Related topics: |  Key Data | Budget & Plan| Budget 2000

APPENDIX II

INCREASING THE PERSONAL RELIEF
FOR INDIVIDUAL INCOME TAX

 Present Position

Currently, an individual taxpayer is given a personal relief of RM5,000 in the computation of income tax. While other reliefs had been increased to take into account the effect of inflation, personal relief has not been revised since the year of assessment 1980. 

Proposal

In order to reduce the tax burden of the individual taxpayer, it is proposed that personal relief be increased from RM5,000 to RM8,000.

This proposal is effective from year of assessment 2000 (current year basis) and will be implemented by amending the Income Tax Act 1967.

APPENDIX III

REDUCTION OF STAMP DUTY ON INSTRUMENT
OF AL-IJARAH TERM LOAN

Present Position

The Al-Ijarah Term Loan is a new Islamic banking product. It is a form of term loan with a floating rate. This loan is required to incorporate al-ijarah (leasing) features to fulfill the syariah principle. Based on the features of al-ijarah, the term loan instrument is subject to progressive stamp duty rate which is not the same as the rate paid by similar products under conventional banking.

Proposal

In order to enhance the competitiveness of the "Al-Ijarah Term Loan", it is proposed that instruments related to this product be subject to the same rate of stamp duty applied to similar products under conventional banking.

This proposal will be implemented by amending the Stamp Duty Act 1949 with retrospective effect from 30 October 1999.

APPENDIX IV

REVIEW OF TAX INCENTIVE
FOR THE VENTURE CAPITAL INDUSTRY

Present Position

    Venture capital is a vital source of financing for projects which encounter difficulties in obtaining bank financing in the absence of an established track record or collateral.

   

    Currently, venture capital companies (VCC) which provide capital to venture companies are given the following incentives:

1. income tax exemption on gains from the disposal of shares in a venture company provided that the disposal takes place within a period not exceeding 3 years after the company is listed in the stock exchange;
2. tax exemption on dividends paid from the exempted income; and
3. losses incurred in respect of disposal of shares in a venture company are allowed to be deducted against aggregate income and allowed to be carried forward if the aggregate income is insufficient.

 The qualifying criteria are as follows:

1. the VCC must be incorporated in Malaysia;
2. the VCC must invest at least 70% of their funds in venture companies;
3. the fund must have a life span of 7 to 10 years and invested in a venture company for 3 to 8 years;
4. the source of the fund is from individuals and corporate investors while the amount invested in a venture company should not be less than RM0.5million;
5. the VCC is to provide its services by way of representation on the Board of Directors of the venture company, market assistance, technological and other management support;
6. the VCC must not be involved in the daily management of the venture company;
7. the VCC must obtain high returns from the sale of shares of the venture company which has been successfully listed in the stock exchange and return the original investment and profits to its investor;
8. the VCC derives its income from the sale of share of the venture company, dividend and interest from savings; and
9. the venture company must be a company which is involved in a new technology or high-risk project.

 Proposal

        A review on the tax incentives for the venture capital industry envisaged that the incentives for the VCC should be enhanced as it is the critical entity in the financing of the industry. As such the following incentives are proposed:

       
        Incentives:

1. VCC be given to full tax exemption on all sources of income at the statutory level; and
2. exemption up to 10 years or equivalent to the life span of the fund, whichever is the lesser.

Qualifying criteria:

1. the life span of the fund should not exceed 10 years;
2. at least 70% of the funds be invested in venture companies and in the form of seed capital, start-up or early stage financing;
3. the venture company must be involved in products and activities promoted by the Government such as projects granted pioneer status/investment tax allowance incentive or MSC-status projects; and
4. VCC should not invest in a company within its group or in a company in which it has equity participation.

Application procedures:

1. VCC must obtain annual certification from the Security Commission that the conditions imposed for the incentives have been complied ;and
2. the letter of certification must be attached with the income tax return form for submission to the Inland Revenue Board.

        This proposal is effective from year of assessment 2000 (current year basis) and will be implemented by amending the Income Tax Act 1967.

APPENDIX V

REVIEW OF PERSONAL INCOME TAX RELIEF ON
EDUCATIONAL AND MEDICAL INSURANCE
PREMIUM

Present Position

        Currently, premium on educational and medical insurance is allowed as a relief of up to RM2,000 in the computation of individual income tax.

 Proposal

        As an incentive to promote savings for future education of children and medical expenses, it is proposed that relief on educational and medical insurance premium be increased from RM2,000 to RM3,000.

        This proposal is effective from the year of assessment 2000 (current year basis) and will be implemented by amending the Income Tax Act 1967.

APPENDIX VI

 INDIVIDUAL INCOME TAX RELIEF FOR
ANNUITY PREMIUM

Present Position

            Currently, contributions to Employees Provident Fund (EPF) and life insurance premium payment by an individual is given income tax relief up to RM5,000. This relief also covers premium on annuity, which is an insurance savings scheme for retirement. EPF is presently promoting the development of annuity where contributors are allowed to use their EPF contribution to finance annuity premium.

 Proposal

            In support of EPF’s effort, it is proposed that a separate relief be introduced for annuity premium up to RM1,000 for taxpayers who purchase annuity through the EPF annuity scheme.

APPENDIX VII

TAX EXEMPTION ON INCOME
FROM MUSIC COMPOSITION

Present Position

            Currently, income derived from the composition of music is granted tax exemption up to RM12,000 per annum and income received for original paintings is granted tax exemption up to RM20,000 per annum. Royalties received from academic as well as literary works are granted tax exemption up to RM20,000 per annum.

Proposal

            To streamline the level of tax exemption enjoyed by artistes, it is proposed that tax exemption on income derived from the composition of music be increased from RM12,000 to RM20,000 per annum.

            This proposal is effective from year of assessment 2000 (current year basis) and will be implemented by amending the Income Tax Act 1967.

APPENDIX VIII

EXTENSION OF TAX EXEMPTION
ON SPARES AND CONSUMABLES

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