Reduction in income tax for SMEs
UNDER the 2017 Budget proposals, the government is introducing a new scheme specifically for the year of assessment 2017 and 2018 which will; benefit the small and medium scale enterprises (SMEs).
Prime Minister Datuk Seri Najib Tun Razak said in his 2017 Budget speech on Friday the move is to appreciate the achievements of companies which had been successful in increasing their revenues.
“The Government has decided to introduce a new scheme specifically for the year of assessment 2017 and 2018.
“This scheme will provide a reduction by stages based on a percentage increase in income compared to the previous year of assessment.
The reduction in income tax are as follow:
One percentage point for increase in chargeable income between 5% to below 10%;
Two percentage point for increase in chargeable income between 10% to below 15%;
Three percentage point for increase in chargeable income between 15% to below 20%; and
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Four percentage point for increase in chargeable income of 20%.
Najib said for example, if a company’s chargeable income for year of assessment 2016 is RM10mil and increase to RM12mil in year of assessment 2017, the income tax imposed for the first RM10mil is 24% or RM2.4mil.
“Whereas the difference of RM2mil increased in year of assessment 2017 will be taxed at 20% equal to RM400,000.
“This means the effective rate is 23.3% and the total amount of tax to be paid is RM2.8mil 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% to 18% 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 Dec 31 2020,” he said.
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