1. National economic recovery plan
On 5 June 2020 the Government unveiled the National Economic Recovery Plan with a total of 40 key initiatives worth RM35 billion (including RM10 billion of direct fiscal injection), to kick start the fourth stage of the recovery plan. The main proposals are summarised below.
The Corporate Tax measures include:
- Further Tax Deductions for Employers who implement Flexible Work Arrangements
- Extension of Deductions / Capital Allowances on Personal Protective Equipment (PPE), Thermal Scanners and Covid-19 Testing
- Extension of Special Tax Deduction for Renovation and Refurbishment Expenses
- Extension of Special Tax Deduction for Rental Reduction Provided to Small and Medium Enterprises
- Tax Incentive for SMEs
- Extension of Accelerated Capital Allowances for Machinery and Equipment Including ICT Equipment
- Special Reinvestment Allowance
- Extension of Deferment of Tax Instalment Payments for Tourism Industry.
The Personal Tax measures include:
- Extension of Tax Exemption for Handphone, Notebook and Tablet Received from Employer
- Special Tax Relief on Purchase of Handphone, Notebook and Tablet
- Increase in Tax Relief for Fees Paid to Childcare Centres
- Extension of Special Tax Relief for Domestic Travelling Expenses.
TAX INCENTIVES TO ATTRACT FOREIGN DIRECT INVESTMENT
The following incentives will be granted to foreign companies who relocate their business to Malaysia:
- 0% tax rate for 10 years for new investment in manufacturing sectors with capital investment between RM300 million and RM500 million
- 0% tax rate for 15 years for new investment in manufacturing sectors with capital investment above RM500 million
- 100% investment tax allowance for 5 years for existing companies in Malaysia who relocate their overseas manufacturing facilities to Malaysia.
The Stamp Duty measures include:
- Stamp Duty Exemption for SMEs Involved in Merger and Acquisition Activities
- Stamp Duty Exemption on Reintroduction of Home Ownership Campaign.
REAL PROPERTY GAINS TAX
RPGT exemption will be given on gains from the disposal of residential homes between 1 June 2020 and 31 December 2021.
The indirect tax measures include:
- Extension of Service Tax Exemption for Operators of Accommodation Premises
- Remission of Late Payment Penalty for Sales Tax and Service Tax
- Export Duty Exemption for Commodity Sector
- Exemption of Sales Tax for Purchase of Passenger Cars
- Tourism Tax Exemption.
Other measures include:
- Extension and Enhancement to Wage Subsidy Programme
- Technical and Digital Adoption for SMEs and Mid-tier Companies (MTCs)
- Hiring and Training Assistance for Businesses.
2. Inland revenue board of malaysia movement control order
On 10 April 2020 the Prime Minister announced that the Movement Control Order (MCO) period will be extended for another 2 weeks from 15 April 2020 to 28 April 2020. On 16 April 2020 the Inland Revenue Board of Malaysia updated its Movement Control Order, with the following main effects:
All IRB offices in Malaysia will remain closed to 28 April 2020. However, stamping counters in all stamping offices (except TelukIntan) are in operation, with limited services until the end of the MCO period.
-Extension of Time for Submission of Income Tax Return Form (ITRF):
The grace period of two months for submission of ITRF has been extended to include taxpayers with accounting period ending 31 December 2019.
-Extension of Time for Remittance of Tax Payments and Submission of Tax Form
The IRB has granted an extension of time for the remittance of tax instalment payments and submission of various tax forms.
-Deferment of Tax Instalment Payment for Small/Medium Enterprise (SMEs)
The IRB has clarified the criteria for businesses to qualify as SMEs for the purpose of deferment of tax instalment payments.
-Tax Refund Process
The IRB has confirmed that tax refunds will be processed as usual. However, for ongoing tax audit cases, taxpayers are required to submit the requested supporting documents during the MCO period to expedite the completion of the audit process for tax refund purposes.
3. Special stimulus package for SME’s
Following the announcement of the 2nd Economic Stimulus Package 2020 on 27 March 2020, the Malaysian Government has been alerted that SMEs will be severely affected by the COVID-19 pandemic and therefore require urgent additional assistance. In response to this, Malaysia’s Prime Minister announced on 6 April 2020 additional measures worth RM10 billion to ease the financial burden of SMEs, and ensure that their employees are protected. The measures are summarised as follows:
A special tax deduction equal to the amount of the rental reduction will be given to owners of buildings or business spaces who provide at least a 30% rental reduction or rental waiver (from the original rental for the period) to SME tenants for the period from April 2020 to June 2020.
