Articles

Government announces Wage Subsidy Program 2.0 (“PSU 2.0”)

The Malaysian Government has announced a follow-up to the current Wage Subsidy Programme, which is ending on 30 September 2020. Termed the Wage Subsidy Programme 2.0, only companies that are still facing an income loss of more than 30% compared to the previous year since the start of the MCO can apply.

This requirement differs from the earlier Wage Subsidy Programme, which is open to employers who have suffered an income loss of more than 50% since 1 January 2020. WeCorporate have extracted an FAQ below from the directive obtained from SOCSO dated 23 September 2020.

1. What are Wage Subsidy Program (PSU) and Wage Subsidy Program 2.0 (PSU 2.0) all about?

• Wage Subsidy Program (PSU) and Wage Subsidy Program 2.0 (PSU 2.0) are financial assistance programs paid to employers for all local employees earning RM4,000 or less.
• Applications for PSU began on 1 April and ends on 30 September 2020.
• Under the PRIHATIN economic stimulus package announced on the 27th of March 2020, PSU subsidised wages for 3 months. Under the PENJANA national economic recovery plan announced on the 27th of June, PSU was extended for an additional 3 months (bringing the total number of months to 6).
• On the 23rd of September 2020, the Prime Minister announced that the PSU will be extended for an additional 3 months for existing employers currently receiving it; while businesses that have yet to apply for PSU may receive 6 months of aid in total. This program is known as PSU 2.0
• The PSU aims to support affected bussinesses by the economic impact of the COVID-19 crisis as well as prevent workers from losing their jobs and source of income.

2. When will PSU 2.0 be implemented?

• PSU 2.0 applications will be open to employers on 1 October 2020.

3. When is the deadline for PSU 2.0 applications?

• All PSU 2.0 applications must be submitted by 31 December 2020.

4. How do employers qualify for PSU 2.0, and what will they receive?

• Please refer to Table 1:

5. Who is INELIGIBLE for PSU 2.0?

• Employers and employees who have not registered with or contributed to SOCSO before 1 September 2020;
• Employers who registered with the SSM / ROS / ROB/ relevant local authority and began operating on or after 1 September 2020;
• Employers who are not registered with the Inland Revenue Board (IRB);
• Employees who earn more than RM4,000 a month;
• Retrenched employees;
• Employees hired under the Penjana Kerjaya Hiring Incentive Program;
• Civil servants, employees of statutory bodies at both state and federal levels, employees of local authorities, and the self-employed (including freelancers);
• Foreign workers and expatriates; and
• Employers who withdrew their successful PSU applications from 15 June 2020 onwards.

6. What are the documents required when applying for PSU 2.0?

• The documents are:
i. Names of eligible employees (based on the size of the company);
ii. The employer’s bank account information (copy of first page of the bank statement);
iii. The Business Registration Number (BRN) used to open the company bank account (please refer to the bank to avoid confusion);
iv. A copy of SSM / ROS / ROB / relevant local authority registration certificate; and
v. The PSU2.0 Declaration Form

7. What is Business Registration Number (BRN)?

• Business Registration Number (BRN) is the company registration number provided to the bank when opening the company bank account.
• Employees should request the BRN directly from their banks to ensure accuracy.
• Employers must download, complete, and upload the BRN Form on prihatin.perkeso.gov.my together with their application.

8. What is PSU2.0 Declaration Form?

• The PSU2.0 Declaration Form serves as a written confirmation that the employer declares all information provided to be factual and accurate.

9. Why are employees earning more than RM4,000 a month ineligible for PSU 2.0 although they also contribute to SOCSO?

• The Government introduced the PRIHATIN economic stimulus package, which includes the PSU 2.0, to assist employers negatively impacted by Covid-19 with continuing their business operations and retaining their employees. B40 employees earning RM4,000 or less a month are prioritised as low-income workers are more likely to be severely impacted if they are retrenched as a result of the Covid-19 pandemic.

10. For PSU 2.0 application purposes, what wages count towards the RM4,000 limit?

• Wages are defined as per the 1969 Employees’ Social Security Act (Act 4). All remuneration in cash e.g. basic salary / overtime / commission / payments in lieu of annual leave, sick leave, maternity leave, public holidays / service charges count as wages. Wages are also subjected to RM 4,000 ceiling.

11. Do employers currently receiving PSU subsidies need to reapply for PSU 2.0?

• Employers currently receiving PSU subsidies must apply for PSU 2.0 on prihatin.perkeso.gov.my from 1 October 2020.

