BUDGET 2016 Chua Tia Guan 25.10.2015 Corporate & Individual Income Tax RM (m) 2012 2013 2014 2015 2016 forecast Companies 51,288 58,175 65,240 68,320 74,381 Individual 22,977 23,055 24,423 28,155 30,266 Total 74,265 81,230 89,663 96,475 104,647 N/A 6,965 8,433 6,812 8,172 9.4% 10.4% 7.6% 8.5% Increase Growth 2 Corporate & Individual Income Tax 3 Income tax changes affecting Companies Tax incentives Reinvestment allowance (RA) Current •60% qualifying project for 15 years beginning from 1st year RA claimed Proposed •Special RA for companies for 3 years after expiration of 15 years From Year of Assessment 2016 to 2018 6 Increased export allowance Current Exemption equivalent to •10% value of increased exports with ≥ 30% value added •15% value of increased exports with ≥ 50% value added Proposed For SME : •10% value of increased exports with ≤ 20% value added •15% value of increased exports with ≤ 40% value added From year of assessment 2016 to 2018 7 R&D project Current •Double deduction on R&D expenditure subject to IRB approval Proposed •SME – double deduction up to RM50,000 per year without approval requirement From year of assessment 2016 to 2018 8 Food production projects Current •Vegetables, fruits, kenaf, herbs, spices, cows, buffaloes, goat, sheep, acquaculture , deep sea fishing •Investment in subsidiary is given a tax deduction •New - 100% income tax exemption for 10 years •Expansion - 100% income tax exemption for 5 years 9 Food production projects Proposed •Extension of 5 years •Scope widen to include planting of coconuts, mushrooms & cash crops, rearing of deer, seaweed cultivation, rearing of honey, animal feed crops From 1 Jan 2016 to 31 Dec 2020 10 Tour operating companies Current •100% income tax exemption for tour packages within Malaysia by ≥ 1,500 local tourists per year •100% income tax exemption for tour packages to Malaysia by ≥ 750 inbound tourists per year Proposed •Extension of 3 years From year of assessment 2016 to 2018 11 Establishment of Independent Conformity Assessment Bodies (ICAB) ICAB – Co that offers independent conformity assessment services to test products, materials, systems or services for conformance to international specifications or safety standards & other conformities Previously, labs testing medical devices given tax incentive. 12 Establishment of Independent Conformity Assessment Bodies (ICAB) Current •Nil Proposed •New ICAB – 100% statutory income tax exemption on qualifying activities for 5 years; or •New ICAB – Investment tax allowance (ITA) of 60% on qualifying capital expenditure for 5 years offset against 100% of statutory income •Existing ICAB – ITA of 60% on qualifying capital expenditure for 5 years offset against 100% of statutory income From 1 Jan 2016 to 31 Dec 2018 13 Establishment of Independent Conformity Assessment Bodies (ICAB) Qualifying Sectors Eligible activities • Machinery & equipment • Electrical & electronics • Chemicals • Aerospace • Medical devices • Fresh & processed food • Testing laboratories • Calibration • Certification • Inspection • Good laboratory 14 Establishment of Independent Conformity Assessment Bodies (ICAB) ICAB accreditated by : • Department of Standards Malaysia • Accreditation bodies recognised by International Laboratory Accreditation Cooperation • International Accreditation Forum • OECD Good Laboratory Practice Mutual Acceptance Data 15 Withholding tax of 10% Current •Withholding tax of 10% on profit distribution from listed REITs for foreign institutional investors & individuals Proposed •Extension of 3 years From 1 January 2017 to 3 December 2019 16 Funding SME Funding Shariah-compliant SME Financing Scheme •RM1billion •Subsidy of 2% of financing profit rate SME Blueprint •RM107m – funds for entities for business development Entrepreneurs Acceleration Scheme, and SME Capacity and Capability Enhancement