Key “Tax-Aways”for the Year 2025

Foreword

In 2025, Malaysia’s economy experienced steady growth under the MADANI Economy framework, providing a stable backdrop for the Government’s fiscal and tax policy agenda. Despite ongoing global uncertainties, manageable inflation, a resilient labour market and sustained investment activity supported efforts to strengthen revenue collection, broaden the tax base and enhance tax compliance while maintaining economic competitiveness.

This publication highlights the key “Tax Takeaways” for 2025, focusing on significant tax developments that taxpayers should keep in mind as we step into the new year. Many of these changes are relatively recent, having been introduced or announced in the past few months, making this a timely and practical reference for those preparing for the year ahead. We encourage taxpayers to review these 2025 tax takeaways carefully to better anticipate and navigate potential challenges.

Looking ahead to 2026, Malaysia’s economic outlook offers a stable foundation for the Government’s fiscal and tax policy initiatives, including measures introduced under Budget 2026. While the outlook is positive, its success will hinge on effective policy execution, particularly in areas of fiscal discipline, inclusivity, and technological innovation. In a landscape defined by ongoing change and uncertainty, staying informed is essential. We remain committed to supporting our clients in navigating the tax challenges ahead.

From all of us at Crowe Malaysia, we extend our warmest wishes to our clients for a Happy New Year and continued success in 2026.

This publication highlights the key “Tax Takeaways” for 2025, focusing on significant tax developments that taxpayers should keep in mind as we step into the new year.

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Corporate Tax

Increase of exemption threshold for e-invoice implementation

The Inland Revenue Board of Malaysia (IRBM) announced on 7 December 2025 that the annual revenue threshold for exemption from implementing e-Invoice has been increased from RM500,000 to RM1,000,000.

Restructuring of monthly tax instalments payment

Effective from the year of assessment (YA) 2028, the monthly tax instalment (CP204) payment schedule for the estimated tax payable will begin in the first month of the basis period, rather than second month as currently practiced.

Expansion of scope for mandatory submission of required information and documents

The requirement to submit information and documents through the Malaysian Income Tax Reporting System (MITRS) within 30 days after the tax return’s due date will be expanded to include partnerships. This aims to assist the Director General of Inland Revenue (DGIR) in determining the partnership’s divisible income or loss, effective from YA 2027.

Imposition of tax on dividends received by individual shareholders

Dividend tax at the rate of 2% will be imposed on dividend income earned by individual shareholders earning annual dividend income exceeding RM100,000, effective from YA 2025.

Imposition of income tax on profit distributions received by partners in a Limited Liability Partnership (LLP)

Effective from YA 2026, profit distributions from LLPs that exceed RM100,000 per year will be taxed at 2% on the chargeable income. The partners are required to declare these profit distributions in their annual income tax returns.

Review of tax exemption on income received from outside Malaysia

The exemption on foreign dividends and profits from the disposal of foreign capital assets will be expanded to cover cooperative societies and trust bodies. This exemption, together with the existing one for unit trusts on foreign-sourced income, will be extended for another four (4) years, effective from 1 January 2027 to 31 December 2030.

Accelerated Capital Allowance (ACA) on capital expenditure for plant, machinery and ICT equipment

Companies that acquire qualifying assets such as heavy machinery, ICT equipment, software, or plant between 11 October 2025 and 31 December 2026 are eligible to claim an Initial Allowance of 20% and an Annual Allowance of 40%.

Stamp duty on employment contracts

Effective 1 January 2026, all employment contracts are subject to a fixed stamp duty of RM10. However, employment contracts with a monthly salary of RM3,000 or below will be fully exempted from stamp duty.

Individual Tax

Individual income tax relief on housing loan interest payment for first residential home

The income tax relief on the interest payments for the first residential home loan (individually or jointly owned), is as follows:

House Price (RM)	Total Tax Relief Per Year (RM)
Up to 500,000	7,000
Above 500,000 tp yo 700,000	5,000

This relief is applicable for the sales and purchase agreement of the first residential home executed from 1 January 2025 to 31 December 2027, provided that the individual meets the requirements as specified by the IRBM.

This will be effective from 1 January 2025.

Review of individual income tax relief for disabled persons

Further income tax relief for disabled individuals has been reviewed as follows:

Relief for a disabled individual taxpayer will be increased from RM6,000 to RM7,000.
Relief for a disabled spouse will be increased from RM5,000 to RM6,000.
Relief for an unmarried disabled child will be increased from RM6,000 to RM8,000.

These will be effective from YA 2025.

Extension of individual income tax relief on net savings in the National Education Savings Scheme (SSPN)

The income tax relief can only be claimed by either parent regardless of the number of children, for Skim Simpanan Pendidikan Nasional (SSPN) savings, with a maximum claim limited to RM8,000; and
Withdrawals from the SSPN fund intended to finance higher education expense of the child will not be considered in the calculation of net savings for that particular year and will not affect the eligible amount for tax relief.

This will be extended for a period of three (3) years from YA 2025 to YA 2027.

Payroll and Immigration

Mandatory EPF contributions for Non-Malaysian citizen employees

EPF contributions will become mandatory for non-Malaysian employees starting with wages for October 2025 (contributions due in November 2025).
The new requirement applies to all non-Malaysians holding a valid passport and employment-related pass— excluding domestic servants.
Contribution Rates:
- Employees contribute 2% of monthly wages; and employers also contribute 2%.
- For individuals who enrolled voluntarily before October 2025, there is an option to continue at the current employee contribution rate of 11%, subject to the completion of the prescribed EPF form.

