Special tax treatment for SME

1. Lower income tax rate

   - 17% on the first RM600,000 of chargeable income.

2. 100% capital allowance on small value assets

   - Assets costs not exceeding RM2,000.00.
   - No maximum limit of RM20,000 per year.

Criteria for SME

1. Share capital / capital contribution

   At the beginning of the basis period for a year of assessment:
   - A resident company: paid-up capital of RM2.5 million and less;
   - LLP: Total contribution of capital of RM2.5 million and less.
   
   AND

2. ​Gross business income

   - Gross business income not exceeding RM50 million.
   - The Gross income shall be determined as follows:
   
   a) If engaged in manufacturing, trading or services activities

• Section 22 of the Income Tax Act (ITA) 1967 – Gross income generally
• Section 24 of the ITA 1967 – Basis period to which gross income from a business is related
• Section 30 of the ITA 1967 – Special provisions applicable to cross income from a business

• Specific provisions under the ITA or specific regulations for certain industries

1. Investment holding company (Not listed on Bursa Malaysia) - Section 60F of ITA 1967
   The entity is deemed to have no gross income from business source.
    
2. Investment holding company (Listed on Bursa Malaysia) - Section 60FA of ITA 1967
   The entity is deemed to have gross income from business source.
    
3. Rent or interest as other source of income
   The rent or interest Is not under paragraph 4(a) of the ITA 1967, the entity is deemed to have no gross income from a business source.
    
4. Income from foreign business sources
   Gross income from foreign business sources shall be taken into account in determining gross business income.
    
5. Company/LLP enjoying tax incentives - such as pioneer status or investment tax allowance
   Exempted gross income from business source shall be taken into account in determining gross business income.
    
6. * Company/ LLP carries out a business activity.- No gross income from business sources due to current year business losses
   The company/ LLP is deemed to have gross income from a business source equivalent to NIL.
    
7. * Company/ LLP is temporary closure of business operation - No gross income from business sources due to current year business losses.

Published : 30-Dec-2020