Covid-19: Government announces Short-Term Economic Recovery Plan (Penjana)

09 June 2020

1. Stimulate the Economy

• To attract foreign companies to relocate their businesses to Malaysia: (i) companies relocating to Malaysia will be subject to (a) 0% tax rate for 10 years for new investments in the manufacturing sectors with capital investment between RM300 million to RM500 million; (b) 0% tax rate for 15 years for new investments in the manufacturing sectors with capital investment above RM500 million; and (c) 100% investment tax allowance for three years for existing companies in Malaysia relocating overseas facilities into Malaysia with capital investment above RM300 million; and (ii) special reinvestment tax allowance for manufacturing and selected agriculture activities from years of assessment 2020 to 2021. The Government has also committed to approving manufacturing licences for non-sensitive industries within two working days;

• A Covid-19 Temporary Measures Act will be tabled in the Malaysian Parliament during the July 2020 Parliament session to mitigate the potential negative impact to economic activities caused by contractual breaches, and enforcement of insolvency actions on groups affected by the Covid-19 pandemic and the Movement Control Order;

• A RM1.2 billion investment fund, the Dana PENJANA Nasional, will be established (with RM600 million from domestic sources and the remainder from international investors) which will match institutional private capital investment with selected venture capital and early stage tech fund managers for the following: (i) seed stage/ co-creation funds; (ii) series A/B funds; (iii) growth stage tech funds; (iv) venture debt funds; and (v) opportunistic funds (e.g. e-sports and healthcare);

• To stimulate the property market: (i) a home ownership campaign (HOC) will be introduced with stamp duty exemption on instruments of transfer and loan agreements for the purchase of residential properties between RM300,000 to RM2.5 million, subject to at least 10% discount by the developer (the stamp duty exemption on the instrument of transfer is limited to the first RM1.0 million of the purchase price while full exemption will be given on the loan agreement subject to the requirement that the sale and purchase agreements must be signed between 1 June 2020 to 31 May 2021; (ii) exemption from real property gains tax for disposal by an individual of up to three residential properties from 1 June 2020 to 31 December 2021; and (iii) the current limit of 70% financing on housing loans for properties valued at RM600,000 and above will be uplifted during the HOC, subject to internal risk management practices of the financial institutions;

• To stimulate the automotive sector, full sales tax exemption will be given for purchases of locally assembled cars and 50% sales tax exemption will be given for purchases of imported cars between mid-June 2020 to end-December 2020;

• To support the commodity sector, 100% export duty exemption will be granted for the export, between 1 July 2020 to 31 December 2020, of: (i) crude palm oil; (ii) crude palm kernel oil; and (iii) refined bleached deodorised palm kernel oil;

• To support the tourism sector: (i) tourism tax will be waived from 1 July 2020 to 30 June 2021; (ii) service tax exemption for hotels will be extended to 30 June 2021; and (iii) income tax relief of RM1,000 granted to individuals for domestic tourism expenses will be extended to 31 December 2021;

2. Propel Businesses

• RM2.0 billion facilities will be made available by the banking sector by way of additional financing facilities to eligible small and medium-sized enterprises (SMEs) which are adversely impacted by Covid-19 to sustain their business operations at a concession rate of 3.5%. This facility is subject to a maximum loan size of RM500,000 per SME, with emphasis to finance new SME customers to banks;

• RM700 million has been allocated to provide grants and loans to eligible enterprises to digitise their operations and trade channels vide (i) SME Digitalisation Matching Grant of RM100 million in partnership with telecommunications companies; (ii) SME Technology Transformation Fund of RM500 million; and (iii) Smart Automation Grant of RM100 million, capped at RM1 million per company;

• RM1.6 billion has been allocated by the SME Bank to provide financing support to contractors and vendors who were awarded small government projects under the Pakej Rangsangan Ekonomi (PRE) 2020 and the PRIHATIN stimulus package;^[1]

• RM1.0 billion of funding will be made available to the tourism sector through the PENJANA Tourism Financing (PTF) to finance transformation initiatives by SMEs in the tourism sector to enable them to remain viable and competitive in the new normal;^[2]

• To encourage the establishment of new businesses and mergers and acquisitions: (i) income tax rebate up to RM20,000 per year for three years of assessment will be granted to SMEs which are established between 1 July 2020 to 31 December 2021; and (ii) stamp duty exemption will be granted to SMEs on any instrument executed for mergers and acquisitions for the period between 1 July 2020 to 30 June 2021;

• RM400 million has been allocated to support micro enterprises at an interest rate of 3.5%, with approved financing capped at RM50,000 per enterprise and RM50 million earmarked for women entrepreneurs;^[3]

• RM200 million has been allocated by Perbadanan Usahawan Nasional Berhad (PUNB) for various financing facilities and RM300 million by Majlis Amanah Rakyat (MARA) for working capital loans for bumiputera owned businesses at an interest rate of 3.5% p.a;

• To encourage businesses to adapt to new norms and adhere to standard operating procedures (SOPs), the scope of expenses allowed as tax deduction or capital allowance will be expanded to include expenses for Covid-19 testing and purchase of personal protective equipment (PPE) and thermal scanners;

• Special tax deduction equivalent to 30% reduction in rental of business premises to SMEs will be extended to 30 September 2020;^[4]

• Special tax deduction for renovation and refurbishment of business premises and Accelerated Capital Allowance on eligible capital expenses including ICT equipment will be extended to 31 December 2021;

• To provide cashflow to SMEs, the Government is encouraging GLCs and large corporations to accelerate payment to their vendors;

3. Empower the People

• RM5.3 billion has been allocated to extend and enhance the Wage Subsidy Programme under the Prihatin Economic Stimulus Packages^[5] as follows: (i) the subsidy of RM600 per eligible employee for eligible employers under the existing programme will be extended by three months; and (ii) the subsidy programme will be enhanced by: (a) allowing employers receiving wage subsidy to implement a reduced work week; and (b) allowing employers in the tourism sector and businesses which were prohibited from operating during the Conditional Movement Control Oder (CMCO) to receive wage subsidy for employees on unpaid leave;

• To encourage work-from-home arrangements, the Government will grant: (i) tax deductions for employers who implement Flexible Work Arrangements (FWAs) or undertake enhancements to their existing FWAs; (ii) individual income tax exemption of up to RM5,000 to employees who receive a handphone, notebook and tablet from their employer; and (iii) special individual income tax relief of up to RM2,500 on the purchase of handphone, notebook and tablet;

• RM1.5 billion has been allocated to provide financial incentives for employees to hire unemployed individuals. The Government will pay employers: (i) RM600 for apprenticeships for school leavers and graduates; (ii) RM800 per month for hiring unemployed individuals below 40 years of age; (iii) RM1,000 per month for hiring unemployed individuals above 40 years of age or persons with disability. The duration of these payments is for up to six months. In addition, a training allowance of RM4,000 will be granted to individuals who have been retrenched but are not covered under the Employment Insurance System (EIS);

• RM2.0 billion has been allocated for reskilling and upskilling programmes for youth and unemployed workers.