Malaysia Budget 2009

Publication Date: 29-08-2008

Malaysian Prime Minister and Finance Minister Abdullah Ahmad Badawi unveiled the much anticipated 2009 Budget on Friday (Aug 29).

The following are the highlights:

Enhancing health services

- Excise duty specific on cigarettes increased by three sen--from 15 sen per stick to 18 sen per stick. With this, the duty for a 20-stick pack of cigarettes is now up 60 sen.

Social safety net

- Eligibility criteria for welfare assistance under the Welfare Department, increased from a monthly household income of 400 ringgit to 720 ringgit for Peninsular Malaysia, 830 ringgit for Sarawak and 960 ringgit for Sabah.

- Government pensioners who have served at least 25 years upon retirement, will receive a pension of not less than 720 ringgit per month, effective Jan 1 2009.

- The government will now also set up a special fund of 25 million ringgit set up to channel financial assistance to victims of calamities such as floods and fire.

Eradicating poverty

- Programmes to enhance income, as well as provide skills and career development training under the Skim Pembangunan Kesejahteraan Rakyat to be continued. In addition, Programme Lonjakan Mega Luar Bandar is being implemented in Pulau Banggi, Sabah and Tanjung Gahai, in Kuala Lipis, Pahang.

- In 2009, 50 million ringgit is allocated to build 1,400 new houses and repair 1,000 houses under the Housing Assistance Programme. Priority will be given to senior citizens, the disabled and single parents with many dependents as well as victims of natural disasters.

- 580 million ringgit and 420 million ringgit allocated for Sabah and Sarawak respectively to increase income and enhance quality of life of Malaysians there by improving basic amenities, such as electricity, water and rural roads.

- Households which incur monthly electricity bills of 20 ringgit or less, will not have to pay for electricity, for the period from October 1, 2008 to end of 2009.

- The current tax rebate of 350 ringgit per person will be increased to 400 ringgit for those with taxable income of 35,000 ringgit and below.

- All interest income from savings for individuals be tax exempt.

- Reduce import duties on various consumer durables from between 10 per cent and 60 per cent to between 5 per cent and 30 per cent. These include blender, rice cooker, microwave oven and electric kettle.

- Full import duty exemption on several food items, which currently attract import duties of between 2 per cent and 20 per cent. These include vermicelli, biscuits, fruit juices and canned sweet corn.

- Reduce the road tax on private passenger vehicles with diesel engines to be the same as those with petrol engines, effective September 1, 2008.

Enhancing the welfare of employees

- Travel allowance for commuting to work provided by employers be given full tax deduction, while the employees receiving such an allowance be given tax exemption of up to 2,400 ringgit per year.

- Tax exemption be given to employees on:

-- Interest subsidies on housing, motor vehicles and education loans. The tax exemption will be limited to total loans up to 300,000 ringgit;

-- Mobile phones, as well as telephone and internet bills paid by the employer;

-- Staff discounts of up to 1,000 ringgit a year on company traded goods;

-- Staff discounts on services rendered by the company, such as private schools providing free education to children of their employees; and

-- Childcare allowance of up to 2,400 ringgit per year.

- Tax exemption on medical benefits provided by employers to include expenses on maternity and traditional medicine, namely acupuncture and ayurvedic.

- Effective from January 1, 2009, civil servants with a monthly household income of 3,000 ringgit will be eligible for a subsidy of 180 ringgit per month.

Improving Public Transportation

- A sum of 35 billion ringgit will be expended during the period 2009 to 2014 to improve public transportation.

- The existing LRT system in the Klang Valley will be extended by 30km, that is 15km respectively, for Kelana Jaya and Ampang lines. Upon completion in 2011, the extensions are expected to benefit 2.6 million residents in the Subang Jaya-USJ and Kinrara-Puchong areas, compared with 1.9 million currently.

- A new LRT line will be built along a 42km route from Kota Damansara to Cheras; to be completed in 2014.

- The commuter rail services of Keretapi Tanah Melayu Berhad (KTMB) will be upgraded. Rehabilitation works are being undertaken on the existing 20 Electric Multiple Units (EMUs) and are expected to be completed in 2009. An additional 13 new units of EMUs will be acquired and be operational by 2011.

- To reduce the operating costs of public transport operators:
-- government will provide a soft loan facility of 3 billion ringgit under the Public Transportation Fund, administered by Bank Pembangunan Malaysia Berhad (BPMB), to finance the acquisition of buses and rail assets; and

-- reduce toll charges by 50 per cent for all buses, except at border entry points, namely Johor Causeway, Second Link and Bukit Kayu Hitam, for a period of two years, effective Sept 15 2008.

- Road tax will also be reduce to 20 ringgit a year for all bus, taxi, car rental and limousine operators.

Food security

- Sum of 5.6 billion is provided under the National Food Security Policy, for the period 2008 to 2010. This allocation is to provide incentives to agriculture entrepreneurs to reduce production costs and encourage higher agriculture output.

