Finance Bill 2023

The Finance Bill 2023 was passed at the Dewan Rakyat on 3 April 2023 with the following key changes:

Corporate Tax

foreign shareholding condition for Reduction in income tax rate for MSMEs

The preferential Income Tax rate for qualifying Micro, Small & Medium Enterprises (“MSME”) is to be reduced by 2 percent, from 17 percent to 15 percent for the first RM150,000 of chargeable income with effect from year of assessment (“YA”) 2023.

In order to enjoy this reduced tax rate, MSMEs need to comply with an additional shareholding condition from YA 2024, i.e., not more than 20 percent of its paid up capital in respect of ordinary shares (in case the MSME is a company), or its capital contribution (in case the MSME is an LLP) at the beginning of a YA is owned directly or indirectly by one or more companies incorporated outside of Malaysia or individuals who are not Malaysian citizens.

Definition of plant for capital allowance purposes

It is incorporated that intangible assets be included in the definition of plant. In addition, the Minister is empowered to impose any asset to be excluded from the definition of plant.

Deadline for remittance of withholding tax on payments made to agents, dealers and distributors (“ADD”)

Effective 1 January 2023, companies making payments to individual ADD under Section 107D of the ITA are obliged to accumulate the tax deducted amounts on a monthly basis, and to remit these to the MIRB not later than the last day of the following calendar month.

Extension of scope for application for relief to include payments made to ADDs

The scope of relief under Section 97A and Section 131A of the MITA is expanded to include payments made to individual ADDs which are subject to Withholding Tax under Section 107D of the MITA.

Personal Tax

Extension of Personal Income Tax relief for National Education Savings Scheme ("SSPN") deposits

Personal Tax relief up to RM8,000 for contributions/deposits into SSPN account is extended to the year of assessment of 2024.

Real Property Gains Tax

Transfer of real property to a former spouse

The "no gain, no loss" principle, whereby the sale price of a property is deemed to be equal to the acquisition price, is to be extended to transfers of property between former spouses which are made pursuant to a court order as a result of the dissolution or annulment of their marriage and where the transferor is a Malaysian citizen.

Transfer of chargeable asset to a company by an individual

Currently, when real estate owned by an individual is transferred to a company controlled by the individual for consideration consisting of at least 75% of shares in that company, the individual is deemed to have transferred the real estate "without profit and without loss," i.e., the sale price is deemed to be equal to the acquisition price. The shares received in exchange are subject to RPGT in the event of a future sale.

It is now incorporated that in addition to the existing conditions, the ‘no gain, no loss’ treatment be granted only if the company which is controlled is incorporated in Malaysia.

Stamp duty

Stamp duty treatment for education loan and scholarship agreements

The fixed duty of RM10 on educational loan and scholarship agreements will be expanded to include education at all levels including certificate (education/skills/professional) in any educational and training institutions for agreements executed as of 1 June 2023.

Stamp duty treatment on security instrument in relation to discounting invoices or factoring agreement entered by small and medium enterprises

The fixed duty rate of RM10 is extended to similar instruments entered into by small and medium enterprises in relation to discounting of invoices or installment purchase receivables or factoring agreements with government agencies/agencies that provide financing to small and medium enterprises.

Tax Administration

Mandatory e-filing of tax returns and amended tax returns

Effective as of YA 2024, e-filing will be mandatory for the following categories of taxpayers.

Form Type	Current mandatory e-filing	Proposed mandatory e-filing
Inocme Tax return	companies and LLPs	all categories of taxpayers
Amended Income Tax return		companies, LLPs, trust bodies and co-operative societies
Return form of employer (Form E)	companies	LLPs, trust bodies and co-operative societies

Instalment payments on tax arising from deemed assessment

With effect from YA 2023, the power for the Director General of Inland Revenue (“DGIR”) to grant instalment payments is to be expanded to include granting tax instalments for tax arising from deemed assessments.

Second revision to estimate tax payable in CP500 cases

Effective as of YA 2023, a second revision on tax payable for the YA (CP 500) for a person other than a company, LLP, trust body or co-operative society be allowed. The second revision can be made by 31 October of the YA.

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