KUALA LUMPUR: The RM35 billion National Economic Recovery Plan (Penjana) is aimed at protecting jobs, empowering businesses especially the small and medium enterprises (SMEs).
And ensuring Malaysia gets its fair share of foreign investments as companies seek to relocate a part of their business arising from the impact of the Coronavirus Disease 2019 (Covid-19), said a tax expert.
Deloitte Malaysia tax leader Sim Kwang Gek said the extension of the Wage Subsidy Programme (WSP) for another three months would further ease the financial burden faced by businesses and provide job security to affected employees.
The wage subsidy is fixed at RM600 per employee for a maximum of 200 employees, and employers who are not allowed to operate during the conditional movement control order (CMCO) can apply for the programme.
“It is uncertain at this juncture if the conditions imposed under the existing WSP will continue to apply,” she said, adding that one of the conditions was only employees earning salaries below RM4,000 a month was eligible.
“I am hopeful that this requirement can be removed as SMEs do employ people above such income threshold. Perhaps, the wage subsidy could apply to the first RM4,000 paid to the employees instead of being restricted to employees earning a monthly salary of RM4,000 or less,” Sim told Bernama.
On attracting foreign direct investments, she said the government had announced generous tax incentives to attract foreign companies to relocate their businesses into Malaysia.
It includes a tax holiday of 10 or 15 years for new foreign investments in the manufacturing sector — 10 years for capital investments of RM300 million to RM500 million and 15 years for capital investments of more than RM500 million.
Additionally, existing companies in Malaysia will receive a 100 per cent Investment Tax Allowance for three years for relocating their overseas facilities into Malaysia with capital investments above RM300 million.
Sim said these measures were crucial and timely to encourage foreign investments in the current economic climate, where tax costs could be a key consideration in selecting a location for investment.
“The condition to require the new investments to commence operations within a year from the approval date and putting a three-year cap on the time frame for capital investment is a good move as this will accelerate the approved projects implementation,” said Sim.
Another good initiative, she said, was the government’s commitment to issue manufacturing licences for non-sensitive industries in two working days as it would enhance Malaysia’s competitiveness in doing business.
Malaysia is currently ranked 12th with 81.50 points among 190 global economies in the World Bank Doing Business 2020 Report, recording an improvement from 15th position in the previous year.
Meanwhile, to spur the setting up of new businesses, an income tax rebate of up to RM20,000 per year for three years of assessment will be given for newly established SMEs between July 1, 2020, and December 31, 2021.
“Assuming that the income tax rebate is deducted from the final tax payable of the SME, this provides a tax savings of RM60,000 for three years.
“The stamp duty exemption given to SMEs on any instruments executed between July 1, 2020, and June 30, 2021, for mergers and acquisitions (M&As) will encourage SMEs to build scale and capacity,” said Sim.
While the focus is understandably on SMEs, she said the current crisis had also forced larger companies to restructure to be more agile, efficient and competitive; in this regard, the stamp duty exemption should apply to all businesses and not be limited to SMEs.
“In addition to stamp duty exemption, a real property gains tax (RPGT) exemption should be introduced as RPGT cost may arise in many M&A activities or restructuring projects,” she said.
Sim said the revival of the Home Ownership Campaign (HOC) should bring cheer to property developers as it would ease properties oversupply, stimulate the property sector and spur buying sentiment.
The tax incentives are similar to the previous HOC where a stamp duty exemption is given on the instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 and RM2.5 million, subject to at least 10 per cent discounts provided by the developer.
The exemption on the transfer instrument transfer is limited to the first RM1 million of the home price while full stamp duty exemption is given on loan agreement, stipulated in sale and purchase agreements signed between June 1, 2020, and May 31, 2021.
“However, It is unclear if this incentive applies to all purchasers of properties or are limited to Malaysian citizens, which was the condition set under the previous HOC,” said Sim. Meanwhile, individual taxpayers who intend to dispose of their residential homes would enjoy RPGT exemption (limited to the disposal of three units of residential home per individual) from June 1, 2020, to Dec 31, 2021.
“While this measure provides some tax savings for individual taxpayers, its impact on stimulating the property sector is unclear due to the downward prices in the secondary property market,” said Sim.
She lauded the proposal to set up an investment fund called Dana Penjana Nasional to encourage the digitalisation efforts by Malaysian businesses, as Covid-19 had accelerated the need for businesses to embrace digitalisation.
The targeted fund size is RM1.2 billion with 50 per cent funded by international investors. “From a tax perspective, it is hoped that the Dana Penjana Nasional will equally benefit from existing venture capital tax incentives and investment fund incentives, to ensure both investors and investees enjoy tax efficient funding,” said Sim.
On facilitating the implementation of working from home, employees will get to enjoy a tax exemption of up to RM5,000 on handphones, notebooks and tablets provided by their employers, effective July 1, 2020.
In addition, there is also a special individual income tax relief of up to RM2,500 on the purchase of handphones, notebooks and tablets effective from June 1, 2020.
“This is on top of the RM2,500 existing lifestyle tax relief that is applicable for similar purchases as well as other items such as reading materials, sports equipment and broadband subscriptions. It should encourage consumer spending on these items,” she said. Meanwhile, the extension of up to Sept 30, 2020, for the special tax deduction equivalent to 30 per cent reduction in rental for SMEs, was pivotal, Sim said, noting that rental costs formed a significant part of operating expenditure for most businesses.
“Thus I believe that this special tax deduction should be made available to all businesses. “Alternatively, for businesses that do not qualify for the special tax deduction, a double tax deduction could be given to the tenants on the rental expense incurred as the cash savings can be channeled towards business continuity and staff retention,” said Sim.- Bernama