The RM322.5 billion Budget 2021 tabled on 6 November 2020 with 3 main focuses on:
1. The people’s well-being
2. Business continuity
3. Economic resilience
The Government revenue collection for the year 2021 is estimated to increase to RM236.9 billion, while the Government has decided that the 2021 Budget to be an expansionary budget. The 2021 fiscal deficit is projected at 5.4% of GDP.
The allocations are:
RM236.5 billion in operating expenses,RM69 billion in development expenditureRM17 billion under the COVID-19 Fund.
Below are the highlights of Budget 2021 for Businesses and Individuals:
1. Investment in Key Sectors
RM1 billion special incentive package for high value-added technology, with a focus on supporting R&D investment in aerospace and electronics.
2. RM500 million High Technology Fund will be provided by Bank Negara Malaysia (BNM) to support high technology and innovative companies.
3. Incentives for businesses relocating into Malaysia
Application for the incentive of special tax rates for manufacturing companies relocating businesses to Malaysia be extended for another 1 year until 31 December 2022;The scope of tax incentives will also be extended to companies in selected services sector which have significant multiplier effect by providing an income tax rate of 0 to 10% for a period of 10 years.
4. Initiatives in Making Malaysia A Destination For High-Value Service Activities
5. Existing Tax Incentives extended until 2022
Include tax incentives for MRO activities for aerospace, building and repair of ships, Bionexus status and economic corridor developments.
6. RM1.4 billion National Development Scheme (NDS) by Bank Pembangunan Malaysia will be introduced to support the implementation and development of domestic supply chain and increase the production of local products such as medical devices.
7. Extension of Funds and Schemes
Maritime Development and Logistics Scheme; Sustainable Development Financing Scheme; Tourism Infrastructure Scheme; and Public Transport Fund will be extended until 31 December 2023 with a fund size of RM 3.7 billion. ( RM500 million ringgit from these schemes will be designated for Bumiputera entrepreneurs.)
8. Targeted Assistance and Rehabilitation facility worth RM2 billion under Bank Negara Malaysia will be introduced through loans from banking institutions for affected SMEs.
9. Initiatives for Locally Manufactured Products
10. Tax incentives for manufacturers of pharmaceutical products including vaccines to invest in Malaysia, preferential tax rate of 0 to 10% for 10 years.
11. Empowering the Agriculture Sector
12. Commodity Sector
13. Tourism Industry
6 months HRDF levies exemption will be given (effective from 1 January 2021)
This exemption will cover the tourism sector and companies affected by the COVID-19 crisis.
Training and placements for 8,000 employees of airline companies in Malaysia with an allocation of RM 50 million to be provided by Government.
RM35 million allocated to the Malaysia Healthcare Travel Council to enhance the competitiveness of the local health tourism industry.
RM1,000 Grant Khas Prihatin for Sabah's traders, hawkers, taxi drivers, e-hailing, rental cars and tour drivers.
14. RM1 billion in Industrial Digitalization Transformation Scheme to be provided by BPMB, to boost digitalization activities. These funds will be extended until 31 December 2023.
15. For automation and modernization, RM150 million under the SME Digitalization Grant Scheme and the Automation Grant will be provided. The Grants’ eligibility conditions are relaxed for micro SMEs and start-ups that have been operating for at least six months.
16. Financing for Business
I) Micro Credit Financing
II) Loan Guarantees Financing
Consumer Credit Act will be formulated
- To encourage standardized credit lending activities and increase consumer protection.
- This formulation will be led by Bank Negara Malaysia and Securities Commission.
III) Alternative Financing
• For Equity Crowd Funding (ECF)
- 50% income tax exemption on the investment amount or limited to RM50,000 will be given.
- An allocation of RM30 million in matching grant will also be invested on ECF platforms under the supervision of the SC.
17. For construction contractors
Including additional RM200 million for maintenance projects for Federal Roads and RM50 million for PPR houses.
