Tax highlights from your advisers · 4/29/2020 · government linked companies, companies owned by...
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Transcript of Tax highlights from your advisers · 4/29/2020 · government linked companies, companies owned by...
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Tax WhizTax highlights from your advisers
KPMG in Malaysia
29 April 2020
Special Tax Deduction for Rental Reduction on Business Premises Rented to Small and Medium Enterprises [Updated on 29 April 2020]
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Tax Whiz 2020 | 29 April 2020
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• Additional tax deduction equivalent to the amount of rental reduction given to qualified SME tenants (including related companies) will be accorded (subject to the gazette of the Income Tax Rules).
• Applicable to rental reductions given from April 2020 to June 2020, including rental received in advance before April 2020.
• Rental reduction of at least 30% is required on the original monthly rental charged and the special deduction is computed on a monthly basis. Failure to provide the 30% discount for a particular month will disqualify the taxpayer from claiming the special deduction for that month. However, it will not affect the claim for other months where the rental reductions are at least 30%.
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2• Companies • Individuals• Co-operatives
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* They have to be completed in the Working Sheet which will be provided together with relevant income tax return form. Both FAQs have not addressed further on the certification or verification process. Further clarification has to be sought from the MIRB on this.
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Special Tax Deduction for Rental ReductionFurther to the Additional PRIHATIN Package announced by the Government on 6 April 2020 which included the granting of a special tax deduction to building owners who provide a rental reduction of at least 30% to their Small and Medium Enterprise (“SME”) tenants for the period from April 2020 to June 2020, the Ministry of Finance (“MOF”) has, via its official Telegram channel, issued a Frequently Asked Questions (“FAQs”) in respect of this tax incentive.
On 25 April 2020, the Malaysian Inland Revenue Board (“MIRB”) has uploaded the related FAQs on the special tax deduction on its website. The MIRB has further updated the FAQs on 28 April 2020. Our summary below has been updated to reflect further information provided in the updated MIRB’s FAQs.
The salient points of the FAQs, which are subject to the gazette of the Income Tax Rules, have been set out below:
Special Tax Deduction
Terms and ConditionsQualifying Persons
Supporting Documents
• Other business and non-business entities
who rent out their business premises to qualified SMEs tenants for the purpose of carrying out a business, whereby such rental income is taxed under Section 4(a) or (d) of the Income Tax Act 1967. Examples of business premises are offices, workshops, warehouses, childcare centres and rented lots / bazaars / booths / stalls. They exclude residential houses that are used for both residential and business purposes.
No. Under MOF’s FAQs Under MIRB’s FAQs
1 Valid tenancy agreement
2 Rental income statement
3 Documents certifying tenant’s SME status
Details of the tenant as SME such as business registration number, tax file number etc*
4 Document certifying the reduction in the rental
Details of the rental reduction*
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Tax Whiz 2020 | 29 April 2020
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The definition of “SME” for the purpose of the special tax deduction follows SME Corporation Malaysia’s definition. A business would have to fulfill either one of following two conditions to be regarded as an SME:
• Annual sales – based on the figure at the end of the basis period of the preceding Year of Assessment (“YA”); or
• Number of full time employees (“FTEs”) – based on numbers at the end of the basis period for the YA prior to the YA in which the SME claims deduction for rental expenditure for the qualifying months or on 1 April 2020.
5 Definition of “SME”
• If a business fulfills either one condition across the different sizes of operation, then the smaller size will be applicable. For example, if a manufacturer’s annual sales is RM100 million but has 150 FTEs, it will be deemed to be an SME (not exceeding 200 FTEs).
• For reference purposes, both FAQs provide a link to access the Guidelines for New SME Definition (“SME Guidelines“) issued by SME Corporation Malaysia. The SME definition in the SME Guidelines excludes the following companies:
o Public listed companies in the main board.o Subsidiaries of public listed companies in the main board, large firms, multinational corporations,
government linked companies, companies owned by the Minister of Finance (Incorporated)(Malaysia) and state-owned enterprises.
• Companies excluded from the SME definition under the SME Guidelines will not qualify for the special tax deduction.
• Based on the SME Guidelines, a business must be registered with Companies Commission of Malaysia, respective authorities/district offices in Sabah and Sarawak or respective statutory bodies for professional service providers to be classified as an SME.
• For further details of the definition of SME including exclusion and additional qualifying criteria, please refer to the SME Guidelines (click here for the link)
Type of Business
Sector Conditions (only one condition is required to be met)
Micro All sectors • Annual sales: Less than RM300,000• FTEs: Less than 5
Small Manufacturing • Annual sales: From RM300,000 but less than RM15 million• FTEs: From 5 to less than 75
Services and other sectors
• Annual sales: From RM300,000 but less than RM3 million• FTEs: From 5 to less than 30
Medium Manufacturing • Annual sales: From RM15 million but not exceeding RM50 million• FTEs: From 75 but not exceeding 200
Services and other sectors
• Annual sales: From RM3 million but not exceeding RM20 million• FTEs: From 30 but not exceeding 75
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Contact us
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Tax Whiz 2020 | Report Name
© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
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