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COVID-19: INSIGHTS ON MALAYSIAN TAX IMPACT

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COVID-19: INSIGHTS ON MALAYSIAN TAX IMPACT

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Food & Beverages (F&B) Industry

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Provide more subsidies for MSME and SME companies

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Provide more subsidies for MSME and SME companies

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Provides subsidies on the cleaning and disinfection services for the companies that are exposed to the COVID-19.

Increase the wage subsidy and grant for the industry in order to help them cover the expenses during the COVID-19 pandemic.

Subsidies to the industry by paying for part of the cost of the raw material of a good by reimbursements or by paying for part of the cost a consumer would pay to purchase a good.

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Provide high tax exemption on compensation for loss of employment

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Provide high tax exemption on compensation for loss of employment

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Increase the tax exemption for the compensation given due to loss of employment.

For example, the tax exemption can be increased to an amount of RM12,000 (currently RM10,000) for each full year of service.

To minimize the financial problems of the employees who have lost their jobs

To support the living of the employees who are in an unemployed status while they are searching for new jobs during the COVID-19 crisis.

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Extend the period of SST penalties' full exemption / Zero SST

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Extend the period of SST penalties' full exemption / Zero SST

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SST penalty percentage:

10% of the amount not paid after the last date of the first 30 days period.

15% of the amount not paid after the last date of the second 30 days period.

15% of the amount not paid after the last date of the third 30 days period.

Provide SST penalty full exemption between the MCO period in March 2020 to April 2020.

Provide 50% penalty remission on SST late payment in July 2020 to September 2020.

Extend the period of full exemption on SST penalty which covers until the end of 2021.

To help the F&B companies which are still under financial burdens.

Abolish the 6% SST which becomes a burden to both F&B companies and their customers.

Prices will become much cheaper and the operators will need not compete for the prices with others.

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Develop a long-term rental deduction for business premises

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Develop a long-term rental deduction for business premises

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Establish a long-term plan for the SME business premises which the tenant's business income had decreased by 30%.

Adopt Canada (CERS) as an example. Using the previous year's revenue as a basis for calculating their discount rate for the tenant.

Create a department and supervise whether applicants meet the standards and supervise whether there is fraud in the operating procedures.

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Provide more tax incentives for start-up companies

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Provide more tax incentives for start-up companies

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Not stable in the industry.

Difficult to survive during this COVID-19 pandemic, especially for start-up businesses.

Reduce their tax burdens by providing more tax incentives.

For example, start-up businesses only have to pay 10% of their taxes for half a year (6 months).

Save more funds to continue their businesses.

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Applicable period: April 2020 - June 2020
Deductible amount: Equal to the rental reduction given to tenants
Eligibility:

Taxpayers who rent their business premises to qualified SMEs (Small and medium-sized enterprise) tenants.

The premises are used by the tenants to carry out businesses, such as warehouses, stalls, and bazaars.

The landlord is a taxpayer who has rental income under Section 4(a) and 4(d) of the Income Tax Act 1967.

Rental reduction is 30% or above of the rental rate.

Advantages to companies:

Lower tax incidence in some taxpayers’ cases, while others instead may see an actual or tax rental loss.

To reduce the burden of both landlords and tenants.

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Total allocation: RM1.2 billion
Applicable period: 1st April 2021 - 15th April 2021
Amount of subsidy: RM3,000 one-off payment

Eligibility:

The owner must be a Malaysian citizen.

Must be carrying out a Micro-Enterprise with annual sales or turnover of less than RM300,000.

Must be carrying out the number of full-time employees does not exceed four people excluding owner.

The firm must still active in business operation at the time of application.

Advantages to companies:

Income support for the companies to pay for wages, rents, intermediate goods, interest on the debt.

To avoid problems such as the lay-off of employees, temporary inability to pay suppliers, and bankruptcy.

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Deduction or Allowance on PPE, thermal scanners and COVID-19 tests

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Deduction or Allowance on PPE, thermal scanners and COVID-19 tests

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Applicable period: 2020 - Current
Deduction / Allowance:

Tax deductions on disposable PPE (face masks, gloves) under Section 33 (1) of the Income Tax Act 1967.

Capital allowances on non-disposable PPE for the prevention of COVID-19, under Schedule 3 in Income Tax Act 1967.

Double deduction on COVID-19 screening of employees.

Eligibility:

The companies that buy the Personal Protective Equipment (PPE) or cover the expenditure of the COVID-19 tests for their employees.

Advantages to companies:

Provide short-term stability to the F&B companies during the COVID-19 crisis

Do not have to worry about covering the cost of purchasing PPE, such as gloves and face masks, which will be heavily used in the F&B industry, for their employees.

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Applicable period: 1st April 2020 - Current
Eligibility:

Pay in capital and stock equal to or not exceed RM2.5 million.

Annual revenue not exceeding RM50 million.

Not affect for the Eligibility condition:

No difference between manufacturing and services.

Number of employees

Related parties company who exceed 2.5million capital still meet the condition

Advantages to companies:

To help the companies who are facing financial issues to distribute the payment for their income tax.

To enable companies to stretch the cost of expenses over a manageable period of time.

To reduce the financial stress when the company was not profitable.

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Applicable period: 1st October 2020 – 31st December 2020

Amount of subsidy:

1. RM600 per month per employee for a maximum of 3 months (for existing applicants)

2. RM600 per month per employee for a maximum of 6 months (for new applicants)

Eligibility:

Revenues or sale decreased by 30% or more year-on-year after Recovery Movement Control Order (RMCO)

Local employees who earn RM4,000 or less per month

Employers are forbidden from retrenching all the employees with earnings of RM4,000 or below

Employers are allowed to reduce working hours or wages upon negotiations

Tax Implication:
Taxpayers are exempted from tax in respect of income received in relation to allocations given by the government in the form of a grant or subsidy under Income Tax (Exemption) (No.22) Order 2006. However, the relevant expenses incurred in relation to the said subsidy are not deductible for tax purposes when charged to the profit or loss.

Advantages to companies:

To help the companies which face financial problems during the COVID-19 crisis to continue their businesses.

To avoid any dismissal which may cause the employees to lose their jobs.

To avoid the problem of lacking employees.