Malaysia’s budget 2020 was tabled in parliament on 11 October 2019. But how does Budget 2020 impact the general public? Let’s review all important highlights of budget 2020.
1. Income tax scale rates
The rates for income tax scale remained unchanged at 0 – 28 Percent for the first RM2 million in chargeable income. However, a minor change was made for residents who have chargeable income over 2 Million Ringgits will be taxed at 30%.
2. Real property gains tax
The RPGT issue of zero-rating was in higher priority on most of the people’s minds. There was a strong public opinion for the zero-rating reinstatement for real properties held for over 5 years.
Finally, the Minister of Finance proposed a higher baseline as the deemed acquisition price at the end. So instead of the market value as at January 1, 2000, the baseline has been moved to January 1, 2013 — a full 13 years later. This will significantly minimize the quantum chargeable to real property gains tax.
3. Stamp duty exemption for Rent-to-Own (RTO)
The Rent-to-Own (RTO) scheme was brought up to assist Malaysians to get financing to own their homes. Stamp duty exemption will be put in place for the instruments relating to the first home under this scheme.
The 50% remission in stamp duty for the transfer of properties between children and parents has been revised so that it is now only applicable to the public.
4. For Parents
The current tax relief of 6,000 Ringgits for medical expenses associated with serious diseases has been expanded to add the fertility treatment cost. The childcare tax relief and day-care services expenses have been increased from RM1,000 to RM2,000. Very good initiative from the Government.
5. Exemption for Private Retirement Scheme (PRS) withdrawals
The exemption for early withdrawals (before the age of 55) from a Private Retirement Scheme withdrawal has been increased when it comes to healthcare and housing.
6. Investing in REITs
Investors in real estate investment trusts (REITs) will keep getting the special 10% tax on the distributions received from REITs. The tax treatment has been stretched to the year 2025.
7. Standardization of donations
The approved cash donation threshold has been standardised at 10 percent of aggregate income. So rakyat can donate up to 10% of their aggregate income and be eligible for a tax deduction.
8. Tax rebate on departure levy for religious pilgrimage
The departure imposed on an individual going outside from Malaysia (with effect from Sept 1) will be allowed as a tax rebate where the person embarks on religious pilgrimage given that it has been duly certified by the associated religious committee.
9. No change in tax rates for local companies
The companies, trusts and limited liability partnerships tax rates remain at 24 percent. The two-tier rates of 17% and 24% for organizations and LLPs with lower paid-up ordinary share capital are the same as earlier.
10. Tax rates for small and medium enterprises
The definition of small and medium enterprises (SMEs) has been modified. According to the new definition, any company or LLP with the paid-up ordinary share capital equal to 2.5 million Ringgits or less and deriving gross business income of not over 50 million Ringgits in the year of assessment.
The 17 percent tax rate for Small and Medium Enterprises is now applicable on the 1st RM600000 (up from RM500000) of its chargeable income; consequently, further tax savings of RM7,000.
Technology related firms and SMEs listing on the ACE and LEAP markets on Bursa Malaysia will be allowed a tax deduction of up to 1.5 million Ringgits of their listing prices. The deduction is available only for 3 years (2020-2022).
11. Capital allowance
The small-value assets (SVA) threshold now will be RM2,000 (up from RM1,300) per asset. The small value assets are eligible for 100 percent capital allowance. The annual total is set at RM20,000 (up from RM13,000) for non-SMEs. Small and medium enterprises will continue to enjoy 100% capital allowance for all of its SVAs instead of RM20,000 a year.
12. Secretarial and tax fees deduction
The tax filing fee (RM10,000) and tax-deductible secretarial fee (RM5,000)will be integrated into a global total of RM15,000 for tax deduction for assessment each year.
13. Payment deduction for PTPTN
Employers that pay employees’ PTPTN loans payable in 2019 are eligible for tax deduction. It has been stretched to payments made in the next 2 years.
14. Tax deduction for sponsorship of local artistes
The deductible amount for the sponsor has been extended from 700,000 Ringgits to 1 million Ringgits. The deduction in respect of sponsorship of foreign artistes remains at 300,000 Ringgits.
15. Penalty for late tax payment reviewed
One of the most exciting news in this 2020 budget is that the penalty for late tax payment has been reviewed. It is now 10% only, with no more than 5% after 60 days.
16. Right of appeal
A taxpayer aggrieved by a tax assessment should submit an appeal within a month of the service of the notice. For now, where a taxpayer sometimes appeals late, he/she has to apply to the DGIR for an extension time to file his appeal. If the DGIR is not inclined to grant the extension, he/she will forward the case to the Special Commissioner of Income Tax. And his decision will be considered final and there will be no more appeal will be made.
17. Double-tax cases
There is now a proposed modification to allow the DGIR to appeal an extra assessment “at any time” in consequence of a mutual agreement procedure. This runs contrary to the statutory time bar of 5 years for general cases.
18. Incentives for the tourism sector
As far as Malaysia tourism is concerned, there are some great measures to consider in budget 2020.
- Businesses are encouraged to organize conferences in the country between 2020 and 2025. If they bring in at least 500 foreign annually, they will be granted a tax exemption of 100% of their statutory income.
- Companies and organizations that organize arts and culture activities, recreational competitions, and international sports to attract foreign tourists will be able to enjoy a tax exemption of 50% of their statutory income. This is available during the year of assessment 2020 to 2022.
- Entertainment duty of 5 percent is free from admission tickets for stage performances in KL during visit Malaysia Year 2020.
To conclude, there is something for everyone in this budget from a man from homeowners to businesses and SMEs. Hope it will benefit rakyat and other starting companies in Malaysia.
YH Tan & Associates PLT can help any startup business in audit, financial matters, product pricing, and taxation in Malaysia.