Businesses in Malaysia are severely affected by the Movement Control Order (the “Order”), which came into effect on 18 March 2020 and forced most businesses to close their premises for at least until 31 March 2020. In addition, the rest of the world is fighting the COVID-19 crisis as well and international trade is in distress. In order to support both Malaysia’s businesses as well as the public in these difficult times, both the Malaysian Government and the banking sector are implementing measures to help mitigate the impact of COVID-19 on businesses and ease the long-term consequences. The purpose of this update is to provide you with an overview of the relevant measures and explain how they could help businesses to tackle the current situation.
Since the issuance of the Economic Stimulus Package (“ESP”) in February, the Government has announced several complementary measures. Special efforts have been made in favour of employers and taxpayers.
The Malaysian Government announced an ESP on 27 February 2020, which was valued at MYR 20 billion and relied on three overarching strategies, namely: (i) mitigating the impact of COVID-19, (ii) spurring individual economic growth, and (iii) promoting quality investments. Our previous newsletter about the initial ESP may be found HERE.
Complementary measures have subsequently been announced and the Government has stated that the new measures released on 16 and 23 March 2020 form part of a more comprehensive Economic Stimulus Package and People’s Aid, which is to be announced imminently.
On 16 March, the Malaysian Government announced that they will ensure the implementation of the ESP with additional measures to mitigate the impact of COVID-19. Such additional measures include a nationwide electricity discount of 2% for industrial, commercial and domestic users, which is expected to involve around MYR 500 million. This discount should be in addition to the 15% discount for hotels, aviation companies and exhibition malls under the ESP. Moreover, some additional measures for employment have been announced (please see below).
The Prime Minister, on 23 March 2020, again announced further initiatives intended to ease the prevalent financial issues, which were decided at the Economic Action Council Meeting on the same day. The measures announced on 23 March can be summarised inter alia as follows:
Following the Order, all business premises are to be closed until the end of the month to prevent people from gathering and spreading COVID-19. Hence, it is prohibited to continue working in office premises except for those involved in essential services (such as water, electricity, energy, telecommunications, post, transportation, irrigation, oil, gas fuel, lubricants, broadcasting, finance, banking, health, pharmacy, fire prevention, prisons, ports, airports, security, defence, cleaning, food supply and retail).
Working from home, as far as this is feasible, is not prohibited. However, employees who cannot work from home, are effectively barred from working.
The situation has raised many concerns among both employers and employees. In the short term, employers are required to pay their employees’ salaries in full, as mentioned in the Frequently Asked Questions issued by the Malaysian Ministry of Human Resources on 19 March. This financial burden will not be sustainable for many employers and may ultimately result in large-scale retrenchment exercises.
Consequently, to mitigate the impact on both sides, the Government has announced a number of measures:
The Government has used the tax system to support both companies and individuals; on the one hand by postponing the filing date of the tax return and, on the other hand, by introducing various new tax support measures.
1. Extension of the period to file the returns
The Malaysian tax authorities have extended the deadline to file income tax returns by two months. In particular, the employers (companies) can submit the E Form until 31 May 2020 (instead of 31 March 2020), and individuals (not carrying business) can submit their BE Form until 30 June 2020 (instead of 30 April 2020). Additionally, the Malaysian tax authorities will omit or reverse default penalties for failure to pay on time during the lockdown period, provided that payment of the taxes is made before 30 April 2020.
2. Tax support measures
The Government has announced various tax support measures, in order to reduce the tax burden for both companies and individuals. Some key measures for businesses are:
The Malaysian Government asked banks and financial institutions to support their clients to mitigate their financial stress caused by COVID-19. The banks have announced various measures, in addition to offering to their clients the special facilities as set up by the Government.
From the Banks and Financial Institutions In the ESP, the Government asked the banks and financial institutions to proactively assist viable businesses and households that face temporary financial constraints to restructure and reschedule their financing facilities, including potentially payment moratoriums.
The Government’s request to the banks to support their customers has not gone unheeded. To date, several banks have already announced that they will take steps in this direction, showing that the private sector is also supporting the Malaysian economy.
As an example, UBO announced on 20 March, that it will grant relief measures to both individuals and businesses, on a caseby- case basis. For businesses, the measures include a moratorium on their loan repayments for up to one year, and the flexibility to request extension of trade bills maturing between March 18 and March 31, 2020, for clients with “good” track records, and review to grant additional facilities based on clients’ financing needs for those who need access to additional financing. Public Bank, HSBC, Alliance Bank, and CIMB Bank, amongst others, have announced similar measures to help their clients.
Furthermore, all banks will make available governmentguaranteed borrowing. In particular, eligible Malaysian SMEs (with at least 51% shares held by Malaysians), can benefit from the following facilities, available from 6 March 2020 to 31 December 2020:
Our team in Malaysia can help you to identify the applicable measures introduced by the Government due to the COVID- 19 outbreak, and provide recommendations to sustain your business operations and safeguard your company’s interests.
As the situation develops quickly, we are constantly monitoring the situation in Malaysia on corporate, social, immigration and tax related issues and will keep you updated at all times.