Additional Allocation for Wage Subsidies Programme:
- The allocation for Wage Subsidies Programme previously announced on 27 March 2020 will be increased by RM7.9 billion i.e. from RM5.9 billion to RM13.8 billion.
Rental Waiver Or Discount To SME Retailers:
- Rental waivers or discounts will be given to SME retailers for premises owned by federal and state owned government linked companies ("GLCs") such as MARA, Petronas, PNB, PLUS, UDA.
Special PRIHATIN Grant:
- Micro-SMEs will be entitled to a special grant amounting to RM3,000.
Special Interest Rate on Micro Credit Scheme:
- The 2% interest rate will be abolished for the RM500 million Micro Credit Scheme under Bank Simpanan Nasional.
Reduction in Foreign Workers' Levy Payments:
- Companies will be given a 25% reduction in foreign workers’ levy payments (except for domestic workers), provided the workers’ permit expires within the period from 1 April until 31 December 2020.
4. Inland Revenue Board of Malaysia movement control order
The Inland Revenue Board (IRB) issued an updated “Frequently Asked Questions (FAQ) on tax matters during the Movement Control Order (MCO) period (18 March 2020 to 14 April 2020)” on 3 April 2020.
It mainly takes into account the tax measures contained in the second Economic Stimulus Package (ESP) announced by the Prime Minister on 27 March 2020, updates on IRB’s operations, and the concession on the remittance of tax instalment payments. The main points are as follows:
- IRB offices will remain closed from 18 March 2020 to 14 April 2020. However, stamp duty counters in 34 stamping offices will resume operations from 3 April 2020 until the end of the MCO period.
- Duty payers (other than individuals) may make stamping applications online. Agents or representatives with STAMPS user ID are required to submit stamping applications and make payments online.
Time limit extensions:
- An extension of time is given until 30April 2020 for submitting Notices of Appeal to the Special Commissioners of Income Tax during the MCO period.
- The IRB has granted an extension of the time for submitting tax estimates and deferments for the payment of instalment payments.
5. Second Economic Stimulus Package
Malaysia’s Prime Minister has announced a Second Economic Stimulus Package amounting to RM250 billion in order to combat the ongoing challenges brought about by the COVID-19 pandemic. Of the RM250 billion, RM128 billion is allocated to safeguard the welfare of the people, RM100 billion to support businesses including Small and Medium Enterprises(“SME”) and RM2 billion to strengthen the country's economy.
The stimulus package includes:
- A Special fund of RM8 million to cover Covid-19 testing costs of up to RM300 for all insurance policy holders.
- Additional investment of RM400 million to ensure efficiency of telecommunication infrastructure.
- Additional allocation of RM530 million to provide discounts from 15% to 50% on electricity bills.
- Employee Provident Fund contributors under the age of 55 allowed to withdraw up to RM500 per month, limited to RM6,000, from Account 2 for 12 months.
- Wage subsidies programme for employees with monthly salaries not exceeding RM4,000 and working for employers who are experiencing more than a 50% drop in their income since 1 January 2020.
Tax measures include:
- Deferment of income tax instalment payments for SMEs for three months beginning 1 April 2020.
- Interest income of banks to be taxed after the moratorium period.
- Pre-retirement withdrawals from the account B of PRS contributors are allowed from April 2020 to December 2020, up to a maximum amount of RM1,500, without incurring any tax penalty.
- Exemption of HRDF levies for all sectors for six months beginning April 2020.
- Deferment of Employee Provident Fund contributions for a period of 6 months.
1. The deadline for all types of returns to be submitted by 31 March 2020 will be extended to 30 April 2020. Remission of penalty will be granted in full for returns submitted on/before 30 April 2020. You are encouraged to remit all your payments online or via cheque or post.
2. Imported duties and sales tax exemption for medical & lab equipment, personal protective equipment and consumables to contain Covid-19. Kindly refer to the Appendix attached.
DIRECT TAX AND OTHER RELATED FISCAL AND MONETARY POLICY
- The Malaysian Tax Authority has announced several measures with regard to extended deadlines for filing of tax returns, payment of taxes and submission of other tax forms. Please refer the attached insight from BDO Malaysia for more information.
- The Central Bank of Malaysia has announced a grant of a six month automatic moratorium on loans to small and medium enterprises (SMEs) and individuals.