Malaysia

ASEAN Regulatory Brief: Malaysia GST, Thailand Foreign Labor Regulation, and Myanmar FDI

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Malaysia: GST exempted for supplies directly related to exported goods

Malaysia’s finance ministry recently issued an order exempting suppliers from the need to charge Goods and Services Tax (GST) on certain goods and services directly connected to exports. The GST relief, which came into effect from July 1, 2017, will apply to four broad categories of services and supplies directly connected to exports and export processing. These include handling or storage services related to goods for export; services provided by a company with licensed manufacturing warehouse status or a business operating in a free zone; research and development (R&D) services related to goods for export; and tools or machines which are highly specialized in nature and used for the manufacture of goods in Malaysia for export.

To qualify for the GST waiver, the recipient of the goods and services must be an overseas customer of foreign nationality, who is resident abroad at the time of receiving the goods and services, and who does not own a business entity in Malaysia. Certain categories of the aforementioned goods will require the approval of Malaysia’s Director General of Customs to avail of the GST waiver. Further, the goods for which the supplies are made must be exported within a period of 60 days from the date of the completion of the services.

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ASEAN Market Watch: Malaysia Growth Outlook, Thailand EEC Investment, and Singapore-Myanmar Relations

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Malaysia: World Bank forecasts positive growth in 2017

According to the Malaysia Economic Monitor, launched by the World Bank, the country’s growth rate for 2017 is forecast to increase to 4.9 percent. Malaysia registered a 5.6 percent year-on-year growth in the first three months of 2017, its highest quarterly growth rate in two years. According to the report, Malaysia’s positive growth outlook is driven largely by strong private consumption, supported by improving labor market conditions. Increasing private investments and major government-led infrastructure projects also contributed to it.

According to the report, an upturn in the US was reflected in the rising external demand, and stabilizing commodity prices as well as a recovery in global trade further helped to boost growth. The report also includes a special section on the importance of good data and effective data management, and how this can inform policy-making and improve service delivery. The Malaysia Economic Monitor series provides an analytical perspective on the policy challenges facing the country as it develops into a high-income economy.

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Import and Export Procedures in Malaysia – Best Practices

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By Bradley Dunseith

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Nestled between the South China and Andaman Seas, Malaysia is a historic trading center and strategic operating location – bordering Brunei, Indonesia, Singapore (via bridge), and Thailand by land and the Philippines and Vietnam by sea.

In 2015, Malaysia exported US$254 billion and imported US$175 billion worth of goods and services. Malaysia continues to liberalize its import and export regulations; but, complex goods-specific rules still exist. In this article, we explain best practices for importing into and exporting out of Malaysia.

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ASEAN Regulatory Brief: Malaysia Tourism Tax, Thailand Land Windfall Levy, and Philippines Excise Tax

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Malaysia: Tourism tax comes into effect from August 1

Malaysia’s customs department has announced that with effect from August 1, foreign visitors as well as domestic tourists will have to pay a tourism tax to operators of different types of accommodation. The tax, which has to be paid regardless of business or leisure travel, has been fixed at RM20 (US$5) for five-star hotels, RM10 (US$2.5) for four-star, RM5 (US$1.25) for three-star, and RM2.5 (US$0.62) for non-rated accommodation.

Accommodations such as traditional kampong stays and homestays as well as premises with less than 10 rooms are exempted from the new tax. The tourism tax will be levied over and above the goods and services tax and service charges.

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ASEAN Market Watch: Malaysia Capital Market, Cambodia Construction Sector, and Thailand Automotive Industry

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Malaysia: Capital market one of the most developed among emerging economies

According to a recently released McKinsey report, Malaysia’s capital market is one of the most developed among emerging economies. The country ranked fifth with a score of 3.25 out of 5 in the McKinsey Asian Capital Markets Development Index, behind Japan (4.0), Australia (3.95), South Korea (3.45) and Singapore (3.40). According to the report, Malaysia is outperforming other emerging economies in the development of its capital market.

Among the factors giving the country an edge are: issuers have access to sufficient debt and equity financing; there is predictable funding from foreign institutional investors; the real cost of equity and debt is quite competitive; and investors get a good mix of equity and debt investment opportunities.

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Individual Income Tax in Malaysia for Expatriates

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HR-Payroll-Cover-300-230By Dezan Shira & Associates
Editor: Ellena Brunetti

Revised and Updated by Bradley Dunseith

Malaysia uses both progressive and flat rates for personal income tax, depending on an individual’s duration and type of work in the country. As expatriates may fall into either tax category depending on their work, it is important to understand Malaysia’s basic tax structure. 

