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Malaysia: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of: 2 December 2020

Business Income Tax

The Prime Minister has announced the following measures:

  • Companies are allowed to revised their tax estimates in the month of their 3rd instalment payment, if the 3rd instalment payment falls in 2020.
  • Accelerated capital allowance will be given for qualifying capital expenditure incurred on machinery and equipment including Information and Communication Technology Equipment from 1 March 2020 to 31 December 2021 where the annual allowance will be increased to 40% (current rates range from 10% to 20%), with initial allowance of 20%.
  • A tax deduction of up to RM 300,000 will be given for expenses incurred on renovation and refurbishment of business premises from 1 March 2020 to 31 December 2021.
  • A double deduction will be given on pre-commencement expenses incurred by International Shipping Companies for setting up regional offices in Malaysia where the application should be made to Malaysian Investment Development Authority not later than 31 December 2021.
  • A tax deduction / capital allowance will be given for expenses incurred on disposable / non-disposable personal protective equipment or other relevant equipment.
  • Donations / contributions in cash / in-kind to fight against the COVID-19 outbreak are allowed as tax deductions
  • Accrued interest income of financial institutions from loans or financing involved with the moratorium from 1 April 2020 to 30 September 2020 would only be taxable upon receipt or when it becomes receivable on or after 1 October 2020. [Gazetted]
  • Annual income tax rebate of up to RM20,000 for the first 3 Years of Assessments (“YA”) will be given to an SME established and in operation between 1 July 2020 and 31 December 2021.
  • Foreign companies that relocate their business operations into Malaysia and have made new investments in the manufacturing industry will be taxed at a rate of 0% for the following periods:
    •  a) 10 years for capital investment between RM300 million to RM500 million
    • b) 15 years for capital investment above RM500 million

provided that the companies relocate and commence their operations within 1 year from the date of approval and the committed capital investment is made within 3 years. This is applicable to applications made from 1 July 2020 to 31 December 2021.

  • The following have been proposed in the Malaysian 2021 Budget:
    • a) the application period be extended to 31 December 2022; and
    • b) the scope of tax incentives be expanded to companies in selected service sectors. Companies in selected service sectors will be taxed at a rate of 0% to 10% up to a period of 10 years (application period from 7 November 2020).

An existing company in Malaysia will be granted a 100% investment tax allowance for a period of 5 years if it relocates its overseas manufacturing facilities back into Malaysia where the application should be made from 1 July 2020 to 31 December 2021. 

  • The following have been proposed in the Malaysian 2021 Budget:
    • a) the application period be extended to 31 December 2022; and
    • b) the scope of tax incentives be expanded to companies in selected service sectors. Companies in selected service sectors will be taxed at a rate of 10% up to a period of 10 years (application period from 7 November 2020).
  • A special reinvestment allowance (“RA”) will be given for qualifying expenditure incurred by companies engaging in manufacturing and selected agriculture activities from YA 2020 to YA 2022 (whose RA incentive period has expired).
  • A further tax deduction will be given to employers who adopt flexible work arrangements effective 1 July 2020.'

Filing/Payment Deadline Extension

Automatic deferment of Monthly Tax Installment Payments (CP204) for Companies:

  • 9 Months from 1 April 2020 to 31 December 2020 for tourism Industry.

Personal Income Tax

The Prime Minister has announced the following measures:

  • Special tax relief up to RM1,000 will be given to individuals on domestic travel expenses incurred from 1 March 2020 to 31 December 2021.\
  • Early withdrawals of contributions of up to RM1,500 from Account B of Private Retirement Scheme from 30 April 2020 to 31 December 2020 would be exempted from withholding tax. [Gazetted]
  • Individual income tax exemption of up to RM5,000 will be given to employees who receive a handphone, notebook or tablet from their employer effective 1 July 2020.
  • The income tax relief given to parents on fees paid to childcare centres or kindergartens will be increased from RM2,000 to RM3,000 for YA 2020 and YA 2021.
  • A special tax relief of up to RM2,500 will be given to individuals on the purchase of a handphone, notebook or tablet effective 1 June 2020.

