Tax Cut on Horizon in Malaysia

October 6, 2014 Taxation in Malaysia

KUALA LAMPUR – The government of Malaysia is looking to use new taxes to und fel subsidies, while providing tax breaks for individuals and businesses.

The implementation of Malaysia’s long-delayed GST system will lead to a reduction in the rate of income taxes in the country, especially on the incomes of middle-income earners, according to information given by Prime Minister Datuk Seri Najib Abdul Razak in a conference held over the weekend.

The cuts to the rate of income tax are expected to be between 1 and 3 percent, with the biggest impact to be felt by approximately 300 000 low-income individuals who will no longer face any income tax, and also by middle-income earners with salaries between MYR 50 000 and RYM 70 000 per year, who will see a reduction of 3 percent.

The cut in income tax obligations is intended to offset the negative financial impact of the country’s upcoming implementation of a GST, which is currently expected to be set at 6 percent.

Alongside the cuts to personal income tax, the implementation of GST will also lead to a 1 percent reduction to the rate of corporate income tax.

The introduction of GST in Malaysia was first proposed in 2011 as a replacement for the current value added tax system, however, the move has been delayed repeatedly for several years.

Currently, the government is looking at the feasibility of levying GST on the sale of fuel, and, during the conference, the Prime Minister indicated that if fuels will be taxed, low- and middle-income individuals will be eligible to receive target tax breaks to compensate for the extra cost of fuel.

Photo By: Abhishek Kumar