Budget 2009 Q&A (Part I): Tax breaks to buy first home

This is the first of a three-part question-and-answer series on various aspects of Budget 2009.

  2. My husband and I plan to buy our first house next year. I heard from my friend that there are some exemptions proposed in the 2009 Budget which can help us in owning our first home. Please elaborate. As we do not have fixed income, we will need all the assistance we can get.
  3. I am a Malaysian and have been working overseas for the last five years. However, I still continue to receive rental income in Malaysia. How will I be taxed differently under the proposed legislation?
  4. I have just started working and my total income for 2009 is RM30,000. Will I be eligible for the tax rebate?
  5. I am a marketing executive and my employer pays me a fixed monthly petrol allowance of RM600 (RM7,200 a year) to cover my travel expenses relating to my official duties. In the past, my employer reports this allowance in my Form EA. How will I be impacted by the new proposal?
  6. I represent a company which operates a fleet of buses. However, I do not own these buses but I lease these buses from a company which acquires these buses from a local manufacturer. What would be the sales tax implications of the present proposal to me as the operator?
  7. I heard that Reinvestment Allowance (RA) will be abolished. Is this true?
Q1: My husband and I plan to buy our first house next year. I heard from my friend that there are some exemptions proposed in the 2009 Budget which can help us in owning our first home. Please elaborate. As we do not have fixed income, we will need all the assistance we can get.

If you are buying a low-cost house, you will get full stamp duty exemption on all documents, including loan agreements. However, if you are buying a medium-cost house of up to RM250,000, you will get a 50% stamp duty exemption on the loan agreement, in addition to the 50% stamp duty exemption on the sale and purchase agreement currently available. However, you need to be a Malaysian citizen to be eligible for the exemption and it is limited to the purchase of one residential property only. Please note that the stamp duty exemption is effective for sale and purchase agreements executed from Aug 30, 2008, to Dec 31, 2010.

As you do not have a fixed income, you may benefit from the Housing Credit Guarantee Scheme, which is a fund set up to assist those without fixed income to obtain housing loans from any financial institutions to purchase low- and medium-cost houses.

Q2: I am a Malaysian and have been working overseas for the last five years. However, I still continue to receive rental income in Malaysia. How will I be taxed differently under the proposed legislation?

Your rental income would be subject to tax in Malaysia as it is a Malaysian sourced income. Prior to 2009, your rental income will be taxed at a non-resident rate of 28%. However, under the proposed legislation, your non-resident tax rate will be reduced to 27% in year of assessment 2009.

Q3: I have just started working and my total income for 2009 is RM30,000. Will I be eligible for the tax rebate?

An individual whose chargeable income is below RM35,000 would be eligible for a tax rebate. Currently, the tax rebate is RM350 per annum. Under the proposed legislation, the tax rebate would be increased to RM400 per annum for 2009. The tax rebate reduces your actual tax payable amount.

Q4: I am a marketing executive and my employer pays me a fixed monthly petrol allowance of RM600 (RM7,200 a year) to cover my travel expenses relating to my official duties. In the past, my employer reports this allowance in my Form EA. How will I be impacted by the new proposal?

Under the proposal, with effect from 2008, the travel allowance paid by employers for official duties will be exempted from tax up to RM6,000 per annum. The excess of RM1,200 would be taxable on you. However, petrol and travel allowance from home to work is exempted up to RM2,400 per year.

Q5: I represent a company which operates a fleet of buses. However, I do not own these buses but I lease these buses from a company which acquires these buses from a local manufacturer. What would be the sales tax implications of the present proposal to me as the operator?

The Budget announcement proposes that only bus operators are eligible to apply for the exemption. There is no specific mention in the proposal that bus operators who are not owners of the buses can take benefit. However, as the application is approved on merits, the bus owner may apply for the exemption from the Finance Ministry. If approval is granted, it should result in lower leasing charges.

Q6: I heard that Reinvestment Allowance (RA) will be abolished. Is this true?

Reinvestment Allowance is still available for a consecutive period of 15 years from the year the first RA is claimed for companies embarking on qualifying project of expansion, automation, modernisation or diversification. However, the criteria and conditions have been amended as follows:

A company must be in operation for at least 36 months (as opposed to 12 months previously) to be eligible for RA claim;
A company purchasing an asset from a related company with the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset; and RA will be clawed back if the asset is disposed of within five years (as opposed to two years previously).

You would note that while the RA is still available, stricter conditions have been imposed from year of assessment 2009 onwards.


This article first appeared in The Sunday Star, 31 August 2008