Governments flag tax breaks and loans to SMEs

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INDONESIA

The Indonesian government has slashed corporate tax rates to 22% until 2021, and flagged a further cut to 20% starting in 2022.

The government has announced loans and business funding support micro, small and medium-sized enterprises (MSMEs) including credit restructuring, guarantees and financing. It also announced that rules governing loan restructuring for small and medium-sized enterprises (SMEs) will be eased, allowing local banks to restructure loans regardless of credit ceiling limits. Additionally, SMEs are eligible for loans of up to IDR10 billion (US$680,000) if they have a good credit history, and the capacity to pay back the loan.

MALAYSIA

The Malaysian government has taken several steps towards providing support to businesses affected by COVID-19. It has announced corporate tax adjustments allowing companies to revise their tax estimates earlier (i.e., in the third month of the instalment payment schedule, if the third month falls in 2020) as well as deferment of CP240 payment for three months, beginning April 2020 until June 2020 for SMEs, and deferment of CP500 instalment payments for March 2020 and May 2020.

Capital expenditure on machinery and equipment, including information and communications technology equipment incurred from 1 March 2020 to 31 December 2020, will be granted an accelerated capital allowance, with an initial allowance at 20%, and annual allowance at 40%, i.e., fully claimable in two years. Businesses that incur qualifying expenditure on renovation and refurbishment of their business premises from 1 March 2020 to 31 December 2020 shall be given a tax deduction up to MYR300,000 (US$69,000).

Financing and loan support announced includes requiring all banks to provide financial relief in the form of a payment moratorium, comprising restructuring and rescheduling loans for affected businesses and individuals for six months, as well as a MYR50 billion Danajamin (financial guarantee insurer) guarantee scheme with up to 80% guarantee for working capital needs, with a minimum MYR20 million loan size per company. Bank Negara Malaysia (BNM) is offering a special relief facility worth MYR5 billion, in the form of working capital for SMEs at an interest rate of 3.5%.

The BNM has expanded a facility for all economic sectors from MYR5.8 billion to MYR6.8 billion, to enhance access to financing for SMEs. The maximum financing rate has also been reduced, from 8% per annum to 7%.

Syarikat Jaminan Pembiayaan Perniagaan, a government owned company set up to assist SMEs in gaining access to financing from financial institutions, will provide MYR5 billion worth of guarantees, with the guaranteed coverage increasing from 70% to 80% for SMEs that face difficulties in obtaining loans.

Moratorium payments have been extended to loans given to SMEs by TEKUN Nasional (an agency under the Ministry of Agriculture that provides financial loans), MARA (Majlis Amanah Rakyat), which offers local business financing schemes of up to MYR5 million, as well as co-operatives and other government agencies, beginning 1 April 2020.

THE PHILIPPINES

The Philippines has announced that all lenders and credit-granting financial institutions under the supervision of the central bank, Bangko Sentral ng Pilipinas, the Securities and Exchange Commission, and the Co-operative Development Authority shall implement a mandatory 30-day grace period for all loans to MSMEs, with principal and/or interest falling due within the enhanced community quarantine period, without incurring interest on interest, penalties, fees and other charges. All lenders and credit-granting financial institutions shall not charge or apply interest on interest, fees and charges during the mandatory grace period to future payments/amortizations of MSMEs.

THAILAND

Thailand has announced a reduction in withholding tax imposed on payment for services, hire of work, commissions (paid to juristic persons only), and liberal professional fees, from 3% to 1.5% for payments made from 1 April to 30 September 2020. The withholding tax will subsequently be reduced to 2% from 1 October 2020 to 31 December 2021, if the payment is made via the e-withholding tax system.

Eligible SMEs can claim a 150% deduction for interest expenses incurred on loans obtained under the government’s funding initiative to provide THB150 billion (US$4.71 billion) in soft loans to SMEs with an interest rate of 2% for the first two years. SME employers have been allowed to deduct 300% of eligible salary costs paid to employees in the period from April to July 2020 for corporate income tax purposes.

It has extended the date for filing corporate income tax to 31 August 2020 (for the 2019 financial year) and 30 September (for the first half of 2020), and filing of excise tax by service businesses has been extended by one month and delayed the filing, submission and payment of all types of tax including VAT, specific business tax, etc., by three months.

The government has announced soft loans to SMEs at 2% per annum for two years on the first THB20 million, with the first six months being an interest-free period.

A loan payment holiday on principal and interest for six months for all SMEs with a credit line not exceeding THB100 million has also been announced.

The Bank of Thailand has provided guidelines to support affected loan-takers, asking all financial institutions to proactively support their customers by relaxing the loan classifications and giving more flexibility on loan approvals to ensure liquidity and the continuity of everyday business.

VIETNAM

The Vietnamese government has announced deferment of VAT for SMEs by five months from the statutory deadlines for the period of March to June 2020 (for monthly VAT declarations), and for the first and second quarters of 2020 (for quarterly VAT declarations). VAT return filing deadlines have not been extended. It has been decided to defer corporate income tax filing for 2019 by five months from the statutory deadlines, and for the first and second business quarters of 2020 for provisional liabilities.

Business Law Digest is compiled with the assistance of ZICO Law. All rights reserved. The information contained in this summary is accurate as of 15 April 2020, unless stated otherwise. This summary is for general information only and is not intended to be exhaustive and should not substitute professional legal advice. Developments on COVID-19 are rapidly changing and you are advised to regularly check for updates with your local authorities. ZICO Law cannot be held liable for any information provided in this summary. No part of this summary or document may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without ZICO Law’s prior written permission. You can contact ZICO Law for further information and assistance by emailing Hanim Hamzah (hanim.hamzah@zicolaw.com)