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Indirect Tax Alert: Budget 2020
The 2020 Budget Speech was laid before the Dewan Rakyat today. At the time of writing, the Finance Bill, which will
enact the changes into law has not been released.
We set out below a summary of the indirect tax changes proposed in the Budget Speech.
Introduction of Approved Major Exporter Scheme under the Sales Tax Act 2018
(Effective 1 July 2020)
The Government has proposed the introduction of an Approved Major Exporter Scheme. To qualify for this scheme,
the traders or manufacturers of exempted goods must export not less than 80% of their annual sales.
Under this proposed scheme:
Traders are eligible for full sales tax exemption on the importation or purchase of their goods.
Manufacturers of exempted goods are eligible for full sales tax exemption on the importation or purchase of raw
materials, components and packaging materials for use in the manufacture of their goods.
However, sales tax must be paid accordingly:
where the traders sell goods in the local market;
where the manufacturers do not export the goods or sell the goods in the local market;
where the manufacturers dispose of or sell waste or refuse raw materials, components and packaging materials
in the local market.
The formula to determine the sales tax payable for items 1 and 2 above has not been released.
For manufacturers, this scheme will
overcome the shortcomings in the current
exemption system whereby manufacturers
are unable to determine at the time of
applying for the exemption the quantity of
raw materials, components and packaging
materials to be used in the manufacture of
exempted goods to be exported.
For traders, this scheme will alleviate the
cash flow impact where a substantial
quantity of their goods are exported.
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Improvement on group relief facility under service tax
(Effective 1 January 2020)
Currently, services within Group G 'Professional Services' (excluding employment services and security services)
provided within the 'same group o