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Key Tax Proposals

Individual Tax

Dividend Tax

Effective from Year of Assessment (“YA”) 2025, a 2 % Dividend Tax will be imposed on annual dividend income exceeding RM100,000, received by individual shareholders. This tax will apply to residents, non-residents and individuals who hold shares through nominees. Exemptions will be granted for specific categories of dividend income.

Additionally, the dividend tax will not apply to distributions from the following government saving schemes:

Employees Provident Fund (“EPF”);
Amanah Saham National Bumiputera (“ASNB”);
Lembaga Tabung Angkatan Tentera (“LTAT”); or
Unit trusts.

Extension of foreign-sourced income exemption

The exemption on foreign-sourced income for resident individuals will be extended for an additional 10 years, until YA 2036, up from the previous deadline of YA 2026. This extension is contingent upon the income having been subjected to the income tax in the country of origin.

Tax exemption on childcare allowance

The Government proposed to extend the childcare allowance of RM 3,000 to cover allowance for the care of senior citizens, such as parents and grandparents, effective from YA 2025.

Tax relief on housing loan interest payment for first residential home

To encourage home ownership, the following tax reliefs will be introduced on interest incurred by first-time home buyers:

Property Price	Tax Relief per Year (capped at)
Up to RM500,000	RM7,000
Above RM500,000 up to RM 750,000	RM5,000

The above can be claimed for three consecutive YAs, for sales and purchase agreements completed between 1 January 2025 and 31 December 2027.

Expansion and extension of tax reliefs

Effective from YA 2025, the following reliefs will be reviewed:

EXTENSION
Tax Reliefs	Description
Net savings in the National Education Savings Scheme (“SSPN”)	The RM8,000 annual tax relief for net deposits to SSPN will be extended until YA2027.
Deferred annuity and Private Retirement Scheme	The annual tax relief of up to RM3,000 for contributions to Private Retirement Schemes and deferred annuities will be extended until YA 2030.
Fees paid to childcare centres or kindergartens	The annual tax relief of RM3,000 for fees paid to childcare centres or kindergartens for children up to the age of six, will be extended until YA 2027.

EXPANSION
Tax Reliefs	Description
Medical expenses incurred for self, spouse or child capped at RM10,000
a) Assessment for intellectual disability diagnosis and early intervention program or rehabilitation treatment for learning disability	The annual tax relief amount will be increased from RM4,000 to RM6,000.
b) Full medical check-up (including COVID-19 screening), COVID-19 detection test or mental health checkup	The annual tax relief of RM1,000 will be expanded to include the purchase of influenza test kit and self-testing medical devices as well as disease detection examination fees. Additionally, the tax relief for full medical check-ups will also cover vaccination expenses.
Medical treatment, dental treatment, special needs and carer expenses for parents	The annual tax relief of RM8,000 will be expanded to expenses incurred for grandparents.
Education and medical insurance premium payments	The annual tax relief will be increased from RM3,000 to RM4,000.
Disabled individuals (self)	The annual tax relief will be increased from RM6,000 to RM7,000.
Disabled spouse	The annual tax relief will be increased from RM5,000 to RM6,000.
Disabled child	The annual tax relief will be increased from RM6,000 to RM8,000.
Sports equipment and activities	The annual tax relief of RM1,000 will be expanded to include expenses incurred for parents.
Purchase of electric vehicle chargers	The annual tax relief of RM2,500 will be expanded to cover the purchase of food waste composting machines for household use, allowing for relief to be claimed once every three years from YA2025 until YA2027.

Corporate Tax

Global Minimum Tax (“GMT”)

As part of the Base Erosion and Profit Shifting (“BEPS”) 2.0 initiative, Malaysia is in the process of implementing the GMT at a rate of 15 %.

While the introduction of the GMT is anticipated to generate additional revenue for the country, it may also pose potential adverse effects on the investment climate.

Thus, in order to address the potential impact of the GMT, the Government is committed to streamlining the existing incentives, creating new non-fiscal incentives, and exploring the feasibility of Strategic Investment Tax Credits.

Tax incentives for the implementation of e-invoicing

Effective from YA 2024 to YA 2025, it is proposed that an Accelerated Capital Allowance (“ACA”) – comprising an initial allowance of 20 % and an annual allowance of 40 % - will be claimable for the purchase of Information and Communications Technology (“ICT”) equipment, software, and consulting fees related to the development of customised computer software for the implementation of e-invoicing.

