Tax and Covid-19 Part 3

As countries all around the world are slowly opening up their economies amidst declining Covid-19 infection rates, economies nevertheless already have irreparable damage done. At the time of writing, more than 100 hotels have closed down nationwide and well-known names such as MPH, Microsoft and Speedy are scaling down operations.

This post is part of the “Tax and Covid-19” series which serves to provide informative expository of the Covid-19 pandemic on taxpayers affairs. Part 1 addresses potential issues arising from Covid-19 related expenses and Part 2 relates to incentives under the PENJANA scheme. Part 3 now intends to explore the topic of the tax treatment of certain types of income.

** Please note that the deadline for submission of personal tax for YA 2019 is 30 June 2020. Please do file your taxes 🙂

1. Income from the release of bad debt

In challenging times, companies may not have the financial ability to repay sums owed to creditors and occasionally, as a sign of goodwill or due to special relationship between the debtor and creditor, the creditor may write off the debt owed. Whether or not writing off bad debt is a deductible expense had been discussed in Part 1 here, whilst now we deal with the tax treatment of the debt in the hands of the recipient.

As a matter of general principle, release of bad debts is taxable in the hands of the recipient. In dealing with the question of whether the debt ought to be taxed, taxpayers are guided by the principles in Section 34(2) of the Income Tax Act 1967 (“the Act”) which provides that a release of bad debts are to be taxed when:-

        1. The taxpayer had taken a tax deduction under Section 33 of the Act against the taxpayer’s business income; or
        2. The taxpayer had claimed capital allowances under Section 42 and Schedule 3 of the Act.

Where the release of bad debts does not fall into either of the categories above, the release of bad debt is arguably not taxable in the hands of the recipient.

In the case of Felda Trading Sdn Bhd v. KPHDN (“Felda Trading”), the court held that the release of bad debt owing to the holding company was taxable because it was “gains or profits from a business” under Section 4(a) of the Act. In this case, the holding company lent money to the taxpayer to settle debts owing to trade creditors and therefore the Special Commissioners of Income Tax (“SCIT”) considered it to be “gains or profits from a business”.

With respect, the Special Commissioners’ decision is flawed because the governing provision used to bring the release of debt was Section 4(a) and not Section 34(2).

As mentioned above, the governing provision to tax release of debt is canvassed in Section 34(2) of the Act. It is further stressed that this is the only section which addresses the release of debt. Therefore, in applying the interpretation principle of generalia specialibus non derogant, the Special Commissioners ought to have applied Section 34(2) instead of Section 4(a). Further reading on the matter can be found here (spoiler: the decision would’ve been different.)

However, in Bandar Nusajaya Development v KPHDN, the Court of Appeal agreed that the waiver of interest expense for loans taken by the taxpayer against its non-business income was not taxable. The Court relied on, inter alia, the fact that Section 30(4) was the only section which addresses the release of debts and the said section did not envisage that a release of debts against the taxpayer’s non-business income is taxable.

Although the Federal Court subsequently overturned the decision on point of judicial review and had the matter was referred back to the SCIT, this point of law still stands.

2. Income from compensation payments

Whilst Part 1 of the series discusses whether early termination payments/compensations payments are deductible, we now turn to whether they are taxable.

Compensation payments received in the course of business are taxable. Examples include compensation payments made to terminate a business contract prematurely, damages for any breaches of contract or damages to replace profits are revenue in nature and are taxable. In contrast, compensation made due to destruction of a profit-making apparatus and sale of rights are capital.

In the landmark case of Van den Bergh v Clark (Van den Bergh”), compensation payments made to terminate a contract was held to be capital in nature. The taxpayer, in this case, was in the business of manufacturing margarine and similar products. The taxpayer entered into an agreement with a Dutch competitor to work in friendly alliance, inter alia, to share profits, not to compete, territories and ancillary matters. Payments to each other under the contract was treated as revenue for income tax purposes at all material times. Owing to war and other difficulties, the parties were in dispute over the alleged payment ought to be made. The Dutch company wanted to terminate the contract but the taxpayer, who was in disadvantaged, refused to terminate unless £450,000 was paid. The Dutch company paid the sums on the condition, amongst others, that the sums represent final payment of all outstanding claims and there would be no counterclaim.

