Eyes of the taxman are on you now

It said main contributions for the fourth quarter increase came from accommodation and food and beverages services activities (2.5%), education (1.4%), arts, entertainment and recreation (1.1%) and real estate activities (0.7%).

THOSE with a taste for luxury items may soon find themselves on the taxman’s radar.

The Inland Revenue Board (IRB) will start scrutinising and investigating those with unexplained and extraordinary wealth, especially those in possession of luxury goods, jewellery, handbags or property.

Finance Minister Lim Guan Eng said in his Budget 2019 speech that the IRB will use all necessary measures permitted by law to recover such monies, whether in the form of additional taxes, penalties or fines.

This is one of the 13 tax reforms for a more progressive and effective taxation system to raise government revenue, he said.

There will also be a Special Voluntary Disclosure Programme for taxpayers to voluntarily declare any unreported income for Malaysian tax purposes, including those in offshore accounts.

The programme, which runs from today to June 30 next year, will grant taxpayers reduced penalty rates.

Disclosures of unreported income until March 31 next year will incur a penalty of 10% of the tax payable.

For disclosures between April 1 and June 30 next year, the penalty will be 15% of the tax payable.

After June 30, the penalty will be between 80% and 300%.

Meanwhile, imported services will also be subjected to the Service Tax beginning Jan 1.

 

 

Lim said this was to ensure that local providers of architecture, graphic design, information technology and engineering design services do not suffer unfair disadvantages against their foreign competitors.

The Service Tax will also be imposed on online services “imported” by consumers. It will come into effect in January 2020.

This will include services such as downloaded software, music, video or digital advertising.

This is expected to affect services popular in Malaysia such as US-based streaming service Netflix and Sweden-based music streaming company Spotify.

According to online statistics portal statista.com, the number of Netflix subscribers in Malaysia is estimated to reach 221,750 next year. This is expected to grow to 336,100 in 2020. The cheapest Netflix plan is currently RM33 per month.

As for the music streaming segment, the portal estimated revenue to be at US$9.3mil (RM38.87mil) next year and US$10mil (RM41.8mil) in 2020.

Foreign service providers will be required to register with the Royal Malaysian Customs, after which they will be charged Service Tax on transactions beginning 2020.

Meanwhile, Customs will also step up enforcement against cigarette smuggling and fraudulent activities and this is hoped to recover at least RM1bil for the government.

The government is expected to receive a revenue of RM261.8bil next year, which will include a one-off special dividend of RM30bil from Petronas that will go towards the repayment of Goods and Services Tax as well as income tax refunds of RM37bil.