Key Highlights of the Malaysia Budget 2024
Crowe Chat Vol.7/2023
Budget 2024 is tabled when the world is faced with unprecedented challenges in a post-normal era. The Prime Minister and Finance Minister, YAB Dato’ Seri Anwar bin Ibrahim noted that such challenges are taking place at a scale and speed that is worrying. These developments are simultaneously damaging ecosystems as well as the livelihoods of the people. It is amidst this backdrop that Budget 2024, Belanjawan MADANI Kedua is tabled. With the Ekonomi MADANI framework as its North Star, Budget 2024 hopes to kickstart Malaysia’s comeback as an economic champion within the ASEAN region and build on the other Unity Government initiatives such as the National Energy Transition Roadmap, New Industrial Master Plan 2030 and the Reviewed 12th Malaysia Plan. To achieve this, Budget 2024 focuses on three (3) key areas i.e. best governance for service agility, restructuring of the economy to increase growth and improving people’s living standards.
The second MADANI budget is the largest budget ever tabled by any government in Malaysia’s history, with a total allocation of RM393.8 billion, of which RM90 billion is allocated for development expenditure. Whilst the amount allocated for development is seemingly lower than the Revised Budget 2023, the total allocation represents an expansionary budget, which is aimed at addressing the key issues of the day and improving the lives of the people. The Unity Government has also underlined the need to address fiscal responsibility and has provided several measures to rationalize the subsidy structure in Malaysia, which remains one of the highest in the world.
To ensure the government can meet its fiscal responsibilities, reduce the deficit to 4.3% and increase its revenue to RM307.6 billion, several structural changes to the tax system have been introduced which taxpayers should take note of. Most notable is the long anticipated introduction of the Capital Gains Tax that will come into effect on 1 March 2024. In addition, the Unity Government is set to increase the Service Tax to a rate of 8% for all services excluding food and beverage as well as telecommunication services. The implementation of the High Value Goods Tax is also set to take place at a rate of 5% to 10%. Aside from this, the government has also affirmed its commitment to implement the e-invoicing system from 1 August 2024 onwards and Global Minimum Tax in the year 2025.
In our view, these structural changes to the tax system are an economic necessity that is needed to drive Malaysia forward. This is especially in light of the fact that Malaysia remains one of the countries with the lowest amount of taxes collected as a percentage of Gross Domestic Product in the ASEAN region. With a clear commitment to fiscal responsibility as well as an emphasis on the Malaysian citizen, Budget 2024 represents a responsible, timely and bold initiative to realize a more resilient and robust economy.
We believe that these structural changes will certainly have a significant impact towards Malaysian businesses and encourage taxpayers to review their business operations following these developments. It is hoped that the analysis contained herein would aid business and finance leaders in establishing the right game plans to meet the challenges these tax changes would bring in the year ahead.
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Highlights at a Glance
The mandatory implementation of e-invoicing for taxpayers with an annual turnover or revenue of more than RM100million will be deferred from 1 June 2024 to 1 August 2024. Taxpayers in other income categories will be required to comply in phases with comprehensive implementation target by 1 July 2025.
Implementation of GMT
The Global Minimum Tax (GMT) will be introduced as recommended under Pillar 2 of the Base Erosion and Profit Shifting (BEPS) 2.0. Subject to further studies, the Global Minimum Effective Tax Rate and Qualified Domestic Minimum Top-Up Tax (QDMTT) are targeted to be implemented in the year 2025.
CGT for Disposal of Unlisted Local Company Shares
CGT will be imposed on the disposal of unlisted local company shares at the rate of 10% on net gains or 2% on gross sales value from 1 March 2024 onwards.
Increase in Service Tax Rate
The Service Tax rate will be increased from 6% to 8%, with the exception for food and beverage, and telecommunications services which will remain at 6%.
Implementation of High-Value Goods Tax
A High-Value Goods Tax will be imposed on specific high-value items such as jewellery and watches, with rates ranging from 5% to 10% depending on the value of the item.
The Green Technology tax incentives for Green Investment Tax Allowance (GITA) project, GITA asset and Green Investment Tax Exemption (GITE) solar leasing will be reviewed and extended for a period of two (2) years for applications received by MIDA or MGTC from 1 January 2024 to 31 December 2026.
Tax Deduction on Contributions for Environmental Preservation and Conservation Projects
Tax deduction will be given for contributions or sponsorships related to tree planting or environmental preservation and conservation awareness projects verified by Forest Research Institute Malaysia, for applications received by the Ministry of Finance from 1 January 2024 to 31 December 2026.
