Malaysia RM35 billion Short-Term Economic Recovery Plan

Prime Minister Tan Sri Muhyiddin Yassin has announced a RM35 billion Short-Term Economic Recovery Plan (ERP) on 5th June 2020, with RM10 billion direct cash injection from the government, bolstering state support for the Malaysian economy hit hard by the global Covid-19 pandemic. The new plan follows a late March stimulus package worth nearly RM250 billion.

The Short-Term Economic Recovery Plan consists of 40 initiatives, with emphasis given to supporting workers and small and medium-sized enterprises (SMEs) in Malaysia. This is done through training programmes, social support, financing schemes, boosting domestic consumption and supporting industries impacted by the outbreak and Movement Control Order (MCO).

Related Read: More Sectors Allowed To Operate With Extension of MCO Malaysia »

Highlights of Malaysia’s Short-Term Economic Recovery Plan

1. Provide Grants and Loans to Help SMEs in Malaysia Towards Digitalisation (RM700 Million) for adoption or subscription of digitalisation services

• RM100 million SME Digitalisation Matching Grant
• RM500 million SME Technology Transformation Fund (loan application opens from July 2020)
• RM100 million Smart Automation Grant (max RM1 million per company)

Lead agencies: MIDA, MDEC, SME Bank, BSN
Participating agencies: Google, Alibaba Cloud

2. Banks to provide RM2 billion PENJANA SME Financing (“PSF”) for businesses in the critically affected sectors

• Interest rate 3.5%
• PSF scheme available from mid June 2020
• Max financing of RM500,000 per SME

3. RM400 million PENJANA Microcredit Funds by TEKUN and BSN

• New funding program for SMEs and micro enterprises in Malaysia (interest rate 3.5%)
• Max financing RM50,000 per enterprise
• RM50 million is earmarked for women entrepreneurs
• A dedicated amount of the funding will be carved out for youth entrepreneurs and social enterprises.

4. Spur Set Up of New Businesses (RM300mil)

• Income tax rebate up to RM20,000 per year up to 3 years for newly established SMEs in Malaysia from 1st July 2020 to 31st December 2021
• Malaysia stamp duty exemption for SMEs Mergers and Acquisitions for period between 1st July 2020 to 30th June 2021

5. Financial Stress Support for Businesses (RM2.4 billion)

• 50% remission of penalty for late payment of sales tax & service tax in Malaysia due and payable from 1st July 2020 to 30th September 2020
• Extension of special tax deduction to 31st December 2021 (renovation and refurbishment of business premises)
• Extension of Accelerated Capital Allowance to 31st December 2021 (eligible capital expenses including ICT equipment)
• Extension of special deduction to 30th September 2020 (30% reduction in rental)

6. Tax Relief for Covid-19 Prevention Related Expenses for businesses (RM600 million) by LHDN & Customs

• Tax relief period extended
• Expanded scope of expenses allowed as tax deduction or capital allowance for COVID-19’s prevention to include:
  • Covid-19 testing
  • Purchase of PPE and thermal scanners

7. Property Tax Exemption Incentives (RM1 billion)

To stimulate property market and provide financial relief to home buyers:

• Home Ownership Campaign (HOC) to be reintroduced for the purchase of residential homes (priced between RM300,000 to RM2.5 million) subject to at least 10% discounts provided by the developer)
• Malaysia stamp duty exemption on instrument of transfer limited to first RM1 million of home price
• Full Malaysia stamp duty exemption on loan agreement for sales and purchase agreements signed between 1st June 2020 to 31st May 2021
• RPGT exemption for disposal of residential homes* (1st June 2020 to 31st Dec 2021) *limited to 3 units of residential homes per individual
• Current 70% margin of financing limit applicable for third housing loan onwards for property valued at RM600,000 and above, will be uplifted during the period of the HOC, subject to internal risk management practices of financial institutions

8. Sales Tax Exemption on purchases of passenger car

• Full sales tax exemption on locally assembled cars
• 50% sales tax exemption on imported cars
• Effective mid June 2020 to end of December 2020

9. Tax incentives for companies relocating into Malaysia

Timeline: July 2020 to December 2021

• 0% tax rate for 10 years for new investment in manufacturing sectors with capital investment between RM300mil – RM500mil
• 0% tax rate for 15 years for new investment in manufacturing sectors with capital investment above RM500mil
• 100% Investment Tax Allowance for 5 years for existing company in Malaysia relocating overseas facilities into Malaysia with capital investment above RM300mil
• Special Reinvestment Allowance for manufacturing and selected agricultural activities, from YA 2020 to YA 2021
• Additional operating expenditure for Malaysian Investment Development Authority (MIDA) to undertake marketing and promotional activities
• Establishment of Project Acceleration & Coordination Unit (PACU) at MIDA
• Enhancement of Domestic Investment Strategic Fund
• Manufacturing License approval for non-sensitive industry within 2 working days

