On 24 February 2023, Malaysian Prime Minister and Minister of Finance Anwar Ibrahim presented a revised Budget for 2023. As previously reported, the budget was first presented on 7 October 2022, but the parliament was dissolved shortly after ahead of elections held in November 2022. The revised budget includes similar tax measures as proposed in the original budget, although several adjustments have been made. The main tax measures include:

• The revision of the individual income tax brackets as follows, with certain rate reductions and increases from assessment year 2023:
  • MYR 0 - 5,000 - 0%
  • MYR 5,001 - 20,000 - 1%
  • MYR 20,001 - 35,000 - 3%
  • MYR 35,001 - 50,000 - 6% (reduced from 8%)
  • MYR 50,001 - 70,000 - 11% (reduced from 13%)
  • MYR 70,001 - 100,000 - 19% (reduced from 21%)
  • MYR 100,001 - 250,000 - 25% (increased from 24%)
  • MYR 250,001 - 400,000 - 25% (increased from 24.5%)
  • MYR 400,001 - 600,000 - 26% (increased from 25%)
  • MYR 600,001 - 1,000,000 - 28% (increased from 26%)
  • MYR 1,000,001 - 2,000,000 - 28%
  • Over MYR 2,000,000 - 30%
• The introduction of a further reduced tax rate of 15% for qualifying SMEs as follows from assessment year 2023:
  • first MYR 150,000 in taxable income - 15% (new rate)
  • taxable income of MYR 150,001 to 600,000 - 17% (current reduced rate)
  • taxable income exceeding MYR 600,000 - 24% (standard rate)
• An extension of the tax deduction of up to MYR 1.5 million for three assessment years for listing expenses incurred by technology-based companies in the Access, Certainty, Efficiency (ACE) Market and SMEs in the Leading Entrepreneur Accelerator Platform (LEAP) Market from assessment year 2023 to assessment year 2025, as well as an expansion of the scope of the deduction to cover the cost of listing technology-based companies on the BURSA Main Market;
• The introduction of a tax deduction for the issuance of Sustainable and Responsible Investment (SRI) Sukuk approved, permitted, or deposited with the Securities Commission Malaysia for a period of 5 years, which will be available from the year of assessment 2023 until the year of assessment 2027 (SRI-linked Sukuk is meant to enable fundraising by companies through financing towards improving sustainability practices and supporting the transition to low carbon activities);
• The extension of the stamp duty exemption on the restructuring or rescheduling of loan/financing agreements between borrowers and financial institutions from 1 January 2022 until 31 December 2022 so that the exemption also applies for the restructuring or rescheduling of loan/financing agreements executed from 1 January 2023 until 31 December 2024;
• The extension of tax incentives to support the development of the electric vehicle industry, including:
  • full import duty exemption on components for locally assembled electric vehicles until 31 December 2027 (extended from 31 December 2025);
  • full excise duty exemption and sales tax on Completely Knocked-Down (CKD) electric vehicles until 31 December 2027 (extended from 31 December 2025); and
  • full import duty and excise duty exemption on imported Completely Built-Up (CBU) EV until 31 December 2025 (extended from 31 December 2023);
• The introduction of new tax incentives for investment in the manufacturing of electric vehicle charging equipment, including the following for applications submitted to the Malaysian Investment Development Authority (MIDA)from 25 February 2023 to 31 December 2025:
  • a 100% income tax exemption for statutory income from assessment year 2023 to assessment year 2032 for companies that make initial investments in EV charging equipment manufacturing; or
  • an investment tax allowance of 100% for a period of 5 years that can be deducted up to 100% of statutory income for each year of assessment;
• An increase in the tax deduction for companies renting non-commercial motor vehicles to MYR 300,000 for electric vehicles from the year of assessment 2023 until the year of assessment 2025;
• The introduction of new tax incentives to encourage investment in carbon capture and storage (CCS), including the following for applications received by the Ministry of Finance from 25 February 2023 to 31 December 2027:
  • for companies that carry out CCS activities in-house:
    • an investment tax allowance of 100% for eligible capital expenditure incurred within 10 years that can be deducted up to 100% of statutory income;
    • full exemption from import duty and sales tax on equipment for CCS technology from 1 January 2023 to 31 December 2027; and
    • a tax deduction for pre-commencement expenses allowed within 5 years from the date of commencement of operations;
  • for companies that perform (undertake) CCS services:
