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Tax Rebate (RM20,000 per year) for Newly Established SMEs

(Updated on 24 Dec 2021)

An income tax rebate up to RM20,000 per year for 3 years of assessment was given to newly established small and medium enterprises (SMEs) between 1 July 2020 to 31 December 2021 pursuant to the Penjana Economic Recovery Plan.

This incentive has now been extended to 31 December 2022.

The yearly tax rebate can be utilised to offset the tax payable for the year of assessment. This means that a qualified SME could save up to RM60,000 of tax for the 3 years of assessment.

Key requirements:

i. Resident companies or Limited Liability Partnership (LLP)

ii. Commenced operation between 1 July 2020 to 31 December 2022.

iii. The amount of rebate is equivalent to the capital and operational expenditure incurred subject to a maximum amount of RM20,000 for each year.

iv. Applicable from Year of Assessment 2021 onwards (for 3 years of assessment).

v. Paid up capital / capital contribution of not more than RM2.5 million at the beginning of the basis period and gross business income not more than RM50 million for that Year of Assessment.

In addition, the company must not be owned directly or indirectly by:

  • A company that has a paid up capital of more than RM2.5 million, or

  • Multi-national companies; or

  • Government Linked Companies.

vi. The Minister may impose other conditions as he thinks fit.

Other conditions*

i. The newly established entity must operate in a different premise than that of its related company (if applicable);

ii. The new entity must use a different plant, equipment and facility than that of any related company and that the plant, equipment and facility are not transferred from any related company (if applicable);

iii. All employees (not including key personnel) must be different employees that that of any related company (if applicable);

iv. Partnership or company that changes into Limited Liability Partnership or vice versa is not eligible.

*These other conditions are not mentioned in the Income Tax Act but would be detailed out by the Inland Revenue Board soon.


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