Malaysia Budget 2024 snapshot.

On 13 October 2023, the honourable Prime Minister and Finance Minister, YAB Dato’ Seri Anwar Ibrahim, delivered Budget 2024 with the theme, “Economic Reforms, Empowering the People”.

This is the second budget presented by the Unity Government since its formation in November 2022. Budget 2024 allocates a total of RM393.8 billion, with RM303.8 billion for operating expenditures and the remaining RM90 billion for development expenditures, with RM2 billion in contingency savings.

As the Unity Government’s second budget, the latest version is being presented as a continuation of the Ekonomi Madani framework, which focuses on good governance for service agility, restructuring of the economy to boost growth, and raising the Malaysian standard of living.

Overall, Budget 2024 reflects the Unity Government’s continued determination to uplift the country’s economy and people’s well-being while setting a sustainable foundation for future tax reforms.

The following pages provide a quick snapshot of the key tax changes and proposals announced in this year’s budget.

Key tax highlights

Individual taxes

Tax relief expansion from YA2024

Medical expenses incurred for self, spouse, or child (up to RM10,000)

• Expanded to include dental examinations and treatment expenses, limited to RM1,000.

Medical treatment, special needs, and carer expenses for parents (up to RM8,000)

• Expanded to include full medical examinations for parents, limited to RM1,000.

Lifestyle relief (up to RM2,500)

• Expanded to include fees for self-development courses but excluding the purchase of sports equipment or gymnasium memberships (see following section).

Sports equipment and activities (up to RM1,000)

• Includes the purchase or rental of sports equipment, gym memberships and entry fees to sports facilities, registration fees for sports competitions, and training fees imposed by sports associations/clubs/companies registered with the Sports Commissioner or Companies Commission of Malaysia.

Up-skilling and self-enhancement courses (up to RM2,000)

• Relief on fees paid for courses recognised by the Department of Skills Development, Ministry of Human Resources extended to YA2026.

Electric vehicle charging facilities (up to RM2,500)

• Expenses incurred for the installation, rental, purchase, or hire-purchase of equipment or subscriptions for EV charging facilities extended to YA2027.

Extension on tax exemptions and incentives

Childcare Allowance under perquisites from employment

• Tax exemption on childcare allowances received by employees or paid directly by employers to childcare centres increased from RM2,400 to RM3,000 effective from YA2024.

Career Comeback Programme for women

• Income tax exemption on a woman’s employment income for a maximum of 12 consecutive months after returning to work from at least a two-year career break extended to from YA2025 to YA2028.

Returning Expert Programme

• For Malaysian professionals returning from abroad, the following incentives are extended until 31 December 2027:
  • Income tax rate fixed at 15% on employment income received for five consecutive YAs.
  • Exemption on excise duty for the purchase of a complete knocked down (CKD) vehicle subject to an exemption amount up to RM100,000.

Corporate taxes

Capital allowance (CA) on information and communication technology (ICT) equipment and customised computer software

• CA rate for expenditures on ICT equipment and customised computer software will be revised to initial allowances (IA) of 40% (previously 20%) and annual allowances (AA) of 20% (unchanged), effective YA 2024.
• With the revised rate, the CA claim period will be reduced from four years to three years.

Further tax deduction for development of carbon projects

• Further tax deductions of up to RM300,000 introduced for costs incurred by companies for measurement, reporting, and verification (MRV) in relation to the development of carbon projects.
• Deductibles against income earned from carbon credits traded on Bursa Carbon Exchange (BCX), for applications received by the Malaysia Green Technology and Climate Change Corporation (MGTC) extended from 1 January 2024 until 31 December 2026.

Tax deduction on environmental, social, and governance (ESG) related expenditures

• Deductions of up to RM50,000 per YA for ESG related expenditures such as the preparation of reports related to corporate tax governance frameworks, preparation of transfer pricing documentation, consultation fees for implementing e-invoicing incurred by micro and small enterprises, etc. applicable from YA2024 to 2027.

Tax incentives for rental of electrical vehicles (EVs)

• Tax deductions on the rental of non-commercial EVs (up to RM300,000) extended to YA2027.

Sustainable and responsible investment (SRI) incentives

• Tax exemptions on management fee income for companies managing SRI funds extended to 2027.
• Tax deductions on the issuance cost of an SRI sukuk (Islamic financial certificate) approved, authorised, or lodged with the Securities Commission Malaysia (SC) extended to YA2027.
• Tax exemptions on the SRI sukuk grant and bond grant schemes expanded to include SRI-linked sukuk grants and bonds issued under the ASEAN Sustainability-Linked Bond Standards (ASEAN SLBS) approved by the SC. Applicable for applications received by the SC from 1 January 2024 to 31 December 2025.

Tax deductions on contributions for environmental preservation and conservation projects

• Special tax deductions introduced under Section 34(6)(h) of the Income Tax Act for entities contributing or sponsoring activities related to environmental awareness and conservation, including tree planting projects, verified by the Forest Research Institute Malaysia (FRIM).
• Applicable for applications received by the Ministry of Finance from 1 January 2024 to 31 December 2026.

Tax deduction for voluntary carbon market

• A further tax deduction of up to RM300,000 will be available for costs incurred by companies for measurement, reporting, and verification (MRV) in relation to the development of carbon projects.
• The deduction is deductible against income earned from carbon credits traded on Bursa Carbon Exchange (BCX), for applications received by the Malaysia Green Technology and Climate Change Corporation (MGTC) from 1 January 2024 until 31 December 2026.