The taxpayer was assessed on the £450,000 received in income tax. The General Commissioners found that the sums were in relation to “pooling arrangements” and must be brought in for the purpose of arriving at the balance of taxable profits and gains. On appeal to the House of Lords, the sums were held to be capital in nature.

The House of Lords took note of the following:

          1. The taxpayers were giving up their rights under the agreements for thirteen years ahead. The agreements were not ordinary commercial contracts made in the course of carrying on their trade but the agreements related to the whole structure of the taxpayer’s profit-making apparatus.
          2. The contract controlled how the taxpayers conducted their business.
          3. The contracts provided the means of making profits, but by themselves did not yield profits. The profits arose from manufacturing and dealing in margarine.

In Malaysia, we have imported Van Den Bergh in the case of MSE Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri and Toxicol Sdn Bhd v KPHDN (“Toxicol”). The latter, being higher in authority, will be discussed.

In Toxicol, the taxpayer entered into a contract with Kualiti Alam Sdn Bhd where Toxicol was to be a special purpose vehicle whose only obligation is to carry out obligations under the contract and is not allowed trade with any other businesses. There was a change in UEM management which frustrated the taxpayer and thereafter, entered a novation agreement to transfer all its rights to a transferee. In return, Toxicol was paid a sum of RM23mil. The bone of contention was whether the RM23mil was revenue or capital in nature.

In holding that the compensation payment was capital in nature, the court held that the novation agreement fundamentally crippled the whole structure as Toxicol could not be involved in Waste Management anymore as it was incorporated solely for the purposes of Waste Management. The taxpayer was also not in the business of selling contracts. The novation contract essentially destroyed the taxpayer’s profit-making apparatus and hence was capital in nature.

Therefore, the cases illustrated the fundamental understanding that if the compensation payments were made pursuant to the termination of a contract which materially affects the taxpayer’s profit-making structure, it is capital. Where the taxpayer is able to absorb the shock of termination, it is incident to the taxpayer’s business only had a minor impact, it is arguably revenue.

On the employment side of things, compensation payment for termination of service contracts is taxable. However, Para 15 Schedule 6 of the Act gives an exemption of RM10,000 for each completed year of service with the company or companies in the same group.

3. Income from government subsidies

Under the PRIHATIN Stimulus+ Package, the federal government introduced the wage subsidy program to encourage companies to retain employees and assist in overhead costs burden. The subsidy comes within the purview of the Income Tax (Exemption) (No. 22) Order 2006 (P.U.(A) 207/2006) (“the Order”) which exempts from tax subsidies given from the government but corresponding deduction/capital allowance for expenses incurred are allowed.

Although the application seems straight forward, taxpayers are reminded to always comply with the requirements to qualify for the wage subsidy and maintain adequate documentation.

Till date, the only case which dealt with the Order substantially is Chantika Kelang Beras Sdn Bhd v Ketua Pengarah Hasil Dalam Negeri. In this instant case, the taxpayer was in the business of rice miller. The taxpayer received a subsidy from the Ministry of Agriculture & Agro-Based Industry Malaysia for rice and paddy seedling. However, the taxpayer mistakenly declared the subsidy as part of the taxpayer’s income. The taxpayer then applied for relief under Section 131(1) of the Act but was denied.

In agreeing with the IRB, the SCIT and the High Court took the view that the taxpayer was not the targeted group as the subsidy was given to paddy farmers to purchase good quality paddy seedlings at a subsidised priced rice at ceiling price. Rice millers were therefore not part of the targeted audience.

