News & Views

The Malaysian Government has responded with a few tepid measures amid widespread criticism of its handling of the Covid-19 pandemic and irrational lockdown procedures based on the absolute number of cases rather than the effect they have on the health care system or the rate of deaths and infections.

On 28 June 2021, as the MCO 3.0 nationwide lockdown was expectedly being extended indefinitely, Prime Minister Muhyiddin Yasin announced the launching of a RM150.0 billion financial aid package, the National People’s Well-Being and Economic Package (“PEMULIH”). PEMULIH focuses on 3 main areas, namely:

• Continuation of the rakyat welfare agenda;
• Supporting businesses; and
• Accelerating vaccination.

Automatic Loan Moratorium

Under PEMULIH the government offered a blanket loan moratorium for all individual borrowers regardless of their income group. This blanket moratorium is also open to all micro-entrepreneurs, meaning those with a sales turnover of less than RM300,000 or less than 5 employees and affected small and medium enterprises (“SME”) operators, subject to bank’s approval.

It should be noted that this is not a loan or interest waiver but a deferral of payment or principal and interest. However, banks would be required to waive compounded interest and penalty charges for borrowers who take up the loan moratorium. The moratorium is automatic, which means that those eligible will only be require to complete a formal application, and will apply to all loans/financing approved before 1 July 2021 and not in arrears for more than 90 days on the date the request for moratorium is submitted to the bank.

In addition, the Association of Banks in Malaysia (“ABM”) and Association of Islamic Banking and Financial Institutions on Malaysia (“ABIM”) stated that Banks will offer a moratorium for all credit facilities excluding credit cards on an opt in basis. ABM and ABIM also stated that banks would also offer to convert credit card balances into a 3-year term loan/financing with reduced interest rates to help borrowers better manage their debt.

Applications for the automatic moratorium begins on 7 July 2021 and applications will be approved automatically upon completion of formalities which will entail an agreement to alter the terms of existing credit facilities.

Tax Relief for Rental Discounts for Business Premises

The Prime Minister has confirmed that PEMULIH will continue with the existing tax incentives for commercial landlords who give at least 30% rental reductions to tenants until 31 December 2021. Landlords are allowed to make a claim for this special deduction with supporting documents such as:

• Official tenancy agreement;
  • Income statement of rental income;
  • Certification of tenant’s SME status from SME Corp;
  • Details of reduced rental.

Human Resources Development Fund (HRDF) Levy

The mandatory levy payable to HRDF imposed on employers under the PSMB Act 2001 applies to all industries. Firms with 10 or more local employees are legally obliged to register with HRDF. The rate of HRDF levy imposed on firms with 10 or more local employees is 1% of the monthly wages of each of their Malaysian employees.

Under PEMULIH, employers who are unable to operate during the lockdown will be granted an automatic exemption from paying the statutory levy to the HRDF for 2 months. Further, employers from new sectors who are required to pay a levy to the HRDF will be exempted from paying the levy until 31 December 2021.

Initiative by Majlis Amanah Raya (MARA)  

Under PEMULIH, MARA will extend the automatic 30% discount on rental of MARA business premises to MARA entrepreneurs affected by the closure of the economy until December 2021. Furthermore, MARA entrepreneurs affected by the Covid-19 pandemic will be allowed to apply to defer the repayment of their MARA business financing for 3 moths or reschedule their repayments by extending the repayment period up to 36 months.

EPF Withdrawals

Under the new i-Citra initiative members of the Employees Provident Fund (“EPF”) may withdraw up to RM5,000 of their savings at a fixed rate or RM1,000 per month for 5 months, provided they have sufficient savings in their respective accounts. Application for i-Citra can be made via the EPF’s i-Citra online portal at icitra.kwsp.gov.my starting from 15 July 2021, with the first payment expected to be credited to the members’ accounts in August 2021.

Postponement of Monthly Income Tax & Exemption on Tourism Service Taxes for Hotel Operators

Under PEMULIH the previous incentives for tourism tax exemptions for foreign tourists staying in registered premises the exemption from tourism and service tax on accommodation provided by hotel operators will continue until 31 December 2021. Further, the Government will defer payment of monthly tax instalments by companies in the tourism industry.

Moratorium in Insurance Premium Payments and Takaful Contributions

The affected insurance policy and certificate holders may opt in for a moratorium in insurance premium payments and takaful contributions up to 31 December 2021. This initiative includes policy and certificate holders of life insurance and family takaful.

Postponement for Repayment of Educational Loans

The government will give a 3-month moratorium to PTPTN borrowers who opt in. The government will give a 6-month postponement for Federal Education Loan (“JPA”) repayments under the Public Service Department and compensation claim payments for recipients of federal scholarships. Repayment of MARA Education Loans can also either be postponed for 3 months or rescheduled with monthly instalments of as low as RM100 for over 12 months. The government will also grant a 3-month postponement on repayments for loans under the Skills Development Fund Corp (PTPK).

RLSE Corporate Team (admin@rlse.law)