Highlights of Malaysia Budget 2025

This post is also available in: Melayu (Malay) 简体中文 (Chinese (Simplified))

Highlights of Malaysia Budget 2025 on 18 October 2024

On 18 October 2024, Dato’ Seri Anwar bin Ibrahim, Prime Minister cum Finance Minister has tabled Budget 2025. The following is the summary of the tax measures for Malaysia Budget 2025.

Personal Tax

Imposition of Tax on Dividends Received by Individual Shareholders

For individual shareholders with annual dividend income exceeding RM100,000, 2% dividend tax will be imposed.

Tax Relief on Medical Treatment Expenses

• Scope of tax relief for medical treatment expenses for self, spouse and child will be expanded to cover purchase of influenza test kit, purchase of self-testing medical devices such as glucometer, pulse oximeter, blood pressure monitor and thermometer, and fees for disease detection examination conducted at clinic or hospital, such as blood test, ultrasound, mammogram and pap smear.
• For relief of assessment and diagnosis, early intervention programme and continuous rehabilitation treatment for children with learning disability, the amount of relief will be increased from RM4,000 to RM6,000.

Tax Relief for Disabled Person

• Further tax relief for the disabled individual taxpayer will be increased from RM6,000 to RM7,000.
• Further tax relief for the individual taxpayer with a disabled spouse will be increased from RM5,000 to RM6,000.
• Further tax relief for the individual taxpayer with unmarried disabled children will be increased from RM6,000 to RM8,000.

Tax Relief for Sport Activities, Health and Elderly Care

• Tax relief of up to RM1,000 for expenses on sports equipment and activities for self, spouse and child will be expanded to parents.
• Full medical check-up expenses for parents, limited to RM1,000 will be expanded to include vaccination.
• Medical treatment, special needs, and parental care expenses will be expanded to grandparents.

Individual Income Tax Exemption on Employee Benefits

• The individual income tax exemption of up to RM3,000 per year given on child care allowance received by employees or paid directly by employers to child care centres will be expanded to include elderly care (parents/grandparents).

Tax Relief on Contribution to Private Retirement Schemes (PRS) and Deferred Annuities

• The tax relief of up to RM3,000 on contributions to PRS and premiums paid for deferred annuities will be extended for 5 years until YA 2030.

Tax Relief on Education and Medical Insurance

• The individual income tax relief on premiums paid for education and medical insurance will be increased from RM3,000 to RM4,000.

Tax Relief on Net Savings in the National Education Savings Scheme (SSPN)

• The tax relief of up to RM8,000 on net annual savings in SSPN will be extended for 3 years until YA 2027.

Tax Relief on Housing Loan Interest Payment for First Residential Home

• The tax relief will be given on the interest payments for the first residential home loan (individually or jointly owned), as follows subject to conditions.

Tax Relief for Nursery or Kindergarten Fees

• The tax relief of up to RM3,000 will be extended for 3 years until YA 2027

Tax Relief for Purchase of Domestic Food Waste Composting Machine

• The scope of relief on expenses for electric vehicle charging equipment will be expanded to include the purchase of food waste composting machines for household use, with the relief limit remaining at RM2,500.

Extension of Foreign-Sourced Income Exemption

Extension of foreign-sourced income received by resident individuals in Malaysia which is currently granted until 31 December 2026 will be extended until 31 December 2036.

Corporate Tax

Tax Incentives for Implementation of E-Invoicing

• The expenses for the purchase of ICT equipment, computer software packages and consulting fees will be given accelerated capital allowance that can be fully claimed within a period of 2 years.

Extension of Tax Deduction for Sponsorship of Smart Artificial Intelligence Driven Reverse Vending Machine (RVM)

• The current tax deductions given to contributions or sponsorships of Smart AI Driven RVM will be extended for 2 years until 31 December 2026.

Tax Incentives

Expansion of Scope of Further Tax Deductions for Provision of Child Care Centre

• The further tax deductions on child care allowance paid by employers to employees will be expanded to include elderly care (parents/grandparents).

Tax Incentive for Smart Logistics Complex (SLC)

• Income tax exemption equivalent to an ITA of 60% on qualifying capital expenditure incurred for a period of 5 years be provided to SLCs. This allowance can be set-off against up to 70% of statutory income for each year of assessment, subject to the conditions.
• For applications received by MIDA from 1 January 2025 until 31 December 2027.

Tax Incentive for Employers Implementing Flexible Work Arrangements (FWA)

• Expenses for capacity building and software acquisition incurred by employers for implementing FWA will be given a 50% further deduction.
• The expenses eligible for further deduction is capped at RM500,000, subject to a one-off claim and to be verified by Talent Corporation Malaysia Berhad.
• For applications received by Talent Corporation Malaysia Berhad from 1 January 2025 until 31 December 2027.

