Sandglass

Key Highlights of the Malaysia Budget 2022 

Crowe Chat Vol.7/2021

30/10/2021
Sandglass
Introduction

2021 had been a year of examination, reflection and anticipation. At the start of the year, many had anticipated that the year 2021 would be associated with economic and social recovery. With ambitious plans in place, including a historic Covid-19 immunisation campaign, Malaysia was expected to benefit greatly from the economic surge as the year progressed. 

However, the past 10 months have proven 2021 to be a more challenging year as the worsening health crisis meant a significant delay to economic recovery efforts. The government agenda is now focused on reviving, recovering and revitalizing the economy. It is amidst this backdrop that Budget 2022 was tabled. The Honorable Finance Minister, building on the economic plans outlined in the previous year’s budget, laid out the largest budget in Malaysia’s history in hopes to accelerate our path to recovery. Budget 2022, themed Keluarga Malaysia, Makmur Sejahtera, aims to tackle a wide range of challenges faced by Malaysian families.

Measures such as direct cash aid and the JaminKerja salary incentive signal the government’s seriousness in tackling issues faced by the most vulnerable in Malaysian society. As we deal with the issues of the day, the government has kept one eye on the future, introducing incentives for digital businesses whilst also reaffirming its climate change objectives through the introduction of the first ever Malaysian voluntary carbon market. 

However, these measures have not come without cost. To redress the budget, a host of changes have been proposed. A one-off tax increase in 2022 known as Tax Makmur will be imposed on companies that earn more than RM100 million in year 2022 and the removal of the long-standing tax exemption on foreign source income are some key changes that are most impactful. 

Therefore, our initial observation is that this expansionary budget has not only built-in measures to encourage resilience but also looks to take decisive action to address fiscal consolidation in the medium term. Despite its size, Budget 2022 outlines a balanced and pragmatic approach to the nation’s finances, where all levels of society would have to come together to contribute towards the betterment of the nation. Given the large number of changes and incentives introduced, it is hoped that the analysis provided herein serves as an essential guide in your business in the months ahead. 
 
Budget 2022

Highlights at a Glance

Businesses
Tax on Income Received from Outside Malaysia
Malaysian residents will be taxed on income derived from foreign sources and received in Malaysia with effect from 1 January 2022.

Deferment of Income Tax Instalment Payments 
Micro, Small and Medium Enterprises (MSMEs) will be given a deferment for payment of monthly tax instalments for a period of six (6) months until 30 June 2022.

Special Revision of Estimate of Tax Payable 
Companies will be given an option to submit a revision of income tax estimates in the eleventh (11th) month of the basis period before 31 October 2022.

Extension of Special Tax Deduction on Rental Reduction for Business Premises
The special tax deduction on rental reduction for business premises will be extended for another six (6) months for rental reduction from 
January 2022 to June 2022.

Extension of Special Tax Deduction on the Cost of Renovation and Refurbishment of Business Premises
The special tax deduction of up to RM300,000 for renovation and refurbishment of business premises will be extended to 31 December 2022. 

Extension of Tax Rebate for Establishment of New Entities for MSMEs 
The income tax rebate of up to RM20,000 per YA, for the first three (3) YAs will be extended for new MSMEs established and which commenced operations by 31 December 2022.
 
Prosperity Tax on non-SMEs
A special one-off tax at the tax rate of 33% on chargeable income exceeding RM100 million will be levied on non-SMEs in YA 2022.
 
Tax Compliance Certificate ("TCC")
Obtaining a TCC issued by the Inland Revenue Board will be a prerequisite for companies to participate in Government procurement starting from 1 January 2023. 

Tax identification number ("TIN") 
TIN will be implemented beginning year 2022 to broaden the tax base. 

Extension of Additional Reinvestment Allowance ("RA") Incentive 
Additional RA incentive period for eligible companies involved in manufacturing and selected agriculture activities will be extended to YA 2024.

Extension of Tax Deduction for Companies under the [email protected] Programme
Companies registered under [email protected] are given further tax deduction on rental expenses for employee accommodation. This incentive will be extended to 31 December 2022.

Extension of Tax Incentive for the Organisation of Arts, Culture, Sports and Recreation Activities in Malaysia
The tax incentive in the form of income tax exemption of 50% on statutory income will be extended for another three (3) YAs.

Tax Incentives for Digital Ecosystem Acceleration Scheme ("DESAC")
Digital technology providers and digital infrastructure providers providing services for activities under DESAC will be given tax incentives.