Scheme •RM60million 18 SME Funding SME Technology Transformation Scheme •RM200million under SME bank •Softloan at 4% interest Small Retailer Transformation Programme (TUKAR) & Automotive Workshop Modernisation (ATOM) •RM18million 19 Other Funding MATRADE •RM235 million •1Malaysia Promotion Program •Service Export Fund •Export Promotion Fund IBS Promotion Fund •RM500million – Industrial Building System Agriculture •RM450million •High impact projects •Fruit & vegetable cultivation •Matching grants for herbal products, fish cage farming20 GST changes GST update Number of registrants – by Customs Administration 22 GST update Number of registrants – by Entity 23 GST update Number of registrants – by Sector 24 Zero rated Food items - addition Proposed •Organic-based milk for infant & children •Soy bean based milk for infant & children •Dhal bean include chickpeas and green & white bean •Vegetables include lotus root and water chestnut •Spices include mustard seeds •Sugar include jaggery powder •Noodle products include “mi kolok” From 1 January 2016 25 Zero rated Drugs / medicine addition Proposed •All types of Controlled Drugs in Poison Groups A,B, C & D under Poisons Act 1952 •Expansion of Over the Counter Medicine from 1,013 brand of drugs to 1,105 •Medical devices under NEML expanded from 125 brands to 128 From 1 January 2016 26 Zero rated Domestic air transport - addition Proposed •Domestic air transportation for passengers within and between Sabah, Sarawak & Labuan From 1 January 2016 27 GST special scheme Flat rate scheme - farmers Current •Threshold for registration- RM100,000 Proposed •Threshold for registration- RM50,000 From 1 January 2016 28 GST incentive – GST relief Reimportation of goods temporarily exported for promotion, research or exhibition Proposed •Relief from GST payment From 1 January 2016 29 GST incentive – GST relief Reimportation of goods temporarily exported for rental & lease Proposed •Relief from GST payment From 1 January 2016 30 Income tax changes affecting Individuals Review of income tax rate Chargeable income (RM) Current Tax Rate (%) Proposed Tax Rate (%) 1 – 5,000 0 0 5,001 – 20,000 1 1 20,001 – 35,000 5 5 35,001 – 50,000 10 10 50,001 – 70,000 16 16 70,001 – 100,000 21 21 100,001 – 250,000 24 24 250,001 – 400,000 24.5 24.5 400,001 – 600,000 25 25 600,001 – 1,000,000 25 26 > 1,000,000 25 28 From Year of Assessment 2016 32 Review of income tax rate Chargeable income (RM) Proposed Tax Rate (%) Chargeable income (SGD) Singapore Tax Rate 1 – 5,000 0 1 – 5,000 0 5,001 – 20,000 1 5,001 – 20,000 0 20,001 – 35,000 5 20,001 – 30,000 2 35,001 – 50,000 10 30,001 – 40,000 3.5 50,001 – 70,000 16 40,001 – 80,000 7 70,001 – 100,000 21 80,001 – 120,000 11.5 100,001 – 250,000 24 120,001 – 160,000 15 250,001 – 400,000 24.5 160,001 – 200,000 17 400,001 – 600,000 25 200,001 – 320,000 18 600,001 – 1,000,000 25 to 26 > 320,000 20 > 1,000,000 25 to 28 From Year of Assessment 2016 33 Tax relief Spouse relief Current •RM3,000 where spouse has no income Proposed •RM4,000 where spouse has no income From Year of Assessment 2016 34 Tax relief Alimony to former wife Current •RM3,000 Proposed •RM4,000 From Year of Assessment 2016 35 Tax relief Parental care relief Current •RM5,000 for medical treatment & care of parents Proposed •RM1,500 each* for parental care From Year of Assessment 2016 until 2020 36 Tax relief Parental care relief * Conditions •No claim for parents’ medical care relief •Parents are natural parents or foster parents by law subject to a maximum of 2 parents •Parents aged 60 years and above •Parents reside in Malaysia in current year of assessment; and •Parents have an annual income <RM24,000 per annum each 37 Tax relief Relief for children below 18 years old Current •RM1,000 for each child Proposed •RM2,000 for each child From Year of Assessment 2016 38 Tax relief