On 14 February 2014, the International Trade and Industry Minister announced a flat rate of 20% for 5 years for Small-Medium Enterprises (SMEs) which have merged to form larger entities. Currently, SMEs only enjoy the reduced corporate tax rate of 20% for the first MYR 500,000 of chargeable income. According to reports, applicants must be 100% Malaysian owned and must be SMEs with annual sales turnover not exceeding MYR 20 million or full-time employees not exceeding 75 workers.
The objective of this legislation is to encourage mergers and acquisitions by smaller firms. SMEs can merge and build larger enterprises that are capable of competing with larger firms. For example, larger entities can take advantage of economies of scale that are not available to a smaller business.
