Budget: What you need to know
Published on: Monday, November 30, 2020
Chia Swee How
Question 1 – Life Style and SSPN ReliefQ: Jonas has reviewed his annual expenditure and noted that he has incurred some lifestyle expenses as well as savings for his daughter’s tertiary education. What can Jonas benefit from Budget 2021 proposals?
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A: Effective from year of assessment 2021, the tax relief on lifestyle expenses has been increased from RM2,500 to RM3,000 per year. The increment of RM500 is limited to the purchase of sport equipment, entrance or rental fee for sport facilities and participation fee for sport events. Meanwhile, the scope of reading materials has been expanded to include subscription of electronic newspaper.
To encourage parents to save for their children’s future education, the existing tax relief up to RM8,000 per year for contributions made to Skim Simpanan Pendidikan Nasional (SSPN) has been extended for another two years for years of assessment 2021 and 2022.
Question 2 - Reduction of Income Tax Rate for Resident Individual
Q: As a single person caring for elderly parents, Agnes is facing difficulty to cope with increasing costs of elderly care and living cost. Her income is about RM65,000 a year. Is there any assistance in the budget 2021 for her?
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A: Agnes will be able to benefit from the reduction of 1 per cent in income tax rate for resident individual under the chargeable income band of RM50,001 to 70,000 to 13 per cent. Tax relief on expenses for medical treatment, special needs and parental care is also increased from RM5,000 to RM8,000.
Question 3: Special Tax Incentive under the National Economic Recovery Plan (“Penjana”)
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Q: GTLA Ltd Co, a manufacturer of semi-conductor components from Japan is exploring investment into Malaysia. They are planning to relocate their operations to Malaysia due to major disruptions of global supply chains. Their initial capital investment is estimated at RM400 million, which may increase progressively over the years. GLTA would like to know if there is any special tax incentive in Budget 2021 proposals that applicable to them.
A: There was a Special Tax Incentive announced by the Government under the National Economic Recovery Plan (PENJANA) on 5 June 2020. As the closing date for the application of the said incentive is approaching, the Government has in the recent budget announcement, extended the tax incentive application period until 31 December 2022.
The types of incentives offered under the Special Tax Incentive are as follows:
l 0 per cent special tax rate for 10 years for new investment in manufacturing sector with capital investment between RM300 million to RM500 million.
l 0 per cent special tax rate for 15 years for new investment in manufacturing sector with capital investment above RM500 million
In view of the proposed initial capital investment of RM400 million, GLTA Ltd Co may be eligible for 0 per cent special tax rate for 10 years. Additionally, non-resident individuals holding key positions will enjoy a flat rate of 15 per cent for a period of 5 years as opposed to the current flat rate of 30 per cent.
Question 4 – Further Tax Deduction for employers to employ Senior Citizens and Ex-Convicts
Q: Mary is 61 years old and has been retired for 1 year. She is contemplating returning to work as she feels bored at home. However, she feels that employers may be reluctant to hire her due to her age. Sam an ex-convict recently released from prison. He would like to look for a job but he is worried that employers may be reluctant to hire him as he has criminal record. What are the Government’s initiatives to encourage senior citizen and ex-convicts back into the workforce?
A: The employer will be given a further deduction on the monthly remuneration of up to RM4,000 who employs senior citizen (60 years and above) and ex-convicts on a full-time basis. This is an extension of the current tax exemption that was introduced in Budget 2019 for the years of assessment 2019 and 2020, which is now proposed to be extended to 2025.
Question 5: Excise Duty
Q: My husband smokes and have seen increasing prices over the years which cuts into our food budget. But we managed to save some money by buying at duty free shops when he comes home from his frequent business travels. What should I be prepared for after this Budget 2021?
A: Effective from 1 January 2021, the Government will impose stricter rules on the importation of cigarettes such as freezing the issuance of import license and stringent rules when it comes to renewal of import license for cigarettes through revising the license term. The government will also impose excise duty at the rate of 10 per cent ad valorem on the electronic and non-electronic cigarettes including vape and 40 cents per ml on the liquid used in the electronic cigarettes. Therefore, your husband can expect more price hikes for cigarettes as well as electronic cigarettes products.
In addition, the government is proposing to make all cigarettes and tobacco products as taxable goods even in duty free islands and any free zones such as airports that have been permitted retail sale of duty free cigarettes.
Question 6 : Stamp duty exemption
Q: I am a newlywed and I am looking forward to purchase my first home together with my spouse. Are there any proposals in the Budget 2021 that can help us buy our first home?
A: To promote home ownership, the Budget 2021 proposes full stamp duty exemption on both instrument of transfer and loan agreement for the purchase of first house worth up to RM500,000, increased from the current RM300,000. This will widen the market of available homes that qualifies for the exemption for first time homebuyers. The exemption is applicable for sale and purchase agreement on purchases completed from 1 January 2021 to 31 December 2025.
Q7: Stamp Duty exemption
Q: The stamp duty exemption on Perlindungan Tenang insurance policies and takaful certificates with a yearly premium / contribution not exceeding RM 100 granted for a period of 2 years up to 31 December 2020 has helped families in the B40 income group afford insurance since. Will the government extend the exemption?
A: Yes. The Government will extend the stamp duty exemption on all the Perlindungan Tenang products with an annual premium or contribution value not more than RM100 for another 5 years up to year of assessment 2025. In addition, the Government also plans to provide a RM50 voucher to assist B40 aid recipients to purchase life insurance and personal accident insurance.
Question 8 – Tax Relief for Medical Expenses Incurred
Q: Anson, who is a Malaysian tax resident, has incurred expenses for medical treatment of RM7,000 for his child due to serious disease and medical treatment/ parental care expenses of RM8,000 for his mother. In addition, Anson has done a full medical check-up and injected vaccine for Influenza. The cost of full medical check-up and vaccine are RM1,000 and RM250 respectively. Would Anson be eligible to enjoy any additional tax relief from the recent budget announcement?
A: From year of assessment 2021 onwards, Anson would be eligible to:
- Tax relief for medical expenses for self, spouse and child for serious diseases of up to RM8,000 (increased from RM6,000 to RM8,000).
- Tax relief for full medical check-up which has been increased from RM500 to RM1,000.
- Tax relief for medical treatment, special needs and parental care expenses for his mother which has been increased from RM5,000 to RM8,000.
- Tax relief for the vaccination expenses of up to RM1,000.
Question 9: Incentive for Global Trade Centre
Q: ABC Group is involved in the manufacturing and trading of rubber products. The management of ABC Group is planning to set up a company as the Global Trading Centre for its Group in Malaysia. The management would like to know whether there is any tax incentive available.
A: Based on the recent budget announcement, the government has proposed to introduce a new incentive scheme for Global Trading Centre and it would be given a reduced income tax rate of 10 per cent for a period of 5 years and renewable for another 5 years. The applications need to be submitted to the Malaysian Investment Development Authority from 1 January 2021 to 31 December 2022. However, further clarification is required on the qualifying conditions for the above incentive.
Disclaimer: The above general comments represent the personal views of the named contributor 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.
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Summary of relief entitlement