On appeal to the Court of Appeal (no written judgment), the decision was overturned. There was no room for intendment that the Order did not apply to the taxpayer because it was not a condition contained within the provision of the subsidy that it was intended for paddy farmers only. The MOA will pay the subsidy after inspecting the taxpayer’s premises to confirm that it met their conditions. Only when the MOA was satisfied that the taxpayer met their conditions and would the subsidy be released.

Therefore, taxpayers are reminded to maintain adequate documentary evidence of the factors which would affect their claim under the Wage Subsidy Program such as the number of employees, the amount of income of each employee and the (mandatory) at least 50% fall in revenue.

Conclusion

The debate of whether an income is revenue or capital in nature is subjective and is often highly dependent on the facts of the case. To prevent ambiguity, parties should record the intentions of the party at time the contract was made in clear and unequivocal language (Lower Perak Cooperative Housing Society Bhd v KPHDN).

税务与新冠肺炎 第二部

于 6月7日2020年,大马首相宣布有条件行动管制令将于6月9日结束,取而代之的是复苏期行动管制令落实于6月10日至9月31日。大马首相也发表了人民对于经济逐渐下降的情况以而介绍了国家经济重建计划(Penjana)(“计划”)。该计划包含了许多不同的计划与激励措施来帮助提振经济基础。计划的意向可以简单的用六个字来形容:解决,韧性,重新启动,修复,振兴和改良。

这文章宗旨提供计划中的税收优惠从企业所得税,个人所得税,印花税,不动产利得税, 销售与服务税等等的角度。

  1.  企业所得税

 

a) 特别再投资税收津贴

在所得税法1967 附表7A内, 仅有制造业企业和特定的农业核准的活动可有资格索求特别投资税收津贴。所得税提供企业可索取再投资减税收津贴高达15年连续课税年。

在计划内: 

如果该企业可索取再投资税收津贴已结束,企业可继续索取多两课税年的特别再投资税收津贴。然而,特别再投资税收津贴是否与再投资税收津贴一致可需要政府誊清。

b) 扣除与资本津贴与控制新冠肺炎关联的费用

大马政府已在上任的经济振兴配套之中允许了与控制新冠肺炎关联的费用一律可得扣除或采用资本津贴。当中,这包括了个人防护装备, 热扫描仪以及测试工具。

在计划内: 

这看起来是重复政府已先期提供的税收优惠为了鼓励企业遵守卫生部的标准操作程序

c) 采用弹性工作制税收优惠

即使条件性行动管制令即将结束,政府呼吁人民保持社交距离以及鼓励企业采取弹性工作制以避免众人在公司集会。

目前,纳税人在所得税(扣除谘询与培训费用于执行弹性工作制税收)条规2015之下可以在获得大马人才机构(TalentCorp)的批准后可扣除与执行或增进弹性工作制相关的谘询与培训费高达3个课税年。

在计划内:

纳税人可从1.6.2020扣除与弹性工作制相关的费用。有关详情与条件需澄清。

d) 中小型企业税务优惠

在计划内: 

如有中小型企业在于1.7.2020 和 31.12.2021 之间开始营业,该企业可索取特别所得税扣税高达RM20,000 给予高达3个课税年。

(请在之下参考给中小型企业的印花税优惠) 

e) 税务津贴为了鼓励聘用雇员

在计划内: 

为了鼓励聘用雇员,政府以介绍了以下的税务津贴:

        1. 雇佣青年在学徒制之下:可获得RM600 每月长达6个月

2. 雇佣>40岁以及失业超过6月:可获得RM800 每月长达6个月

3. 雇佣>40岁以及残障人士:可获得RM1,000 每月长达6个月

4. 被裁员的了的雇员但没有缴纳社会保险:一次性的RM4,000培训练津贴

f) 其他税务优惠

在计划内: 

