Malaysia prepares for new tax regime

Malaysia will introduce a GST on April 1. AseanBriefing.com explains the changes…

From April 2015, Malaysia will introduce a goods and services tax (GST) of six per cent – the lowest rate in the ASEAN region.

The new GST will replace the country’s current sales and services taxes.

The new tax regime is intended to increase the competitiveness of Malaysia’s exports, which will be zero rated. Additionally, a number of special schemes will be implemented in order to support the cash flow of exporters – such as allowing companies to defer accounting for GST on temporarily imported goods for re-export.

Due to the imposition of the GST, a number of important changes to the country’s tax system will take place. These include:

  • A one to three percent decline in income tax rates.
  • Households with a monthly income of up to MYR4000 will be exempt from income tax.
  • The income tax threshold for the top rate will be raised from MYR100,000 to MYR400,000.
  • Income above MYR400,000 is subject to a lowered tax rate of between 25 and 26 per cent.
  • Corporate income tax rates will be reduced to 25 per cent from 26 per cent.
  • The tax rate on SMEs will be reduced one per cent to 19 per cent.

Malaysia’s Prime Minister, Datuk Seri Razak, has argued the GST is a good tool for increasing government revenues and will allow the country to become more competitive against rivals such as Singapore.

The implementation of GST has been an increasingly common sight throughout ASEAN. Besides Malaysia, only Brunei and Myanmar have not implemented the tax regime.

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