Government will also extend flexibilities accorded on procurement procedures until December 2021 to expedite the implementation of developmental projects.
18. RM20 million allocated to the Malaysian Global Innovation and Creativity Center (MaGIC) and selected agencies in social enterprise development program.
- Social enterprises with Government Impact e-Procurement Program Certificate from MaGIC and other selected agencies can join in the pilot project for the e-Procurement registration to become suppliers to the Government.
- With this initiative, social enterprises can supply goods and services in total up to RM20 million per year.
19. RM2 billion allocated in Green Technology Financing Scheme 3.0 (GTFS3.0) and extended for two years up to 2022.
20. Additional tax deduction for employers who employ Ex-Convict, Parolee, Supervised Person and Ex-Drug Dependant. This tax deduction will be extended until 2025.
21. Additional tax deductions for employers who employ senior citizens.
This tax deduction will be extended until 2025.
22. The government will also extend the tax exemption on the value of increased in export for private healthcare services for 2 years from year of assessment 2021 to 2022.
23. Incentive for manufacturers of pharmaceutical products including vaccines to invest in Malaysia, including preferential tax rate of 0 to 10 percent for 10 years.
1. The maximum tax relief for individual, spouse and children's medical expenses for serious medical ailments be increased from RM6,000 to RM8,000.
2. The maximum tax relief for medical treatment, special needs and carer expenses for parents be increased from RM5,000 to RM8,000.
3. Tax relief for a full health screening be increased from RM500 to RM1,000.
Further, scope of health screening expanded to include expenses on vaccine such as for pneumococcal, influenza and Covid-19.
4. Reduction of personal income tax rate by 1% for chargeable income bands from RM50,001 – RM70,000
5. The income tax exemption limit for compensation on loss of employment will be increased from RM10,000 to RM20,000 for every completed year of service. Exemption is available for a period of two years of assessment.
6. The limit of the ‘lifestyle tax relief’ has been raised from RM2,500 to RM3,000, which is an increase of RM500 specifically for sports-related expenditure, including entrance participation fees for sports competitions. The scope of the relief has also been expanded to include subscription to electronic newspapers.
7. To encourage parents to save for the costs of their children’s higher education fees, a tax relief of up to RM8,000 for National Education Savings Scheme (SSPN) net savings will be implemented until year of assessment 2022.
8. The Private Retirement Scheme (PRS) tax relief of RM3,000 a year has been extended till year of assessment 2025.
9. The maximum tax relief for disabled husband and wife be increased to RM5,000 from RM3,500.
10. To encourage more individual investors to participate in equity crowdfunding (ECF) platforms, an income tax exemption of 50% from the invested amount or limited to RM50,000 will be given.
11. The scope of tax relief on self-education fee of RM7,000 be expanded to include courses of up-skilling or self-enhancement. The maximum relief for education fee under this scope to be limited to RM1,000.
12. Returning expert may choose to be taxed at a flat rate of 15% for a period of 5 consecutive years. This is extended till year 2023.
13. The Government will impose excise duty of 10% on devices for all types of electronic and non-electronic cigarettes including vape, effective from 1 January 2021. Meanwhile, liquid used in electronic cigarettes will be imposed an excise duty at a rate of 40 cents per millilitre.
14. Full stamp duty exemption will be given to transfer of ownership document and loan agreement for the purchase of a first home worth not more than RM500,000. This exemption will be for the purchase agreement from January 2021 to Dec 31, 2025.
15. RM6.5billion allocated in Bantuan Prihatin Rakyat (BPR)
Household Income <RM2,500
1 child RM1,200
≥ 2 children RM1,800
Household Income RM2,501 to RM4,000
1 child RM800
≥ 2 children RM1,200
Household Income RM4,001 to RM5,000
1 child RM500
≥ 2 children RM750
Single individuals earning < RM2,500
21 years old & above RM350
16. Banks will enhance the TRA to B40 borrowers who are BSH recipients or BPR, and to micro enterprises with loans of up to RM150,000. Borrowers in this category will be given the following options:
Option 1: A moratorium on their instalments for a period of 3 months; or
Option 2: Reduce their monthly repayment by 50 percent for a period of 6 months
Eligible borrowers will only need to contact their banks to choose the options and complete the documentation.
