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Key Tax Proposals

Corporate Tax

Income Tax Rate for Micro, Small and Medium Enterprises (“MSME”)

A reduction of the Corporate Income Tax rate from 17 percent to 15 percent for the first RM 150,000 of chargeable income for MSMEs, effective from YA 2023, shall be graded as follows:

Chargeable Income	Income Tax Rate
First RM 150,000	15 %
RM 150,001 to RM 600,000	17 %
Exceeding RM 600,000	24 %

Review of Tax Deduction on Cost of Listing in Bursa Malaysia

To further encourage more technology-based companies and MSMEs to expand their business by increasing capital funds through Bursa Malaysia listing, it is proposed that:

the existing tax deduction of up to RM 1.5 million on the cost of listing on the ACE and LEAP Markets be extended for a period of 3 years, i.e., from year of assessment (“YA”) 2023 to YA 2025; and
the tax deduction is expanded to include cost of listing technology-based companies in Bursa Main Market.

Tax Deduction for Expenditure on Malaysian-Made Handicraft

It is proposed that a tax deduction of up to RM 150,000 be granted on qualified Malaysian-made handicraft purchased from local handicraft entrepreneurs registered with the Malaysian Handicraft Development Corporation from 1 January 2023 to 31 December 2025.

This deduction does not apply to expenditures where claims have been made under Section 33 or Schedule 3 of the Income Tax Act, 1967 (“the Act”).

Tax Deduction for Sponsorship of Smart Artificial Intelligence (“AI”) –
Driven Reverse Vending Machines

It is proposed that a tax deduction under Section 34(6)(h) of the Act be granted to companies, individuals, partnerships, trusts and cooperatives with business income undertaking donations or sponsorships of AI – Driven Reverse Vending Machines to support the recycling of plastic waste ecosystem and to ensure that the collected-for-recycling rate is increased through an effective and organised plastic waste collection program.

The above will be made effective for contribution and sponsorship application received by the Ministry of Finance (“MoF”) from 1 April 2023 to 31 December 2024.

Tax Deduction on Issuance Cost of Sustainable and Responsible Investment
(“SRI”) Linked Sukuk

It is proposed that a tax deduction on the cost of issuing SRI-linked Sukuk, approved or deposited with the Securities Commission Malaysia (“SSM”), be granted for a period of 5 years (i.e., from YA 2023 to YA 2027) in order to provide an innovative Shariah-compliant financing and to place Malaysia as a regional hub of SRI-linked Sukuk issuance.

Tax Deduction for Contributions Made to National Film Development Corporation Malaysia (“FINAS”)

It is proposed that a tax deduction be granted for contributions made to the Tabung Komuniti Filem dan Pembangunan Filem Kenegaraan under FINAS to support the arts and culture industry.

Tax Deduction for Employment of Former National Athletes

It is proposed that tax deduction be granted to employers for the employment of former athletes in order to safeguard the welfare of former national athletes.

Tax Deduction for Renting Non-Commercial Electric Vehicles (“EV”)

The maximum tax deduction for the rental of non-commercial EVs is increased to RM 300,000 from YA 2023 to YA 2025.

Double Deduction for Child Care

To encourage employers to provide childcare facilities for their employees, expenses incurred for the provision and maintenance of child care centres, and child care allowance provided to employees are given a double deduction. It is proposed that the double deduction be maintained until further notice.

Tax Incentives

New Industrial Master Plan 2030

It is proposed that investment incentives will be restructured towards tiered tax rates with an outcome based approach. The New Industrial Master Plan 2020 (to be announced in Q3 2023) will place an emphasis on high quality activities and the recruitment of local talent.

The monitoring of investments receiving incentives will also be strengthened.

Tax Incentive for Manufacturers of EV Charging Equipment

It is proposed that tax incentives shall be granted to further the complement of the EV ecosystem and to attract high value investment in EV charging equipment manufacturing.

The proposed tax incentives are:

100 percent tax exemption on statutory income from YA 2023 to YA 2032.; or
Investment Tax Allowance (“ITA”) of 100 percent on qualifying capital expenditure (“QCE”) incurred for a period of 5 years and set-off against 100 percent of the statutory income for each YA.

Effective for applications received by the Malaysian Investment Development Authority (“MIDA”) from 25 February 2023 to 31 December 2025.

Review of Automation Capital Allowance (“CA”)

It is proposed that the Automation CA for automation equipment be enhanced as follows:

the scope of automation to include the adaptation of Industry 4.0 elements;
the scope of tax incentive be expanded to include the agricultural sector; and
the capital expenditure threshold for categories 1, 2 and agriculture be aligned and increased up to RM
10 million.