政府延长了一些近期会到期的税务优惠

I. 降低租给中小型企业至少30%的特别税务扣除延长至30.9.2020 。

II. 电脑软件工具的加速资本减免率延长至31.12.2021。

III. 装修与翻新贸易建筑的特别税务扣除高达RM300, 000 延长至31.12.2021。

IV. 工资补贴计划延长多3个月。

 

  1. 个人所得税

a) 购买手机,电脑或平板的个人可获得所得税减免

目前,每个人都可获得个人所得税减免高达RM2,500在用于生活方式兴趣费用例如购买书籍,个人电脑,智能手机或平板(非商业使用),运动工具,健身房会员以及支付网络订阅。

在计划内: 

如果收到得一架手机,电脑或平板高达RM5,000,纳税人可用来抵减个人所得。

纳税人可另外获得RM2,500 减免在购买了手机,电脑或平板的费用。

政府必须澄清这一措施了是否提高了所得税法令之下的限额还是另外运转,例如是否一个人可获得RM5,000的减免为了购买1个平板,还是每个资产的减免额限制于RM2,500.

b) 对于育兒的个人所得税减免

目前,每个个人纳税人都可获得支付育儿费用高达RM2,000的个人所得税减免。前提是该育儿中心必须已注册还有儿童的年龄不超过6 岁。

在计划内:

该所得税减免额被提高至RM3,000. 育儿中心必须与社会福利局或教育局注册

c) 于旅游的个人所得税减免

在之前的经济配套之中,政府给予了在本地旅游行程在酒店和入门票之类的开支高达RM1,000的个人所得税减免为了促使马来西亚居民帮助旅游产业从1.3.2020至31.8.2020.

在计划内: 

减免时期已延长至 31.12.2021.

  1. 印花税

a) 对于并购过程的合同或文件的特别豁免印花税

在计划内: 

中小型企业可享受豁免特别印花税征收在并购过程的合同或文件从1.7.2020至30.6.2021. 

b) 购买房屋豁免印花税

在计划内: 

为了重振地产市场,政府一再次的介绍了房屋拥有权活动以及提供税务优惠。从1.6.2020至31.12.2021, 如果发展商处给予至少10%折扣在价值RM300,000 – RM2,500,000住宅物业,其相关的买卖合约以及贷款协议都可获得所得税豁免。

购买者可获得的印花税豁免如下:

买卖合约:限于首RM1,000,000。

贷款合约: 全额免税。

  1.  产业盈利所得税

在产业盈利税法1976,出售房屋或土地的产业盈利必须支付5 – 30% 的产业盈利税。产业盈利税率根据纳税人购置与出售的时间来定。

在计划内: 

从1.6.2020 至 31.12.2021,出售房屋或地产可豁免产业盈利税,但此优惠只限至于3间房屋或土地。

注意:仅有如果出售房屋或地产会招致产业盈利税可豁免。如果出售房屋或地产会招致所得税,该盈利是应税所得。

  1. 间接税

a) 旅游税

外国游客必须为每晚住宿在酒店支付RM10 的旅游税。

在计划内: 

从1.7.2020 至 30.6.2021, 酒店可豁免旅游税。

b) 豁免汽车销售税

根据销售税(税率)法令2018,本地组装车以及进口车会招致为 10%的销售税。

在计划内: 

从15.6.2020 至31.12.2020, 本地组装车全额免销售税而进口车免50%。

c) 豁免服务税

在之前已介绍的经济配套之中,政府豁免酒店支付服务税在住宿和相关的服务从1.3.2020 至 31.8.2020. 

在计划内: 

豁免服务税的时期延长至30.6.2021. 

d) 豁免出口关税

毛棕榈油、棕榈油仁油和加工棕榈仁油都会招致 0 – 30% 的出口关税。政府已降低5月和6月的出口关税至分别4.5% 和 0%,

在计划内: 

从1.7.2020 至 该国出口的毛棕榈油、棕榈油仁油和加工棕榈仁油将免除出口关税。

e) 减免迟缴销售与服务税罚款

亚皇家海关局已宣布任何迟缴销售与服务税而引起罚款一律全额减免如果该销售和服务税在30.6.2020 前缴纳给应纳税期在29.2.2020, 31.3.2020 和 30.4.2020结束. 

