KUALA LUMPUR: Malaysia’s 2017 Budget will provide corporate tax cuts for companies increasing their annual revenues and for small businesses.
Under the proposals, companies increasing their annual revenue by at least five percent over the preceding year will be entitled to a one percent reduction in Malaysia’s 24 percent corporate tax on the incremental portion of taxable income. This discount rises on a sliding scale to four percent corresponding to revenue increases of 20 percent or more. The reduction will apply in years of assessment 2017 and 2018.
In addition, the Government has announced as part of the 2017 Budget a one percent cut to the small business corporate tax rate to 18 percent. This will apply on income up to MYR500,000 (USD120,000). Income in excess of this threshold will continue to be taxed at 24 percent.
Budget 2017 also extends tax incentives for certain sectors, including investments in new four- and five-star rated hotels, which will qualify for Pioneer Status for an additional two years until the end of 2018. Pioneer Status allows hotel operators on the Malaysian mainland to benefit from a tax exemption on 70 percent of income for five years. However, operators located in Sabah and Sarawak enjoy a 100 percent tax exemption, also for five years.
In addition, the investment tax allowance scheme has been extended for two years for the hotel industry. This allows companies to offset 60 percent of qualifying capital expenditure against 70 percent of income for a period of five years. Operators in Sabah and Sarawak can offset 100 percent of qualifying capital expenditure against 100 percent of income.
Tax incentives designed to promote growth in Malaysia’s Islamic finance industry have also been extended so that Islamic banks will continue to be exempt from tax on income derived from Islamic banking activities executed in foreign currencies from the year of assessment 2017 until YA2020.
For the same period, Takaful (Islamic insurance) companies will also qualify for a tax and stamp duty exemption on income derived from, and instruments associated with, Takaful business conducted in foreign currencies.
