The 2024 budget plan, totaling RM393.8 billion, exceeds the prior record of RM386.3 billion established when Prime Minister Datuk Seri Anwar Ibrahim presented last year’s budget in February. Out of this total allocation, RM303.8 billion is allocated for operational expenses, RM90 billion for development projects, and RM2 billion set aside as a reserve fund.

The government anticipates allocating RM52.8 billion for subsidies and social assistance in 2024, a decrease from the expected RM64.2 billion for this year. Revenue collection is projected to rise to RM307.6 billion from the current year’s RM303.2 billion. Any deficit in revenue will be covered through borrowing.

Business

1. The Income Tax Act 1967 (ITA) mandates the imposition of a capital gains tax (CGT) on the sale of unlisted shares. If shares are purchased after March 1st of the following year, the tax rate on the profit from the sale of unlisted shares will be 10%. For unlisted shares bought before March 1st, 2024, the seller has two options: they can either pay 10% on the profit after deducting the acquisition cost and associated selling expenses (such as stamp duty, legal fees, broker fees, and commissions) or pay 2% based on the gross turnover value. The 2% rate on the gross sale value is provided as an option, recognizing that the seller may not have accessible records of the initial equity cost.

Consequently, the Real Property Gains Tax (RPGT, regulated by a separate Act) will continue to be applicable to the sale of shares in a real property company (RPC), including those held by individuals, while the sale of unlisted non-RPC shares will be subject to the ITA’s CGT.

The CGT is applicable to the sale of unlisted shares held by:

1. Corporations,
2. Limited Liability Partnerships,
3. Cooperative Societies, and
4. Trust Entities.

Individual shareholders selling unlisted, non-RPC shares are exempt from CGT.

CGT exemptions are granted to:

1. Companies that have received approval for their Initial Public Offering through Bursa Malaysia.
2. Restructuring of shares within the same group of companies.

The date of sale is determined by:

1. The date of a written agreement or,
2. The absence of a written agreement, the date when the share transfer is completed.

Taxpayers are required to submit CGT returns electronically within 60 days from the sale date.

CGT losses can only be offset against income from the same source, and any unused capital losses can be carried forward for up to 10 consecutive years of assessment.

2. Capital Allowance for Information and Communication Technology (ICT) Equipment and Computer Software

The capital allowance for information and communication technology (ICT) equipment and computer software will see the initial allowance increase from 20% to 40%, while the annual allowance will remain at 20%. 

This allowance covers expenses related to the purchase of ICT equipment, computer software packages, and costs associated with customized computer software development, including consulting, licensing, and incidental fees.

Tax Reliefs for Individuals

1. Expansion of the scope of income tax relief for parent’s medical treatment, special needs, and carer expenses (as per Paragraph 46(1)(c) of the ITA 1967).

Currently, tax relief for parent’s medical expenses, limited to RM8,000, is applicable only to:

1. Medical treatment, special needs, and carer expenses.
2. Dental treatment, covering tooth extraction, filling, scaling, and cleaning, but excluding cosmetic dental treatment.

Starting from the year of assessment (YA) 2024 and onwards, the RM8,000 relief is broadened to include:

1. Full medical examination (up to RM1,000).
2. Dental examination and dental treatment now include teeth restoration and replacement, involving crowning, root canal, and dentures.

2. Extension of tax relief for up-skilling or self-enhancement course fees (according to Paragraph 46(1)(f) of the ITA 1967).

Currently, taxpayers are granted personal tax relief from YA 2022 to YA 2023 to enhance their skills and knowledge, with the relief capped at RM2,000. This relief is now extended for an additional 3 years. Effective from YA 2024 until YA 2026, this relief is part of the maximum relief of up to RM7,000 as stated in Paragraph 46(1)(f).

3. Dental examination and treatment for self, spouse, and child (Paragraph 46(1)(g) of the ITA 1967) (The relief is limited to RM1,000.)

Currently, medical treatment reliefs cover expenses related to:

1. Serious illness for self, spouse, and children.
2. Fertility treatment for self and spouse.
3. Vaccination for self, spouse, and children (up to RM1,000).

