Category: Business

What is SST? Your guide to sales and service tax in Malaysia

SST Banner

What is SST? Your guide to sales and service tax in Malaysia

boardroomsuperadmin

If you are planning to expand your business into Malaysia, you are likely asking the question, What is SST?

SST refers to the Malaysian sales and service tax, where a sales tax is imposed at the manufacturer level, and a service tax is paid by consumers who are using taxable services.

Tax regulations are relatively fluid in Malaysia compared to neighbouring regions, which can make compliance challenging to maintain. This is why many growing businesses partner with a corporate services team who can help them navigate multi-country taxes as they evolve.

Read on as BoardRoom’s Tax Director for Malaysia, Cheong Woon Chee, provides an overview of how SST works, and what you can do as a taxable person to ensure compliance.

Did SST replace GST?

In 2018, the Malaysian Government reintroduced sales and service tax to replace the goods and services tax (GST), which reformed the local tax system.

“Many people actually believed that GST had increased the living cost since it was implemented,” Woon Chee says. “Therefore, the main objective of this abolishment was to put more purchasing power in the hands of the Malaysian people – especially the lower- to middle-income earners – which would result in a much higher disposable income.”

How SST works in Malaysia: definition and rates

SST is an indirect tax made up of the following components.

Sales tax

The sales tax component of SST is imposed on products manufactured and produced locally and on taxable goods imported into Malaysia. It is charged to consumers based on the purchase price of certain goods and services.

The sales tax is only imposed at one stage of the supply chain (at the time of the goods’ sale or disposal).

The sales tax rate in Malaysia ranges from 5%, 10% or another specified rate, depending on the type of goods.

Your business is required to pay SST if your total sales value of taxable goods has exceeded RM 500,000 in the past 12 months.

Service tax

The service tax is a consumption tax imposed on taxable services provided in Malaysia by a registered business.

The rate for service tax is 6% in Malaysia.

Your business is required to pay SST if your total value of taxable services within 12 months exceeds the prescribed threshold, which is usually RM 500,000. Some services have a different threshold (for example, the threshold for operators of restaurants and cafes is RM 1.5 million).

TaxServices

How to register for SST

If your business’s annual income has exceeded the respective thresholds for sales or service tax, you need to register for SST on the MySST website. A tax professional can assist you with this process.

Is there anything or anyone exempt from SST in Malaysia?

In Malaysia, services that are imported or exported are exempt from service tax, as are goods manufactured for export.

Other exempted goods include:

Bicycles, including certain parts, and accessories
Books, newspapers, magazines, and journals
Live animals, meat, seafood, and eggs
Insecticides and disinfectant
Cereals
Coffee and tea
Fertilisers
Pharmaceutical products
Spices
Wood pulp

Manufacturers of non-taxable goods are exempt from SST, as are certain government bodies and educational institutions.

You can view complete lists of exempted goods, services and persons on the MySST website.

Exemption rules can be complicated, and the ramifications for tax evasion are severe. This is why it is a good idea to consult a tax professional who can help determine whether SST applies to your business.

Is SST different from company tax?

Another common question among businesses branching into Malaysia is, What is the company tax rate?

When it comes to understanding how to pay tax in Malaysia, business leaders should first learn the difference between SST and company tax.

While SST is imposed by the Royal Malaysian Customs Department, corporate tax is imposed by the Inland Revenue Board.

“Corporate tax is governed under the Income Tax Act 1967, which applies to all companies registered in Malaysia for chargeable income derived from Malaysia, including profits, dividends, interest, rentals, royalties, premiums, and other income,” Woon Chee explains.

Currently, the general rate for corporate income tax in Malaysia is 24%.

SST different

What is required of businesses to comply with SST?

All companies doing business in Malaysia – no matter their size – should do the following to ensure compliance with SST:

Find out if you are liable for SST by checking the prescribed thresholds for goods and/or services
Determine if your business is eligible for exemption from SST (and apply for an exemption if eligible)

If your business is liable for SST, ensure that you:

Register for SST on the MySST website (check first whether you are already registered)
Charge service tax on your taxable service (if applicable)
Issue invoices in the national language or in English
File returns every two months
Make payments on time
Keep accurate records

Ensuring SST compliance can be an arduous process, which is why many businesses in Malaysia choose to engage a skilled corporate services provider for ongoing support.

What you may not know about Malaysian taxation

As a business leader, it is important that you stay aware of local taxation developments and discourse. With this knowledge, you will be able to make smarter decisions when it comes to company strategy and forward planning.

Some of the latest tax facts you should know include:

  • In its first year of implementation, Malaysia’s digital services tax brought in more than RM 400 million for the government. With the uptake of digital tools and streaming services on the rise, this indirect tax is likely to provide a significant revenue stream for the government in the years to come.
  • A tax exemption for SST on cars ended on 30 June 2022 after an extension was provided as part of the Malaysia Budget 2022. The exemption was introduced in 2020 to help automotive companies survive the impacts of the COVID-19 pandemic and also stimulate local economic growth.
  • Malaysia’s tax regulations are in a near-constant state of flux. Malaysia’s 2023 budget is set to be retabled, meaning businesses must be ready to adapt to potential new tax requirements in the near future.
  • Many companies find outsourced accounting and tax services benefit their business by ensuring they meet regulatory requirements, particularly as they grow and evolve.

Maintain SST compliance in Malaysia with the help of a tax professional

Navigating Malaysia’s tax landscape can be a complex and time-consuming exercise, especially for new businesses. In contrast to neighbouring countries, tax regulations and rates in Malaysia change so often that the tax research you performed at the start of your expansion journey may no longer be relevant just six months later, such as with the reintroduction of SST.

To ensure smooth and successful business growth, and to answer any of your questions about sales and service tax or otherwise, contact a local tax professional who can help ensure your Malaysian venture is fully compliant from the start.

Contact us to find out more.

Related Business Insights

The impact of a great company secretary in modern Malaysia

The impact of a great company secretary in modern Malaysia

The impact of a great company secretary in modern Malaysia

boardroomsuperadmin

How company secretary responsibilities are evolving in Malaysia

Historically, the responsibilities of a company secretary were limited to basic administrative tasks such as minute taking, annual return filing, editing company constitutions and other internal office duties. But the role is evolving as business management and corporate governance grow increasingly complex and gain greater importance.

In modern-day Malaysia, the company secretary is an executive-level role tasked with a wide range of important responsibilities across multiple business functions. As such, the company secretary plays a critical role in helping a business reach its maximum potential.

In this article, we explore the evolving role of a company secretary, and how a skilled company secretary can help your business gain a competitive advantage.

Why is a company secretary important?

Company secretaries carry out various duties to support the running of a business: importantly, they ensure full compliance with the Companies Act and related regulations.

If your goal is to succeed in business, particularly in competitive markets, do not underestimate the value of an experienced company secretary. They will be able to help elevate your governance practices in a way that maximises both benefits and performance.

