BDO Malaysia Calls For Simpler Tax Rules In Budget 2027
By Niam Seet Wei
KUALA LUMPUR, Sept 29 (Bernama) -- Audit firm BDO Malaysia has called on the government to simplify tax rules and reduce compliance costs in Budget 2027 to lower the cost of doing business.
Its executive director and head of tax advisory, David Lai said clearer tax rules and procedures would provide greater certainty for businesses and encourage voluntary compliance without imposing significant fiscal costs on the government.
“The most consequential contribution Budget 2027 can make is a reduction in the cost of doing business, and the most cost-effective method of achieving this is not a further incentive, but simplification of the rules themselves,” he told Bernama in an email interview on the Budget 2027 wish list.
SST- GST Features
On the proposed incorporation of selected goods and services tax (GST) features into the sales and service tax (SST) system, Lai said the government should focus on measures that reduce tax cascading and improve traceability, rather than simply replicating GST mechanics.
He suggested further simplification of the business-to-business (B2B) service tax exemption and the use of e-invoicing data for invoice matching -- an element of the GST architecture that delivers genuine audit assurance and functions independently of a credit mechanism.
“The sales tax and service tax regimes could be aligned on registration, taxable periods, invoicing, grouping and exemptions, with rates standardised into a small number of categories, such as zero, standard, and a special rate where policy requires,” he said.
According to Lai, businesses generally make capital commitments on a three-to-five-year planning view, whereas tax measures announced in the annual budget are frequently set on a one-to-two-year cycle without a clear medium-term roadmap.
“A stated medium-term policy direction -- including, if GST is not to be reinstated within this cycle, the conditions precedent to its reconsideration or a commitment on timing -- would contribute more to investor confidence than a further year of speculation,” he said.
E-Invoicing
On e-invoicing, Lai said the increase in the exemption threshold from RM1 million to RM3 million in annual turnover, announced on Aug 30, 2026, recognised that implementation costs could be disproportionate for micro, small and medium enterprises (MSMEs).
However, he cautioned that an excessive volume of exemptions could undermine the system’s intended assurance objective, while incomplete data would fail to address leakage from the informal economy.
Lai said further refinement may follow, but emphasised that the appropriate response to MSME compliance costs was not additional exclusions, but a reduction in the cost of participation.
This could include a simplified submission channel for micro-enterprises, fewer mandatory data fields for low-value transactions, continued reliance on consolidated invoicing, and financial or tax support for the initial system investment, he said.
“Businesses should be encouraged to adopt e-invoicing because of its benefits, rather than merely comply to avoid penalties,” he added.
Stamp Duty
On stamp duty, Lai said the Stamp Act 1949, now in its eighth decade, remains difficult to construe, with clearer definitions, charging provisions, instrument classifications, exemptions and liability rules needed to reduce avoidable disputes.
He said recent court cases showed that determining the appropriate stamp duty could be complicated, as the amount payable depends on how an agreement is classified under the Act.
For instance, he said an agreement could attract ad valorem duty based on the value of the transaction, or only the nominal RM10 duty, depending on the category it falls under.
“That uncertainty is materially heightened by the phased rollout of stamp duty self-assessment from Jan 1, 2026, with instruments of transfer of property following in 2027, since self-assessment shifts the burden of correct characterisation onto the taxpayer.
“Legislation subject to self-assessment must be drafted in language that a taxpayer can understand and apply without professional assistance,” he said.
CGT and RPGT
On capital gains tax (CGT), Lai said the interaction between CGT and real property gains tax (RPGT) should be reviewed to address potential overlap in taxation of property-owning companies.
He said in a members’ voluntary liquidation of a property-owning company, the disposal or distribution of the real property could constitute a disposal for RPGT purposes at the company level, while the corporate shareholder could be treated as disposing of its shares for CGT purposes.
“The same underlying transaction in the property may therefore be taxed twice,” he said.
He said a targeted CGT relief could address the overlap where the gains had already been subject to RPGT.
According to Lai, the definition of disposal for CGT purposes was amended by the Finance Act 2025 with effect from Jan 1, 2026 to include, among other events, the extinguishment of shareholder rights arising from the winding up or dissolution of a company.
Since Jan 1, 2024, shares in a real property company held by a corporate shareholder have also been taken outside RPGT and brought within CGT, he said.
-- BERNAMA