The Budget 2022 themed “Keluarga Malaysia, Makmur Sejahtera (A Prosperous Malaysian Family)” was tabled in Parliament on 29 October 2021. The theme is in line with the policies and strategies outlined in the 12th Malaysia Plan. Budget 2022 focuses on 3R, which are Recovery, Resilience and Reform, with an allocation of 332.1 billion MYR, the highest value compared with previous budgets. From here, we share key highlights from the Budget to bring you an overview of the key tax proposals which may be crucial to your business.
As the vaccination rollout program continues to inoculate Malaysians against the pandemic, as well as the focus of the government to curb the spread of Covid-19, thus with the rapid reopening of the economic and social sectors, and the continuous government assistance to help industries and business to reopen, the nation’s economy is expected to resume its recovery path.
FISCAL AND ECONOMY
|GDP Growth||3% – 4%||5.5% – 6.5%|
|Unemployment||4.6% – 4.8%||4.0%|
KEY PROPOSALS on CORPORATE TAX
Resulted by the impact of Covid-19 pandemic, the economies have been slowed down in the past years. In order to expedite the recovery of the nation’s economy as well as to assist the business operations of companies, especially to those Micros, Small and Medium Enterprises, Ministry of Finance (MoF) has been proposed several significant measures in the Budget.
1. Removal of Income Tax Exemption on Foreign Sourced Income
|Income of any person (other than a resident company carrying on the business of banking, insurance or sea/air transport) derived from sources outside Malaysia is exempted from income tax.||Removal of income tax exemption on Foreign Sourced Income of Malaysian tax residents.|
It has been proposed that the foreign source income derived by Malaysian tax residents, which is remitted into Malaysia will be taxable.
Effective from 1 Jan 2022
1 Jan to 30 Jun 2022: to be taxed at 3%1 Jul 2022 onwards: to be taxed at prevailing rate
2. Imposition of One-off “Cukai Makmur (Prosperity Tax)”
|The current tax rates for companies:|
MSME companies:Chargeable income for the 1st 600K MYR – 17%Chargeable income in excess of 600K MYR – 24%
Non-SME companies – 24%
*Companies with paid-up capital of less than 2.5million MYR and turnover not exceeding 50 million MYR
|It has been proposed that the chargeable income of non-SME companies in excess of 100 million MYR will be subject to a one-off special tax rate in YA2022.|
Chargeable income for the 1st 100mil MYR – 24%Chargeable income in excess of 100mil MYR – 33%
Effective for Year of Assessment 2022
3. Extension of Carry-Forward of Unabsorbed Business Losses
|Effective from YA2019, unutilised business losses arising in a YA can be carried forward for a maximum period of 7 consecutive YAs, to be utilised against income from any business source. |
Unutilised business losses from YA2018 can be carried forward up to YA2025.
|It has been proposed that the time limit to carry forward the unutilised business losses to be extended to 10 consecutive YAs. And, accumulated unutilised business losses from YA2018 can now be carried forward to YA2028.|
Effective retrospectively from YA2019
4. Revision of Tax Estimates and Deferment of Tax Instalments
|Companies are allowed to submit a revised tax payable estimate in the 6th and/or 9th months of the basis period for a YA.|
Companies may apply for deferment of instalment payments for the months of April to December 2021.
|It has been proposed that companies may submit a revised tax payable estimate in the 11th month of the basis period for a YA, before 31 October 2022. |
It is also proposed that SME companies to be granted a deferment of income tax instalment payments for a period of six months until 30 June 2022.
Effective for Year of Assessment 2021 and 2022
KEY PROPOSALS on PERSONAL TAX
Other than the assistance to support the companies, the government has also in the Budget proposed a numbers of aid schemes as well as the extension or expansion to the existing reliefs to individual, especially to enhance support to low-income households. Overall, the Budget will benefit more than 9.6 million recipients with an allocation of 8.2 billion MYR.
