Quarterly Market Outlook
Malaysia’s new Budget brings tax reforms focussed on the well-being of Malaysians and the growth of the entrepreneurial economy. Whether you are serving your obligation as a responsible citizen or as a good corporate citizen, there are key tax changes that could save you thousands of ringgit or more. You just have to know where to look.
These are the areas where you can maximise tax benefits in the new environment.
The main focus of the 2019 Budget is Industry 4.0 and how it can make SMEs more competitive on the global front. Align your business operations towards this as well as its other key economic strategies, and the result could be an unexpected double win—business growth and potential tax breaks to boot.
What is Industry 4.0?
Industry 4.0 or the fourth industrial revolution is transforming the way manufacturers, farmers, retailers and service providers operate through smart, automated and connected technology such as the Internet of Things (IoT), Big Data and Artificial Intelligence (AI). Examples include smart factories, remote engineering and autonomous cars. Malaysian businesses migrating to Industry 4.0 are beginning to profit from significantly enhanced product quality, improved efficiency and huge materials and labour cost-savings, resulting in higher productivity. Because it is also the new global industry standard, Industry 4.0 is increasingly becoming a pre-requisite to securing business deals and markets.
Migrating to Industry 4.0? A multitude of tax incentives await you. If you haven’t, these tax breaks might just help convince you.
The Industry4WRD policy offers numerous tax incentives in the following areas. I4.0 Readiness Assessment (I4.0-RA):
Industry4WRD Vendor Development Program:
You may have previously unreported income received in offshore accounts. There’s still time to take advantage of these special disclosure rates.
Human Capital Development:
Human Capital Development (cont’d):
Special Voluntary Disclosure Program penalty rates offered to taxpayers who voluntarily declare any unreported income as follows:
After these periods, penalty rates will range from 80 percent to the maximum of 300 percent.
Deadline 30 June 2019.
If you are a small or medium-sized enterprise, this tax break will help you put your money into much needed areas.
The tax rate for firms or LLPs with less than 2.5 million ringgit in paid-up capital has been reduced from 18 to 17 percent on chargeable income of up to 500,000 ringgit.
Effective from YA 2019.
If you are doing business in or with the Labuan international financial hub, there are new tax treatments that greatly favour your day-to-day operations.
Key tax restrictions at the Labuan International Business FInancial Centre (IBFC) have been removed. They include the tax ceiling of 20,000 ringgit, restrictions on transactions conducted in ringgit, and restrictions of transactions between Labuan entity and resident of Malaysia. Resident who transacts with a Labuan entity is also entitled to tax deductions on expenses incurred, limited to 3 percent of the allowable expenditure.
Effective from 1 January 2019.
Also look out for land auctions by the government. They could prove to be huge savings in business assets.
Scheduled and staggered land sales via auctions to the highest bidder, based on conditions imposed on the land.
Effective from 1 January 2019.
Does your company hire a large number of senior workers? If so, there could be substantial tax savings to be made here.
Further deduction given on the remuneration paid to full-time employees who are above 60 years of age or ex-convicts whose monthly remuneration does not exceed 4,000 ringgit.
Effective from 1 January 2019.
If you’re in the farming business, you may be caught in the current market‘s low produce prices. You’ll be pleased to know of some government assistance.
Reduced levies on foreign workers in the agriculture and plantation sectors who have served for ten years or more, from 10,000 ringgit to 3,500 ringgit per worker per annum.
Effective from 1 January 2019.
There are huge profits to be made in the green technology sector, as proven by many sustainable economies around the world. If you are already thinking about the green tech business or planning to make your building more environmentally-sustainable through the purchase of green assets, you may be eligible for green investment tax allowances.
The Ministry of Energy, Science, Technology, Environment & Climate Change’s Green Tech Malaysia website announced unspecified amounts of special investment tax allowances for green projects and green technology service companies as well as the purchase of green assets. The incentives are offered in three categories:
Applications for GITA-Project and GITE are to be submitted to the Malaysian Investment Development Authority (MIDA) while applications for GITA-Asset are to be submitted to the Malaysian Green Technology Corporation (GreenTech Malaysia).