Increased allocation of HRD Corp funds for skill training facilities

Employers shall be permitted to allocate up to 50% of HRD Corp funds, an increase from the current limit of 30%, for the purpose of financing skills training facilities. This allocation may include expenditures related to equipment procurement as well as modifications and enhancements to training facilities.

Simplify documents for Professional Visit Pass (PVP) application

The Expatriate Services Division (ESD) has revised the document requirement list on its online portal to uphold national security standards and enhance the efficiency of application processing. All applicants are required to ensure that their submissions fully comply with the updated requirements. Failure to adhere to these standards may result in delays or the rejection of applications due to outdated or incomplete documentation.

Cooling-off period

The Malaysian Immigration Department has implemented a stringent compliance measure for companies found in breach of expatriate application regulations. A defaulting company will be subjected to a six‑month cooling‑off period. During this suspension, the company’s Expatriate Services Division (ESD) account will be disabled and cannot be used to submit new applications or lodge appeals. Breaches that trigger this sanction include the submission of false information, the use of forged documents, or the misuse of the ESD online system. Upon completion of the six‑month period, the ESD will conduct a reassessment of the company’s eligibility before reinstating access to the system.

Transfer Pricing

Revised Malaysian Transfer Pricing Guidelines 2024 (MTPG)

The MTPG 2024 was issued on 24 December 2024. The key changes are as follows:

The thresholds for preparing Contemporaneous Transfer Pricing Documentation (CTPD) have been updated to the following:
- Annual gross business income exceeding RM30 million and total cross-border controlled transactions exceeding RM10 million annually; or
- Receives or provides controlled financial assistance of more than RM50 million annually.
The following persons will be exempted from preparing a CTPD:
1. Individuals not carrying on a business;
2. Individuals carrying on a business (including partnerships) who are only engaged in domestic controlled transactions;
3. Persons who entered into controlled transactions (including domestic and cross-border) with a total amount not more than RM1 million per year; or
4. Persons who entered solely into domestic controlled transactions with another person where both parties:
  - do not enjoy tax incentives;
  - are taxed at the same headline tax rate; and
  - do not suffer losses for two consecutive years prior to the controlled transactions.
A simplified approach (safe harbour rule) for low value adding intra-group services (LVAS) was introduced to allow a standard 5% mark-up on costs which eliminates the need for taxpayers to conduct benchmarking studies for LVAS.
Fine-tuning the comparability analysis
- Adoption of a narrower arm’s length range (ALR) to a range from 37.5th to 62.5th percentile. Where the tested party's results fall outside the ALR, the IRBM may adjust to the median point of the ALR.
- Comparable companies with turnover of less than 10% of the tested party’s revenue will be deemed to have a lesser degree of comparability and will not be accepted as comparable unless they are accepted by the IRBM.
- In computing the benchmarking results, the latest financial data available should be used. Multiple-year data (3-year weighted average) is prohibited.

Revised Transfer Pricing Tax Audit Framework 2025 (TPTAF)

The TPTAF 2025 was issued on 31 July 2025 to address the following changes:

The structure of penalty and surcharge rate for TP audit adjustment are as follows:

TP Adjustments made on	Penalty / Surcharge	Penalty / Surcharge Rates
Basis periods commencing before 1 January 2021	Penalty under Section 113(2) of the Malaysian Income Tax Act, 1967 (MITA)	Penalty on additional tax payable: - First offence: 15% - Second offence: 30% - Third & subsequent offences: 45%
Basis periods commencing on or after 1 January 2021	Surcharge under Section 140A(3C) of the MITA	5% on the amount of TP adjustment

The surcharge rate for voluntary disclosure (VD) ranges from 0% to 4%.
Penalty under Section 113B of the MITA will be imposed for each year of assessment if:
- The transfer pricing documentation (TPD) submitted to the IRBM exceeds the 14 days period from the date of service of the written notice; or
- TPD does not comply with the requirements under Transfer Pricing Rules 2023 and MTPG 2024.

The penalty amount imposed depends on the period of delay in submitting the TPD, as follows:

No.	Period of Delay (from expiration of 14 days)	Penalty (per year of assessment) RM
1.	Up to 7 days	20,000
2.	More than 7 days up to 14 days	40,000
3.	More than 14 days up to 21 days	60,000
4.	More than 21 days up to 28 days	80,000
5.	More than 28 days	100,000

Indirect Tax

Expansion of taxable services effective 1 July 2025

Effective 1 July 2025, the scope of taxable services has been expanded to include financial services, healthcare, rental or leasing, construction works, and education services.

Revision of sales tax rate effective 1 July 2025

The Sales Tax rates for non-essential items and premium goods have been revised effective 1 July 2025.

New customs duties order 2025 effective 1 November 2025

The Customs Duties Order 2025 sets out the rules and guidelines on customs duties, specific rates, exemption details, specific conditions and tariff rates applicable across the Malaysian Customs territory. The order comes into full force effective 1 November 2025.

Customs Compliance Verification Audit Programme (AViP)

The programme is still available. Taxpayers can voluntarily disclose any non-compliance through self-assessment. The key points of AViP are:

The AViP covers all areas of indirect taxes, duties and levies under the purview of Royal Malaysian Customs Department (RMCD) such as Sales Tax, Service Tax, Customs Duties, Excise Duties and Tourism Tax.
Taxpayers selected / subject to audit by RMCD can request to participate in AViP.
Taxpayers not under audit but have underpayment of taxes, duties and/or levies can approach RMCD to request to participate in the AViP.