A Company or Limited Liability Partnership (LLP) that has a paid-up capital of RM2.5 million and below with an annual sales turnover not exceeding RM50 million is categorised as Micro, Small and Medium Enterprises (MSME).
They are subjected to income tax of:
17% (preferential tax rates) for the first RM600,000 of chargeable income; and
24% (prevailing tax rate) on the remaining chargeable income.
Proposal
To boost MSME competitiveness and promote economic growth, it is suggested to cut the tax rate on chargeable income for the first RM150,000 from 17% to 15%, while maintaining the tax rates for the remaining taxable income at 17% and 24% as follows:-
Effective Date
For the year of assessment 2023.
Comments
The reduction of tax rates for the first RM150,000 of chargeable income can provide some relief for MSMEs, which are often cash-strapped and struggling to stay afloat, especially during the COVID-19 pandemic.
By reducing their tax burden, MSMEs can have more resources to invest in their business and grow their operations. This, in turn, can contribute to economic growth and job creation.
Footnotes
A MSME will not be entitled to the preferential tax rate if more than:
50% of the paid-up capital of its ordinary shares is directly or indirectly owned by a related company
50% of the paid-up capital of the ordinary shares of the related company is directly or indirectly owned by the first-mentioned company, or
50% of the paid-up capital of the ordinary shares of the first-mentioned company and the related company is directly or indirectly owned by another company.
“Related Company” means a company which has a paid-up capital in respect of its ordinary shares of more that RM2.5m at the beginning of the basis period for a year of assessment.
Practice Note
The Inland Revenue Board (IRB) released Practice Note No 3/2020 and Practice Note No 4/2020 to explain gross income from business sources of not more than RM50m.
According to the practice note, investment holding companies not listed on Bursa Malaysia are not eligible for the preferential tax rate because they do not have business income. However, Investment holding companies listed on Bursa Malaysia will be considered to have business income and qualify for the preferred tax rate.
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1. The Inland Revenue Board has published a frequently asked questions document on the 2% Withholding Tax on payments made by a company to agents, dealers, or distributors under Budget 2022.
2. Agents, dealers, and distributors are individual tax residents whom the paying company authorizes to act as agents, dealers, and distributors and receive payments as remuneration for sales, transactions, or schemes carried out by them.
3. Scope of agents, dealers or distributors includes a sole proprietor and an individual partner of a partnership (in respect of payments to the individual partner but excludes payments made to the partnership).
8. MASB Updates No.1 November 2021 – IASB Project on Equity Method [MASB 2021年11月第1号更新 – 会计准则理事会关于权益法 [Equity Method] 的项目] https://lnkd.in/eu3ZX_rB
9. Bursa Malaysia issues updated Corporate Governance Guide [马来西亚证券交易发布更新的 公司治理指南] https://lnkd.in/e5pEbgpt
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11. Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 [2021年纳闽商业活动税 （纳闽商业活动的要求）条例] https://lnkd.in/etg252Kb
12. Pembangunan Sumber Manusia Berhad (Exemption of Levy) (No. 2) (Amendment) Order 2021 [2021 年人力资源发展有限公司 (免征征税)(第 2 号) (修订) 指令] https://lnkd.in/eGmGXRaU
13. Income Tax (Exemption) (No. 11) Order 2021 [2021年所得税 (豁免)(第11号) 指令] https://lnkd.in/e5e-J8SV
14. Income Tax (Exchange of Information) Rules 2021 – Request for Information [2021年所得税 (信息交流) 细则 – 要求提供信息] https://lnkd.in/eUCUWXK6
16. Income Tax (Exemption) (No. 13) 2013 (Amendment) Order 2021 [2021年所得税 (豁免)(第 13 号) 2013年(修订) 指令] https://lnkd.in/ejJyjQFs
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24. Income Tax (Deduction for Relocation Costs for Tun Razak Exchange Marquee Status Company) (Amendment) Rules 2021 [2021年所得税 (敦拉萨国际贸易中心 Marquee 地位公司 搬迁费用的扣除)(修订) 细则] https://lnkd.in/e8UDx5Ki
25. Income Tax (Deduction for Rental Payments) (Tun Razak Exchange Marquee Status Company) (Amendment) Rules 2021 [2021年所得税 (租金扣除) (敦拉萨国际贸易中心 Marquee 地位公司)(修订) 细则] https://lnkd.in/eiZAG8aP
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27. Income Tax (Exemption) (No. 12) Order 2021 [2021年所得税 (豁免)(第12号) (修订) 指令] https://lnkd.in/eyiVRAAr
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29. Special Deduction for Reduction of Rental to Non-SMEs Tenants extended to 30.6.2022 [非中小型企业租户租金特别扣税 延长至2022年6月] https://lnkd.in/eiCFG9bS
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34. Double Tax Deduction for the Sponsorship of Scholarship to Malaysian Student [赞助马来西亚学生奖学金，所得税双重扣税] https://lnkd.in/erNAhxAn
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1) The Inland Revenue Board (IRB) has published Operational Guidelines No. 3/2021, titled “Permohonan Surat Penyelesaian Cukai Bagi Syarikat, Perkongsian Liabiliti Terhad Dan Entiti Labuan” on its website in Bahasa Malaysia.
2) The Guidelines, which were issued on June 30, 2021, supersede GPHDN 2/2019, which was published on November 12, 2019.
🌼🌼🌼🌼🌼🌼🌼🌼🌼🌼
1) 内陆税收局（IRB）在其网站上发布了马来文版本的第3/2021号操作指南，题为 “Permohonan Surat Penyelesaian Cukai Bagi Syarikat, Perkongsian Liabiliti Terhad Dan Entiti Labuan”。