Tax Incentives for Upstream Petroleum Industry
Companies with Late-Life Assets ("LLA") projects in the upstream petroleum industry will be given tax incentives for LLA Production Sharing Contracts awarded from 1 January 2020 to 31 December 2029

Review of Tax Incentives for Scholarships
The tax incentive given to companies sponsoring scholarships to students will be expanded to include all fields of study at the Technical and Vocational level, Diploma, Bachelor's Degree, Bachelor and Doctor of Philosophy, and the tax incentive period will be extended to YA 2025.

Review of Tax Incentives for Structured Internship Programme ("SIP")
The tax incentive for SIP will be expanded to include students undertaking Masters, Professional Certificates and Malaysia Skill Certificate Level 1 and 2, and the tax incentive period will be extended to YA 2025

Review of Tax Incentives for Anchor Companies under the Vendor Development Programme ("VDP")
The tax incentives for anchor companies under VDP will be enhanced to include double tax deduction on qualifying operating expenses of up to RM500,000 per YA, extension of tax incentive period for five (5) years for anchor companies that have signed MoU with MEDAC and deductions will be given for three (3) consecutive YAs. This tax incentive will be applicable for anchor companies that sign the MoU with MEDAC from 1 January 2021 to 31 December 2025.
 
Expansion of Scope for Tax Incentives for Green Technology
Green technology tax incentives will be expanded to include Rainwater Collection and Utilisation System projects and is applicable for applications received by MIDA from 1 January 2022 to 31 December 2023.
 
Extension of Tax Incentive for the Purchase of Tourism Vehicles
Accelerated Capital Allowance ("ACA") given on capital expenditure incurred for the purchase of tourism vehicles will be extended to YA 2024. 
 
Income Tax Exemption for Social Enterprises
Income tax exemption will be given on all income of a social enterprise accredited by the Ministry of Entrepreneur Development and Cooperation for a period of up to three (3) YAs.
 
Stamp Duty Exemption for P2P Loan or Financing Agreements
100% stamp duty exemption will be given on P2P loan or financing agreements between MSMEs and investors for agreements executed between 1 January 2022 and 31 December 2026. 
 
Review of Stamp Duty on Contract Notes for Trading of Shares Listed on Bursa Malaysia
The stamp duty rate on contract notes for trading of shares listed on Bursa Malaysia will be increased to 0.15% and the stamp duty limit of RM200 for each related contract note will be abolished.
 
Extension of Stamp Duty Exemption for Loan Restructuring and Rescheduling
Stamp duty exemption for loan restructuring or rescheduling will be extended for agreements executed up to 31 December 2022.

Extension of Stamp Duty Exemption for Mergers and Acquisitions ("M&A") Related Instruments
Stamp duty exemption for instruments related to M&A will be extended for applications for M&A received by the Ministry of Entrepeneur Development and Cooperatives up to 30 June 2022 and instruments executed up to 31 December 2022.
 
Review of Stamp Duty Exemption for Perlindungan Tenang Products
Stamp duty exemption will be given on Perlindungan Tenang products and insurance products or takaful with a premium or contribution value not exceeding RM150 for individuals and RM250 for MSMEs.
 
Extension of Sales Tax Exemption for Purchase of Passenger Cars
The Sales Tax exemption period for purchase of passenger cars will be extended to 30 June 2022.
 
Extension of Tourism Tax Exemption
The Tourism Tax exemption period will be extended to 31 December 2022.
 
Extension of Entertainment Duty Exemption
The Entertainment Duty exemption period on admission fees to entertainment places in the Federal Territories will be extended to 31 December 2022.
 
Review of Crude Palm Oil ("CPO") Threshold Price and Rate of Windfall Profit Levy
The threshold price of CPO will be increased by up to RM1,000 per metric tonne and the rates of Windfall Profit Levy on CPO at Sabah and Sarawak will be increased from 1.5% to 3.0%. 
 
Import Duty, Excise Duty and Sales Tax Exemption for Electric Vehicles
Import Duty, Excise Duty and Sales Tax exemption will be given for the importation and sales of electric vehicles 
 
Sales Tax Imposition on Low Value Goods
Sales Tax will be imposed on the sales of Low Value Goods to consumers in Malaysia from 1 January 2023.
 
Service Tax on Goods Delivery Services
Service tax will be imposed on goods delivery services provided by service providers including e-commerce platforms from 1 July 2022.
 
Special Voluntary Disclosure Program ("SVDP") for Indirect Taxes
The SVDP will be introduced by the Royal Malaysian Customs Department for indirect taxes with penalty remissions of up to 100%, and tax remissions in certain cases.
 
Service Tax Exemption on Brokerage Services
Service tax exemption will be given on brokerage services related to trading of shares listed on Bursa Malaysia from 1 January 2022. 
 