Stamp Duty 

The Prime Minister has announced the following measures:

  • A loan/financing instrument relating to restructuring or rescheduling of a business loan/financing between a borrower/customer and a financial institution which is executed from 1 March 2020 to 31 December 2020, is exempt from stamp duty provided the existing agreement has been duly stamped and the application is submitted with a letter of offer from the financial institution. [Gazetted]
  • A stamp duty exemption will be given on instruments executed by SMEs for mergers and acquisitions taking place between 1 July 2020 and 30 June 2021.
  • Loan agreements and instruments of transfer relating to the purchase of residential property under the Home Ownership Campaign 2020/2021 valued at more than RM300,000 but not more than RM2.5 million executed between an individual named in a sale and purchase agreement and a qualifying party, would be exempt from stamp duty. Full exemption on loan agreements and exemption is limited to the first RM1 million of the house price and 3% stamp duty will be imposed on the price exceeding RM1 million for instruments of transfer. [Gazetted]

Additional Information

Real Property Gains Tax

The Prime Minister has proposed the following measures:

  • Disposal of residential property (maximum of 3 units) by an individual from 1 June 2020 to 31 December 2021 would be exempted from real property gains tax. [Gazetted]

Customs/Import and Other Miscellaneous Taxes

The Prime Minister has announced the following measures:

  • Service tax exemptions are given to hotel and other similar establishments for taxable services provided from 1 March 2020 to 30 June 2021.
  • Subject to conditions, import duty and sales tax exemption on equipment and machines are given to port operators an application is submitted from 1 April 2020 to 31 March 2023.
  • Expansion of the value-added activities permitted in the Licensed Manufacturing Warehouse and the Free Industrial Zone to include supply chain management, strategic procurement operation and total support solutions effective from 1 April 2020. In addition, it was proposed in the Malaysian 2021 Budget announced on 6 November 2020 that the value-added and additional activities permitted be increased from 10% to 40% of the company’s annual sales value, effective for applications received by the Royal Malaysian Customs Department from 7 November 2020.
  • Review of conditions to purchase duty free goods from duty free shops at international airports in Malaysia by persons entering Malaysia effective from 1 April 2020.
  • Sales tax exemption of 100% and 50% are given for the purchase of locally assembled cars and imported passenger cars respectively from 15 June 2020 to 31 December 2020.
  • Accommodation premise operators are exempted from charging Tourism Tax from 1 July 2020 to 30 June 2021.
  • 100% export duty exemption are given on crude palm oil, crude palm kernel oil and refined bleached deodorized palm kernel oil from 1 July 2020 to 31 December 2020.
  • Acquisition from local registered manufacturers and importation of face masks (under certain tariff codes) are exempted from Import Duty and Sales Tax from 23 March 2020 and 1 July 2020, depending on the tariff code of the masks. 
  • Subject to meeting conditions, acquisition from local registered manufacturers and importation of prescribed taxable personal protective equipment and consumables to be contributed to the Ministry of Health are exempted from Import Duty and Sales Tax.
  • Subject to meeting conditions, manufacturers of hand sanitizer (under tariff code 3808.94.9000) are eligible for Import Duty, Excise Duty and Sales Tax exemptions on the raw materials (undenatured ethyl alcohol and denatured ethyl alcohol) where application should be submitted to the Ministry of Finance.
  • It was proposed in the Malaysian 2021 Budget announced on 6 November 2020 that Sales Tax exemption for the purchase of locally assembled buses by bus operators (including chassis fitted engine and air conditioner) be extended for another 2 years to 31 December 2022 and application should be submitted to the Ministry of Finance.

Recovery plan

Key measures:

  • RM0.6b for tax relief for COVID-19 related expenses to encourage businesses to adapt to new norms and adhere to standard operating procedures (“SOPs”).
  • RM2.4b to ease financial stress on businesses through remissions of penalties related to late tax payments.
  • RM0.897b for tax incentives for purchase of passenger cars to stimulate the automotive sector and provide financial relief to car buyers.
  • RM0.05b for tax incentive to attract foreign companies to relocate their business into Malaysia by addressing the risk of re-shoring.
  • RM1.8b for tax incentives to support the tourism sector during the COVID-19 period.

Additional information regarding employment-related measures, economic stimulus measures and other measures.