Effective from YA 2024, the scope of medical treatment is expanded to cover dental examination and treatment expenses.

4. Tax Relief for Lifestyle for Self, Spouse, and Child (Paragraph 46(1)(p) of the ITA 1967).

(The relief is limited to RM2,500.)

Currently, reliefs for lifestyle expenses can be claimed for:

1. Purchase or subscription of books, journals, magazines, newspapers, or other similar publications.
2. Purchase of a personal computer, smartphone, or tablet.
3. Purchase of sports equipment and payment of gym membership fees.
4. Monthly internet subscription bills.

Starting from YA 2024, the scope is extended to include fees for self-improvement courses, such as language courses, photography, and sewing. However, beginning from YA 2024, the purchase of sports equipment and payment of gym membership fees are no longer covered under lifestyle relief but can be claimed under sports equipment and activities for self, spouse, and children deduction (Paragraph 46(1)(u) of the ITA 1967), with a limit of up to RM1,000.

5. Tax relief for sports equipment and activities for self, spouse, and children (Paragraph 46(1)(u) of the ITA 1967).

Currently, the relief for lifestyle expenses related to sports is limited to RM500 and includes:

1. Purchase of sports equipment for sports activities.
2. Rental fees or admission fees to sports facilities.
3. Registration fees to participate in sports competitions.

Effective from YA 2024, the relief is increased to RM1,000, and the scope is expanded to include gym membership fees and sports training fees imposed by associations, sports clubs, or companies registered with the Sports Commissioner or Companies Commission of Malaysia and engaged in sports activities under the Sports Development Act 1997.

6. Extension of the tax relief for electric vehicle charging facilities for an additional 4 years (Paragraph 46(1)(v) of the ITA 1967).

Previously, this tax relief was granted from YA 2022 to YA 2023 for expenses related to:

Installation cost of an electric vehicle charging device:

1. Purchases, including lease-purchase of vehicle charging equipment.
2. Rental of electric vehicle charging equipment.
3. Subscription fees for electric vehicle charging facilities.

This relief is now extended from YA 2024 until YA 2027.

Business

1. Eligibility criteria for the tax treatment of micro, small, and medium enterprises (MSMEs) (As per Subsection 107C(4B) and Paragraph 19A(4) of Schedule 3 in the ITA).

As a reminder, in the revised Budget of 2023 announced by the Madani government in early February 2023, it was specified that companies having 20% or more of their ordinary paid-up share capital, either directly or indirectly, owned by entities incorporated outside Malaysia or individuals who are not Malaysian citizens are no longer qualified for the MSME tax rates of 15% and 17%. Starting from the year of assessment (YA) 2024, these companies will be subject to a tax rate of 24%.

Effective from YA 2024, additional conditions are imposed on companies meeting the above ownership criteria, whereby they are not entitled to:

1. Be exempted from filing tax estimates during the first 2 years of operation; consequently, they must submit tax estimates from the first year of incorporation (Subsection 107C(4B) ITA 1967).
2. Claim a special allowance for small-value assets without the maximum restriction of RM20,000 (Subparagraph 19A(4) Schedule 3 ITA 1967).

2. Revision of estimated tax payable (3rd tax installment, CP204) for the relevant year of assessment.

Effective from YA 2024, the Inland Revenue Board (IRB) permits a third revision of the total estimated tax on the 11th month of the basis period (Subsection 107C(7) ITA 1967). This third revision is allowed for companies, limited partnerships, cooperative societies, and trust bodies.

3. Restrictions on the use of funds and expenses for institutions, organizations, or funds approved under Subsection 44(6) of the ITA 1967.

Starting from YA 2024, the conditions for obtaining an exemption under the above sections and subsections of the ITA involve limitations on:

4. Tax Exemption for Institutions, Organizations, or Funds Approved under Subsection 44(6) ITA 1967 (As per Subparagraph 13(1)(a) of Schedule 6 in ITA 1967)

Commencing from the year of assessment (YA) 2024, income generated by an institution, organization, or funds approved under Subsection 44(6) ITA 1967 is exempt from income tax as long as it complies with the conditions of approval.

