KUALA LUMPUR: After expanding incentives last year to mitigate the economic impact of the pandemic. The Malaysian government has introduced several fiscal measures in its national budget that will hit business in 2021. According to Bloomberg’s letter, Malaysia has extended the current interest or deposit income tax exemption for corporate investors of retail money market funds to January 1, 2022.
On Monday, the regulator sent an email to Bloomberg, which was sent to the Malaysian Federation of Investment Managers. Due to the holiday in Malaysia, the Malaysian Federation of Investment Managers has not yet commented. It is time to prepare at the fund level for the expiration of the income tax exemption. And the introduction of a taxation mechanism for corporate shareholders before January 1, 2022, the letter said.
Malaysia’s GDP shrinks by 4.5% in 2020. In 2021 the Economy is expected to grow by 6.5% to 7.5%. But this depends on the successful control of the virus and strong external demand. The government also hopes that these incentives will work. The additional economic stimulus plan planned in the 2021 budget will have a spillover effect this year. Which will give an additional boost to the economy.
As part of the 2021 budget. The government reduced the income tax rate for resident taxpayers by 14% to 13%. Ranges from ringgit 50,000 (US$12,375) and to ringgit 70,000 (US$17,325).
Tax incentives offered by the Malaysian Government are from tax deductions and credits to higher tax deductions. Tax incentives usually apply to companies with tax resident status. Pioneer Status (PS) is a form of tax exemption that applies to companies. Who have carried out advertising campaigns or produced promotional items for 5-10 years. Another option to reward pioneer status is usually the Investment Tax Credit (ITA). ITA is an incentive measure based on investment in advertising campaigns. Or advertising product manufacturing in industrial buildings, factories, and equipment. Such awards are usually awarded for 5 to 10 years.
If the income is exempt from PS benefit tax, tax-exempt dividends can be paid from the tax-exempt income. Unused ITA can be transferred before it is fully used.
However, the unused PS loss can only be carried forward for 7 consecutive years after the end of the original period. For the unutilized PS losses accumulated before 2018 when the power expires. These losses can be carried forward from the next 7 years to 2025. Your tax credits, royalties, and intellectual property income are not included in the BEPS action 5 (Better Combat Harmful Tax Practices through Transparency and Content) tax credits.
The government is also conducting a comprehensive study of the existing tax incentive structure. To ensure a competitive, transparent, and more attractive tax incentive system.
BioNexus and Economic Corridor will expire in 2020 and last until 2022. An approved plan aims to encourage high-tech activities in the manufacturing and service industries. And other activities that are beneficial to the Malaysian economy. More than 20% must be stipulated by the Minister of Finance.