10. Tourism Sector Tax Incentives (RM1.8 billion)

• Tourism tax exemption from 1st July 2020 to 30th June 2021
• Extension of service tax exemption for hotels in Malaysia to 30th June 2021
• Extension RM1,000 individual income tax relief for tourism expenses to 31st December 2021
• Extension of period for deferment of tax instalment payment for tourism industry to 31st December 2020

11. Wage subsidy program extended by 3 months

Under the Short-Term Economic Recovery Plan, additional RM5 billion allocation to extend the Wage Subsidy Program (WSP) for a further 3 months (mid June to end of September 2020), with subsidy of RM600 per employee for all eligible employers. Enhancement of WSP:

• Allow employers to implement reduced work week (e.g. 4-day work week with a reduced pay of 20%)
• Allow reduced pay (max 30%)
• Allow unpaid leave – only applicable for tourism sector and businesses which are prohibited from operating during Conditional Movement Control Order (CMCO)

Related Read: Malaysia Wage Subsidy Programme 2.0 | What You Need to Know »

12. Support work-from-home with tax deduction

To sustain the new normal of work-from-home, the Government will support employers and employees with the following:

• Further tax deduction for employers which implement Flexible Work Arrangements (FWAs) or undertake enhancement of their existing FWAs (effective 1st July 2020)
• Individual income tax exemption of up to RM5,000 to employees who receive a handphone, notebook & tablet from their employer (effective 1st July 2020)
• Special individual income tax relief of up to RM2,500 on the purchase of handphone, notebook & tablet (effective 1st June 2020)
• SOCSO will also provide
• Coverage for workers involved in accidents while working at home under the Employment Injury Scheme

13. Encourage hiring of the unemployed

Under the Short-Term Economic Recovery Plan, the Government will introduce incentives to encourage the hiring of the unemployed as follows:

• Hiring Youth – RM600 per month for apprenticeships for school leavers and graduates for up to 6 months;
• Hiring Unemployed Workers
  • Below 40 years old: RM 800 per month for employment of unemployed for up to 6 months
  • 40 years old and above: RM 1,000 per month for employment of unemployed for up to 6 months
  • Training allowance of RM4,000 per individual will also be extended to those retrenched but not covered under the Employment Insurance System (EIS)

14. RM2 billion funds to improve skills for the unemployed

A RM2 billion fund from the Short-Term Economic Recovery Plan will be dedicated to reskilling and upskilling programmes for Youth and Unemployed Workers. To enhance employability of youth particularly school leavers and fresh graduates, the Government will:

• Provide a 1-to-1 matching fund of RM250 million to co-fund place-and-train in addition to other upskilling programmes with HRDF
• Optimise Government training facilities such as those under MARA, Community Colleges, IKBN and ILP
• Support Securities Industry Development Corporation (SIDC) programs such as Capital Market Graduate Apprenticeship program, Islamic Capital Market Graduate Training Scheme (ICM GTS) and training subsidy of up to RM 3,500 over the next 6 months
• Relax conditions for PROTÉGÉ Ready to Work (RTW) programme

15. Support the growth of the gig economy

• RM50 million matching grant for gig economy platforms who contribute their gig workers towards PERKESO’s employment injury scheme of up to RM162 and EPF’s i-Saraan contribution of up to RM250 yearly.
• Provide MDEC with RM25 million for the Global Online Workforce (GLOW) program which will train Malaysians to earn income from serving international clients while working online from home.

16. Childcare Subsidy

The Short-Term Economic Recovery Plan includes subsidy of childcare expenses for parents:

• RM 800 e-Vouchers per household for mobile childcare services, to be utilised till end of August 2020
• Increase in income tax relief for parents on childcare services expenses, from RM 2,000 to RM 3,000 for Year of Assessment (YA) 2020 and 2021
• For childcare centres, incentives to comply with the new normal and to incentivise certification of early education practitioners
• One-off grant of up to RM5,000 per childcare centre registered with the Ministry of Women, Family and Community Development (up to 31st December 2020) to comply with new healthcare SOPs
• Incentive to train new practitioners for child nursing and early education course under Ministry of Women, Family and Community Development

17. Launched RM30 public transport monthly pass

To reduce the burden of costs of transportation, the Government will:

• Introduce an unlimited monthly travel pass costing RM30 for use on all rail services (MRT, LRT, Monorail), BRT, RapidKL buses and MRT feeder buses

18. RM1 billion PENJANA Tourism Financing (PTF)

• To finance transformation initiatives by SMEs in the tourism sector in Malaysia
• Details of this fund was announced by Bank Negara Malaysia in July 2020

19. Cash flow support for G2 & G3 contractors and vendors

SME Go-Scheme for Liquidity Support (RM1.6 billion)
SME Bank will provide financing support to contractors and vendors who were awarded with small government projects (aggregate value of RM 4 billion) under the Pakej Rangsangan Ekonomi (PRE) 2020 and the PRIHATIN stimulus package.