Company secretarial services can include:

  • establishing the best structure for your business;
  • lobbying for the development of a strong environmental, social and governance strategy, known as ESG in Malaysia;
  • ensuring regulatory compliance; and
  • implementing contemporary corporate governance practices.

The company secretary acts as a voice of reason, ensuring your business pursues its goals with equal determination and integrity.

Corporate Secretary

The role of a company secretary in Malaysia

The rules and regulations for company secretarial services vary across the Asia-Pacific (APAC) region. In Malaysia, businesses are required by law to appoint a company secretary after incorporation.

Common duties for company secretaries in Malaysia include:

Participating in board meetings
Coordinating annual general meetings
Liaising with shareholders and directors
Keeping secretarial records of the company
Preparing and lodging annual returns
Obtaining certification of documents by local authorities
Handling the consolidation, division and transfer of shares
Performing ad hoc tasks on behalf of the board (e.g. signing bank or statutory statements).

Company secretaries can help at every stage of business, from registering a company to closing a company.

How has the company secretary role evolved?

While company secretaries used to have very little authority, today they are well-versed in local laws and regulations. This means the role has taken on a key business advisory function: directors and shareholders can seek the company secretary’s advice on the best way to handle compliance matters.

New focus areas for company secretaries include guiding the board on ESG and matters of legal compliance.

Environmental, social and governance

Rising expectations from regulators, investors and customers for strong ESG in Malaysia means businesses are under mounting pressure to demonstrate good governance. According to a 2020 KPMG survey, sustainability reporting in APAC has grown from 78–84% since 2017.

The company secretary’s broad involvement in both business operations and board activities means they have a crucial role to play in ESG advancement.

Company secretaries can support ESG performance by:

  • helping devise contemporary ESG measures (e.g. introduction of a whistleblower protection policy);
  • working collaboratively with the sustainability team to manage and control ESG risks and opportunities;
  • arranging regular ESG auditing; and
  • assisting with transparent ESG reporting in the company’s annual report.

 

    Legal compliance

    Keeping up with statutory requirements and advising updates to the legal team is a core responsibility of the company secretary. While the company secretary is not held accountable for legal decisions, directors and management teams must be able to trust that the company secretary’s compliance advice is reliable and up to date.

    On top of this, company secretaries must help the company prepare for all types of legislative uncertainty.

    Company secretaries support legal compliance in many ways, including:

    • planning and coordinating shareholder and board meetings and taking attendance;
    • preparing shareholder and board resolutions;
    • ensuring timely filing of all necessary ​​returns with the Companies Commission of Malaysia;
    • updating the Companies Commission on changes to statutory information;
    • ensuring compliance with Securities Commission legislation;
    • reviewing and preparing corporate governance reports for inclusion in annual reports; and
    • helping the company meet the requirements of Bursa Malaysia.

    The best company secretaries can develop tailored compliance solutions that satisfy requirements without costing unnecessary resources.

    Top challenges in company secretarial services

    Key qualities to look for in a company secretary include adaptability and strong communication skills. These attributes are crucial for overcoming common challenges in the compliance space.

    Here are the three main challenges company secretarial services may face.

    1. Keeping up with changing regulations

    The biggest obstacle for company secretaries is keeping their organisations compliant amid rapidly evolving regulatory landscapes. One way they support ongoing compliance is by working hand-in-hand with regulators.

    Company secretaries act as a vital link between organisations and authorities. They are able to access information about regulatory changes before they are made and can therefore help their organisation prepare in advance.

    This way, there is no big rush to adjust processes or take action once the changes come into effect.

      2. Developing tailored compliance solutions

      A successful compliance framework will look different for every business depending on its location, size, industry and listing status. This means company secretaries must have the skills to devise tailored business solutions for their organisation in line with the company’s constitution and within the framework of the Companies Act.

      When properly customised, a compliance framework supports a business to operate with integrity while also performing well in its industry.

      3. Obtaining buy-in from stakeholders

      Sometimes, companies fail to see the value of investing in a skilled company secretary. This is usually due to a poor compliance culture, where compliance is viewed as a burdensome box-ticking exercise rather than an opportunity to advance company goals.

      It is the responsibility of the company secretary to oversee compliance activities across the organisation.

      They should help the directors, shareholders and all staff to understand:

      • why statutory, regulatory and corporate requirements exist;
      • why the organisation must comply with these requirements; and
      • how the organisation and its people benefit from strong compliance.

      To ensure your business remains in strict compliance with all relevant requirements, make sure to appoint a company secretary that takes compliance very seriously.

      Corporate Secretary

      Partner with a company secretary you can trust

      If your company secretary lacks the right qualifications, skills or attitude to support good corporate governance, your business will be at risk of penalisation for failing to fulfil its compliance obligations. You may also miss out on valuable opportunities to improve your efficiency, productivity and profitability.

      Many organisations choose to streamline their operations by engaging in a reputable third-party corporate services provider. With this approach, executive staff can worry less about compliance obligations and focus more on business growth.

      Additionally, you can:

      Ensure your company incorporation is handled seamlessly
      Streamline your cross-border business administration
      Achieve multi-country compliance via one point of contact
      Receive vital business advisory services to support success in new regions
      Save time and money through a reduced administrative load
      Put more resources into achieving your primary objectives

      If your organisation has plans to expand across APAC, it is important to consider and prepare for the new set of regulations and cultural nuances each region will bring. You will also need to adhere to legislative requirements for any international partnerships you establish.

      The complexity of your operations can increase however if you engage corporate service providers in each region to meet relevant requirements.

      Corporate Secretary

      Gain a competitive advantage

      If your aim is to achieve successful business growth across APAC, BoardRoom provides a full suite of corporate services to suit your needs. Our Malaysian company secretary team stays up to date on regulatory developments and industry best practices to provide you with insightful advice every step of the way.

      To find out more about partnering with a skilled corporate secretarial team, chat with our specialists today.

      Related Business Insights

      Great corporate governance in Malaysia starts with a qualified company secretary

      Great corporate governance in Malaysia starts with a qualified company secretary

      Great corporate governance in Malaysia starts with a qualified company secretary

      boardroomsuperadmin

      The COVID-19 pandemic reshaped the corporate landscape of markets all over the world. Survival has meant adapting to ongoing uncertainty and change. But as we enter a new era of economic promise, Asia-Pacific businesses are proactively pursuing corporate governance to secure a prosperous future for themselves and the broader economy.

      In this article, CEO of BoardRoom Malaysia, Samantha Tai, explains the importance of corporate governance in Malaysia and how leaders can establish values-based governance practices for the best outcomes. We will also explore the pivotal role of the company secretary in advising and implementing best-practice corporate governance initiatives effectively.

      What is corporate governance?

      At an organisational level, the meaning of corporate governance lies in achieving higher performance, acting with integrity and maximising value to stakeholders. Businesses that meet corporate governance standards are more likely to achieve corporate objectives, attract investment and outperform competitors.

      Importantly, Group-wide corporate governance also helps reduce the risk of malpractice and subsequent penalisation.