5. Extension of Industrial Building Allowance (IBA) to Private Nursing Homes for the Elderly

Private nursing homes for the elderly, endorsed by the Malaysian Ministry of Health, will be entitled to claim Industrial Building Allowance (IBA) at an annual rate of 10% for eligible expenses incurred in the acquisition, construction, or renovation of a building from January 1, 2024, to December 31, 2026.

6. Taxation of Capital Gains on Foreign Income Remitted into Malaysia

Tax will be imposed on the gains derived from the disposal of various types of capital assets. The applicable tax rate will depend on the category of the taxpayer. The following entities are subject to capital gains tax (CGT) on the disposal of capital assets from overseas when remitted to Malaysia:

1. Corporations
2. Limited Liability Partnerships
3. Cooperative Societies
4. Trust Entities

Exemptions are provided to these entities for remittances that meet the economic substance (ES) criteria. Among the ES conditions, taxable entities must meet the following requirements:

1. Employ an adequate number of qualified employees.
2. Incur sufficient operating expenses.

These requirements are enforced through subsidiary legislation.

7. Capital Gains Tax (CGT) on Foreign Incorporated Companies Holding Malaysian Properties

Gains from the sale of shares in a foreign-incorporated company holding properties in Malaysia are considered to have originated from Malaysia upon the sale of such shares, provided that the foreign-incorporated company acquired these shares from Malaysia. 

Shares are deemed to have been acquired from Malaysia if the company owns real property within Malaysia or shares in another controlled company, where the combined market value of real property and shares exceeds 75% of the value of its tangible assets.

8. Revised Definitions of Foreign Tax and Foreign Income (As per Subsection 2(1) ITA 1967 and Paragraph 16 of Schedule 7 ITA 1967)

Starting from the year of assessment (YA) 2024, the following definitions apply:

1. Foreign tax refers to taxes levied by the country where income is generated or derived.
2. Foreign income, for unilateral credit purposes, comprises income subject to foreign tax but does not encompass income derived from Malaysia.

9. Mandatory Electronic Submission of Forms E, CP21, CP22, CP22A, and CP22B (Section 83 ITA 1967)

All types of employers are obligated to electronically submit Form E, CP21, CP22, CP22A, and CP22B. 

1. The electronic submission of Form E is applicable for the year ending on December 31, 2023, and subsequent years.
2. CP21, CP22, CP22A, and CP22B electronic submissions will commence from January 1, 2024.

10. Employee Appointment for Electronic Submission of Forms (Section 152A ITA 1967)

Effective from the commencement of this Act, individuals falling under Section 75 ITA 1967 can designate employees to complete and electronically submit forms on behalf of their organizations.

11. Exemption from Submitting Forms CP22A and CP22B (Subsection 83(3) ITA 1967)

Starting from January 1, 2024, employers are not obligated to submit Forms CP22A and CP22B if they have knowledge that an employee is not retiring from employment. 

Employers are required to submit these forms when employees retire or pass away or when employees retire, pass away, or leave employment without PCB/STD deductions but are still liable for deductions under the scheme.

12. Taxpayer Responsibility for Electronic Information and Document Submission

Commencing from the year of assessment (YA) 2025, companies and other business entities are required to provide information and submit documents via the Malaysian Income 

Tax Reporting System (MITRS) within 30 days of the return submission date. 

Non-compliance constitutes an offense under Section 120 ITA 1967.

