Highlights from Malaysia’s Budget 2020 related to your business and personal finances.

Contents

Theme: Driving Growth And Equitable Outcomes Towards Shared Prosperity.

Item	2019	2020	Change
Fiscal deficit	3.4% of GDP	3.2% of GDP	-0.2%
Federal government revenue	RM263.3b	RM244.5b	-RM18.8b (-7.1%)
Operating expenditure	RM262.3b	RM241.0b	-RM21.3b (-8.1%)
Development expenditure	RM53.7b	RM56.0b	+RM2.3b (+4.2%)

Committed to bringing stability to Government’s finances with a new growth trajectory under the foundation of Shared Prosperity Vision 2030.

4 Thrusts and 15 Strategies

1. Driving Economic Growth in the New Economy and Digital Era

Making Malaysia the preferred destination for investment

Incentives to attract Fortune 500 companies
Channel to attract investments from China under InvestKL
Incentives for qualifying export companies
Tax incentives for E&E
Tax incentives for Automation
Transportation infrastructure improvements for Port Klang
Transportation infrastructure improvements for Port Klang

Accelerating the digital economy

National Fiberisation & Connectivity Plan (NFCP) public-private partnership
5G Ecosystem Development Grant
SME digitalisation matching grant of RM5k
Smart automation matching grant
RM20m Cradle Fund for training & grants to seed companies
RM30 e-wallet digital stimulus (age >=18; annual income <RM100k)
MDEC training for digital entrepreneurs

Strengthening access to financing for businesses

Skim Jaminan Pinjaman Perniagaan (SJPP) guarantee facility
SME Bank funding with 2% subsidy (prioritising: women entrepreneurs, Bumiputera SMEs, halal)
Market Development Grant by METDC increase RM200k to RM300k
Matching guarantee for PE investments in Malaysian construction consortiums
Merger of Bank Pembangunan Malaysia, Danajamin Nasional, SME Bank & Export-Import Bank of Malaysia
Sukuk issuance under Wakalah tax deduction extension until Y2025
Tax exemption for Shariah compliant fund management extended to Y2023

Strengthening economic diversity

Tax exemption for Green Investment and Green Income extended to Y2023
Palm oil replanting loan for smallholders collateral-free at 2% pa
Tax exemption for IP-generated income from patents & copyright software for 10 years
Tax exemption for arts, cultural, international sports & conferences organisers
Tax deductions for companies sponsoring arts, cultural & heritage increased RM700k to RM1m

2. Levelling up human capital

Enhancing job opportunities for Malaysians

Malaysia@Work programme
Women application through TalentCorp income tax exemption extended to Dec 31, 2023
Women 30-50 returning to work RM500 per month wage incentive (via EPF)
Women 30-50 returning to work RM300 mthly hiring incentive for employers

Modernising the labour market

Employment Act 1955 review
Maternity leave increase 60 to 90 days (from Y2021)
OT eligibility max wages increased RM2k to RM4k
New guidelines anti-discrimination on religion, ethnicity & gender
Min wage increase to RM1.2k mthly (in major cities)

Investing in education and talent

EPF withdrawals criteria
Professional certification relating to IR4.0 included
Income tax deduction on PTPTN loan payment on behalf of employees extended to Dec 31, 2021
Tax incentive for structured internship program expanded to all academic fields for min period 10 wks
RM1.3b allocation for low income & rural bumiputeras (MARA)
Income tax relief increase from RM1k to RM2k for children <=6 in kindergartens

3. Creating a united, inclusive and equitable society

Inclusive development

RM5.2b allocation for Sabah
RM4.4b allocation for Sarawak
RM300 mthly Bantuan Sara Hidup for singles >40 earning
RM300 mthly Bantuan Sara Hidup for disabled >18 & free Takaful MySalam
RM8b for bumiputera entrepreneurship development

Towards better health services

mySalam protection plan expanded to M40 annual gross income <=RM100k
Skim Peduli Kesihatan (PeKA) B40 to provide screening & early intervention for non-communicable diseases
Income tax relief for medical expenses expanded to cover fertility treatment
PRS pre-retirement withdrawal 8% penalty waived for healthcare and housing purposes

Enhancing the transportation ecosystem

RM450m for electric public transportation buses
RM85m to reduce congestion at Causeway & 2nd Link
PLUS highways toll charges reduced by >=18%
Congestion charges lowered by 30% during near peak & normal hours, and free during off-peak
2nd Penang Bridge toll reduction from RM8.50 to RM7
Targeted BSH fuel subsidy program RM30 monthly for car owners; RM12 for motorcycle owners
Non-BSH motorists receive Kad95 to enjoy fuel subsidy of RM0.30 per litre (monthly capped 100 litres for cars / 40 litres for motorcycles)

