AT RM332.1 billion, Budget 2022 is the largest budget in the history of Malaysia. The clear focus of this budget is to revive the economy and to selectively help the sections of society that require immediate assistance through a direct cash injection of RM8.2 billion to 9.6 million recipients.
Assistance to businesses and individuals has been given in via cash transfers, grants, loans, guarantees, moratoriums, and through the taxation system.
Major tax measures to help the revival
Disposal of real properties and real property companies shares held by individuals for investment purposes will no longer attract Real Property Gains Tax if the sale takes place after the fifth year. This will certainly invigorate the property market which is currently in its doldrums. Since this is effective from Jan 1, 2022, it may be advisable to defer the transactions to post Jan 1, 2022.
Special relief of RM2,500 for purchase of smartphone, personal computer or tablet will be extended until Dec 31, 2022. This is an addition to the existing RM2,500 lifestyle relief. In case you buy a smartphone costing more than RM5,000, you can claim a relief up to RM5,000 and the previous condition that you can only buy computers once in three years is no longer there.
Employee contribution to the Employees Provident Fund can be maintained through election at 9% instead of 11% until June 2022. Tax relief for Socso contributions is increased to RM350 and will include contributions for the Employment Insurance System.
You will be able to purchase cars at a lower price due to a 100% exemption on CKD assembled cars, 50% exemption for CBU imported vehicles for six months up to June 30, 2022 and a 100% sales tax (CKD)/customs duty (CKD and CBU) exemption for electric vehicles from 2022 to 2025.
Extension of period to utilise business losses from seven to 10 years will be welcomed by businesses who suffered losses during the pandemic period. There is no time limitation to use unutilised capital allowance and investment tax allowance.
Reinvestment allowance has been extended up to year of assessment 2024 which will certainly help subsidise and spur manufacturing and selected agricultural businesses to reinvest in plant, machinery, and industrial buildings.
Extremely profitable companies generating taxable income of more than RM100 million will be subject to a one-off prosperous tax of 33% on the excess of RM100 million. In the event such companies are attempting planning measures to accelerate the income into 2021 before the introduction of this tax, please be mindful of the anti-avoidance provisions which the Inland Revenue Board will invoke in case such moves are not commercially explainable. Similarly, if such companies attempt to defer the income from 2022 to 2023 purely for tax purposes, you will be in trouble.
Foreign sourced income
From Jan 1, 2022 onwards, foreign sourced income received in Malaysia will be taxed in Malaysia. This applies to both individuals and corporates. In case the foreign sourced income suffers tax overseas, the Malaysian taxpayer should be able to claim tax relief through the double tax agreements or unilateral tax credits.
However, there are many complicated issues in this matter and an example would be although Malaysian dividends are not taxed, foreign dividends received in Malaysia will be subject to tax from 2022 and there could be more than one level of taxation on the foreign dividends.
Similar complications could exist for interest income, rental income, business income and other income.
Other important measures
In order to discourage Malaysians from consuming sugary drinks, excise duty has been extended to include sugary premixed drinks, such as 3-in-1 sachets.
To bring the taxation regime of the vape industry on par with the cigarette industry and to increase the government coffers, excise duty is now imposed on gel/liquids used in vape pens. The vape industry needs to get its act together quickly to comply with the excise duty which will be implemented in 2022.
SMEs have been given numerous tax and non-tax benefits in this budget, and among them is the deferment of the income tax instalment payment for six months up to June 30, 2022, and new SMEs established and operate from July 1, 2020 to Dec 31, 2022 will be allowed a maximum rebate of RM20,000.
An important change in stamp duty is that the cap of RM200 for contract notes for trading listed shares has been removed. The stamp dutyalso has been increased from 0.1% to 0.15%. Those who undertake high value transactions will feel the pinch.
This article was contributed by Thannees Tax Consulting Services Sdn Bhd managing director SM Thanneermalai.