How to spend the company budget in 2022

​What a year 2021 was, still it was better in some ways than 2020 which was also known as the year that didn’t happen. After grave miscalculations on how vaccines would help the economy recover, Malaysia’s Budget 2022 seems to be focusing on building the country up from the grassroots.
 
In the Budget there are some interesting incentives for businesses brave enough to take advantage of the opportunities. Let’s jump right in and explore 8 ideas on how to spend company money this year.

​The elephant in the room is the special one-off windfall tax or cukai Makmur which the government is looking towards as a means to refill its treasury. It states that any chargeable income of above RM100million in 2022 is subject to 33% income tax which means this is a good year to support your fellow entrepreneurs and build up your asset base.

1. Buy a car… no, make those CARS

Electric car fueling up. Photo credits: Canva

​With the sales tax exemptions on CKD & CBU passenger cars (100% & 50% respectively) until June 2022, it would be a good time for companies to upgrade the vehicles for their key contributors. If your company hasn’t gone down this route, this might be a good option to reduce that extraordinary income. Plus, with the exemptions on road tax for electric vehicles (EVs) and attractive green vehicle financing, your company would be getting rewarded for doing Planet Earth a favour.
 
On the fun front, did you know ATVs and mobile homes are also included into the sales tax exemptions? Let us know how we can help you bring in that dream-on-wheels you’ve been eyeing from overseas.

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2. ​Invest in houses/housing

​With the removal of the Real Capital Gains Tax (RCGT) from the 6th year onwards, housing in relatively established neighbourhoods should be more affordable now. Given that infrastructure like nearby shops, highways and some form of public transport would have developed over this time, housing in these areas would not just be valuable assets but good housing options for staff/employees.

3. ​Renovations & building upgrades

Another way for companies to spend their budget this year is renovations and building upgrades. Claimable to up to RM300,000 per company, some of the renovations included in this category are:

• General electrical installations
• Gas systems
• Water systems
• Kitchen fittings
• Sanitary fittings
• Fitting rooms or changing rooms
• Recreational rooms for employees
• Air-conditioning systems
• Children play areas

… and more.

Businesses can claim tax deductions up to the aforementioned sum on the costs of renovation to comply with COVID-19 standard operating procedures, including improved ventilation. Bye bye, sick building syndrome!

4. ​Invest in ESG (Environment - Social - Governance)

Sustainable manufacturers are better received by their local community, banks & conscientious buyers. Photo credit: Mclaren factory, Flickr

​With Environmental, Social & Governance (ESG) principles becoming more essential to a company's investability, a growing number of Malaysian manufacturers are implementing scrubbers, washers, waste management and energy efficient systems to their factory processes in order to benefit from the triple bottom line of profits, people & planet. There is also an international basket of ESG-compliant suppliers from which companies from around the world seek to purchase from, in order to maintain their own ESG status. We will cover a bit more about green spending a little later on, but if your company is keen to discover this new market, come talktome@alienlogistics.com
 
Even if your company is not a manufacturer, giving your employees some space for stress release, “me-time” or childcare goes a long way in attracting and retaining good talent. Finding good childcare near or on the way to the office can be a challenge – young parents who are talented company assets would be motivated to stay with the company which takes care of more than just their pay check.

5. Let’s science the sh*t out of this

​The famous line from “The Martian” brings benefits to companies willing to invest in R&D and technology to bring an edge to their operations in 2022. As the number 5 way to reduce company taxes, the matching grants available to help you spend that extraordinary profit are focused on R&D and investments in engineering, science and technology.

With such an open statement, this even enables companies who are in food & retail to come up with innovations within their industry to be able to make use of the grants. For example, if a retailer was investing in a bio-plastic packaging manufacturing process to replace single-use plastics the retailer would not only be able to write off the cost of the machinery involved in but get a grant for the R&D and digital marketing costs as well.

6. Upgrade your IT infrastructure

​The push for WFH isn’t over. In fact, it's now becoming a permanent option for some. The WFH phenomena is now enabling companies to attract talent from across borders, allowing people from other states or countries to work in and around Malaysia without the stress of having to migrate. This hybrid way of working has far-reaching implications for the company. From the internet connection at the office to having to switch employees from desktops to laptops to implementing cyber security, contemplating cloud storage or having more than one network server.
 
Investing in your IT infrastructure in 2022 is a great idea because these can get written off as asset investments to defray your windfall tax; if your company profits don’t quite fall into that category, you can still write off these off your tax while leveraging on the digital grants available from MDEC and the banks.

7. Build up your market presence

Nisha Patel, Co-founder of Soaplab Malaysia (right) making what looks like dumplings ... Or are they soap dumplings? Photo credits: Soaplab Malaysia, LinkedIn

A branch off from the WFH culture is the burgeoning of independent agencies which expand the sales & marketing arms of organisations direct to consumers. The ability to scale down in the OEM (Other Equipment Manufacturer) industry has allowed budding entrepreneurs to launch profitable e-commerce shops.
 
​This is most profound in the billion-dollar cosmetics industry. Companies like Soaplab Malaysia and Kyoumei help beauty-preneurs get off the ground fast with their high-quality products and assistance in branding & marketing.

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Soaplab’s uniqueness lies in a GMP (Good Manufacturing Practice) factory that produces handmade soaps and skincare. Being registered with the NPRA & regularly audited for quality by the Ministry of Health, this puts their products in a class above those of their peers in the home crafted skincare industry; while Kyoumei sources for packaging materials as well as assists with the Halal certification of the cosmetics so their clients don’t have to.
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So, rather than increase your salaried sales employees, one school of thought is to encourage micro-enterprises to set up their own business selling YOUR products while leveraging on the government’s benefits on e-commerce implementation activities, training in marketing and digital payments. As business owners, people are more willing to dig deep to become architects of their future as Robin Sharma puts it.

To push Malaysian businesses into the global limelight, the government has allocated RM25 million to explore high-impact investments and new export markets through the Trade and Investment Mission; the micro, small & medium enterprise (MSME) Halal Product Digital Branding and MSME Halal Product Marketability Enhancement programs (RM25 million); and Industry4WRD to encourage technological transformation towards the fourth industrial revolution among SMEs (RM45 million). For more info on these programs and how to participate, check out https://www.mida.gov.my/forms-and-guidelines/
 
One of Alien Logistics’ strengths is to facilitate your products’ entry into new markets. E.g., checking what paperwork is required in order for a smooth import to happen, planning out the local warehousing & distribution once the goods have arrived, and more. Just let us know if your cargo has specific requirements, i.e. Halal, Reefer, Dangerous Goods or all the above and we'll work things out.

8. Reinvestment allowance 

Where there is chaos, there is opportunity. While the pandemic saw many businesses flounder, several rose out of the ashes to great, profitable heights. And of course, Big Brother caught scent of this and introduced the windfall tax.
 
There’s some good news for Malaysian companies in operation below 3 years which have fallen into this net, and it comes in the form of the reinvestment allowance. According to PWC,

1. A resident company in operation for not less than 36 months that incurs capital expenditure to expand, modernise, automate, or diversify its existing manufacturing business or approved agricultural project is entitled to reinvestment allowance as follows:
2. The allowance is given for 15 years from the first year of claim.
3. The allowance is computed at 60% of QCE incurred and can be utilised against 70% of statutory income.
4. The 70% restriction does not apply to projects that have achieved the level of productivity as prescribed by the Minister of Finance.
5. The allowance will be withdrawn if the asset for which the allowance is granted is disposed of within five years.

Got more ideas on how companies can wisely spend their budget this year? Feel free to share them below!