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SME Corp eyes tax exemption for start-ups

[ 08-11-2013 ]
SME Corp eyes tax exemption for start-ups
KUALA LUMPUR: SME Corp Malaysia hopes the government will offer corporate tax exemption for new small and medium enterprise (SME) start-ups in the 2014 Budget.

Currently, SMEs with a paid-up capital of RM2.5 million and below are eligible for a reduced corpora-te tax rate of 20 per cent on chargeable income of up to RM500,000.

According to SME Corp chief executive officer Datuk Hafsah Hashim, the move will encourage more entrepreneurs to expand their businesses, which in turn will boost SME contribution to the gross domestic product (GDP).

This is in line with the SME Masterplan 2012-2020, which aims to increase the contribution of SMEs to Malaysia's GDP from the current 32 per cent to 41 per cent by 2020, employment from 59 per cent to 62 per cent and exports from 19 per cent to 25 per cent.

"With this tax exemption ... at least for the first three years, the new SME start-ups can get on their feet and stabilise their businesses first," she said recently.

"SMEs are important to the country's economy as they contribute significantly to Malaysia's GDP and employment market," she said, adding that the relief to the SME players will also encourage them to push for higher growth.

Hafsah noted that the role of SMEs will become increasingly critical, not only as an enabler of growth by providing support to large firms, but also as a driver of economic growth via their business activities.

The SME Annual Report 2012 revealed that SMEs constitute some 98 per cent of the about 78,000 companies in Malaysia, with the remaining made up of multinational and public-listed companies.

In many developed nations, SMEs are estimated to contribute between 40 per cent and 60 per cent to GDP, but the SME sector in Malaysia has not reached the mark yet.

More than 80 per cent of SMEs are engaged in the services sector, while the remaining ar involved in the manufacturing and agriculture.