Tax Changes 2018 Budget - ACCA F6 (TX) and P6 (ATX) MYS

We all know the pain in dealing tax subjects - the Updates and Changes.

For our ACCA exam, Budget 2017 is valid up to Sep 2018 exam and Dec 2018 will be based on Budget 2018.

Some of you might be interested to know the changes:
(Take note: I only incorporated changes that are more relevant to your studies rather than the entire budget proposal)

1) GST to SST - This is perhaps the No 1 question many students want to know. How is ACCA going to react to our unique situation? We are still waiting for updates from ACCA but what I hear is, they are adamant that "Indirect Tax" must be in the syllabus and since we do not have the "New SST law", it is highly likely, they still need you to study the old GST Act - What?? and I know your reaction. Same here.

2) Some Key Changes to Personal Tax - (some are not significant and I would not elaborate much)

• Streamlining "Para 22 Schedule 6" to ensure consistency in the definition of Public Entertainer. 
• Reduction in personal tax rate(s): Since Tax Rate(s) table is given in the exam question, you do not have a concern here. 
• There were 2 Proposals - but the Statutory Order was NOT PASSED by the Parliament. Considering that there is a change in the Government (BN to PH), I am not sure if they will still go ahead with it. So, these two PROPOSED LAWS are NOT in your syllabus. (They are not yet made laws) 
• It was proposed - Exemption for women returning to work after a career break of 2 years, then she will enjoy an exemption on her employment income for 12 consecutive months. 
• It was proposed - 50% Exemption for rental income if the rental income does not exceed RM2,000 per month for each residential unit. 

 3) Capital Allowances for Computer Equipments and Software.

• Historically, these IT assets were given a special rate of CA at 20% IA and 40% AA. Then, the government enhanced it to 20% IA and 80% AA. However, the 80% rate has expired (last up to Y/A 2016). Therefore, IT assets were left stranded with "which rate do we use for it AA?" And, in Budget 2018 - it was proposed that 20% AA is given for IT assets and this included an extension to cover "expenditure for customized software comprising of consultation fee, licensing fee and incidental fee".  Again this statutory order has not been gazetted

4) New Double Deduction:

• Previously, DD is given when hiring disabled employees. It is now proposed that hiring employees whom are affected by accidents or illnesses, but these workers shall be certified by the Medical Board of SOCSO. (Again this statutory order has not been gazetted) 

• We know that DD is given to company for obtaining quality or halal certifications. However, it is now extended to include companies registered with Malaysia Healthcare Travel Council that provide dental and ambulatory healthcare services. For example of quality certification bodies are like M'sian Society for Quality of Health, CHKS Accreditation & Joint Comission International.

5) Anti-Avoidance on Interest Expense Deduction - more for P6 Students:

• Previously, we have "Thin Capitalisation Rule" - a term to describes company which has very small proportion of equity capital in relation to its loan capital. For instance, a company that has just RM100 ordinary share capital but has a loan from Holding Co of RM5million. 
• Budget 2018 has "deleted" Sec140A(4) - previously read as "S140A(4) Where the Director General, having regard to the circumstances of the case, is of the opinion that in the basis period for a year of assessment the value or aggregate of all financial assistance granted by a person to an associated person who is a resident, is excessive in relation to the fixed capital of such person, any interest, finance charge, other consideration payable for or losses suffered in respect of the financial assistance shall, to the extent to which it relates to the amount which is excessive, be disallowed as a deduction for the purposes of this Act." (Note: This law has now been deleted to be replaced with ESR - see below)
• Government has adopted "EARNING STRIPPING RULES" advocated by OECD. Basically, it is "set a maximum amount of interest expense deduction" claimable by a chargeable person. Much details from MOF are required to understand exactly how ESR would be implemented. 
• Quick Overview of ESR is: 
• Application of a fixed ratio rule is proposed, that is said to be between 10% to 30% of EBIT or EBITDA (Earnings Before Interest Tax Depreciation Amortisation). However, "earnings" usually be based on "Earnings per Tax Law" as such, it is probably CHARGEABLE INCOME of the company. 
• Say if the EBITDA is RM50million and ratio of 20% is applied, then MAX interest deduction is RM10million. 
• In that case, the deductible interest would be the lower of actual interest or RM10million.
• The budget proposal has indicated ESR rule is meant for Related-Party Loan within the Group of Companies.   

6)  A new Tax Compliance requirement is introduced: (I have quoted exact wordings of the act for the new Sec 21A(3A) as follows. And as before, a failure to do so shall construe an offence and shall, on conviction, be liable to a fine of between RM200 - RM20,000 or maximum 6months jail or both.

21A(3A) [Notification to Director General of any change in accounting period]

Where a company, limited liability partnership, trust body or co-operative society has made up the accounts of its operations for a period of twelve months ending on a day in a basis year and has failed to make up its accounts ending on the corresponding day in the following basis year (“hereinafter referred to as “the new accounts”), the company, limited liability partnership, trust body or co-operative society shall notify the Director General of such failure in the prescribed form—

(a) in the case where the new accounts are made up ending before the corresponding day, thirty days before the end of the new accounts; or

(b) in the case where the new accounts are made up ending after the corresponding day, thirty days before the corresponding day.

7) RPGT - retention sum. We are aware that the acquirer shall retain the lower of  "whole of that money" or a "3% of the consideration". A new retention rule is introduced for acquirer whom is "not a citizen and not a permanent resident," to retain the lower of "whole of that money" or "7% x consideriation". 

Syllabus Changes to P6 for DEC 2018 - SEP 2019
8) Some AREAS been clarified, and some are not DELETED.

• Syllabus Clarification: 
• Compute Double-Taxation Relief  is now specifically mentioned in the syllabus
• Compute Tax under Labuan Business Activity Tax Act is now mentioned in syllabus.
• Deletion:
• Advanced Pricing Arrangement 
• Increased exports of Qualifying services 
• Venture company 
• Angel Investor 
• Deduction for the cost of acquisition of a foreign owned company
• Approved food production project
• Exemption of a new private healthcare facility business

Syllabus Changes to F6 for DEC 2018 - SEP 2019
No Changes being Made 


Low Chin Ann is the Founding Director of Genesisorigo