Relief for children studying at tertiary level Current •RM6,000 for each child Proposed •RM8,000 for each child From Year of Assessment 2016 39 Tax relief Relief on fees for tertiary education Current •RM5,000 •Certificate/Diploma/Degree : law, accounting, Islamic finance, vocational, technical, industrial, scientific & technological skills or qualification •Master / Doctorate : all fields Proposed •RM7,000 From Year of Assessment 2016 40 Tax relief Relief on contribution to SOCSO Current •Nil Proposed •RM250 From Year of Assessment 2016 41 Other changes Stamp duty Exemption on revived abandoned housing Current •Instruments of loan agreement for financing •Instruments of transfer of title •From 1 January 2013 to 31 December 2015 Proposed •Extension of 2 years Effective from 1 Jan 2016 to 31 Dec 2017 43 Stamp duty Exemption on Shariah financing Current •20% exemption on housing financing instruments •From 2 September 2006 to 31 December 2015 Proposed •Extension of 2 years Effective from 1 Jan 2016 to 31 Dec 2017 44 Thank You Vision 2020 = RAKYAT + quality of life High Income, Inclusiveness, Sustainability 11th MP = Anchoring Growth on People • Enhancing inclusiveness towards an equitable society • Improve well being for all • Accelerate human capital development for an advance nation • Pursuing green growth sustainability and resilience • Re-engineering economic growth for great prosperity Budget 2016 Prospering The Rakyat 46 Financial target of 2020 2015 10,196 2016 ?? 2020 USD15,690 Budget deficit 3.2% 3.1% 0% Government debt 54% ?? 45% GNI per capita (USD) Source : 11MP & 2016 Econ Rpt 47 Rationalising operating expenditure Billion (RM) Operating expt 2010 151b 2016 215b 2020 290b Gross Dev expt 74% 53b 81% 50b 86% 48b Total Budget 26% 204b 19% 265b 14% 337b Source : 11MP & 2016 Econ Rpt • Value for money • Open tender --- eProcurement, e-Bidding • Outcome based budgeting : –operating + development 48 Rationalising public sector for greater productivity & performance Billion (RM) Emolument &pension, etc 2010 58b 2016 90b 2020 120b Gross Dev expt 28% 53b 26% 34% 50b 19% 36% 48b 14% Total Budget 204b 265b 337b Execution is the key : • Reducing overlapping roles • Rightsizing the public service • Exit policy for under performers 49 Lower education allocation for 2016 million (RM) Education & training ** 2014 4,928 2015 5,629 2016 4,691 -23.5% 14.2% -16.7% ** development expenditure 50 Fiscal discipline and reforms Reliance • • • • Income Tax GST Oil revenue Diversified sources of income Resilience of economy Preserve the value of ringgit Credit rating 51 OIL REVENUE 60,000 55,956 50,000 40,000 35,529 30,000 25,331 20,000 10,000 0 2014 2015 2016 (F) OIL REVENUE (PITA + DIV) (RM million) Source: Economic Report 2015/2016 52 SST/GST REVENUE 39,000 40,000 34,635 35,000 30,000 25,000 20,000 17,216 15,000 10,000 5,000 0 2014 2015 2016 (F) SST/GST Revenue (Sales tax, Service tax & GST) (RM million) Source: Economic Report 2015/2016 53 OIL + SST/GST REVENUE 80,000 73,172 70,164 70,000 64,331 17,216 60,000 34,635 50,000 39,000 40,000 30,000 55,956 20,000 35,529 25,331 10,000 0 2014 2015 OIL REVENUE 2016 (F) SST/GST (RM million) Source: Economic Report 2015/2016 54 GST collection & Oil revenue 2014 2015 Actual Brent (USD99) Budgeted Brent (USD100) 2016 Rev(ER) Brent (USD50) Budgeted Brent (USD48) RM Million Oil revenue 66,274 62,428 43,872 31,718 PITA 26,956 25,600 9,529 9,331 Dividend 29,000 27,000 26,000 16,000 GST/SST 17,216 31,608 34,635 39,000 SST 17,216 *4,608 *7,635 - GST - **27,000 **27,000 39,000 Total 83,490 94,036 78,507 70,718 N/A 10,546 -4,983 -7,789 Net revenue difference (y-o-y) * SST (Jan – Mar 2015) ** GST (Apr – Dec 2015) 55 RM5.9 b Category Household Individual e-Kasih Unit Monthly income BR1M value Payment frequency ≤ RM3,000 RM1,000 (2015: RM950) Monthly RM3,001 – RM4,000 RM800 (2015: