NOTES – BUDGET 2020
This year, the Government has embarked on a comprehensive review and revamp of the existing incentive framework, comprising the Promotion of Investments Act 1986, Special Incentive Package and incentives under the Income Tax Act 1967. This new framework is expected to be ready by 1st January 2021.
Tax Identification Number (TIN)
Beginning January 2021, Malaysians above the age of 18 and corporate entities will be assigned a Tax Identification Number or TIN. In order to implement this initiative, engagement sessions with all stakeholders will commence next year.
Personal Income Tax
Personal Income Tax Rate
To ensure a more progressive personal income tax structure, it is proposed that a new band for taxable income in excess of RM2 million be introduced and taxed at 30%, which is a 2 percentage point increase from the current 28% rate.
Fertility Relief
The income tax relief of up to RM6,000 given on expenses incurred for medical treatment of serious illnesses will be expanded to include expenses incurred on fertility treatment.
Personal Tax Relief - Child
To ease the financial burden of parents who enroll their children in registered nurseries and kindergartens, individual tax relief for fees paid will be increased from RM1,000 to RM2,000.
Women
Women who have stopped working for a year or more, and are between 30 to 50 years old can enjoy the income tax exemption until 2023.
Corporate Tax
SME Tax Rate
The SME with paid-up capital of not more than RM2.5 million, income tax rate for Chargeable Income up to the first RM600,000 is 17%.
Electrical and Electronics (E&E) industry
The Government will also provide tax incentives to further promote high-value added activities in the Electrical and Electronics (E&E) industry to transition into 5G digital economy and Industry 4.0. These incentives include:
First: Income tax exemption up to 10 years to E&E companies investing in selected knowledge-based services
Second: Special Investment Tax Allowance to encourage companies in E&E sector that have exhausted the Reinvestment Allowance to further reinvest in Malaysia.
Automation
In addition, to encourage automation and to increase company’s productivity, it is proposed:
First: Accelerated Capital Allowance and automation equipment capital allowance for manufacturing sector on the first RM2 million and RM4 million incurred on qualifying capital expenditure is extended to the year of assessment 2023
Second: The incentive is also be expanded to include services sector on the first RM2 million incurred on qualifying capital expenditure from the year of assessment 2020 to the year of assessment 2023.
Building Digital Malaysians
To ensure gains arising from successful Digital Companies are shared with the Rakyat, the Government will introduce the concept of Digital Social Responsibility (DSR). DSR is the commitment by businesses, to contribute to digital economic development while improving the digital skills of the future workforce with initiatives such as technology scholarships, training and upskilling for digital skills for communities in need. Contributions towards DSR by the companies will be given tax deduction.
Strengthening Access to Financing for Businesses
To further encourage alternative sources of funding for start-ups companies and to attract more foreign investment to Malaysia, tax incentives given to venture capital and angel investors will be extended until the year 2023.
Angel Investors: http://lampiran2.hasil.gov.my/pdf/pdfam/PR_11_2015.pdf
Venture Capital: http://lampiran1.hasil.gov.my/pdf/pdfam/PR_2_2016.pdf
Growing Islamic Finance
The current tax deductions on the cost of issuance and additional deduction on sukuk issuance costs under the principle of Wakalah will be extended for 5 years until year of assessment 2025.
To further promote Islamic fund and Sustainable and Responsible Investment (SRI) fund management activity, the tax exemption for fund management companies managing Shariah compliant funds and SRI funds, and the tax deduction on the cost of issuing SRI Sukuk will be extended for another 3 years until year of assessment 2023.
Green Growth and Energy for the Future
The Government intends to attain Malaysia’s goal to generate 20% of our energy consumption from renewable sources by 2025. Green Investment Tax Allowance (GITA) and Green Income tax Exemption (GITE) incentives will be extended to 2023. A 70% income tax exemption of up to 10 years will be given to companies undertaking solar leasing activities.
Enhancing Research & Development (R&D) Framework
IP-generated income based on the Modified Nexus Approach (MNA) derived from patents and copyright software will be given tax exemption for a period of up to 10 years.
https://www.mida.gov.my/home/incentives-in-services-sector/posts/
Visit Malaysia 2020
First: Income tax exemption be given for organisers of approved arts and cultural activities, approved international sports recreational competitions, and conferences organisers
Second: New investments in international theme park projects will be given income tax exemption of 100% of statutory income or Investment Tax Allowance of 100% to be set off against 70% for 5 years
Third: Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,00 to RM1,000,000 per year
Fourth: Accelerated Capital Allowance for expenditure incurred on the purchase of new locally assembled excursion bus to be fully claimed within 2 years
Fifth: Excise duty exemption of 50% for locally assembled vehicles be given to tour operators for the purchase of qualified new tourism vehicles.
Apprentice
Government extend double tax deduction on expenses incurred by companies participating in Skim Latihan Dual Nasional (SLDN) for another two years.
The double tax deduction given to companies undertaking Structured Internship Programme (SIP) approved by Talent Corporation Malaysia Berhad (TalentCorp) will be expanded to include students from all academic fields rather than just engineering and technology.
Corporate Social Responsibility (CSR)
To further encourage the private sector to donate as part of their corporate social responsibility, Government will increase the donation reporting threshold to RM20,000 under Income Tax Act 1967 beginning 2020.
Donation
To inculcate philanthropy, tax deduction on donation for charitable and sports activities and projects of national interest will be increased to 10% from the aggregate income for tax payer. The tax deduction is expanded to:
First: Cash wakaf contribution to state religious authorities or a body established by state religious authorities administering wakaf
Second: Cash wakaf contribution to public universities allowed by the state religious authorities to receive wakaf
Third: Cash endowment contribution to public universities
Beginning 2020, tax exemption will be extended to religious institution or organization registered as a Company Limited By Guarantee with Companies Commission of Malaysia.
Real Property Gain Tax
In response to the public view regarding the Real Property Gain Tax (RPGT) imposed on disposal of properties after 5 years onwards, the Government will enhance RPGT treatment by revising the base year for asset acquisition at 1st January 2013 for asset acquired before 1st January 2013 as compared to the previous base year of 1 January 2000.
Sales and Service Tax
Digital Service Tax
Digital Service Tax will be implemented with effect from 1st January 2020, to include services such as, but not limited to downloaded software, music, video or digital advertising. Foreign service providers can commence registration with the Royal Malaysian Customs Department (RMC) as of 1st October 2019.
Training
All training and coaching services provided by training service provider to the disable persons will be exemption from service tax.
