The aftermath of the COVID-19 pandemic has been disastrous for the global economy. Inflation rates have never been higher, and large corporations are rapidly downsizing on staffing, while several SMEs are struggling to stay afloat, with many already out of business.
The effects of the global economic crisis have been felt keenly, prompting the government to devise new means and measures to help organizations, individuals, and SMEs to navigate the trying times.
The Malaysia 2023 budget saw significant changes to the nation’s individual and corporate tax regimes, with chargeable income taxes on SMEs also favorably revised.
High earners will see a marked increase in income taxes, while mid-to-low-income earners will enjoy lowered taxes.
Top 5 Benefits to SMEs of Malaysia Revised Budget 2023
Small and medium-sized businesses can look forward to the following benefits per Malaysia Revised Budget 2023:
- Tax exemption on sales of carbon capture and storage technology
- RM1 billion allocated under the Bank Negara Malaysia (BNM) to promote SME business process automation
- RM100 million to fund SME grants for business digitization
- Up to RM20 billion in loans available for businesses in manufacturing and technology
- Tax deductions of up to RM1.5 million for listed companies on LEAP markets and Bursa Malaysia’s ACE until 2025
Malaysia Revised Budget 2023: Financing SMEs
SMEs are a crucial component of the Malaysian economy, contributing a significant chunk of the Gross Domestic Product (GDP) and providing multiple employment opportunities to millions of individuals across the country.
The new 2023 budget was passed into law on the 9th of March, 2023, after being tabled by the new Prime Minister Anwar Ibrahim in 2022.
The budget is valued at RM388 billion, the largest in the nation’s history, and includes new tax schemes to speed up economic growth and promote inclusivity.
As such, the most significant changes implemented in the budget include tax cuts for SMEs and middle-income earners and increased taxes for high-income earners.
The new budget also has special tax incentives in key sectors like electricals, electronics, shipbuilding, and aerospace.
The Malaysia Revised Budget of 2023 provides several financing schemes for SMEs by banking institutions. The latter provides over 90% of all the funding, with the BNM Fund for SMEs and Government Funds and Development Financial Institutions contributing significantly.
As of February 2023, Malaysia’s inflation rate is at 3.7%, an increase driven by the following sectors:
- Restaurants and hotels
- Transportation
- Food and non-alcoholic beverages
- Furnishings, household equipment, and routine household maintenance
- Miscellaneous goods and services
- Unclassified food products
Although the inflation rate in Malaysia is better than it is in other countries like the Philippines (8.7%), Thailand (5.0%), and South Korea (5.2%), MSEs and regular individuals have recently struggled to balance the books, navigating business operations for profit, within the confines of the nation’s tax laws.
Reduction of Income Tax Rates
Under the revised budget 2023, there will be a slight reduction in SME corporate income taxes. These taxes will now be 15% for the first RM150,000 chargeable income. Businesses with chargeable incomes between RM150,000 and RM600,000 will pay 17% of corporate income taxes, while those with over RM600,000 will pay a 24% tax rate.
Tax deduction on the cost of listing in Bursa Malaysia
The Bursa Malaysia is the nation’s prime capital market company and a stock exchange that offers three market categories for companies seeking listings in Malaysia.
Main Market
This is the prime market for established organizations for companies that have met specified criteria regarding operations, size, and quality measured by market capitalization.
ACE (Access, Certainty, Efficiency) Market
This is the market for companies with growth prospects, with considerations for corporate conduct and adequacy of internal control.
LEAP (Leading Entrepreneur Accelerator Platform) Market
This market is designed to provide SMEs and emerging companies with more access to visibility fundraising via the capital market.
Per the new Malaysia Budget 2023, tech-based organizations listed in the ACE and LEAP markets enjoy tax deductions of as much as RM1.5 million for three years. The tax deductions cover the following expenditure:
- Fees to authorities
- Brokerage and placement fees
- Professional fees
Extension of Stamp Duty Exemption for Instruments relating to Restructuring or Rescheduling of Loan or Financing Agreements
The former agreement regarding the restructuring or rescheduling of financing agreements or loans between borrowers and financial institutions executed in the 2022 fiscal year granted a total exemption from stamp duty.
The new budget proposal implies an extension of this agreement. The full stamp duty exemption on restructuring or rescheduling of the loan or financing arrangement is extended for an extra two years.
This agreement will boost borrowers’ cash flow and reduce overall borrowing costs.
Digitalisation Grant for business automation and digitalization activities
The Digitisation Grant for business automation and digitalization activities will help SMEs accelerate the adoption of technology solutions in their business operations. The digitization service areas include:
- Human Resource Payroll Systems/ Customer Relationship Management (CRM)
- Electronic Point of Sales System (e-POS)
- Accounting and Taxation
- Remote working
- E-commerce
- Procurement
- Digital marketing/sales
To this effect, Bank Negara Malaysia has established an RM1.5 billion facility with up to 4% financing rates to automate processes and digitalize business operations to boost efficiency and productivity.
Financing for Micro Entrepreneurs and Small Businesses
Micro entrepreneurs and small businesses can also benefit from the RM725 million grant to boost digital connectivity across various industrial areas in the country.
How We Can Help
As a business owner and CEO, keeping abreast of the latest legal and corporate developments in the country your organization is incorporated in is essential.
It’s also essential to ensure that tax filing and accounting operations are aptly done as at when due, as failure to do this can result in serious issues and often stiff penalties that could cripple your business.
Why not reach out to an expert to help you handle everything tax related?
At Premia TNC, we offer various taxation services, including tax return filing, tax file registration, tax estimation, and account analysis.
Contact us today.
Q1. Will the new Malaysia 2023 budget benefit SMEs?
Yes, there are multiple bank-funded grants to boost business productivity.
Q2. How can SMEs in Malaysia boost their business operations?
The Digitisation Initiative and Grant provide significant funds for business digitization and automation of business processes via the adoption of various tech solutions.
Q3. Are the tax rates higher for SMEs in the revised 2023 Malaysia Budget?
The new 2023 Malaysia Revised Budget provides reduced income taxes for SMEs. The income tax rate reduced by 2% from 17% to 15% for the first RM150,000 chargeable income.
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