Short-Term Economic Recovery Plan introduced by Malaysian Government (PENJANA) - Tax Measures, includes changes made in Budget 2022.
In this article, we highlight the tax measures that is relevant to our Client. For complete measures of PENJANA, please click the link to Ministry of Finance at the bottom of this page.
Measures relating to Income Tax
1. Income tax rebate for a new SME
An income tax rebate up to RM20,000 per year for first 3 years of assessment (YA) will be given for Small and Medium-Sized Enterprise (SME), where the date of incorporation and commencement of business is during the period from 1 July 2020 to 31 December 2021. The income tax rebates has been extended to 31 December 2022 in Budget 2022.
The qualifying conditions are:
the business entity registered under Companies Act, 2016 and qualify as SME under the Income Tax Rules;
the SME can claim a rebate of equivalent to the amount of capital expenditure or operating expenses incurred in each YA subject to a maximum expenditure of RM20,000 per YA;
tax rebates that was not fully utilised during a YA is not allowed to be carried forward to the next YA; and
the new SME must use a new facilities, including property and plant which is not transferred from existing or related companies.
the SME or MSME that perform business activities through online platform has been included in Budget 2022.
2. Tax benefits for COVID-19 related expenses
Expenditures incurred in relation to providing employees with disposable personal protective equipment (PPE) such as face masks and COVID-19 testing are deductible expenses under Section 33(1) of the Income Tax Act 1967 (ITA).
Capital allowances can be claimed for expenditures incurred in providing non-disposable PPE to employees such as purchase of thermal scanners.
The qualifying conditions are:
the expenditures incurred from 1 March 2000; and
the incentive is extended for an indefinite period.
3. Incentives for Flexible Work Arrangements (FWAs)
To encourage employers to adopt Work From Home (WFH) practice, a further tax deduction will be given to an employer who implements FWA or enhance their existing FWA conditions.
The incentives are in the form of double tax deduction, for 3 consecutive YA, YA 2020, YA 2021 & YA 2021 for the following expenses;
consultation fees.
capacity building for FWA including staff training cost.
cost of acquiring "virtual working environment" software.
The qualifying conditions are:
effective for applications received by Talent Corporation Malaysia Berhad from 1 July 2020 to 31 December 2022; and
the expenditure shall be confirmed by Talent Corporation Malaysia Berhad and the total expenditures should not be more than RM500,000 for each YA.
4. Personal tax exemption for employees who receive handphone, notebook and tablet from employers
Tax exemption of up to RM5,000 given to employees who receives Mobile Phones, Laptops and Tablets from their employers effective 1 July 2020.
The qualifying conditions are:
the exemption is effective from YA 2020; and
the exemption is not given to directors of controlled companies, sole proprietors and partnerships.
5. Personal tax relief on purchase of handphone, notebook and tablet
Currently, resident individual taxpayers can claim a lifestyle relief of up to RM2,500 for the purchase of books, personal computer, sports equipment, gym membership subscription and for the payment of monthly bill for internet subscription.
In addition to the above, a further income tax relief of up to RM2,500 will be given for the purchase of handphone, notebook and tablet.
The qualifying conditions are:
the tax relief is for YA 2020 for the purchases made from 1 June 2020 to 31 December 2020.
this relief has been extended to YA 2021 under PERMAI.
Budget 2022 updates:
the period of relief has been further extended for another 1 year to YA 2022.
6. Personal tax relief for domestic travelling expenses
Personal income tax relief of RM1,000 is given to resident individuals for domestic travelling expenses such as;
accommodation expenses at premises registered with the Ministry of Tourism, Arts and Culture Malaysia; and
entrance fees to tourist attractions.
The qualifying conditions are:
the tax relief is for YA 2020 and YA 2021 for the domestic travelling expenses incurred during the period from 1 March 2020 to 31 December 2021.
Budget 2022 updates:
the relief amount of RM1,000 has been increased to RM2,000
the period of relief has been extended to YA 2022 and YA 2023
7. Personal tax relief increased from RM2,000 to RM3,000 for fees paid to child care centres
To encourage parents to send their children to child care centres, the tax relief is increased from RM2,000 to RM3,000.
