Highlights of Malaysia Budget 2022
On 29 October 2021, Tengku Dato Sri Zafrul Tengku Abdul Aziz, Finance Minister has tabled Budget 2022 themed “Keluarga Malaysia, Makmur Sejahtera”.
The following is the summary of tax measures for Malaysia Budget 2022.
- Tax relief for SOCSO contribution be expanded to include employee’s contribution through the Employment Insurance System and the tax relief limit be increased from RM250 to RM350.
- Tax relief for up-skilling and self-enhancement courses fees be increased from up to RM1,000 to up to RM2,000 for YA 2022 and extended to YA 2023.
- Scope of tax relief for EPF contributors be expanded to include voluntary contributors including pensionable civil servants.
- Scope of tax relief for full medical check-up expenses be expanded to cover the cost of check-up or consultation service related to mental health.
- Tax relief for domestic tourism expenses be extended for 1 year to YA 2022.
- Tax relief for child care centre or kindergarten fees be extended for 2 years to YA 2023.
- Tax relief for purchase of mobile phone, computer and tablet be extended for 1 year to YA 2022.
- Tax relief for deferred annuity premium be extended for 4 years to YA 2025.
- Income tax be imposed to residents in Malaysia on income derived from foreign sources and received in Malaysia.
- Tax relief up to RM2,500 on expenses related to cost of installation, rental, purchasing including hire-purchase equipment or subscription fees for electric vehicles charging facilities (YA 2022 and 2023).
- Extension of special income tax rate to non-residents individual holding key positions in companies investing in new strategic investments.
- Income tax exemption on prize money from e-sports tournaments
- The tax relief for medical expenses for self, spouse or child includes COVID-19 detection test by a hospital or registered medical practitioner or purchase of COVID-19 self-detection test kit.
- The scope of domestic travel expenses expanded to include purchase of domestic tour package through a licensed travel agent registered with the Commissioner of Tourism under the Tourism Industry Act 1992.
Corporate Tax and Tax Incentives
- Imposition of Cukai Makmur for YA 2022 as follows:
- the chargeable income up to the first RM100 million is subject to 24% tax rate; and
- the remaining chargeable income is taxed at 33%.
- Income tax exemption be given on all income for up to 3 YAs for social enterprise.
- The time limit to carry forward unutilised business losses to be extended to 10 consecutive YAs.
- Special tax deduction for rental deduction for business premises be extended for another 6 months for January 2022 until June 2022.
- Revision of tax estimate is allowed in the 11th month of the basis period for a YA, before 31 October 2022.
- A deferment of income tax instalment payments for MSMEs for 6 months until 30 June 2022.
- Tax incentive for renovation and refurbishment of business premises be extended until 31 December 2022.
- Tax incentive for the purchase of tourism vehicles be extended for 3 years.
- Tax incentives for anchor companies under the vendor development programme be reviewed as follows:-
- Deductions for qualifying operating expenses be increased up to RM500,000 per YA;
- The tax incentive be extended for 5 years for anchor companies that have signed MoU with MEDAC; and
- deductions are given for 3 consecutive YAs.
- Additional reinvestment allowance (RA) provided for the YA 2020 to YA 2022 be extended for 2 years until YA 2024 for existing companies in Malaysia that have exhausted RA and Special RA eligibility. Such extension will make up the total period of Additional RA to 5 years.
- Tax incentive for structured internship programme be extended for 4 years and expanded to include students at the academic levels of Master’s Degree, Professional Certificate, and SKM Level 1 and 2.
- Extension of tax rebate for establishment of new entities for micro, small and medium enterprises (MSMEs). It is proposed the establishment and operational period for new MSMEs including MSMEs that perform business activities through online platform be extended to 31 December 2022.
- Review of tax incentives for scholarship. It is proposed double tax deduction incentive be reviewed as follows:
- The scope of qualifying studies be expanded to all fields of study at the Technical and Vocational, Diploma, Degree including Master’s and Doctorate; and
- The tax incentive be extended for 4 years from the YA 2022 to 2025.
- Tax deductions on employees accommodation expenses (Safe@Work) be extended for 1 year.
- Tax incentive for organising arts, cultural, sports and recreational activities in Malaysia be extended for 3 years.
- Expansion of scope for green technology tax incentives.