1. Extension of Special Income Tax Rate to non-Malaysian
|A special income tax rate at 15% is offered to non-Malaysian who is holding key or C-Suite positions in companies investing in new strategic investments for a period of 5 consecutive years, with an application submitted to the MIDA from 7 Nov 2020 to 31 Dec 2021.||It has been proposed that the deadline for application be extended to 31 December 2022.|
2. Extension of Reduction of Employees Provident Fund Contribution (EPF)
|As consequence of the pandemic, the employee minimum monthly contribution rate (Malaysian residents) is reduced to 9% by default since 1 Jan 2021. Though, employee can opt to maintain at the rate of 11%. ||It has been proposed that the reduced employee minimum monthly contribution rate of 9% is extended to June 2022.|
Effective from January to June 2022
3. Various Personal Tax Reliefs
|EPF Contributions||The current tax relief for employee contributions to EPF is capped at 4,000 MYR per YA, which applies to only mandatory contributions.||It is proposed that the tax relief for EPF contributions to include voluntary contributions by self-employed individuals and pensionable civil servants. |
Effective from YA2022
|SOCSO Contributions||The current tax relief for employee contributions to SOCSO is capped at 250 MYR per YA.||It is proposed that the tax relief for SOCSO contributions is increased to 350 MYR and expanded to include employee’s contributions through the Employment Insurance System (EIS).|
Effective from YA2022
|Medical Expenses||Personal tax relief for full medical examination for serious disease is limited to 1,000 MYR.||It is proposed that the scope of personal tax relief on medical examination is expanded to include cost incurred for examination or consultation relating to mental health by psychiatrists, clinical psychologists and registered counselors. |
Effective from YA2022
|Upskilling or Self-Enhancement Course||Personal tax relief on any course of study undertaken for the purpose of upskilling or self-enhancement is limited to 1,000 MYR per YA for YAs 2021 and 2022. ||It is proposed that the tax reliefs be increased to 2,000 MYR per YA and extended to YA 2023.|
Effective from YA2022 to 2023
|Purchase of Smartphone, Personal Computer or Tablet||Personal tax relief of 2,500 MYR on the purchase of personal computer, smartphone and tablet were extended to YA2021.||It is proposed that the period of relief be extended to YA2022.|
Effective from YA2022
|Domestic Travel Expense||Personal tax relief of 1,000 MYR is granted for qualifying domestic travel expenses with payments made on or after 1 Mar 2020 but not later than 31 Dec 2021.||It is proposed that the period of relief be extended for another one year for payments made from 1 Jan to 31 Dec 2022.|
Effective from YA2022
|Childcare Centres and Kindergartens||Personal tax relief of 3,000 MYR on the fee paid to registered childcare centre and kindergarten for child aged 6 years and below is granted for YA2021.||It is proposed that the tax reliefs of 3,000 MYR be extended to YA2022 and YA2023. |
Effective from YA2022 and YA2023
|Deferred Annuity||Personal tax relief for premium for deferred annuity of 3,000 MYR were effective for YAs from 2012 to 2021. ||It is proposed that the period of relief for premium for deferred annuity be extended up to YA2025.|
Effective from YA2022 to YA2025
|Cost Relating to Electric Vehicle (EV) Charging Equipment/Facilities||Not available.||It is proposed that the personal tax relief of 2,500 MYR per YA for the cost of installation, rental, purchase (including hire purchase) or subscription fees of electric vehicle charging facilities.|
Effective from YA2022 and YA2023
KEY PROPOSALS on INDIRECT TAX
The MoF is expected the federal revenue to achieve 234 billion MYR or 5.9% increase compared to 2021’s estimated income of 221 billion MYR. As such, various measures to increase tax revenue and enhance tax compliance has been proposed in the Budget.
1. Imposition of Service Tax
- Delivery Services
It has been proposed that all delivery services including thru e-commerce platform, except for the delivery for food and beverage and logistics services would now be subject to 6% service tax, with effect from 1 July 2022.
- Brokerage Services
The existing 6% service tax charged on the brokerage services relating to the trading of shares listed on Bursa Malaysia is now proposed to be exempted, with the effective date from 1 January 2022.
2. Reduction of Real Property Gains Tax (RPGT)
For disposal of real property by Malaysian citizens, permanent residents and persons other than companies in the 6th year and onwards, is currently subject to RPGT at 5%. It has been proposed that full exemption (0%) for disposals made in the 6th and subsequent years after acquisition, with effective from 1 January 2022.
3. Introduction of Special Voluntary Disclosure Programme (SVDP)
Special Voluntary Disclosure Programme is proposed to be introduced in two phases for indirect taxes, with the following incentives:
|Phase 1 – 100% remission of penalties||Phase 2 – 50% remission of penalties|
4. Imposition of Sales Tax on Low Value Goods (LVG)
Low value goods which do not exceed 500 MYR imported via air courier service into Malaysia is currently exempted from paying sales tax. It is proposed that the exemption to be abolished and the importation from overseas into Malaysia will be subject to sales tax, effective from 1 January 2023.
5. Extension of Sales Tax Exemption on Purchase of Passenger Cars
The sales tax exemption of 100% on locally assembled passenger cars (CKD) and 50% on imported passenger cars (CBU) is proposed to be extended for another six months until 30 June 2022.
6. Exemption of Import Duty, Excise Duty and Sales Tax on Electronic Vehicles (EVs)
Full import duty exemption on components for locally assembled (CKD) EVs and full excise duty and sales tax exemption on locally assembled (CKD) EVs is proposed for the effective date from 1 January 2022 to 31 December 2025.
While, full import duty and excise duty exemption on imported (CBU) EVs is proposed, with effective date from 1 January 2022 to 31 December 2023.
7. Imposition of Excise Duty on Gel or Liquid Used for Electronic Cigarettes and Vapes
It is proposed that the excise duty on non-nicotine contained gel or liquid used for e-cigarettes and vapes to be increased from 0.40 MYR per milliliter to 1.20 MYR per milliliter. While, it is also proposed that excise duty to be imposed at 1.20 MYR on nicotine contained gel or liquid used for e-cigarettes and vapes. Effective from 1 January 2022.
