On 17 March 2021, the Malaysian Government unveiled the Strategic Programme to Empower the People and the Economy (PEMERKASA) stimulus package valued at RM20 billion of which RM11 billion constituted a direct fiscal injection.
The PEMERKASA stimulus package comprises a total of 20 strategic initiatives that aims to boost economic growth, support businesses and provide targeted assistance to the people and sectors that are still affected by the pandemic and/or the movement control order.
It is timely that the Government introduced this PEMERKASA stimulus package to revitalise the country’s economy.
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The Government introduced the Wage Subsidy Program to subsidise affected employers in respect of each local employee earning RM4,000 and below per month, according to the following basis:
Size of enterprise
More than 200 employees
76 to 200 employees
Less than 76 employees
RM600 per month for each local employee
Note: The maximum number of employees entitled for this subsidy is 200 employees
RM800 per month for each local employee
RM1,200 per month for each local employee
Based on the Budget 2021, the Government proposed that the Wage Subsidy Program would subsidise employers of targeted sectors (i.e., tourism and retail sectors), at the rate of RM600 per month for employees earning RM4,000 and below per month. In the PERMAI Assistance Package, the Wage Subsidy Program 3.0 was further enhanced to subsidise affected employers from all sectors in the MCO states (the enhanced WSP) for the month of January 2021. The enhanced WSP subsidised the employers at the rate of RM600 per month for each local employee earning RM4,000 and below per month, for companies with more than 200 employees and up to a maximum of 500 employees.
The Government will allocate a sum of RM700 million for the extension of the Wage Subsidy Program 3.0 for another 3 months particularly for those in the tourism, wholesale and retail sectors as well as other types of businesses that were affected by the implementation of the MCO such as gymnasiums and spas.
The current Wage Subsidy 3.0 programme is available for applications made between 1 January 2021 to 30 June 2021.
The continuous effort from the Government to subsidise affected employers is a commendable move. The subsidy will alleviate the cash flow issues confronted by affected employers and assist businesses to stay afloat during this pandemic. Further, it will help to safeguard jobs and benefit more employees.
Further clarification is required specifically on the application of the subsidy for the 3 months from February 2021 to April 2021.
Companies in the tourism industry such as travel agencies, hoteliers and airlines were given a deferment for payment of their monthly tax instalments for a period of 9 months from 1 April 2020 to 31 December 2020. This was applicable to monthly tax instalments that fell between 1 April 2020 to 31 December 2020.
In light of the continuing pandemic, companies in the tourism industry such as travel agencies, hoteliers, etc. and in selected industries such as cinemas and spas will be given a deferment for payment of their monthly tax instalments for the period from 1 April 2021 to 31 December 2021.
For monthly tax instalment payments falling between 1 April 2021 to 31 December 2021 and the application for deferment must be submitted to the Inland Revenue Board of Malaysia (IRBM).
This proposed measure will help to ease the cash flow of the companies in these industries for a period of 9 months.
Currently, businesses are allowed a single tax deduction on expenses incurred for the rental of premises for their employees.
An additional tax deduction, limited up to RM50,000, will be given to companies operating in the manufacturing sector and service providers related to the manufacturing sector registered with the Ministry of International Trade and Industry (MITI). Such companies are required to comply with the [email protected] audit requirement.
Voluntary registration with MITI for the [email protected] initiative will commence on 1 April 2021.
This incentive promotes a conducive environment in the workplaces and dormitories for employees of companies and will translate to a safe working environment.
Businesses are allowed a single tax deduction on expenses incurred on Covid-19 detection tests for employees.
An additional tax deduction will be given to all businesses on the expenses incurred on Covid-19 detection tests for employees.
Until 31 December 2021.
This incentive encourages businesses to absorb the cost of Covid-19 screening tests on behalf of their employees which in turn will lessen the financial burden of the employees.
Effective from 1 September 2017, accommodation operators who are registered under the Tourism Tax Act 2017 (i.e., registered operators) are required to charge a Tourism Tax to foreign tourists. The Tourism Tax is fixed at RM10 per room per night.
Effective from 1 July 2020 to 30 June 2021, the registered operators are exempted from charging the Tourism Tax to foreign tourists.
Effective from 1 September 2018, accommodation service providers who are registered under the Service Tax 2018 (i.e., registered persons) are required to charge Service Tax on the provision of all taxable services (i.e., accommodation and other related services). The Service Tax is fixed at 6%.
Effective from 1 March 2020 to 30 June 2021, the registered persons are exempted from charging Service Tax on the accommodation and other related services.
The above-mentioned Tourism Tax exemption and Service Tax exemption will be extended up to 31 December 2021.
1 July 2021 to 31 December 2021.
The Government is looking forward to boost the tourism industry by extending the Tourism Tax and Service Tax exemptions on the accommodation services which had been adversely affected by the Covid-19 pandemic.
The extension will benefit the consumers as the price charged by the operators of accommodation premises would be reduced by RM10 and 6% respectively. It is hoped that the exemptions would encourage local tourists as well as foreign tourists to visit Malaysia once the Covid-19 pandemic is under control.
Presently, admission fees to places of entertainment are subjected to 25% Entertainment Duty.
A 100% Entertainment Duty exemption will be granted on the admission fees to entertainment places (e.g., theme parks, stage performance, sports events and competitions, cinemas, etc). This Entertainment Duty exemption is only applicable to places of entertainment in the Federal Territories of Malaysia (i.e., Kuala Lumpur, Putrajaya and Labuan).
The Covid-19 pandemic and implementation of the MCO had badly affected the tourism industry, especially the entertainment sector. The entertainment sector requires higher reinvestment costs to improve its facilities. In addition, the entertainment premise operators (e.g., theme park operators, etc.) are the key players that boost the tourism industry. The development of the tourism industry can improve living standards through the creation of employment opportunities.
It is hoped that the entertainment premise operators can improve the productivity, quality and competitiveness of the entertainment services following the full exemption on Entertainment Duty.
Presently, assembled motorcycles are subjected to Excise Duty.
A 100% Excise Duty exemption will be given on locally assembled motorcycles. This Excise Duty exemption is only applicable for locally assembled motorcycles with engine capacity of 150cc and below.
1 April 2021 to 31 December 2021.
The existing Excise Duty exemption on locally assembled motorcycles is only applicable for Malaysian citizens working abroad who return and work in Malaysia under the Returning Expert Programme.
By expanding the Excise Duty exemption on locally assembled motorcycles, the Government intends to boost the automotive sector which had been adversely affected by the Covid-19 pandemic.
Tour operators were eligible for the following income tax exemptions on statutory income derived from domestic and group inclusive tours up to YA 2020:
It is proposed that the above tax incentives for tour operators be extended up to YA 2022.
For the YAs 2021 and 2022.
The tourism industry is severely affected during the Covid-19 pandemic and this extension provides timely stimulating effects to the tourism industry
A special personal income tax relief of up to RM1,000 is given to resident individuals for the following domestic travelling expenses:
The special income tax relief will be expanded to include tour packages purchased from tour agencies registered with the MOTAC.
For expenses incurred up to 31 December 2021.
Resident individuals who undertake domestic travelling may enjoy additional tax savings of up to RM300 (RM1,000 relief x the maximum individual tax rate of 30%) in the YA 2021.
Other Economic Stimulus Packages and Insights
COVID-19 Impact and Response