Industrial Building Allowance (IBA) for Private Nursing Home for the Elderly
Private nursing homes for the elderly approved by the Malaysian Ministry of Health will be given IBA at an annual rate of 10% for qualifying expenditure on the purchase or construction of a building including renovation costs incurred from 1 January 2024 to 31 December 2026.
Review of Capital Allowance on Information and Communication Technology (ICT) Equipment and Computer Software
Initial allowance rate will be revised from 20% to 40% for capital expenditure incurred by companies on the purchase of ICT equipment and computer software from YA 2024.
Incentive for Reinvestment under the New Industrial Master Plan (NIMP) 2030
A tiered reinvestment tax incentive in the form of Investment Tax Allowance of 60% / 100% on qualifying capital expenditure will be given to existing companies that have exhausted their Reinvestment Allowance eligibility period. This incentive will be applicable for applications received by MIDA from 1 January 2024 to 31 December 2028.
The income tax exemption for social enterprises accredited by the Ministry of Entrepreneur Development and Cooperation will be extended for applications received by the Ministry of Finance from 1 January 2024 to 31 December 2025.
Income Tax Exemption for Islamic Financial Activities under the Labuan International Business and Financial Centre (IBFC)
Full income tax exemption will be given to 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 from YA 2024 to YA 2028.
A special income tax rate ranging from 0% to 10% will be given to film production companies, foreign actors, and film crews who carry out filming activities in Malaysia.
The income tax exemption on management fee income for managing SRI funds will be extended for a period of four (4) years from YA 2024 to YA 2027.
The scope of income tax exemption under the SRI Sukuk Grant and Bond Grand Scheme will be expanded to include SRI-Linked Sukuk Grants and bonds issued under the ASEAN Sustainability-Linked Bond Standards (ASEAN SLBS) approved by Securities Commission Malaysia (SC). This applies to applications received by SC from 1 January 2024 to 31 December 2025.
The tax deduction on issuance cost of SRI (Sustainable and Responsible Investment) Sukuk approved, authorised or lodged with the SC will be extended for a period of four (4) years from YA 2024 to YA 2027.
A flat rate stamp duty of 4% is to be imposed on the instrument of transfer executed by foreign-owned companies and non-citizen individuals (except Malaysian permanent residents) for instruments of property ownership transfer executed from 1 January 2024 onwards.
Import duty and sales tax exemptions will be given to eligible manufacturers on the importation and purchase of local manufacturing aids for certain sectors of the manufacturing industry and category of goods, effective from 1 January 2024.
The entertainment tax rate in the Federal Territories will be reduced from 25% to reduced rates, for applications received by the Ministry of Finance from 1 January 2024 to 31 December 2018.
The scope of excise duty will be expanded to include the imposition of excise duty on chewing tobacco at a rate of 5% plus RM27 per kilogram effective from 1 January 2024.
The excise duty rate for sugar sweetened beverages will be increased from RM0.40 per litre to RM0.50 per litre effective from 1 January 2024.
Expansion of Scope of Income Tax Relief for Medical Treatment, Special Needs and Carer Expenses for Parents
The scope of income tax relief for medical expenses, special needs and parental care will be expanded to include full medical examination for parents limited to RM1,000. This will be effective from YA 2024.
Review of Lifestyle Income Tax Relief
- The scope of lifestyle income tax relief will be expanded to include fees for self-improvement courses.
- However, expenditure on the purchase of sports equipment and gymnasium membership fees are removed from the scope of lifestyle income tax relief.
- Specific tax relief will be introduced, i.e. “Sports Equipment and Activities”, which will include expenditure on sports equipment and fees for use of sports facilities, registration for sports tournaments and gym memberships. This tax relief will be limited to RM1,000.
- These changes will be effective from YA 2024.
The income tax relief of up to RM2,000 from the total education fees relief of RM7,000 for Up-Skilling and Self-Enhancement Courses Fee will be extended for a period of three (3) years effective from YA 2024 to YA 2026.
Extension of Individual Income Tax Relief for EV Charging Facilities
Stamp Duty for Transfer of Property Ownership by Renunciation of Rights
Fixed duty of RM10 is imposed on the transfer of property ownership in which the eligible beneficiary renunciates his / her right to another eligible beneficiary in accordance with a will / faraid or the Distribution Act 1958 for instruments of property ownership transfer executed from 1 January 2024.
Non-Governmental Organisations (NGO) and Civil Society Organisations
The Government is allocating RM100 million to continue supporting the efforts taken by NGOs and civil society organisations including Yayasan Hasanah.