8. Expansion of Excise Duty on Sugar Sweetened Beverages
The imposition of excise duty on sugar sweetened beverages to be expanded to include certain pre-mixed preparations of beverages containing a total sugar content exceeding 33.3 grams per 100 grams, with effective from 1 April 2022.
9. Extension of Tourism Tax Exemption
It is proposed that the exemption for tourism tax on the accommodation premise operators registered under the Tourism Tax Act 2017 to be extended for another one year to 31 December 2022.
10. Extension of Entertainment Duty Exemption
It is proposed that the exemption for entertainment duty on the admission fees on the entertainment premises such as theme park, stage performances, sports and events competitions as well as cinemas in Federal Territories to be extended for another one year to 31 December 2022.
12. Stamp Duty Exemptions
- Loan or Financing Agreements
It is proposed that full stamp duty exemption be given on peer-to-peer (P2P) loan or financing agreements signed between SME and investors which executed between 1 January 2022 to 31 December 2026.
While, the stamp duty exemption for restructuring or rescheduling of loan or financing agreement between a borrower and a financial institution to be extended to 31 December 2022.
- Mergers and Acquisitions (M&A)
Stamp duty exemption is currently given to the qualifying instruments executed for the M&A of SME, is proposed to be extended for another one year to 31 December 2022.
- Contract Notes on Trading of Bursa Listed Shares
It is proposed that the stamp duty charged on contract notes relating to the sale of listed shares to be increased from 0.1% (calculated at 1.00 MYR for every 1,000 MYR) to 0.15% of the transaction value (calculated at 1.50 MYR for every 1,000 MYR) and stamp duty cap of 200 MYR to be abolished.
KEY PROPOSALS on TAX INCENTIVES
- The existing Special Reinvestment Allowance (RA), which 60% of qualifying capital expenditures to be set off against 70% or 100% of the statutory income for each year of assessment, is proposed to be extended for another two years until YA2024.
- Income tax rebate of up to 20,000 MYR per each year of assessment for the first three year of assessments for new incorporated SMEs is proposed to be extended to 31 December 2022.
- The special tax deduction of up to 300,000 MYR on qualifying costs incurred for renovating and refurbishing business premises is extended to cover the expenditure incurred until 31 December 2022.
- Double tax deduction for qualifying operating expenses incurred by anchor companies under the Vendor Development Programme is proposed to increase from 300,000 MYR to 500,000 MYR and to extend to 31 December 2025.
- The special tax deduction for tax payers who provides at least 30% of rental reduction to tenants is proposed to be extended for another 6 months, up to June 2022.
- Further tax deduction up to 50,000 MYR on qualifying rental expenditure incurred for employee’s accommodation under Safe@Work Programme is extended for another one year to 31 December 2022.
- Double deduction given to companies which provide scholarship to Malaysian students is expanded to all fields of study and be extended to YA2025.
- Double deduction for tax payers who conducts Structured Internship Programme approved by TalentCorp is proposed to be extended for another four years to YA2025 with an expansion of qualifying academic levels.
- Income tax exemption of 50% on statutory income for organising arts, cultural, sports and recreational activities in Malaysia is proposed to be extended to YA2025.
- It is proposed that Green Investment Tax Allowance (GITA) of 100% on the capital expenditure for qualifying green activities to be set-off against 70% of statutory income and Green Investment Tax Exemption (GITE) of 70% of statutory income for qualifying green services activities to be expanded to include Rainwater Harvesting System activities.
- It is proposed that the income tax rate of 0% to 10% for up to 10 years is given to a new company as a digital technology provider, and income tax rate of 10% for up to 10 years for an existing company as a digital technology provider that diversify in new service activities or new service segments.
It is also proposed that an Investment Tax Allowance of 100% on capital expenditure for qualifying activities for up to 10 years to be set-off against 100% of statutory income is given to the digital infrastructure provider.
- Income tax exemption on all income up to three years of assessments for Social Enterprise is proposed.
Tax Identification Number
It has been proposed that the tax identification number to be issued automatically to any person who is a citizen and aged 18 years old and above to be implemented with effective from 1 January 2022.
Tax Compliance Certificate
It is proposed to introduce of a Tax Compliance Certificate as a pre-condition for tax payers to tender for government projects.
Review of Windfall Profit Levy – Crude Palm Oil (CPO) Windfall profit levy is currently imposed on CPO at the rate of 3% for 2,500 MYR per metric ton (for Peninsular Malaysia) and 1.5% for 3,000 MYR per metric ton (for Sabah and Sarawak). It is proposed that the levy rates to be revised to 3% for 3,000 MYR per metric ton for Peninsular Malaysia and 3.0% for 3,500 MYR per metric ton for Sabah and Sarawak.