RM750) Monthly ≤ RM2,000 RM400 (2015: RM350) RM400 January ≤ RM1,000 RM1,050 Monthly 4.7 m 2.7 m 56 High income USD15k = quality of life ? RM 2020 2014/15 Labour productivity 92,300 77,100 Household income M40 B40 mean mean monthly monthly 9,970 5,270 5,662 2,537 • Wages rise faster than productivity • Purchasing power 57 Global Labour Productivity Frontier US 70,242 HK 65,598 Spore 49,464 Korea 46,098 Malaysia 25,090 Source : Productivity Report 2014/2015 58 B40 SL1M Up-skill Re- skill Multi-skill TVET PLWS 59 Vision 2020 = RAKYAT + quality of life High Income, Inclusiveness, Sustainability 11th MP = Anchoring Growth on People • Enhancing inclusiveness towards an equitable society • Improve well being for all • Accelerate human capital development for an advance nation • Pursuing green growth sustainability and resilience • Re-engineering economic growth for great prosperity Budget 2016 Prospering The Rakyat 60 Financial target of 2020 2015 10,196 2016 ?? 2020 USD15,690 Budget deficit 3.2% 3.1% 0% Government debt 54% ?? 45% GNI per capita (USD) Source : 11MP & 2016 Econ Rpt 61 Rationalising operating expenditure Billion (RM) Operating expt 2010 151b 2016 215b 2020 290b Gross Dev expt 74% 53b 81% 50b 86% 48b Total Budget 26% 204b 19% 265b 14% 337b Source : 11MP & 2016 Econ Rpt • Value for money • Open tender --- eProcurement, e-Bidding • Outcome based budgeting : –operating + development 62 Rationalising public sector for greater productivity & performance Billion (RM) Emolument &pension, etc 2010 58b 2016 90b 2020 120b Gross Dev expt 28% 53b 26% 34% 50b 19% 36% 48b 14% Total Budget 204b 265b 337b Execution is the key : • Reducing overlapping roles • Rightsizing the public service • Exit policy for under performers 63 Lower education allocation for 2016 million (RM) Education & training ** 2014 4,928 2015 5,629 2016 4,691 -23.5% 14.2% -16.7% ** development expenditure 64 Fiscal discipline and reforms Reliance • • • • Income Tax GST Oil revenue Diversified sources of income Resilience of economy Preserve the value of ringgit Credit rating 65 OIL REVENUE 60,000 55,956 50,000 40,000 35,529 30,000 25,331 20,000 10,000 0 2014 2015 2016 (F) OIL REVENUE (PITA + DIV) (RM million) Source: Economic Report 2015/2016 66 SST/GST REVENUE 39,000 40,000 34,635 35,000 30,000 25,000 20,000 17,216 15,000 10,000 5,000 0 2014 2015 2016 (F) SST/GST Revenue (Sales tax, Service tax & GST) (RM million) Source: Economic Report 2015/2016 67 OIL + SST/GST REVENUE 80,000 73,172 70,164 70,000 64,331 17,216 60,000 34,635 50,000 39,000 40,000 30,000 55,956 20,000 35,529 25,331 10,000 0 2014 2015 OIL REVENUE 2016 (F) SST/GST (RM million) Source: Economic Report 2015/2016 68 GST collection & Oil revenue 2014 2015 Actual Brent (USD99) Budgeted Brent (USD100) 2016 Rev(ER) Brent (USD50) Budgeted Brent (USD48) RM Million Oil revenue 66,274 62,428 43,872 31,718 PITA 26,956 25,600 9,529 9,331 Dividend 29,000 27,000 26,000 16,000 GST/SST 17,216 31,608 34,635 39,000 SST 17,216 *4,608 *7,635 - GST - **27,000 **27,000 39,000 Total 83,490 94,036 78,507 70,718 N/A 10,546 -4,983 -7,789 Net revenue difference (y-o-y) * SST (Jan – Mar 2015) ** GST (Apr – Dec 2015) 69 RM5.9 b Category Household Individual e-Kasih Unit Monthly income BR1M value Payment frequency ≤ RM3,000 RM1,000 (2015: RM950) Monthly RM3,001 – RM4,000 RM800 (2015: RM750) Monthly ≤ RM2,000 RM400 (2015: RM350) RM400 January ≤ RM1,000 RM1,050 Monthly 4.7 m 2.7 m 70 High income USD15k = quality of life ? RM 2020 2014/15 Labour productivity 92,300 77,100 Household income M40 B40 mean mean monthly monthly 9,970 5,270 5,662 2,537 • Wages rise faster than productivity • Purchasing power 71 Global Labour Productivity Frontier US 70,242 HK 65,598 Spore 49,464 Korea 46,098 Malaysia 25,090 Source : Productivity Report 2014/2015 72 B40 SL1M Up-skill Re- skill Multi-skill TVET PLWS 73