Deloitte Q&A on Budget 2022 impact to businesses
Below are some questions and answers from Deloitte arising from its Budget 2022 analysis:
Special reinvestment allowance
Q: Smarthelper Sdn Bhd is engaged in the business of manufacturing kitchen appliances since 1988. Smarthelper Sdn Bhd is planning to reinvest RM15 million to automate its existing production lines. The management is planning to implement this automation project in stages from 2022 onwards. The company claimed Reinvestment Allowance (RA) for 15 consecutive years from 1999 to 2012.
The company is exploring if there is any tax incentive introduced in the Budget 2022 that is relevant to its proposed automation project?
A: The company may want to consider the Special Reinvestment Allowance (Special RA) introduced in the Budget 2022 which is claimable on qualifying capital expenditure incurred for qualifying project from 2022 to 2024. In which case, Smarthelper Sdn Bhd is entitled to claim the Special RA which is computed based on 60 per cent of qualifying capital expenditure incurred to be set off against 70 per cent of the company’s statutory income.
Real property gains tax
Q: Jayden is planning to migrate to Australia mid of next year. He intends to sell his house which he owned for more than 15 years.
He heard in the recent Budget announcement that there are some changes in real property gains tax (RPGT).
He would like to know how these changes might affect him?
A: If Jayden sells his house while he is still a Malaysian citizen next year, he need not pay any RPGT as the rate of RPGT for disposal by a Malaysian citizen or permanent resident after 6 years of holding period is zero per cent.
If he sells his property after he changes his citizenship to Australian, the applicable RPGT rate is 10 per cent.
Hence, Jayden should consider selling his property first before changing his citizenship in order for him to enjoy the “nil” RPGT rate.
Extension of tax rebate for MSMEs
Q: Speedy Logistics Sdn Bhd (Speedy Logistics) intends to incorporate a company in Malaysia. Speedy Logistics expects that it will be able to commence operation on 1 January 2022. Speedy Logistics would like to know if there is any tax incentive in Budget 2022 that will help its business in the initial years?
A: Currently, MSMEs are entitled for tax rebate equivalent to capital expenditure or operating expenditure incurred by the MSME up to a maximum amount of RM20,000 for 3 consecutive years of assessment (YAs), beginning from the YA in which the SME commences operation. This tax incentive is available for MSMEs that was established and commenced operations from 1 July 2020 to 31 December 2021. The MSME must also fulfill the following conditions:
• The SME shall be a company or a limited liability partnership incorporated or registered in Malaysia and qualify as a tax resident in Malaysia;
• Have paid-up capital in respect of ordinary shares or contribution of capital (whether in cash or in kind) of not more than RM2.5 million at the beginning of the basis period for the YA;
• Having a gross income from business sources of not more than RM50 million for the basis period for the YA; and
• Commences operation during the period from 1 July 2020 to 31 December 2021.
Hence, Speedy Logistics may be eligible for the tax rebate for MSME if it fulfils all the conditions.
Foreign source income
Q: If I am collecting rental income on an apartment which I owned in the United States for investment purpose and remits the rental income to Malaysia, would the said income remitted be taxable in Malaysia? What if I sell the property?
A: With effect from 1 Jan 2022, foreign sourced income remitted to Malaysia by a Malaysian tax resident will be taxable in Malaysia.
Hence, in this case, the rental income remitted will be subject to tax if you are a tax resident of Malaysia. However, if your property is situated in a country where Malaysia has a double taxation agreement with, such as Singapore or China, tax exemption or double taxation relief may apply.
On the other hand, profit from sale of property will not be taxable if you are holding the property for investment purpose, as revenue from sale of investment property is “capital in nature” not subject to Income Tax in Malaysia.
Cukai Makmur
Q: Century Glove Manufacturing Sdn Bhd (Century) is a glove manufacturing company with significant revenue and profits. Based on the tax computation for year of assessment 2022, Century has a tax chargeable income of RM105 million. What is the potential tax implication on Century based on Budget 2022 proposals?
A: The government proposed to introduce “Cukai Makmur” (prosperity tax) of 33 per cent for companies with a tax chargeable income over RM100 million for the year of assessment 2022.
In this case, the corporate tax rate for Century’s chargeable income up to RM100 million remains unchanged at 24 per cent, whereby the remaining RM5 million will be subject to a higher corporate tax rate of 33 per cent for year of assessment 2022.
Limitation to carry forward unabsorbed business losses
Q: Due to Covid-19 pandemic, DMT Sdn Bhd is facing business downtime and experiencing huge business loss since 2020. The company’s management is unsure how Budget 2022 announcement will help as they are expecting slow business recovery for the coming years and the unabsorbed business losses may have been disregarded by the time of recovery.
A: It is proposed in the Budget 2022 announcement that with effect from year of assessment 2019, a 10-year time limit (7-year under current tax regime) is imposed for carrying forward of unutilised losses.
In other words, the unutilised business losses brought forward from the year of assessment 2018 will be disregarded in the year of assessment 2028.
Low value goods
Q: I have found purchasing goods from online merchants a convenient way to obtain necessities during the pandemic especially cheaper goods from overseas merchants. Will I be affected by any new tax in Budget 2022 on these low value goods (LVG) from overseas online merchant imported into Malaysia?
A: Effective January 1, 2023, all LVG purchased from overseas online merchants and shipped to Malaysia through air courier services will be subject to sales tax.
This is to ensure fair treatment between taxable goods manufactured in Malaysia (with the embedded sales tax in the selling price) or local seller import and sell such goods which have been subject to sales tax upon importation, with imported goods shipped direct to the consumer through air courier services which are currently exempted from sales tax if the value of the goods combined was below RM500 per consignment.
Such an imposition of sales tax on the LVG will be implemented through new legislation and the overseas online merchants or sellers abroad may need to register and charge sales tax.
Indirect taxes
Q: Audrey operates a business which assist consumers to purchase and deliver daily goods for an additional fee. How does the announcements in Budget 2022 affect her business?
A: Currently delivery services by service provider who are not licensed under the Postal Services Act 2012 are not subject to service tax. Under Budget 2022, it proposed that service tax be charged on all delivery services for goods, by any service provider including e-Commerce platforms to streamline the service tax treatment of courier and delivery services. However, the delivery of food and beverages as well logistics services will be excluded from this service tax.
Disclaimer: The above general comments represent the personal views of the named panelists solely and should not be construed as rendering of any professional advice or services. Before making any decision or taking any action that may have implications on finance or business, readers should consult a qualified professional adviser. Deloitte shall not be responsible for any loss whatsoever sustained by any person who relies on the above.