Malaysia Budget 2019 Highlights

Malaysia’s budget 2019 focuses on institutional reforms, ensuring people’s well-being, and promoting entrepreneurship. Will Malaysia gain the economic position as one of the Asian Tigers? Learn how Malaysia’s new budget will affect you for better or worse.

 

Overview

Credible Malaysia, Dynamic Economy, Prosperous Rakyat

Budget 2019 Focus

Budget 2019 of RM314.5b tabled by Malaysia’s Finance Minister Lim Guan Eng using zero-based budgeting system focusing on 3 main thrusts with 12 key strategies to restore Malaysia’s economic position as one of the Asian Tigers.

  1. Implement institutional reforms
  2. Ensure rakyat’s well-being
  3. Nurture culture of entrepreneurship

Overview

  • Govt real debt and liabilities as of end-June 2018 RM1,065b vs RM715b in previous administration. Debt breakdown:
    • Direct government debts: RM725.2b
    • Committed contingent liabilities: RM155.8b
    • Public Private Partnership projects lease payments: RM184.9b
  • Govt guarantees increased from RM69b in 2008 to RM238b in 2017 (+244%)
  • Forecast 2019 GDP growth at 4.9% despite global economic uncertainty
  • Forecast 2019 debt at 51.8% of GDP
  • Forecast 2019 total liability: 73.5%

Allocations (RM b)

 

Tax

Corporate

  • 2019: Tax deduction on PTPTN payment by employer on behalf of employee
  • 2019-2020: Tax deductions on salaries for ex-convicts and senior citizens up to RM4,000 monthly
  • Tax Rate for SME reduced to 17% for first RM500k
  • Unutilised business & pioneer losses (including unabsorbed CA, RA, ITA) can only be carried forward for 7 consecutive years of assessment.
  • Tax incentive pioneer status incentive of 70% or investment allowance of 60% for 5 years for companies which produce environmentally-friendly plastics based on bio-resin and biopolymer
  • Tax deduction maximum 10% of aggregate income on contribution to social enterprise (Alos applicable for individuals up to 7% aggregate income)
  • Tax exemption on donations to public schools and public institutions to upgrade infrastructure (Also applicable for individuals)
  • Labuan entities taxed at 3% & can transact with Malaysian residents & in RM

Individual

  • Tax relief for EPF contributions and life insurance/takaful deductions (previously combined RM6k) separated into EPF contributions RM4k and life insurance/takaful RM3k
  • National Education Savings Scheme (SSPN) income tax relief increased from RM6k to RM8k
  • Special Voluntary Disclosure Program allowing taxpayers to voluntarily declare unreported income

Sales and Service Tax

  • Introduce credit system for sales tax deductions to avoid double-taxing and lower business costs
  • Service tax will be imposed on imported services
  • GST 545 items zero-rated VS above 5000 items exempted from SST
  • Jan 1, 2020: Online services tax including transaction on software, music, and online advertising
  • Servid tax exemption for specific B2B registered entities

 

Education

  • Govt scholarships and study loans allocated RM3.8b including RM2b for MARA-sponsored Bumiputera students
  • PTPTN loan payment discounts ending as of Dec 31, 2018
  • Assistance for poor allocated RM2.9b through food supplies, textbooks and cash assistance
  • Upgrading and maintenance of schools allocated RM650m
  • National schools allocated RM250 million with RM50 million each to Chinese national type schools, Tamil national type schools, full boarding schools, Mara Junior Science Colleges and government assisted religious schools
  • Registered pondok schools allocated RM25m
  • National type secondary schools allocated RM15m
  • Chinese private secondary schools allocated RM12m
  • Reconstruction of schools nationwide allocated RM100m

 

Property/Land

  • 1st time home buyers exempted from stamp duties for first RM300,000 for the transfer of deeds and loan agreements on homes valued up to RM500,000 (for two years until December 2020)
  • Homes below RM150k allocated RM1b fund to facilitate those earning below RM2,300 to own homes through Ambank, CIMB, Maybank, RHB, and BSN
  • REHDA agrees to cut house prices by up to 10% on new projects
  • Property crowdfunding driven by private sector as alternative first home purchase supervised by Securities Commission
  • Stamp duty on property transfer above RM1m will be raised by 1% from 3% to 4%
  • RPGT increase
    • Malaysian/PR: RPGT in 6th year increase 0% to 5% (exemption for land/low-cost/affordable housing below RM200k)
    • Companies/Foreigners: RPGT increase 5% to 10%
  • Govt will pursue PPP model for land transactions via open tender
  • Govt sell land on scheduled and staggered basis to highest bidder to maximize revenue
  • Govt setting up Airport Real Estate Investment Trust (Airport REIT) to obtain up to RM4b funding via 30% equity sale

 

