SME Tax Incentives You Need to Know About

The COVID-19 pandemic has lasted beyond initial expectations without a foreseeable end. With so much uncertainty, the Malaysia Budget 2022 has the highest allocation to date – RM332.1 billion*.

What are the key tax incentives that impact businesses? Here’s a convenient refresher on the 5 tax incentives that entrepreneurs and small and medium enterprises (SMEs) should know from Budget 2022.

Tax deduction on business premises rental 

If you’re a landlord renting business premises to SMEs and other businesses, you get to enjoy a special tax deduction equivalent to the rental reduction given.

Remember that this only applies to buildings or business premises owners, providing at least a 30% rental reduction from the original rental rate. This tax deduction has been extended for six (6) months from January to June 2022.

Renovating and refurbishing of business premises

Are you planning to give your office a facelift? Maybe your old building needs a fresh coat of paint?

Well, good news for you. You’ll get to enjoy a tax deduction for the costs of renovation and refurbishment of business premises of up to RM300,000 till 31 December 2022.

More importantly, there are some things you should take note of to be eligible for the tax deduction. Whether you own or are renting your business premises, you would still qualify for the deduction.

Next, an external auditor must certify the costs of renovations or refurbishing your business premises. Additionally, fees incurred for the external auditor cannot be claimed as part of the “cost for renovation and refurbishment”, and no tax deduction will be allowed.

What if your office renovation costs more than RM300,000? There is no need to worry as you would still be able to claim a tax deduction of up to RM300,000.

Establishment of new SMEs

If you’re establishing a new SME by 31 December 2022, you’re eligible for an income tax rebate of up to RM20,000 per Year of Assessment (YA). This tax rebate extension also applies to SMEs performing online businesses.

As the rebate is available for the first three years for new SMEs, you can get a total tax rebate of up to RM60,000 (RM20,000 per YA). This tax incentive will help lower the entry costs of setting up a business and tax impact for the first three years of business.

To be eligible, the company must be a newly established SME. That means you won’t be applicable for the tax rebate if you’re transferring your company from any type into a Limited Liability Partnership or Sdn Bhd.

The local electric vehicles industry gets a boost

In line with Malaysia’s commitment to be a carbon-neutral nation by 2025,  the government has proposed a 100% relief for electric vehicles (EVs) import duty, excise duty, sales tax and road tax. Here are the tax incentives in detail:

• Full import duty exemption on components for locally assembled EVs (From 1 January 2022 to 31 December 2025).
  
  
• Full excise duty and sales tax exemption on completely-knocked-down (CKD) EVs (From 1 January 2022 to 31 December 2025).
  
  
• Full import and excise duty exemption on imported completely-built-up (CBU) EVs (From 1 January 2022 to 31 December 2023).

Further spurring the adoption of EVs, an individual tax relief of up to RM2,500 is also given for costs related to EV charging facilities, effective from 1 January 2022 to 31 December 2023. The tax exemption for individuals applies to the cost of purchase, installation, rent, hire purchase, as well as subscription fees for EV charging facilities. 

Activities under DESAC

Tax incentives will be offered for activities under the Digital Ecosystem Acceleration Scheme (DESAC) to support the national digital ecosystem. Preferential tax rates will be granted to:

1.     Digital technology providers

2.     Digital infrastructure providers

New digital technology providers are eligible for an income tax rate of 0% to 10% for up to 10 years. On the other hand, existing digital technology providers can enjoy an income tax rate of 10% for up to 10 years.

Digital infrastructure providers are eligible for an investment tax allowance of 100% on capital expenditure for qualifying activities for up to 10 years.

The DESAC will be effective for applications received by the Malaysian Investment Development Authority (MIDA) from 30 October 2021 until 31 December 31 2025. Check out MIDA’s official website for more updates on the guidelines and forms.

This is where CIMB can help you digitise your business with our SME Partners. Our SME Partners offer a variety of solutions for your business from Payment gateway, Digital Marketing, e-Commerce, Courier solutions as well as accounting and cloud HR solutions.

Through these strategic partnerships, we aim to empower CIMB SME customers to digitise their business and ensure a seamless, smooth and efficient business operation as you embrace the digital solutions. Not only that, CIMB SME customers have the advantages of receiving  exclusive offers! Find the solutions to all your business needs with CIMB, right here. 

Other SME tax reliefs

Aside from the company tax relief mentioned above, other notable corporate income tax measures that can aid business recovery or support a pivot of strategies include:

• Extension of tax deduction for companies registered under Safe@Work
• Extension of tax exemption for organising arts, culture, sports and recreation activities in Malaysia
• Expansion of tax incentive to companies sponsoring scholarships to students
• Expansion of green technology tax incentives
• Deferment of income tax instalments for micro, small, and medium-sized enterprises for six months
• Stamp duty exemption for P2P loan or financing agreements
• Extension of stamp duty exemption for loan restructuring and rescheduling
• Extension of stamp duty exemption for mergers and acquisitions (M&A) instruments

For the complete listing of business assistance and tax reliefs in Budget 2022, visit the Ministry of Finance website.

It is an exciting time for startups and SMEs to make the most out of the government’s numerous incentives, initiatives, and programmes. These financial reliefs provide some much-needed support for the people and businesses in Malaysia to get back on their feet.

This article is brought to you by CIMB as part of our ongoing efforts to raise the level of financial literacy among Malaysians. Financial knowledge and understanding are key to making well-informed and meaningful financial decisions towards positively improving welfare and well-being of communities. This is one of our many efforts to achieve CIMB’s purpose of advancing customers and society.

Source:

* https://www.mof.gov.my/portal/en/news/press-citations/budget-2022-highlights

*https://budget.mof.gov.my/pdf/2022/ucapan/bs22.pdf