On 27 February 2020, the Malaysian Government announced a RM20 billion Economic Stimulus package in response to the coronavirus (COVID-19) outbreak
The government will release RM3.5 billion as soft loans to SMEs. This will be provided by financial institution under the guidance of Bank Negara Malaysia.
Employees are given an option to reduce their EPF contribution rate – this is aimed at improving consumer spending.
Tax measures
Companies affected by the COVID-19 to be allowed to revise their profit estimation for the year 2020 with respect to monthly income tax instalment payments without penalty. Usually, companies are allowed to revise their tax estimation in the 6th and 9th month of the basis period only. But under the stimulus plan, companies may make an early revision in the 3rd month - if the 3rd instalment falls in the year 2020. Example A company ends its financial year on 31 Dec. The company may revise its tax estimation downward by 31 April 2020 (the 3rd month) so that it can pay a lower monthly tax instalment or zero instalments for the rest of the basis period. This can be done by way of a special application to the Malaysia Inland Revenue Board. Having utilised this concession, it does not preclude the company from further revising its tax estimation in June and Sept 2020, whether upward or downward. This would give the company more flexibility in managing its cash flow. For companies with financial year end other than 31 Dec, revision can be made too in the 3rd and 6th and 9th month, as the case may be.
Service tax exemption for hotels.
Personal tax relief for local travelling expenses such as accommodation (only applicable to hotels and accommodation registered with the Ministry of Tourism) and entrance fees.
To allow deferment of monthly income tax instalment payments for businesses in the tourism sector.
Stamp duty exemption on business loan agreement for loan restructuring and rescheduling of loans purposes.
Accelerated capital allowances over a two-year period on expenses incurred on machinery and equipment including ICT.
The Government will provide a tax deduction of up to RM300,000 on renovation and refurbishment cost. This may be a good time to look into expanding your office or business premises as renovation costs are normally not allowed for tax deduction.
Double tax deduction for establishment of regional offices by international shipping companies.
Review on condition for purchase of duty-free goods for persons entering Malaysia.
The approval and facilitation process of licensed manufacturing warehouse (LMW) and free industrial zone (FIZ) in conducting value-added activities to be improved and simplified at the Royal Malaysian Custom Department level and the list of approved activities to be expanded.
Port operators will be given import duty and sales tax exemption on imported or locally purchased of equipment and machinery used directly in port operation from 1 April 2020 to 31 March 2023.
Commentary by StanleyCo
Legislation to give effect to these measures will be introduced into Parliament when the Parliament resumes.
As certain incentives in the economic package will only be available for a short period of time, businesses should consider taking action as soon as practicable.
It is hoped that state governments would release their own stimulus packages soon.
If you are a client of StanleyCo, please contact us for free consultation on how these stimulus plan could assist you. We can also refer you to our selected banks for SME soft loans under this stimulus plan.