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Key tax changes that could save you thousands.
Malaysia’s new Budget brings tax reforms focussed on the well-being of Malaysians and the growth of the entrepreneurial economy. Whether you are serving your obligation as a responsible citizen or as a good corporate citizen, there are key tax changes that could save you thousands of ringgit or more. You just have to know where to look.
These are the areas where you can maximise tax benefits in the new environment.
Special Voluntary Disclosure Programme
You may have previously unreported income received in offshore accounts. There’s still time to take advantage of these special disclosure rates.

Special Voluntary Disclosure Program penalty rates offered to taxpayers who voluntarily declare any unreported income as follows:
Time frameRate
3 November 2018 until 31 March 201910%
1 April 2019 until 30 June 201915%
After these periods, penalty rates will range from 80 percent to the maximum of 300 percent.
Deadline 30 June 2019.
Lower SME tax
If you are a small or medium-sized enterprise, this tax break will help you put your money into much needed areas.

The tax rate for firms or LLPs with less than 2.5 million ringgit in paid-up capital has been reduced from 18 to 17 percent on chargeable income of up to 500,000 ringgit.
Effective from YA 2019.
Labuan restrictions abolished
If you are doing business in or with the Labuan international financial hub, there are new tax treatments that greatly favour your day-to-day operations.

Key tax restrictions at the Labuan International Business FInancial Centre (IBFC) have been removed. They include the tax ceiling of 20,000 ringgit, restrictions on transactions conducted in ringgit, and restrictions of transactions between Labuan entity and resident of Malaysia. Resident who transacts with a Labuan entity is also entitled to tax deductions on expenses incurred, limited to 3 percent of the allowable expenditure.
Effective from 1 January 2019.
Government land auctions
Also look out for land auctions by the government. They could prove to be huge savings in business assets.

Scheduled and staggered land sales via auctions to the highest bidder, based on conditions imposed on the land.
Effective from 1 January 2019.
Senior citizen hiring incentive
Does your company hire a large number of senior workers? If so, there could be substantial tax savings to be made here.

Further deduction given on the remuneration paid to full-time employees who are above 60 years of age or ex-convicts whose monthly remuneration does not exceed 4,000 ringgit.
Effective from 1 January 2019.
Reduced foreign farm worker levies
If you’re in the farming business, you may be caught in the current market‘s low produce prices. You’ll be pleased to know of some government assistance.

Reduced levies on foreign workers in the agriculture and plantation sectors who have served for ten years or more, from 10,000 ringgit to 3,500 ringgit per worker per annum.
Effective from 1 January 2019.
Green tech incentives
There are huge profits to be made in the green technology sector, as proven by many sustainable economies around the world. If you are already thinking about the green tech business or planning to make your building more environmentally-sustainable through the purchase of green assets, you may be eligible for green investment tax allowances.

The Ministry of Energy, Science, Technology, Environment & Climate Change’s Green Tech Malaysia website announced unspecified amounts of special investment tax allowances for green projects and green technology service companies as well as the purchase of green assets. The incentives are offered in three categories:
Green Investment Tax Allowance For Projects (GITA-Project), applicable to companies that undertake Qualified Green Technology Projects
Green Investment Tax Allowance For Assets (GITA-Asset), applicable to companies that purchase assets listed in the MyHIJAU Directory
Green Income Tax Exemption (GITE), applicable to green technology service companies listed in the MyHIJAU Directory
Applications for GITA-Project and GITE are to be submitted to the Malaysian Investment Development Authority (MIDA) while applications for GITA-Asset are to be submitted to the Malaysian Green Technology Corporation (GreenTech Malaysia).

MyHIJAU Directory is a comprehensive list of certified green product and service providers carrying the MyHIJAU mark, an official green recognition scheme endorsed by the government of Malaysia. The directory is available on the official MyHIJAU Malaysia (Malaysia’s Green Recognition Scheme) website.
Deductible education donations
If you’re someone who often gives back to your alma mater or make donations to your child’s school, you may choose to contribute through your company to enjoy further tax deductions, While this area applies specifically to the upgrading of school infrastructure, this may likely include donating a piece of your company’s real estate to a school.

