Kuala Lampur:KPMG Malaysia suggests implementing a targeted input tax credit mechanism for business-to-business transactions if selected goods and services tax (GST) features are incorporated into the sales and service tax (SST) framework.

According to BERNAMA News Agency, KPMG Malaysia's head of tax, Soh Lian Seng, emphasizes the importance of timely and predictable refunds to support exporters, manufacturers, and businesses with significant capital expenditures. Under the current SST system, taxes from earlier stages of the supply chain can become embedded costs, leading to increased overall business expenses.

Soh suggests that incorporating GST features into the SST should aim to reduce tax cascading while maintaining administrative simplicity. Allowing businesses to offset qualifying taxes on inputs would contribute to a more neutral and efficient tax system. He also highlights the potential of utilizing the e-Invoicing infrastructure to support tax credit verification and refund claims, with transaction-level data enhancing transparency and compliance.

For broader tax measures, Soh recommends that Budget 2027 should focus on improving Malaysia's competitiveness through tax certainty, administrative efficiency, and an investment-friendly environment. This includes strengthening tax governance, simplifying stamp duty administration, and streamlining compliance procedures.

As Malaysia aims to attract regional and global capital, Soh advises that the proposed dividend withholding tax mechanism should minimize compliance burdens to facilitate cross-border investments. He stresses the importance of simplicity, clarity, and certainty for international investments.

Regarding e-Invoicing, Soh views the increase in the exemption threshold as a pragmatic step for micro, small, and medium enterprises (MSMEs), urging the next phase to focus on MSME digitalization instead of further exemptions.

In terms of real estate investment trusts (REITs), KPMG Malaysia's corporate tax partner Ong Guan Heng calls for a simpler tax framework for foreign investors. He points out the complexity introduced by different withholding tax rates and suggests reinstating a final withholding tax regime with rates competitive with other regional REIT markets. Simplified compliance and administrative requirements are also recommended to provide clarity and certainty for investors during transitions.