Tax Incentive for Employers Providing Caregiving Leave Benefit

• 50% further deduction will be given to employers who provide additional paid leave of up to 12 months for employees caring for children or ill or disabled family members.
• For applications received by Talent Corporation Malaysia Berhad from 1 January 2025 until 31 December 2027.

Tax Incentive for Hiring Women Returning To Work

• 50% further deduction be given to employers on employment expenses paid for a period of 12 months for hiring women returning to work.
• For applications received by Talent Corporation Malaysia Berhad from 1 January 2025 until 31 December 2027.

Tax Incentive for Increased Exports

• Companies engaged in selected service activities and successfully increase exports are eligible to claim tax exemption up to 70% of the statutory income equivalent to 50% of the value of increased exports.   

• It is proposed the increased export incentive for the services sector be expanded to IC Design services.

Review of Tax Deduction on The Cost of Developing New Courses at Private Higher Education Institutions (PHEIs)

• Tax deduction on cost of developing new courses by PHEIs will be allowed to be fully claimed within the same YA. This incentive is also extended to include the development of Technical and Vocational Education and Training (TVET) courses by private skills training institutions.
• Effective from the year of assessment 2025 until the year of assessment 2030.

Tax Incentive for Structured Internship Programme (SIP)

• The scope of SIP will be expanded to include hire of students pursuing structured training conducted by industry regulatory bodies and the incentive will be extended for another 5 years from YA 2026 to YA 2030.

Tax Deduction on Donations of New Equipment and Machines

• Companies will be given tax deduction on new equipment and machines donated to Institut Latihan Kemahiran Awam (ILKA), polytechnics, or registered vocational colleges.

Indirect Tax

Review of The Rates of Sales Tax and the Expansion of Service Tax Scope

• Sales tax and service tax will be reviewed as follows:
• sales tax exemption be maintained on basic food items consumed by the rakyat;
• sales tax be increased on non-essential items such as imported premium goods (e.g. salmon and avocado); and
• the scope of service tax be expanded to include new services such as commercial service transactions between businesses (B2B).

Review of Excise Duty Rate on Sugar Sweetened Beverages

• Excise duty on sugar sweetened beverages be increased in phases starting from 1 January 2025 at 40 sen per litre.

Review of Export Duty Exemption on Crude Palm Oil (CPO)

• Export duty for CPO, taking into accounts the partial exemption, be revised as follows:

Review of Threshold Value for Windfall Profit Levy

• The threshold of windfall profit levy for Peninsular Malaysia, Sabah and Sarawak be revised as follows:

Sales Tax Exemption on Mastectomy Bra for Breast Cancer Patient

• In line with the value of compassion and to ease the burden of breast cancer patients, it is proposed that sales tax exemption be given for mastectomy bras.

Stamp Duty

Review of Stamp Duty on the Assignment of Life Insurance Policy and Family Takaful Certificate

• The deed of assignment for life insurance policy and family takaful certificate given by way of love and affection or through a trustee, be subject to stamp duty at a fixed rate as follows:

Effective Date: For deed of assignments for life insurance policy and family takaful certificate executed from 1 January 2025.

Review of Stamp Duty on Loan or Financing Agreements Based on Shariah Principles

• Fixed stamp duty of RM10 be imposed on loan or financing agreement for the purchase of goods based on Shariah principles, other than hire purchase.
• Effective Date: For loan or financing agreements based on Shariah principles executed from 1 January 2025.

Exemption of Stamp Duty on Loan or Financing Agreements Through The Initial Exchange Offering (IEO) Platform for Micro, Small and Medium Enterprises (MSMEs)

• 100% stamp duty exemption will be given on loan or financing agreements executed by MSMEs and investors through the IEO platforms registered with the Securities Commission Malaysia for 2 years from 1 January 2025 until 31 December 2026.

Revision of Stamp Duty Exemption on Loan or Financing Agreements for Skim Pembiayaan Mikro

• Stamp duty exemption be given for SPM loan or financing agreements, for amounts up to RM100,000 from 1 January 2025.

Implementation of Self-Assessment System for Stamp Duty

• The self-assessment stamp duty system (STSDS) will be implemented in phases based on the types of instruments or agreements.

Labuan

Income Tax Exemption for Islamic Financial Activities under Labuan International Business and Financial Centre

It is proposed full income tax exemption given to Labuan trading entities that undertake Islamic finance activities be expanded to include qualifying Labuan takaful business activities and Labuan takaful related activities as follows: