In 2020, the Malaysian Government had announced four stimulus packages worth RM305 billion to keep the engines of the economy running against the backdrop of a global pandemic. Coupled with the initiatives under Budget 2021, it had been hoped that this year would be a year of swift economic recovery given Malaysia’s past success in managing the Covid-19 outbreak. However, record high cases and widespread community infection had necessitated the re-imposition of the Movement Control Order and a declaration of a National Emergency, the first of its kind for the country in this century.
As a response to these new developments, the Malaysian Government has announced the PERMAI Assistance Package worth RM15 billion. This round of economic assistance is aimed at providing vital support to businesses and the general public who may be affected by the new lockdown measures. Continued cash assistance to selected groups, improvements in the i-Sinar program, tax reliefs for screening and detection, and the loan moratorium extensions stand out as key policy announcements to help uplift the ailing Malaysian economy amid this crisis.
Despite the popular notion that 2021 would see a return to “business-as-usual” practices, it would seem that greater uncertainties now lie ahead. The only certainty is that the economic challenges will likely remain and may only abate once global vaccine rollouts have reached optimum levels. In the interim, taxpayers are faced with further economic uncertainties along with questions as to how these initiatives will help them prevail through this storm.
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A special tax deduction which is equivalent to the amount of rental discount will be given to landlords of private business premises which are rented out to SMEs. In order to be eligible for this special tax deduction, the discount provided must be at least 30% of the original rental starting from 1 April 2020 to 31 March 2021.
The special tax deduction period will be extended to 30 June 2021 and expanded to include rental discounts given by landlords of private business premises which are rented out to non-SMEs.
From 1 April 2020 to 30 June 2021.
The extension and expansion of this special tax deduction on rental discounts given would incentivise landlords of private business premises to lend a helping hand to businesses during this difficult time. This may be a win-win situation to both parties.
The Inland Revenue Board has issued Frequently Asked Questions (FAQ) to provide clarification on the special deduction on rental discounts given by landlords of private business premises to SMEs pending the issuance of the relevant gazette order. Under the clarifications provided in the FAQ, it was acknowledged that SME companies had faced difficulties in meeting the SME criteria which in turn made it difficult for landlords to be able to claim the special tax deduction. With the expansion of the special tax deduction for private business premises rented out to non-SMEs, it is likely that landlords will find it easier to claim the special tax deduction.
On a separate note, landlords and tenants who are related parties may start revisiting their existing tenancy arrangements in order to maximise cash flow during this challenging period. Further, with the passing of the new laws on Transfer Pricing whereby the IRB may impose a surcharge of 5% on any Transfer Pricing adjustments made, emphasis must be placed on the related parties to relook at their transfer pricing documentation on an urgent basis to justify the updated rental rates.
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:
Based on the Budget 2021, the Government has proposed that the Wage Subsidy Program will 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.
The Wage Subsidy Program 3.0 is further enhanced to subsidise affected employers from all sectors but limited to those in the MCO states (“the enhanced WSP”). The enhanced WSP subsidises 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. The maximum number of employees entitled for this subsidy will be expanded from 200 employees to 500 employees. This enhanced WSP will be applicable for a period of 1 month.
1 January 2021 to 31 January 2021
The continuous effort from the Government to subsidise affected employers is a commendable move. With the expansion of the wage subsidy limit from 200 employees to 500 employees, the subsidy will further alleviate the cash flow issues confronted by affected employers and assist businesses to stay afloat during this pandemic. Further, the enhanced WSP will help to safeguard jobs and benefit more employees.
Notwithstanding the above, it will be good that the enhanced WSP would also apply to businesses located in all the states, instead of limiting this subsidy program to only businesses located in the MCO states. Further clarification will be required specifically the applicability of the enhanced WSP to businesses located in the Conditional Movement Control Order (CMCO) or Recovery Movement Control Order (RMCO) states.
The COVID-19 Act 2020 came into force on 23 October 2020 and was enacted with the intention to reduce the impact of COVID-19 for individuals and companies that are economically affected by the COVID-19 pandemic. Section 7 of the said Act relieves businesses and individuals from the performance of their contractual obligations. This means that creditors are not allowed to sue or enforce their contractual rights against counterparties. However, any dispute may be settled by way of mediation. The effective period covering the inability of parties to perform contractual obligations under the COVID-19 Act 2020 had expired on 31 December 2020.
In view of the Movement Control Order announcement and the high COVID-19 daily positive cases, the Government has agreed to extend the effective period of the inability to perform contractual obligations to 31 March 2021.
The inability to perform contractual obligations will include repayments under hire purchase or lease contracts and credit sales contracts. Such an amendment will benefit the Rakyat under the household income group of B40 and M40 as well as micro enterprises (i.e. enterprises with an annual sales turnover of less than RM300,000 or with employees of less than 5 persons) who are unable to meet their contractual obligations.
