2023 Revenue and expenditure summary
Govt earmarks RM 372.3 billion in spending for 2023.
Govt revenue is seen at RM 272.6 billion next year.
The deficit of RM 99.7 billion will be financed through borrowings.
However, the 2023 budget will require more time to be tabled once again and approved as the current government was dissolved on 10th October 2022.
Individual and corporate tax
The taxation rate for micro, small and medium enterprises (MSMEs-entities with paid-up capital of not more than RM2.5 million) for the first RM100,000 will be reduced from 17% to 15% effective from the 2023 year of assessment (Y/A). Therefore, the new 3 tiers tax rate from Y/A 2023 would be the chargeable income of:
1st RM100,000 at 15%
Next above RM100,000 to RM600,000 at 17%
And the balance of any amount exceeding RM600,000 at 24%.
- The 3 tiers tax rate for MSMEs is likely applicable only for companies with a turnover of RM50 million or less and
- that does not control, directly or indirectly, another company that has paid-up capital of more than MYR 2.5 million, and
- is not controlled, directly or indirectly, by another company that has paid-up capital of more than MYR 2.5 million.
Otherwise, the 24% tax rate is applicable.
The individual income tax rate is reduced by 2% for those earning between RM50,001 to RM100,000. However, income above the RM250,000 to RM 600,000 range will be subject to a 25% tax rate. An increase of half of 1% for taxpayers earning above RM 250,000 to RM 400,000. Therefore, an individual with an income of up to RM250,000 will save RM1,000 while a taxpayer with earnings of up to RM400,000, is reduced to RM250. Effective from Y/A 2023.
The income tax relief given to individual taxpayers of up to RM3,000 for registered kindergarten and childcare centers will be extended to Y/A 2024.
The life insurance or takaful contributions for individual reliefs of up to RM3000 will also include EPF contributions in Y/A 2023.
Tax relief for medical expenses is to be expanded to include dental examination and treatment expenses of up to RM1,000. The examination and treatment must be provided by a dental practitioner registered with the Malaysian Dental Council. This applies to YA2023.
Tax relief for Covid-19 detection is to be expanded to include tests conducted in a laboratory that is recognized by the Ministry of Health, from YA2023.
Tax relief extended for (Net) deposits in Skim Simpanan Pendidikan Nasional (SSPN) of RM8,000, up to YA2024.
The special flat tax rate of 15% for non-Malaysian individuals holding C-suite positions in Electronics & Electrical companies relocating their operations to Malaysia is extended to YA2024.
The scope of tax incentives widens for individual investors who invest in Equity Crowd Funding to include investments made by an individual investor through a Limited Liability Partnership Nominee Company. The incentive is extended for a period of three years, for investments made up to 31 December 2026.
Tax incentive for angel investors who invest in ordinary shares of a company is extended for a period of three years, for applications received by MOF up to 31 December 2026
Women returning to the workforce after taking a career break will receive income tax exemptions for five years from 2023 to 2028. Applications for the exemption must be received by Talent Corporation Malaysia Berhad (TalentCorp) between 1 January 2023 and 31 December 2027 and the career break must have been for at least two years on the date the application is received by TalentCorp.
Unutilized unabsorbed losses carried forward for companies in sectors with long-gestation periods (e.g., forestry and hydroelectric projects) will be extended from 10 Y/As to 20 Y/As.
EV charging equipment manufacturers are also given a 100% income tax exemption on statutory income from Y/A 2023 to the assessment year 2032 and a 100% Investment Tax Allowance.
Extension of the incentive application period for Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) until Dec 31, 2025, by increasing the incentive period from three years (previously) to five years for eligible green activities such as solar activities along with Battery Energy Storage System
The Income Tax (the Incentive for Manufacturers of Pharmaceutical Products Scheme) Rules 2022 [P.U.(A) 34] were gazette on 17 February 2022. The Rules provide that a qualifying company that carries on a business in respect of a qualifying activity under the Incentive for Manufacturers of Pharmaceutical Products Scheme (Scheme) shall be taxed at the following rates:
- 0% to 10% tax rate for the first 10 years
- 10% tax rate for the next 10 years.
