KUALA LUMPUR: Economic recovery will continue to dominate the main agenda for owners of businesses and the man in the street this year. But apart from that, there are some tax issues that they have to be prepared for.

Effective Jan 1, the 5% Real Property Gains Tax (RPGT) on the sale of property assets held five years or less has come into effect. Next year, the Goods and Services Tax (GST) will take effect.

GST is tentatively set at 4% with some observers commenting that the rate is a compromise of 3% requested by tax agents whose clients are mainly corporates and the 5% originally suggested by the government.

Tax Services Sdn Bhd executive director Khoo Chin Guan said the re-introduction of RPGT could be a prelude to the possible introduction of a wider form of capital gains tax that may cover other assets in addition to real property.

“Alternatively, the 5% tax rate could be increased. The government has been stressing their intention to find new revenue sources and widen their tax base. We can also look forward to more tax audits by the tax authorities to tighten up the compliance side as well as to increase their revenue collections.”

However, Khoo also has some positive expectations for the taxpayer. “On a brighter note, we are hoping that there will be some income tax break for companies and individual taxpayers when GST is introduced in 2011,” he said.

Ernst & Young Tax Consultants (E&Y) outgoing national director of tax Kenneth Lim pointed out that for ordinary residents who are not high-net worth individuals, their main concern would be the increasing prices of goods and services that they consume regularly.

Lim does not see GST and RPGT at current proposed rates as having too much of a dampening effect in terms of doing business.

Tax-wise, the main focus would still be on full and accurate tax reporting, as penalties under the self-assessment system remain punitive for businesses, he added.

Meanwhile, PricewaterhouseCoopers Taxation Services Sdn Bhd tax leader and senior executive director Khoo Chuan Keat expressed concern on the disconnection between tax rules and Malaysia’s move to adopt global accounting standards.

“As we usher in 2010, one of the most pressing issues for corporate taxpayers is the convergence of accounting and tax treatment. Malaysian Financial Reporting Standards (FRS) will converge fully with IFRS by Jan 1, 2012. However, much of the tax treatment currently adopted is based on old accounting standards which are no longer applicable.”

The issue is that accounts based on current Malaysian FRS may not show results that are compliant with the tax treatment required by the Internal Revenue Board, resulting in the need for many companies to keep separate sets of accounts for the purpose of tax computation, he said.

In many countries, tax authorities issued guidelines aimed at converging tax treatment with accounting standards. However, there does not seem to be any steps taken in that direction in Malaysia, and there is no indication that such guidelines will be issued in the near future, said Khoo.

Crowe Horwath managing and tax partner Poon Yew Hoe and Horwath KL Tax Sdn Bhd tax director Fennie Lim in a joint statement highlighted the need for companies to beef up their tax reporting as the penalty for failing to provide proper estimates can be costly.

“In the 2010 Budget, an additional penalty will be imposed for failure to furnish a tax estimate. The penalty is calculated at 10% of the tax payable. As such, the additional penalty is a serious cost of non-compliance which companies should take heed of,” said the duo in a statement.

Deloitte Touche Tohmatsu Tax Services Sdn Bhd managing director Ronnie Lim felt that companies and high-net worth individuals should look beyond the next two years to prepare for the single tier-tax system that is to take effect from 2014.

He suggested looking out for further tax options with the emphasis on green taxation and following the Copenhagen conference.


This article appeared in The Edge Financial Daily, January 11, 2010.