Withholding tax on special classes of income
Prior to 28 December 2018, only payments for services which were of technical nature and performed in Malaysia were subject to withholding tax (WHT). However, effective from 28 December 2018, WHT will be applicable on both payments for technical and non-technical services.
Tax incentives - Legislative changes to incorporate BEPS Action 5
Following the review by the Forum on Harmful Tax Practices, Malaysia has made the necessary legislative amendments to the relevant tax incentives to meet the requirements of BEPS Action 5. The changes specify that royalty and intellectual property income are no longer entitled for tax relief, and the requirement to have substantial activities in the location where the income enjoying the tax relief is earned.
Sales and services taxes
The sales and services taxes were implemented on 1 September 2018 to replace the goods and services tax. The rate of service tax is 6%.
Carry forwards of losses and allowances
A time limit of 7 consecutive years of assessment has been placed on the carrying forward of certain losses and allowances, notably business losses, pioneer status losses, and allowances pertaining to the reinvestment allowance incentive scheme.
Special voluntary disclosure programme
As part of the measure to encourage compliance amongst taxpayers, the tax authorities have initiated a special voluntary disclosure programme from 3 November 2018 to 30 June 2019 to provide taxpayers an opportunity to disclose previously undeclared income with a lower rate of penalty (10% to 15% of tax payable) imposed during this period.