KPMG Malaysia Calls For Targeted Input Tax Credit, Timely Refunds If GST Features Added To SST
By Niam Seet Wei
KUALA LUMPUR, Sept 30 (Bernama) -- A targeted input tax credit mechanism for business-to-business transactions should be considered if selected goods and services tax (GST) features are incorporated into the sales and service tax (SST) framework, said KPMG Malaysia.
Its head of tax Soh Lian Seng said the mechanism should be supported by timely and predictable refunds, particularly for exporters, manufacturers and businesses undertaking significant capital expenditure.
He said under the current SST system, taxes incurred at earlier stages of the supply chain may become embedded costs, resulting in cascading effects that increase the overall cost of doing business.
“If selected GST features are to be incorporated into the SST framework, the priority should be to reduce tax cascading while maintaining administrative simplicity.
“And allowing businesses to offset qualifying taxes incurred on inputs would help create a more neutral and efficient, fairer tax system,” he told Bernama in an email interview ahead of the tabling of Budget 2027 on Oct 9.
Soh said the government could also leverage the growing e-Invoicing infrastructure to support verification of tax credits and refund claims.
“The availability of transaction-level data presents an opportunity to enhance transparency, improve compliance monitoring and accelerate processing timelines,” he said.
Greater Tax Certainty
On broader tax measures, Soh said Budget 2027 should focus on enhancing Malaysia’s competitiveness through greater tax certainty, administrative efficiency and a more investment-friendly ecosystem to improve the ease of doing business.
He said this included strengthening cooperative compliance programmes and tax governance initiatives, simplifying stamp duty administration and streamlining compliance procedures.
Meanwhile, Soh said as Malaysia seeks to remain competitive in attracting regional and global capital, the implementation framework for the proposed dividend withholding tax mechanism should be carefully designed to minimise compliance burdens and facilitate cross-border investment flows.
“Businesses value simplicity, clarity and certainty, particularly where international investments are concerned,” he said.
On e-Invoicing, Soh said KPMG views the increase in the exemption threshold to RM3 million from RM1 million as pragmatic in addressing implementation cost concerns among micro, small and medium enterprises (MSMEs), but does not expect any major further increase in the immediate future.
“We believe that the next phase of the e-Invoicing initiative should focus on MSME digitalisation rather than further exemptions,” he said.
Simpler REIT Tax Framework
On real estate investment trusts (REITs), KPMG Malaysia corporate tax partner Ong Guan Heng called on the government to enhance Malaysia’s competitiveness through a simpler tax framework for foreign investors.
Ong said the cessation of the 10 per cent withholding tax (WHT) regime for foreign institutional investors, such as pension funds and other non-resident persons, from the 2026 year of assessment (YA 2026), while non-resident companies remain subject to WHT at 24 per cent, has resulted in a more complex and burdensome tax framework.
He said KPMG Malaysia hopes the government will consider reinstating a final WHT regime for foreign institutional investors and other affected non-resident investors in Budget 2027.
“We hope the government will consider a WHT rate lower than 30 per cent, taking into account the tax treatment available in other established regional REIT markets,” he said.
He added that compliance and administrative requirements should also be simplified during any transition period, with further guidance provided to improve clarity and certainty for affected investors.
-- BERNAMA