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Tax WhizTax highlights from your advisers

KPMG in Malaysia

15 April 2020

Special Tax Deduction for Rental Reduction on Business Premises Rented to Small and Medium Enterprises


Tax Whiz 2020 | 15 April 2020


Additional tax deduction equivalent to the amount of rental reduction given to SME tenants will be accorded (subject to the gazette of the Income Tax Rules).

• Applicable to rental reductions given from April 2020 to June 2020.

• Rental reduction of at least 30% on the original monthly rental charged and the special deduction is computed on a monthly basis. Failure to provide the 30% discount for a particular month will disqualify the taxpayer from claiming the special deduction for that month. However, it will not affect the claim for other months where the rental reductions are at least 30%.

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• Companies • Individuals• Co-operative

societies

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• Official tenancy agreement• Rental income statement• Document certifying tenant’s SME status• Document certifying the reduction in the

rental (to be prescribed under the Income Tax Rules to be gazetted)

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Special Tax Deduction for Rental ReductionFurther to the Additional PRIHATIN Package announced by the Government on 6 April 2020 which included the granting of a special tax deduction to building owners who provide a rental reduction of at least 30% to their Small and Medium Enterprise (“SME”) tenants for the period from April 2020 to June 2020, the Ministry of Finance has, via its official Telegram channel, issued a Frequently Asked Questions (“FAQs”) in respect of this tax incentive. The salient points of the FAQs, which are subject to the gazette of the Income Tax Rules, have been set out below:

Special Tax Deduction

Terms and Conditions

Qualifying Persons

Supporting Documents

who rent business premises to SMEs.

• Other business and non-business entities


Tax Whiz 2020 | 15 April 2020


The definition of “SME” for the purpose of the special tax deduction follows SME Corporation Malaysia’s definition. A business would have to fulfill either one of following two conditions to be regarded as an SME:

• Annual sales – based on the figure at the end of the basis period of the preceding Year of Assessment (“YA”); or

• Number of full time employees (“FTEs”) – based on numbers at the end of the basis period of the preceding YA or at 1 April 2020.

5 Definition of “SME”

* If a business fulfills either one condition across the different sizes of operation, then the smaller size will be applicable. For example, if a manufacturer’s annual sales is RM100 million but has 150 FTEs, it will be deemed to be an SME (not exceeding 200 FTEs).

For reference purposes, the FAQs provide a link to access the Guidelines for New SME Definition (“SME Guidelines”) issued by SME Corporation Malaysia (please click here for the link). It is noted that the SME definition in the SME Guidelines excludes subsidiaries of the following companies:

• Public listed companies in the main board; and• Large firms, multinational companies, Government-linked companies, companies owned by the

Minister of Finance (Incorporated) (Malaysia) and State-owned enterprises.

In addition, there are also additional criteria stated in the SME Guidelines which need to be met to be considered as an SME.

It remains unclear whether these exclusions and additional criteria will be applied to determine the eligibility of taxpayers for this special deduction.

Business Size

Sector Conditions (only one condition is required to be met)

Micro All sectors • Annual sales: Less than RM300,000• FTEs: Less than 5

Small Manufacturing • Annual sales: From RM300,000 but less than RM15 million• FTEs: From 5 to less than 75

Services and other sectors

• Annual sales: From RM300,000 but less than RM3 million• FTEs: From 5 to less than 30

Medium Manufacturing • Annual sales: From RM15 million but not exceeding RM50 million• FTEs: From 75 but not exceeding 200

Services and other sectors

• Annual sales: From RM3 million but not exceeding RM20 million• FTEs: From 30 but not exceeding 75

http://www.smecorp.gov.my/images/pdf/GarisPanduan_Definisi_Baharu_PKS_updated.pdf

© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 3

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Contact us

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© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. 4

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© 2020 KPMG Tax Services Sdn. Bhd., a company incorporated under Malaysian law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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