Malaysia

Tax and financial measures associated with COVID-19

29 June 2020

Malaysia implemented lockdown under the Movement Control Order (MCO) starting from 18 March 2020 aimed to slow the spread of COVID-19: the country’s borders were shut, travel restrictions were imposed, all government, business and private premises were required to close, except for those in the essential services. The approach taken focuses on 6 phases: Resolve, Resilience, Restart, Recover, Revitalise and Reform.

Tranches of proactive and reactive economic measures from the 1st to the 4th phases total valued at RM295 billion were taken by Malaysia to stimulate the economy and assist the people and businesses through this challenging time. A summary of the key economic measures and support introduced to-date are as follows:

Tax measures

  • Tax deduction on selected costs, expenditure and industry
    • Deduction of up to RM300,000 for renovation and refurbishment costs incurred from 1 March 2020 to 31 December 2021
    • Deduction on contributions to charity or project dealing with COVID-19 pandemic
    • Increase in Accelerated Capital Allowance (ACA) rate up to 40% for machinery and equipment, including information communication technology (ICT) until 31 December 2021
    • Additional deduction on minimum 30% rental discount for 6 months as given by landlords to eligible SME tenant
    • Deduction for employers which implement Flexible Work Arrangements (FWA) or undertake enhancement of their existing FWA with effect from 1 July 2020
    • Deduction or allowance for COVID-19 prevention expenditure provided to employees, including COVID-19 testing, purchase of personal protective equipment (PPE) and thermal scanners
  • Tax rebate of up to RM20,000 per year for 3 years of assessment for new established SME between 1 July 2020 and 31 December 2021
  • Tax exemption on selected costs, expenditure and industry
    • Exemption of stamp duty on restructuring and rescheduling of loans
    • Exemption of stamp duty for SMEs on any instruments executed for Mergers and Acquisitions (M&A) for the period between 1 July 2020 and 30 June 2021
    • Exemption of service tax given to accommodation premises operators such as hotels from 1 March 2020 to 30 June 2021
    • Exemption of sales tax and import duty on face mask imported or purchased
    • Exemption of sales tax and import duty on medical, lab and personal protective equipment imported or purchased for donation
    • Exemption of sales tax, excise duty and import duty on ethyl alcohol given to manufacturers of hand sanitisers
    • Exemption of sales tax and import duty for 3 years on equipment and machinery purchased for port operations
    • Full exemption of sales tax on locally assembled cars and 50% exemption of sales tax on imported cars
    • Exemption of Tourism tax from 1 July 2020 to 30 June 2021
    • Exemption of export duty for crude palm oil, crude palm kernel oil and refined bleached deodorised palm kernel oil from 1 July 2020 to 31 December 2020
  • Reduce threshold for selected tax incentives or schemes
    • Application for exemption from complying with conditions due to COVID-19 pandemic and MCO available under the Principal Hub incentive
  • Deferment of tax instalment payment
    • Automatic deferment of monthly tax instalment payment for 9 months given to companies in tourism related business
    • Automatic deferment of monthly tax instalment payment for 3 months given to all SMEs
    • Special early revision in the 3rd month on tax payable estimation for affected businesses
  • Deferment of tax payments
  • Automatic extension of time to 30 June 2020 for payment of sales and service tax for the period from January 2020 to April 2020.
  • Remission of penalty
  • 50% remission of penalty for late payment of sales tax and service tax due and payable from 1 July 2020 to 30 September 2020

Business support

  • Deferment of loan repayments
    • Automatic suspension of SMEs repayment obligation with no penalties and late payment charges for 6 months
  • Reduction on electricity bills given to companies for non-residential properties
    • Discount range from 2% to 15% for 6 months
  • Special cash grant to micro enterprises
    • One off cash subsidy of RM3,000 to eligible micro enterprises
  • Reduction on rental
    • waiver of rental for all premises owned by the federal government
    • discounts on rental for non-residential premises owned by government-linked companies to SME retailers
  • Financing facilities at reduced rates for micro businesses and SMEs to support funding in specific purpose
    • Micro Credit Scheme – maximum RM75,000 per micro enterprise or self-employed individual at financing rate of 0%
    • Special Relief Facility COVID-19 – maximum RM1 million per SME at financing rate up to 3.50% p.a.
    • All Economic Sector Facility – maximum RM5 million per SME at financing rate up to 7% p.a.
    • Automation and Digitalisation Facility – maximum RM3 million per SME at financing rate up to 4% p.a.
    • Agrofood Facility – maximum RM5 million per SME at financing rate up to 3.75% p.a.
    • Micro Enterprises Facility – maximum RM50,000 per enterprise
  • Waiver of listing fees
    • Fee waiver of 12 months for companies seeking to list
  • Expansion of approved activities to provide more value-added services for licensed manufacturing warehouse (LMW) and operating in free industrial zone (FIZ)
  • Other allocated funds in the nation’s recovery plan
    • RM100 million of matching grant for SME Digitalisation
    • RM100 million of grant for Smart Automation
    • Up to RM50 million of matching grant for eligible gig economy platforms
    • RM25 million provision for Global Online Workforce (GLOW) program
    • Up to RM5,000 one-off grant for each eligible childcare centre
    • RM500 million of loan for SME Technology Transformation Fund
    • RM2 billion of funding facility for eligible SME
    • RM400 million of funding facility for micro enterprises with RM50 million earmarked for women entrepreneurs
    • RM1 billion of funding facility for PENJANA Tourism Financing (PTF)
    • RM400 million of funding facility for agriculture and food sector
    • RM225 million of funding facility and support for the arts, culture, entertainment, events and exhibitions sector
    • RM1.6 billion of funding facility for contractors and vendors of small government projects
    • RM200 million funding facility for Bumiputera