Expansion of Scope for Excise Duty on Electronic Cigarettes
The scope of excise duty will be expanded to include the imposition of excise duty on liquid or gel containing nicotine used for electronic cigarettes.
 
Expansion of Scope for Excise Duty on Sugar Sweetened Products 
The scope of excise duty on sugar sweetened products will be expanded to include additional pre-mixed preparation products.
 
Sales Tax Imposition on Low Value Goods
Sales Tax will be imposed on the sales of Low Value Goods to consumers in Malaysia from 1 January 2023.
 
Service Tax on Goods Delivery Services
Service tax will be imposed on goods delivery services provided by service providers including e-commerce platforms from 1 July 2022.

 

Individuals
Expansion of Tax Relief on SOCSO Contributions
Tax relief on SOCSO contributions will be increased from RM250 to RM350 and will now include Employment Insurance System contributions.
 
Expansion of Tax Relief on Upskilling and Self-Enhancement Course Fees
Tax relief on upskilling and self-enhancement course fees will be increased from up to RM1,000 to up to RM2,000 and will be extended until YA 2023.
 
Expansion of Tax Relief on EPF Contributions
Tax relief on EPF contributions will be expanded to include voluntary contributors (self-employed) including pensionable government servants. 
 
Expansion of Tax Relief on Medical Check-up Expenses
Tax relief of up to RM1,000 on medical check-up expenses for self, spouse and child will be expanded to include examination costs and consultation services related to mental health. 
 
Extension of Tax Relief for Domestic Tourism Expenses
Special tax relief of up to RM1,000 on domestic tourism expenses will be extended for expenses incurred until 31 December 2022.
 
Extension of Tax Relief for Childcare Centres and Kindergartens Fees
Tax relief of up to RM3,000 on childcare centres and kindergartens fees will be extended for another two (2) years for YAs 2022 and 2023.
 
Extension of Tax Relief on the Purchase of Mobile Phone, Computer and Tablet
Special tax relief of up to RM2,500 on the purchase of mobile phone, computer and tablet will be extended to YA 2022.
 
Extension of Tax Relief for Deferred Annuity Premium Payments
Tax relief of up to RM3,000 on deferred annuity premium payments will be extended for another four (4) years until YA 2025.

Extension of Special Income Tax Rate for Non-Resident Individuals
Special income tax rate of 15% given to non-residents holding key positions in companies relocating their operations to Malaysia will be extended for applications received by MIDA until 31 December 2022.
 
Tax Exemption on Recognised e-Sports Tournament Prize Money
Income tax exemption will be given on income earned from recognized e-sports tournament prize monies won by e-sports athletes.
 
Tax Relief on expenses for EV Charging Facilities
Tax relief of up to RM2,500 will be given on expenses related to cost of installation, rental, purchasing including hire purchase of equipment or subscription fees for EV charging facilities.
 
Review of Real Property Gains Tax (“RPGT”) rate for individuals, permanent residents and other than companies
RPGT rate on disposal of real property and real property company shares by an individual, permanent resident and other than a company in the 6th year and thereafter after the date of acquisition will be reduced from 5% to 0%.
Government Grants

Grants for Rukun Tetangga Areas ("KRT")
Grant of RM6,000 for each KRT to support the agenda of unity and culture of volunteerism at the community level.

Financing for Youth Entrepreneurs
Bank Simpanan Nasional and Agrobank have earmarked financing of RM150 million to facilitate youths venturing into entrepreneurship.

Grants under the Malaysian Incentive Community Empowerment Initiative
Grants of up to RM10,000 for 2,000 associations registered with The Registry of Societies Malaysia in the category of welfare, social, safety and basic rights.

Matching Grants for the Malaysia Co-investment Fund
Matching grants of RM80 million for the Malaysia Co-investment Fund for funding through equity crowdfunding and peer-to-peer financing platforms.
 
Matching Grants for Aerospace Businesses
Matching grants of RM100 million for Bumiputera SMEs to explore business opportunities in the aerospace segment.
 
SME Digitalisation Grant Scheme
Enhancement of SME Digitalisation Grant Scheme in 2022 with the total fund increased to RM200 million of which RM50 million is dedicated towards Bumiputera micro-entrepreneurs in rural areas.
 
Matching Grants for Budget Hotels and Repair Grants for Home Stay Owners
RM30 million is allocated for matching grants for repair purposes for 738 budget hotels registered under MOTAC and repair grants for registered home stay owners.
 
Matching Grants for Arts and Cultural Programs Organisers
Matching grants of RM50 million for companies who organise programs related to arts and culture.
 
Smart Automation Matching Grants
Smart Automation matching grants of RM100 million for 200 companies in the manufacturing and service sector to automate their business processes. 
 