• No deposits or collateral needed
• SME Bank shall pay directly to the contractors and vendors based on the presentation of invoices/claims

20. Agriculture and Food Sector Support (RM400mil)

• RM350mil Micro credit financing under Agrobank for agropreneurs (interest rate 3.5%)
• Max loan size: RM50,000
• Tenure of loan: 5 years
• Agrofood workforce mobility via incentives for pioneer companies to train and educate workforce
• In-kind benefits for Urban Farming (e.g. Fertilisers, Seeds, Infrastructure, Equipment, Advisory and Training) worth RM500 per person and RM 50,000 per community

21. Crude Palm Oil Export Duty Exemption

Support the commodity sector through 100% export duty exemption from 1 July 2020 to 31 December 2020 for:

• Crude Palm Oil
• Crude Palm Kernel Oil
• Refined Bleached Deodorized Palm Kernel Oil

22. Arts, Culture, Entertainment Events and Exhibition Sector Support (RM225mil)

• RM100mil soft loans (3.5% interest rate) and RM30mil grants for the creative, events and exhibitions industries under MyCreative Ventures and RM10mil for CENDANA
• RM50mil worth of digital marketing obtained from RM10mil Digital Marketing and Promotions Grant under MyCreative Ventures (max RM5,000 per event) for 2000 events, exhibitions, and productions
• RM35mil Dana Kandungan Digital under MDEC for projects in the creative sector (focus on animation and visual effects)
• Collaboration between MyCreative and the private sector to help players adapt to new normal through training in digital distribution methods and promotion, development of new business models, and connectivity

23. Promote local products through National “Buy Malaysia” Campaign (RM20 million)

The Short-Term Economic Recovery Plan pushes for consumption of local products and services through:

• Promoting the “Buy Malaysia” campaign by the Government and relevant agencies
• Ensuring local product tagging or identification is compulsory for big supermarket chains
• Create dedicated Malaysian products channels on major digital platforms

24. Encourage e-wallet usage

Malaysians aged 18 and above; and earning less than RM100,000 annually are eligible to receive:

• RM 50 worth of e-wallet credits
• Additional RM50 in value through vouchers, cashback and discounts by e-wallets
• Only for offline/physical purchases

25. Shop Malaysia Online (RM70 million)

Government collaborates with e-commerce platform in Malaysia to co-fund digital discount vouchers to encourage online spending on products from local retailers.
Participating agencies are: Boost, Lazada, foodpanda, FashionValet, Grab, Fave, TouchnGo, Shopee, Maybank and Zalora.

26. Micros and SMEs E-commerce Campaign (RM70mil)

To encourage adoption of e-commerce platform by micro-enterprises and SMEs in Malaysia to widen market reach.

Timeline: June to September 2020

Eligible Micro enterprises and SMEs in Malaysia to shift towards business digitalisation through a co-funded programme with MDEC and e-commerce platform in Malaysia.
Participating e-commerce platforms will provide the following to eligible MSMEs:

• On-boarding training
• Seller subsidy
• Sales support

Fresh food producers such as farmers and fishermen are encouraged to join the campaign.

Participating agencies are: Boost, Lazada, foodpanda, FashionValet, Grab, Fave, TouchnGo, Shopee, Maybank and Zalora.

27. Dana Penjana Nasional investment fund (RM1.2 billion)

For start-ups tech funds & local private sector venture capital funds in Malaysia
(RM600mil from international investors + RM600mil from local investors).
Funding from international investors and institutional private capital investment will be matched and channelled into:

• Seed Stage / Co-creation Funds
• Series A/B Funds
• Growth Stage Tech Funds
• Venture Debt Funds
• Opportunistic Funds (e.g. e-sports, healthcare)

International investors and venture capital funds that have expressed interest include SK Group, Hanwha Asset Management, KB Investment Co. Ltd, Provident Growth, 500 Startups and The Hive.

28. RM5 million allocated to set up online one-stop business advisory platform: MyAssist MSME One Stop Shop

• To provide guidance and recovery for micro enterprises and SMEs in Malaysia, including guidance in funding facility, trade facilitation, technology support, legal, branding and promotion

Related Read: RM3,000 Special Grant for Micro Enterprises »

29. RM10 million matching grant for Social Enterprises activities

• Through Malaysian Global Innovation & Creativity Centre (MaGIC)

30. Proposed Covid-19 Temporary Measures Act to be tabled during July 2020 Parliament session

• To mitigate potential negative impact to economic activities caused by contractual breaches and enforcement of insolvency actions on groups affected by Covid-19 and MCO
• Beneficiaries: relevant parties such a manufacturer, renters etc.

Through the Short-Term Economic Recovery Plan, the Malaysian government aims to help businesses and individuals better cope with the pandemic. At WeCorporate, we help businesses navigate through such schemes and grants to ensure that you benefit from them. Consult us today!

Christine

Christine is a content writer at WeCorporate whose focus is mainly on the business landscape in the APAC region. She also occasionally writes on trending topics and provides useful insights to aspiring entrepreneurs and seasoned businessmen alike.

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