In addition to current deductions on donations to institutions approved by the Ministry of Finance, donations for the purposes of upgrading infrastructure to National Schools and Public Institutions of Higher Learning (IPTA) registered with the Ministry of Education is now tax deductible.
Details to be announced.
Youth programme incentives
Believe in investing in young blood? 2019 could be the year for your company to benefit from their fresh ideas and further tax deductions.

20 million ringgit has been allocated to the Human Resource Development Fund to benefit 4,000 youths by launching the Apprenticeship and Graduate Enhancement Programme for employability. Employer portion of EPF contributions is cut to 4 percent from the current 6 percent while the mandatory employee contribution for this group is zeroed; plus the provision of additional tax deductions to employers who employ this group up to a monthly salary of 4,000 ringgit.
Effective from 1 January 2019.
Relief for PTPN loan settlements
Enjoy further deductions when you help your employees settle their remaining education loans.

Tax relief for companies that help settle remaining PTPN loans of their employees for the year ending 2019.
Effective for payments made from 1 January 2019 to 31 December 2019.
Corporate
The main focus of the 2019 Budget is Industry 4.0 and how it can make SMEs more competitive on the global front. Align your business operations towards this as well as its other key economic strategies, and the result could be an unexpected double win—business growth and potential tax breaks to boot.
What is Industry 4.0?
Industry 4.0 or the fourth industrial revolution is transforming the way manufacturers, farmers, retailers and service providers operate through smart, automated and connected technology such as the Internet of Things (IoT), Big Data and Artificial Intelligence (AI). Examples include smart factories, remote engineering and autonomous cars. Malaysian businesses migrating to Industry 4.0 are beginning to profit from significantly enhanced product quality, improved efficiency and huge materials and labour cost-savings, resulting in higher productivity. Because it is also the new global industry standard, Industry 4.0 is increasingly becoming a pre-requisite to securing business deals and markets.
I4.0 double deductions and more
Migrating to Industry 4.0? A multitude of tax incentives await you. If you haven’t, these tax breaks might just help convince you.

The Industry4WRD policy offers numerous tax incentives in the following areas.
I4.0 Readiness Assessment (I4.0-RA):
The implementation of I4.0 requires a comprehensive assessment process which will be undertaken to assess the readiness of the company and its current capability as well as its potential to shift to I4.0 technology

In assisting the company to undertake this assessment process, it is proposed that a tax deduction is eligible to be claimed on the readiness assessment expenses of I4.0-RA. The eligible deduction is on such expenses of up to RM27,000 paid to the Malaysian Productivity Corporation
Effective from YA 2019 to YA 2021.
Industry4WRD Vendor Development Program:
Anchor company that develops local vendors in I4.0 is eligible to claim double deduction on expenses incurred in implementing the Industry4WRD Vendor Development Program as follows:

(i) Operating expenditure on costs of product development, upgrading capabilities of vendors and skill training of vendors, as verified by the Ministry of International Trade and Industries (MITI)

(ii) Qualifying operating expenditure capped at up to RM1 million per year and eligible to be claimed for 3 consecutive years of assessment
Effective for MOUs signed between company and MITI from 1 January and 31 December 2021.
Human Capital Development:
Various incentives are available for the training of existing workforce and talent development in line Industry 4.0

Double deduction on scholarships provided by companies to Malaysian students residing in Malaysia pursuing full-course studies at technical and vocational levels, diplomas and degrees in the fields of engineering and technology, and who have no means of income on their own and whose parents or guardian have total monthly income not exceeding RM8,000 per month
Effective from YA 2019 to YA 2021.
Human Capital Development (cont’d):
Double deduction on expenses incurred by companies participating in the National Dual Training Scheme for the I4.0 program approved by the Ministry of Human Resources
Applicable to programmes implemented from 1 January to 31 December 2019.

Tax deduction on expenses for development of new I4.0 technology and engineering courses by Private Higher Education Institutions. The new courses must be verified by the Ministry of Education
Effective from YA 2019 to YA 2021.

Double deduction on expenditure incurred by a company in upgrading and developing its employees technical skills in I4.0 technology for training programmes approved by the Malaysian Investment Development Authority (MIDA)
Applicable to companies participating in the Readiness Assessment Intervention Plan from 1 January 2019 to 31 December 2019.