Promoting access to housing

RPGT disposal to be based on market value as of January 2013 (current Jan 2010)
Foreign property ownership threshold on high rise property prices in urban areas reduced RM1m to RM600k
Housing stamp duty 50% remission by way of love & affection no longer applicable for non-Malaysians

Unity through sports

RM299m to implement Sports For All program rehabilitating & upgrading of sports facilities
RM179m for preparation international sporting events such as the Tokyo Olympics 2020 & Hanoi Sea Games 2021 (including paralympic athletes)
RM45m for National Football Development Programme

Promoting environmental sustainability

RM444m towards flood mitigation projects
RM150m towards maintenance of existing flood retention ponds
RM100m Disaster Assistance Fund to provide loans at an interest rate of 4% for farmers
RM48m to preserve Malaysia’s pristine forests & natural biodiversity
RM10m towards joint Government-UN Sustainable Development Goals (SDG)
RM16.9b (2019 RM15.6b) to Ministry of Home Affairs
RM15.6b (2019 RM13.9b) to Ministry of Defence to enhance defence readiness

4. Revitalisation of Public Institutions and Finances

Commitment to fiscal consolidation

Special Commissioner of Income Tax and Customs Appeal Tribunal merger into Tax Appeal Tribunal
Malaysians >18 & corporate entities will be assigned a Tax Identification Number (TIN)
Centralise tender & procurement of medicine worth RM500m across the Ministry of Health, Ministry of Defence and University Hospitals to generate bulk purchase savings
SME income tax at 17% chargeable income increased from RM500k to RM600k
Promotion of Buy Made in Malaysia
New personal tax bracket at 30% for chargeable income > RM2m
Digital services tax with effect from Y2020

Strengthening institutions, governance & integrity

National Anti-Corruption Plan (NACP) launched in 2019 Jan including assets disclosure by ministers & MPs
Independent Police Complaints and Misconduct Commission (IPCMC) to raise public confidence in our Royal Malaysian Police Force (PDRM)
Establish Malaysian Ombudsman to replace the Bureau of Public Complaints to enhance governance & delivery systems of the Government
Civil servants COLA increase by 50 mthly
New government housing loan borrowers free RM100k pa policy for 2 years
Civil servants Ex-Gratia Death Benefit of up to RM150k
RELA higher allowance of RM2 hourly
PJM award holders RM500 special one off payment

Household Impact

B40

Min wage increase to RM1.2k mthly: RM150 x 2 = +RM300
Targeted BSH fuel subsidy program RM30 monthly for car owners; RM12 for motorcycle owners: RM30 + RM12 = +RM42
Total Household Income/Savings Increase: RM442 x 2 = +RM884

M40

mySalam protection plan expanded for annual gross income <=RM100: +RM240 (est premium cost savings)
PLUS highways toll charges reduced by >=18%: RM300 * 18% = RM54
Non-BSH motorists receive Kad95 to enjoy fuel subsidy of RM0.30 per litre (monthly capped 100 litres for cars
Digital services tax with effect from Y2020: -RM200 * 6% = -RM12
Total Household Income/Savings Increase: RM282 x 2 = +RM564

T20

Personal income tax increase in excess of RM2m taxed at 30% (previously 28%): -RM20k
PLUS highways toll charges reduced by >=18%: RM500 * 18% = RM90
Not qualify for Kad95: RM0.30 per litre x 100 litres = -RM30
Digital services tax with effect from Y2020: -RM500 * 6% = -RM30
Total Household Income/Savings Reduction: -RM19,880

Budget 2020 Reaction

“Overall it’s good to see Malaysia’s fiscal deficit reduced with the new Budget 2020. Also positive was operating expenses cut while development expenditure increased as the focus shifts to future shared prosperity.

Highlights that are positive include steps to drive investments & the digital economy to remain competitive today & tomorrow. The focus on education & work is also welcomed especially empowering women & increasing basic income.

Positive steps to reduce leakages & increase tax revenue were also visible with the new targeted petrol subsidies & the new higher personal income tax bracket. If there was a miss, it would be the RM30 for e-wallet users which I have my doubts on its effectiveness beyond being viewed as a free handout.”

~Stev Yong, Founder of MyPF

Wealth Vantage Advisory Co-founder and Managing Director, Rafiq Hidayat shares his Budget 2020 thoughts.

0:30 Helping Malaysians have more surplus money in their cashflow by increasing income & reducing monthly expenditure
0:50 Malaysia@Work initiative
3:00 Increase in minimum wage
3:40 Reducing expenses with fuel subsidies for BSH & non-BSH
4:40 Discounts for toll users & congestion charge
6:00 Increase in high income earners personal taxes; Tax relief increase for kindergarten costs

Malaysia’s Budget 2020 Highlights