| Malaysia
is a reasonably tax friendly jurisdiction. There
are no annual wealth taxes, no estate duties,
no gift taxes, no accumulated earnings tax, no
federal (as opposed to national) income tax, no
controlled foreign company legislation, no thin
capitalization rules and no transfer pricing rules
(although the tax authorities will apply normal
transfer pricing principles to related party transactions).
Moreover capital gains tax when levied is only
levied in very limited circumstances. The regular
rate of corporate income tax was 28% but has recently
been cut- see below. In addition, Malaysia offers
a number of attractive incentives and special
regimes, linked from below.
Although
the October, 2005, Malaysian government budget
stopped short of cutting rates of corporate tax,
the Prime Minister and Minister of Finance, Datuk
Seri Abdullah Ahmad Badawi, detailed a number
of tax-related measures designed to boost economic
activity.
One
of the more significant proposals outlined by
the Prime Minister was the introduction of group
relief for losses, a measure which is likely to
be welcomed by the business community. This will
allow firms within a group with a minimum of 70%
ownership between them to offset the current year
losses of a company against the profits of another.
By doing so, it is hoped that more companies will
be encouraged to take part in high-risk projects
requiring a large initial capital outlay.
The
Prime Minister also proposed to tempt more technology
firms to establish in Malaysia through a widening
of the Multimedia Super Corridor Incentives (MSC),
which extended the Investment Tax Allowance Incentive
to qualifying firms currently operating outside
of the MSC.
Small-and
medium-sized firms were also slated to receive
a tax break in the form of 50% stamp duty remission
on instruments for loans not exceeding RM1million
(US$265,250).
In
September, 2006, Prime Minister Abdullah Ahmad
Badawi announced a package of tax cuts, including
a 2% corporate tax cut and tax breaks for businesses
across a number of economic sectors, as the government
attempts to boost the nation's competitiveness.
Tabling
his third budget as Prime Minister and Minister
of Finance, Abdullah announced that the corporate
tax rate will be cut to 27% in 2007, followed
by an additional one-percentage-point cut in 2008.
"Although
this measure will result in a significant reduction
in revenue, the government is confident that it
will have a positive overall effect on the economy,"
he stated. Although it is Asia's third largest
economy, Malaysia's corporate tax rate compares
unfavourably to other economic powers in the region,
particularly Singapore and Hong Kong.
Malaysia Knowledge
Base
- MALAYSIA
INVESTMENT TAX ALLOWANCES
- MALAYSIA INCOME TAX INCENTIVES
- MALAYSIA THE "MALAYSIAN
SATAY" HOLDING COMPANY STRUCTURE
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