Malaysia´s Budget 2025

On 18 October 2024, the Prime Minister of Malaysia, Dato’ Seri Anwar Ibrahim, tabled the 2025 Budget (“the Budget”) in Parliament under the slogan of “Reinvigorating the Economy, Driving Reforms, and Prospering The Rakyat”. This marks the third Budget formulated under the Madani economic framework, aimed at revitalising the economy, catalysing transformative change, and enhancing the overall well-being of the rakyat.

With a total of RM421 billion, the Budget 2025 is the highest-ever budget allocation in history, of which RM 335 billion are allocated to operating expenditure, and RM86 billion to development expenditure.

To stimulate economic revitalisation, a New Investment Incentive Framework (“NIIF”) has been introduced, designed to attract and facilitate high-value investments for balanced economic growth. The NIIF is expected to be implemented in the third quarter of 2025.

Some key tax measures are as follows:

Effective from 1 May 2025, the Sales Tax and Service Tax regime will be expanded to include commercial service transactions between businesses (“B2B”), and non-essential goods. However, the Government will conduct engagement sessions with relevant stakeholders and industries before finalising the scope of expansion and the relevant tax rates.
Dividend income of individuals exceeding RM100,000 per annum will be subject to tax at the rate of
2 %, effective from the year of assessment (“YA”) 2025.
Resident individuals will be exempt from tax on foreign-sourced income received in Malaysia up to the year 2036, provided such income has been subjected to income tax in the country from which it was received.
Carbon tax will be introduced on the iron and steel, and energy industries by 2026, to encourage the adoption of low-carbon technologies. The proceeds will be used to fund green research and technology programs.
A self-assessment system for stamp duty will be implemented in phases, starting from 1 January 2026.
To mitigate the impact of Global Minimum Tax (“GMT”), the Government is committed to streamlining existing incentives, introducing non-tax incentives and studying the feasibility of a “Strategic Investment Tax Credit”.