      “Under Section 17A of Malaysia’s Anti-Corruption Commission Act, organisations can now be held liable for the corruption act of an individual officer,” Samantha says. “So companies need to make sure they have adequate procedures in place.”

      Corporate governance itself is not a legal requirement for all businesses in Malaysia, but Samantha says its alignment with fiduciary duty makes it an important investment for any leader.

      “In BoardRoom training sessions, we start by explaining a director’s fiduciary duty to the Commonwealth to always prioritise the best interests of the company, minimise conflicts of interest and act in good faith,” she says.

      “In Malaysia, fiduciary duty is taken very seriously, with regulators taking action against directors who neglect their duty — including independent directors.”

      Successful corporate governance frameworks involve:

      • the development of customised policies; and
      • the subsequent implementation of those policies.

      Stewardship of this function usually resides with the company secretary.

      CorporateGovernance

      How company secretaries drive good governance

      Historically, the company secretary performed a purely administrative role and had very little authority. Today, the company secretary performs a wide range of vital responsibilities for the company, as both a senior business manager and a statutory officer.

      Alongside their key role in the administration of important undertakings such as company incorporation, company secretaries serve as the link between the board of directors, senior management and the company’s stakeholders (including regulatory bodies). This includes leveraging digital technologies, such as board management and ESG software, to strengthen board and shareholder processes and improve corporate governance. In addition, their thorough knowledge of local regulations means they can ensure corporate governance standards are implemented, followed and regularly reviewed.

      Samantha says the current role of the company secretary is clearly set out in the Malaysian Code on Corporate Governance.

      “In Malaysia, the views of the company secretary on corporate governance are sought because they attend all board meetings, know the relevant policies and understand compliance requirements,” she says. “They advise the board on corporate governance processes that need to be put in place. This may relate to the board composition or the company’s policies and code of ethics, for example.”

      They also help publicly listed companies demonstrate corporate governance in their annual report, including mention of any alternative methods used to achieve the same objective.

      Company secretarial duties have become so synonymous with corporate governance that the UK’s Institute of Company Secretaries and Australia’s Institute of Chartered Secretaries and Administrators have both rebranded to the ‘Chartered Governance Institute’, with other regions expected to follow suit.

      Corporate Secretarial

      How to improve your corporate governance

      Good corporate governance will become increasingly important in the years to come, with regulators expected to introduce new recommendations for both public and private businesses. Organisations that continue to meet best-practice standards as they evolve will be in a strong position to grasp new opportunities and meet market demands.

      By taking the following steps, you can lead your organisation towards stronger corporate governance.

      1. Appoint a qualified company secretary in Malaysia

      The first step to improving your corporate governance is ensuring your business complies with current rules and applies best practices, particularly those prescribed in the Malaysian Code on Corporate Governance. This also means adapting to new standards as they come into effect.

      For example, the Securities Commission Malaysia recently rolled out group-wide governance requirements for listed corporations.

      “Publicly listed companies already need corporate governance because they must report to the stock exchange,” Samantha explains. “But now, on top of that, they must ensure corporate governance is practised in all their subsidiaries too — regardless of whether the subsidiaries are themselves listed entities or located in Malaysia or overseas.”

      To satisfy this requirement, an experienced company secretary would assist with the establishment of a group-wide framework for corporate governance. The framework would include a code of conduct, as well as policies and procedures for corporate governance issues such as whistleblowing, anti-corruption, board diversity and sustainability.

      Company secretaries help uphold corporate governance by:

        • Staying across changing standards
        • Checking compliance levels
        • Conducting gap analyses

        Company secretarial services providers are a popular choice for leaders who want peace of mind about receiving specialist advice that’s tailored to their organisation.

        2. Develop detailed, customised policies

        Despite Malaysia’s relatively strong corporate governance performance, the country still experiences corporate irregularities month to month. Failure to meet expectations tends to come down to internal perceptions of corporate governance as a mere box-ticking exercise, with the resulting policies lacking sufficient length and detail.

        Demanding workloads at a senior level can lead to quick copy-paste solutions.

        “But corporate governance is not just copywriting,” Samantha warns. “For corporate governance frameworks to work, you have to bring your relevant management team together to discuss their development, as there are many tools available.”

        The most effective corporate governance policies:

        • are comprehensive;
        • reflect the values of the organisation;
        • suit the organisation’s industry and size; and
        • detail how good governance is actively applied.

        3. Adopt integrated reporting

        While it is important to ensure your corporate governance policies and annual reports are up to standard, good governance can’t be achieved through documentation alone. Samantha says that integrated reporting is likely to become mandatory in the coming years.

        “Integrated reporting is a process founded on integrated thinking for communicating how an organisation’s strategy, governance, performance and prospects lead to value creation,” Samantha says. “It makes your annual report more meaningful.” Embarking on an integrated reporting journey allows for better employee engagement and value creation, rather than looking at reporting as a compliance exercise alone.

        All members of an organisation have a role to play in pursuing good governance, so it is also important to spend time demonstrating the value of corporate governance to board members and staff. You can do this by explaining how corporate governance practices are important tools for enhanced company performance, rather than arbitrary obligations that must be met.

        “Successful corporate governance is integrated into the day-to-day operations of the company,” Samantha says. “It’s not just a policy for compliance.”

        CSReporting

        4. Incorporate and prioritise ESG in your company culture

        Aligning your company culture with your Environmental, Social and Governance (ESG) initiatives, will help employees better understand corporate governance and the role they play in it. Investing in an ESG professional can help you communicate important messages, maintain up-to-date ESG reporting and ultimately drive a positive company culture.

        According to Samantha, many leaders are so focused on navigating a challenging economy that they deprioritise ESG issues. “But remember, the ‘social’ part of ESG is about your employees,” she says. “At the end of the day, taking care of your employees will impact your bottom line.”

        In the interests of top-down corporate governance, regulators are also encouraging greater board involvement in ESG initiatives, with country-specific compliance requirements changing regularly. Board directors are in the best position to account for ESG risks and make decisions to lift shareholder value. Because of this, greater responsibility is placed on securing a comprehensive ESG strategy that benefits the company, its shareholders, employees and the environment.

        ESG

        Start practising good governance today

        The effectiveness of your corporate governance efforts in the years to come will determine your business success in the short and long term.

        It is important that your company board and executive staff champion your governance framework, but it is equally important that your company secretary drives its success. For the best results, choose a company secretary that offers varied expertise, strong ethics and outstanding communication skills.

        Having a reliable company secretary handling your corporate governance also allows your executive team to focus on key business objectives, such as taking your company digital.

        Contact BoardRoom’s corporate secretarial experts to discuss how we can help your business reach its corporate governance goals.

        Related Business Insights

        Never Underestimate the Importance of Employee Engagement in a Hybrid Working Malaysia

        Stock photo of laptop on a wooden table. The screen is split into four with employees engaging in work discussions remotely

        Never Underestimate the Importance of Employee Engagement in a Hybrid Working Malaysia

        boardroomsuperadmin

        In the wake of the global shift brought about by the COVID-19 pandemic, the dynamics of the workforce have evolved significantly. Understanding the changing landscape, particularly in Malaysia, is crucial for businesses striving to foster employee engagement in this post-COVID era.