    • an investment tax allowance of 100% for eligible capital expenditure incurred within 10 years that can be deducted up to 100% of statutory income; or
    • a tax exemption of 70% of statutory income for a period of 10 years; and
    • a full exemption from import duty and sales tax on equipment for CCS technology from 1 January 2023 to 31 December 2027;
  • for companies that use CCS services, a tax deduction is provided for the fees for CCS services;
• The extension of the following tax incentives for food production projects by 3 years for applications received by the Ministry of Agriculture and Food Security (MAFS) from 1 January 2023 to 31 December 2025, with the scope expanded to include agricultural projects based on controlled environment agriculture:
  • companies that invest in subsidiary companies that carry out new food production projects are granted a tax deduction equal to the amount of investment made in the base year the investment is made; and
  • companies that carry out food production projects are granted the following for new and existing company expansion projects:
    • new projects are granted 100% income tax exemption for statutory income for 10 assessment years; and
    • existing company expansion projects are granted 100% income tax exemption for statutory income for 5 assessment years;
• An increase in the income tax exemption for statutory income of companies with BioNexus status from 70% to 100%, with the application period for BioNexus status incentives extended by two years for applications received by the Malaysian Bioeconomy Development Corporation from 1 January 2023 to 31 December 2024;
• The extension and revision of tax incentives for investment in automation in the manufacturing and service sector so that the incentives are also provided for the agriculture sector for applications received by MIDA and MAFS from 1 January 2023 to 31 December 2027, including:
  • a 100% accelerated capital allowance (ACA) for eligible capital expenditure for automation equipment up to MYR 10 million that can be fully claimed within 1 year (increased from MYR 4 million for labor-intensive industries and MYR 2 million for others); and
  • a 100% income tax exemption equivalent to the ACA that can also be claimed within 1 year;
• The extension of tax incentives for companies that carry out shipbuilding and ship repair (SBSR) activities in Malaysia by 5 years for applications received by MIDA from 1 January 2023 to 31 December 2027, including:
  • for new companies:
    • Pioneer status with an income tax exemption of 70% of statutory income for a period of 5 years; or
    • an investment tax allowance of 60% on eligible capital expenditure incurred within 5 years that can be deducted up to 70% of statutory income for each year of assessment;
  • for existing companies, an investment tax allowance of 60% on eligible capital expenditure incurred within 5 years and can be deducted up to 70% of statutory income for each year of assessment;
• The extension of incentives for new and existing aerospace companies carrying out high-value activities in Malaysia by 3 years for applications received by MIDA from 1 January 2023 to 31 December 2025, including:
  • for new companies:
    • a 70% to 100% income tax exemption for a period of 5 to 10 years; or
    • an investment tax allowance of 60% to 100% for a period of 5 years that can be deducted up to 70% to 100% of statutory income for each year of assessment;
  • for existing companies, an investment tax allowance of 60% for a period of 5 years that can be deducted up to 70% of statutory income for each year of assessment; and
• The introduction of an import duty and sales tax exemption on studio and film production equipment for a period of three years for applications received by the Ministry of Finance from 1 April 2023 until 31 March 2026, which is meant to boost the domestic industry and attract foreign film producers.

In addition to the above, several other measures are noted in the budget speech, although limited details are provided. These include:

• The introduction of a Luxury Tax with certain limits according to the type of luxury good, including luxury watches, luxury fashion items, etc.;
• A consultation on a Capital Gains Tax on the disposal of unlisted shares by companies beginning in 2024 at a lower rate;
• The reintroduction of a voluntary disclosure programme providing a 100% penalty waiver for voluntary disclosures made from 1 June 2023 to 31 May 2024;
• The extension of the tax incentive given to manufacturing companies that relocate to Malaysia; and
• The introduction of the global minimum effective tax rate under Pillar 2 and the implementation of the Qualified Domestic Minimum Top-up Tax (QDMTT).

Click the following link for the Ministry of Finance Budget website for more information.