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

Theme: Driving Growth And Equitable Outcomes Towards Shared Prosperity.

Item20192020Change
Fiscal deficit3.4% of GDP3.2% of GDP-0.2%
Federal government revenueRM263.3bRM244.5b-RM18.8b (-7.1%)
Operating expenditureRM262.3bRM241.0b-RM21.3b (-8.1%)
Development expenditureRM53.7bRM56.0b+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