Building the economy together

By Tai Lai Kok, Head of Tax at KPMG in Malaysia

As SMEs and micro businesses are the backbone of the Malaysian economy representing
some 98.5 percent of Malaysia’s business population, it is certainly a step in the right direction for the National Economic Recovery Plan (PENJANA) to continue placing emphasis on accelerating their recovery.

The various digitalisation and financing initiatives for SMEs and micro businesses such as the training and support under the e-commerce campaign, grants and loans for the adoption of digitalisation services as well as the PENJANA SME Financing and Microfinancing
programmes would assist SMEs and micro businesses to recover faster and quickly adapt to
the new normal. The 3-months wage subsidy extension would also provide direct and
immediate cashflow support critical to sustain these businesses.

It is also encouraging to see that the government has put in place bold measures to boost
investments into Malaysia. This is indeed timely as COVID-19 has affected businesses
globally and MNCs are increasingly cautious on their foreign investments.

The introduction of the 10 – 15 years tax exemption for new foreign direct investments in the manufacturing sector with capital investment of RM300 million or more and the 100%
Investment Tax Allowance for 5 years for existing companies which relocate their overseas
facilities into Malaysia would allow Malaysia to differentiate itself and encourage investors to choose Malaysia as the preferred investment destination in the region.

These incentives, however, are targeted only at the manufacturing sector and it is hoped that consideration is also similarly given to the services sector that can play an equivalent role in boosting the domestic economy. It is hoped that the necessary guidelines and conditions accompanying such incentives can be released quickly as much time will be required for MNCs to make such significant investment decisions and hence, the sooner clear and unambiguous guidelines and conditions are formalized, the more likely favourable decision can be arrived at.

Meanwhile, the PENJANA also contained several stamp duty and RPGT exemptions which
are aimed at spurring the property sector, which is also severely affected by COVID-19.
These announcements are indeed welcomed as the sector was not provided with any stimulus in the previous Prihatin packages. The sector benefits are mainly concentrated on residential properties and there was no blanket RPGT and stamp duty exemption period for the property sector at large, like many had hoped to see to boost the dampened property market.

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