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Insights Malaysia´s Budget 2025

Malaysia´s Budget 2025

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On 18 October 2024, the Malaysian Government presented the 2025 Budget (“the Budget”) in Parliament , under the slogan of “Reinvigorating the Economy, Driving Reforms, and Prospering the Rakyat”. 
     
With a record allocation of RM421 billion, the Budget is designed to bolster revenue growth through tax reforms and targeted subsidies. This substantial allocation is divided into two key components: RM335 billion allocated to operating expenditure and RM86 billion for development expenditure. The Government has projected that revenue collection will rise to RM322 billion for 2024, up from RM308 billion in 2023, with further growth expected to reach RM340 billion in 2025. This growth in revenues is expected to reduce the budget deficit to 3.8 % of gross domestic product, compared to the 2024 target of 4.3 %.​
     
In alignment with the Budget’s theme, numerous initiatives, including tax-related measures, have been proposed to achieve these objectives. Below are the key tax measures and policies outlined in the Budget:
    
  • 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 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; 
  • To mitigate the impact of Global Minimum Tax, the Government is committed to streamlining existing incentives, introducing non-tax incentives and studying the feasibility of a “Strategic Investment Tax Credit”;
  • The Sales Tax and Service Tax regime will be expanded to include commercial service transaction between business (“B2B”) and non-essential goods;
  • The minimum wage will be increased from RM1,500 to RM1,700, effective 1 February 2025. 

For further details on Malaysia´s Budget 2025 please refer to the November Tax Edition​ of our Malaysia Newsflash.

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