In a move to restart the nation’s economy, the Malaysian government initiated an economic recovery plan known as Pelan Jana Semula Ekonomi Negara (PENJANA) on June 9, 2020.
The initiative earmarked RM35 billion to aid businesses hit by the COVID-19 pandemic and help them recover. This stimulus package also targets at protecting jobs and empowering small and medium business enterprises.
Incentives under Pelan Jana Semula Ekonomi Negara (PENJANA)
PENJANA comes with various incentives to help reboot the Malaysian economy, ranging from tax exemptions to wage subsidy programs. Below is the list of incentives included in the PENJANA stimulus package.
Incentives for the Disabled and Single Mothers
Through PENJANA, the government offers a one-off payment of RM300 as additional support to vulnerable groups such as single mothers and the disabled as the Malaysian economy reopens.
Three hundred thousand single mothers and disabled under the Department of Social Welfare stand will benefit from this incentive.
Tax Exemption on Travel Expenses
The stimulus package offers personal tax relief of up to RM1,000 incurred by residents on domestic travel between March 1, 2020, and December 31, 2021. This tax relief is geared towards encouraging tourism to boost the economy.
Following the massive impact on the tourism industry, the Malaysian Ministry of Tourism aims to encourage 30 million Malaysians to travel and generate over RM80 billion.
Tax Exemption for Fees Paid to Child-Care Centres
Up to RM3,000 tax relief is offered to residents who enrol their children (up to the age of six) in kindergartens or child-care centers.
However, this is applicable to child-care centers or kindergartens registered under the Director-General of Social Welfare under the Child Care Centre Act 1984.
An Incentive for the Establishment of New Businesses
An income tax rebate of up to RM20,000 per year is offered for the first three years of operation of any small or medium business enterprise incorporated between July 1, 2020, and December 31, 2020.
This initiative is to encourage more new business establishment and inspire entrepreneurship.
Healthcare Support Incentive
A healthcare support scheme, PeKa B40, was introduced to serve low-income groups’ healthcare needs. Through the Ministry of Health (MOH), a healthcare incentive covering non-communicable diseases will be provided to the low-income group.
The age threshold to benefit from this incentive has been reduced from 50 to 40 years old and above.
Real Property Gains Tax Relief
To stimulate the property market, PENJANA introduced an exemption from payment of real property gains tax under the Real Property Gains Tax Act 1976 (‘the Act’) on the disposal by an individual of up to three residential properties from June 1, 2020, to December 31, 2021.
The exemption applies to up to 3 residential properties per citizen. It provides relief to Malaysian citizens who have been forced by the pandemic to dispose of their private property and boost the real estate industry.
Agriculture Industry Incentive
To encourage diversification of the economy and investment in the agricultural sector, the Malaysian government has, through the PENJANA scheme, allocated RM350 million to finance agroprenuers.
Agroprenuers can receive up to a total of RM50,000 at a 3.5% interest rate set at five years.
Purchase of Passenger Car Tax Relief
Buyers of locally assembled cars are entitled to a full tax exemption, while buyers of imported cars get a 50% tax exemption.
Working from Home Incentives
The Malaysian government is pioneering working from home. It offers a tax exemption of up to RM5,000 to employees on work tools such as tablets, notebooks, and handphones provided by their employers.
Employees also stand to benefit from a RM 2,500 income tax relief on the purchase of their own notebooks, handphones, and tablets.
Wage Subsidy Programme
To lessen businesses’ burden in these unprecedented times, the Wage Subsidy Programme has extended until September 2020.
This initiative covers up to RM600 per employee earning less than RM4,000 for a business or organisation of up to 200 employees.
Malaysia’s 2021 Budget was tabled on November 6, 2020, and passed on November 26, 2020. A total of RM322.5 billion has been allocated for 2021 to improve people’s welfare, promote business continuity, and restore economic resilience.
Approximately RM236.5 billion has been allocated for operational expenditure, RM69 billion for development, and RM17 billion for the COVID-19 fund.
The government has also announced tax relief incentives under Budget 2021, such as reducing the personal income tax rate, lifestyle tax reliefs, and more. Please refer to the following table for more information:
In a Nutshell
The Pelan Jana Semula Ekonomi Negara (PENJANA) initiative and Budget 2021 are tailored to offer Malaysian citizens support and as a catalyst to boost the country’s economy.
To obtain tax relief, taxpayers must retain documentary evidence to support their claims. If taxpayers fail to present the documentary evidence during tax audits, there will be a penalty of up to 100% of the tax under-charged.
In this regard, online accounting software can be of great help in ensuring all documentary evidence. Online invoices and receipts are well kept safely and systematically for future reference and record-keeping.
Online accounting software can also benefit businesses when it comes to completing the tedious bank reconciliation process. For more information, feel free to get in touch with us.