The government’s budget proposal for 2020 is RM297 billion representing a drop of 5.6% compared to Budget 2019. This is due to the expectation that revenue will fall 7.1% to RM244.53 billion, but Malaysia plans to increase development spending to offset an expected slowdown in global demand.
Key Highlights of Budget 2020
Public service:
- Bomba personnel: RM 200/ mth special allowance
- Armed forces: One-off RM 500
- Civil servants: Special RM 500 pay
- Govt retirees: Special RM 250 pay
- One-off RM500 special bonus for mosque officials Supplies
Monthly fuel subsidy:
- BSH cash aid receivers: RM 30/mth (car), RM 12/mth (motorcycle)
- Non-BSH: RON95 petrol 30 sen discount up to 100l / mth (car), 40l /mth (motorcycles)
Social welfare:
- RM575m senior citizens’ aid
- RM4.5m for homeless transit centre
- RM25m for Food Bank programme
Health
- RM60m for child pneumococcal vaccination
- MySalam health insurance: Increase coverage to 45 illnesses, up to age 65
- PeKA 840 health screening expanded from age 50-60, to age > 40
Taxation:
- New tax category: 30% for > RM 2m income earners (2,000 persons)
- Individual tax relief for nursery, kindergarten fees: Increase to RM2k
- Fertility treatment: Now EPF allows withdrawals, can claim tax relief
Employees:
- Maternity leave 90 days (from 2021)
- Workers <RM 4k/ mth can claim overtime
- New anti-workplace discrimination lawsSocial
- Better sexual harassment complaint process
- Minimum wage hike to RM 1,200/mth in major cities (from 2020)
- Expanded coverage: EPF (to contract workers), Socso (to more self-employed categories)
- General Administration
Agriculture is expected to expand at 3.4%, slower than 4.3% pace forecast in 2019. In the palm oil industry, the government plans to set aside RM550 million ringgit for loans for palm oil replanting, allocates RM810 million ringgit for FELDA settlers, implement Biodiesel program B20 for transport sector at the end of 2020 and move to raise palm oil demand by as much as 500,000 tonnes a year.
There were no new taxes introduced in Budget 2020 save for a 2% increase in the individual tax rate on chargeable income exceeding RM 2 million. Goods and Services Tax (GST) will not be re-introduced next year. The Government’s plan on increasing tax revenue lies mainly on spurring private sector investments through targeted incentives and increasing the ease of doing business to enhance Malaysia’s competitiveness.
Personal Tax
- Introduction of new tax bracket of 30% for individuals with excess chargeable income of RM 2 million.
- Non- resident individual tax rate is increased by 2% from 28% to 30%.
- Individual tax relief be increased from RM1,000 to RM2,000 for fees paid to childcare centers and kindergartens.
- Extension of tax exemption to 4 years for women returning to work from career.
- Extension of period of income tax deduction to 2 years on Perbadanan Tabung Pendidikan Tinggi Nasional (PTPTN) loan amount paid by employers to employees.
- Tax deduction for donation to charitable and sports activities and projects of national interest is increased from 7% to 10%.
- Increase in minimum wage to RM 1200 per month.
Indirect Taxes
- Export duty rate of Crude Palm Oil (CPO) is reduced to 3% from 4.5% for RM 2,250 – RM 2,400 band. Subsequent bands above RM 2,400 is reduced by 0.5% respectively.
- Introduction of approved major exporter scheme under the sales tax 2018
Stamp Duty
- Stamp duty exemption for first residential home priced up to RM 500,000 from housing developer to financial institution and from financial institution to buyer.
Corporate Tax
- First chargeable income which is subject to 17% tax rate be increased from RM500,000 to RM 600,000 for SMEs having annual sales of not more than RM 50 million.
- Qualifying expenditure of Small Value Assets (SVA) be increased from RM 1,300 to RM 2,000
- Tax deduction on expenses incurred on secretarial fee and tax filing fee be combined and allowed up to RM 15,000.
- Tax Deduction up to RM 1.5 million on Cost of Listing in Bursa Malaysia.
- Income tax exemption up to 10 years for electrical and electronic companies investing in selected knowledge-based services.
- Income tax exemption of 100% up to 10 years be given to qualifying intellectual property.
- Income derived from patent and copyright software.
- Green Investment Tax Allowance (GTA) of 100% on capital expenditure for qualifying green activity to be set off against 70% of statutory income is extended for 3 years.
- Income tax exemption of 100% of statutory income be expanded for organising conferences in Malaysia if there are at least 500 foreign participants annually.
- Income tax exemption equivalent to 100% of the Accelerated Capital Allowance on automation equipment extended to 3 years.
Real Property Gains Tax
- Market value as of 1 January 2013 is used as the acquisition price for the disposal of real properties acquired prior to year 2013.
Although Budget 2020 allocation (RM297 billion is lower compared to that in 2019 (RM314.5 bil), there are a number of incentives tabled in Budget 2020. Here are 16 things that might affect citizens financially in 2020:
- RM30 will be credited to the e-wallet of Malaysians who are above 18 years old and earning less than RM 100,000 a year.
- Digital Service Tax will be imposed on streaming services like Spotify and Netflix, digital software and games distribution companies such as Steam, and digital advertising offered by Google.
