Key Highlights of the Malaysia Budget 2022
Crowe Chat Vol.7/2021
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.
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.
Highlights at a Glance
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.
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 identification number ("TIN")
TIN will be implemented beginning year 2022 to broaden the tax base.
Extension of Tax Deduction for Companies under the Safe@Work Programme
Companies registered under Safe@Work 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 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
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
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.
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.
Stamp duty exemption for loan restructuring or rescheduling will be extended for agreements executed up to 31 December 2022.
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.
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.
The Sales Tax exemption period for purchase of passenger cars will be extended to 30 June 2022.
The Tourism Tax exemption period will be extended to 31 December 2022.
The Entertainment Duty exemption period on admission fees to entertainment places in the Federal Territories will be extended to 31 December 2022.
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 will be given for the importation and sales of electric vehicles
Sales Tax will be imposed on the sales of Low Value Goods to consumers in Malaysia from 1 January 2023.
Service tax will be imposed on goods delivery services provided by service providers including e-commerce platforms from 1 July 2022.
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 will be given on brokerage services related to trading of shares listed on Bursa Malaysia from 1 January 2022.
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.
The scope of excise duty on sugar sweetened products will be expanded to include additional pre-mixed preparation products.
Sales Tax will be imposed on the sales of Low Value Goods to consumers in Malaysia from 1 January 2023.
Service tax will be imposed on goods delivery services provided by service providers including e-commerce platforms from 1 July 2022.
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.
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 of RM80 million for the Malaysia Co-investment Fund for funding through equity crowdfunding and peer-to-peer financing platforms.
Matching grants of RM100 million for Bumiputera SMEs to explore business opportunities in the aerospace segment.
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 of RM50 million for companies who organise programs related to arts and culture.
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.
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.
- 30% of monthly salary for first 6 months; and
- 40% for the next six (6) months.
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 of 50% or up to RM150 will be given for the purchase of child safety car seats by B40 households.
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.
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.
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.
Allocation of RM600 million for WSP initiative for tour operators that experienced at least 30% reduction in revenue.
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.
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