Monday October 1, 2012
Incentives for house buyers
This is the first of a two-part Q&A provided by PwC on various aspects of Budget 2013. Part two will appear tomorrow.
As a property developer, I noticed that there are several abandoned housing projects in the Klang Valley. Are there any tax incentives available if I were to undertake to revive one?
Yes. A double tax deduction is given on interest expense and all costs involved in obtaining loans to revive the abandoned project. In addition, stamp duty exemption is also given on the transfer of land or houses and loan agreements to finance the abandoned projects.
As an employer, I would like to improve the well-being of working parents in my organisation. Are there any additional incentives as announced in the recent budget?
The tax incentive has been enhanced to give a double deduction on expenses for the provision and maintenance of child care centers and childcare allowansce given to employees, as compared with the single deduction granted previously.
The budget speech mentioned that to encourage companies to issue retail bonds and retail sukuk, tax deductions are available on these. What is the tax deduction given?
A double tax deduction will be given on expenses incurred on the issuance of retail bonds and retail sukuk. Examples of such expenses include rating rationale fee, underwriting and placement fees, facility agency fee, advertising cost and cost of printing prospectus. The double deduction is given for a period of 4 years effective from year of assessment 2012 to 2015.
An additional double deduction on sukuk issuance costs is also given to promote funding in the agricultural sector (subject to receiving approval from Securities Commission or Labuan Financial Services Authority).
Besides the double tax deduction, stamp duty exemption is also given on instruments relating to the subscription of retail sukuk and retail bonds executed by individual investors for instruments executed from Oct 1, 2012 to Dec 31, 2015.
I got married recently and am planning to buy a house. I am keen to know what Budget 2013 has in store for me.
As announced during the budget speech, for first time house buyers, the current 50% stamp duty exemption on the purchase of first residential property will be extended to Dec 31, 2014 (from Dec 31, 2012). This is for sales and purchase agreements executed between Jan 1, 2013 to Dec 31, 2014. In addition, the price of the residential property has been raised to properties not exceeding RM400,000.
I heard that the relief for deposits by an individual for his child into the Skim Simpanan Pendidikan Nasional account established under the Perbadanan Tabung Pendidikan Tinggi Nasional Act 1997 has been increased from RM3,000 to RM6,000. I deposited RM10,000 in one year but withdrew RM5,000. Will I still be entitled to the RM6,000 relief? My wife, on the other hand, deposited another RM6,500 for the same child in the same year. Can she get a deduction on the deposit made as well?
Only the net deposit would qualify for the relief, ie total deposit for the year less the withdrawal made. Therefore, in this case, only RM5,000 relief will be allowed instead of RM6,000. If your wife is filing her own tax return, she would be able to claim the RM6,000 relief for the deposits made by her for that year.
Do also take note that the increased relief is only applicable for years of assessment 2012 to 2017.
I have two children, both above 18 years of age and studying outside Malaysia. My first child is studying at the diploma level in the UK while my second child is pursuing a Master’s degree in the United States. Do I get the maximum child relief of RM6,000 for each of my children?
For children studying outside Malaysia, the maximum child relief of RM6,000 is only allowed if your child is studying at degree level (including a degree at Master or Doctorate level) or the equivalent of a degree. Therefore, in this case, you are entitled to RM1,000 relief for your first child and RM6,000 relief for your second child.
My company encourages me to contribute towards the Private Retirement Scheme (PRS) to support me for my future retirement, and to make the most of the additional RM3,000 relief on top of the RM6,000 relief which I am currently entitled to for my contribution towards the Employees Provident Fund. I am happy to contribute but I want the flexibility of withdrawing my contributions should the need arise. Can I withdraw from my PRS as and when I like? Are there any repercussions?
You may be aware that only 30% of your PRS savings can be withdrawn flexibly. Also, the amount withdrawn would be subject to a flat income tax rate of 8% on every ringgit of the contribution withdrawn, if the withdrawal is made before you are 55 (other than by reason of death or permanently leaving Malaysia).
The PM did not mention an implementation date for the goods and services tax (GST). Does this mean that the tax is not coming?
Even though there was no direct mention of GST, the Prime Minister reiterated that the tax system of Malaysia would continue to be reviewed with the objective of introducing a fairer tax system. This reference would suggest that GST remains a strategic policy for the government.
In response to concerns that GST would be inflationary, it would appear that the Prime Minister is preparing the lower and medium income groups for the tax when he announced a 1% reduction in personal income tax rates on bands of income between RM2,500 and RM50,000.
This measure, along with information programmes, education and extensive consultations, also appear to be preparatory steps for the introduction of GST in the near future.