With effective from YA 2020, the issuance of Practice Note No. 3/2020 clarifies, in addition to having paid up ordinary shares of up to RM 2.5mil and gross business income of not exceeding RM 50mil, the gross income has to be from business source (i.e. manufacturing/ trading or service activities) to be eligible for tax treatment under paragraph 2A and 2D Part 1, and subparagraph 19A(3) Schedule 3 of ITA 1967 i.e. where the chargeable income shall be taxed at the preferential tax rate of 17% on the first RM600,000.

Please take note the following when estimating CP204 for the year of assessment 2021; 
​

An IHC is deemed to have no gross income. However, when the company comprehensively and actively provides maintenance or support services in relation to the properties rented, the rental income shall be business source and assessed under Section 4(a) of the ITA 1967, therefore eligible for the preferential tax rate provided all other criteria i.e. paid up capital and gross business income limit are also met.

​With reference to the Public Ruling No. 12/2018, to "provide maintenance or support services" means services that include:
(a) doing generally all things necessary (e.g. cleaning and repair services) for the maintenance and management of the real property such as the structural elements of the building, stairways, fire escapes, entrance and exits, lobbies, corridors, lifts, escalators, compounds, drains, water tanks, sewers, pipers, wires, cables or other fixtures and fittings; and 

(b) doing generally all things necessary for the maintenance and management of the exterior parts of the real property such as playing fields, recreational areas, driveways, car parks, open spaces, landscape areas, walls and fences, exterior lightings or other external fixtures and fittings,

where the services are actively provided by the person himself who owns or lets out the property or that he hires another person or another firm to provide the said services.

A person is deemed NOT actively and comprehensively providing maintenance or support services and as such, the rental income is NOT assessed under Section 4(a) of the ITA 1967 when:
​
(a) the owner of the property merely provides security services and/ or other facilities; or
(b) facilities are provided and maintained by the joint management corporation of the property and the owner only pays maintenance fees, thus the services enjoyed by the tenant are merely an extension of the owner's right as proprietor of the property unit.

​Should you need further clarification, please do not hesitate to contact us.

1) Companies manufacturing pharmaceutical products including vaccines

Other facilities including grants, import duty or sales tax exemption for machinery and equipment as well as raw materials, may be considered depending on the strategic investments by the companies. For the first 10 years, the income tax rate ranges from 0% to 10%. For the subsequent 10 years, the tax income tax is taxed at 10%.
 
(Effective for applications to be received by MIDA from 7 November 2020 to 31 December 2022)
 
2) Extension of tax incentive for exports of private healthcare services
 
Incentive is to be extended to YA 2022
 
3) Review of income tax exemption on Green Sustainable and Responsible Investments Sukuk Grant

• The existing income tax exemption will be extended to cover grants for all types of SRI sukuk and bonds which meet the ASEAN Green, Social and Sustainability Bond Standards approved by the SC; and
• The income tax exemption on the above grant will be extended for another 5 years.

(Effective for applications received by the SC from 1 January 2021 to 31 December 2025)
 
4) Review of Principal Hub Incentive

• The application period to be extended for 2 more years up to 31 December 2022; and
• The conditions relating to the number of high value workers, key posts and annual operational expenditure for the extended 5 year period be relaxed.

(Effective for applications to be received by MIDA from 1 January 2021 to 31 December 2022)
 
5) Global Trading Center Incentive
 
To enhance and simplify the tax incentive for trading activities currently provided under the Principal Hub incentive which is subject to a higher eligibility criteria, a new Global Trading Centre tax incentive is to be introduced. Under the Global Trading Centre incentive, a concessionary tax rate of 10% will apply for a period of 5 years (renewable for another 5 years)
 
(Effective for applications to be received by MIDA from 1 January 2021 to 31 December 2022)  
 
6) Review and expansion of tax incentive for commercialization of Research and Development findings
 
To create a competitive R&D ecosystem, it is proposed that the tax incentives are to be:

• reintroduced for non-resource based R&D; and
• extended to private higher learning institutions.

(Effective for applications to be received by MIDA from 7 November 2020 to 31 December 2025)
 
7) Extension of period of further deduction for employment of senior citizens, ex-convicts, parolees, supervised persons and ex-drug dependents
 
Extended for another 5 YAs from YA 2021 to YA 2025
 
8) Tax incentive for investment in Equity Crowd Funding (ECF)
 
To encourage more individual investors to invest in ECF, income tax exemption on aggregate income equivalent to 50% of the amount of investment made in the ECF will be given subject to the following:

• Amount exempted from tax will be capped at RM50,000 for each YA;
• Deductible amount is restricted to 10% of aggregate income for each YA. Any excess amount will be disregarded;
• The investor, investee company and amount of investment must be verified by SC;
• Investor must not have family relationship with the investee company;
• Investment must be made through ECF platform approved by SC; and
• The investment must not be disposed of either in full or in part within 2 years from the date of investment made.