The qualifying conditions are:
the tax relief is for YA 2020 and YA 2021.
Budget 2022 updates:
the period of relief has been extended for YA 2022 and YA 2023
8. Accelerated Capital Allowance (ACA) for machinery and equipment including Information and Communications Technology (ICT) equipment
Annual allowances for machinery and equipment and ICT equipments increased from 20% to 40%.
The qualifying conditions are:
qualifying expenditures incurred from 1 March 2020 to 31 December 2021.
9. Deduction for Renovation and Refurbishment expenses
A special deduction is given for the renovation and refurbishment expenditures up to a limit of RM300,000.
Please click the following link for the details of the gazetted rule P.U. (A) 381, which is available in Bahasa and English;
The qualifying conditions are:
cost of renovation and refurbishment of business premise incurred from 1 March 2020 to 31 December 2021 and used for the purpose of its business; and
the special deduction should not be a claimable allowance under Schedule 2 or Schedule 3 of the Income Tax Act, 1967; and
the special deduction should not have been claimed as allowable expenses under Section 33 (1) of ITA.
Budget 2022 updates:
the special deduction has been extended up to 31 December 2022.
Details on the Deduction:
for the purpose of ascertaining the adjusted income.
a deduction is allowed for the cost of renovation and refurbishment of business premise for the purposes specified in First Schedule of the P.U. (A) 381.
a deduction is not allowed for the purposes specified in Second Schedule of the P.U. (A) 381.
First Schedule items - general electrical installation, lighting, gas system, water system, kitchen fittings, sanitary fittings, door, gate, window, grill, roller shutter, fixed partitions, flooring (including carpets), wall covering (including paint work), false ceiling and cornices, ornamental features, decoration excluding fine art, canopy, awning, fitting room, changing room, recreational room for employee, air-conditioning system, children play area, reception area, surau.
Second Schedule items - designer fee, professional fee, purchase of antique.
10. Deferment of tax instalment payments for companies in the tourism industry
Businesses in the tourism industry such as travel agents, hotel operators and airline companies are allowed to defer their monthly tax instalments from 1 April 2020 to 31 December 2020.
Measures relating to Sales and Services Tax (SST)
1. Remission of penalties for late payment of SST
A 50% remission of penalty given for late payment of SST penalty which is due and payable from 1 July 2020 to 30 September 2020.
2. Service tax and tourism tax exemption for hotels
The operators of accommodation premises such as hotels, inns, lodging house, service apartment, homestay and any other similar establishment is exempted from charging service tax on accommodation and any related services effective from 1 March 2020 to 30 June 2021.
Operators of accommodation are also exempted from charging tourism tax with effect from 1 July 2020 to 30 June 2021.
Measures relating to Real Property Gains Tax (RPGT)
1. RPGT exemption relating to disposal of residential property
Malaysian citizens are eligible for RPGT exemption on gains arising from the disposal of residential properties.
The qualifying conditions are:
the date of disposal period from 1 June 2020 to 31 December 2021; and
the exemption is limited to 3 residential properties per individual.
Measures relating to Stamp Duty
1. Stamp duty exemptions relating to residential property
Stamp duty is fully exempted on loan agreement while exemption on the instruments of transfer is restricted to the first RM1 million of the value of the residential property.
The qualifying conditions are:
the property is a residential property;
the residential property is priced between RM300,000 to RM2.5 million;
sales and purchase agreement signed from 1 June 2020 to 31 May 2021; and
the developer must give at least 10% discount on the price of the residential property.
You may refer to the link below for further details and other tax-related matters which is not listed above;
This article is based on the Prime Minister’s announcement on the Short-Term Economic Recovery Plan, "PENJANA” on 5 June 2020 and the subsequent issuance of the Appendices by the Ministry of Finance on which we have provided a link above.The article is intended to provide a general guide to the subject matter and should not be regarded as a basis for ascertaining the liability to tax in specific circumstances. No responsibility for loss to any person acting or refraining from acting as a result of any material in this publication can be accepted by Gunalan & Associates. Readers should not act on the basis of this publication without seeking professional advice.
Should you require further clarification, please do not hesitate to contact us at gunalan@gunalanassociates.com. Thank you.
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