Special tax treatment for SME

1. Lower income tax rate

   - 17% on the first RM600,000 of chargeable income.

2. 100% capital allowance on small value assets

   - Assets costs not exceeding RM2,000.00.
   - No maximum limit of RM20,000 per year.

Criteria for SME

1. Share capital / capital contribution

   At the beginning of the basis period for a year of assessment:
   - A resident company: paid-up capital of RM2.5 million and less;
   - LLP: Total contribution of capital of RM2.5 million and less.
   
   AND

2. ​Gross business income

   - Gross business income not exceeding RM50 million.
   - The Gross income shall be determined as follows:
   
   a) If engaged in manufacturing, trading or services activities

• Section 22 of the Income Tax Act (ITA) 1967 – Gross income generally
• Section 24 of the ITA 1967 – Basis period to which gross income from a business is related
• Section 30 of the ITA 1967 – Special provisions applicable to cross income from a business

• Specific provisions under the ITA or specific regulations for certain industries

1. Investment holding company (Not listed on Bursa Malaysia) - Section 60F of ITA 1967
   The entity is deemed to have no gross income from business source.
    
2. Investment holding company (Listed on Bursa Malaysia) - Section 60FA of ITA 1967
   The entity is deemed to have gross income from business source.
    
3. Rent or interest as other source of income
   The rent or interest Is not under paragraph 4(a) of the ITA 1967, the entity is deemed to have no gross income from a business source.
    
4. Income from foreign business sources
   Gross income from foreign business sources shall be taken into account in determining gross business income.
    
5. Company/LLP enjoying tax incentives - such as pioneer status or investment tax allowance
   Exempted gross income from business source shall be taken into account in determining gross business income.
    
6. * Company/ LLP carries out a business activity.- No gross income from business sources due to current year business losses
   The company/ LLP is deemed to have gross income from a business source equivalent to NIL.
    
7. * Company/ LLP is temporary closure of business operation - No gross income from business sources due to current year business losses.

Taxpayer can claim 𝐒𝐩𝐞𝐜𝐢𝐚𝐥 𝐃𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐑𝐞𝐧𝐨𝐯𝐚𝐭𝐢𝐨𝐧 & 𝐑𝐞𝐟𝐮𝐫𝐛𝐢𝐬𝐡𝐦𝐞𝐧𝐭 𝐨𝐟 𝐁𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐏𝐫𝐞𝐦𝐢𝐬𝐞 as it was finally gazetted on 28/12/20.

Keynote on the PU order:

• Gazetted on 28th December 2020
• Effective from Year Assessment 2020
• Incurred from 1st March 2020 to 31st December 2021
• Maximum amount of RM300K
• Certified by external auditor

Background story in our social media dated 30/11/20 as we voiced our concern on this special deduction.

''We, as approved tax agent, can not claim these two tax incentives namely

𝟏. 𝐒𝐩𝐞𝐜𝐢𝐚𝐥 𝐝𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐫𝐞𝐧𝐭𝐚𝐥 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐭𝐨 𝐒𝐌𝐄 𝐭𝐞𝐧𝐚𝐧𝐭𝐬

𝟐. 𝐃𝐞𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 𝐫𝐞𝐧𝐨𝐯𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐫𝐞𝐟𝐮𝐫𝐛𝐢𝐬𝐡𝐦𝐞𝐧𝐭

The above-said special tax deduction has not yet been gazetted. Claims on such incentive/deduction can only be allowed after legislation is gazetted....''

Click the gazette order PU (A) 381

INCOME TAX (COST OF RENOVATION AND REFURBISHMENT OF BUSINESS PREMISE) RULES 2020

PS #1 We still need to seek further clarification of IRB guideline especially on the involvement of external auditor on certification.

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