13. Tax Deduction for Environmental, Social, and Governance (ESG) Practices

To promote the adoption of ESG practices, the Malaysian government allows a tax deduction of up to MYR 50,000 per year of assessment for eligible ESG-related expenses from YA 2024 to 2027. This deduction covers various ESG expenditures, including ESG reporting by listed companies:

1. ESG reporting by financial institutions regulated by the Bank Negara Malaysia
2. Preparation of reports related to the Tax Corporate Governance Framework (TCGF)
3. Preparation of transfer pricing documentation
4. Consultation fees for implementing e-invoicing by micro, small, and medium enterprises.
5. Any other ESG reporting by companies to approved regulators

14. Additional Tax Deduction for Carbon Project Development

Companies incurring expenses related to the development of carbon projects, including Development and Measurement, Reporting, and Verification (DMRV) expenditures, are eligible for a further tax deduction of up to RM300,000. This deduction can be applied against income derived from trading carbon credits on the Bursa Carbon Exchange, and applications must be submitted to the Malaysian Green Technology and Climate Change Corporation (MGTC) between January 1, 2024, and December 31, 2026.

15. Tax Exemption for Islamic Securities Selling and Buying (ISSB) Transactions

Starting from the year of assessment (YA) 2024, income generated from ISSB transactions will be exempt from taxation, aligning the tax treatment of ISSB with conventional Securities Borrowing and Lending (SBL) transactions.

16. Extension of Tax Incentives for Sustainable and Responsible Investment (SRI) Funds and Sukuk

The income tax exemption for fund managers managing SRI funds and tax deductions for the issuance of SRI Sukuk will be extended for an additional four years of assessment, spanning from YA 2024 to YA 2027.

17. Expansion of Accelerated Capital Allowance for Automation Equipment

The accelerated capital allowance of 100% on capital expenditures for automation equipment will be expanded to include the commodity sector under the Ministry of Plantation and Commodities (KPK). Applications must be submitted to KPK between October 14, 2023, and December 31, 2027.

18. Extension of Green Investment Tax Allowance and Green Income Tax Exemption

The Green Investment Tax Allowance and Green Income Tax Exemption will be extended for applications received by the Malaysian Investment Development Authority (MIDA) or MGTC between January 1, 2024, and December 31, 2026.

19. Special Income Tax Rates for Film Production

A special income tax rate ranging from 0% to 10% will be introduced for film production companies, actors, or production crew members conducting film shoots in Malaysia.

20. Tax Incentives for Electric Vehicle Charging Equipment Manufacturers

A new tax incentive will be introduced for manufacturers of electric vehicle charging equipment:

1. Income tax exemption of 100% Statutory Income for up to 10 years from YA 2023 to YA 2032; or
2. Income Tax Allowance of 100% for a period of 5 years, which can be set

21. Reintegration of Women Returning to Work after a Career Break: The income tax exemption will be prolonged until the year of assessment (YA) 2028, with an extension of the application period until December 31, 2027.

22. Childcare Allowance from Employers or Employees: The income tax exemption for childcare allowances provided by employers or received by employees, applicable to children up to 12 years old, will be raised from RM2,400 to RM3,000 per year of assessment (YA).

23. Returning Expert Programs: The application timeframe for the Returning Expert programs will be expanded to include applications from January 1, 2024, to December 31, 2027. Approved applicants will be eligible for a 15% income tax rate for five consecutive years of assessment and an excise duty exemption of up to RM100,000 for the purchase of completely knocked-down (CKD) vehicles.

23. Equity Crowdfunding: The income tax exemption for individuals investing through equity crowdfunding platforms will be extended for three years, and it will now encompass investments made through a limited liability partnership (LLP) nominee company. This extension is valid for investments made from January 1, 2024, to December 31, 2026.

24. Angel Investors: The tax incentive for angel investors will be extended for an additional three years, covering investments made from January 1, 2024, to December 31, 2026.

Global Minimum Tax

In 2025, Malaysia will implement a minimum tax for companies generating a global income of at least 750 million euros ($789 million) annually, aligning with international standards.

Stamp Duty

1. Revision of the Definition of ‘Writing’ or ‘Written’ in the Stamp Act 1949 (As per Section 2, Stamp Act 1949)

Starting from January 1, 2024, the definition of ‘writing’ or ‘written’ will be amended to explicitly include electronic instruments.

