Highlights of Budget 2014 – Corporate Income Tax

In Malaysia, a corporate covers the following entities:-

  1. Company, both private and public
  2. Trust body
  3. Executor of an estate of an individual domiciled outside Malaysia at the time of his death
  4. Receiver appointer by the court
  5. Limited liability partnership

The current fixed income tax rate is 25% on the Chargeable Income of the corporate. However, specific to the company with paid-up capital of up to RM2.5 million (referred to “SME”s), the tax rates are as follows:-

  • 20% on Chargeable income up to RM500,000; and
  • 25% on the remaining Chargeable income.

In this Budget, the proposal is to reduce 1% on all current tax rates mentioned. This measure is to support the smooth implementation of GST, and to further enhance the competitiveness of the nation.

Effective Year of Assessment 2016 (meaning the financial year ending in 2016 onwards), the tax rates are as follows:-

  • Fixed rate shall be reduced to 24% for all corporate entities; and
  • For SMEs, the tax rates shall be reduced to 19% for the first RM500,000 chargeable income, and 24% thereafter.

Accelerated Capital Allowance on ICT Equipment

In line with the evolution of technology, the Budget announced that all expenses on purchase and installation of ICT equipment and software be given accelerated capital allowance (“ACA”) with an initial allowance of 20% and an annual allowance of 80%.

ACA is applicable for the Years of Assessments from 2014 to 2016.