        The “Great Resignation” phenomenon, as highlighted by Microsoft’s 2022 Work Trend Index, remains a noteworthy factor. It emphasises the need for businesses to adapt and prioritise employee engagement, as 41% of the global workforce is likely to consider leaving their current employer within the next year, with workers looking for better conditions, more engaged teams and a greater sense of purpose.

        At the same time, the cost of hiring is rising. The latest research has found the average cost of recruiting has doubled in some parts of the world. And it takes at least a week longer to recruit someone than it did 12 months ago.

        In many cases, it has become harder – and more expensive – to find and hire new people than it is to retain your current employees.

        With these figures in mind, the importance of employee engagement in a hybrid working Malaysia simply cannot be underestimated.

        The hybrid working Malaysia engagement juggle

        Remote and hybrid work has become the preferred way of working in Malaysia, with 77% of workers indicating they want flexible remote work options to stay. In response, 62% of business leaders are considering restructuring their offices to suit a hybrid working Malaysian team.

        Employers are under pressure to provide an exceptional experience for their people, wherever they may be: in the office, at home, or working from the local cafe. Achieving this is becoming increasingly hard when people are not physically together or even working the same 9 to 5 schedule.

        Photo taken from above a sitting woman who has a laptop in her lap. She is talking to a split screen of four other employees about encouraging employee participation.

        5 ways to encourage employee engagement in the hybrid world of work

        When we’re not physically together, many leaders are left wondering how to increase employee engagement.

        Here are five ways how to increase employee engagement to keep employees connected and engaged wherever they may be.

        1. Bridge the physical and digital worlds with technology

        Having reliable technology in place to enable collaboration and efficient work processes is fundamental to creating an efficient and frictionless employee experience. The last thing you want is for your people to be dealing with frustrating technology issues when they could be making progress on real work. 

        Automating repetitive tasks and introducing self-service portals empower people to take control of simple tasks, like booking their own leave, accessing payslips and updating contact details. By optimising the user experience with easy-to-use applications, simplified central logins and cloud-based systems, your employees will be able to immediately access and update their data from anywhere, at any time.

        Consider streamlining your core functions like payroll, finance and HR to free up your people to focus on collaboration and employee engagement strategies.  

        And, of course, having platforms in place to enable collaboration is crucial. Make sure you are set up for what Google refers to as “collaboration equity“. That is, ensuring everyone can contribute and communicate equally, regardless of location, role, experience level, language, or device preference.

        2. Prioritise wellness

        Photo taken from behind a man sitting at table with his laptop. The screen is black with white bold writing that states perks and bonuses

        While hybrid working undoubtedly has its benefits, it also comes with some downsides.

        We’re seeing a blurring of boundaries between work and life, a weakening of social bonds with colleagues and a greater push for productivity from employers. And this is causing high levels of burnout, which has an impact on not only employees but businesses as well.

        Analyst firm Gallup estimates employee burnout costs USD $322 billion in turnover and lost productivity globally.

        The good news is that companies that prioritise employee wellbeing are being rewarded with more productive and engaged employees.

        Companies that adopted key wellness initiatives such as stress management initiatives, adapted workplace design and financial education saw employee loyalty improve by 79%.

        3. Acknowledge and Show Employee Appreciation

        Publicly celebrating accomplishments might involve regular team shout-outs in virtual meetings, spotlighting achievements in company newsletters, or hosting virtual events to honour milestones. Establishing a culture of peer-to-peer recognition could involve platforms or channels where team members can acknowledge and commend each other’s efforts.

        For instance, a dedicated Slack channel for shout-outs or a monthly newsletter highlighting peer recognition contributes to a positive and appreciative work environment. These measures collectively foster engagement, which is particularly crucial for those managing the dynamics of hybrid roles.

        4. Promote Employee Development and Growth

        To promote continuous learning and growth, organisations can offer diverse training opportunities. This might include workshops on effective virtual collaboration, seminars on time management in a hybrid setting, or access to specialised online courses related to industry trends. Encouraging professional development could involve supporting employees in obtaining relevant certifications or sponsoring attendance at virtual conferences. Utilising feedback surveys and performance metrics allows organisations to gather insights on the effectiveness of these initiatives.

        For instance, a post-training survey could assess the perceived impact on job performance and satisfaction. Organisations can then tailor future programs based on this valuable feedback, ensuring that employee development remains aligned with their evolving needs and aspirations.

        5. Reward your team

        Being paid on time is vital. And people’s experience with pay directly impacts how they feel about working with an organisation.

        If people have continual issues with your current systems — for example, difficulty accessing payslips or being unable to update important details — you might want to look into how to fix this problem. Having a system in place to make sure your people get paid accurately and on time will ensure they are motivated and engaged. And that’s whether you choose to implement a payroll solution or outsource your payroll to professionals.

        Optimising your software applications to benefit your employees and simplify their day-to-day operations, will ultimately give them more control and empowerment in their role.

        Mechanics aside, how much you pay people also matters.

        The cost of living is rising steadily, and employers need to keep pace with rising costs of food, petrol and living expenses to make sure their people are taken care of.

        If you have limited funds to pay bonuses or increase salaries, an alternative is offering employees a stake in the company in the form of shares or stock options.

        Offering equity in the company means employees start seeing the business in a different light. Rather than simply clocking in and out and completing tasks, they begin to think of how to move the business forward in a meaningful way and increase revenue.

        Equity can come in many forms, but leading companies in Malaysia are adopting employee stock option plans (ESOP).

        What is an employee stock option plan?

        An employee stock option plan (ESOP) gives employees the opportunity to purchase company shares at a future date for an agreed price. An ESOP differs from an employee share award plan in that it gives employees the option to buy shares instead of simply enabling them to purchase those shares outright.

        Because ESOPs give employees financial benefits when the company performs well, they are more likely to be invested in the long-term success of the company.

        There are many benefits of offering an ESOP for both employees and business leaders.

        ESOPs help employees:

        • feel valued and rewarded because they are being compensated for their efforts
        • improve their financial position through dividend payments and profit from selling shares
        • gain a sense of part ownership in the company they work for, which means they are more likely to be satisfied and less likely to join their peers in “The Great Resignation”.

        And for companies, ESOPs enable them to:

        • reward high-performing employees without impacting cash flow
        • attract higher-quality talent
        • enhance retention and loyalty
        • enjoy sustained growth and increased company performance.
        Illustrated image of small blue figurines positioned in a circle on a white background. In the middle of the circle in the word share. A digital finger is also pointing to the word.

        How ESOPs work

        Setting up an ESOP can be a complex procedure. In Malaysia, there are specific rules and regulations as well as , so it’s important to get help from experienced professionals who understand the local landscape.

