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Highlights of Malaysia Budget 2024 on 13 October 2023

On 13 October 2023, Dato’ Seri Anwar bin Ibrahim, Prime Minister cum Finance Minister has tabled Budget 2024 themed “Economic Reforms, Empowering the People”.

The following is the summary of the tax measures for Malaysia Budget 2024.

Highlights of Malaysia Budget 2024

Personal Tax

Scope of tax relief for medical treatment expenses for self, spouse and child be expanded to cover dental examination and treatment expenses from dental practitioners registered with the Malaysian Dental Council, limited to RM1,000.
Scope of tax relief for medical treatment, special needs and carer expenses for parents be expanded to cover full medical examination for parents, limited to RM1,000.
The limit and scope of tax relief for lifestyle be restructured as follows:
1. The lifestyle relief of up to RM2,500 is for the purchase of reading materials including e-book, printed/electronic daily newspapers, purchase of personal computers, smartphones or tablets and internet subscriptions.
  The scope be expanded to include fees for self skills enhancement course. Whereas, the purchase of sports equipment and gymnasium membership fees are removed from the scope of lifestyle relief.
2. Specific tax relief be introduced for “Sports Equipment and Activities” limited to RM1,000.
  The scope of relief covers the purchase of sports equipment, rental or entry fees to sports facilities, registration fees for participating in sports competitions and gymnasium membership fees. This relief is also expanded to sports training fees imposed by associations/sports clubs/companies registered with the Sports Commissioner or Companies Commission of Malaysia and carrying out sports activities as listed under the Sports Development Act 1997.
Tax relief for up-skilling and self-enhancement courses fees to be extended until YA 2026.
Tax relief on expenses related to installation, rental, purchasing including hire-purchase equipment or subscription fees for EV charging facilities be extended until YA 2027.
The income tax exemption on child care allowances received by employees or paid directly by employers to child care centres be increased from RM2,400 to RM3,000 per year, effective from YA 2024.
The eligibility criteria for the Women Career Comeback Programme tax incentive be enhanced as follows:-
1. Women returning to work after a career break at least 2 years before the date of application received by the Talent Corporation Malaysia Berhad; and
2. Employment income received from YA 2025 to YA 2028.

Corporate Tax

To enhance tax compliance among institutions, organisations, funds approved under subsection 44(6) of the Income Tax Act, 1967, it is proposed the approval conditions be reviewed as follows:

The accumulated funds utilisation limit of not more than 25% for participation in business activities be increased up to 35%;
Institutions, organisations, funds may choose any of the following options to continue receiving the subsection 44(6) incentives benefits:

Option Utilisation of Accumulated Funds Threshold of Charitable Activity Expenditure

1 Up to 25%

At least 50%

2 Over 25% and up to 35% At least 60%
In the event any of the conditions in the approval letter are breached, IRB will not withdraw the approval under subsection 44(6) for institutions, organisations, funds during the validity period. The approval status is upheld to ensure that donors remain eligible for tax deductions on contributions made to institutions, organisations, funds throughout the approval period; and
For any breach of conditions within the approval period, the institutions, organisations, funds will not be eligible for tax exemption and IRB will raise tax assessment on all income received by the institutions, organisations, funds in the YA the breach of conditions occurred.

Tax Incentives

Capital allowance rate on information and communication technology (ICT) equipment and computer software be revised to initial allowance of 40% and annual allowance of 20%.
To encourage existing companies that have exhausted their RA eligibility period and to increase capacity and investment in high-value activities under the New Industrial Master Plan 2030, it is proposed tax incentives be given based on an outcome-based approach as follows:

