Malaysia: Economic Stimulus Packages and Budget 2021

On 27 February 2020, the Economic Stimulus Package 2020 (ESP) valued at RM20 billion was announced to mitigate impact of Covid-19, spur economic growth, and promote quality investments. Some key measures are as follows: 

• Deferment of tax instalment payments for tourism industry 

• Revision of tax estimate in the third month 

• Reduction in employees’ contribution to the Employees Provident Fund (EPF) 

• Special personal income tax relief for domestic travelling expenses 

• Service tax exemption for hotel and other accommodation operators 

• Accelerated capital allowance for machinery and equipment 

• Deduction for renovation and refurbishment expenses 

• Further deduction for training expenses for hotel and tour operators 

• Deduction/allowance on personal protective equipment provided to employees 

In addition to the ESP announced on 27 February 2020, the Prihatin Rakyat Economic Stimulus Package (PRIHATIN) valued at RM250 billion was announced on 27 March 2020. Some key measures are as follows: 

• Deferment of tax instalment payments for Small and Medium Enterprises (SMEs) 

• Exemption of Human Resource Development Fund (HRDF) levy 

• Withdrawal from Private Retirement Scheme (PRS) 

• Wage subsidy program 

Focusing on reducing the burden of SMEs, the PRIHATIN Tambahan (PRIHATIN PKS+) valued at RM10 billion was announced on 6 April 2020. Some key measures are as follows: 

• Enhanced wage subsidy program 

• Reduction of foreign workers levy 

• Special PRIHATIN grant for Micro SMEs 

• Abolishment of 2% interest rate under Micro Credit Scheme 

• Waiver or discount on rent 

- Government-linked Corporations (GLCs) owned premises rented to retail SMEs 

- Private sector owned building and business premises rented to SMEs (Additional tax deduction) 

Short-term Economic Recovery Plan (PENJANA) valued at RM35 billion was announced on 5 June 2020 to support the economy. Some key measures are as follows: 

• Extension of wage subsidy program 

• Deduction/allowance on personal protective equipment, thermal scanners and Covid-19 testing 

• Tax exemption up to RM5,000 for provision of mobile phones, laptops and tablets to employee 

• Special personal income tax relief on the purchase of handphone, notebook and tablet 

• Further tax deduction for implementation of Flexible Work Arrangement

• Extension of special deduction for rental discount given to SME tenants 

• Extension of accelerated capital allowance for machinery and equipment 

• Extension of deduction for renovation and refurbishment expenses 

• Income tax rebate for new SMEs 

• Stamp duty exemption for merger and acquisition 

• Extension of deferment of instalment payments for tourism industry 

• Extension of special personal income tax relief for domestic travelling expenses 

• Extension of service tax exemption for hotel and other accommodation operators 

• Exemption of tourism tax 

• Incentivesfor relocation of manufacturing activities into Malaysia • Stamp duty exemption for purchase of residential properties 

• Real Property Gains Tax (RPGT) exemption for disposal of residential properties 

On 23 September 2020, KITA PRIHATIN valued at RM10 billion was announced. Some key measures are as follows: 

• Targeted wage subsidy program 

• Extension of special PRIHATIN grant for Micro SMEs 

Under Budget 2021 announced on 6 November 2020, RM322.54 billion would be allocated with the hope to achieve economic recovery at a growth rate between 6.5% to 7.5%. Some key measures are as follows: 

• Reduction of individual income tax rate 

• Tax reliefs 

• Increase in limit of income tax exemption on compensation for loss of employment 

• Extension of tax incentive for returning expert program 

• Special income tax rate for non-Malaysian citizen individuals holding key positions in companies investing in new strategic investments 

• Reduction in employees’ contribution to the Employees Provident Fund (EPF) 

• Exemption of Human Resource Development Fund (HRDF) levy 

• Targeted wage subsidy program 

• Tax incentives for various industries such as manufacturing pharmaceutical products, companies relocating their operations to Malaysia, Principal Hub, Global Trading Centre, export of private healthcare services, commercialisation of Research and Development findings, East Coast Economic Region Development Corridor, Iskandar Malaysia and Sabah Development Corridor 

Malaysia, and the whole world is looking forward to a better Year 2021. Together, fighting as one, we will win this battle against Covid-19 and the adverse economy it brought. In years to come, the Year 2020 will be special in the hearts of Malaysian and people around the world!