        There are several administrative processes required to effectively implement and maintain an ESOP, including:

        • offer management
        • vesting management
        • participant information record-keeping
        • participant liaison regarding plan mechanisms
        • leave management
        • regulatory reporting.

        Other important considerations to think about are:

        • How long it takes for an individual’s share to be supplied to them over the course of their employment.
        • How long an employee needs to stay before the ESOP ‘kicks in’. Also known as the “cliff” or “lock-in” time, it’s important to consider how much equity to give early employees in case they leave with your shares in hand without adding significant value to your organisation.

        Of course, an ESOP is not the only option for offering employees equity in your company.

        Other options include:

        • performance share plan (PSP)
        • restricted share plan (RSP)
        • share appreciation rights plan (SARP)
        • phantom share plan.

        To figure out which is right for your company, you’ll need the help of trusted professionals to examine different setups and scenarios before going ahead.

        Cut the complexity with a global strategy

        Incentivising your employees with ESOPs is an effective way to boost engagement and productivity. But it is not without its complexities, especially if your presence stretches across the Asia-Pacific or globally.

        And with the trend of remote and hybrid working looking set to continue, who knows how far and wide your people could reach?

        Each country will have different regulations and options for offering ESOPs, so it’s important to partner with someone who understands the intricacies of local regulations to ensure you are compliant.

        Just as there are many benefits of consolidating multinational taxes with one agency, there are benefits to consolidating your employee stock options across multiple jurisdictions.

        These include:

        • Mitigating risk: having a team of professionals that understands not only Malaysia’s laws but those across the entire Asia-Pacific region can help your business mitigate risk when it comes to offering equity.
        • Improving employee experience: streamline your correspondence with a share management platform that provides timely and clear communication in multiple currencies and languages across the region. This ensures everyone on the team, globally, has the same level of access, understanding and experience of the information at hand.
        • Reducing administrative burden: implement efficient, automated processes and a single point of contact to ensure you receive clear and consistent communication across your locations.

        At BoardRoom, we offer Employee Stock Options Plans (ESOP) Services for your business. We use leading technologies and a panel of experts to guide you through implementing and administering your ESOP. Our team of experienced professionals have in-depth knowledge of the local Malaysian regulations, as well as regional and international experience. 

        Wherever your employees work, we’ll be able to support the implementation and ongoing administration of your employee stock option plan to ensure they remain engaged and loyal for the long term. 

        Speak to our team of experts today to get started on implementing an ESOP in your company.

        Related Business Insights

        The advantages of consolidating multi-country taxes with one provider

        The advantages of consolidating multi-country taxes with one provider

        The advantages of consolidating multi-country taxes with one provider

        boardroomsuperadmin

        Handling tax and accounting in-house is not easy for any business. Errors in these processes can have severe consequences, so they need to be executed with exceptional accuracy and skill. Multinational companies in the Asia-Pacific region face the additional challenge of navigating the complex rules and regulations of each jurisdiction they operate in.

        Deloitte’s 2021 Asia Pacific Tax Complexity Survey revealed 80% of respondents felt the region’s tax regimes have become more complicated since 2018.

        If given the choice, many tax and accounting executives would engage an international company taxation and tax planning advisor in Malaysia, Singapore, Hong Kong or China to handle all their accounts locally. But this gold standard isn’t the reality for most businesses, especially when they are new to expansion.

        Often, businesses will engage an additional tax firm to handle local regulatory requirements each time they expand to a new region. It is an understandable approach – specialist firms are able to offer in-depth knowledge of local tax laws. The issue is that collaborating with multiple firms can present its own challenges.

        Many tax executives in multi-country companies end up struggling with:

        • Tax treaties and implications: difficulty understanding statutory and regulatory compliance resulting in penalty and delay.
        • Communication issues: language and cultural variations can make fostering collaboration between separate tax service providers challenging.
        • Staff retention: the great resignation is happening, so there are more new hires to onboard and train.
        • Technology issues: technological systems and communication modes vary from country to country, which can cause issues during cross-border dealings.

        Do these challenges sound familiar? If so, the solution may lie in consolidating your taxes with an international business tax advisory service in Malaysia, Singapore, Hong Kong or China. Wherever your business is centralised, a third-party advisor will be able to help administer your tax functions across the Asia-Pacific region via a single point of contact.

        This article explores the advantages of consolidating your taxes with one firm and provides tips on selecting a suitable provider for your company.

        The value of local knowledge

        Governments across the Asia-Pacific region frequently set new laws and regulations, which means businesses must keep up with local tax environments as they evolve. This is particularly important when it comes to cross-border tax implications and treaties.

        Outsourcing your taxes to a highly trained team will make it easier to navigate local requirements and manage your cross-border dealings successfully.

        Malaysia’s tax system is particularly complex. Consider the Sales and Service Tax (SST), for example, which has replaced Malaysia’s GST. The SST has a fixed rate of 6% for service tax, and a variable rate between 5-10% for sales tax. Understanding your company’s requirements and having an expert advisor at hand can make all the difference when maintaining tax compliance.

        When reporting season arrives, you can expect to leverage any and all tax benefits and incentives available to you when you have outsourced your accounting and compliance services to the same team that is handling your taxes. It can be easy to overlook tax breaks and exemptions if you do not have local expertise.

        If your organisation operates in Malaysia only, you may be able to manage your taxes internally. But, for peace of mind that your multi-country business is operating with efficiency and integrity, you need to select a knowledgeable tax partner in Malaysia that has strong relationships in neighbouring countries.

        Simplify communication

        Before engaging a tax advisor, ask them whether you will be assigned a dedicated contact person or need to interact with people in different countries. The second scenario should be avoided, as you would face all the same challenges that in-house tax management brings and gain little benefit.

        An ideal arrangement would have you communicating with a connected network of tax professionals via one point of contact. In this situation, you benefit from a wealth of tax experience without the difficulties of coordinating internal personnel.

        The benefits of partnering and consolidating with a premium service provider can also offer great financial rewards.

        Communication

        Tax incentives and benefits will be optimised across your company while mistakes, miscommunication and delays are reduced. Implementing a single point of contact also makes it easier to keep consistency across your business and align your company goals.

        When managing tax in multiple jurisdictions, it is also important to be aware of subtle differences in culture. A wide variety of cultures, customs, religions and languages exists throughout the Asia-Pacific region. To do business successfully and ensure productivity, it is crucial to work with a local contact who is part of a global team rather than spending time and effort on competing international opinions.

        For help with tailoring your business approach for individual countries, seek a specialist international tax advisor in Malaysia, Singapore, Hong Kong or China.

        Tax compliance is crucial

        Tax operations are drawing increased scrutiny from authorities as regulations become more stringent. No business wants to be targeted for a tax compliance audit. And as budgets and staff numbers reduce, finance and accounting personnel are forced to accomplish more with less.

        A global workforce transition poses another challenge for companies. Employees are increasingly looking for new positions that offer better pay or work-life balance – meaning teams and resources are often overstretched.