12. After the first PSU 2.0 application is approved, do employers need to reapply in each subsequent month?

• Employers do not need to reapply in each subsequent month. However, they are required to update the information provided on prihatin.perkeso.gov.my if there are any changes like business closure, reduction in the number of eligible employees, etc.
• If there is any change to the number of eligible employees (increase or decrease), the employer must provide an update by the 15th of the month.
• Applications that misstate the number of local employees (does not tally with the information on ASSIST) will be querried. Employers should make sure all information is accurate before submitting their applications to avoid delays.
• SOCSO reserves the right to reject any application if the information provided is inaccurate.
• Employers who falsify information may face legal action.

13. My business started operating before 1 September 2020, but I am not registered with SOCSO. Can I apply for PSU 2.0?

Employers must register with SOCSO as well as SSM / relevant local authorities / any other professional associations before 1 September 2020 and employ at least one local worker to qualify for the PSU 2.0.

14. An employer registered with SOCSO prior to 1 September 2020. S/he has an employee not registered with SOCSO who started working on 1 February 2020. Can the employer apply for PSU 2.0?

• The employer can apply for the PSU 2.0. However, the employee must start working and be registered under the employer (on SOCSO’s ASSIST portal) prior to 1 September 2020.

15. My PSU application was approved in June 2020. Can I apply for PSU 2.0?

• Yes, employers who fulfill all conditions listed in Table 1 (Q4 (d)) by 31 December 2020 can apply for PSU 2.0. Successful applicants will receive subsidies for an extra 3 months.

16. My PSU application was previously rejected. Can I apply for the PSU 2.0?

• Yes, employers who fulfill all conditions listed in Table 1 (Q4 (d)) by 31 December 2020 can apply for PSU 2.0 on prihatin.perkeso.gov.my

17. An employer’s PSU application was approved but some applications of employees were rejected as they were not registered with SOCSO prior to 1 April 2020. Can the employer apply for PSU 2.0 on behalf of these employees?

• Yes. The employer can submit a PSUB application for the registered employees after April 1, 2020. The employer will receive the wage subsidy at the rate of RM600 monthly per employee for only three months under PSU 2.0 by fulfilling the eligibility requirements in Table 1 (Question 4 (d).

18. How can employers prove that their sales / revenue have decreased by at least 30%?

• Employers may provide concrete monthly sales figures when applying on prihatin.perkeso.gov.my. The figures should show that sales or revenue in a certain month decreased by at least 30% compared to the same month in the previous year after the RMCO.

• Examples:

19. My employee resigned voluntarily after receiving both PSU and PSU 2.0. Do I need to reapply?

• No, employers do not need to reapply. They only need to update the list of eligible employees by the 15th of the month on prihatin.perkeso.gov.my. Failure to report any changes may result in legal action.

20. What can employees do if their employer withholds wages, reduces wages, orders them to take unpaid leave or retrenches them despite receiving PSU or PSU 2.0 subsidies?

• Employees may check whether their employer have successfully applied for the PSU on https://eiscentre.perkeso.gov.my/.
• They may also submit a complaint to aduansip@perkeso.gov.my.
• Any other labour disputes may be referred to the Department of Labour (JTK) at 03-8890 3404 / 03-88862409 / jtksm@mohr.gov.my.

21. What will SOCSO do if an employer is proven to have defied PSU and PSU 2.0 regulations?

• SOCSO has the right to suspend all future payments and reclaim any money that has been paid to the employer. The employer may also face legal action.

22. My company employs both local and foreigner workers who are registered with SOCSO. May I leave out foreign workers when calculating the size of my company workforce?

• No, employers must include all employees in their declaration including their foreign workers.

23. For PSU 2.0 application purposes, are employers also considered as employees when calculating the size of their company workforce?

• For PSU 2.0 application purposes, employees will be defined using the definition stipulated under in Act 4 of the 1969 Employees’ Social Security Act.

24. How can employers check their application status?

• Employers will receive a reference number after they completed their application on prihatin.perkeso.gov.my. They may check their application status by entering their reference number.
• A list of approved employers (including the number of employees approved) may also be found on website https://eiscentre.perkeso.gov.my/.

25. Do employers still need to pay SOCSO and EIS contributions after receiving PSU and PSU 2.0 aid?

• Yes, employers must pay contributions as mandated by Act 4 and Act 800.

26. Can employers utilise a portion of their PSU or PSU 2.0 aid to pay their share of SOCSO and EIS contributions?

• No, employers may not utilise any of their PSU or PSU 2.0 aid to pay their share of SOCSO and EIS contributions.

27. Do employers need to pay contributions on behalf of employees on unpaid leave who are receiving PSU or PSU 2.0 aid?

• Yes, employers must pay SOCSO and EIS contributions when salaries are paid each month as usual.

28. An employer has registered multiple employer codes on SOCSO’s ASSIST portal. Are PSU and PSU 2.0 payments made based on the multiple different employer codes or the employer only?