2. Stamping of Instruments Executed Outside Malaysia (As per Subsection 42(2) of the Stamp Act 1949)

Beginning on January 1, 2024, instruments executed outside Malaysia pertaining to matters within Malaysia must be stamped within 30 days of acceptance via electronic means. Acceptance can be validated through a copy or printout of the electronic transmission.

3. Stamp Duty for Conventional Loan Agreements and Shariah-Compliant Financing in Foreign Currency

Effective from January 1, 2024, agreements in foreign currency will be subject to ad valorem stamp duty at a rate of RM5 for every RM1,000 of the loan amount, and the maximum stamp duty limit of RM20,000 is removed for items under para 27(a)(ii) of the First Schedule, Stamp Act 1949.

4. Stamp Duty Treatment for Property Transfer by Renunciation (Item 32(h) of the First Schedule of the Stamp Act 1949)

Commencing on January 1, 2024, the transfer of property involving beneficiaries renouncing their rights to other beneficiaries as per a will, faraid, or the Distribution Act 1958, will be subject to a fixed stamp duty of RM10.

5. Flat Stamp Duty Rate for Property Transfers by Foreign-Owned Companies and Non-Citizen Individuals

Starting from January 1, 2024, property transfers by foreign-owned companies and non-citizen individuals (excluding Malaysian permanent residents) will be subject to a fixed stamp duty rate of 4% for instruments executed from January 1, 2024. This replaces the current rates, which range from 1% to 4% based on sales price/market value (Item 32, First Schedule, Stamp Act 1949).

6. Discontinuation of Digital Franking Machines and Postal Franking Machines

As of January 1, 2024, amendments will be made to the provisions related to stamping through digital franking machines and postal franking machines (Sections 8, 48, 6A Stamp Act 1949, Subsections 7(1), 15(6), 82(b) Stamp Act 1949, and Fifth Schedule Stamp Act 1949).

7. Discontinuation of Adhesive Stamps

Effective from January 1, 2024, changes will be made to the provisions regarding the use of adhesive stamps (Sections 7, 43, 45, 48, 60, 71, 72, 73 of the Stamp Act 1949, and Subsections 57(b), 82(a) of the Stamp Act 1949, and Second Schedule to the Stamp Act 1949).

Real Property Gains Tax Act (RPGTA)

1. Introduction of the Self-Assessment System on January 1, 2025

(Amendments encompass provisions related to the introduction of the Self-Assessment System (STS) for Sections 2, 13, 13A, 14, 15, 15A, 16A, 17, 19, 19A, 20, 21, 57A of the RPGTA 1976)

Effective from January 1, 2025, 

1. the disposer will be responsible for computing their own tax within the RPGT return form. The disposer is allowed to submit a revised RPGT return form within 6 months from the RPGT return form’s due date.
2. The RPGT return form will be considered an assessment initiated by the Director-General (DG) 
3. deemed to have been served on the taxpayer when the return is filed. 
4. documents must be retained for a period of 7 years from the conclusion of the year of assessment in which the assessment was generated.

Luxury Goods Tax (LGT)

An imposition of a 5% to 10% tax is planned for luxury goods, with no specific information provided regarding the value or a comprehensive list of the types of goods that will fall under the LGT.

Service Tax (Under Sales & Service Tax (SST) Act)

The current tax rate on services will be raised from 6% to 8%. However, it’s important to note that this tax increase will not be applicable to certain services such as food and beverage and telecommunications.

Entertainment Duty – Exemption and Amendment

The entertainment duty levied in the Federal Territories of Kuala Lumpur, Labuan, and Putrajaya will be adjusted or waived for applications submitted to the Ministry of Finance from January 1, 2024, to December 31, 2028, in the following manner:

Stage performances by local artists will be completely exempt from entertainment duty.

The entertainment duty rate for theme parks, family recreation centers, indoor gaming centers, and simulators will be reduced from 25% to 5%.

The entertainment duty rate for stage performances by international artists and other entertainment events or venues, including film screenings, sports, e-sports, gaming, zoos, aquariums, circuses, and exhibitions, will be lowered from 25% to 10%.