        That said, legal requirements cannot go unmet. Your business must make every effort to comply with Malaysia’s stringent tax laws by making accurate and timely tax payments. Businesses that fail to do so may face serious legal repercussions.

        Non-compliance can be due to something minor, such as missing a detail in legislation or incorrectly calculating money owed.

        If you are a multi-country firm with international business partners, ensuring compliance with evolving legislation can be particularly tricky.

        Compliance

        By engaging a specialist firm that understands the tax laws in Malaysia, Singapore, Hong Kong, China and across the Asia-Pacific region, your teams will have more time to concentrate on business growth and profitability. You will have the support you need to comply with tax legislation as it evolves and ensure accurate tax reporting.

        And should compliance problems occur, your advisor will be able to attend to them promptly.

        The most reliable business tax advisory services perform a thorough analysis of company structure before providing advice on long-term tax management. This empowers your staff to be able to identify and apply for tax benefits into the future.

        Choosing the right tax partner

        Cost and time savings are two of the main advantages of outsourcing your tax management. Your efficiency will go up, which in turn boosts profitability.

        While cost considerations are important, avoid opting for the cheapest service when it comes to business tax advisory. Reputation is key to ensuring a reliable service.

        Ask your potential tax partner these questions:

          How many clients do you service?
          How many years have you been in business?
          What is your business history?
          Do you have past accomplishments and results you can share?
          How many countries do you operate in?
          Can you service my company as it expands?
          What has your staff turnover rate been like?
          Do employees stay for a long time?

          A high-quality business tax advisory service provider will be able to answer these questions with confidence and pride. By partnering with them, you can rest assured your tax functions are managed in a professional, correct and timely manner.

          Top-tier firms like BoardRoom also guarantee:

          • Minimal errors: BoardRoom has been servicing Asia-Pacific businesses for over 50 years and is known for precision.
          • Attentive service: our low staff turnover rates mean we always have professionals on hand to meet your needs quickly and accurately.
          • Highly trained personnel: BoardRoom’s specialist team stays across local legislation as it evolves.

          Aim high, look beyond

          Organising today’s tax management is vital, but any executive knows that future planning is just as crucial for business success.

          If you are already a multi-country organisation with offices within the Asia-Pacific region, you may be thinking about further expansion. As you grow, you will have more legislative and cultural challenges to deal with.

          This is why global capabilities are a must when it comes to choosing a skilled tax advisory firm.

          For instance, BoardRoom partners with Andersen Global, a network of legal and tax experts based in 315 locations around the world. This means we possess outstanding knowledge of cross-border business taxation matters.

          Essentially, outsourcing your taxes to a global firm ensures you have all the specialist legal advice you need to expand into new countries and find success within them.

          Consider all outsourcing possibilities

          When selecting a tax partner, it is a good idea to ask whether they can provide additional corporate advisory and management services.

          Successful business growth requires the proficient handling of business functions related to tax compliance, such as company incorporation and corporate secretarial services.

          Engaging an advisory firm that provides a full suite of company services will support a simpler expansion process. You will save money and time, meaning you can direct more resources into your business’s primary objectives.

          Efficiency tends to become more crucial the larger your company becomes.

          Outsourcing

          When you find a reliable tax services partner, you might wonder what further business functions they can manage, such as:

          It makes sense to outsource multiple functions to a full-service provider because they will already have intimate knowledge of your business’s operations, structure and working methods. They will be able to support your company in a range of areas with minimal fuss.

          Streamline your processes through consolidation

          The advantages of consolidating multiple functions with one tax services provider are significant – especially when you take into account the cost and time involved in coordinating separate firms across the region. And if your partner is well-versed in the local tax breaks and incentives to which your business is entitled, you will enjoy substantial annual savings.

          But beyond cost savings, quality tax outsourcing will help streamline your operations on a company-wide scale.

          The complexity of tax management continues to grow. The solution may lie in engaging a reliable tax partner who can support your expansion throughout the Asia-Pacific region and ensure compliance with evolving rules and regulations.

          If you want to find out more about consolidating your business’s tax administration with one firm, chat with our tax specialists today.

          CONTACT US FOR A QUOTE

          Related Business Insights

          Digital vs Electronic Signatures in Malaysia: a Guide

          Electronic vs Digital Signatures in Malaysia

          Digital vs Electronic Signatures in Malaysia: a Guide

          boardroomsuperadmin

          When a face-to-face meeting is impossible, paperless signatures are a practical option for your business in Malaysia. They are fast, convenient and environmentally friendly.

          However, you need to carefully consider the legal implications of using digital or electronic signatures over the traditional ‘wet-ink’ variety. While the terms ‘electronic’ and ‘digital’ are often used interchangeably to refer to paperless signatures, each one is a separate legal concept under Malaysian law.

          In this article, we cover the differences between electronic and digital signatures in Malaysia, and explain when they are legally binding, and where you can use them.

          What you need to know about electronic signatures in Malaysia

          An electronic signature is defined by the Electronic Commerce Act 2000 (“ECA”) as:

           “any letter, character, number, sound or any other symbol or any combination thereof created in an electronic form adopted by a person as a signature.”

          Electronic Signature in Malaysia
          Are electronic signatures legally binding in Malaysia?

          The ECA legally recognises electronic signatures used in commercial transactions either:

          • to fulfill legal requirements; or
          • to facilitate commercial transactions through electronic means.

          In Malaysia, electronic signatures are typically used for simple contracts and agreements (such as the ones outlined below) where the risk of legal disputes around document validity is low.

          Electronic signatures are legally binding under Malaysian law, where they fulfil the ECA requirements, being:

          1. that the signature is attached to, or logically associated with, an electronic message;
          2. the signer and their approval of the related information can be adequately identified; and
          3. the signature is as reliable as is appropriate, given the purpose and circumstances for which the signature is required.

          To be considered ‘reliable’, electronic signatures must also fulfill these ECA requirements:

          1. the means of creating the electronic signature is linked to, and under the control of, that person only;
          2. any alteration made to the electronic signature after signing is detectable; and
          3. any alteration made to that document after signing is detectable.

          Some grey areas surround these requirements as they have largely been untested in Malaysia Courts. However, we recommend that companies adopt internal guidelines relating to the use of electronic signatures that outline the approvals process, digital security measures, electronic record keeping policies and compliance and internal audit team procedures. These guidelines can be used to provide evidence that the ECA requirements have been met. Companies may consult their lawyers or corporate secretarial agents for assistance in this regard.

          Common electronic signature applications in Malaysia

          Common electronic signature applications

          There’s a reasonably broad scope when it comes to applying electronic signatures in Malaysia to execute documents. For example, case law suggests that even a text message can be considered a legally binding electronic signature under the ECA.

          More typically, electronic signatures are commonly used in:

          • HR documents: Employment contracts, benefits paperwork and new employee onboarding processes;
          • Commercial agreements between corporate entities: Non-disclosure agreements, procurement documents and sales agreements;
          • Commercial real estatedocuments: Lease agreements, and sales and purchase contracts; and
          • Minutes and resolutions:(subject to the company’s constitution).

