Legal

Malaysian Wealth Management - Latest Developments

Baker McKenzie, 29 June 2021

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Here is an outline of important recent legal, tax and regulatory developments affecting wealth managers doing business with, or in, Malaysia.

This news service is pleased to share this update outlining important developments affecting the wealth management sector in Malaysia. The note comes from Wong & Partners, member firm of Baker McKenzie in Malaysia. 

Authors of the article are Adeline Wong – partner; Istee Cheah – partner; Tanya Tan – associate; Lisa Yeoh – associate, and Mei Yeo - legal assistant.

The editors of this news service are pleased to share these views, and invite responses. The usual editorial disclaimers apply. To respond, email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

The COVID-19 pandemic brought about the largest Malaysian Budget in history, which was unveiled on 6 November 2020, in efforts to shore up the Malaysian economy and keep livelihoods and local businesses afloat. The Malaysian Budget 2021 (Budget) was announced in the midst of a number of other COVID-19-related stimulus packages implemented to help Malaysians weather the pandemic, and was later legislated into the Finance Act 2020 (gazetted on 31 December 2020) (Finance Act).

We have summarised some of the key legal and tax developments in the past year that are relevant to the wealth management industry.

Direct tax and indirect tax matters
Income tax
Reduction of income tax rate
Pursuant to the Budget, the resident individual income tax rate for the chargeable income band of RM 50,001 to RM 70,000 has been reduced from 14 per cent to 13 per cent with effect from the year of assessment (YA) 2021.

With this, in line with Malaysia's progressive personal income tax system, tax resident individuals with a chargeable income of over RM 70,000 will be able to enjoy a slight reduction in income tax payable. 

Increase in tax deduction cap for lifestyle
Previously, individual taxpayers could claim a lifestyle tax relief of up to RM 2,500 for expenses incurred in purchasing reading materials (such as e-books, printed daily newspapers), a personal computer, smartphone or tablet, internet subscription, sports equipment and gymnasium memberships. 

Under the Finance Act, effective from YA 2021 onwards:
-- an additional RM 500 income tax relief is allocated for the cost of purchase of sports equipment, entry or rental fees for sport facilities and fees for participation in sports competitions; and
--  the scope of the lifestyle income tax relief for reading materials now includes subscriptions to electronic reading materials.

Real property gains tax (RPGT)
RPGT exemption for disposal of residential properties
Any Malaysian citizen is exempted from paying RPGT on gains received on the disposal of up to three residential properties in Malaysia on or after 1 June 2020 until 31 December 2021, provided that:
--  the property was not acquired by way of a transfer between spouses, or a gift between spouses, parent and child or grandparent and grandchild, where the donor is a citizen; and
--  the sale and purchase agreement or any other instrument of transfer for the disposal of the residential property is executed between 1 June 2020 and 31 December 2021 (inclusive) and is duly stamped no later than 31 January 2022.

Stamp duty
Extension of stamp duty exemption for the purchase of a first residential home.
To increase the number of home owners in Malaysia, the Malaysian Government has raised the stamp duty exemption limit for first-time residential property buyers from RM 300,000 to RM 500,000.
The exemption now applies to sale and purchase agreements executed from 1 January 2021 to 31 December 2025. The exemption is available only to Malaysian citizens.

Extension of stamp duty exemption for exchange traded funds (ETF)
Previously, contract notes for the sale and purchase of ETFs executed within the period from 1 January 2018 to 31 December 2020 were exempted from stamp duty. The government has extended this stamp duty exemption for five years to cover contract notes for the trading of ETFs executed from 1 January 2021 to 31 December 2025.
 

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