What are the benefits to SMEs from Budget 2023 Malaysia?

With the announcement of Budget 2023 Malaysia (also known as Belanjawan Madani) on 24th February 2023 by Prime Minister Datuk Seri Anwar Ibrahim, who is also the Finance Minister, here are the key takeaways and revised budget 2023 highlights impacting the SMEs.

1. Reduction of Income Tax Rate

In the revised Malaysia Budget 2023, the income tax rate was reduced by 2 percentage points from 17% to 15% on the first RM150,000 chargeable income effective YA 2023. These apply to company or Limited Liability Partnership (LLP) that is categorized as Micro, Small and Medium Enterprises (MSMEs).

Definition of MSMEs:

1. Companies with paid up capital in respect of ordinary shares of not more than RM2.5 million; or
2. LLP with a capital contribution of not more than RM2.5 million; and
3. Annual gross income from business source of the MSMEs is not more than RM50 million.

2. Tax deduction on Cost of Listing in Bursa Malaysia

Currently, the cost of listing incurred by technology-based companies for listing in LEAP and ACE Market are allowed for tax deduction of up to RM1.5 million and this is further extended to include Main Market and for another 3 years from YA 2023 until YA 2025. The qualifying expenses are as follows:

1. Fees to authorities;
2. Professional fees; and
3. Underwriting, placement and brokerage fees.

3. Tax incentive for Rental of Electric Vehicles (EV)

Tax deduction of up to RM 300,000 is allowed for companies renting non-commercial EV (from YA 2023 until YA 2025). Currently the cost of renting non-commercial motor vehicles is given tax deduction of up to RM50,000 or RM100,000 depending on the cost of motor vehicles.

4. Expansion of Double Deduction to include Employment of Inmates and Ex-Inmates

Further tax deduction given to employers who employ senior citizens and ex-convict, now expanded to include remuneration paid to inmates and ex-inmate of Henry Gurney School under Malaysian Prison Department, protection and rehabilitation institution, and care centres registered under the Social Welfare Department effective from YA 2023 until YA 2025.

5. Extension of Stamp Duty Exemption for Instruments relating to Restructuring or Rescheduling of Loan or Financing Agreements

100% stamp duty exemption for instrument of loan /financing agreement relating to restructuring /rescheduling of a loan between borrowers and financial institution to be extended for another 2 years to cover loans and financing agreements executed from 1 January 2023 to 31 December 2024 subject to the following conditions.

1. The original instruments has been duly stamped; and
2. The instrument of loan / financing agreement relating to restructuring / rescheduling does not contain the element of additional value to the original loan /financing agreement.

6. Digitalisation Grant for business automation and digitalisation activities

A total of RM100 million is allocated under the SME Digitalisation Grant Scheme. A matching grant of up to RM5,000 will be paid to MSMEs that subscribe to business digitalisation applications such as POS sales system, accounting, or inventory management.

7. Financing for Micro Entrepreneurs and Small Businesses

Provision of financing through agencies such as Bank Negara Malaysia (BNM) and Bank Simpanan Nasional (BSN).

1. RM300 million to support micro businesses owned by women and youth entrepreneurs.
2. BSN provides more than RM1 billion with a focus on MSMEs and hawkers.

Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will guarantee up to RM20 billion in SME loans where key sectors such as high technology, agriculture and manufacturing are provided with Government guarantee up to 90%. Guarantees also expanded to financing by non-banking financial institutions such as credit leasing companies to specifically benefit small businesses.