Effective for applications received by MIDA and the Ministry of Agriculture and Food Security (“MAFS”) from 1 January 2023 to 31 December 2027.

Tax Incentives for Carbon Capture and Storage (“CCS”)

In order to reach the Low Carbon Nation Aspiration by 2040 under the National Energy Policy 2022 – 2040, the following tax incentives are proposed for companies undertaking CCS activities.

Companies undertaking CCS in-house activity

ITA of 100 percent of QCE for a period of 10 years and set-off against 100 percent of business statutory income;
Import duty and sales tax exemption on equipment used for CCS technology from 1 January 2023 to 31 December 2027; and
Tax deduction for allowable pre-commencement expenses within 5 years prior to the date of commencement of operation.

Companies undertaking CCS services

ITA of 100 percent of QCE for a period of 10 years and set-off against 100 percent of statutory income; or
Tax exemption of 70 percent on statutory income for a period of 10 years; and
Full import duty and sales tax exemption on equipment used for CCS technology from 1 January 2023 to 31 December 2027.

Companies using CCS services be granted a tax deduction on fees incurred for the use of CCS services.

The above will be made effective for application received by the MoF from 25 February 2023 to 31 December 2027; and tax deduction can be claimed from YA 2023 to 2027.

Tax Incentive for Chicken Rearing in Closed House System

It is proposed that an Accelerated Capital Allowance (“ACA”) and an Income Tax exemption of 100 percent on QCE be granted to chicken rearers who adopt an environmentally friendly closed house system and increase productivity from YA 2023 to YA 2025. Thus QCE that can be claimed amounting to 200 percent within a year.

Tax Incentives for Aerospace Industry

It is proposed that the tax incentive be extended for a period of 3 years from 1 January 2023 to 31 December 2025 in line with the 12th Malaysia Plan to transform Malaysia into a key player in the aerospace industry.

Tax Incentive for Relocation to Malaysia

It is proposed that the tax incentives be extended for a period of 2 years from 1 January 2023 to 31 December 2024. This incentive includes a special tax rate of 0 percent for up to 15 percent or 100 percent ITA for 5 years for qualifying companies in the manufacturing and selected services sectors.

Tax Incentives for Ship Building and Ship Repairing Industry (“SBSR”)

Tax exemption and ITA SBSR will be extended for 5 years from 1 January 2023 to 31 December 2027.

Tax Allowance for Data Centres

To facilitate the optimization of government services to the people, the government will ensure more data centres to be opened in Malaysia by providing tax incentives, in addition to other infrastructure and facilities. Further details on the incentives have not yet been announced.

Indirect tax

Introduction of luxury goods tax

It is proposed that a Luxury Goods Tax be introduced from 2023 with a certain threshold value, based on the type of luxury items (e.g. it could include expensive cars, watches, handbags, private jets, jewellery, etc.).

Extension of period for import duty, excise duty and sales tax exemptions on imported CBU, locally assembled CKD EVs and components for locally assembled EVs

It is proposed that import duty, excise duty and sales tax exemption given to imported CBU and CKD components and locally assembled EVs be further extended, as follows:

Tax Measures	Period Extension
Full import duty and excise duty exemption on imported CBU EV	until 31 December 2025
Full Excise Duty and Sales Tax exemption on locally assembled CKD EVs	until 31 December 2027
Full Import Duty exemption on components for locally assembled EV	until 31 December 2027

Imposition of excise duty on liquid or gel products containing nicotine

It is proposed that the imposition of Excise Duty will be extended to liquid or gel containing nicotine used in electronic cigarettes and vape. The rate of applicable Excise Duty and the effective date is yet to be announced. Currently, only nicotine free liquid and gel products are subject to Excise Duty.

Exemption on Nicotine Replacement Therapy (“NRT”) Products

Currently, NRT products, specifically nicotine gums and nicotine patches, are subject to Import Duty and Sales Tax. It is proposed that effective 1 April 2023, nicotine gum and nicotine patch products be exempted from Import Duty and Sales Tax for a period of 3 years.

Import duty and sales tax exemption on studio and filming production equipment

It is proposed that studio and filming production equipment be exempt from Import Duty and Sales Tax from 1 April 2023 to 31 March 2026, and be granted to providers of equipment and production services including post-production, studio and cinema.

Review of excise duty and sales tax exemption on sale, transfer and disposal of taxi

Effective from 1 March 2023, it is proposed that the current exemption be extended to include executive taxi and Teksi 1Malaysia and airport taxis. The qualifying age of the vehicles is proposed to be reduced from 7 years to 5 years from the registration date.

