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Summary of Malaysia Budget 2021

On 6 November 2020, YB Senator Tengku Dato’ Sri Zafrul Tengku Abdul Aziz, Finance Minister has tabled Budget 2021 themed “Stand United, We Shall Prevail”.

The following is the summary of tax measures for Malaysia Budget 2021.

 

Personal Tax

• Income tax rate for resident individuals be reduced by 1% from 14% to 13% for the chargeable income band of RM50,001 to RM70,000 from YA 2021.
• Relief on expenses for medical treatment, special needs and parental care to be increased from RM5,000 to RM8,000.
• Relief for medical expenses for taxpayer, spouse and children with serious diseases to be increased from RM6,000 to RM8,000. The relief for full medical check-up expenses is to be increased from RM500 to RM1,000. Scope of tax relief to be expanded to include vaccination expenses of up to RM1,000 for taxpayer, spouse and children.
• Income tax relief for disabled spouse be increased from RM3,500 to RM5,000.
• Income tax relief for lifestyle be increased from RM2,500 to RM3,000 (the additional RM500 is allocated for the cost of purchasing sports equipment, entry/rental fees for sports facilities and participation fees in sports competitions). The scope of relief is to be expanded to include subscription for electronic newspapers.
• Income tax relief up to RM3,000 on contribution to PRS be extended until 2025.
• Income tax relief up to RM8,000 on net annual savings in SSPN to be extended for another 2 years for YA 2021 and YA 2022.
• Income tax relief of RM7,000 be extended to include fees for attending up-skilling and self-enhancement courses in any field of skills recognised by the Department of Skills Development, Ministry of Human Resources (up to RM1,000 for YA 2021 and 2022).
• Income tax exemption for compensation for loss of employment be increased from RM10,000 to RM20,000 for each full year of service with the same employer or companies within the same group.
• Application period for Returning Expert Programme (REP) incentive be extended for another 3 years and revised as follows:

1. flat rate of 15% on employment income for a period of 5 consecutive YA; and
2. exemption on import duty and excise duty for purchase of a CBU vehicle or excise duty exemption for purchase of a CKD vehicle (total duty exemption limited up to RM100,000).

 

Corporate Tax and Tax Incentives

• Income tax exemption for Green Sustainable and Responsible Investment (SRI) sukuk grant be extended for another 5 years from 31 December 2020 and be expanded to include all SRI sukuk and bonds approved by Securities Commission.
• Further tax deduction on remuneration paid to employ senior citizens, ex-convicts, parolees, supervised persons and ex-drug dependants to be extended for five years to YA2025.
• The existing income tax exemption for export of private healthcare services be extended for another 2 years from YA 2021 until YA 2022.
• Individual investors be given income tax exemption on aggregate income equivalent to 50% of the amount of investment made in equity crowdfunding, up to a maximum of RM50,000 for each YA, and subject to meeting relevant conditions.
• Existing tax incentives for companies in the manufacturing sector relocating its operations to Malaysia is expanded to include companies in selected services sector including companies adapting Industrial Revolution 4.0 and digitalisation technology.
• Manufacturers of pharmaceutical products including vaccines especially COVID-19 vaccine be given income tax rate of 0% up to 10% for the first 10 years; and income tax rate of 10% for the subsequent period of 10 years.
• Tax incentive for commercialisation of R&D products be extended to private higher education institutions.
• A new incentive scheme known as Global Trading Centre be introduced. A 10% income tax rate for a period of 5 years which is renewable for another 5 years is given under this tax incentive.
• Principal Hub incentive for companies undertaking qualifying services activities be extended for another 2 years. The minimum condition of the number of high value job, annual operating expenditure and the number of key post for renewal of the tax incentive for the second 5 years be relaxed.
• The tax incentives for maintenance, repair and overhaul (MRO) activities for aerospace, building and repair of ships, Bionexus status and economic corridor developments (East Coast Economic Region Development Corridor, Iskandar Malaysia and Sabah Development Corridor) will be extended to 2022.
• Tax incentive for manufacturers of Industrialised Building Systems (IBS) components be extended for another 5 years.

 

Stamp Duty

• Extension of stamp duty exemption to revive abandoned housing projects until 31 December 2025.
• Extension of stamp duty exemption for insurance policies and takaful certificates for ‘Perlindungan Tenang’ productsprojects until 31 December 2025.
• Stamp duty exemption on instruments of transfer and loan agreements for first residential property up to RM500,000, for SPAs executed between 1 January 2021 to 31 December 2025.

 

Indirect Tax

• Sales tax exemption for the purchase of locally assembled bus including air conditioner will be extended for a period of 2 years effective from 1 January 2021 to 31 December 2022.
• Sales tax shall be imposed on imported cigarettes for transhipment with refund or drawback facility be given for re-export from 1 January 2021.
• Cigarettes and tobacco products will be subject to sales tax in all duty free islands and any free zones that have been permitted retail sale of duty free cigarettes with effect from 1 January 2021.
• Imposition of tourism tax be extended to accommodation premises booked through online platform providers with effect from 1 July 2021.