Malaysia - Big breaks for education sector

The issue of developing, attracting and retaining talent has come up a lot more in recent years. One of the reasons for that has to do with Malaysia’s vision of attaining high-income status by 2020.

The government’s focus on human capital was underscored by the establishment of Talent Corp Malaysia (TalentCorp) under the Prime Minister’s Department on January 1. The government’s continued commitment towards the area of human capital was also evident in the 2012 Budget speech by Prime Minister Datuk Seri Najib Razak on Friday, with an allocation of RM50.2 billion to boost the nation’s education sector.

To achieve its aspirations of becoming a developed and high-income country, the government recognises the need to develop the country’s education system at the groundroots level in order to produce a highly-skilled, creative and innovative work force.

Private schools and international schools registered with the Education Ministry will now be granted tax incentives in the forms of:

* Income tax exemption (restricted to 70 per cent of statutory income) for a period of five years or investment tax allowance (“ITA”) of 100 per cent on qualifying capital expenditure incurred within a period of five years;

* Double deduction for overseas promotional expenses to attract more foreign students; and,

* Import duty and sales tax exemption on all educational equipment.

These incentives should augur well for parents as the anticipated savings from the tax incentives may translate into a reduction in school fees, making private and international schools more affordable to middle-income families.

These incentives are timely, given the huge market potential and growing demand for private education.

They may very well act as a catalyst of growth to the private and international school segments of the education market.

These tax incentives should also attract more reputable international schools to set up branches in Malaysia.

In the long run, we hope to see foreign students choosing Malaysia as a preferred destination to further their studies, and for these talented students to add to the country’s workforce.

To encourage the private sector’s involvement in the development of human capital, three tax incentives  have been proposed.

The Higher Education Ministry, in collaboration with TalentCorp, will implement a structured internship programme that includes technical, communication and business skills.

This programme will provide students with the opportunity to experience the real working environment while, at the same time, enable companies to identify potential employees.

Companies will be given a double deduction on the expenses incurred to implement this programme. The internship programme would be required to run for a minimum of 10 weeks with a monthly allowance of not less than RM500.

The tax incentive for scholarships will also be enhanced to further support companies in carrying out their social responsibilities.

Currently, scholarships awarded by companies to students are given a deduction when certain criteria are met. Under the new proposal, companies will now be eligible for a double deduction on scholarships awarded to Malaysian students pursuing studies at diploma and bachelor degree levels in local institutions of higher learning registered with the Higher Education Ministry.

With the availability of more scholarship funding from the private sector, students from families in the lower-income group can have more opportunities to pursue higher education.

Lastly, in line with TalentCorp’s focus on bringing back Malaysians who are working overseas, tax incentives will be given to companies that participate in career fairs abroad.

Where companies would have previously qualified for a deduction, expenses incurred by companies participating in career fairs abroad that are endorsed by TalentCorp will now be given a double deduction.

The joint effort by TalentCorp and the private sector will definitely help to attract more Malaysians to return to the country.

The 2012 Budget has clearly demonstrated the government’s emphasis on developing the education sector for the benefit of the rakyat.

The writer is a partner of Ernst & Young Tax Consultants Sdn Bhd.

The information contained in this article is intended for general guidance only. It is not intended to be a substitute for detailed research or the exercise of professional judgment. On any specific matter, reference should be made to the appropriate adviser.

BTimes

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