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Malaysia: Tax incentives, other measures in 2020 budget

Malaysia: Tax incentives, other measures in 2020 budget

The budget for 2020, presented in October 2019, includes the following tax-related items.

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  • Expenses incurred on listing on certain stock exchange markets qualify for tax deduction of up to RM1.5 million (approximately U.S. $359,000); eligible fees include amounts paid to authorities and professionals; and for underwriting, placement, and brokerage services
  • An income tax exemption of 100% for up to 10 years on intellectual property (IP) income (e.g., patent and copyright software) derived from qualifying activities and obtained from IP development in Malaysia
  • An investment tax allowance of 50% on qualifying capital expenditures for five years, to be set off against 50% statutory income for electrical and electronic companies that have exhausted the 15-year investment allowance
  • Extension to year of assessment 2023 of the 100% accelerated capital allowance for automation equipment, and of the income tax exemption that equals 100% of the accelerated capital allowance; expansion of the covered services
  • Extension of renewable energy tax incentives to year of assessment 2023, and a new income tax exemption of 70% of statutory income for 10 years for solar leasing companies
  • Introduction of “approved major exporter” regime for traders or manufacturers of exempted goods, with exports of not less than 80% of annual sales; a full sales tax exemption on import and purchase of goods or raw materials, components, and packaging
  • Service tax group relief for taxable services provided by a company to third parties (other than companies within the same group) provided the value of such services does not exceed 5% of the total value of services provided within a 12-month period
  • Stamp duty relief of 50% for transfers of real property between parents and their children, limited to Malaysian citizens
  • A 100% capital allowance on “small value assets” (assets having a value of up to RM2,000), but subject to a ceiling of qualifying capital allowance of RM20,000 per year
  • A 50% income tax exemption for organizing approved arts and cultural activities, international sports competitions
  • An increased tax deduction for sponsoring local arts, cultural, and heritage activities (increased to RM1 million a year)
  • Tourism incentives of 100% income tax exemption for five years or an investment tax allowance of 100% for five years, up to 70% of statutory income, for new investments in international theme parks; and 100% income tax exemption for promoting and organizing conferences with at least 500 foreign participants annually
  • Extension of existing tax incentives for real estate investment trusts (REITs), angel investors, venture capital, and certain insurance costs
  • An increase in the individual (personal) income tax rate (the highest band) from 28% to 30% for individuals who are residents of Malaysia having income of more than RM2 million (approximately U.S. $478,000)
  • Fixed income tax rate for non-resident individuals also increases to 30%
  • Revised tax for small and medium size entities (SMEs) with capital of up to RM2.5 million and additional condition of annual sales of not more than RM50 million (17% for chargeable income of up to RM600,000 and 24% for the remaining chargeable income)
  • Market value as of 1 January 2013 to be used as the “acquisition price” for disposal of real property acquired before 2013, for purposes of the real property gains tax (only applies to Malaysian citizens and permanent residents)

Read an October 2019 report prepared by the KPMG member firm in Malaysia

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