在计划内: 

从1.7.2020至31.9.2020,任何迟缴销售与服务税在和纳税期在30.6.2020, 31.7.2020 和 30.8.2020结束的的罚款将会减免50%。至于给纳税期在31.5.2020 必须缴纳的销售与服务税应纳税期是否会必须如期(30.6.2020)支付,减免50% 还是100%则不清。

  1. 其他税务优惠

a) 为了鼓励外国直接投资的税务优惠

目前,促进投资法1986定为新兴工业地位的企业可享受法定收入全额免税高达10年以及政府介绍的各种税务优惠。

在计划内: 

搬迁制造业至马来西亚的外资企业以及投入新资本投资进制造产业。根据直接投资额,这会影响外资企业在马来西亚可享受的收入免税时期:

在RM3亿至RM5亿之间:10年

高于RM5亿:15年

如有兴趣,企业可在1.7.2020 至 31.12.2021 之间向马来西亚投资发展局申请批准。该企业必须在获得批准后的一年之内搬迁以及开始制造业。

b) 搬迁制造业至马来西亚的马来西亚企业

在计划内: 

凡是搬迁制造业至马来西亚的居民公司和马来西亚投资发展局的批准后可获得可以获得高达5年100%的再投资津贴。

企业可在1.7.2020 至 31.12.2021 之间向马来西亚投资发展局申请批准。

 

Tax and Covid-19 Part 2

(This post will be updated as more clarification comes to light)

On 7 June 2020, the Prime Minister of Malaysia had announced that the Conditional Movement Control Order (“CMCO”) will come to an end on 9 June 2020 and be replaced with Recovery Movement Control Order (“RMCO”) which is set to take effect from 10 June 2020 to 31 August 2020. During his speech, the Prime Minister addressed the public’s concerns about reopening the economy and also introduced various measures to stimulate the economy with the introduction of the National Economic Recovery Plan (otherwise known as “PENJANA”) which encapsulates the Government’s initiatives in 6 words: Resolve, Resilience, Restart, Recovery, Revitalise and Reform.

This Article aims to provide a summary of the tax initiatives under PENJANA from the corporate income tax, personal income tax, stamp duty, real property gains tax, indirect tax and other incentives perspective.

1. Corporate Income Tax

(1) Special Reinvestment Allowance (“SRA”)

Under Schedule 7A of the Income Tax Act 1967 (“the Act”), only manufacturing companies and selected agricultural activities are eligible to claim for Reinvestment Allowance (“RA”). Furthermore, the Act provides that a company may claim for RA only for up to 15 consecutive Year of Assessment (“YA”).

Under PENJANA:

Where the company’s eligibility to claim RA has expired, the company can continue to claim SRA for up to 2 YAs. However, it is unclear whether the SRA would be the same rate as the RA and whether there are any further conditions to comply.

(2) Deduction and capital allowance for expenses incurred in relation to prevention of Covid-19

The Government had previously announced in the first stimulus package that taxpayers are allowed to claim tax deductions or capital allowances in relation to expenses incurred on Covid-19 prevention measures such as personal protective equipment (“PPE”), thermal scanners and testings.

Under PENJANA:

This seems to be a repetition of the same incentive to ease the cost burden of adopting measures under the SOPs issued by the Ministry of Health

(3) Incentives to adopt Flexible Work Arrangements (FWA)

As social distancing measures are encouraged, the government aims to further incentivise companies to have in place FWA to prevent a gathering of large number of employees.