• PSU 2.0 payments are issued based on a company’s SSM / ROS / ROB / trading license / registration with professional regulatory body. Payments are NOT made based on the number of individual branches with different employer codes.
• Applications from different branches of a company (using different employer codes) that only has one SSM / ROS / ROB / trading license / professional regulatory body registration will be combined and considered as one application.
• When different branches of the same company (with only one SSM / ROS / ROB / trading license / registration with professional regulatory body) apply using different employer codes, the company size used to determine payment rates will be calculated based on the combined workforce of all the branches.
• The number of employees eligible to receive PSU or PSU 2.0 aid will be determined based on the company’s SSM / ROS / ROB / trading license / registration with professional regulatory body.

Please note that this publication is based on the publicly available information and may change from time to time.

If you require further assistance, simply contact us here.

Withholding Tax (WHT) on Foreign Service Providers in Malaysia

During the last few years, there have been significant growth for e-commerce players in the market which have been accelerated with the Covid-19 pandemic lockdown, driving online shopping into new heights.

This change isn’t limited only to e-commerce players but also traditional businesses where many have started to embrace technology for their business, for instance social media marketing, cloud-based accounting software etc.

In 2017, LHDN expanded the scope of withholding tax to capture services performed to the e-commerce industry which includes services performed by foreign providers outside of Malaysia. With this, many parties have suddenly started asking what is WITHHOLDING TAX?

1) What is Withholding Tax (“WHT”)?

WHT is an amount withheld by the party making payment (payer) on income earned by a non-resident (payee) and this amount have to be paid to Inland Revenue Board Malaysia or Lembaga Hasil Dalam Negeri Malaysia (“LHDN”).

In common man language, if you are paying non-local (foreign) vendors, you need to withhold a certain % of the invoiced amount and pay to LHDN as a form of tax, and the remaining balance to be paid to your foreign vendor.

WHT is not new and has been in existence since Income Tax Act 1967 (“ITA”) and it covers payment such as:
a. Contract payment
b. Interest
c. Royalty
d. Special classes of income: Technical fees, payment for services, rent/payment for use of moveable property
e. Interest (except exempt interest) paid by approved financial institutions
f. Income of non-resident public entertainers

Each type of payment will have different withholding tax rates and may enjoy preferential tax rate if there is a double taxable agreement between Malaysia and the country where the non-resident (foreign party) is a tax resident of. The table below details the relevant forms for different withholding tax payments (Source: Official website of LHDN).

2. Does WHT cover services rendered outside of Malaysia?

Prior to 2017, WHT is only applicable for services rendered in Malaysia by non-local vendors but effective 17 January 2017, LHDN expands the scope to cover services rendered outside of Malaysia.

This immediately affected many services provided by foreign providers such as Facebook, Google Ads, Stripe, GoDaddy etc and fee paid to overseas service providers.

For this publication, we will focus on two types of payments under WHT:

i) Royalty Income under paragraph 4(d) of the ITA;
ii) Special classes of Income under paragraph 4A of the ITA;

These two types of income are usually the services that involves foreign service providers.

3. What is Royalty Income? And what will be considered as Royalty Income?

As per LHDN, royalty is defined as any sums paid as consideration for the use of or the right to use:

• Copyrights, artistic or scientific works, patents, designs or models, plans, secret processes or formulae, trademarks or tapes for radio or television broadcasting, motion picture films, films or video tapes or other means of reproduction where such films or tapes have been or are to be used or reproduced in Malaysia or other like property or rights;
• Know-how or information concerning technical, industrial, commercial or scientific knowledge, experience or skill; or
• Income derived from the alienation of any property, know-how or information mentioned in above paragraph of this definition.

Based on GUIDELINES ON TAXATION OF ELECTRONIC COMMERCE TRANSACTIONS released by the LHDN on 13th May 2019, it considers payments made to Facebook, Google and the like to be similar to payment for the use and right to use the platform.

4. What are Special classes of Income?

As per LHDN, the income of a non-resident from the following special classes of income is chargeable to tax in Malaysia if it is derived from Malaysia:
a) amounts paid in consideration of services rendered by the non-resident person or his employee in connection with:
(i) the use of property or rights belonging to him; or
(ii) the installation or operation of any plant, machinery or other apparatus purchased from him [paragraph 4A(i) of the ITA];

b) amounts paid to a non-resident person in consideration of any advice given or assistance or services rendered in connection with management or administration of any scientific, industrial or commercial undertaking, venture, project or scheme [paragraph 4A(ii) of the ITA]; or
c) rent or other payments made under any agreement or arrangement to a non-resident person for the use of any moveable property [paragraph 4A(iii) of the ITA].

This usually happens when you hire non-resident contractors to perform work for you e.g. software development or engage an overseas marketing agency to manage your social media marketing accounts.