Matching Grants through Collaborative Research in Engineering, Science and Technology
Matching grants of RM12 million through Collaborative Research in Engineering, Science and Technology in the areas such as Gallium Nitride for application in LEDs and electric vehicles.
 
Technology Transformation Incentive Towards Industry4WRD
Technological transformation incentive of RM45 million for SMEs as well as mid-stage companies in the manufacturing and services sectors, in line with Industry4WRD.

Matching Grants for Various Social Programmes
Matching grants of RM100 million for NGOs to fund various social programmes assisting the vulnerable in terms of education, income generation and mental health.

 

Financing
Equity and Quasi-equity investment scheme
The Government will introduce a RM2.1 billion matching method through equity and quasi-equity investments to help companies facing gearing or leverage problems.

Funds available for SMEs
RM14.2 billion worth of funds will be made available in 2022 for SMEs, through SME Bank, PUNB, BPMB, AgroBank, MIDF, and MARA as well as through BNM Funds for SMEs.

Assistance to Listed Companies on Bursa
Companies listed on Bursa Malaysia that were affected by the Covid-19 pandemic will get an injection of additional funds through a Government-owned SPV in the form of equity instruments or other related instruments.

Business Financing Guarantee
Syarikat Jaminan Pembiayaan Perniagaan ("SJPP") will enhance the scheme with an additional guarantee limit of RM10
billion to provide guarantees for loans dedicated to Bumiputera businesses.

Other Key Initiatives

Bantuan Keluarga Malaysia ("BKM")

  • Assistance of RM2,000 for households earning less than RM2,500 per month with three (3) or more children.
  • Additional RM500 for single parent households earning a monthly income of up to RM5,000.
  • Additional RM300 for senior citizen households.

Discounts on Repayment of PTPTN Loans
Discounts for repayment of PTPTN loans from 1 November 2021 to 30 April 2022 will be given at:

  • 15% discount for full settlement.
  • 12% discount for at least 50% repayment.
  • 10% discount for repayment through salary deductions or direct debit according to the repayment schedule.

Incentive for Hiring Unemployed Malaysians
Employers who hire Malaysians who have not been actively employed will be given incentives in the form of: 

  • 20% of monthly salary for first six (6) months; and
  • 30% for the next six (6) months.
  • Subject to jobs with a monthly salary of RM1,500 and above.
Incentive for Hiring Unemployed Targeted Groups
Employers providing jobs with a minimum salary of RM1,200 to disabled persons, Orang Asli, ex-convicts, unemployed women for more than a year, single mothers and housewives will be given incentives in the form of:
  • 30% of monthly salary for first 6 months; and
  • 40% for the next six (6) months.
Extension of the Job Search Allowance ("JSA") under Employment Insurance System ("EIS")
Monthly allowance for a minimum of three (3) months up to a maximum of six (6) months at the payment rate of between 30% - 80% based on an assumed monthly wage capped at RM4,000.

Subsidy for Child Safety Car Seats 
Subsidy of 50% or up to RM150 will be given for the purchase of child safety car seats by B40 households.
 
Improvement of Incentive for Hiring Apprentices
Monthly incentive will be improved from RM800 to RM900 for a period of up to six (6) months starting from year 2022 for employers who employ school leavers and graduates aged 18 to 30 years.
 
eStart Programme
One-off payment of RM150 will be credited into the e-wallet for youths aged 18 to 20 as well as full-time students at institutions of higher learning.
 

Extension of EPF Contribution Rate of 9%
Minimum employees’ EPF contribution rate reduction from 11% to 9% will be extended up to June 2022.

Increase of SOCSO Insured Salary Ceiling 
SOCSO insured salary ceiling will be increased from RM4,000 to RM5,000 in 2022.

Expansion of SOCSO Coverage
SOCSO coverage will be expanded to include nine (9) new categories as follows:

1) Artists;
2) Hawkers;
3) Fisheries;
4) Agriculture;
5) Travel agents;
6) OKU;
7) “Orang Asli”;
8) “Orang Asli” of Sabah, Sarawak; and
9) Community Rehabilitation supervisors and staff.
 
Wage Subsidy Program ("WSP") for Tourism Industry Players
Allocation of RM600 million for WSP initiative for tour operators that experienced at least 30% reduction in revenue.
 
Financing Scheme for Microenterprises in the Informal Sector
Financing at 0% interest for a maximum loan amount of up to RM10,000, with a moratorium period of up to twelve (12) months; and Micro credit loans of up to RM75,000 at 0% interest for first six (6) months of the loan tenure, with a six (6) months moratorium.
 

Budget 2022 Crowe Chat Vol.7/2021

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