          When deciding whether to use an electronic signature in Malaysia, it is important to note that while electronically signed documents are legally enforceable, wet-ink signatures may still be required for stamping and some filing and registration procedures. Some financial institutions may also require wet-ink signatures.

          Where you can’t use electronic signatures

          In Malaysia, electronic signatures are not allowed in:

          • Power of Attorney documents as per section 2 (2) of the ECA;
          • Wills, codicils and trusts as per section 2 (2) of ECA;
          • Negotiable instruments, bills of exchange, and promissory notes as per section 2 (2) of the ECA;
          • Any instrument dealing with properties under the Malaysian National Land Code; and
          • Statutory Declarations under the Statutory Declarations Act 1960.

          The documents listed above cannot be executed via e-signature or digital signature because they require notarisation or attestation before a public notary or commissioner of oaths. As such, wet-ink signatures are required for these documents.

          What you need to know about digital signatures in Malaysia

          Digital signatures are considered a subset of electronic signatures in Malaysia and are governed by the Digital Signatures Act 1997 (“DSA“).

          A digital signature is defined by the DSA as:

          “a transformation of a message using an asymmetric cryptosystem such that a person having the initial message and the signer’s public key can accurately determine:

          a. whether the transformation was created using the private key that corresponds to the signer’s public key; and
          b. whether the message had been altered since the transformation was made.”

          Digital Signature in Malaysia

          Electronic signature software providers like DocuSign and HelloSign use certificate-based digital IDs to authenticate each signer’s identity, providing a higher level of security and assurance. Each digital signature is bound to the document via encryption to provide proof of signing, and is validated by licensed certification authorities.

          In Malaysia, it is the role of licensed certification authorities to act as a trusted third party in verifying the identity of both the signer and the recipient of electronically signed documents.

          Think about it this way, a digital signature requires a process, whereas an electronic signature can be implied – such as in the case of a text message.

          Are digital signatures legally binding in Malaysia?

          A digital signature that meets the DSA’s validity requirements is as legally binding in Malaysia as a handwritten signature, an affixed thumbprint or any other mark.

          When the law requires a seal to be affixed to a document, a digital signature must be used.

          Where you can’t use digital signatures

          In Malaysia, like electronic signatures, digital signatures are also are not allowed in:

          • Power of Attorney documents as per section 2 (2) of the ECA;
          • Wills, codicils and trusts as per section 2 (2) of ECA;
          • Negotiable instruments, bills of exchange, and promissory notes as per section 2 (2) of the ECA;
          • Any instrument dealing with properties under the Malaysian National Land Code; and
          • Statutory Declarations under the Statutory Declarations Act 1960.
          Digital signatures must be validated by select authorities in Malaysia

          Currently, there are no foreign certification authorities recognised in Malaysia. Digital signatures can only be validated with one of the following licensed certification authorities:

          • Post Digicert Sdn Bhd;
          • MSC Trustgate Sdn Bhd;
          • Telekom Applied Business Sdn Bhd;
          • Rafcomm Technologies Sdn Bhd;

          Optimise your business with digitisation

          A smart way to optimise your business processes is to use electronic and digital signatures, particularly when face-to-face meetings are not practical or possible. But – as we covered in this article – you need to fulfill specific legislative requirements in Malaysia to ensure that paperless signatures are legally binding.

          Get in touch with our experts today to learn more about how they can help you implement innovative technological solutions to empower your business. 

          Related Business Insights

          Mitigating Costs in an Economic Downturn

          mitigating_costs_in_an_economic_downturn

          Mitigating Costs in an Economic Downturn

          boardroomsuperadmin

          The onset of the COVID-19 pandemic along with efforts to contain it has plunged much of the global economy into a recession. In April, the International Monetary Fund’s World Economic Outlook (WEO) projects global growth to shrink by 3 per cent. However, its October publication amended the projection to 4.9 per cent. The impact of the pandemic will continue into 2021, where the WEO projects global growth to be at 5.4 per cent, which is 6.5 per cent lower than the pre-COVID-19 projections of January 2020.

          Mitigating costs in an economic downturn-Growth projection

          Looking forward, we can expect the recession to leave lasting scars despite the extraordinary efforts of governments worldwide to alleviate the situation through fiscal and monetary policy support.

          During these unprecedented times, companies need to take affirmative action to mitigate risk amidst the economic downturn. Crafting recession strategies to retain or expand your customer base, learning to embark on affordable yet effective marketing or even taking this opportunity to review and better optimise business operations are all practical solutions businesses can explore. However, the immediate strategy for most companies would be to adopt cost-cutting measures.

          In this article, we will share some of the most popular and effective measures companies can take to mitigate costs during an economic downturn.

          Look to outsource

          Outsourcing is when a company engages a third-party service provider to handle or manage a business function externally instead of choosing to manage the particular service in-house.

          Of the numerous functions that exist in a company, payroll is perhaps the one that will offer the most significant benefit when outsourced during an economic downturn. By outsourcing payroll, your company can effectively improve its focus and expand its accessible talent pool, which are all essential to helping the company navigate through an economic recession. But most notably (and most beneficial during an economic downturn), outsourcing can reduce and control a company’s operating cost.

          While the actual cost-savings of outsourcing HR and payroll services may vary between businesses, the most common areas where they could come from are:

          • Reduced payroll employees or headcounts
          • Elimination or change of existing payroll management software (often to something like a cloud-based payroll system that offers automation solution)
          • HR and payroll system updates
          • Employee training
          • Hefty penalties that are incurred when payroll mistakes happen

          Outside of payroll, some of the most popular services that companies often outsource to mitigate and manage costs are accounting, administrative services (corporate secretary) and human resources.

          Look to your accountants

          During an economic downturn, it becomes imperative that you have experienced accountants to help you financially navigate through this challenging landscape. Beyond their capacity for keeping financial records, accountants can interpret them and provide you with a clear and succinct evaluation of the company’s current performance and financial position that could positively influence the outcome of any business decision during a recession.

          Given their unique position and objectivity, a critical and core function of accountants on mitigating costs during an economic downturn is to uncover opportunities to eliminate unnecessary expenses and save costs. In areas where it is not possible to cut costs completely, your accountant can strategically advise on how payments can be deferred to maintain a healthy cash flow during difficult periods.

          In addition to cutting cost, seasoned accountants can also analyse your business trends and provide effective forecasting. Such input is critical to helping you understand the changing performance of your business and assist with realigning projections, which can help you assess the viability of your current business plan and provide insights for new alternatives should the need arise.

          Look at tax relief and economic stimulus packages

          In an economic downturn, it is essential to monitor tax policy changes that can aid in providing financial relief for the company and improve cashflow. During such times, it is common for banks to begin cutting their interest rates while the government actively works to put forward spending and tax packages as well as offer administrative relief by extending tax-filing deadlines. Governments across the world might even introduce tax credits and tax cuts for companies that have experienced a significant drop in revenue.