Employer support

  • Wage subsidy program to support affected employers
    • Monthly subsidy of RM600 to RM1,200 per eligible employee for up to 3 months from April 2020
    • Monthly subsidy of RM600 per eligible employee for a further 3 months from June 2020
  • Automatic exemption from Human Resource Development Fund levy
    • Levy exemption given to all sectors of businesses for 6 months
  • Reduction on foreign worker levy
    • Discount of 25% given to all SMEs with foreign workers’ permits expiring between April 2020 and December 2020
  • Incentives for hiring the unemployed
    • Youth (school leavers and graduates)
      • RM600 per month for apprenticeships for up to 6 months
    • Unemployed workers below 40 years old
      • RM800 per month for up to 6 months
    • Unemployed workers of 40 years old and above or persons with disability
      • RM1,000 per month for up to 6 months
  • Other allocated funds in the nation’s recovery plan
    • RM2 billion for reskilling and upskilling programmes for Youth and Unemployed Workers

Regulatory Relief

  • Companies Commission of Malaysia
    • Moratorium period of 30 days from expiry of MCO for statutory lodgement
    • Application for extension of time of 3 months for lodgement of annual financial statement by companies with financial year ended between 30 September 2019 and 31 December 2019
    • Application for extension of time for holding of the Annual General Meeting for public companies with financial year ended between 16 September 2019 and 30 November 2019
    • Increase threshold for level of indebtedness under the Companies Act 2016 to RM50,000 until 31 December 2020 to reduce winding up action against companies
  • Inland Revenue Board of Malaysia
    • Additional grace period of 2 months for lodgement of individual annual tax returns
    • Additional grace period of 2 to 3 months for lodgement of annual tax returns for companies with accounting period ending between 31 July 2019 and 31 March 2020

To support the people and employee

  • Financial aid to support low-income and selected group:
    • Eligible single individual
      • one-off cash subsidy of RM500 to RM800
    • Eligible households
      • one-off cash subsidy of RM1,000 to RM1,600
    • Students in higher education
      • one-off cash subsidy of RM200
    • Civil servants and pensioners
      • one-off cash subsidy of RM500
    • Taxi and e-hailing drivers
      • one-off cash subsidy of RM500 to RM600
    • Healthcare workers involved in curbing and preventing the COVID-19 outbreak
      • special monthly allowance during the period
    • Eligible COVID-19 patients and those under quarantine
      • Daily cash subsidy as income replacement for up to 14 days
    • Eligible persons with disability (OKU)
      • one-off financial assistance of RM300
    • Eligible single mothers
      • one-off financial assistance of RM300
    • Eligible volunteer of Home Help Services
      • one-off financial assistance of RM300
  • Financial and tax relief to individuals
    • Job retention for employee under the Wage subsidy program for 6 months
    • Deferment on repayment of hire purchase, housing and study loan for 6 months
    • Rental waiver on premises owned by the federal government and those under public housing for 6 months
    • Discount range from 2% to 50% on electricity bills of all residential properties for 6 months
    • Exemption of Real Property Gains Tax (RPGT) for disposal of up to 3 residential homes by individual from 1 June 2020 to 31 December 2021
    • Exemption of stamp duty up to the first RM1 million on the instruments of transfer and full exemption of stamp duty on the loan agreements for the purchase of eligible residential homes from 1 June 2020 to 31 May 2021
    • Tax exemption of up to RM5,000 to employees who receive a mobile phone, notebook and tablet from their employer with effect from 1 July 2020
    • Special tax relief of up to RM2,500 for the purchase of mobile phone, notebook and tablet with effect from 1 June 2020
    • Increase in tax relief on child care service expenses to RM3,000 incurred for the Years of Assessment (YA) 2020 and 2021
    • Tax relief of up to RM1,000 for domestic tourism expenses incurred from 1 March 2020 to 31 December 2021

To support foreign investors and businesses

  • Tax incentives for company relocating to Malaysia
    • 0% tax rate for 10 years for new investment in manufacturing sectors with capital investment between RM300 to RM500 million
    • 0% tax rate for 15 years for new investment in manufacturing sectors with investment above RM500 million
    • 100% Investment Tax Allowance for 3 years for existing company in Malaysia relocating overseas facilities into Malaysia with capital investment above RM300 million
    • Special Reinvestment Allowance for manufacturing and selected agriculture activity from YA 2020 to YA 2021
    • Double deduction for pre-commencement expenses incurred by international shipping companies to set up regional office in Malaysia

As at 18 June 2020, there have been 8,529 confirmed cases: 8,000 have recovered, 408 are receiving treatment and 121 are deceased.

Since 4 May 2020, Malaysia has progressively introduced conditions to ease the MCO and on 10 June 2020, Malaysia has entered the recovery phase of the MCO where most of the sectors and industries have re-opened. For latest updates, further details and to explore on how we can help those doing business in and with Malaysia, feel free to reach out to us.

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