Investment Tax Allowance

Tier 1 Tier 2

Qualifying Capital Expenditure

100% 60%

Statutory Income to be Set-Off 100% 70%
The application period for tax exemption on all income of Social Enterprise be extended for 2 years until 31 December 2025.
Tax deduction on EV rental cost be extended for a period of 2 years until YA 2027.
Tax deduction up to RM50,000 for each YA be given on Environmental, Social and Governance (ESG) related expenditure such as ESG reporting, preparation of reports related to Tax Corporate Governance Framework, preparation of transfer pricing documentation, consultation fee for implementing e-invoicing incurred by Micro, Small and Medium Enterprises.
Tax exemption on management fees income for managing Sustainable and Responsible Investments (SRI) funds be extended for a period of 4 years until YA 2027.
Tax deduction is given on the issuance cost of SRI sukuk be extended for a period of 4 years until YA 2027.
The income tax exemption on the SRI Sukuk grant and bond grant scheme be expanded to include SRI-Linked Sukuk Grants and bonds issued under the ASEAN Sustainability-Linked Bond Standards (ASEAN SLBS) approved by SC.
The income tax exemption period for Shariah-compliant fund management services companies be extended for 4 years with 60% tax exemption until YA 2027.
Full income tax exemption for a period of 5 years be given to Labuan entity that undertakes Islamic financial-related trading activities such as Islamic digital banking, Islamic digital bourses, ummah-related companies and Islamic digital token issuers.
To maintain Malaysia’s competitiveness as a key player in the global services sector in the region and to establish the country as a high-impact strategic services hub, Global Services Hub tax incentive based on outcome-based approach be introduced. The determination of the eligibility for the income tax rate that a company will enjoy for each YA is based on the outcome-based approach.
In addition, income tax rate of 15% be given for a period of 3 consecutive YA and limited to 3 non-citizen individuals holding key/C-Suite positions with a monthly salary of at least RM35,000 appointed by a new company approved with Global Services Hub tax incentive.
To increase agricultural productivity and minimise dependency on foreign labour, the scope of Accelerated Capital Allowance (ACA) on purchase of automation equipment including the adaptation of Industry 4.0 elements in manufacturing, services and agricultural sectors be expanded to include the commodity sector under the Ministry of Plantation and Commodities (KPK).
To attract more individual investors to invest in start-up companies through ECF platform, the tax incentive be expanded to investment made by individual investor through Limited Liability Partnership nominee company and be extended for a period of 3 years until 31 December 2026.
To attract more angel investors to provide capital funding for tech start-up companies, the tax incentive be extended for a period of 3 years until 31 December 2026.
In line with Malaysia’s aspiration to be an inclusive, sustainable and carbon neutral nation by 2050, the green technology tax incentives is reviewed and is tiered. The scope of qualifying activities in widened to cover green hydrogen and wind energy.
Tax deduction under subsection 34(6)(h) of the Income Tax Act, 1967 be given to entities contributing or sponsoring activities related to tree planting projects or environmental preservation and conservation awareness projects verified by FRIM.
Further tax deduction up to RM300,000 be given to companies for costs incurred on the Development and Measurement, Reporting and Verification (MRV) related to the development of carbon projects. The further tax deduction is deductible from the carbon credits income traded on Bursa Carbon Exchange (BCX).

Capital Gains Tax

In line with Budget 2023 announcement to implement Capital Gains Tax (CGT) on the disposal of unlisted shares for companies, it is proposed CGT rate be imposed as follows:

Shares Acquisition Date

CGT Rate

Before 1 March 2024

The taxpayers may choose:

i. 10% on the net gain of the disposal of shares; or

ii. 2% on the gross sales value.

From 1 March 2024

10% on the net gain of the disposal of shares

CGT exemption be given on the disposal of shares related to approved Initial Public Offering (IPO) and restructuring of shares within the same group.

Implementation of E-Invoice

Mandatory enforcement of e-invoice for taxpayers with an annual turnover of income in excess of RM100 million to be postponed from 1 June 2024 to 1 August 2024. For other categories of taxpayers, implementation in phases from 1 July 2025.

Global Minimum Tax (GMT)

The Government is expected to implement the GMT in year 2025 and it is applicable to multinational enterprises (MNEs) with an annual consolidated revenue of Euro 750 million or more in at least two out of four preceding years.

Indirect Tax

Increase in service tax rate from 6% to 8% for all prescribed taxable services except for food and beverages services and telecommunication services.
Scope of prescribed taxable services will be expanded to include logistics services, brokerage services, underwriting services and karaoke.
Import duty and sales tax exemption be given to eligible manufacturers on the importation and locally purchased of manufacturing aids subject to types of industry and category of goods determined.
In supporting national creative industry’s development, nurturing cultural unity and strengthening family bonding, the current entertainments duty rate be reduced to 0% – 10% for selected type of entertainments held in the Federal Territories.
The excise duty rate for sugar sweetened beverages be increased to RM0.50 per litre.
The excise duty at a rate of 5% + RM27/kg be imposed on chewing tobacco under the tariff code 2403.99.5000.

Stamp Duty

The transfer of property ownership in which the eligible beneficiary renunciates his/her right to another eligible beneficiary in accordance with a will/faraid or the Distribution Act 1958 be subjected to a fixed duty of RM10.
A flat rate stamp duty of 4% be imposed on the instrument of transfer executed by foreign-owned companies and non-citizen individuals (except Malaysian permanent residents).

High Value Goods Tax

Introduction of High Value Goods Tax at the rate of 5% to 10% on certain high value items such as jewellery and watches based on the threshold of price.