The following are prepared based on the Budget 2020 speech on 11 October 2019. The salient tax proposals that would affect or relevant to SME and Individual Tax Payers are described below.
Corporate Income Tax for Small and Medium Enterprises (SME)
Currently:
SME is defined as Company resident in Malaysia with paid-up capital is not more than RM2.5 million.
Subject to income tax at the rate of 17% on the first RM500,000 of chargeable income. The remaining chargeable income is taxed at 24%.
Budget 2020 Proposal:
Definition of SME to include a requirement of annual sales of not more than RM50 million, in addition to the paid-up capital requirement.
Chargeable income to be increased from RM500,000 to RM600,000.
Effective date: Year of Assessment 2020
Capital Allowance (CA) for Small Value Assets (SVA)
Currently:
Qualifying expenditures on assets valued RM1,300 and below are eligible for 100% of special allowance and there is no limit for SME.
For non-SMEs the total SVA is limited to RM13,000 for each year of assessment.
Budget 2020 Proposal:
Qualifying expenditure of SVA to be increased from RM1,300 to RM2,000.
For non-SMEs the limit of total SVA to be increased from RM13,000 to RM20,000 for each year of assessment.
Effective date: Year of Assessment 2020
Tax deduction on Secretarial fee and Tax filing fee
Currently:
Secretarial fee is allowed up to RM5,000 for each year of assessment.
Tax filing fee is allowed up to RM10,000 for each year of assessment.
Budget 2020 Proposal:
To combine both secretarial fee and tax filing fee and to be allowed up to RM15,000 for each year of assessment.
Effective date: Year of Assessment 2020
Change in Individual Income Tax rate
Currently:
Tax rate for a resident individual with chargeable income exceeding RM2 million is 28%.
Tax rate for a non-resident individual is 28%.
Budget 2020 Proposal:
Tax rate for a resident individual with chargeable income exceeding RM2 million to be increased to 30%.
Tax rate for a non-resident individual to be increased to 30%.
Effective date: Year of Assessment 2020
Other than the above, features of the Budget 2020 proposal that not really relevant to our clients we find it but interesting are as follows;
Tax deduction on cost of listing in Bursa Malaysia, up to RM1.5 million for ACE Market and LEAP Market.
Tax incentives for development of Intellectual Property (IP), 100% tax exemption for 10 years, provided the IP is developed in Malaysia.