MyHIJAU Directory is a comprehensive list of certified green product and service providers carrying the MyHIJAU mark, an official green recognition scheme endorsed by the government of Malaysia. The directory is available on the official MyHIJAU Malaysia (Malaysia’s Green Recognition Scheme) website.
If you’re someone who often gives back to your alma mater or make donations to your child’s school, you may choose to contribute through your company to enjoy further tax deductions, While this area applies specifically to the upgrading of school infrastructure, this may likely include donating a piece of your company’s real estate to a school.
In addition to current deductions on donations to institutions approved by the Ministry of Finance, donations for the purposes of upgrading infrastructure to National Schools and Public Institutions of Higher Learning (IPTA) registered with the Ministry of Education is now tax deductible.
Details to be announced.
Believe in investing in young blood? 2019 could be the year for your company to benefit from their fresh ideas and further tax deductions.
20 million ringgit has been allocated to the Human Resource Development Fund to benefit 4,000 youths by launching the Apprenticeship and Graduate Enhancement Programme for employability. Employer portion of EPF contributions is cut to 4 percent from the current 6 percent while the mandatory employee contribution for this group is zeroed; plus the provision of additional tax deductions to employers who employ this group up to a monthly salary of 4,000 ringgit.
Effective from 1 January 2019.
Enjoy further deductions when you help your employees settle their remaining education loans.
Tax relief for companies that help settle remaining PTPN loans of their employees for the year ending 2019.
Effective for payments made from 1 January 2019 to 31 December 2019.
Despite the lack of goodies, the 2019 Budget did put in place a number of tax and employee benefits focussed on the well-being of Malaysians. To take advantage of them in your coming year’s tax returns, it is useful to plan the year ahead—especially in the areas of property purchases, insurance and religious holidays.
Is your child a fresh graduate enrolled in the government’s Human Development Resource Fund programme? Remind him or her that he or she is relieved from the mandatory employee EPF contributon.
The government has zeroed the mandatory employee EPF contribution for youths employed through the Apprenticeship and Graduate Enhancement Programme for Employability programmes.
Effective from YA 2019.
Currently as an individual taxpayer, you are eligible to claim income tax relief on EPF contributions and payments for life insurance pemiums or takaful of up to 6,000 ringgit per assessment year.
You are now eligible for 7,000 ringgit of tax relief on EPF contributions and life insurance premiums or takaful separately—at up to 4,000 ringgit and 3,000 ringgit respectively.
Effective from YA 2019.
If you are planning for Haj, it is good to know that you are entitled to paid leave for up to a week.
New employee allowances include a total unrecorded leave of seven (7) working days for Malaysians going on faith-based undertakings such as religious pilgrimages.
Effective from 1 January 2019.
The Budget’s ‘Housing For All’ policy introduces a number of stamp duty exemptions to encourage first-home ownership. They could also equate to huge savings if you’re planning to help your children purchase their first homes.
Stamp duty exemptions on residential property purchases and their limited effective periods are as follows:
This is only the tip of the iceberg. There are fundings and allocations across all sectors—such as tourism incentives and the new Airport REIT—that could help you plan your spending, investments and business for the year ahead. For the full details, look up your area of interest in the 2019 Budget made available on the Ministry of Finance website. Or for a comprehensive analysis, view the RHB Research Institute’s November article, Strategy—Malaysia 2019 Budget, on our Merge website.
Meanwhile, current economic times call for us to be mindful of how and where we spend. Understanding personal money management and how wealth can be maximised will matter greatly in 2019. Let your Relationship Manager know how he or she can assist you in the areas of wealth management and investments.
Notable areas of individual well-being also include proposed free mammograms, increased funding for the treatment of rare diseases, and a nationwide health screening programme.
Other new employee benefits include the formation of an Industrial Appeals Court to help resolve employee-employer disputes which could otherwise lead to expensive court cases.
Get in touch with RHB Premier today.
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