Malaysia's Finance Minister (who is also the Prime Minister) has presented the country's budget for year 2008 today. The complete text of the budget speech (which lasted 1 hour 30 minutes) is available from the official Government portal.
I always try to make time to listen firsthand to the budget speech. My first boss, a tax practitioner started us on this habit. While we are listening /watching TV, the dispatch rider will be queueing at the Finance Ministry to get the "embargo" copy of the speech. Once he gets hold of it, we will begin to prepare a newsletter for our clients summarising the impact of the budget on their businesses, from a tax viewpoint.
So how will this year's budget impact your business?
1) For one, there is a big shift in the taxation of dividends. Previously, when a company pays out dividend to the shareholders, the company will deduct tax and remit net of tax to the shareholder. The shareholder will then claim the tax back for the Income tax department if his tax bracket is lower than the Company's tax bracket. This causes a lot of unnecessary administrative work. With effect from next year, dividends will not be subjected to tax at source, and so shareholders can receive 100% of the dividends upfront. Good news indeed, especially for the retiree-shareholders of Malaysian public listed companies!!
2) Corporate tax rate is further reduced by 1%. The tax rate for year 2007 is 27%, for year 2008 is 26%, and for year 2009, it will be 25%.
3) Gains from disposal of property is exempted from Real Property Gains Tax (RPGT), while the stamp duty for purchase of one (1) house costing below Rm 250,000 is reduced by 50%
4) Donations to schools, especially Chinese, Tamil and religious schools will be tax exempted. So be generous!
5) Do your bit and offer to sponsor computers and pay for broadband subscription to your employees home. You will enjoy tax deduction for the payments. This is to nurture a knowledge based economy.
More details when the budget is gazetted and the finance bills are issued.