- The time limit on the carry forward of unutilised reinvestment allowance (RA) for 7 consecutive YAs is also applicable to the unabsorbed Ras from the special RA under PENJANA.
Real Property Gains Tax (RPGT)
- The RPGT rate on gains from the disposal of real property and shares in real property company in the 6th year and onwards be reduced from 5% to 0%.
- The category of disposer under Part II be expanded to include body of persons registered under any written law in Malaysia (replace “Society registered under the Societies Act 1966”).
- For disposer who falls under Part II (company incorporated in Malaysia, a trustee of a trust, or body of persons registered under any written law in Malaysia), the acquirer is required to retain the lower of the whole amount of money received or 5% of the purchase consideration, where the disposal is within a period of 3 years after the acquisition date.
- Penalty for non-payment of RPGT for person leaving Malaysia – the scope be extended to include increase in tax arising from RPGT payable that is overdue / failure to remit amount to be withheld by acquirer, and the fine for the offence be amended to RM200 to RM20,000.
- Stamp duty exemption on loan/financing agreements for peer-to-peer financing (P2P).
- Review of stamp duty treatment on insurance policies or takaful certificates.
- Review of stamp duty on contract notes for trading of listed shares.
- Extension of stamp duty exemption on restructuring or rescheduling loan/financing agreement.
- Extension of stamp duty exemption for instruments related to merger and acquisition.
- Introduction of Special Voluntary Disclosure Programme (“SVDP”).
- Extension of sales tax exemption on passenger cars.
- Imposition of sales tax on law value goods.
- Imposition of service tax on goods delivery services.
- Service tax exemption on brokerage services related to trading of listed shares.
- Expansion of scope for excise duty on sugar sweetened beverages.
- Sales tax exemption on passenger motor vehicles be extended for 6 months to 30 June 2022.
- Tourism tax exemption be extended for one year to 31 December 2022.
- Entertainment duty exemption for entertainment activities in all Federal Territories until 31 December 2022.
- Import duty, excise duty and sales tax exemptions on electric vehicles.
- Review of excise duty on liquid or gel used for electronic cigarettes and vape.
- Review of windfall profit levy.
- Tax Identification Number (TIN) is to be implemented in 2022 and will be used for the purposes of income tax, real property gains tax and stamp duty.
- Submission of tax return based on financial statements – It is proposed that an LLP, trust body and co-operative society are also required to furnish its tax return based on financial statements made in accordance with the requirement of any written law governing the entity.
- Increase in tax for failure to furnish estimated tax payable – It is proposed that the 10% tax increase be extended to LLPs (in addition to companies, trust bodies and co-operative societies).
- Power to call for bank account – It is proposed that the IRB is empowered to request for taxpayer’s bank account information from financial institutions for the purpose of making an application to court for a garnishee order.
- Notification for change of address is to be made via a prescribed form.
- Request to forward the application of relief to the SCIT is to be made via a prescribed form.
Under the existing tax law, income of any person (other than a resident company carrying on the business of banking, insurance or sea or air transport) derived from sources outside Malaysia and received in Malaysia is exempted from income tax.
It is proposed that with effect from 1 January 2022, foreign-sourced income of Malaysian tax residents (both companies and individuals) which is received in Malaysia will be subject to tax.
There will be a transitional period from 1 January 2022 to 30 June 2022 where foreign-sourced income remitted to Malaysia will be taxed at the rate of 3% on gross income. Foreign-sourced income remitted to Malaysia will be taxed at the prevailing tax rate from 1 July 2022 onwards.
Withholding Tax on Payment Made to Agent, Dealer or Distributor
Payment made by a company in monetary form to its agents, dealers or distributors arising from sales, transactions or schemes carried out would be subjected to 2% withholding tax (WHT).
WHT is only applicable where the payments are made to resident agents, dealers or distributors who are individuals and have received payments of more than RM100,000 in monetary form and/or non-monetary form from the same company in the immediately preceding YA.
The WHT shall be remitted to IRB within 30 days after paying or crediting the payments to agents, dealers or distributors. Failure to remit within the stipulated time frame will attract 10% penalty and tax deduction is not allowed on the expenses.
The WHT deducted can be used to offset against the tax payable by the agents, dealers or distributors.