20-Minute read

Table Of Contents

1. Overview →
2. Key Announcements →
3. Individual Tax →
4. Corporation Tax →
5. Indirect Tax →
6. Business Implications →
7. Final Words →

Malaysia’s Budget 2024, unveiled by Prime Minister and Finance Minister Datuk Seri Anwar Ibrahim, marks a significant milestone in the country’s economic development. With a theme of “Economic Reforms, Empowering the People,” the budget focuses on good governance, spurring economic growth, and elevating the standard of living for Malaysians, particularly the underprivileged.

Overview

The second Madani budget, Budget 2024, is Malaysia’s largest ever budget, amounting to RM393.8 billion. It comprises operating expenditure of RM303.8 billion and development expenditure of RM90 billion. Despite the increase in expenditure, the government remains committed to its gradual fiscal consolidation path.

The fiscal deficit is projected to narrow to 4.3% of GDP in 2024, down from an estimated 5% in 2023, driven by higher growth and increased government revenue collections. Tax revenue, the largest contributor to government revenue, is expected to reach RM243.6 billion, accounting for 79% of total revenue. The introduction of taxes on capital gains and luxury goods, as well as an expansion in the scope of the service tax and an increase in its rate from 6% to 8%, will contribute to higher tax collections.

Key Announcement

Service Tax

The scope of the service tax will be expanded to include logistics, brokerage, underwriting, and karaoke services. However, services related to food and beverages and telecommunications will remain exempted. The service tax rate will be increased from 6% to 8%.

High Value Goods Tax

A High Value Goods Tax will be imposed at a rate of 5% to 10% on certain high-value items such as jewelry and luxury watches, depending on the value threshold.

Global Minimum Tax

Starting in 2025, a Global Minimum Tax will be implemented on companies with global income of at least EUR750 million.

Capital Gains Tax

A Capital Gains Tax of 10% on net profit will be imposed on the disposal of unlisted shares by local companies, effective from 1 March 2024.

E-Invoicing

E-Invoicing will become mandatory for taxpayers with an annual turnover or revenue of more than RM100 million from 1 August 2024. Taxpayers in other income brackets will adopt e-invoicing in stages, starting from 1 July 2025.

Individual Tax

Upskilling Courses

Tax relief up to RM2,000 for upskilling courses is extended until the year of assessment (YA) 2026.

Lifestyle Relief

The scope of the lifestyle relief is expanded to include fees for self-improvement courses such as language, photography, sewing, and others.

Electric Vehicle Charging Facilities

Tax relief up to RM2,500 for expenses related to electric vehicle (EV) charging facilities is extended from YA 2024 to YA 2027.

Childcare Allowance

Tax exemption on childcare allowance received by employees or paid directly by employers to childcare centers is increased from RM2,400 to RM3,000.

Sports Equipment and Activities

A new tax relief up to RM1,000 is introduced specifically for expenses on sports equipment and activities, including training fees.

Medical Treatment Expenses

Medical treatment expenses for self, spouse, child, and parents will be expanded to include dental examination and treatment, full medical examination for parents, and limited to a maximum of RM1,000.

Tax Incentives

Tax incentives are introduced to encourage women to return to the workforce, and the application period for the Returning Expert Programme is extended until 31 December 2027.

Corporation Tax

Environmental, Social, and Governance (ESG) Expenditure

Information and Communication Technology (ICT) Equipment

Capital allowance for ICT equipment and computer software will be revised to an initial allowance (IA) of 40% and an annual allowance (AA) of 20%. The period to claim the capital allowance is reduced from 4 years to 3 years.

Senior Citizens Private Nursing Case Home

Industrial Building Allowance (IBA) at a rate of 10% will be given to Senior Citizens Private Nursing Case Home approved by the Ministry of Health for building or renovation cost.

Sustainable and Responsible Investment (SRI) Fund Management

Tax exemption on management fees income from SRI fund management services and tax deduction on the cost of issuing SRI Sukuk are extended.

Social Enterprises

The application period for tax exemption on social enterprises is extended until 31 December 2025.

Indirect Tax

Import Duty and Sales Tax Exemption

Starting from 1 January 2024, eligible manufacturers will be granted import duty and sales tax exemption on the importation and locally purchased manufacturing aids, subject to the type of industry and category of goods.

Excise Duty

Excise duty on sugar-sweetened beverages will be increased from RM0.40 to RM0.50 per liter starting from 1 January 2024. Chewable tobacco products will also be subject to excise duty at a rate of 5% + RM27/kg.

Entertainment Duty

Entertainment duty in the Federal Territories (Kuala Lumpur, Putrajaya, and Labuan) will be reduced to between 0% to 10% from the current 25% for selected types of entertainments.

Stamp Duty

A flat rate stamp duty of 4% will be imposed on the instrument of transfer of property by non-citizens and foreign-owned companies, excluding Malaysian permanent residents. Property transfer documents involving beneficiaries relinquishing their rights will also be subjected to a stamp duty of RM10.

Business Implications

Considerations may include changes in tax policies, incentives for certain industries, infrastructure investments, and economic stimulus measures. It’s crucial for businesses to stay informed about budget updates to adapt their strategies and operations accordingly.

If you’re seeking more information on Malaysia’s Budget 2024 or require expert assistance in navigating its implications, we’re here to help. Our team is dedicated to providing comprehensive insights and tailored services to address your specific needs. Feel free to reach out for a deeper understanding of the budgetary changes and how they may impact your business, or to explore our range of services designed to support you in adapting to the evolving fiscal landscape.

Final Words

Budget 2024 has received mixed perspectives from various sources. Principal, a financial services company, expressed optimism about the valuation upside and recommended investing in sectors such as utilities, construction, property, and technology. They also highlighted the positive impacts on consumer, tourism, construction, and utilities sectors. Additionally, Principal mentioned the potential for steepening of the government bond yield curve.

The article published by Principal also highlighted the launch of the New Industrial Master Plan (NIMP) 2030, aimed at driving industrialization and establishing Malaysia as a regional economic leader. The plan focuses on attracting investments in priority sectors such as aerospace, chemicals, electrical and electronics, pharmaceuticals, and medical devices. It also identifies new growth areas, including advanced materials, electric vehicles, renewable energy, and Carbon Capture, Utilization, and Storage (CCUS).

In conclusion, Malaysia’s Budget 2024 introduces several significant changes and initiatives to drive economic growth, enhance fiscal responsibility, and improve the standard of living for Malaysians. The budget’s focus on good governance, targeted tax incentives, and strategic investments in key sectors demonstrates the government’s commitment to economic reforms and empowering the Rakyat.