Malaysia Budget 2001
Malaysia Budget 2001
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INDIRECT TAXES

Import Duties and Sales Tax - Increase / Abolition / Exemption

Rationalisation of Service Tax





1. Import Duties and Sales Tax - Increase / Abolition / Exemption

a. Cigarettes and Other Tobacco Products and
All Types of Alcoholic Beverages

With the objective of promoting a healthy life-style and discouraging addiction to smoking and excessive consumption of liquor, sales tax has been increased to 25% for cigarettes and tobacco products and 20% for alcoholic beverages effective from 4.00 p.m. 27th October 2000. Details of the items are provided in Appendix I.
   
b. Equipment Used by Disabled Person

To promote a caring society and for the convenience of the disabled, import duty and sales tax on equipment detailed in Appendix II used by disabled persons were abolished with effect from 4.00 p.m. 27th October 2000.
   
c. Vehicles for the Physically Disabled

With a view to easing the financial burden of the physically disabled in the purchase of a motor vehicle in order to facilitate mobility, a 50% excise duty exemption on the purchase of national motorcars and motorcycles is effective from 28th October 2000 subject to the following conditions :-

i. the applicant is registered with the Social Welfare Department;
ii. the applicant has a valid driving licence;
iii. the vehicle is not allowed to be sold or its ownership transferred for a period of 10 years except with the approval of the Treasury; and
iv. exemption is given for a vehicle once in every 10 years.


Details of the current excise duty rate for motorcars and motorcycles are provided in Appendix II.
   
d. Prime Movers and Trailers Used by Hauliers

Presently, prime movers and trailers used by hauliers are not given tax exemptions. The imposition of a high import duty of 30% and 25% on prime movers and trailers respectively together with a 10% sales tax was aimed at protecting the local manufacturers.

With the intent to lower the costs of operations since hauliers play an important role in providing an efficient and modern distribution system to support the manufacturing and trading sectors, import duty and sales tax exemptions are proposed for imported prime movers and trailers used by hauliers. Locally produced prime movers and trailers will be granted sales tax exemption.

The implementation of the import duty and sales tax exemption on prime movers and trailers is effective from 28th October 2000.
   
e. Machinery and Equipment for the Plantation Sector

Currently, the established plantation sector such as rubber and oil palm estates are not given import duty and sales tax exemptions on machinery and equipment.

In order to help the plantation sector to increase its productivity through modernisation and reduction of labour force, import duty and sales tax exemptions will be given on machinery and equipment not available locally and used in the plantation sector with effect from 28th October 2000. Locally produced machinery and equipment will be given sales tax exemption with effect from the same date.

Applications for the aforesaid import duty and sales tax exemptions should be made to the MIDA.
   
f. Spares and Consumables

Tax exemption on spares and consumables was previously given until 31st December 2000 to export-oriented manufacturing companies with exports exceeding 80% to reduce their cost of production. In order to qualify for the said exemption, spares and consumables must attract more than 5% import duty and not be available locally.

Since most of these spares and consumables are still not produced locally, it is proposed that the tax exemption be extended and the scope be widened to include companies providing promoted services.

The aforesaid tax exemption will extend from 1st January 2001 until 31st December 2003.

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2. Rationalisation of Service Tax
To rationalise the applicability of service tax, the following services will be subject to service tax of 5% :-
   
a. Golfing and Golf Driving Facilities

Currently, golfing and golf driving range facilities provided by private clubs with annual sales turnover of more than RM500,000 are subject to service tax.

It is proposed that the aforesaid services provided by all private clubs and persons other than such clubs be subject to service tax regardless of the amount of annual sales turnover.
   
b. All Classes of Public and Beer Houses

Currently, only premises licensed as First Class Public House and First Class Beer House are subject to service tax.

It is proposed that the imposition of service tax be extended to all classes of Public and Beer Houses.
   
c. Forwarding Agents

Currently, only approved forwarding agents which have an annual turnover of more than RM150,000 are subject to service tax.

It is proposed that the threshold of RM150,000 be abolished. Thus, all forwarding agents regardless of annual turnover will be subject to service tax.
   
d. Telecommunication Services except the Internet

Currently, basic telecommunication services such as telephone, facsimile, telemail, paging, cellular phone and telex are subject to service tax.

Following the rapid development in the telecommunication industry, new telecommunication services have been introduced, such as leased lines / bandwidth and value-added service which are not subject to service tax.

In order to accord the same tax treatment on similar services, it is proposed that service tax be imposed on all forms of telecommunication services, except the Internet.

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This proposal is effective from 1st January 2001.


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Deloitte KassimChan Tax Services Sdn Bhd and Deloitte Touche Tohmatsu Tax Services Sdn Bhd.
© October 2000