ‘additional personal expenses’ probably wouldn’t give much effect on growth values.

Budget 2010 is expected to have a lower fiscal deficit – 5.5% in estimate, according to Reuters. Financial analysts figured a high fiscal deficit estimated at 7.6% according to The Star.

The Asian Development Bank had revised its forecast for Malaysian economic growth this year to -3.1% from an original -0.2%. “The expenditure ceiling under the Ninth Malaysia Plan (2006-2010) is RM230bil and a total of RM174.2bil, or 75.8% of total allocation, has been utilised.

“This means that a balance of RM55.8bil will be allocated for the 2010 budget, a rise of 1.3% from an estimated RM55bil in 2009 (assuming a 3% spending shortfall from the budget allocation of RM56.7bil) – The Star.

Mega projects such as Interstate Water Transfer Scheme (IWTS) amounting to RM1.3 billion, the Medini integrated development in Iskandar Malaysia infrastructural works at RM766 million, Sepang LCCT, LRT extensions for Klang Valley and Bakun Undersea Cable Project are less than 20% of the planned projects – Which could mean more spendings yet to be unsure.

While Malaysian government anchors 1Malaysia and looks to address the needs of Malaysians first, it has been said that the agricultural industry will receive more focus on their part – The rest of it such as healthcare, broadband infrastructure, telecommunications, rural developments and education has been spoken much in the past years – Malaysians still have major concerns that are yet to be addressed.

Public transportation, being another major problem as citizens are not maximizing the usage of public transportation in certain areas, there are some areas to where mass people transporting is a concern. A good example would be light rail transit systems, where fiscal deficits are often the major problem. Others include overcrowded and under-developed infrastructure (in which the government is looking at another mega project of LRT extensions, said to cover areas close to Sunway Pyramid).

Budget 2010 – Before announcement

First published on September 1st, 2009.

The ‘Malaysian‘ Budget for Year 2010 seemed promising for some companies out there, but to what extent can you expect out of the budget to help your business grow faster?

It has been said in the main media that our Prime Minister, Mr. Najib has planned out a “Shrinkage of Budget Deficit” plan. Just to satisfy the technical people reading this – The Malaysian government intends to reduce expenses to falling offset revenues. Of course, you can read that anywhere. While the purpose of “The Accounting Digest” is to provide “between-the-line” explanations pertaining the finance and accounting industries, stories of what the Malaysian government is planning to do can vary.

Malaysia’s Budget 2010

Injecting billions of Ringgit as stimulus packages often come with one main responsibility every receiver and giver has to handle – Discipline. It’s quite impossible to expect small companies to positively response to economic downturns, albeit the fact that their management practices have good cash reserves, financed well or practices excellent financial management.

The RM67 billion stimulus plan is measured to encumber businesses from fallouts, at the same time allow small timers to grow competitively. Yet again:

Malaysia has unveiled RM67 billion (US$19 billion) of stimulus measures to counter a global recession that policy makers predict may cause the Southeast Asian economy to shrink as much as 5 per cent in 2009.

The additional spending will swell this year’s budget shortfall to 7.6 per cent of gross domestic product, the biggest in 22 years, the government said in March.

That prompted Fitch Ratings to lower Malaysia’s long-term local-currency credit rating to A, the fifth-lowest investment grade, from A+, on June 9. It was Fitch’s first rating cut for the nation’s debt since the Asian financial crisis in 1998. -Business Times.

Yet again, the Malaysian government has said to put focus in education & health infrastructures, public social frameworks, agricultural and export growth for the country. These are excellent to start with – But how long have we been putting focus on these basic needs?

Tax Measures to call for in 2010

Looking at everyday news and getting updates from the mass media can be informational and entertaining – But it comes down to evaluating your businesses from the very foundation of it. Since many financial analysts, experts and economists would charge you a bomb for just advices alone, The Accounting Digest will point out some highlights in tax functions to help you evaluate and understand better:

Filing tax returns is no joke. Don’t expect the tax framework to benefit you. Instead, make it work for your business in particular.

• Withholding tax system – Income tax from employees paid directly to the Tax department. For small companies, a financial restructuring plan can be done, but multiply that by 20 – 100 employees. Ask us how you can perform proper financial restructuring on withholding tax on your company.
• Taxation Fees – Corporate tax return fees, bookkeeping (in some cases) fees, company secretarial fees, etc. Since tax filing is complicated and varies between businesses, your local tax professional can now provide you a list of what to declare, what can be declared and to what extent.
• Tax losses and group relief - (In taxation) When total expenses are more than income, you can incur a loss for taxation purposes. For certain industries, tax losses are at 70%. If you’re unsure about how to go about this, be sure to ask your local tax professional.