A “qualifying company” is a manufacturer of pharmaceutical products whose application for the Manufacturers of Pharmaceutical Products Incentive Scheme has been approved by the Minister. The application must be received by the Minister, through MIDA, between 1 January 2021 and 31 December 2022 (the application be extended to 31st December 2025).
The government will also extend income tax incentives and investment tax allowances for aerospace companies until Dec 31, 2025, to attract new entrants and encourage growth by existing industry players. A matching grant of RM50 million was also provided to support the development of the aerospace industry.
Special tax status for Pengerang, as well as chemical and petrochemical industry investment incentives to develop Pengerang as a petrochemical hub.
Tax deductions to those who contribute to non-governmental organizations (NGOs) which are involved in the development of sports at the grassroots level.
Further deduction given on the remuneration of ex-convicts is extended to attendees and former attendees of the Henry Gurney School, protection and rehabilitation institutions, and non-government care centers registered under the Department of Social Welfare. This proposal is effective from YA2023 until YA2025.
Deduction for contributions to the Trust Fund for the Treatment of Rare Diseases, to be established by the Government
Deduction for contributions to the Komuniti Filem Funds and Pembangunan Filem Kenegaraan under the National Film Development Corporation Malaysia (FINAS)
Deduction of up to RM1.5m in relation to the cost of listing on the Access, Certainty, Efficiency (ACE), and Leading Entrepreneur Accelerator Platform (LEAP) markets to be extended for another three years, until YA2025. Scope of deduction to be expanded for YA2023 to YA2025 to include the cost of listing technology-based companies on the Bursa Main Market.
Government to introduce the qualified domestic minimum top-up tax.
Tax Administration
Individuals aged 18 years and above will automatically receive a TIN (Tax Identification Number) from the year 2023 onwards
Import & stamp duties and excise tax
Import duty and excise exemption on imported complete built-up (CBU) type electric vehicles (EVs) will be extended until Dec 31, 2024.
Additionally, the exemption for the approved permit (AP) fee will also be given for the import of EVs (CBU) until Dec 31, 2023.
Import duties and sales tax exemptions for the purchase of film equipment.
Extension of 100% stamp duty exemption on loan restructuring or rescheduling agreement, or financing, until 2024
Stamp duty exemption for instruments of purchase of residential property valued between RM500,001 and RM1m will be increased from 50% to 75%, up to 31 December 2023. This applies to first-time homeowners only.
From 1 January 2023, RM10 stamp duty is applicable on:
Instrument of transfer of real property between family members (between spouses, parent and child, and grandparent and grandchild) by way of love and affection, provided the transferee is a Malaysian citizen
Educational loan or scholarship agreement for all levels, including certificates (education / skills / professional) at any educational and training institution. The RM10 stamp duty was previously only applicable to loans made for the purpose of pursuing higher education in higher educational institutions.
Others- Going Green Initiative
The Green Technology Financing Scheme (GTFS) will also be improved, with the guarantee value increased to RM3 billion until 2025, while the financing scope is extended specifically to the EV sector with a guaranteed limit of up to 60%, and the financing of the waste sector will be increased to 80%
Bank Negara Malaysia (BNM) will provide RM1 billion under the High Tech and Green Financing Facility (Dana Pembiayaan Teknologi Tinggi dan Hijau) to support innovative sustainable technology start-ups and RM1 billion under the Low Carbon Transition Facility to help SMEs (small and medium enterprises) implement low carbon practices. Through the Dana Impak (loosely translated as Impact Fund), Khazanah Nasional Bhd will provide RM150 million to boost the development of environmentally friendly projects including supporting the carbon market and restoration of degraded forests.
The government intends to introduce a carbon tax and will study the feasibility of a carbon pricing mechanism. To support the implementation of this mechanism, the government will provide RM10 million as a matching grant to help prepare carbon assessments for SME companies and eligible related products.
EPF & SOCSO
Aside from the compulsory EPF contribution by employers and employees, the voluntary employees’ Provident Fund contribution limit has been increased to 100,000 ringgit per year from 60,000 ringgit. The self-employed must contribute to SOCSO starting in 2023.
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