PWC Initial note on Budget 2021
Impacting corporates
1) Allocation of RM1b for high tech investment and value-added activities to encourage R&D investment in aerospace and electronic clusters in Batu Kawan, Penang, Kulim.
2) Allocation of RM500m high technology fund (from BNM) for high tech and innovation.
3) High value added activities –
i) Principal Hub incentive – conditions relaxed and extended to 31 Dec 2022.
ii) [New] Global Trading Centre – 10% concessionary rate for 5 years + 5 years.
4) Various incentives to be extended to 2022 – Maintenance, Repair and Overhaul (MRO) activities related to aerospace, shipbuilding and repair, bionexus status and tax incentives for economic development corridors.
5) Incentives for selected pharmaceutical companies (including vaccine for Covid19) to invest in Malaysia – tax rate of 0% to 10% for the first 10 years.
6) Allocation of RM1b for the industry digitalisation transformation scheme till 31 Dec 2023 – to boost digitalization activities.
7) Allocation of RM150m for SME digitisation grant scheme and automation grant.
8) Tax exemption on Sustainable and Responsible Investment (SRI) products and Bonds extended to 2025.
Impacting corporates (indirect taxes)
1) GST is not reintroduced.
2) Extension of sales tax exemption on the purchase of ready-made buses. [Effective from 1 Jan 2021 to 31 Dec 2022]
3) Value added activities in FZ and LMW will be extended from 10% to 40% of total annual sales turnover. There are currently 9 types of value added activities are allowed in the FZ and LMW.
4) Excise duty based on ad valorem rate of 10% on all electronic cigarettes and non-electronic cigarette devices including ‘vape’. [Effective from 1 Jan 2021]
5) Excise duty at the rate of 40 cents per millilitre on electronic cigarette ‘liquids’. [Effective from 1 Jan 2021]
6) To counter distribution of illicit cigarettes – (i) freeze the issuance of a new licence for the importation of cigarettes; (ii) tighten the conditions and importation quota for the renewal of importation license; (iii) limit the activities of transhipment to dedicated ports only, (iv) imposition of excise duty on the importation of cigarettes with drawback facilities for the purpose of transhipment; (v) imposition of excise duty on cigarettes and tobacco products in all duty-free islands.; and (vi) any transhipment activities and the re-exportation of cigarettes using local crafts will not be allowed.
For the rakyat
1) Reduction in tax rate for the RM50,001 to RM70,000 income bracket by 1% (current tax rate is 21%. [Effective from YA2021]
2) Expansion in the scope of tax relief for medical expenses for self, spouse or child to include vaccination costs up to RM1,000 and threshold increased from RM6,000 to RM8,000. For complete medical examination, threshold is increased from RM500 to RM1,000. [Effective from YA2021]
3) Bantuan Saraan Hidup replaced with Bantuan Prihatin Rakyat with higher rates of assistance.
4) Tax relief up to RM8,000 for net deposits into Skim Simpanan Pendidikan Nasional. [For YA2021 and YA2022]
5) Increase in the tax relief for expenses relating to parent’s medical expenses, special needs and carer expenses from RM5,000 to RM8,000. [Effective from YA2021]
6) EPF employee contribution rate reduced from 11% to 9% for 1 year starting Jan 2021.
7) Withdrawals from EPF Account 1 allowed for 12 months (application start Jan 2021) – RM500/month up to RM6,000 per annum, and Account 2 for insurance, takaful and critical illness products.
8) Exemption per completed year of service (compensation for loss of employment) increased from RM10,000 to RM20,000. [For YA 2020 and 2021]
9) Tax relief for education expenses (self) are expanded to include expenses for qualifying courses, limited to RM1,000 for each year of assessment.
10) Tax relief for PRS contributions of RM3,000 extended to YA 2025. [Effective from YA2022 to YA2025]
11) Increase in tax relief for disabled spouse from RM3,500 to RM5,000. [Effective from YA2021]
12) Increase in lifestyle relief from RM2,500 to RM3,000 and expanded scope to include sport expenses (sports equipment, facilities entrance / rental fees and participation fees) and electronic newspapers. [Effective from YA2021]
13) Preferential tax rate of 15% allowed for 5 years to foreign citizens holding key positions (C-suites) in new strategic investments in companies that move their operations into Malaysia.
14) Additional tax deductions will be given to employers who employ senior citizens, ex-convicts, parolees, etc. This tax deduction is extended until 2025.
15) Geran Khas Prihatin Tambahan of RM1,000 will be provided to traders, taxi drivers, e-hailing, rental car and tourist drivers to mitigate the drop in tourism in Sabah.
16) [New] Equity Crowd Funding – tax exemption for individual investor to encourage crowdfunding.
17) One off payment of RM500 for frontliners.
18) Proposed increase in monthly social welfare for OKU and senior citizens.
19) Stamp duty exemption – SPA and loan agreement for purchase of first residential property worth up to RM500k. For SPA signed between 1 Jan 2021 to 31 Dec 2025.
20) Stamp duty exemption – SPA and loan agreement on abandoned housing project – extended to 31 December 2025.
21) Stamp duty exemption on insurance policies and takaful from 1 January 2021 to 31 December 2025.
22) Stamp duty exemption on ETF transactions between 1 January 2021 to 31 December 2025.