- 300 million ringgit allocated to increase fish landings. Of this, 180 million ringgit is in the form of cost of living allowance to fishermen and fishing boat owners, as well as 120 million ringgit as incentive for fish landings.

- 1 billion ringgit allocation as incentives for 220,000 padi farmers throughout the country to increase padi production.

Generating income through micro credit

- 160 million ringgit allocated to provide better education opportunities as well as improve health and basic amenities for the Orang Asli.

- A monthly allowance of 150 ringgit to disabled who are unable to work. In addition, the monthly allowance for disabled students in special education schools, will also be increased from 50 ringgit to 150 ringgit, while teaching assistants in these schools will be provided incentive payments of 200 ringgit per month.

- In 2009, an allocation of 330 million ringgit is provided to Jabatan Perumahan Negara to complete 4,400 units of Programme Perumahan Rakyat (PPR) Disewa, 1,500 units of PPR Bersepadu and 600 units of PPR Dimiliki. In addition, Syarikat Perumahan Negara Berhad will build 33,000 low cost houses.

- For civil servants, tenure of new housing loans extended from 25 years to 30 years. They will also be provided housing loan facility for renovation works on houses not purchased through Government housing loan.

- For medium cost houses of up to 250,000 ringgit, a 50 per cent stamp duty exemption is extended to the loan agreement on top of the 50 per cent stamp duty exemption on the instrument of transfer.

- For companies contributing to charitable institutions, the limit of tax deduction be increased from 7 per cent to 10 per cent of aggregate income.

Improving public amenities

- Allocation of 3 billion ringgit to intensify efforts to further develop Sabah and Sarawak for infrastructure projects, including 266km of federal and rural roads, benefiting more than 550,000 residents.

- An allocation of 3.3 billion ringgit is provided for Sarawak to implement various projects, including the construction of 230km of federal and rural roads, benefiting more than 350,000 residents.

Second strategy: Developing quality human capital

- A sum of 70 million ringgit is allocated in 2009 to train 5,600 nurses in training colleges under the ministry of health, with 2,000 in recognised private training colleges.

- To meet the need for new schools and replace dilapidated schools, 110 primary and 181 secondary schools will be built. In addition, to ensure that existing schools are well maintained, an allocation of 615 million ringgit is provided.

- 14.1 billion ringgit to improve quality of learning at institutions of higher learning. Of this, RM8bil is for Operating Expenditure for public institutions of higher learning, 627 million ringgit for polytechnics and community colleges as well as 37 million ringgit for the Malaysian Qualification Agency.

Culture of excellence

- The highest marginal tax rate for individuals be reduced from 28 per cent to 27 per cent, effective the year of assessment 2009. In addition, the marginal tax rate of 13 per cent will also be reduced to 12 per cent, which will benefit the middle income group.

- Recruitment costs, such as payments to employment agencies and participation in job fairs, be tax deductible.

Third strategy: Strengthening the nation’s resilience

- To encourage private sector activities, tax treatment on group relief be enhanced by allowing losses for the purpose of offsetting be increased from 50 per cent to 70 per cent.

- An additional 300 million ringgit under the Strategic Investment Fund to further strengthen private investment in Iskandar Malaysia.

Promoting tourism

- New investments by 4-star and 5-star hotel operators in Sabah and Sarawak be given Pioneer Status with 100 per cent income tax exemption or Investment Tax Allowance of 100 per cent for 5 years.

- 50 million ringgit for conservation works of heritage sites in Malacca and Penang to support activities undertaken by non-governmental organisations (NGOs) and private sector.

Promoting venture capital companies

- Venture capital companies that invest at least 30 per cent of their funds in start-up, early stage financing or seed capital be eligible for a 5-year tax exemption.

Promoting small and medium enterprises (SMEs)

- All SME assets in the form of plant and machinery acquired in the years of assessment 2009 and 2010 be given Accelerated Capital Allowance to be claimed within one year. In addition, SMEs are allowed to claim full Capital Allowance on all small value assets within one year.

National energy plan

- Exemption of import duty and sales tax on solar photovoltaic system equipment, import duty and sales tax on intermediate goods such as High Efficiency Motors and insulation materials; sales tax on locally manufactured solar heating system equipment; sales tax on locally manufactured energy efficient consumers goods such as refrigerators, air-conditioners, lightings, fans and televisions; and 100 per cent import duty and 50 per cent excise duty on new hybrid CBU cars, with engine capacity below 2,000cc, be given to franchise importers. This exemption is given for a period of two years to prepare for the local assembly of such cars.

Towards a vibrant capital market

- Tax exemption be given on fees received by domestic intermediaries, which successfully list foreign companies and foreign investment products in Bursa Malaysia. This measure will also enable domestic investors to acquire shares of foreign companies listed in the local exchange.

- Current tax rate on dividends received by foreign institutional investors from Real Estate Investment Trusts (REIT) be reduced from 20 per cent to 10 per cent. Recognising that REITs is an attractive investment product for individuals as well, the government also proposes a reduction in tax rate from 15 per cent to 10 per cent.