BDO Corporate Tax News

Malaysia - Highlights of Budget 2024

Malaysia’s Budget 2024, presented by the Prime Minister on 13 October 2024, has three key pillars: good governance for service agility, restructuring of the economy to boost growth and raising the standard of living for the population (click here for an analysis of the tax proposals in budget 2024 prepared by BDO in Malaysia).

The main budget proposals that affect businesses include the following:
  • The global minimum tax under Pillar Two would be introduced in 2025 and would apply to companies with annual global income of at least EUR 750 million. Meanwhile, the government will continue to monitor development of the minimum tax at the international level.
  • A 10% capital gains tax would be imposed on net gains derived from the disposal of unlisted shares of domestic companies as from 1 March 2024 (for shares acquired before that date, the taxpayer could elect to pay 10% on the net gain or 2% on the gross sales value of the shares). The government is also proposing an exemption from the tax on the disposal of shares related to approved initial public offerings and internal restructurings.
  • A global services hub tax incentive would be introduced under which qualifying income would be subject to an income tax rate of 5% or 10% for up to 10 years. Applications for the incentive would have to be received by the Malaysian Investment Development Authority during the period 14 October 2023 to 31 December 2027.
  • Labuan entities that undertake Islamic financial-related trading activities, such as Islamic digital banking, Islamic digital bourses, ummah-related companies and Islamic digital token issuers, would be exempt from income tax for a five-year period (year of assessment (YA) 2024 to YA 2028).
  • The application period to benefit from the three-year income tax exemption on all income of a social enterprise, which is due to expire on 31 December 2023, would be extended for two years to 31 December 2025.
  • The service tax rate would be increased from 6% to 8%, although this increase would not include food and beverage and telecommunications services. The scope of the tax would be expanded to include logistics, brokerage and underwriting services.
  • New legislation would be drafted to introduce a luxury tax on high value items, based on the value of the goods. The tax rate would be 5% or 10%.
  • The introduction of mandatory e-invoicing for taxpayers with annual turnover or revenue of more than MYR 100 million would be deferred from 1 June 2024 to 1 August 2024. Taxpayers in other income categories would be required to comply with the phased-in implementation by 1 July 2025.

David Lai
BDO in Malaysia