Currently, under the Income Tax (Deduction for Consultation and Training Costs for the Implementation of Flexible Work Arrangements) Rule 2015 allows taxpayers to claim double tax deductions for consultation fees and costs of training in implementing or enhancing FWAs for up to 3 consecutive YA and a cap of RM500,000 per year subject to approval by Talent Corp.

Under PENJANA:

Tax deduction for FWA will begin from 1 June 2020 onwards. Further clarification on the type of expenses and corresponding conditions will be required.

(4) Small and Medium Enterprise (“SME”) tax incentives

Under PENJANA:

Where an SME commences operation between 1 July 2020 to 31 December 2021, a special annual income tax rebate of up to RM20,000 will be given for up to 3 YAs.

(Please refer to stamp duty relief available to SME below)

(5) Incentives to encourage employment

Under PENJANA:

To further encourage employment, the Government had announced the following tax incentives:

      1. Employment of youth for apprenticeships: RM600 per month for up to 6 months
      2. Employment of person >40 years old and been unemployed for 6 months: RM800 per month for up to 6 months
      3. Employment of persons >40 years old or persons with special abilities: RM1,000 per month for up to 6 months
      4. Employees retrenched but are not covered under the Employment Insurance Scheme: one-off RM4,000 training allowance.

(6) Other incentives

Under PENJANA:

The Government further announced the extension of various incentives currently already in place but due to expire soon.

      1. Special tax deduction for rental reduction for business premises rented to SMEs of at least 30% to be extended to 30 September 2020.
      2. Accelerated capital allowance of 40% for ICT equipment to be extended to 31 December 2021.
      3. Special tax deduction for renovation and refurbishment expenses of business premises up to RM300k to be extended to 31 December 2021.
      4. Extension of the Wage Subsidy Program to be extended for a further 3 months.

2. Personal Income Tax

(1) Personal income tax reliefs for purchase of handphone, notebook and tablet

At present, individuals may claim income tax relief of up to RM2,500 for lifestyle expenses such as the purchase of books, personal computer, smartphone or tablet (not for business use), sports equipment, gym membership payment and monthly bill for internet subscription

Under PENJANA:

      1. From 1 July 2020 onwards, individuals who receive a handphone, notebook or tablet can claim personal income tax relief of up to RM5,000.
      1. Similarly, individuals can claim further claim a tax exemption of RM2,500 for purchase of handphone, notebook and tablet.

Further clarification is required whether a claim under the PENJANA tax incentive operates exclusively to the current tax relief or in addition i.e. can a person claim for a total of RM5,000 for purchase of 2 tablets?

(2) Personal income tax relief for childcare

At present, individuals can claim an income tax relief of up to RM2,000 for child care expenses at a registered child care centre/kindergarten for a child aged 6 years and below

Under PENJANA:

The income tax relief is increased to RM3,000 for YA 2020 to 2021.

The child care centre must be registered with the Department of Social Welfare or the Ministry fo Education.

(3) Personal tax relief for travelling expenses

Previously, a special personal income tax relief of up to RM1,000 allowed for resident individuals for expenses incurred domestic travelling between 1 March 2020 to 31 August 2020.The expenses eligible for tax relief are accommodation fees with registered accommodation providers and entrance tickets to tourist attractions spots.

Under PENJANA:

The period is extended to 31 December 2021.

3. Stamp Duty

(1) Special stamp duty exemption for instruments executed in connection with Mergers and Acquisition for SMEs.

Under PENJANA:

For any instruments executed between 1 July 2010 and 30 June 2021 by SMEs, there will be a stamp duty exemption if it is for the purpose of mergers and acquisitions.

(2) Stamp duty exemption for instruments executed in connection with the purchase of residential properties

Under PENJANA:

With the reintroduction of the Home Ownership Campaign, a stamp duty exemption will be given for the purchase of residential properties between the value of RM300k to RM2.5million ON THE CONDITION THAT at least a 10% discount is given by the developer & the instrument was executed between 1 June 2020 to 31 December 2021.