For the M40 borrowers, the application process for the repayment assistance will be simplified. Borrowers would only need to make a self-declaration of the reduction in income in order to secure the repayment assistance. The facility for the B40 and M40 will commence in December 2020.
17. mySalam’s coverage broaden to include medical devices such as heart stent or prosthesis.
18. B40 aid recipients will be given a RM50 voucher under Perlindungan Tenang Voucher Programme as financial aid to purchase Perlindungan Tenang products such as life takaful and personal accident. At the same time, the Government will also extend the stamp duty exemption period on all Perlindungan Tenang products with an annual premium or contribution value not exceeding RM100 for another 5 years until year of assessment 2025.
19. Minimum employee EPF contribution rate is reduced from 11 to 9% beginning January 2021 for a period of 12 months.
20. Facility to withdraw EPF savings from Account 1 for EPF members who have lost their jobs. The amount allowed will be RM500 a month with a total of up to RM6,000 over 12 months. Eligible contributors can apply beginning January 2021.
21. EPF will allow members to withdraw from EPF Account 2 to purchase insurance and takaful products which are approved by EPF relating to life and critical illnesses coverage for themselves and their family.
22. For the year 2021, the Job Search Allowance will be extended by 3 months and the rate will be:
80% in the first month,
50% for the second till the sixth month
30% for the last three months.
For this purpose, an allocation of RM150 million will be provided and is expected to benefit up to 130 thousand job seekers.
23. The Government will also continue the PenjanaKerjaya - hiring incentive programme under PERKESO, with several enhancements as below:
i. Incentive for employees earning RM1,500 and above will be enhanced from a flat rate of RM800 per month to 40 percent of monthly income, subject to a maximum incentive of RM4,000;
ii. to encourage employment for the disabled, long –term unemployed, and retrenched workers, employers will be given an additional incentive equivalent to 20 percent of the employee’s monthly income making the total incentive to employers’ amount to 60 percent; and
iii. For sectors with a high reliance on foreign workers such as construction and plantations, a special incentive of 60% of monthly wages will be provided whereby 40% will be channeled to the employer while 20% will be channeled as a wage top up to the local worker replacing the foreign worker.
The above three incentives will be given for a period of six months; and
iv. For those employed under the PenjanaKerjaya, the maximum training rate which can be claimed by employers will be increased from RM4,000 to RM7,000 to enable workers to take up high skilled training and professional certifications.
To ensure the success of these four PenjanaKerjaya initiatives, a total of RM2 billion will be allocated, which is expected to increase the employment opportunities for 200 thousand job-seekers.
24. One-off RM50 into e-wallet accounts for those aged 18 to 20 years via the eBelia Programme.
25. To enhance the welfare of vulnerable groups, the Government has agreed to increase the monthly rate of financial assistance as follows:
i. The rate for Financial Assistance for Person With Disabilities (OKU) who are Incapable of Work is increased from RM250 to RM300;
ii. The rate for Financial Assistance for Older Persons, Carers of Bed-ridden Disabled Person (OKU) and Chronically Ill Patient is increased from RM350 to RM500;
iii. The rate for Incentive Allowance for Disabled Workers is increased from RM400 to RM450; and
iv.The rate for Financial Assistance for Children is increased from RM100 per child with a maximum of RM450 per family, to RM150 per child aged seven years to 18 years, or RM200 per child aged six years and below with a maximum of RM1,000 per family. It is hoped this increase will help with childcare and nutritious food.
26. SAVE 2.0 program, an e-Rebate of RM200 program for households who buy any energy efficient locally manufactured air conditioner or refrigerator. A total of RM30 million is allocated in this program which is expected to benefit 140,000 households.