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Malaysia’s Latest Tax Benefits for Individuals and Businesses

As 2025 approaches, many of us are closely examining the national budget, particularly its tax-related provisions, to understand how we might benefit from it. Malaysia’s budget 2025 has been unveiled by Malaysia’s government on 18 October 2024, it focuses on revitalizing the economy through significant tax reforms and measures designed to benefit both individuals and businesses.

Here are some key highlights of Malaysia’s latest tax benefits and reforms introduced in Budget 2025:

For individuals:

1. Expansion or increased of tax reliefs from YA 2025

  • Medical expenses incurred for self, spouse or child capped at RM10,000.
  • Medical treatment, dental treatment, special needs and carer expenses for parents capped at RM8,000: Reliefs extended to cover grandparents.
  • Education and medical insurance premiums: Relief limit raised to RM4,000.
  • Sport equipment and activities up to RM1,000: Expanded to include expenses incurred for parents.
  • Further tax relief on top of personal income tax relief of RM9,000 for disabled:

2. Extension of tax reliefs

  • Private Retirement Scheme (“PRS”) and deferred annuity premiums: Relief extended until YA 2030.
  • Savings in Skim Simpanan Pendidikan Nasional (SSPN): Relief extended for three more years up to 2027.
  • Nursery or kindergarten fees relief up to RM3,000 will be extended to YA 2027.

3. Reintroduction of tax relief for first residential home

  • If you are a first home buyer: Tax relief up to RM7,000 for houses below RM500,000 and RM5,000 for house between RM500,000-RM750,000.

Condition:

-Sale and Purchase Agreement (SPA) must be executed from 1 January 2025 until 31 December 2027.

-Can’t use home to generate income.

-Tax relief for 3 assessment years (starting from 1st year interest paid).

4. Tax Exemptions

  • Exemption on foreign-sourced income received by resident in Malaysia, which is currently granted until 31 December 2026 has been extended until 31 December 2036.

For Businesses:

1. Tax incentives for implementing e-invoicing

  • Qualifying expenditure for purchase of ICT equipment, computer and software package, consultation, licensing and incidental fees for the development of customised software for the implementation of e-invoicing. The claim is effective from YA 2024 to YA 2025.

2. Dividend tax

  • Introduction of a 2% dividend tax on annual dividend income exceeding RM100,000 received by individual shareholders. Effective from YA 2025.

3. Sales and service tax

  • Sales tax will be increased on non-essential items such as imported premium goods.
  • Expansion of the scope of service tax to include commercial service transactions between businesses.
  • Effective date: 1 May 2025

4. New investment incentive framework

  • Supply chain resilience initiatives:

-Double tax deduction up to RM2 million per year for multinational enterprises (MNE) for a period of 3 consecutive years to strengthen local supply chain.

-Tax deduction on the amount of investments made by MNEs or their suppliers who make joint venture investments with other local suppliers. Local suppliers will be considered for tax incentive based on outcome.

-Investment matching fund up to RM100 million for the expansion of local suppliers in the electrical and electronic sectors, specialty medical device and chemical industry.

-Income tax incentive at special rate for investment in 21 economic sectors across specific states within Malaysia.

  • Tax incentive for increasing exports of integrated circuits

-Tax exemptions on 70% of statutory income equivalents to 50% of the value of increased exports to be expanded to include Integrated Circuit (IC) design services.

5. Smart Logistics Complex (SLC)

  • 60% investment tax allowance (ITA) to be offset against 70% of statutory income for a period of 5 years to promote business utilising advanced technology for logistics (for applications received by MIDA from 1 Jan 2025-31 Dec 2027)

6. Structured Internship Programme (MySIP)

  • Double deduction on expenses incurred by companies implementing MySIP is expanded to cover students participating in structured internship conducted by industry regulatory bodies. This incentive is extended to YA 2030.

7. Tax incentives for employers

  • Hiring women returning to work– A 50% further deduction will be given to employers on employment expenses paid for a period of 12 months for hiring women returning to work. (Effective for application received by TalentCorp from 1 Jan 2025 – 31 Dec 2027)
  • Employers implementing flexible work arrangement (FWA) – A 50% further deduction will be given to employers whose incur expenses for capacity building and software acquisition to implement FWA. The eligible expenses capped at RM500,000, subject to one off claim and to be verified by TalentCorp. (Effective for application received by TalentCorp from 1 Jan 2025 – 31 Dec 2027)
  • Tax Exemption on childcare allowance to employees (RM3,000 limits) – The scope of further tax deductions on childcare allowance paid by employers is expanded to cover elderly care (parents and grandparents) (Effective from YA 2025)

In conclusion, Malaysia’s Budget 2025 introduces a range of tax benefits designed to alleviate the cost of living, promote sustainable growth, and support both individuals and businesses. From enhanced tax reliefs for education, healthcare, and housing to targeted business incentives and green initiatives, these measures aim to foster economic resilience and social well-being.

Abbreviation:

TalentCorp – A national agency under the Ministry of Human Resources in Malaysia.