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MALAYSIA: 2020 Budget Looks to Woo Overseas Investors and Incentivise Exporters

In a bid to appeal to overseas businesses, a number of investment-related incentive measures have been incorporated into the country’s 2020 Budget. Among these is a move to offer RM1 billion (US$239 million) worth of customised investment incentive packages a year over a five-year period. This is thought to be aimed at attracting large global players and key start-ups in the high-tech, manufacturing and creative industries. In order to qualify, each such businesses would need to commit to investing at least RM5 billion (US$1.19 billion) in the country over the five-year period, while simultaneously being responsible for the creation of 150,000 high-quality jobs. The government expects this to provide a supportive environment for the country’s SMEs, while also enhancing the operating environment for its manufacturing and service industries.

The Budget also proposes the introduction of a Special Channel specifically geared to facilitating investments from China in high-value projects across the country. In an additional move, RM50 million (US$11.9 million) is to be allocated to the development of a 100-acre logistics hub at the Kota Perdana Special Border Economic Zone in Bukit Kayu Hitam on the Thai border.

The introduction of an Approved Major Exporter Scheme is also proposed, under which companies exporting 80% of their annual sales volume will be exempt from Sales Tax on imported inputs as well as on packaging material. Meanwhile, in a bid to boost to the country’s real estate sector, the minimum price of high-rise urban properties open to overseas purchasers is to be reduced from RM1 million to RM600,000 from 2020 onwards.

In terms of the domestic agenda, the Budget proposes that, every year for the five years beginning 1 January 2021, RM1 billion worth of customised investment incentive packages will be made available to any local businesses able to demonstrate their capability successfully export their products/services. Among the Budget’s other investment-related changes are proposals to offer a 10-year Corporate Income Tax exemption for businesses in the country’s electrical and electronics (E&E) sector who invest in specified knowledge-based services. The Budget also looks to provide RM550 million (US$131 million) worth of grants to 1,000 qualifying manufacturing and services companies in order to help automate their business processes. The incentives, which will run until the end of 2023, will be in the form of 100% tax deductions on expenditure incurred in procuring automated systems.

Among other notable measures featured in the budget is the imposition of a 6% Digital Services Tax as of 1 January next year on online advertising, software and music downloads and all e-commerce transactions. In line with this, overseas suppliers of all such goods and services are to be obliged to register for payment of the levy with immediate effect.

Content provided by Picture: HKTDC Research
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