Tax Bulletin - PENJANA Short-Term Economic Recovery Plan

The Prime Minister has unveiled a RM35 billion ‘short-term economic recovery plan’  (“PENJANA”), which includes a RM10 billion direct cash injection from the Government, to assist in the recovery of the economy which has been severely impacted due to the COVID-19 pandemic and the Movement Control Orders. Please refer to the booklet issued by the Ministry of Finance [click here] for the details on the PENJANA new measures announced on 5 June 2020.

These measures are proposals by the current Government, and its effectiveness and implementation will be subject to the relevant Bills being tabled and passed in Parliament during the proposed July sitting.

Baker Tilly Malaysia will be monitoring and verifying the implementational aspects of the PENJANA measures closely, and will regularly update our readers as and when clarity and insights are brought to bear over the ensuing weeks and months.

The PENJANA measures announced covers 3 main thrusts and we list below some of the more significant ones –

1. Empower People

• The Wage Subsidy Programme (WSP) will be extended for another three months until end September 2020 for eligible employers at a fixed rate of RM600 per employee up to a maximum of 200 employees.
   
• Under the Hiring and Training Assistance, financial incentives are provided to employers for hiring unemployed workers (June to end December 2020):
  - RM600 per month for apprenticeships programme for school leavers/graduates
  - RM800 (below 40 years old) to RM1,000 per month (40 years and above) for each worker
  - Training allowance of RM4,000 per individual will also be extended to those retrenched but not covered under the Employment Insurance System (EIS)
   
• Flexible Work Arrangements (FWAs) incentives (effective 1st July 2020):
  - Further tax deduction for employers which implement FWAs or undertake enhancement of their existing FWAs
  - Income tax exemption of up to RM5,000 to employees who receive benefits like mobile phones, notebooks and tablets from their employers
  - Special individual income tax relief of up to RM2,500 on the purchase of handphone, notebook & tablet

• Income tax exemption of up to RM3,000 for childcare expenses paid by parents for Year of Assessment (YA) 2020 and 2021.

2. Propel Businesses

• Grants and loans will be provided to eligible enterprises to adopt digitalisation services.
   
• COVID-19 testing expenses and purchases of Personal Protective Equipment (PPE) and thermal scanners allowed as tax deduction where they comprise disposal PPE. Capital allowance available for equipment like thermometer scanners, testing equipment, setc purchased by businesses.
   
• Extension of the following until 31 December 2021
  - Special tax deduction for renovation and refurbishment of business premises
  - Accelerated Capital Allowance on eligible capital expenditure including ICT equipment
   
• Extension of special deduction for business premise owners for rental reduction (of at least 30%) to SMEs to 30 September 2020.
   
• Income tax rebate of RM20,000 per year for three years for new SMEs that begin operations between 1 July 2020 to 31 December 2021.
   
• Stamp duty exemption for SMEs on instruments executed for mergers and acquisitions (M&A) between 1 July 2020 and 30 June 2021.
   

3. Stimulate the Economy

• Home Ownership Campaign (HOC) to be reintroduced, with stamp duty exemption on the instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 to RM2.5 million provided at least 10% discount is given by the developer. The exemption on the instrument of transfer is limited to the first RM 1 million of the home price while full stamp duty exemption is given on loan agreements in respect of Sales and Purchase Agreements signed between 1 June 2020 to 31 May 2021.

• Real Property Gains Tax (RPGT) exemption for disposal of up to three units of residential properties (per individual) from 1 June 2020 until 31 December 2021.
   
• For the purchase of passenger cars beginning mid-June 2020 until 31 December 2020
  - Full sales tax exemption on locally assembled cars
  - 50% sales tax exemption on imported cars
   
• To assist the tourism sector:
  - 100% exemption of tourism tax from 1 July 2020 until 30 June 2021.
  - Extension of service tax exemption on lodgings and accommodation services until 30 June 2021.
  - Extension of deferment of tax instalment payment for companies in the tourism industry by another 3 months until 31 December 2020.
  - Extension of personal relief of up to RM1,000 for individuals on local tourism expenses incurred until 31 December 2021.
   
• Tax incentives for companies relocating into Malaysia
  - Tax holiday ranging from 10 to 15 years for new investments in the manufacturing sectors with capital investment between RM300 million to RM500 million or above.
  - 100% Investment Tax Allowance for 5 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 activities, from YA 2020 to YA 2021.

We will keep you updated on any further details  and announcements on the above initiatives in our coming tax bulletin(s).