COVID-19 & CMCO: Tax Initiatives In PENJANA
June 8, 2020
On 5 June 2020, the Prime Minister announced the Pelan Jana Semula Ekonomi Negara or PENJANA as a short-term economic recovery plan. The Tax Division of the Ministry of Finance has prepared a comprehensive 25-page summary of the 22 tax initiatives contained in PENJANA.
This alert highlights the 22 tax initiatives.
(1) Businesses in the tourism industry such as travel agencies, hotel operators and airlines are given a further extension for the instalment payment of estimated taxes for another 3 months from 1 October 2020 to 31 December 2020.
(2) Tax deduction and capital allowance claim on expenditure related to the prevention of COVID-19 and Personal Protective Equipment (PPE) is extended further from 1 January 2021. Further, the scope of deduction and claim is expanded to cover the screening expenses and other related PPE equipment from 1 March 2020.
(3) Accelerated capital allowance for capital expenditure incurred to purchase machinery and equipment including information and communications technology (ICT) equipment is extended until 31 December 2021.
(4) Special tax deduction equal to the rental reduction or waiver given by property owners to tenants consisting of small and medium enterprises (SMEs) registered with SME Corporation is extended to September 2020. This is provided that the rental reduction is at least 30% of the original rent for that period.
(5) Tax deduction for expenditure incurred (up to RM300,000) in relation to renovation and refurbishment of premises is extended to 31 December 2021.
(6) Tax rebate of up to RM20,000 for each year of assessment for the first 3 years of assessment is given to newly established and operating SMEs from 1 July 2020 to 31 December 2021 subject to the following conditions:
• SMEs are registered under the Companies Act 2016.
• Paid-up capital of RM2.5 million and below with annual sales not exceeding RM50 million per annum.
Unutilised tax rebate cannot be carried forward to the next year of assessment for tax deduction purposes. The new company must use separate plants, machineries and facilities which are not transferred from existing or related companies.
(7) Tax incentive for the applications received by the Malaysian Investment Development Authority from 1 July 2020 to 31 December 2021 from foreign investors and for existing companies to relocate their business or manufacturing activities from abroad as follows:
• New Companies
➢ Special tax rate of 0% for 10 years for capital investments of RM300 million to RM500 million.
➢ Special tax rate of 0% for 15 years for capital investments of RM500 million and above.
• Existing Companies
➢ Investment tax allowance of 100% for 5 years for capital investments of RM300 million and above.
The eligibility requirements are:
New fixed asset investments are made within 3 years from the date of the tax incentive approval.
The company relocates operations to Malaysia within 1 year from the date of the approval of tax incentive.
Open to the manufacturing sector except for specified industries.
(8) An additional reinvestment allowance is available for companies that have previously claimed reinvestment allowance or special reinvestment allowance. This incentive amounts to 60% of the capital expenditure incurred in the years of assessment 2020 to 2022 for manufacturing activities and selected agricultural activities.
(9) Double tax deduction is given on the following expenses to implement or improve flexible work arrangements:
Capacity building for flexible work arrangements including staff training costs
Cost of acquiring virtual working environment software
The expenses shall be determined by Talent Corporation Malaysia Berhad and shall not exceed RM500,000 for each year of assessment. This incentive is available for 3 consecutive years for applications received from 1 July 2020 to 31 December 2022.
(10) Additional tax deduction available for companies participating in the PROTÉGÉ READY TO WORK scheme is extended to companies not providing essential services or companies which had to be closed during the movement control period. This deduction is subject to the companies obtaining the approval of the Ministry of Entrepreneur Development and Co-operatives (MEDAC) and replacing the training period as determined by MEDAC.
Personal Income Tax
(11) Tax exemption of up to RM5,000 is given to individuals who receive mobile phone, tablet and laptop from their employers under the flexible work arrangements. This relief commences from the year of assessment 2020.
(12) Special income tax relief of up to RM2,500 is granted to individuals in addition to the existing lifestyle allowances for the purchase of mobile phone, laptop or tablet between 1 June 2020 and 31 December 2020.
(13) Tax relief of RM1,000 for individuals for domestic travel expenses is extended to 31 December 2021. This relief covers expenses in relation to accommodation expenses at premises registered with the Ministry of Tourism, Arts and Culture Malaysia and entrance fee to tourist attractions.
(14) Tax relief limit is increased to RM3,000 for fees paid by individuals to a registered nursery or childcare centre registered with the Department of Social Welfare or the Ministry of Education. This relief can be claimed by one of the parents of the children and is available for the years of assessment 2020 and 2021.
Sales Tax & Service Tax
(15) Penalty on late payment of sales tax and service tax will be reduced by 50% for 4 taxable period between 31 May 2020 to 31 August 2020.
(16) 100% sales tax exemption for locally assembled passenger cars and 50% sales tax exemption for imported passenger cars. The exemption will last from 15 June 2020 to 31 December 2020 and is subject to the sales tax savings being channeled to the buyers and submitting a list of the relevant vehicle models/variants to the Ministry of Finance.
(17) Service tax exemption on accommodation services and other related services is extended to 30 June 2021.
Real Property Gains Tax (RPGT)
(18) RPGT exemption will be granted from 1 June 2020 to 31 December 2021 to Malaysian citizens subject to the following conditions:
Limited to the disposal of up to 3 residential units only during the RPGT exemption period.
The residential units disposed must not have been previously obtained by the disposer by way of love and affection.
(19) Stamp duty exemption is granted for instruments in relation to mergers and acquisitions (M&As) involving the following:
Contract or agreement for the sale or lease of property (land, building, plant and machinery)
Instrument of transfer and memorandum of understanding
First lease agreement
The exemption applies to M&As approved by MEDAC from 1 July 2020 but before 30 June 2021 and the instruments must be executed by 31 December 2021.
(20) Stamp duty exemption is granted on instrument of transfer for properties priced at RM300,000 to RM2.5 million and loan agreement (on the first RM1 million) for purchase of homes under the Home Ownership Campaign subject to the following conditions:
The sale and purchase agreement is executed with a housing developer who is registered with Real Estate & Housing Developers’ Association, Sarawak Housing and Real Estate Developers’ Association and Sabah Housing And Real Estate Developers Association between 1 June 2020 to 31 May 2021.
A minimum 10% discount is given by the developer.
The buyer is a Malaysian individual.
(21) Tourism tax is exempted between 1 July 2020 and 30 June 2021 for foreigners who stay at accommodations registered under the Tourism Tax Act 2017.
(22) Full export duty exemption for the export of Crude Palm Oil, Crude Palm Kernel Oil and Refined Bleached Deodorised Palm Kernel Oil for 6 months beginning 1 July 2020.