00:00Saya akan teruskan dengan perbincangan dalam bahasa Inggeris,
00:03di mana the government's latest revision to the sales and service tax or SST
00:07has sent ripples through the property and finance sectors.
00:11With new services now taxable under the revised regime,
00:14real estate investment trust rate and financial service providers
00:17are bracing for increased operational costs, tighter margins and strategic shifts.
00:22So what does this mean for investors, businesses and even everyday consumers?
00:26Joining us now is Ang Sulin, the Head of Indirect Tax at KPMG in Malaysia
00:30to help unpack the implications of this SST shake-up.
00:34Good morning, Sulin.
00:36Good morning. Thank you for having me here.
00:39No problem.
00:39Firstly, we could start by sharing which specific elements of the new SST revision
00:44that actually are expected to hit rates and financial services the hardest
00:48and why are these sectors particularly vulnerable?
00:51Yes.
00:53For REITs, the potential expanded taxable services that are applicable
00:57are the rental and leasing services as well as, to a certain extent, construction services.
01:02The service tax at 8% on rental and leasing will be levied on commercial properties.
01:08However, the government take note of it and there are exemptions available,
01:12particularly for the micro, small and medium tenants,
01:14those with annual revenue below RM500,000 and also there are non-weber contract transitional rules.
01:21Hence, to a certain extent, REITs should try and see if they can avail to these exemptions
01:26to help their tenants whilst remain competitive.
01:30Construction services is another taxable service at 6%,
01:33but if there are any construction or renovation work to the commercial buildings,
01:39they will hit their costs.
01:41So for REITs, these are the potential implications,
01:45but there are measures, there are exemptions available to cushion it.
01:49Whereas for financial services, previously most fees and commission income
01:54were not subject to service tax, except for certain advisory type of services,
01:58especially in the investment banking space.
02:01But with the expansion, these are now subject to 8%.
02:04However, the positive side of it is that these are basic banking services
02:10relating to the operation of savings account, current account or similar,
02:14is still not subject to service tax, as well as interest or profits.
02:18Hence, there are exemptions and exclusions available to take advantage of
02:22and cushion the impact.
02:24But Suleen, for REITs specifically,
02:27how will the taxation of previously exempted services like property management
02:31affect returns for investors and also future property development plans?
02:37Okay, for property management,
02:39it was actually already subject to service tax earlier.
02:42At a rate of 8%, it does represent a cost
02:45and if passed on to the tenants,
02:48could in turn affect rental demand or profitability for the REITs.
02:52but it is hoped that the amount is not significant enough to deter occupants.
02:57I believe when it was initially implemented,
02:59there was an initial knee-jerk reaction
03:01as tenants tried to negotiate better pricing,
03:04but it should normalise eventually.
03:07For future property developments,
03:08this would be an additional factor,
03:10amongst the many other factors to be considered
03:12when undertaking future projects and negotiating contracts,
03:16especially long-term contracts.
03:17Do you foresee REITs restructuring operations
03:21or outsourcing services to actually reduce their SOC exposure
03:25and what risks come with that?
03:29In the short to medium term,
03:31REITs will try to explore available exemptions
03:34such as the business-to-business exemptions
03:36and group relief,
03:38particularly where they have many related companies in the group
03:42and they need to see how they can enjoy these exemptions,
03:44which comes with conditions.
03:46Outsourcing of services may be one of the methods
03:49if they are not able to enjoy the group relief exemptions,
03:52but care must be taken to ensure
03:54there is no tax cascading or other tax considerations.
03:58But turning to financial services, Suleen,
04:02with more advisory and also fund management services
04:04that is now taxable,
04:06will the increased costs be passed on to consumers?
04:09On this, I think it depends on the financial institution
04:14and the product,
04:15their business arrangement with the consumers.
04:18I believe it is a demand and supply consideration
04:20as well as how their competitors react.
04:23It will be a balance.
04:25The financial institutions have been operating in this space
04:27for many years
04:28and I believe have many experiences in navigating this.
04:31But given this sector-specific stresses,
04:35is this a latest SST move,
04:37a sign that Malaysia should reconsider transitioning back
04:40to a broader-based GS system, for example?
04:44I wouldn't call this stresses.
04:46I would say that this is a different type of tax mechanism
04:49because GST is also a tax,
04:52just that the mechanism is slightly different.
04:54I would say that this expansion
04:56appears to be more carefully thought through
04:58and a more targeted approach
05:00in an effort to make the tax structure more progressive,
05:04broadening the tax base
05:05whilst ensuring that the right yard is not underly burdened.
05:09I believe the government has commented previously
05:11that it is not the right time to reintroduce GST
05:14given the fiscal position of the nation.
05:17Hence, in the interim,
05:18expanding the scope of sales tax and service tax
05:21on a targeted basis
05:23can help improve revenue collection
05:25whilst ensuring it does not impact
05:27the men on the street too much.
05:29On GST, I think we will have to wait and see.
05:32Sulin, we have about five minutes or more.
05:35I would may add
05:36whether the SST division
05:38potentially lead to a capital flight
05:41or reduction in foreign investors,
05:42for example,
05:43when it comes to participation in Malaysian rates
05:46and also, or perhaps, capital markets.
