In the last budget 2021 update, we have highlighted matters concerning personal and employment. We will detail down tax areas relating to Economic Continuity per budget 2021 that was announced on 6th November 2020 in this article.
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
4) Review of Principal Hub Incentive
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:
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:
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:-
- Tax incentive : 0% - 10% tax rate
- Incentive period: Up to 10 years
- Tax incentive : 10% tax rate
- Incentive period: Up to 10 years
(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:
Extended until YA 2022.
Disclaimer: The above stated tax incentives are extracts of the 2021 budget, of which the details have yet been finalised. We will provide updates should there be any new finance bills issued.
FUNDS FOR SMALL MEDIUM ENTERPRISE (SME)
1) Establishment of RM 2 billion Targeted Relief and Recovery Facility (TRRF)
The RM 2 billion facility is for eligible SMEs whose revenues have been affected by the recent enhanced and conditional movement control orders.
In addition, SMEs in targeted vulnerable sectors, namely personal services, food and beverage services, human health and social work, arts, entertainment and recreation sub-sectors, will also be eligible for the TRRF.
Offered at a concessionary rate of up to 3.5%, the TRRF will be available through participating financial institutions, with guarantee coverage by Syarikat Jaminan Pembiayaan Perniagaan (SJPP) and Credit Guarantee Corporation (CGC). The facility will be open for applications from 1 December 2020.
2) Establishment of RM 500 million High Tech Facility (HTF)
The RM 500 million facility is to support SMEs in high-tech sectors, for example fertilizers and synthetic rubber, basic chemicals, refined petroleum products, biotech pharmaceuticals, as well as air and spacecraft sub-sectors. As the high-tech sectors and innovation-driven firms are instrumental to realizing new growth opportunities, the HTF aims to sustain Malaysia’s competitive positioning in global value chains and safeguard high-skilled jobs. Further details on the HTF will be announced on 1 December 2020.
3) RM 110 million increase in allocation for the Micro Enterprises Facility (MEF)
The facility will be increased from RM 300 million to RM 410 million, with an available balance of RM 200 million to support micro-enterprises including gig workers on digital platforms and the self-employed. The facility is for working capital and capital expenditure.
ENHANCEMENTS TO THE TARGETED REPAYMENT ASSISTANCE (TRA)
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:
Borrowers in these categories can request to either:
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.
1) Expansion of iTEKAD programme
The iTEKAD programme, which was launched in May 2020, combines social finance instruments such as zakat, sadaqah and waqaf with the provision of micro financing, structured training and mentorship. These instruments will empower micro-entrepreneurs from the B40 segment to generate sustainable income and achieve financial resilience.
2) Perlindungan Tenang Protection for B40
Financial assistance will be provided by the Government for the B40 segment in the form of vouchers to purchase insurance and takaful coverage under the Perlindungan Tenang scheme from licensed insurers and takaful operators. The financial assistance of RM50 voucher will be given to eligible B40 recipients to help them purchase Perlindungan Tenang products starting 1 April 2021.
Perlindungan Tenang products are products approved by BNM to meet the needs of under-served market segments. The products must satisfy stringent criteria on affordability and customer value, with minimal exclusions to ease claims and ensure meaningful protections, particularly for lower income groups. The products include protection for life takaful and personal accidents.
Source: https://www.bnm.gov.my/index.php?ch=en_press&pg=en_press&ac=5147 // https://www.bnm.gov.my/covid19/
Source: Budget 2021 Speech
This material or communication has been prepared for the sole purpose of providing general information to our clients, and is not intended to be relied upon as accounting, tax or other professional advice. Consent has to be obtained from the firm prior to any act of republishing or circulating to the general public. While the information is considered correct at the date of publication, changes in circumstances or updates in tax ruling after the time of publication may impact its accuracy and reliability. We have not, by means of this material or communication, rendered any professional advice or services. Thus, we shall not be responsible for any losses sustained by any person who relies on this material or communication. Please refer to our tax advisors should you require our consultancy services
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