Under fire GEN Malaysia appeals income tax change
The operator of Resorts World Genting, Malaysia’s only legal casino resort, has applied for a judicial review against a Malaysian government decision that the firm says would delay some promised tax incentives for its multi-billion-dollar revamp plan for the complex.
A Thursday note from Maybank IB Research flagged that the change of mind by the Malaysian authorities on the tax issue had been a factor in the 11-percent sequential fall in Genting Malaysia’s core net profit in the third quarter, due to it having to pay additional income tax of MYR166.2 million (US$40.1 million).
Genting Malaysia Bhd said in a Thursday filing to Bursa Malaysia that the High Court in Kuala Lumpur had that day granted leave to commence judicial review of the relevant Ministry of Finance decision on the income tax question; and also granted a stay of that decision, “pending disposal of the judicial review application before the High Court”.
The Resorts World Genting revamp – dubbed the Genting Integrated Tourism Plan (GITP) – was launched in December 2013.
It is a multi-phase initiative described as a 10-year, MYR10-billion master plan, equivalent to about US$2.4 billion.
The Malaysian property has already opened several new facilities and attractions; one of the new main attractions under the GITP was to have been a Fox-branded, Hollywood-focused, theme park, but that is now the centre of a legal battle in the United States courts.
Genting Malaysia said in its Thursday filing that the appeal it was making related to the government’s wish to amend the terms of tax incentives for the GITP, approved by the Ministry of Finance in December 2014.
It said that “among other” things, the original agreement had entitled the company to claim for income tax exemption “equivalent to 100 percent of qualifying capital expenditure incurred for a period of 10 years”.
According to Thursday’s filing, the ministry made a decision in December 2017 to amend the 2014 tax incentive approval.
Genting Malaysia stated: “The amendment does not remove the tax incentives previously granted but will effectively prolong the utilisation period of the tax allowances significantly. “
The firm had submitted an appeal to the ministry on the issue, but the appeal was turned down in September 2018.
“We understand that Genting Malaysia will continue to recognise income tax at the higher rate of approximately 25 percent in its income statements until the Kuala Lumpur High Court finds in its favour,” said Maybank analyst Samuel Yin Shao Yang in his Thursday note.
Coinciding with a change of government in Malaysia in May, Genting Malaysia has been facing other tax headwinds.
In November the government budget plan said the casino licence fee paid by Genting Malaysia for its Genting Highlands facility was being be increased from MYR120 million to MYR150 million per year, while the casino duty rate was to be raised to 35 percent from 25 percent of gross gaming revenue. The authorities also said gaming machine duties were being increased from 20 percent to 30 percent on gross collection.
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