Version : Oct 2023
This policy brief offers insights into the potential implications of the 2024 Budget for Micro, Small, and Medium Enterprises (MSMEs).
Key Points:
TAX CHANGES
The service tax rate will generally increase to 8%, although certain essential services, such as food and beverage, and telecommunications, will continue to be taxed at 6%. The scope of taxable services will expand to include logistics, brokerage, underwriting, and karaoke.
A capital gains tax (CGT) will be introduced from 1 March 2024 on the sale of unlisted shares by companies. For shares acquired before this date, companies can choose to pay CGT at 10% of the net gains or 2% of the gross sale value. For shares acquired from 1 March 2024 onwards, the CGT rate will be 10% on the net gains. The Government is considering exemptions to the CGT in certain circumstances, such as the disposal of shares as part of an approved initial public offering or intragroup restructuring exercises, subject to conditions. This new tax measure might impact MSME and start-up funding in the short to medium term.
The Luxury Goods Tax will apply at a rate of 5% to 10% on certain high-value goods such as jewelry and watches, based on prescribed thresholds. This could impact MSMEs dealing in these goods.
The excise duty on premixed sugary beverages will increase from 40 sen per litre to 50 sen per litre, effective from 1 January 2024. This increase is part of the government’s efforts to curb health risks among Malaysians, particularly diabetes.
FINANCIAL SUPPORT
MSMEs stand to benefit from a significant allocation of RM44 billion, earmarked for loans, credit guarantees, and digitalisation grants. This financial support is expected to bolster the resilience and growth of MSMEs, particularly those operating in green sectors.
Loans: These are funds that MSMEs can borrow to finance their operations, expansion, or other business needs. The loans are likely to have more favorable terms than those available from commercial lenders, making it easier for MSMEs to access the capital they need.
Credit guarantees: These are assurances provided by the government that a borrower’s debt will be paid if they default on their loan repayments. This reduces the risk for lenders, making them more willing to provide loans to MSMEs. Under Budget 2024, the Syarikat Jaminan Pembiayaan Perniagaan (SJPP) will provide guarantees for up to 80% of loans by entrepreneurs, with special attention to those who are involved in the green economy, technology, and halal sectors.
Digitalisation grants: These are funds provided to MSMEs to help them adopt digital technologies in their operations. The government has proposed to allocate RM100 million for digitalisation grants, expected to benefit more than 20,000 MSME entrepreneurs. These grants can be used to upgrade sales, inventory, and digital accounting systems.
INVESTMENT INCENTIVES
The government has announced a restructuring of investment incentives to be more outcome-based. A tiered incentive system will be adopted, where investors will enjoy incentives commensurate with their commitments to Malaysia. As a start, the government proposes to introduce a tax incentive for reinvestments, in the form of an investment tax allowance of 60% (to be utilized against up to 70% of statutory income) or 100% (to be utilized against up to 100% of statutory income).
ESG STANDARDS
An RM8 billion allocation in BNM funding has been earmarked for MSMEs, with RM600 million devoted towards the adoption of ESG (Environmental, Social, and Governance) standards. Adopting ESG practices can enhance MSMEs’ competitiveness and resilience in the face of changing market conditions.
CARBON CREDITS
An additional tax deduction of RM300,000 for expenses related to carbon-credit measurement and verification on Bursa is being introduced. This move is aimed at improving the nascent carbon-credit trading ecosystem, which currently suffers from low corporate participation.
SUBSIDY RATIONALISATION
This includes the gradual removal of blanket subsidies for electricity and diesel, which has crucial implications for the operations of MSMEs.
E-INVOICING
The mandatory e-invoicing deadline for taxpayers with annual turnover or revenue exceeding RM100 million has been extended from 1 June 2024 to 1 August 2024. The implementation of mandatory e-invoicing for other taxpayers will be undertaken in phases, with full implementation targeted from 1 July 2025.
CONCLUSION
While Budget 2024 introduces several changes that could potentially impact MSMEs, it also includes measures aimed at supporting these businesses. It’s crucial for MSMEs to understand these changes and adapt their business strategies accordingly. MSMEs should also consider investing in energy-efficient technologies and practices to reduce their energy consumption and, consequently, their energy costs.
Copyright © 2023 Prezytion. All rights reserved. No part of this brief may be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of Prezytion. Disclaimer: This brief is provided for informational purposes only. Prezytion makes no warranties, express or implied, in this document. The information contained in this brief is believed to be reliable and has been obtained from sources believed to be reliable, but Prezytion makes no representation or warranty as to the accuracy, reliability, or completeness of such information. Prezytion will not be liable for any loss or damage arising from the use of, or reliance upon, this brief or the information contained herein.