Capital gains tax (CGT)

Disposal of unlisted shares

• For the imposition of CGT for the disposal of unlisted shares for companies, rates are proposed as follow:

• CGT exemption is granted for the disposal of unlisted shares in relation to:
  • Initial public offering (IPO) approved by Bursa Malaysia; and
  • Restructuring of shares within the same group.
• Effective from 1 March 2024

Tax incentives

Review of tax incentives for equity crowdfunding

• The tax exemption on equity crowdfunding is extended for investments made from 1 January 2024 to 31 December 2026.
• The scope of the tax incentive is expanded to investments made by individual investors through the limited liability partnership nominee company.

Tax incentive for angel investors

• It is proposed that for tech start-ups, capital funding tax incentives be extended for investments made from 1 January 2024 to 31 December 2026.

Tax incentives for automation in manufacturing, services, and agriculture

• Manufacturing, services, and agricultural entities with capital expenditure for automation equipment are given 100% accelerated capital allowance (ACA) on the first RM10 million of the qualifying capital expenditure and can be fully absorbed within one year.
• The scope has been expanded to include the commodity sector under the Ministry of Plantation and Commodities.
• Applicable for applications received by the Ministry of Plantation and Commodities from 14 October 2023 until 31 December 2027.

Income tax exemption for social enterprises

• The tax exemption on the income of social enterprises is extended for two years, for applications received by the Ministry of Finance from 1 January 2024 until 31 December 2025.

Income tax exemption on Shariah-compliant fund management services

• The exemption for Shariah-compliant fund management companies approved by the Securities Commission Malaysia is to be extended for four years until YA2027.
• The income tax exemption on statutory income is reduced from 100% to 60%

Incentives for reinvestment under The New Industrial Master Plan 2030

• To encourage companies that have exhausted their reinvestment allowance eligibility period to increase capacity and reinvest in high-value activities under the New Industrial Master Plan 2030, incentives are as follows:

• Applicable for applications made to the Malaysian Investment Development Authority from 1 January 2024 until 31 December 2028.

Tax incentive for global services hub

• To maintain Malaysia’s competitiveness in the region’s global services sector and to establish the country as a high-impact strategic services hub, outcome-based tax incentives are introduced as follows:

• The proposed income tax rate is 15% applied for three consecutive YAs, limited to three non-citizen individuals holding key/C-suite positions with monthly salaries of at least RM35,000 appointed by new companies approved with Global Services Hub tax incentive.

Review of green technology tax incentives

• Companies that undertake qualifying green activities are given the following tax incentives:
  • Green Investment Tax Allowance (GITA)
  • Green Income Tax Exemption (GITE)
• In line with Malaysia’s aspiration to be an inclusive, sustainable, and carbon neutral nation by 2050, the green technology incentives are as follows:

GITA Project (business purposes)

GITA Asset (own consumption)

GITE Solar Leasing

Effective dates

Others

Review of conditions for institutions/organisations/funds approved under subsection 44(6)

• Effective from YA2024, the approval conditions for the above entities are proposed to be as follows:
  • The accumulated funds utilisation limit of not more than 25% for participation in business activities will be increased to 35%.
  • Entities may choose either of the following options to continue qualifying for income tax exemption under Section 44(6):

• Should an entity breach the conditions within the approval period, the entity will not be eligible for tax exemption in the YA the breach of conditions occurred. However, the approval status will not be withdrawn to ensure donors remain eligible for tax deductions on contributions made to charitable institutions.

Income tax exemptions for Islamic financial activities in the Labuan special economic zone

• It is proposed that full income tax exemption for a period of five years be given to Labuan entities that undertake Islamic financial-related trading activities until YA 2028.

Indirect tax

Stamp duty for transfer of property ownership by renunciation of rights

• Transfer of property ownership by renunciation of rights from one eligible beneficiary to another eligible beneficiary in accordance with a will/faraid or the Distribution Act 1958 will be subjected to a flat stamp duty rate of RM 10.
• Applicable for instruments of property ownership transfer executed from 1 January 2024.

Stamp duty on property ownership by non- citizens

• A stamp duty flat rate of 4% on instruments of transfer executed by foreign-owned companies and non-citizen individuals (excluding Malaysian permanent residents) will be effective from 1 January 2024.

Import duty on manufacturing aids

• Eligible manufacturers on the importation and local purchase of manufacturing aids (subject to predetermined types of industry and categories of goods) to be exempted from import duty and sales tax effective from 1 January 2024.

Entertainment duties in the Federal Territories

• Entertainment duties in the Federal Territories are to be reduced as below effective from 1 January 2024 to 31 December 2028.

Excise duty on sugar-sweetened beverages

• Excise duty on sugar-sweetened beverages is proposed to increase from RM 0.40 per litre to RM 0.50 per litre from 1 January 2024.

Excise duty on chewing tobacco

• Excise duty on chewing tobacco proposed under the tariff code 2403.99.5000 at 5% + RM 27 per kg from 1 January 2024.

Sales and service tax (SST)

• Rate of service tax to be increased from 6% to 8% on all taxable services (except telecommunications and food & beverage)
• Service tax to be expanded to certain services such as logistics, brokerage, underwriting, and karaoke.

Luxury goods tax

• A luxury goods tax will be introduced at 5% to 10% on high-value goods.
• A tourist refund scheme will be implemented subject to rules and regulations.