(Effective for applications to be received by MIDA from 1 January 2021 to 31 December 2023)  
 
9) Review of tax incentives for companies relocating their operations to Malaysia and undertaking new investments
 
To spur the economic recovery through investment activities and to create multiplier effects to the economy, it is proposed that:
a) The application period be extended for another 1 year; and
b) The tax incentive be expanded to companies operating in selected services sector, including companies adapting IR4.0 and digitalisation technology with investment that contributes to significant multiplier effect in the following services:-

• Provision of technology solution, or more typically technology company which develops technology and provides technology solutions based on substantial scientific or engineering challenges;
• Provision of infrastructure and technology for cloud computing;
• Research and development / design and developments activities;
• Medical devices testing laboratory and clinical trials;
• Any services or manufacturing related services as determined by the Minister of Finance.

c) The tax incentive is as follows: 
 
New company:
- Tax incentive : 0% - 10% tax rate
- Incentive period: Up to 10 years
 
Existing company:
- Tax incentive : 10% tax rate
- Incentive period: Up to 10 years
 
Effective date:

• Manufacturing sector - Applications received by MIDA until 31 December 2022
• Selected services sector - Applications received by MIDA from 7 November 2020 to 31 December 2022

10) Review of tax incentive for manufacturers of Industrialized Building System (IBS) components

• Incentive to be extended for another 5 years
• Categories 1 (company producing at least 3 basic components) and categories 2 (company producing at least 4 basic components) are to be merged where companies are only required to produce at least 3 basic components of IBS or IBS systems that use at least 3 basic IBS components. 

Investment Tax Allowance of 60% on the qualifying capital expenditure incurred within 5 years will be given. This allowance can be set off against 70% of the Statutory Income
 
(Effective for applications to be received by MIDA from 1 January 2021 to 31 December 2025)    
 
11) Extension of existing tax incentives expiring on 31 December 2020
 
To provide space for the comprehensive study of the existing tax incentive to be completed, it is proposed that the existing tax incentive due to end on 31 December 2020 will be extended until 2022. The incentives mentioned includes:

• a) Maintenance, repair and overhaul (MRO) activities for aerospace
• b) Building and repair of ships
• c) Bionexus status

12) Tax incentives for East Coast Economic Region Development Corridor, Iskandar Malaysia and Sabah Development Corridor
 
Extended until YA 2022.

The banking industry has agreed to provide additional targeted repayment assistance for individuals and SME borrowers. These enhancements are an addition to those previously announced for those who have lost their jobs, and for individuals and SMEs whose incomes have been affected by the pandemic. Borrowers can also continue to approach their banks for tailored repayment assistance based on their specific financial circumstances as all banks continue to stand ready to provide support to borrowers that need assistance. ​

1) Additional assistance for B40 and micro enterprise borrowers

Additional repayment assistance will be rolled out to borrowers in the following categories:

• B40 individuals who are recipients of Bantuan Sara Hidup (BSH)/Bantuan Prihatin Rakyat (BPR); and
• Micro enterprises, as defined by SME Corp, for facilities with approved amounts of up to RM 150,000.

 
Borrowers in these categories can request to either:

• ​Defer monthly installment for 3 months; or
• Reduce monthly installment by 50% for 6 months.

 
The assistance will be extended for facilities approved before 1 October 2020 which are not in arrears for more than 90 days at the time a borrower requests for repayment assistance. 
 
B40 and micro-enterprise borrowers who had previously received other forms of targeted repayment assistance and who wish to request for further assistance under the additional measures announced today can still do so by contacting their banks.

To request for this assistance, eligible borrowers will only need to confirm their repayment option with their bank. 

Additional documentation from borrowers is not required by banks to obtain repayment assistance.

However, for hire purchase loans and fixed rate Islamic financing, borrowers would need to sign new agreements in accordance with the Hire Purchase Act 1967 and Shariah requirements.

These additional repayment assistance will be available to eligible borrowers between 23 November 2020 and 30 June 2021. 

​Borrowers may indicate the repayment assistance from 23 November 2020 through banks’ customer service hotlines, online banking, or by visiting bank branches. 

​The repayment enhancement will be available for installment due in December 2020 onward, and will take effect at the next installment following a borrower’s request and confirmation.