- Minimum reduction of 18% discount for toll charges across all PLUS highways. Toll rate at the Second Penang Bridge will be reduced to RM 7 from RM 8.50.
- Fuel subsidy programme for individuals who own not more than 2 cars and 2 motorcycles (RM 30 per month for car and RM 12 per month for motorcycle).
- RON95 and diesel retail prices will be gradually floated.
- Single citizens above 40 years and earning less than RM 2000 a month is eligible for RM 300 Bantuan Sara Hidup aid.
- Additional tax relief from RM 1000 to RM 2000 for parents who send their kids to TASKA.
- Minimum wage is raised to RM 1200.
- Incentive of RM 500 per month for 2 years for graduates who gets a job after being unemployed for more than 12 months. Employers will get RM 300 per month for 2 years for hiring.
- Women between the age of 30 and 50 will received incentive of RM 500 a month for 2 years for going back to work after 1 year of unemployment. Employers will get RM 300 per month for 2 years for hiring.
- Incentive of RM 350 or RM 600 monthly for 2 year for taking over a foreign worker’s job. Employers will receive RM 250 monthly for 2 years.
- Rent to Own (RTO) financing scheme for first time home buyers to rent a property up to 5 years before having the option to purchase the house.
- Base year for Real Property Gains Tax (RPGT) is revised to 1 January 2013 from 1 January 2000 for property bought before the date.
- Foreigners can buy properties priced from RM 600,000 instead of RM 1 million.
- EPF withdrawal is allowed for qualifications attained at certificate level relating to the Fourth Industrial Revolution.
- Housewives can opt-in for EPF contributions under the i-Suri
Generally, Malaysians will enjoy the continued pace of growth in 2020. The forecast for GDP growth is to improve marginally to 4.8% in 2020 from 4.7% last year. Various measures will be undertaken to sustain Malaysia’s growth momentum and ensure the people’s well-being such as moving up the value chain through 5G technology and IR 4.0.
The government’s plans to strengthen domestic economic activities as pre-emptive measures to support and sustain the growth momentum in 2020. Allocation is provided to each Ministry to enhance the nation’s economic competitiveness.
Fiscal Outlook
Revenue
- Revenue is projected to register RM 244.5 billion or 15.2% of GDP in 2020.
- Out of this amount, RM 189.9 billion is from the collection of tax revenue while the balance of RM 54.6 billion is from non-tax revenue.
Expenditure
- Expenditure is forecast at RM 297 billion or 18.4% of GDP in 2020.
- This comprises operating expenditure at RM 241 billion and development expenditure at RM 56 billion.
Budget Allocation
- RM 10 million to Ministry of Entrepreneur Development to focus on advocacy and awareness for halal certification
- RM 4.9 billion to Ministry of Agriculture to enhance income of farmers
- RM 524 million to Ministries and Public Agencies to enhance research and development.
- RM 11 million to Ministry of Education and Ministry of Environment, Science, Technology and Climate Change (MESTECC) towards the initiative to inculcate the Science, Technology and Innovation (STI) culture, encouraging more students into the fields of Science, Technology, Engineering and Mathematics (STEM).
- RM 1.1 billion to the Ministry of Tourism, Arts and Culture to fulfil the aspirations of Visit Malaysia Year 2020
- RM 10 million to Ministry of International Trade and Industry (MITI) to focus on post-approval investment monitoring and realisation
- RM 50 million to Ministry of Transport for repair and maintenance of roads.
- RM 50 million to Ministry of Economic Affairs for entrepreneurship under Unit Peneraju Agenda Bumiputera (TERAJU)
- RM 30.6 billion to Ministry of Health for healthcare services.
- RM 16.9 billion to Ministry of Home Affairs to safeguard national safety.
- RM 817.8 million to Ministry of Foreign Affairs to realise the nation’s aspiration.
- RM 670.2 million to Ministry of Primary Industry for Malaysia to be the main commodities exporter globally.
- RM 4.9 billion to Ministry of Agriculture and Agro-based industry to transform the agriculture sector to be modern, dynamic and competitive.
- RM 8.42 billion to Ministry of Rural Development to drive the development in rural area.
- RM 4.78 billion to Ministry of Water, Land and Natural Resources to manage the resources sustainably.
- RM 1.1 billion to Ministry of Domestic Trade and Consumer Affairs to develop an ethical trade ecosystem based on consumer interest.
- RM 8 billion to Ministry of Works to develop infrastructure and construction industry of the nation.
- RM 1.46 billion to Ministry of Federal Territories to lead the progress and physical development of the nation to increase the people’s quality of life.
- RM 4.78 billion to Ministry of Housing and Local Government to create a sustainable living environment in line with the country’s vision.
- RM 1.16 billion to Ministry of Youth and Sports to strengthen and maximise the human capital of youth as the nation’s driver of strategic development.
- RM 1.29 billion to Ministry of Human Resource to develop a competent, productive, responsive and empowered human capital.
- RM 1.95 billion to Ministry of Communications and Multimedia to enforce a connected, informative, creative and digitally literate citizens.
- RM 2.47 billion to Ministry of Women, Family and Community Development to integrate women’s perspective into the nation’s development and strengthen family institutions’ social welfare.
- RM 15.6 billion to Ministry of Defence to enhance defence readiness and improve Armed Forces mobility.
Written by Adrienne Gim, Senior Consultant at 27 Capital.
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