BY Farah Rosley
Budget 2022 announced by the Minister of Finance with the theme “Keluarga Malaysia, Makmur Sejahtera” reflects an inclusive “Keluarga Malaysia” approach in line with the policies and strategies outlined in the 12th Malaysia Plan. It has a total allocation of RM332.10 billion, the largest ever for the country and it surpasses Budget 2021’s allocation of RM322.54 billion.
Budget 2022 is formulated based on the 3M strategy i.e.: “Memulih Kehidupan”, “Membina Semula Daya Tahan” and “Memangkin Pembaharuan” and its 3 key focuses are anchored on protecting, restoring the lives and livelihoods for the people, rebuilding resilience of the economy, and catalysing socio-economic reforms.
As expected, there were no new tax regimes that were announced in Budget 2022. This is in line with what the Government had said that now is not the time to introduce new taxes as the economy is still in repressive mode.
Tax revenue collection in 2021 is expected to fall short of the estimated target of RM162.1 billion and the tax revenue collection in 2022 is expected to pick up with the recovery of the economy. The announcement of enhancements to tax reliefs for individuals and tax deductions for the corporate sector is most welcomed.
Some of the notable enhancements are as follows:-
Extending the special individual income tax relief of up to RM2,500 on the purchase of mobile phones, computers and tablets until 31 December 2022.
Tax relief on fees up to RM7,000 for those who take approved professional courses with approved professional bodies. Approved professional courses include accounting, finance as well as those related to environmental, social and governance (or ESG).
Tax relief of up to RM4,000 for EPF contributors which cover voluntary contributions such as those who are self-employed in the gig sector.
Tax relief for those who attend reskilling courses increased to RM2,000 from RM1,000 previously. This tax relief can be applied up to 2023.
In recognition of working women who look after their children during working hours, the individual income tax relief up to RM3,000 for the payment of child care centre and kindergarten fees until the year of assessment 2023.
For the work of renovating business facilities that comply with standard operating procedure (SOP) requirements such as ventilation as well as seating for customers and employees, the tax deduction on the cost of renovation and renewal of premises up to RM300,000 will be extended until 31 December 2022.
For companies registered under Safe@Work, the additional tax deduction of up to RM50,000 on the rental expenses of employee accommodation premises will be extended for another year.
Special tax deduction extended until June 2022 to owners of building or business space that provide rental reduction of at least 30 percent.
Additional reinvestment allowance extended for another two years until the year of assessment 2024.
To further ease the burden of the Rakyat, the Real Property Gains Tax (RPGT) rate will be reduced to 0% from 5% currently on the chargeable gain from disposal of real property or real property company shares by “individual citizens, permanent residents and other than company” in the 6th year onwards. This will take effect from 1 January 2022. Real property owners can now plan their disposal of real property in the 6th year onwards and save on the 5% RPGT. This will be welcomed with much relief.
It is also encouraging to know that the Government will not impose any sales tax for passenger vehicles assembled in Malaysia until 30 June 2022 and imported vehicles will be given a 50% discount in sales tax. Malaysians can benefit from this extension of sales tax incentives to purchase locally assembled passenger vehicles and imported vehicles at a reduced price. This will continue to encourage the purchase of new motor vehicles and support the automotive industry which includes a significant number of small-medium enterprises (SMEs) in the supply chain.
It was also expected that the Government will look at ways to increase tax revenue through diversifying and broadening the tax base. In this respect, some of the measures announced include:-
Special Voluntary Disclosure Programme on Indirect Tax will be introduced in phases with remission of a penalty of 100% for the first phase and remission of a penalty of 50% for the second phase. Tax remission will also be considered for specific cases.
Tax Compliance Certificate will be part of the prerequisites for companies participating in Government procurement starting 1 January 2023.
Tax identification number (TIN) will be implemented from 2022 to broaden the tax base.
A special one-off tax for companies other than SMEs will be imposed. Companies will be taxed at 24% on the first RM100 million of chargeable income and at 33% on the balance of chargeable income for the year of assessment 2022.
Income tax will be levied on residents on income derived from foreign sources and received in Malaysia from 1 January 2022.
Sales tax will be levied on low-value goods received from outside Malaysia which are sold by online merchants and delivered to consumers in Malaysia via air courier services.
Service tax will be levied on delivery of goods provided by service providers including e-Commerce platforms except for food and beverage delivery services as well logistics services.
At first glance, the above measures will have an initial impact on online consumers as well as companies other than SMEs and companies with foreign investments. How it affects the behaviour of taxpayers remains to be seen.
Overall, Budget 2022 is a budget “from the people, by the people, for the people” as mentioned by the Prime Minister. This Budget has covered a wide spectrum in terms of tax deductions and incentives for businesses, employment, women’s development, cost of living, rural development and others that will help sustain and spur economic activities, rebuild economic resilience, and catalyze the reform agenda against the backdrop of the prolonged COVID-19 pandemic.
Farah Rosley is the President of Chartered Tax Institute Malaysia