5. Why it is important to differentiate between Royalty Income or Special Classes of Income?

This is due to different preferential withholding tax rate which may be available for different type of payments under Double Taxation Agreement with different countries. For example:

Assuming that the foreign service provider is based in Singapore, if the service is considered under Special Classes of Income (e.g. Technical Fees), it will be withheld at 5% rather than 8% (% to be withheld if it is considered as “Royalty”).

6. Does it mean all payments made to non-resident in relation to project or assignment undertake by them will be subjected to WHT under Special Classes of Income?

With effect from 6^th September 2017, there is an Exemption Order granted on payments made in relation to Special Classes of Income where a non-resident shall be exempted from the payment of income tax on the fees if the services are performed by the non-resident outside Malaysia. In other words, withholding tax is exempted if the services are performed outside Malaysia.

7. How to calculate the Withholding Tax?

In the past, the payer is required to calculate the WHT tax due based on re-gross method.

Example:

Fee charged by Foreign Service Provider : RM100,000

Withholding tax                                      : 10%

Withholding tax due                               :  RM100,000 / 0.9 * 0.1 = RM11,111

However, with LHDN announcement on 5^th December 2018, WHT is to be computed on the gross amount paid to a non-resident.

Example:

Fee charged by Foreign Service Provider : RM100,000

Withholding tax                                      : 10%

Withholding tax due                               :  RM100,000 * 0.1 = RM10,000

8. How to pay WHT and penalty if WHT is not paid:

The payer must, within one month after the date of payment to the non-resident, remit the withholding tax to LHDN. Failing of doing so, you may face the potential risks of:

• 10% late WHT payment penalty
• Ineligibility to claim advertising cost as your business expenses in your annual return (if your advertising costs are from for example foreign providers such as Facebook, Google)
• At least 45% penalty on tax avoidance, according to paragraph 113(2) of ITA.

If you require in-depth study on Withholding Tax for your business, contact us at enquiry@wecorporate.com.my to arrange a consultation session.

Please note that this publication is based on the publicly available information and as tax policies may change from time to time, you may need to consider the latest tax developments when planning your withholding tax. Further, the above examples are for illustration purposes only and should not constitute as tax consultation.

STAY TUNED: In the next article, we will be writing on Digital Tax, a topic many have asked alongside Withholding Tax.

If you require further assistance, simply contact us here.

What is PENJANA KERJAYA?

Under the Short-Term Economic Recovery Plan (ERP) or better known as PENJANA, the Government has introduced PENJANA KERJAYA with various financial incentives given to employers on hiring candidates from the following categories:
• School-leavers and fresh graduates
• Unemployed persons
• Disabled persons

Many employers have been enquiring on how to apply for the PENJANA KERJAYA incentives, and WeCorporate have prepared a summary below based on the FAQ released by the Malaysia Government:

1) What is PENJANA KERJAYA?
It is part of the PENJANA plan where it focuses on matching the needs of the employers who are seeking eligible candidates to hire, whilst helping jobseekers to secure employment.

2) What are the available incentives for employers under PENJANA KERJAYA?
a. #MyApprentice: Incentives given to employers on hiring school leavers and fresh graduate as apprentice.
b. #HireMalaysia –
i. Incentive given for hiring Malaysian employees under 40 years old;
ii. Incentive given for hiring Malaysian employees above 40 years old;
iii. Incentive given for hiring vulnerable Malaysian employee who are disable and/or those under “Return to Work” Scheme under PERKESO

3) Who are eligible to apply for PENJANA KERJAYA?
• Employers who have registered with:
a. Suruhanjaya Syarikat Malaysia (SSM)
b. Jabatan Pendaftaran Pertubuhan Malaysia (ROS)
c. Pendaftaran Perniagaan (ROB)
d. Local Authority or any other authorities before 1 June 2020
• Employers who have registered with PERKESO before 1 June 2020

4) Can employers claim the PENJANA KERJAYA incentives if they have hired job seekers and apprentice but have yet to register at MyFutureJobs?

Yes – they can still apply so long as both the employers and employees register at MyFutureJobs. Further, the employers are required to register SOCSO and EIS for the employees before they can apply for the incentives.

5) How to apply for the PENJANA KERJAYA incentives?
First of all, the employer is required to register the vacancy at MyFutureJobs even if they have advertised at other job portals. Once there is new hire, the employer is required to register the new hire in the ASSIST PERKESO system within 30 days from the employee reporting to work date.

From 15 June 2020, employers can register their profile at PENJANA KERJAYA’s portal: penjanakerjaya.perkeso.gov.my and from 1 July 2020, employers can start applying for the incentives for new hires recruited under this programme.