The Income Tax Act of 1967 structures personal income taxation in Malaysia, while the Malaysian government’s annual budget can change the rates and variables for an individual’s taxation.

In this article, we explain how expatriates should calculate their individual income tax in Malaysia. We highlight exceptions to tax rates and penalties for noncompliance.

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ASEAN Market Watch: Thailand GDP Growth, Malaysia Manufacturing Sector, and Singapore Retail Sales

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Thailand: First quarter GDP growth fastest in four years

The Thai economy recorded its fastest growth in four years during the January-March 2017 period. This has been propelled by stronger exports, consumption and growth in tourist arrivals despite weaker private investment and public funding. According to a poll conducted by Reuters, gross domestic product (GDP) is expected to have expanded a seasonally-adjusted 1.2 percent in the January-March period from the previous quarter, when growth was 0.4 percent – the best pace since the final quarter of 2012. As per the poll, growth is expected at 3.3 percent in 2017, up from 3.2 percent in the previous year.

According to data from Thailand’s central bank, exports grew at 6.6 percent in January-March, private consumption at 2.9 percent and farm income grew at 20 percent. Exports comprise about two-thirds of the Thai economy. Tourist numbers rose to 9.2 million in the January-March period from 7.8 million in the previous quarter, when some tourism-related entertainment activities were curtailed following the death of King Bhumibol Adulyadej in October 2016.

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ASEAN Growth to Remain Resilient Despite Regional Vulnerabilities

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By Bradley Dunseith

In April, 2017, the World Bank (WB) released their biannual East Asia and Pacific Economic Update, entitled, “Sustaining Resilience.” As the title suggests, the WB anticipates growth in East Asia and Pacific, including ASEAN states, to remain resilient despite risks from global and regional vulnerabilities. In this article, we go through “Sustaining Resilience” and summarize the WB’s forecast for developing ASEAN states generally as well as their country specific predictions for economic growth.

About the report

The WB predicts that large developing economies will continue to grow moderately while smaller regional economies will benefit from the rapid growth of their neighbors as well as high commodity prices. The WB marked that poverty has continued to decline in most countries and will continue to fall with sustained growth and rising labor incomes. However, the WB report noted that global policy uncertainties means that countries must address macroeconomic vulnerabilities so as to prepare for external shocks to the economy. External shocks – such as changes in US policy – disproportionately affect smaller countries; as such, the WB report strongly recommends small economics to improve the efficiency of their public spending in preparation of needed structural changes.

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ASEAN Regulatory Brief: Malaysia Cabotage Policy, Philippines Tax Reform, and Laos Land Concessions

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MALAYSIA: Sarawak, Sabah and Labuan exempted from cabotage policy

With effect from June 1, 2017 the states of Sarawak and Sabah as well as the Federal Territory of Labuan will be exempted from the cabotage policy. As per the erstwhile policy, only Malaysia-flagged ships were permitted to transport cargo from Peninsular Malaysia to these three territories and vice versa. As a result foreign vessels carrying freight bound for the three territories had to stop at the port of Klang in Selangor state in Peninsular Malaysia in order to transfer the goods to domestic ships for onward shipment to Sarawak, Sabah and Labuan.

The Malaysian transport ministry has announced that the exemption will however not apply to freight transport between Labuan and the states of Sarawak and Sabah. While the domestic shipping industry has protested against the government’s move to end the cabotage policy, it has been welcomed by the local administrations. It is believed that the policy had led to higher prices of commodities and as a result a higher cost of living in the three territories. Observers have stated that now it will be possible to ship goods directly to Sarawak, Sabah and Labuan without having to transfer at a Peninsular Malaysian port.

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Labuan: Offshore Opportunities in Malaysia

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By Bradley Dunseith

Labuan is an offshore, Malaysian island, which has the benefit of low tax regimes while still retaining the protection of Malaysia’s laws and regulations. This means Labuan entities benefit from nearly all the Double Taxation Agreements (DTAs) Malaysia has signed with over 70 countries while profiting from tax exemptions under the Labuan International Banking and Financial Center (IBFC).

Considered the ‘pearl of Borneo,’ Labuan is located off the coast of the eastern Malaysian state of Sabah and borders Brunei by sea. The territory is strategically located in close geographical proximity to financial capitals like Hong Kong, Jakarta, Kuala Lumpur, and Singapore. Labuan is technically comprised of seven islands – Labuan Island proper and six smaller satellite islands – and enjoys tropical weather. Labuan offers multiple ferry connections to mainland Malaysia and Brunei; its airport is served by two daily flights to Malaysia’s capital Kuala Lumpur and one daily flight to Kota Kinabalu, the Sabah state capital. The island has a deep sea port and is planning to further develop its airport. 

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