Double deduction on expenditure incurred by acompany in conducting internship programme approved by the Ministry of Human Resources for undergraduate students in fields of engineering and technology
Effective from YA 2019 to YA 2021.

ax deduction on equipment and machinery contributed by companies to Skills Development Centres, Polytechnics or Vocational Colleges certified by the Ministry of Human Resources or the Ministry of Education
Effective for contributions made from 1 January 2019 to 31 December 2021.
Individuals
Despite the lack of goodies, the 2019 Budget did put in place a number of tax and employee benefits focussed on the well-being of Malaysians. To take advantage of them in your coming year’s tax returns, it is useful to plan the year ahead—especially in the areas of property purchases, insurance and religious holidays.
Zero EPF for youths
Is your child a fresh graduate enrolled in the government’s Human Development Resource Fund programme? Remind him or her that he or she is relieved from the mandatory employee EPF contributon.

The government has zeroed the mandatory employee EPF contribution for youths employed through the Apprenticeship and Graduate Enhancement Programme for Employability programmes.
Effective from YA 2019.
Higher reliefs on EPF and insurance
Currently as an individual taxpayer, you are eligible to claim income tax relief on EPF contributions and payments for life insurance pemiums or takaful of up to 6,000 ringgit per assessment year.

You are now eligible for 7,000 ringgit of tax relief on EPF contributions and life insurance premiums or takaful separately—at up to 4,000 ringgit and 3,000 ringgit respectively.
Effective from YA 2019.
Up to 7 days’ religious leave
If you are planning for Haj, it is good to know that you are entitled to paid leave for up to a week.

New employee allowances include a total unrecorded leave of seven (7) working days for Malaysians going on faith-based undertakings such as religious pilgrimages.
Effective from 1 January 2019.
First-home exemptions
The Budget’s ‘Housing For All’ policy introduces a number of stamp duty exemptions to encourage first-home ownership. They could also equate to huge savings if you’re planning to help your children purchase their first homes.

Stamp duty exemptions on residential property purchases and their limited effective periods are as follows:
100% stamp duty exemption on the instrument of transfer and the loan agreement for purchase of a first residential home priced up to 300,000 ringgit
Effective for sales and purchase agreement executed from 1 January 2019 to 31 December 2020.
100% stamp duty exemption is limited to the instrument of transfer for the purchase of a first residential home priced between 300,001 and RM1 million ringgit from any housing developer for a period of 6 months
Effective for sales and purchase agreement executed from 1 January 2019 to 30 June 2019.
Stamp duty exemption on the instrument of transfer and the loan agreement for purchase of a first residential home priced between 300,001 and 500,000 ringgit. The stamp duty is 100% exempted but limited to the first 300,000 ringgit of the price of the home. The remaining balance of the price of the home is subject to the prevailing rate of stamp duty
Effective for sales and purchase agreement executed from 1 July 2019 to 31 December 2020.
Summary
This is only the tip of the iceberg. There are fundings and allocations across all sectors—such as tourism incentives and the new Airport REIT—that could help you plan your spending, investments and business for the year ahead. For the full details, look up your area of interest in the 2019 Budget made available on the Ministry of Finance website. Or for a comprehensive analysis, view the RHB Research Institute’s November article, Strategy—Malaysia 2019 Budget, on our Merge website.
Meanwhile, current economic times call for us to be mindful of how and where we spend. Understanding personal money management and how wealth can be maximised will matter greatly in 2019. Let your Relationship Manager know how he or she can assist you in the areas of wealth management and investments.
Notable areas of individual well-being also include proposed free mammograms, increased funding for the treatment of rare diseases, and a nationwide health screening programme.
Other new employee benefits include the formation of an Industrial Appeals Court to help resolve employee-employer disputes which could otherwise lead to expensive court cases.
Sources:
1 RHB Research Institute, Strategy—Malaysia 2019 Budget, 2 November 2018. 2 Ministry of Finance Malaysia, A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society—Budget 2019, 2 November 2018. 3 GreenTech Malaysia/Ministry of Energy, Science, Technology, Environment & Climate Change (Kementerian Tenaga, Sains, Teknologi, Alam Sekitar Dan Perubahan Iklim), Green Investment Tax Incentives, 2018.