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Tax Incentives Feature In Malaysia's 2012 Budget

Tuesday, October 11, 2011

In what is considered to be the last before he calls for elections, the Malaysian Prime Minister and Minister of Finance, Datuk Seri Najib Tun Abdul Razak, recently introduced a 2012 Budget that was full of tax breaks and incentives.

Overall, while he said that economic growth in Malaysia is estimated at between 5% and 5.5% of gross domestic product (GDP) in 2011, global economic prospects next year are expected to be more challenging. However, the government is to put in place measures to stimulate domestic economic activity, in particular public and private investment, as well as private consumption, and economic growth in 2012 is projected at between 5% and 6%.

The government’s total revenue is expected to increase by 1.9% to MYR186.9bn (USD58.9bn) in 2012, compared with MYR183.4bn in 2011. Despite the tax breaks and incentives he announced, the public deficit next year is expected to improve to 4.7% of GDP, compared with 5.4% in 2011.

Much of Najib’s speech was dedicated to the services sector, which is the largest contributor to Malaysia's economy, accounting for almost 58% of GDP, and is targeted to reach 60% of GDP by 2015. He considered that, “to accelerate the banking, finance and capital markets, continuous effort is required to promote the development of more integrated and comprehensive financial services.”

Therefore, while attempting to attract multinational companies to establish their treasury management services in Malaysia, with a 70% income tax exemption for five years, a withholding tax exemption on interest payments and a stamp duty exemption on loan and service agreements, he also proposed the accelerated development of the Kuala Lumpur International Financial District (KLIFD).

For example, for companies in the KLIFD, the government proposes a 100% income tax exemption for a period of 10 years and a stamp duty exemption on loan and service agreements, and a 70% income tax exemption for five years for property developers.

In addition, in recognition of the need for product diversification in the capital market to attract foreign and domestic investments, the government will extend the concessionary 10% tax rate on dividends of non-corporate institutional and individual investors in real estate investment trusts (REITs), currently available until December 31, 2011, for a further five years to December 31, 2016.

With regard to the pressure on property prices in the country, Najib said that the government did not believe that the current 5% real property gains tax (RPGT) on properties held and disposed within two years, is proving effective in curbing real estate speculative activity. It is therefore proposed that, from January 1, 2012, for properties bought and sold within two years, the tax rate will be 10%; for properties bought and sold within a period from two years and up to five years, the rate will be 5%; and properties bought and sold after five years will not be subject to RPGT.

In an attempt to ease the higher cost of living on lower income groups, the government is to propose the provision of one-off cash assistance. MYR500 will be given to households with a monthly income of MYR3,000 and below. Najib said that a total of 3.4m, or 53% of total households, are expected to benefit from this assistance, which will cost MYR1.8bn.

He also announced an additional bonus of half a month’s salary for civil servants, with a minimum payment of MYR500, and assistance of MYR500 to government pensioners. For 2011, the total payout will thereby be one month’s pay, with a minimum payment of MYR1,000 for civil servants and government pensioners alike, costing MYR4bn.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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