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MALAYSIA BUDGET 2003/ 2004

12 September 2003

KUALA LUMPUR, September 12, 2003 - Prime Minister Datuk Seri Dr Mahathir Mohamad in his last budget address as the Finance Minister says that the time has come for Malaysia to re-engineer its growth strategies, especially in bolstering the domestic sector and reducing its high dependence on the external sector.

Malaysian Budget 2003/ 2004 Highlights

Corporate Tax

  • To encourage Small Medium Industries to increase their investments, the Government proposes to increase the threshold of Chargeable Income that is subject to a corporate tax of 20% as announced in the 2003 Budget, from RM 100,000 to RM 500,000.

  • To further promote the development of private venture capital companies, the venture capital fund for Malaysian Venture Capital Management (MAVCAP) will be increased by RM 300 million, thereby increasing the total amount of funds under MAVCAP to RM 800 million.

  • In addition, the Government has established the Malaysian Debt Venture (MDV) with a fund of RM650 million and the Malaysian Technology Development Corporation (MTDC) with a fund of RM1 billion to finance investment in areas, such as logistics and modernisation of agriculture.

  • The Government has also granted income tax deduction to venture capital companies equivalent to their investments in venture companies, provided the shares in venture companies are disposed through initial public offerings (IPOs).

  • To further enhance this incentive, tax deduction will be allowed for shares disposed through other approved exit mechanisms, such as put option and management buyout.

  • To further enhance the incentives for Operational HeadQuarters, the Government proposes that income derived by OHQs from the provision of services to its related companies in Malaysia, will be given income tax exemption not exceeding 20% of its total income from its global operations.

  • New companies which provide cold chain facilities and services for perishable agricultural produce are given Pioneer Status or Investment Tax Allowance. To promote reinvestment in this field, the Government proposes that existing locally owned companies be granted the following incentives: Pioneer Status with tax exemption of 70% on the increased income from reinvestment for 5 years; and Investment Tax Allowance of 60% on the additional investment for 5 years.

  • To further promote local products, a Fund for the Development and Promotion of Malaysian Brands has been established with an initial allocation of RM 100 million. The Government will further increase the Fund by an additional RM 100 million.

  • allowing full deduction on entertainment expenses incurred in sales promotions and deduction of 50% on other entertainment expenses

  • abolishing the limit on the exemption period for import duty and sales tax on spares and consumables for the manufacturing and services sectors, which is due to expire on 31 December 2003

  • extending deduction on incorporation expenses to companies with authorised capital up to RM 2.5 million, currently enjoyed by those with authorised capital up to RM 250,000

  • reducing or abolishing import duties on selected goods such as computer batteries, wooden and plastic goods, from the current rates of between 5% and 30% to between 0% and 20%; and reducing or abolishing export duties on several agricultural produce and commodities, such as fish, fruits and certain minerals, from the present rates of between 2.5% and 10% to between 0% and 5%

  • Employment Double Deduction

  • To encourage employers to hire unemployed graduates registered with the Economic Planning Unit (EPU), the Government proposes that expenses incurred by employers in employing these graduates be given double tax deduction for a period of 2 years.

  • Research And Development

  • To promote the commercialisation of research findings, the Government proposes that income received by researchers from such activity be given tax exemption of 50% for 5 years. At the same time, the Government will not impose charges on patents registered by local researchers.

  • To help in the promotion of Malaysian products abroad, Dr Mahathir said MATRADE would be corporatised and the government would provide a launching grant of RM 100 million for it to undertake foreign roadshows and bring in private sector expertise, including expatriates in the promotion of exports.

  • Personal Tax

  • Tax exemption on income remitted from abroad by individuals, as presently enjoyed by companies. It is hoped that this measure would encourage individuals to remit their income from their investments or savings abroad for domestic investment.

  • To assist parents in reducing the burden of expenditure on children, the Government proposes an increase in tax relief from RM 800 to RM 1,000 per child.

  • AFTA - Car Prices

  • The Government has indicated earlier that the prices of cars will not be lowered even after the reduction of import duties on cars from ASEAN countries.

  • To mitigate the loss in revenue, the Government proposes to levy excise duties on imported cars when import duties are reduced from 1 January 2004. Therefore, consumers are encouraged to purchase cars now for themselves and their families.

  • Micro-Credit Scheme

    Given the good response from small businesses to the Micro-Credit Scheme of BPM and BSN, the Government will provide an additional RM 1 billion to the Scheme.

    Internet Access Charges

    Telekom Malaysia will reduce the internet access charges. It will provide 50% discount for industrial and corporate package, beginning with 30% for phase 1 and a further 20% for phase 2.   For other users, a 30% reduction will be given for consumer broadband internet charges.

    Real Property Gains Tax

    The Real Estate Investment Trust and the Property Trust Fund will be established to enable small investors to invest in the real property sector. To encourage the development of these funds, the Government proposes: exempting the real property gains tax on gains from disposal of property by individual or company to these funds; and exempting stamp duty on instruments of transfer of real property from individual or company to these funds.

    Budget 2004 - For More Details

    Ministry Of Finance Malaysia Website

    Laporan Ekonomi Malaysia 2003/2004 - Malaysia Economic Report


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