          Additionally, most governments would also roll out stimulus packages as part of their plan to spur their respective economies. However, it is worthwhile to note that in the long term, these governments intend to recoup the funds that were used to finance the stimulus packages and their plans could impact the bottom line of many businesses later. A likely course of action would be adjustments made to policies and tax rates, including but not limited to Corporate Taxes and the Sales and Service Tax (SST). Therefore, we strongly advise that businesses continually revise their tax plan in response to any possible policy changes to achieve greater savings and maximising any tax benefits.

          As you embark on any tax planning efforts and find yourself lacking in experience or resources to do so adequately, it is a good idea to engage a professional. In doing so, you can ensure that your tax plan is continuously revised to strategically leverage every tax benefit, maximise tax deductions, and comply with the local tax regulation and statutory requirements.

          Look at better managing your working capital

          An economic downturn presents several working capital challenges for businesses across industries. To stay operational, companies must look for new ways to finance their working capital. According to the Hackett Group’s 2020 Working Capital Survey, organisations have focused on the availability of corporate debt as a source of working capital for too long. While this may be a common practice, it increases the company’s exposure to unavoidable risks, such as changing customer demands and disruption to the supply chain. During an economic downturn, these potential risks to your working capital could prove detrimental to the survival of the company.

          Companies need to manage their working capital during an economic downturn effectively to mitigate cost through individual strategies that address their levels of debtors, creditors, procurement and inventory, and receivables process.

          Mitigating cost and managing working capital in an economic downturn

          Look at BoardRoom to help you through this crisis

          During an economic downturn, when faced with numerous challenges, companies will naturally seek to hunker down and begin cost-cutting strategies. Such strategies are necessary, but it is also vital to note that even in crisis, there are opportunities. Companies will have to practice greater diligence and adapt to the changing landscape quickly through the adoption of forward-looking, growth-oriented plans that prepare the company for when the economy improves.

          BoardRoom can help you through any recession period and prepare your business for the inevitable upturn. As a market leader in providing accounting, payroll and corporate services, our in-house team of dedicated experts can help to provide effective cost strategies regardless of your business size or needs. Our in-depth understanding and experience of economic trends will empower your business to discover and explore new opportunities.

          Are you looking for a trusted partner and advisor as you weather this difficult time? We are here for you with your tax services needs. Contact our BoardRoom outsourcing experts here!

          Related Business Insights

          Malaysia Budget 2021 – The Tax Highlights for Rakyat and Enterprises

          Malaysia Budget 2021 - The tax highlights for Rakyat and Enterprises

          Malaysia Budget 2021 – The Tax Highlights for Rakyat and Enterprises

          boardroomsuperadmin

          Malaysia Budget 2021 – The Tax Highlights for Rakyat and Enterprises

          On 6 November 2020, Finance Minister Tengku Zafrul Aziz delivered the Malaysia Budget for 2021. The budget is anchored on three crucial goals – Rakyat’s well-being, Business continuity, and Economic resilience. The three goals are a continuity of the PRIHATIN, PRIHATIN SME PLUS, PENJANA, and KITA PRIHATIN stimulus packages. Find out more below as we summarise the key tax highlights for Rakyat and Enterprises in the Malaysia Budget 2021. For further details you can download our full report.

          Corporate Tax

          Key takeaways in relation to corporate tax cover the following areas:

          • Support for companies relocating their operations to Malaysia and undertaking new investments via tax incentives for both new and existing companies. This is an extension from the original incentives unveiled in PENJANA, however, the deadline for application has been extended until 31st December 2022.
          • New incentives added for companies who have Malaysia as their principle hub and a global trading centre.
          • Income tax exemption for Equity Crowd Funding to encourage alternate financing methods for technology start-ups.
          • Tax incentives for Maintenance, Repair & Overhaul activities
          • Preferential tax rate for manufacturers of pharmaceutical products
          • Extension of income tax exemption until YA2022 for export of private healthcare services
          • Simplify and merge the tax incentive for manufacturers of industrialised building system
          • Income tax exemption has been extended for both East Coast Development Corridor, Iskandar Malaysia and Sabah Development Corridor & Sustainable and Responsible Investments (“SRI”)
          • Tax incentives for non-resource-based R&D product commercialization activities will be reintroduced.
          • Tax incentives for commercialization of R&D product by public research institutions will be extended to private higher education institutions.
          • There were also a number of incentives released in relation to employment of senior citizens, ex-convicts, parolees, supervised persons and ex-drug dependents.
          • Income tax deduction on investment on ASNB wakaf fund
          • Extended implementation timelines for the Wage Subsidy Programme

          Individual Tax

          Several initiatives were released in relation to individual tax:

          • Reduction in income tax rate by 1% for the chargeable income band range of RM50,001 – RM70,000
          • There were also a number of incentives released across
            • Compensation due to job loss
            • National Education Savings Scheme
            • Education fees
            • Private Retirement Scheme contributions
            • Lifestyle expenses
            • Disabled spouse
            • Medical treatment
            • Employee Provident Fund (“EPF”) contributions
          • A special income tax rate for non-resident individuals holding key positions in companies investing in new strategic investments was announced
          • Amongst other incentives a flat 15% tax rate was announced for the Revision of Returning Expert Programme (“REP”)

          Sales & Services Tax (“SST”)

          The following initiatives were unveiled in relation to SST

          • Sales tax exemption for the purchase of locally assembled bus including air-conditioner
          • Increase of Sales Limit for Value-added and Additional Activities Carried Out in the Free Industrial Zones (“FIZs”) and Licensed Manufacturing Warehouses (“LMWs”)

          Stamp Duty

          The key takeaways from the budget in relation to Stamp Duty are as follows:

          • Stamp duty exemption of 100% for the purchase of a first residential home
          • Stamp duty exemptions for the revival of abandoned housing projects
          • Stamp duty exemption will be extended for 5 years for the purchase of insurance policies and takaful certificates for “Perlindungan Tenang”
          • Stamp duty exemption will be extended for another 5 years on the Trading of Exchange Traded Fund (“ETF”)

          There were a number of other incentives announced around Indirect Taxes. Our full report covers these and the above highlights in more detail.

           

          Download the full Malaysia Budget 2021 tax highlights here

          Related Business Insights

          SSM Offers Incentive of up to 80% for Compounds

          SSM Offers Incentive of up to 80% for Compounds

          SSM Offers Incentive of up to 80% for Compounds

          boardroomsuperadmin

          SSM has announced a discount of up to 80% reduction on compounds in relation to offences for non-compliance with sections 143, 165 and 169 of the Companies Act 1965.

          Payment PeriodReduction Rate*
          9 to 30 September 201580%
          1 to 31 October 201570%
          1 to 30 November 201560%
          1 to 31 December 201550%

          * The reduced fee is based on the original compound amount and is subject to the terms and conditions.

          Payments can be made at any SSM counters nationwide.

          Related Business Insights