Prior to 1 March 2023, Excise Duty and Sales Tax exemption are granted for the sales/transfer/private use/disposal of budget taxis and hired cars which are individually owned budget taxis and hired cars, and the age of the vehicle exceeding 7 years from the date of registration.

Individual tax

Review of individual income tax rate

It is proposed that the Income Tax rate for resident individuals for YA 2023 be reduced by 2 percent for resident individuals with a chargeable income ranging between RM 35,0001 and RM 100,000. Whereas an increase of 0.5 percent up to 2 percent is proposed for resident individuals with achargeable income ranging between RM 100,001 and RM 1,000,000.

Chargeable Income	Current Tax Rate (%)	Proposed Tax Rate (%)
RM 35,001 to RM 50,000	8	6
RM 50,001 to RM 70,000	13	11
RM 70,001 to RM 100,000	21	19
RM 100,001 to RM 250,000	24	25
RM 250,001 to RM 400,000	24.5	25
RM 400,001 to RM 600,000	25	26
RM 600,001 to RM 1,000,000	26	28

Tax relief for medical treatment expenses

It is proposed that the scope of tax relief up to RM4,000 for medical treatment expenses be expanded to include intervention expenditure for Autism, Attention Deficit Hyperactivity Disorder, General Developmental Delay, Intellectual Disability, Down Syndrome and Specific Learning Disabilities, where:

Diagnostic assessment is certificed by a medical practitioner registered with the Malaysian Medical Council; and
Early intervention and rehabilitation program is conducted by a health practitioner registered under the Allied Health Profession Act 2016.

With the expanded scope, the amount of tax relief for medical treatment expenses is increased from
RM 8,000 to RM 10,000.

Tax relief for fees paid to child care centre and kindergarten

The tax relief of RM 3,000 for fees paid to child care centre and kindergarten is extended for another year effective YA 2024.

Tax relief for life insurance premiums or takaful contribution on life insurance policy

The scope of this tax relief is to be expanded to cover contributions to Employees Provident Fund (“EPF”) made voluntarily by individuals or pensionable public servants of up to RM 3,000, effective YA 2023.

Concessionary tax rate for C-Suite in E&E sector

The concessionary flat rate of 15 percent for C-suites is to be extended until 2024. This applies to non-citizen individuals who are resident in Malaysia and hold a C-suite position or key position in Malaysian companies which relocate their overseas operations into Malaysia.

Stamp Duty

Stamp duty exemption for first-time home buyers

It is proposed (effective date is yet to be stated) that Stamp Duty exemption is granted for first-time home buyers.

Value of 1st Residential Home	Stam Duty Exemption
RM 500,000 and below	100 %
over RM 500,000 to RM 1,000,000	75 %

Stamp duty for transfer of property by way of love and affection

Effective from 1 April 2023, the Stamp Duty on instruments of transfer of property between parents and children, grandparents and grandchildren of Malaysian citizens, be fully exempted, limited to the first RM
1 million of the property’s value. The remaining balance is subject to ad valorem rate and is granted a 50 percent exemption on the Stamp Duty imposed.

Currently, a Stamp Duty exemption of 50 percent is granted on the instrument of transfer of property executed between parents and children of Malaysian citizens.

Stamp duty for educational loan/scholarship agreement

Effective from 1 June 2023, the scope of a Stamp Duty of RM 10 applicable on educational loans/scholarship agreements will be expanded to include educational loans/scholarship agreements to pursue education at all levels, including certificates in any educational and training institutions.

Currently, Stamp Duty on educational loan/scholarship agreement is imposed on tertiary education (diploma and above) at higher learning institutions at RM 10, whilst other education levels are charged at ad valorem rates.

Stamp duty exemption on restructuring or re-scheduling of loans/financing agreements

This Stamp Duty exemption is proposed to be extended for another 2 years, i.e., for instruments executed from 1 January 2023 to 31 December 2024.

Other matters

Reintroduction of Special Voluntary Disclosure Programme

As previously introduced by the Royal Malaysian Customs Department (“RMCD”) on the Special Voluntary Disclosure Program (“SVDP”), The Inland Revenue Board of Malaysia (“IRB”) and RMCD will re-implement SVDP from 1 June 2023 to 31 May 2024.

A 100 percent penalty remission will be granted for any companies/individuals to make a voluntary disclosure, in good faith for any duty/penalty liabilities that remain outstanding.

Proposed introduction of capital gains tax

The Government will conduct a study on introducing Tax on Capital Gains from YA 2024 on the disposal of unquoted shares made by companies at a low tax rate.

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