Budget 2016 was first unveiled on October 23, 2015 by the Malaysian Prime Minister and Minister of Finance, Dato’ Sri Mohd Najib Tun Haji Abdul Razak, and passed by the Dewan Rakyat on November 16, 2015.
Personal income: Taxpayers will now have to pay 26 percent (from the previous 25 percent) if their annual income is between MYR600,000 and MYR1 million, and 28 percent (from the previous 26 percent) for those earning above MYR1 million.
The fixed income tax rate for non-resident individuals1 will be increased by 3 percent, raising it from 25 percent to 28 percent from the year of assessment 2016.
Taxpayers with children below the age of 18 will now be subject to a tax relief of MYR2,000 (in comparison to the previous MYR1,000) for each child, from the year of assessment 2016. Tax relief for those with children above 18 years old who are studying in institutions of higher education has now been increased from MYR6,000 to MYR8,000 for each child from the year of assessment 2016. For those with disabled children, the existing tax relief of MYR6,000 for each child is maintained. However, if such disabled child is studying in an institution of higher education, a further relief of MYR8,000 is added, bringing the total tax relief for a disabled child to MYR14,000.
Tax relief in the amount of MYR4,000 is also given to a taxpayer whose spouse has no income.
A novel aspect of Budget 2016 is the tax relief for those who provide for their parents. An amount of MYR1,500 is granted for each parent, on condition that such parent is at least 60 years old, and does not have a monthly income exceeding MYR2,000.
Subsidies: Under the Bantuan Rakyat 1Malaysia (BR1M) scheme, a programme providing cash assistance for low income households, the budget allocation has been increased from MYR4.9 billion in 2015 to MYR5.9 billion.
The BR1M handout for a single individual with a monthly income not exceeding MYR2,000 has been raised from MYR350 to MYR400. Households with a monthly income of MYR3,000 and below will receive an increased BR1M of MYR1,000 from the previous MYR950, whilst those with an income of between MYR3,000 and MYR4,000 will be entitled to an increased handout of MYR800 from MYR750 previously.
Employment: Except for domestic services and domestic maids, the minimum wage has been increased from MYR900 to MYR1,000 in Peninsular Malaysia, and from MYR800 to MYR920 in East Malaysia. This will take effect from July 1, 2016.
The eligibility for mandatory contribution for the Social Security Organisation (SOCSO) has also been increased from a monthly salary of MYR3,000 to MYR4,000.
Goods and services: Goods and services tax (GST) is zero-rated for all types of controlled medicines under Group A, B, C and D of the Poisons List2, including an addition of 95 brands of over-the-counter medicine. Food items including organic milk for infants and children, soybean-based milk, lotus root and water chestnut, mustard seeds and jaggery powder are also zero-rated.
GST relief is also provided for re-importation of goods that were exported temporarily for the purposes of promotion, research or exhibition.
Under the oil and gas industry, relief is given for the re-importation of equipment, including those for oil and floating platforms that are temporarily exported for the purposes of rental and leasing.
Relief is also provided for teaching materials and equipment procured by skills and vocational training providers conducting approved programmes under the National Skills Development Act 2006.
Mobile phone users who subscribe to prepaid telecommunication services or prepaid cards will also receive rebates equivalent to the amount of GST paid, which will be credited directly to their prepaid accounts. This will be effective from January 1 to December 31, 2016.
Property: In order to encourage the completion of abandoned housing projects and to assist affected house purchasers, exemption on stamp duty is given on financing instruments to contractors who revive the projects as well as the original purchasers of the abandoned house.
A 20 percent stamp duty exemption on Shariah-compliant loan instruments to finance the purchase of houses is also provided.
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Endnote
1. An individual will be considered a non-resident for income tax purposes if he is physically present in Malaysia for less than 182 days (whether consecutive) during the calendar year regardless of the citizenship or nationality.
2. Issued under the Poisons Act 1952 (Revised – 1989).
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