6) What are the documents required for the application
a. Employer’s Bank Account Details (First page of bank statement with name of employer, bank account number and bank)
b. Business Registration Number

7) How will the incentives under PENJANA KERJAYA be disbursed?
The incentive payment will be paid monthly after the employer starts contributing SOCSO and EIS as required by laws. For example: if the new hire is recruited on the 1 July but the employer only register and contribute SOCSO and EIS on 15 July, the incentive will only be given from August 2020 onwards.

8) Will the employer continue to receive the incentive if the employee has resigned or been terminated?
No – the incentive will be stopped once the employee has resigned or been terminated.

If you require further assistance, simply contact us here.

How to close a Limited Liability Partnership (“LLP”) in Malaysia?

Due to poor business performance or company being dormant (no activity), business owners may close down their LLP. In this article, WeCorporate explains the processes and costs involved in formally closing down a LLP in Malaysia.

LLP can be closed down/dissolved through compulsory winding-up by court, voluntary winding-up by partners or striking-off by Registrar (“SSM”). 

The most common method will be by way of voluntary winding-up, initiated by one of the partners of the LLP when the LLP has ceased operations and discharged its debts and liabilities.

Winding Up – LLP Company

Process

1. The LLP must obtain closure confirmation from EPF/Perkeso/LHDN.
2. It must submit the final tax return to LHDN and obtain a written notice from the Inland Revenue Board (IRB).
3. Upon obtaining the clearance from IRB, notice for winding-up shall be sent to all partners of the LLP.
4. A notice has to published in widely circulated Malaysian newspapers for declaration of such winding-up.
5. SSM will declare the LLP is dissolved if no objection is received. If there is any objection, upon withdrawal of such objection by the partners/creditors or when SSM decides the objection made is without justification.

Costs to dissolve a LLP

Around RM4,500 including government fee and newspaper advertisement fee.

To view the processes involved in closing a Sdn Bhd company, visit here How to close a Sdn Bhd company in Malaysia

If you require further assistance, simply contact us here.

How to close a Sdn Bhd company in Malaysia?

Due to poor business performance or company being dormant (no activity), business owners may close down their Sdn Bhd company. In this article, WeCorporate explains the processes and costs involved in formally closing down a Sdn Bhd company in Malaysia.

In general, there are 2 options to close a Sdn Bhd being 1) Strike off or 2) Winding Up. We summarize the differences in processes below:

A. Strike Off  – Sdn Bhd Company

Criteria

Section 551 of Companies Act 2016 grants the rights to the shareholders of the company to apply to SSM to strike off the company provided that the following conditions are met:

1. The company has NOT commenced business since incorporation or is NOT carrying on business or ceased business operations for quite some time;
2. The company has NO intention to commence or carry on its business or operation in the future;
3. The company has NO assets and liabilities including outstanding charges in the Register of Charges;
4. The company has insufficient funds to pay for winding up expenses;
5. The company has NO outstanding penalties or offer of compounds under the Companies Act 2016;
6. The company has NO outstanding tax or other liabilities and is NOT indebted to any government agencies in Malaysia;
7. The company has NOT made any return of capital to the shareholders;
8. The information of the company with the Registrar as shown in the “print-out” is up to date;
9. The company is NOT involved in any legal proceeding within or outside Malaysia;
10. The company is NOT holding company or a subsidiary of other corporate body;
11. The company is NOT a “Guarantor Corporation

Account closure confirmation from Government Agencies

The company will need to obtain closure confirmation from EPF/Perkeso/LHDN. Further, if there is tax refund the company should only proceed with bank account closure and strike off application upon receiving the tax refund. 

Audited Accounts Requirement

For company which used to be active or with assets and liabilities, SSM will require the company to submit up to date audited accounts prior to accepting the strike off application.

However, SSM may accept un-audited management accounts where company has no assets and liabilities. Nonetheless, SSM has the sole discretion to require audited accounts after the strike off application.

Processing Time

It usually take between 6 months to 12 months to complete the whole strike-off process.

Strike off initiated by SSM

SSM may strike off a company from the register provided in accordance with Section 549 of Companies Act 2016, if the company fails to submit the company annual return for three years or more.

Costs to strike off a company

It will be in the range of RM1,500 to RM2,000 depending on complexity of the company status.

B. Winding Up – Sdn Bhd Company

Criteria

The winding up process is more complex as it includes Voluntary Winding Up and/or Compulsory Winding Up and the proceeses are covered in this article: Overview on restructuring and corporate rescue options for businesses in Malaysia

In short, winding up process of a Sdn Bhd company will involve application to the court and appointment of liquidator to oversee the the entire winding up process. Hence, the cost to wind up a company will usually start from RM10,000.

If you require further assistance, simply contact us here.

