KUALA LUMPUR (Oct 29): Investors' fear of a surprise corporate taxation came true when Finance Minister Datuk Seri Tengku Zafrul Abdul Aziz announced a one-off 33% "Cukai Makmur" (Prosperity Tax) on companies with chargeable income over RM100 million for the year of assessment 2022.

The "Cukai Makmur" is a one-off tax measure introduced by the federal government in Budget 2022, whereby chargeable income above the RM100 million mark will be taxed at a rate of 33%, instead of the blanket 24% rate previously. Tax is levied on a company's chargeable income and not its net profit.

Among over 900 public-listed companies on Bursa Malaysia, 145 of them earned over RM100 million in their financial year 2019 (FY19), while there were only 125 such companies in FY20, based on Bloomberg data.

Only 113 companies managed the same level of pre-tax earnings across the last two financial years, according to Bloomberg data.

Banks and big plantation companies are seen as the obvious targets.

The FBM KLCI constituents such as Malayan Banking Bhd, Public Bank Bhd, Tenaga Nasional Bhd, Top Glove Corp Bhd and Petronas Chemicals Group Bhd were among the 113 companies that managed over RM100 million consistently across the two financial years. (see table)

Glove makers such as Careplus Group Bhd and Rubberex Corp (M) Bhd as well as semiconductor automated testing equipment (ATE) and packaging companies, such as ViTrox Corp Bhd and Unisem (M) Bhd also saw their pre-tax earnings rise in FY20 compared with FY19.

It is unclear if the "Cukai Makmur" will apply to all companies as the current year of assessment differentiates tax rates depending on the paid-up capital of the company according to the Inland Revenue Board.

For the year of assessment 2020, companies with paid-up capital of less than RM2.5 million are charged a 17% tax rate for their first RM600,000, while the extra income will be subject to 24% tax rate. Companies with paid-up capital of above RM2.5 million, however, will be subject to a tax rate of 24% regardless of their income generated.

See more Budget 2022 highlights here.