Kumpulan Wang Amanah Rakyat Malaysia Luar Negeri (KWARMLN)
MADANI budget provides an additional RM10 million to the KWARMLN to defend the fate of our people who are victims of employment fraud syndicates and other welfare cases abroad.
NIMP
- NIMP targets a total investment of up to RM95 billion while involving 3.3 million job opportunities with median salaries of up to RM4,510/month by 2030.
- The Government will allocate up to 10% from the total NIMP investment as a catalyst to accelerate the NIMP mission with a 2024 startup fund amounting to RM200 million.
MYStartup platform
National Digital Economy and Industrial Revolution Council decided to provide RM28 million to develop the MYStartup platform as a single window that brings together startups while simplifying business activities throughout their lifecycle. This initiative will optimise RM200 million fund under various funding agencies and venture capital under a single platform.
Micro, Small and Medium Enterprises
Funding of RM44 billion is allocated as loans and financing guarantees available for the benefit of Micro, Small and Medium Enterprises.
Micro-entrepreneurs and small traders under BNM, BSN and TEKUN
Funding of RM2.4 billion is allocated as small loan facilities under agencies including BNM, BSN and TEKUN for micro-entrepreneurs and small traders.
Sustainability practices and food security related sectors
A total of RM8 billion in loan funds are provided to support SME companies under BNM. From this amount, RM600 million is dedicated to help micro-enterprises and low-income entrepreneurs, small contractors, the application of sustainability practices and food security related sectors.
Dana Impak Khazanah Nasional
Funding of RM600 million is allocated under the Dana Impak Khazanah Nasional, with priority to promote economic growth and provide more opportunities to rural, semi-urban communities and those with less access to financial services in 2024.
SMEs
Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) will guarantee up to 80 percent of SME entrepreneurs’ loans, especially those involved in the green economy, technology and halal fields with the availability of a guarantee fund of up to RM20 billion.
Amanah Ikhtiar Malaysia (AIM)
Funding of RM100 million is allocated to support AIM’s function to eradicate poverty.
Revolving Capital Fund under the Malaysian Cooperative Commission (MCC)
Financing funding of RM100 million is allocated to the cooperative movement through the Revolving Capital Fund under MCC to assist more cooperatives.
Franchise Strengthening Programme
Funding of RM10 million is allocated to the Franchise Strengthening Programme to expand the franchise trade.
Local artistic works
Funding of RM160 million is allocated to implement various initiatives for the benefit of creative artists as follows:
- RM60 million under the Digital Content Fund to promote local works and support content based on national values;
- RM90 million under the Film in Malaysia Incentive (FIMI) initiative to further encourage international film production; and
- RM10 million to provide for the MyCreative Matching Grant Scheme to support artists in the production of creative projects.
Funds available for an economic growth model led by research, development, commercialisation and innovation (R&D&C&I) activities
R&D funding of RM510 million is allocated under the Ministry of Science, Technology and Innovation as well as the Ministry of Higher Education. In which RM50 million is a matching grant for public universities to collaborate with the private sector in intensifying research and innovation activities that can be commercialised.
Palm Replanting Program Incentive
Funding of RM100 million is allocated to Palm Replanting Programme Incentive and offered through a grant and loan to 7,000 private oil palm smallholders.
Funds allocated to optimise the production of crops and livestock
Funding of RM90 million is allocated to RISDA and FELCRA to encourage smallholders to optimise the use of production of crops and livestock such as mushrooms, pineapple, matag coconut, cattle and poultry.
Transition towards a low-carbon economy
Funding of RM200 billion is provided by Financial Institutions to encourage the industry to transition towards a low-carbon economy.
Farmers and fisherman
Allocation of RM2.6 billion to channel various forms of subsidies and incentives to farmers and fishermen.
Payung Rahmah
Funding of RM200 million will be provided to implement Payung Rahmah as follows:
- Rahmah Sales Program – offers basic necessities at prices 30% lower
- Pasar Rahmah Program – offers incentives to 1.2 million wholesale market, night market and farmer’s market entrepreneurs.
Sumbangan Tunai Rahmah (STR)
The allocation of RM10 billion will be given to STR:
- STR maximum rate will be increased to RM3,700
- STR minimum rate for youths will be increased to RM500
- First payment of STR for households will be increased to RM500
- Sumbangan Asas Rahmah (SARA) will be introduced with 200,000 recipients receiving RM100/month for 6 months in their myKad
Program Bina Kerja Perkeso
Allocation of RM35 million will be provided to finance the training fees and income replacement incentives for 9,000 gig workers who attended the training program.