Summary of Malaysia’s RM35 billion Short-Term Economic Recovery Plan (“ERP”)

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 consisted of 40 initiatives, with emphasis given to supporting workers and small and medium-sized enterprises (SMEs) through training programmes, social support, financing schemes, boosting domestic consumption and supporting industries impacted by the outbreak and Movement Control Order (“MCO”).

Highlights of Malaysia’s RM35 billion Short-Term Economic Recovery Plan:

1) Provide Grants and Loans to Help Companies 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 (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 SME from 1st July 2020 to 31st December 2021
•  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 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:
i)  Covid-19 testing
ii) 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)
•  Stamp duty exemption on instrument of transfer limited to first RM1 million of home price
•  Full 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 agriculture activity, 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 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
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)

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
The Government will introduce incentives to encourage the hiring of the unemployed as follows:
i) Hiring Youth – RM600 per month for apprenticeships for school leavers and graduates for up to 6 months;
ii) 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 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 for 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
Subsidy of childcare expenses for parents:
• RM 800 e-Vouchers per household for mobile childcare services, to be utilised from now 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

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

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)

Push 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 will collaborate with e-commerce platforms 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 by Malaysian micro-enterprises and SMEs to widen market reach.
Timeline: June to September 2020
Eligible Micro enterprises and SMEs to shift towards business digitalisation through a co-funded programme with MDEC and e-commerce platforms.
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
(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, including guidance in funding facility, trade facilitation, technology support, legal, branding and promotion

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

If you require further assistance, simply contact us here.

The future of supply chain and how Malaysia can be part of the solution

When China was on a lock-down between January to March 2020, the global supply chain was greatly disrupted. Orders which used to take 1 to 2 weeks to fulfill became months or even cancelled as there was no way to transport the goods out of China.

For instance, car manufacturers across the globe were impacted due to supply chain delays which halted production of certain car models due to lack of car parts coming from China. From the chart below, it was observed that China’s Manufacturing PMI dropped from 50% in Dec 2019 to 35.7% in Feb 2020.

The supply-chain disruptions have led to Fortune 500 manufacturers reconsidering their global supply chain strategy. Historically, manufacturers positioned their production lines at the most cost-effective locations since logistics costs have reduced significantly over the past decades. Furthermore, “Just-In-Time” delivery method has helped to reduce inventory holding costs for many companies. However, the existing supply-chain strategy is being re-tested during the Covid-19 outbreak which presents new problems i.e. insufficient safety stock in times of crisis during the Covid-19 outbreak.

So, what are the key changes to supply chains that we envision would take place to counter the “China Factor”?

1. Relocate the production lines back to home country

Governments from major economies such as France and Japan have already launched incentive schemes by giving out aids and grants for companies to relocate their production lines back to the home country.

However, some companies may not willing to move their production lines back to the home country due to several concerns. For example, unionised workforce in France have always been a headache for French companies. For Japanese companies, even though it has a highly automated production lines, moving production lines back could present other operational risks as the country is prone to natural disaster such as typhoon and earthquakes.

2. Regionalisation/localization of supply chain

This is a strategy where the manufacturer source supplies from suppliers from nearby locations. This is a strategy being adopted by Toyota. In fact, for its Georgetown factory, more than 350 suppliers are located within the United States and more than 100 are inside the Kentucky State.

However, this method presents its own set of issues when it comes to relying on suppliers with unique capabilities. For instance, Taiwan holds around 22% of the world’s semiconductor wafer fabrication capacity and more than 50% of the foundry capacity. Taiwan Semiconductor Manufacturing Company (TSMC), a leading semiconductor company in Taiwan accounts for approximately 67% of Taiwan’s capacity and is the World’s largest producer. TSMC has diversified its production lines into three different location but some of its supplies comes from a single supplier. For example, for its advanced lithography systems it only sources from ASML which is in turn dependent is on a single factory in Germany for its optical engine.

3. Diversification of production lines

Very often, manufacturers will think of having a second or alternative production lines as mitigation plan. However, the traditional theory of economies of scale will usually be used as arguments against this arrangement, as the costs of setting up a production lines and keeping it running require certain volume to break even.

However, in this digital age, technology may be able to resolve the issue of scale if the production lines are designed to be agile and dynamic. For example, the production lines can be tweaked in a short notice to produce different product type or product model.

What is in it for Malaysia?

