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The Highlights of Short-term Economic Recovery Plan (ERP)

On 5 June 2020, Prime Minister Muhyiddin Yassin has announced an RM35 billion short-term economic recovery plan (ERP) that aims to help the economy recover from the impacts of the COVID-19 pandemic and the subsequent Movement Control Order (MCO) and Conditional Movement Control Order (CMCO).

The ERP, or Pelan Jana Semula Ekonomi Negara (PENJANA), was established with three main thrusts:  to empower the people, to propel businesses and to stimulate the economy.

 

ERP Highlights and Tax-related Measures

Below are some of the highlights and tax-related measures of the ERP.

• Extension of wage subsidy programme to reduce cost of doing business and ease cash flow burden.
• Incentives to encourage the hiring of the unemployed.
• RM2 billion allocated for reskilling and upskilling programmes to enhance employability of unemployed workers and youths.
• Flexible work arrangement incentives
  • Further tax deduction for employers which implement Flexible Work Arrangements (FWAs) or undertake enhancement of their existing FWAs (effective 1st July 2020)
  • Individual income tax exemption of up to RM5,000 to employees who receive a handphone, notebook & tablet from their employer (effective 1st July 2020)
  • Special individual income tax relief of up to RM2,500 on the purchase of handphone, notebook & tablet (effective 1st June 2020)

• Child care subsidy
  • Increase in income tax relief for parents on childcare services expenses, from RM 2,000 to RM 3,000 for Year of Assessment (YA) 2020 and 2021

• Incentives for digitalisation of companies
• Extend the period and expand the scope of expenses allowed as tax deduction or capital allowance for COVID-19’s prevention, including:
  • COVID-19 testing
  • Purchase of PPE and thermal scanners

• Tax incentives for purchase of passenger cars
  • 100% sales tax exemption for purchase of locally assembled passenger cars and 50% sales tax exemption for fully-imported passenger cars from 15 June 2020 to 31 December 2020.

• Tourism sector support
  • Tourism tax exemption from 1st July 2020 to 30th June 2021
  • Extension of service tax exemption for hotels to 30th June 2021
  • Extension of period for income tax relief of RM1,000 for tourism expenses to 31st December 2021
  • Extension of period for deferment of tax instalment payment for tourism industry to 31st December 2020

• Incentives for property sector
  • Home Ownership Campaign (HOC) to be reintroduced
  • RPGT exemption for disposal of residential homes from 1st June 2020 to 31st December 2021 (This exemption is limited to the disposal of three units of residential homes per individual)
  • In addition, the current 70% margin of financing limit applicable for the third housing loan onwards for property valued at RM600,000 and above, will be uplifted during the period of the HOC, subject to internal risk management practices of financial institutions.

• Tax incentives for company relocating into Malaysia
  • 0% tax rate for 10 years for new investment in manufacturing sectors with capital investment between RM300 – RM500 million
  • 0% tax rate for 15 years for new investment in manufacturing sectors with capital investment above RM500 million
  • 100% Investment Tax Allowance for 3 years for existing company in Malaysia relocating overseas facilities into Malaysia with capital investment above RM300 million
  • Special Reinvestment Allowance for manufacturing and selected agriculture activity, from YA 2020 to YA 2021.

• Financial stress support for businesses
  • Special Reinvestment Allowance for manufacturing and selected agriculture activity, from YA 2020 to YA 2021.
  • 50% remission of penalty for late payment of sales tax & service tax due and payable from 1st July 2020 to 30th September 2020
  • Extension of special tax deduction for renovation and refurbishment of business premises to 31st December 2021
  • Extension of Accelerated Capital Allowance on eligible capital expenses including ICT equipment to 31st December 2021
  • Extension of special deduction equivalent to 30% reduction in rental for SMEs to 30th September 2020

• To encourage the establishment of new businesses and transactions such as mergers and acquisitions, financial relief will be provided in the form of:
  • Income tax rebate up to RM20,000 per year for 3 years of assessment for newly established SME between 1st July 2020 to 31st December 2021
  • Stamp duty exemption for SMEs on any instruments executed for Mergers and Acquisitions (M&As), for period between 1st July 2020 to 30th June 2021

 

Please refer to the page here for full details of the 40 initiatives under PENJANA.