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Taxation (Other)

Malaysia - Taxation (Other)

The tax system in Malaysia is pretty basic. Many of the taxes which become fiddly and complicated in the UK simply don’t exist in Malaysia. Although Malaysia currently does not impose a VAT as we know it, it does implement a compulsory sales tax and a compulsory service tax on sales and services purchased within the country. Any person who manufactures goods to sell and make a profit must apply for a sales tax license. The license must be displayed in the business headquarters at all times.

Sales Tax

Sales tax is essentially VAT, a tax added to all sales of locally manufactured taxable goods, as well as to taxable goods imported from outside Malaysia for domestic consumption. Only products which are specifically exempted by law are not subject to sales tax in Malaysia, along with any good manufactured in or imported into Labuan, Langkawi, Tioman, free zones and licensed warehouses. The rate of sales tax currently stands at 10% for most products (as of July 2013).

Service Tax

Service tax is the same as sales tax in essence but it applies to specified taxable services, not to products purchased. Any service which does not feature on the prescribed list is not taxable. There are currently nine major groupings of taxable services in Malaysia. These taxable services include, but are not limited to services in the following sectors: telecommunications, recruitment and employment, consultancy and advisory, management, legal, accounting, advertising and PR, engineering, surveying, architectural, insurance and car hire. As with sales tax, service tax does not apply in Labuan, Langkawi, Tioman and free zones. The rate of service tax currently stands at 6% (as of July 2013).

Proposed Changes

But this system may not be around for much longer. Malaysia is looking to implement a system which is very similar to the VAT system in the UK. It is proposed that the standard rate will start at 4% and that there will be a number of goods which are not taxable such as basic grocery items. The government has yet to announce the date they wish to implement this system but it looks like a change will happen in the near future.

Capital Gains Tax

There is no capital gains tax enforced in Malaysia. There is, however, a Real Property Gains Tax (RPGT) which was introduced in 2010. This tax applies to property sold less than five years after its purchase. Property sold less than 2 years after purchase will incur a real property gains tax of 10%, and any property sold between 3 and 5 years after purchase will incur a rate of 5%. If you sell a property more than 5 years after you bought it then you are not liable to may any capital gains tax on any profit you might make.

Inheritance, Estate, Wealth and Gift Taxes

None of these taxes apply in Malaysia. Whilst you cannot be taxed for any transactions you make from Malaysian citizen to Malaysian citizen, you may still be liable for tax if you gift money to British citizens whilst you are still a British citizen. The rules around gifting money back to the UK are very complicated and will differ according to individual cases. If you think that any of the above taxes may apply to you in the UK then make sure you get some expert advice before you leave the country so that you know exactly where you stand.

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