Make Sure That You Make Yourself Aware of These Tax Incentives 2019 Because of It May Vary Every Year for Local and Foreign Investors
No one is happy about paying taxes. But owning a small to medium business in Malaysia come with benefits even if you have taxes. They are called tax incentives and you will save a considerable amount when the tax season arrives. Do not worry because they are legal. There are really tax regimes that help lower the taxes you are paying in Malaysia.
PS and ITA
PS stands for pioneer status and ITA means investment tax allowance. Companies who are in the agricultural, manufacturing, hotel, and tourism sectors, or other sectors that take part in their promoted activity or make a promoted product should be eligible for ITA or PS.
PS is released to the receiver by exemption from the CIT on the statutory income of 70% for five years. The remaining 30% will be taxed based on the prevailing rate of the CIT. The ITA is given 60% qualifying capital expenditure that was incurred over a period of 5 years/ It is to be used against 70% of the statutory income, and the 30% balance is taxable at the CIT’s prevailing rate.
Companies that plan to invest before the PS or ITA status expires can choose to have a reinvestment allowance.
Tax Incentives Based on Sector
Malaysia has tax incentives that range from exemptions to allowances and even tax deductions. The allowances are possible to be forward until they have fully utilized it.
There are tax incentives for information and communication technology wherein the incurred costs in the development of an e-commerce website have a yearly deduction of 20% in a total of 5 years.
The merger and acquisition are when enterprises in a particular sector if completely owned by Malaysians relay a scheme of acquisition or merger that has been approved by Small and Medium Enterprises Corporation Malaysia, may have a flat tax rate of x% applied on all income. The effect of this tax rate will take place in 5 years from when the merger was completed. There will be certain deductions for stamp duty on these enterprises.
Approved Service Projects
When a resident company takes over a project that got the approval of the Minister of Finance in the subsectors of communications, transportation, services, and utilities are entitled to incentives too. They are allowed to receive an investment allowance of 60% QCE that was incurred within in 5 years so it can be used against 70% of the statutory income.
An alternative to this is the 70% tax exemption of the statutory income for 5 years. Buildings that are only used for these projects qualify for industrial building allowance.
0% to 5% Tax Rates for Incoming Companies
Companies that are about to establish their presence in Malaysia are allowed to apply for 0% to 5% tax rates based on the investments and commitments to job-creation. In the past, the tax rates of these companies were 0%, 5%, and 10%.
This PH tax incentive is very timely in Malaysia. It continues to improve its strategies and policies to draw in investments. That is done so that there will be a strong integration of the country in the region and other markets.
It includes expenses incurred in getting a recognized quality system, halal certifications, and standards. The expenditure that companies incur on employee training under the approved training program. The childcare allowances employees receive, and goods and expenses services tax (GST) that is related to employee training in information and accounting, as well as communication technology. Aside from that, the expenditure that is incurred in career fairs participation abroad that received an endorsement from the TalentCorp.
The resident company that is engaged in agriculture or manufacturing that is responsible for exporting manufactured products, services, or agricultural produce is allowed to have allowances ranging between 10% and 100% increased exports, which is deductible to a maximum of 70% statutory income.
Incentives for Underserved SMEs
There is further allocation of RM50 million given by the government to the MY Co-Investment under the Securities Commission Malaysia. This is to leverage these platforms in helping finance underserved SMEs. The government builds on the early success of the new digital financial improvements like Peer-to-Peer platforms and Equity Crowdfunding. It has collectively raised over RM430 by June 2019. Therefore, there are more than 1,200 SMEs that could benefit from this offer.
To encourage this further, there are alternative funding sources for new companies and to draw in more foreign investors. The tax incentives that are given to angel and venture capital investors will be until 2023. In order to give support to the Bumiputera entrepreneurial development, the grants that amount to RM445 million will be provided with financing, business provision premises and entrepreneurial training.
Less Developed Areas Incentives
To boost the special incentive package that is available in economic corridors for less-developed areas, they are entitled to incentives as well. They have a 100% tax exemption that lasts up to 15 assessment years. It should commence from the first year of statutory income assessment or a 100% income tax exemption. This is applied to the qualifying capital expenditure, which can be completely offset against 10 years of statutory income.
They are also exempted from stamp duty tax on transfer or land lease when building. The WHT fees exemption for technical assistance, advice, or services relates to manufacturing and services activities lasts up to December 31, 2019.
These are the 2019 tax incentives in Malaysia for SMEs and you need to take note of them.