The stamp duty exemption given is:

      1. Instrument of transfer: Restricted to the first RM1million of the property price
      2. Loan agreement: Full stamp duty exemption

4. Real Property Gains Tax (“RPGT”) Exemption

At present, taxpayers are subject to an RPGT at the rate of between 5 – 30% depending on the period in which the taxpayer acquires and subsequently disposes of the property.

Under PENJANA:

Taxpayers are exempted from RPGT for properties disposed between the period of 1 June 2020 to 31 December 2021 for up to 3 units of residential property.

Note: caution must be taken as the exemption appears to apply only where the disposal of real property is subjected to RPGT and not income tax. Where the disposal of real property is subject to income tax instead, the exemption may not apply.

5. Indirect Tax

(1) Tourism tax exemption

Currently, a tourism tax of RM10 is charged on foreign travellers on a per room per night basis.

Under PENJANA:

Hotels are exempted from charging the tourism tax between 1 July 2020 to 30 June 2021.

(2) Sales tax exemption on automotive vehicles

Under the Sales Tax (Rates of Tax) Order 2018, a sales tax of 10% is imposed on the sale price of locally assembled cars and final price of imported cars.

Under PENJANA:

A full sales tax exemption (100%) on locally assembled passenger vehicles and a 50% sales tax exemption for imported passenger vehicles purchased between the period 15 June 2020 to 31 December 2020.

(3) Service tax exemption

At present, hotel operators are exempted from imposing service tax on accommodation and related services for the period 1 March 2020 to 31 August 2020.

Under PENJANA:

The service tax exemption is to be extended up to 30 June 2021.

(4) Export duty exemption

Currently, an export duty of between 0-30% is imposed on the export of crude palm oil, crude palm kernel oil and refined bleached deodorised palm kernel oil. The Government had previously announced that the export duty for crude palm oil had been reduced to 0% for June from 4.5% in May.

Under PENJANA:

There will be a full export duty exemption on the export of the aforementioned commodities between the period 1 July 2020 to 31 December 2020.

(5) Remission of penalties for late payment of Sales and Service Tax

The Royal Malaysia Customs Departments had previously announced that any penalty imposed on late payment of Sales and Service Tax due at the end of the month between the period of March to May will be fully remitted if the payment is received on or before 30 June 2020 for the taxable period ending 29 February 2020, 31 March 2020 and 30 April 2020.

Under PENJANA:

There will be a 50% remission on penalty for late remission of Sales and Service Tax due and payable between the period 1 July 2020 to 31 September 2020, which correlates to the taxable period ending 30 June, 31 July and 30 August 2020. 

However, further clarification is required for the taxable period ending 31 May and tax due on 30 June whether any remission on penalty for late payment is given. 

6. Other incentives

(1) Incentives to encourage Foreign Direct Investments (“FDI”)

At present, there are various incentives available in addition to the Promotion of Investments Act 1986 where companies with a Pioneer status may enjoy a full income tax exemption of the statutory income for a period of up to 10 years.

Under PENJANA:

Foreign companies can enjoy a full income tax exemption of 0% if they relocate their manufacturing business operations into Malaysia and make new investments in the manufacturing industry. Depending on the amount of the FDI made, this will affect the corresponding period in which the company can enjoy the income tax exemption:

      1. For FDI between RM300mil to RM500mil: 10 years
      2. For FDI above RM 500mil: 15 years

Applications must be made to the Malaysia Investment Development Authority (MIDA) for approval between 1 July 2020 to 31 December 2021. The company must shift and commence manufacturing operation within 1 year after approval.

(2) Relocation of manufacturing operations by Malaysian companies

Under PENJANA:

If a resident company moves its manufacturing operations from overseas into Malaysia, the resident company would be eligible to claim a 100% investment tax allowance for a period of up to 5 years, subject to approval by MIDA.

Applications can be made between 1 July 2020 and 31 December 2021.