KUALA LUMPUR: Companies which had been successful in increasing revenues will benefit from reduction in their income taxes for the year of assessment 2017 and 2018.
The government is introducing a new scheme to provide a reduction by stages based on a percentage increase in income compared to the previous year of assessment.
The reduction in income tax is as follows:
• One percentage point for increase in chargeable income between 5 per cent to below 10 per cent;
• Two percentage point for increase in chargeable income between 10 per cent to below 15 per cent;
• Three percentage point for increase in chargeable income between 15 per cent to below 20 per cent; and
• Four percentage point for increase in chargeable income of 20 per cent.
For example, if a company’s chargeable income for year of assessment 2016 is RM10 million and increase to RM12 million in year of assessment 2017, the income tax imposed for the first RM10 million is 24 per cent or RM2.4 million.
The difference of RM2 million increased in year of assessment 2017 will be taxed at 20 per cent equal to RM400,000. This means the effective rate is 23.3 per cent and the total amount of tax to be paid is RM2.8 million with tax saving of RM80,000.
Currently, for all SMEs the tax rate on chargeable income up to the first RM500,000 is reduced from 19 per cent to 18 per cent effective from year of assessment 2017.
To boost the local vendor development programme in the manufacturing and services sectors, double deduction on expenses incurred by the anchor company, will be extended until December 31, 2020.