Few countries in ASEAN have traditionally been the favoured destination for manufacturers such as Malaysia, Singapore, Thailand, and Vietnam. Out of the four, Malaysia is arguably the country that can benefit the most from this switch for the following reasons:

1. Educated and young workforce – More than 80% of the workforce are in semi to high-skilled category and more than 25% have a minimum of tertiary education. Many MNCs have established their Centre of Excellence in the country as the talents are readily available.
2. Ready infrastructure – Such as reliable power supply, road and ports are ready for various type of manufacturing activities.
3. Strong support from the Government – Especially in manufacturing sector and e-commerce sector. For instance, it has the only Alibaba Fulfilment Centre in the region which is in a dedicated Digital Free Trade Zone (DFTZ) located near both the international airport and sea port of Malaysia.
4. Financial and tax incentives from the Government – To promote Industrial 4.0 transformation for manufacturers and tax exemption for foreign manufacturers who bring in technology driven manufacturing process.

In summary, if you are a manufacturer looking to re-design your supply chain – Malaysia can be an ideal location and WeCorporate is ready to assist you from market research to establishing your company presence in Malaysia. Contact us through this link 

If you require further assistance, simply contact us here.

4 new-norms that SME-focused accountants should be ready post Covid-19

As a result of various forms of “Lockdowns” to fight against the spread of Covid-19, many Small-Medium Enterprises (“SME”) are forced to implement and adopt Work-From-Home (“WFH”) policies even as many SME companies have not previously planned for such policy to be in place.

This incident will be very likely accelerate the digitization process of these SMEs in the coming months as we can expect the following 4 scenarios to be the new norms:

1. The growth of Cloud-based accounting software usage

Traditionally, most Malaysia SME companies uses desktop-based accounting software from traditional software providers. While some of the desktop-based software providers have upgraded their software with cloud functionalities, their offering currently still have certain limitations.

In developed markets such as US, UK and Australia, their SMEs have been adopting Cloud-based accounting software even before the Covid-19 outbreak, with the more popular softwares being Xero and Quickbooks. These cloud based accounting software have syncing functionalities which will enable them to link directly to certain banks, which would mean all the bank transactions can be imported into the accounting system automatically once approval is given. This will save a lot of time on data entries and allow the accountants to focus on more critical business areas.

As of now, Xero have a strong presence in Singapore and Hong Kong and the growth rate for the rest of the emerging markets in South East Asia is very encouraging even before the Covid-19 outbreak. WeCorporate and our clients have begun migrating into Cloud-based accounting software and is a Xero certified partner.

2. Moving towards paperless record keeping

Gone are the days where business owners have to keep all the thermal-based receipts and hardcopy supplier invoices while worrying that these receipts will face and no longer be valid. 

We predict that there will be more and more regional SMEs owners that will utilitise softwares such as Receipt Bank to store these digital receipts. Some may even opt to take photos or scan receipts and upload these into cloud storage, hence reducing the physical paper which takes out space and time to arrange and file. This in fact is good for accountants as we can now access those documents anytime, anywhere over the internet.

3. Increasing use of Outsourced service providers

One of the possible scenarios is the increasing use of outsourced service providers on finance and accounting related matters. Given that cloud based technologies allows the accountant to provide service remotely, from issuing invoice to recording expenses, this removes the barrier of an accountant having to physically be present in the client’s office.

Further, accounting and finance functions within a company will usually be deemed as cost centre rather than profit centre hence as part of cost control measure, the business owners would be more keen to outsourced this function if the accounting service providers can offer seamless support. Apart from cost-savings, this will also reduce the employment compliance requirement when using outsourced service providers rather than hire a permanent in-house staff.

4. Request for accounting services beyond routine data-entry

There will be more expectations from business owners that accounting service providers should be able to value-add beyond routine data-entry, ranging from accounting treatment, employer’s regulatory responsibilities to taxation advice. While the business owners do not expect an immediate answer, they would expect the service providers to have the resources to assist them on these queries.

Service providers should also develop business acumen to offer strategic advice based on the financial statements prepared. Further, strong analytical skills will be desirable as this will assist the business owners to understand the performance of the business and able to plan accordingly.

In summary, today’s accountants will need to develop agility in adopting to changes in accounting standards, tax laws as well as technology in order to excel and provide the desirable level of service to their clients.

If you require further assistance, simply contact us here.

Are e-signatures legally recognised on company statutory documents in Malaysia?

As a result of Covid-19, many countries are enforcing movement restriction order where in-person meetings are not possible. This has led to increased usage of electronic signatures (such as DocuSign, HelloSign) on agreements and contracts. 

Many of our clients have asked us whether e-signatures are allowed in Malaysia and the legality on the acceptance of e-signatures on agreements and contracts. We have compiled a summary of documents which are acceptable to be signed via e-signatures below:

1. What is an electronic signature or e-signature?

Malaysia have laws in place governing e-signature under the Electronic Commerce Act 2006 (“ECA“), where it defines electronice signature as “any letter, character, number, sound or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature.”