From 1 January 2021 to 31 March 2021.
Extension of the effective period covering the inability to perform contractual obligations is to prevent lawsuits to be initiated by the parties involved (i.e. financial institutions, businesses with credit sales contracts, etc.). However, disputes can be resolved through the COVID-19 mediation center which is established under the Prime Minister’s Department if the disputed sum is RM300,000 and below.
Full Sales Tax exemption is given on locally assembled cars whilst a 50% Sales Tax exemption is given on imported cars. This Sales Tax exemption was effective from 15 June 2020 to 31 December 2020.
The above-mentioned Sales Tax exemption on the purchase of passenger cars will be extended to 30 June 2021.
From 15 June 2020 to 30 June 2021.
The intention of the Government to extend this Sales Tax exemption on the purchase of passenger cars by another 6 months is to continue to boost the automotive sector which had been adversely affected by the Covid 19 pandemic. The extension will also benefit buyers as the selling price of passenger cars may be reduced by approximately 5% to 10%. However, given the current pandemic situation, the public may not find it a priority to purchase new passenger cars due to travel restrictions and other more pressing needs.
Any person who has been granted a taxi cab license, airport taxi cab license or a hire car license is exempted from payment of Excise Duty and Sales Tax on the purchase of motor vehicles.
However, the person is required to pay back the Excise Duty and Sales Tax if there is any disposal, transfer or conversion of the vehicle into private use and the motor vehicle is owned by the person for less than a period of 7 years from the date of purchase.
It is proposed that the person is required to pay back the Excise Duty and Sales Tax on the disposal, transfer or conversion of the vehicle into private use if the motor vehicle is owned for less than 5 years from the date of purchase.
From 1 January 2021 to 31 December 2021.
With the applicability of the MCO 2.0 in most of the states, it is expected that the taxi ridership will be lower than that during pre-MCO 2.0 since no local tourism activity is allowed. Furthermore, many employees will continue to work from home. As a result, some of the taxi drivers may decide to cease their existing taxi business. This new proposed measure would reduce the burden of the taxi driver for any disposal of the taxi which is owned for more than 5 years.
The Bantuan Prihatin National (BPN) 2.0 was introduced by the Government in a special announcement under Kita Prihatin on 23 September 2020. The amount of assistance channelled under BPN 2.0 is as follows:
The BPN 2.0 payment will be made in two instalments. The first instalment payment was made on 26 October 2020 and the second instalment is expected to be paid in January 2021.
It is proposed that the second instalment payment of the BPN 2.0 will start from 21 January 2021 onwards.
Meanwhile, the phase one of BPR will have the first instalment payment as follows:
Payment starting from 21 January 2021 for BPN 2.0. There is no mention on the payment date for BPR.
The proposed earlier payment of second instalment has come in time with the implementation of Movement Control Order (MCO) 2.0. As B40 and M40 individuals are the ones most affected under the implementation of MCO, hence accelerating the BPN 2.0 assistance will certainly help to relieve the cash flow crunch of B40 and M40 individuals.
PresentIt was proposed in the Budget 2021 that a resident individual is entitled to claim up to RM8,000 on medical expenses for serious diseases for self, spouse and child including fertility treatment for self and spouse. The relief also includes expenses incurred for full medical check up for a maximum amount of RM1,000 which cover the following costs of vaccination:-
Effective DateYear of assessment 2021
This proposed measure will alleviate the burden of the people to bear the cost of Covid-19 screening at a time when the outbreak is rising in numbers by the day. The screening will include antibody tests and RT-PCR which are commonly known as swab tests undertaken at clinics or hospitals approved by the Ministry of Health, Malaysia (MOH).
Under the Malaysia Short–Term Economic Recovery Plan (STERP), a special income tax relief of up to RM2,500 is given to individuals for the purchase of a personal computer, smartphone or tablet (not being used for the purposes of his own business) from 1 June 2020 to 31 December 2020 and is claimable in the year of assessment (YA) 2020. This relief is given in addition to the current lifestyle relief of RM2,500 for expenses incurred in respect of the following:-
It is proposed that the special income tax relief period be extended to 31 December 2021.
YA 2020 and YA 2021
As individuals embrace the new normal in this current Covid-19 situation, whereby one is required to work from home without jeopardising work quality, it is important that the digital tools are up to date to ensure seamless flexible working arrangements. This measure also allows parents to buy digital equipment to facilitate studies by their children at home. As such, the initiative to extend the period for the special lifestyle relief until 31 December 2021 is highly commendable and will provide further tax savings for resident individuals in YA 2021.
Other Economic Stimulus Packages and Insights
COVID-19 Impact and Response