Travel/Transportation/Tourism

  • January 2019: Public transportation users can buy RM100 monthly passes for unlimited trips on RapidKL rail or bus services
  • Single car/bike owners with engine capacity 1500cc and below to get targeted fuel subsidy
  • RON95 petrol subsidy of 30 sen/litre
    • Capped 100 litres/month for cars
    • Capped 40 litres/month for bikes
  • Freeze toll hikes on all city highways (estimated cost RM700m)
  • June 1, 2019: Departure levy on air travelers leaving Malaysia – RM20 on travellers flying to Asean and RM40 other countries
  • Public Transport Fund allocated RM500m in the form of 2% subsidy rate for taxi, bus firms, and public transport operators
  • Railway tracks upgrading allocated RM2.46b
  • World-standard aerospace hub over 80-acre plot in Subang by Khazanah
  • Pulau Indah, Selangor over 380 acres designated as free trade zone to support and catalyse shipping and logistics activities in Port Klang
  • LRT3 cost now RM16.6b (reduced from RM31.6b)
  • MRT2 cost now RM30.5b (reduced from RM39.3b)
  • MRT3 project deferment (cost: RM60b) until MRT2 completed
  • Klang Valley Double Track Project (worth RM5.2b) will be re-tendered via open tender for cost savings
  • Continue Pan Borneo Highway project, subject to a cost-rationalisation study
  • Construction and upgrading of roads and bridges in rural areas allocated RM926m
  • Govt to share 50% of tourism tax it collects with states (est RM60m)
  • SME Tourism Fund provided loan facilities with interest rate of 2% allocated RM500m
  • Sultan Abdul Samad building in KL restoration and redevelopment into arts, cultural and heritage hub in public-private partnership lead by Khazanah Nasional
  • Malaysia Healthcare Tourism Healthcare Tourism Council (MHTC) allocated RM20m to boost health tourism

 

Individual/Family/Consumer/Communities

  • Bantuan Sara Hidup (replacing BR1M)
    • Households monthly income RM2,000 and below: RM1,000 financial assistance
    • Households monthly income RM2,001 to RM3,000: RM750 financial assistance
    • Households monthly income RM3,001 to RM4,000: RM500 financial assistance
    • AND RM120 per child (max 4 children) age 18 below (except if disabled)
  • Govt top up RM40 monthly to EPF accounts of housewives whose husbands make minimum deposit of RM5 per month
  • Jan 1, 2019: Propose raise minimum wage to RM1.1k
  • National Health Protection Fund B40 (in partnership with private insurance company)
    • Free coverage on 4 critical illnesses up to RM8k
    • Wage replacement during hospital treatment at RM50/day (max RM700/year)
  • PERKESO will compensate retrenched workers and help them find employment
  • One-off assistance RM500 for eligible pensioners
  • Civil servants at grades 54 and below will receive a RM500 bonus while pensioners will receive a RM250 bonus
  • Reduction of employers’ EPF contribution for workers aged 60 and above to 4%. Employee mandatory contribution reduced to 0%.
  • Buy Malaysian Product Campaign to support local products and services allocated RM20m
  • April 1, 2019: Packaged sweet drinks in 2 categories will be imposed excise duty of 40 sen/litre
    • Drinks which include additional sugar or sweeteners exceeding 5g per 100ml
    • Fruit and vegetable juices with a sugar content exceeding 12g per 100ml
  • Chinese new villages allocated RM85m to upgrade and maintain roads, community halls and open spaces
  • Indian community allocated RM100m for technical and skills training
  • Orang Asli community allocated RM100m for infrastructure, education, welfare, and economic development
  • Govt to set standards for sale of bitcoin and token exchanges in Malaysia

 

Business

  • Labor laws to be reviewed to strengthen labour market and workers’ welfare prohibiting discriminatory practices by employers
  • Langkawi Island further developed as duty free zone
  • Pangkor Island to be designated duty free zone
  • Penang Sweetenham Pier tax free incentives
  • National Fiberisation and Connectivity Plan allocated RM1b
  • 2019-2021: Industry 4.0 Transition allocated RM210m
  • TEKUN to finance small entrepreneurs allocated RM100m
  • PUNB to allocate RM200m for Bumiputra SMEs
  • Islamic banks to offer Shariah-compliant financing for SMEs with govt subsidizing 2% profit rate
  • Film in Malaysia Incentive (FIMI) allocated RM30m with additional RM100m from Khazanah for production at Pinewood Iskandar Malaysia Studios
  • Small palm oil plantation estate holders allocated RM30m to obtain MSPO certification
  • Gaming/Casinos
    • Annual gaming licence fee for casinos raised RM120m to RM150m
    • Gaming tax on casinos raised to 35% of gross revenue
    • Gaming machine dealer’s licence raised RM10k to RM50k per year
    • Gaming machines tax increase 20% to 30% of gross collection

 

1MDB

  • Previous govt secretly paid RM7b for 1MDB debts
  • Govt will take action to recover stolen/lost funds
  • Govt needs to pay another RM43.9b to settle remaining 1MDB debt
  • Govt will not pay balance of USD4.3b paid to IPIC & Aabar and instead seek return of US1.4b paid
  • Govt will accept international bids for superyacht Equanimity by Dec 5, 2018

 

Government/Nation

  • In 2021, govt will table Fiscal Responsibility Act to prevent uncontrolled spending causing super debts
  • Renegotiate direct/limited tender contracts (worth RM19b) with min 10% cost-cutting target (RM1.9b)
  • Introduce Government Procurement Act to ensure transparency and open competition, open tender practices, and punitive action for abuse of power
  • National Debt Management Office to review and manage govt debts and liabilities, and monitor new debt issuance by government, statutory bodies and special purpose vehicles
  • MoF to helm special Special Task Force to review role and function of MoF-owned firms and statutory bodies to avoid duplication, direct competition with private sector
  • Collection RM30b special dividend from Petronas
  • Samurai bond issuance at coupon rate of 0.65% for 10 year return guaranteed up to 200b Yen (RM7.4b) to be issued before March 2019
  • Govt quarters maintenance and improvement allocated RM400m
  • 2020 Tokyo Olympics athletes allocated RM100m

 

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