05:49What do you think about that?
05:51I don't think that
05:52maybe in the interim
05:53or in the initial knee-jerk reaction
05:56or initial reaction,
05:57businesses will try to see
05:58whether they want to do investments overseas,
06:01they want to try to move their operations overseas.
06:03But I think after you do,
06:05you need to do visibility studies,
06:07you need to see
06:08there are pros and cons.
06:09so you need to weigh the benefits
06:11of doing businesses in Malaysia versus overseas,
06:14particularly for rich businesses
06:16and then see
06:17ultimately whether the local environment
06:21will still be supportive.
06:23I think the intention of the government
06:24is for this
06:26expanded service tax
06:27and sales tax code
06:28is very targeted.
06:30It's still to protect the right yard.
06:33so hopefully businesses
06:35can take advantage
06:36of all the various exemptions given
06:38to still be able to
06:40do business competitively.
06:44In your opinion,
06:46what's the risk
06:46of this intermediation
06:49or innovation
06:49by passing traditional financial services
06:52due to higher SST burden?
06:54For instance,
06:55perhaps via final technology
06:57or fintech
06:58or perhaps offshore alternatives?
06:59In terms of technology,
07:03I think there are exemptions available
07:06just to quickly,
07:06there are exemptions available
07:08to encourage businesses
07:09to undertake technology
07:12and automation.
07:14So perhaps in line with SST,
07:17then there is also the e-invoicing
07:18to help cushion the impact
07:20of this expanded scope
07:22because with e-invoicing,
07:25it will also help to
07:26make all the
07:28the invoices,
07:31the charges
07:32all more open,
07:34more transparent
07:35and hopefully it will help
07:37businesses to understand
07:38where the taxes are,
07:39help the right yard
07:40to understand
07:41where the taxes are collected
07:42and ultimately to benefit
07:44both the government
07:46as well as the development
07:47of the country.
07:48But could this SST revision
07:49actually trigger rates
07:51to restructure
07:52their service models
07:53or operations
07:54to mitigate this tax burden?
07:56and perhaps, for example,
07:58outsourcing
07:59or by relocating
08:01outsourcing
08:02service functions as well?
08:05Like I mentioned earlier,
08:07the initial reaction
08:09may be to find
08:09other ways
08:10to restructure,
08:11to find other ways
08:12to see whether
08:14the costs
08:14can be absorbed elsewhere,
08:17can be passed elsewhere.
08:18but apart from
08:20trying to see
08:20whether it can be passed
08:21elsewhere,
08:23there is,
08:23like I mentioned,
08:24the government
08:24also take note
08:25and has given
08:26a lot of exemptions,
08:27a lot of incentives
08:28available
08:29to the businesses
08:31to cushion the impact.
08:33So I guess
08:33not only to restructure,
08:36to look at
08:36how do you want
08:37to set it up
08:38but also
08:38to see whether
08:40any incentives,
08:42exemptions
08:42can be enjoyed
08:43because for players,
08:45if you don't try
08:45to enjoy
08:46these exemptions,
08:47incentives
08:47that are readily available,
08:49then your competitors
08:50may do so.
08:51So you want
08:52to make sure
08:52that you are also
08:53enjoying it
08:54to remain
08:55a level playing field.
08:58But could this
08:58new relieved
09:00SSD revisions
09:01actually trigger
09:02lobbying efforts
09:03from affected sectors
09:04for exemptions
09:05or relief
09:05and what lessons
09:07can Malaysia learn
09:08from other countries
09:09that transition
09:10back to GSD
09:11after SSD-like systems?
09:15In terms of
09:16what experiences,
09:17I guess
09:18it is
09:19more communication,
09:21awareness,
09:23more
09:23interaction,
09:26more transparent
09:27discussions
09:27with the government,
09:29with the authorities
09:29and businesses
09:30should also take note
09:32that they should also
09:33know the intention
09:34of these taxes
09:35and I think
09:37what the
09:38businesses
09:40and the riot
09:41want to know
09:42is how the
09:43taxes collected
09:44could benefit
09:45the country
09:45and ultimately
09:46to the nation.
09:49Maybe perhaps
09:50last one before
09:51we could wrap up
09:52this discussion,
09:53how might SSD
09:54revisions influence
09:55Malaysia's broader
09:57economic competitiveness
09:58and also investment
09:59climate as a whole?
10:02With this expanded scope,
10:04again,
10:04I want to say
10:05it's very targeted.
10:07It's targeted
10:07towards certain sectors.
10:09I think the government
10:10has already undertaken
10:11a lot of analysis
10:13to see what sectors
10:15to target
10:16and implement
10:18this SSD.
10:19So hopefully
10:20the impact
10:21will not be huge.
10:22Maybe in the
10:23interim,
10:24there will be
10:24reaction to say
10:27maybe for the
10:28cost of goods,
10:29cost of services,
10:30there will be
10:31initial reaction.
10:33But ultimately,
10:34hopefully,
10:35it will just
10:35taper it out,
10:36it will neutralise
10:38and businesses
10:39will accept it.
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