2. What are the differences between e-signature and digital signature?

Digital signature is governed under The Digital Signatures Act 1997 (“DSA”) and is defined as “a transformation of a message using an asymmetric cryptosystem (an algorithm or series of algorithms which provide a secure key pair) such that a person having the initial message and the signer’s public key can accurately determine (a) whether the transformation was created using the private key that corresponds to the signer’s public key and (b) whether the message has been altered since the transformation was made.”

In layman language, Digital Signature is more like a process rather than being a mere symbol affixed to an electronic document. For this article, e-signature will be our focus.

3. What are the requirements for an e-signature to be valid?

According to the ECA, an electronic signature is legally enforceable if:

•  it satisfies the definition of an electronic signature as mentioned above;
•  it is attached to (i.e. forms a part of) or can be logically associated with the electronic document;
•  it adequately identifies the owner of the signature and indicates their approval of the information in the document to which they attach their electronic signature;
•  the means of its creation is uniquely linked to and under the sole control of its owner; and
•  any changes made to the signature or the associated document after the time of signing is detectable.

4. What documents can be executed via e-signature?

We provide some example of documents that can be executed via e-signature in the table below

5. What documents cannot be executed via e-signature?

Below are some of the type of documents that cannot be executed via e-signatures

6. What are the practical implications of e-signature for commercial transactions?

Stamping
Notwithstanding that both electronically and digitally signed documents are legally enforceable under the ECA and DSA respectively, there may be issues in respect of the stamping of such documents. Documents have to be stamped for them to be admissible as evidence in court.

In practice, prior consent of the Malaysian Inland Revenue Board (“IRB“) is required before an agreement (whether electronically/digitally signed by all parties or by one party) may be submitted for stamping. However, there are no formal directives or orders issued by the IRB in this regard as at publication time. As such, apart from the risk that such consent may not be given, the current practice may change in the foreseeable future.

This is especially pertinent for share transfer as it normally require the share transfer form (Section 105) involved to be stamped. Although electronic stamping (which reduces the need to submit physical documents to the stamp office for adjudication) is available as an alternative, all documents submitted online for stamping are still subject to an online assessment of stamp duty. The adjudication process under the electronic Stamp Duty Assessment and Payment System (“STAMPS“) is not an automatic process as the relevant stamp officer will review the documents submitted and then approve or reject the adjudication application or request for further information. As such, there is no guarantee that agreements that are executed via e-signature will be able to be stamped electronically.

Authentication of the E-signature
In the event of any dispute, even if the electronically signed documents were stamped and admitted as evidence, the authenticity of the e-signatures may still be questioned in court. As the e-signature is merely a symbol affixed to an electronic document, there is no way to track any changes made to the document after the time of signing. There is also no verification process for electronic signatures that can confirm that the person who electronically signed the document is the owner of the signature, or whether circumstances of duress exist at the time the person signed the documents or even in the case where the witnessing of the execution of the documents was done via video conferencing, the right documents were executed. All these practical issues should be dealt with to mitigate the risk of authentication being raised.

7. What are the recommended courses of action?

For prudence, all documents that are agreements are recommended to be executed via physical wet-ink signatures, given that IRB’s prior consent is required for the stamping of electronic documents (as of the time of writing) and it may be difficult to obtain such consent during the MCO period. On the other hand, documents that are not agreements (i.e. board resolutions) may be executed via e-signatures.

In the long run, Companies should ensure that there is standing operating procedure for the utilisation of electronic signatures. The signature should therefore be authentic, created in confidentiality and with consent and intent.

If you require further assistance, simply contact us here.

FAQ: RM3,000 Special Grant for Micro Enterprises

1. What is the Special Grant (Geran Khas PRIHATIN “GKP”)
The grant is an one-off financial aid worth RM3,000 given to micro enterprises who are affected by Covid-19 outbreak.

2. Who is eligible to apply for the Special Grant (Geran Khas PRIHATIN “GKP”)
i) Applicant must be Malaysian; and
ii) Applicant must be running a micro business fulfilling the following conditions:

• Annual turnover of less than RM300,000; and
• Less than 5 employees (excluding employer)

iii) Registered with either LHDN or Local Authority or SSM before 31 December 2019
iv). Still running an active business
v) Business information are consistent between different government agencies

3. What is the value of the Special Grant (Geran Khas PRIHATIN “GKP”)
One-off payment of RM3,000

4. How to apply for the Special Grant (Geran Khas PRIHATIN “GKP”)
You can apply through https://gkp.hasil.gov.my 

5. When is the application period
From 1 May 2020 to 15 May 2020

6. When will the applicant be notified on the result?
First week of June 2020

7. I have registered with SSM and Local authority but not LHDN. Am I still eligible?
Yes, you will need to fill in the business details while applying the special grant online

8. When will the payment be made?
First week of June 2020

9. How will the payment be made?
It will be credited to the bank account provided during the application process

If you require further assistance, simply contact us here.