MIDA TAX EXEMPTIONS UNDER SECTION 14(2) CUSTOMS ACT 1967 AND RELATED SST RULES

INTRODUCTION FOR MIDA TAX EXEMPTIONS UNDER SECTION 14(2) CUSTOMS ACT 1967 AND RELATED SST RULES

The Royal Malaysian Customs Department (RMCD) provides various tax incentives to the business community to lower their cost of doing business in Malaysia in order to be competitive globally. The manufacturing sector in particular is granted tax exemptions under the Customs Act 1967 and Sales Tax Act 2018 on imported and locally purchased raw materials / components, packing / packaging materials, manufacturing aids, machinery, equipment & spare parts used in the manufacturing process.

It is surprising that organizations which are entitled to claim the tax exemptions are not doing so. This training caters primarily for manufacturers registered under the Sales Tax Act 2018 and non-registered manufacturers located in Special Areas (FIZ and LMW). Manufacturers will be exposed to the facilities and incentives available to them, application procedures, documentation and the conditions required to be satisfied.

COURSE OBJECTIVES

• To understand and explore the coverage and benefits from the tax exemptions under custom legislation.
• The application procedures and review.

COURSE CONTENT

OVERVIEW OF TAX EXEMPTIONS UNDER CUSTOMS LEGISLATIONS

INTRODUCTION TO  MIDA EXEMPTIONS AND SECTORS ELIGIBLE

ORGANIZATIONS QUALIFIED FOR TAX EXEMPTIONS

• • Manufacturers registered under the Sales Tax Act 2018
  • Non registered manufacturers (LMW, FIZ and manufacturers of non sales taxable goods)

GUIDELINES ON TAX EXEMPTIONS FOR MANUFACTURING SECTOR:

• • Duty/Tax Exemption on Raw Materials and Components
  • Duty/Tax Exemption on Machinery/Equipment
  • Guidelines and Criteria for Tax Exemptions

CHANGES IN TAX EXEMPTION POLICY

• • Drawback facilities for export-oriented industries
  • Exemption for Iron & Steel Industry
  • Tax Exemption for non-registered manufacturers under Schedule B, Sales Tax (Persons Exempted from Tax) Order 2018

TYPES OF TAX EXEMPTIONS:

• • Import duty exemption on raw materials / components granted by Ministry of Finance/ (MIDA)
  • Import duty exemption on machinery / equipment approved by RMCD based on Letter of Confirmation from MIDA.
  • Drawback Facility for export orientated industry.
  • Import duty exemption on importation of raw materials listed under Item 105 & 106, CDEO 2017 for manufacturers licensed under Industrial Coordination Act 1975
  • Import Duty Exemption under Item 99 CDEO 2017 for Iron & Steel Products.
  • Category of manufacturers qualified under Schedule B, Sales Tax (Persons Exempted from Payment of Tax) Order 2018

APPLICATION PROCEDURES FOR TAX EXEMPTIONS (Form SPM / SPM1)

CONDITIONS IMPOSED BY MIDA/ RMCD ON TAX EXEMPTIONS

IMPLEMENTATION, ENFORCEMENT AND SUPERVISION BY RMCD ON EXEMPTION HOLDERS

• • Visit & surprise check by senior officer of customs
  • Auditing of records & documents
  • Control over importation pending MIDA exemption / Bank Guarantee.
  • Compliance with MIDA conditions.
  • Procedures as to Disposal of Scrap / Destruction Certificate.

RESPONSIBILITIES OF EXEMPTION HOLDERS

• • Submission of quarterly returns
  • Maintenance of Machinery & Equipment Inventory List
  • Maintenance of Records / Documents on Raw Material / Components and Finished Goods

COMMON MISTAKES / NON-COMPLIANCE BY EXEMPTION HOLDERS 

TAX EXEMPTIONS UNDER CUSTOMS DUTIES EXEMPTION ORDER 2017 and SALES TAX (PERSONS EXEMPTED FROM PAYMENT OF TAX) ORDER 2018

• • Temporary Import / Export of Machineries / Equipment
  • Temporary Import / Export of Defective Goods
  • Compliance with Conditions

TREATMENT OF MISCELLANEOUS ITEMS

• • Winding up / Receivership / Liquidation of Exemption Holders
  • Accounting for Losses by Floods, Fire and Theft
  • Accounting for Subcontract
  • Drawback Facility under Customs Act 1967 and Sales Tax Act 2018

BRIEF OUTLINE SALES TAX CONCEPT

• • Single Stage Taxation
  • Concept of manufacture
  • Facilities / Incentives under Sales Tax Legislations
  • Treatment of Special Areas & Designated Areas

APPLICATION FOR SALES TAX EXEMPTIONS

• • Schedule A, Sales Tax (Persons Exempted from Payment of Tax) Order 2018
  • Schedule B, Sales Tax (Persons Exempted from Payment of Tax) Order 2018
  • Schedule C, Sales Tax (Persons Exempted from Payment of Tax) Order 2018
  • Sales Tax Exemption For Traders & Manufacturers under Approved Major Exporter Scheme (AMES)

SALES TAX EXEMPTIONS ON SUBCONTRACT WORKS & RELATED PROCEDURES

OFFENCES AND PENALTIES

• • Section 15, Customs Act 1967
  • Section 138,Customs Act 1967
  • Section 86 (1), Sales Tax Act 2018

REMISSION OF CUSTOMS DUTY AND SALES TAX

• • Remission of duty / tax by the Director General of Customs
  • Remission of duty / tax by the Minister of Finance
  • Related provisions under Customs Act and Sales Tax Act

REVIEW AND APPEAL PROCEDURES

• • Appeal to Director General of Customs
  • Appeal to Minister of Finance
  • Appeal to Customs Appeal Tribunal
  • Prescribed Forms – JKDM 4 and SST 04