Malaysia’s Minister of Finance tabled in parliament the Budget for 2020.

The budget provides the following tax measures:

• The SME income tax rate for Chargeable Income up to the first RM500,000 was reduced by 1% to 17% in 2019. To further support the growth of the SME, the chargeable income subjected to 17% rate will be increased to RM600,000, subject to the SME having paid-up capital of not more than RM2.5 million and annual sales of not more than RM50 million.
• To ensure a more progressive personal income tax structure, it is proposed that a new band for taxable income in excess of RM2 million be introduced and taxed at 30%, which is a 2 percentage point increase from the current 28% rate. Fixed income tax rate for non-resident individuals is also increased to 30%.
• The introduction of tax incentives to further promote high-value-added activities in the Electrical and Electronics (E&E) industry to transition into 5G digital economy and Industry 4.0-(i) income tax exemption up to 10 years to E&E companies investing in selected knowledge-based services; and (ii) special Investment Tax Allowance to encourage companies in E&E sector that have exhausted the Reinvestment Allowance to further reinvest in Malaysia.
• Intellectual property (IP) generated income based on the Modified Nexus Approach (MNA) derived from patents and copyright software will be given tax exemption for a period of up to 10 years.
• Accelerated Capital Allowance and automation equipment capital allowance for manufacturing sector on the first RM2 million and RM4 million incurred on qualifying capital expenditure is extended to the year of assessment 2023. The scope of the above incentive has also been expanded to cover the services sector.
• New investments in international theme park projects will be given income tax exemption of 100% of statutory income or Investment Tax Allowance of 100% to be set off against 70% for 5 years.
• Increasing tax deductions given to companies sponsoring arts, cultural and heritage activities in Malaysia from RM700,000 to RM1,000,000 per year.
• Investment tax allowance (ITA) of 50% on qualifying capital expenditure for 5 years to be set off against 50% statutory income for E&E companies that have exhausted 15-year reinvestment allowance (RA).
• Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) incentives will be extended to 2023. A 70% income tax exemption of up to 10 years will be given to companies undertaking solar leasing activities.
• The Digital Services Tax will be implemented with effect from 1 January 2020, to include services such as, but not limited to downloaded software, music, video or digital advertising. Foreign service providers can commence registration with the Royal Malaysian Customs Department (RMCD) as of 1 October 2019.
• To further encourage alternative sources of funding for startups companies and to attract more foreign investment to Malaysia, tax incentives given to venture capital and angel investors will be extended until the year 2023.
• The current tax deductions on the cost of issuance and additional deductions on sukuk issuance costs under the principle of Wakalah will be extended for 5 years until year of assessment 2025.
• Tax exemption for fund management companies managing Shariah compliant funds and SRI funds, and the tax deduction on the cost of issuing SRI Sukuk will be extended for another 3 years until year of assessment 2023.