Skim Keselamatan Sosial Suri Rumah
FAllocation of RM 50 million will be provided to benefit more than 400,000 female housewives registered under e-kasih.
Program Tunas Usahawan Belia Bumiputera & Skim TEKUN Belia Mobilepreneur
Both the programs will be continued with allocation of RM20 million and RM10 million respectively.
Special Grant Sarawak and Sabah
Increased rates of the grant to RM300 million compared to RM16 million for Sarawak and RM125.6 million for Sabah as the last review were made in 1969 and 2022 respectively.
High Growth and High Value (HGHV)
GLCs to provide funds up to RM1.5 billion to encourage startups including SME and Bumiputera to venture into HGHV fields such as digital economy, space technology and electronics and electrical (E&E).
i-Tekad
Additional funds up to RM25 million in matching grants with financial institutions to give more benefits to entrepreneurs.
Matching grant of RM50 million and RM20 million is allocated to Port Klang Authority and Port Authorities to maintain Jalan Port Klang and upgrade the Malaysia Maritime Single Window.
Biodiversity sukuk up to RM1 billion will be issued for the replanting of degraded forest that will in return generate carbon credit.
Government matching contribution limit under EPF’s i-Saran will be increased to RM300 per year, limited to RM3,000 or life.
Funding of RM1 billion is allocated under the MADANI Community Fund to provide grants ranging from RM50,000 to RM100,000 to communities to facilitate the Program Komuniti Madani.
SME
- RM100 million provided to provide grants for digitization up to RM5,000 benefitting more than 20,000 SMEs
- RM900 million loans under BNM to encourage SME to increase productivity and digitizations
- RM40 million provided to implement Shop Program Malaysia Online to encourage small traders in the field of food to do business from home
- RM25 million allocated to Digital Economy Centre in each DUN to support small entrepreneurs.
Increased Cash Assistance – Rahmah Cash Donation
Rahmah Cash Donation will be increased from RM8 billion to RM10 billion.
Electricity Subsidy
- The Government has implemented targeted subsidy for 10% consumers with highest electricity consumption.
- The Government will continue giving electricity bill rebates up to RM40 per month to hardcore poor households with allocation of RM55 million.
Diesel Fuel
- Sales of subsidized diesel have increased by up to 40% since 2019 while total vehicles using diesel has only increased less than 3%.
- Government intends to rationalize diesel prices in stages to prevent leakage and smuggling.
- Improving the imposition of stamp duty;
- Strengthening tax administration;
- Expanding the coverage of social protection system;
- Restructuring of development finance institutions (DFIs);
- Strengthening the venture capital environment through the centralization of venture capital agencies.
Government to intensify efforts to achieve more high-impact investments by expanding the responsibilities of MITI and MIDA to facilitate issues related to investments beginning from the date of application until the investment is realised.
Government to introduce new initiatives involving the following:-
- Facilitate Employment Pass (EP) approvals for strategic investors in key sectors;
- Introduce Long-Term Social Visit Pass for international students who have graduated to meet industrial skilled personnel needs;
- Improve Visa-On-Arrival facilities, social visit passes and multiple entry visa offers to encourage tourists and investors especially from India and China
Existing application of MM2H will be eased to increase arrival of tourists and foreign investors to Malaysia.
Electric Motorcycle Usage Incentive Scheme with rebate up to RM2,400 will be offered to buyers with an annual income of less than RM120,000.
Solar Panels
- Net Energy Metering (NEM) programme will be extended until 31 December 2024 to encourage installations in residential premises.
- Roof solar buyback programme with minimal cost implications to the system will be developed.
- Companies are encouraged to offer “Zero Capital Cost” subscription model for residential housing category
EPF i-Sayang
EPF’s i-Sayang programme will be expanded to allow wives to transfer 2% of their EPF contributions to their husband.
Monthly salary ceiling for SOCSO contributions will be increased from RM5,000 to RM6,000.
EPF Flexible Account will be introduced as a new account to allow accessibility to members at any time in order to strengthen retirement savings.
A RM500 amount will be awarded to youths who have successfully volunteered with bodies recognised by the Government in order to inculcate the spirit of volunteerism amount youths aged 18 to 20 years.
Discounts will be given for PTPTN loan repayment from 14 October 2023 until 31 March 2024 at the following rates:-
- 10% discount on balance of the debt for full settlement of the loan;
- 10% discount on payment of at least 50% of the remaining debt in a single payment receipt; and
- 15% discount on payment by salary deduction or scheduled direct debit.
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