Extension of tax deduction for sponsorship of Smart Artificial Intelligence (“AI”) Driven Reverse Vending Machines

To further support plastic waste recycling and reduce plastic waste, tax deductions for the sponsorship of Smart AI-Driven Reverse Vending Machines will be extended for an additional two years effective from 1 January 2025 until 31 December 2026.

Tax incentive for employers implementing flexible work arrangements (“FWA”)

To further encourage more employers to offer flexibility to employees and to create a positive work life balance, a further deduction of 50 % will be granted to employers that incur expenses for capacity building and software acquisition to implement FWA. This deduction will be applicable for applications received by the Talent Corporation Malaysia Berhad (“TalentCorp”) from 1 January 2025 to 31 December 2027, on a one-off basis.

Tax incentive for hiring women returning to work

For applications received by TalentCorp between 1 January 2025 and 31 December 2027, employers are entitled to a further deduction of 50 % on the employment expenses paid for a period of 12 months for hiring women returning to work.

Tax incentive for employers providing caregiving leave benefit

The Government has proposed that a further 50 % deduction will be granted to employers on additional paid leave of up to 12 months provided to employees caring for children or ill or disabled family members.

Benefits granted to the Technical and Vocational Education and Training (“TVET”) sector

Effective from YA 2025 to YA 2027, tax deduction will be permitted for new equipment and machinery donated to registered Institusi Latihan Kemahiran Awam (“ILKA”), polytechnics or vocational colleges.

Employers may also utilise the Human Resource Development Corporation (“HRD Corp”) levy to pay allowances up to RM1,000 per year for graduates participating in skills training programs through HRD Corp.

Payment of salaries and wages of teaching staff by institutions or organisations approved under Section 44(6) of the Income Tax Act 1967 (“ITA”)

To improve the educational access for students from underprivileged families, the payment of salaries and wages of teaching staff by institutions or organisations with educational objectives, approved under Section 44(6) of the ITA, will be classified as allowable welfare expenditure.

Expansion of childcare allowance

The further deduction claimable on childcare allowance paid by employers will be expanded to include expenses incurred for elderly care (i.e. parents or grandparents), effective from YA 2025.

Double deduction for Structured Training Programs

Double deduction for expenses incurred in implementing the Structured Training Program (“MySIP”) under TalentCorp will be extended to include students who undertake structured training conducted by industry regulatory bodies. Further, this double deduction will be extended for another five YAs, until YA 2030.

Incentive for hiring disabled persons and ex-convicts

An incentive of RM600 per month, for a total of three months, will be given to employers who hire persons with disabilities and ex-convicts. This incentive will be under the supervision of the Social Security Organisation (“SOCSO”).

Tax incentives

New Investment Incentive Framework (“NIIF”)

The introduction of the NIIF through the Budget 2025 is anticipated to attract more impactful investments. The framework is expected to be launched in the third quarter of 2025 with a fo-cus on high-value activities and economic spillover for the country, while moving away from existing incentives that are based on specific products.

Under the NIIF, the following incentives are to be anticipated:

Tax incentives for increased exports will be extended to include integrated circuit (“IC”) design activities;
Private Higher Education Institutions will be permitted to claim a deduction for the costs associated with developing new courses in fields such as digital technology, AI, robotics, the Internet of Things (“IoT”), data science, financial technology (“FinTech”) and sustainable technology;
A double tax deduction, capped at RM2 million per year for three consecutive years, will be available for expenditures incurred by multinational enterprises (“MNEs”) with the aim to strengthen the local supply chain;
Tax deductions will be offered on total investments made by an MNE or its vendors engaged in joint venture investments with other local vendors;
An outcome-based special incentive package for local vendors participating in the Supply Chain Resilience Initiative;
A matching investment fund exceeding RM100 million will be established through an equity crowdfunding platform to support the expansion of local suppliers in the electrical and electronic (“E&E”), specialty chemicals, and medical devices sectors;
Economic clusters will be established, tailored to the unique value propositions of each state;
Tax incentives will be introduced in 21 economic sectors in states such as Perlis, Kedah, Kelantan, Terengganu, Sabah and Sarawak, based on the economic spillover; and
Tax incentives, such as investment tax allowance or income tax exemptions, will be provided for Carbon Capture Utilisation and Storage (“CCUS”) activities.

Smart Logistics Complex (“SLC”)

It is proposed that an eligible SLC will be applicable to claim for an investment tax allowance of 60 % on qualifying capital expenditure incurred for a period of five years, to be set-off against 70 % of statutory income.

Eligible SLC Companies	Definition
SLC Investor	Investments in the construction of smart warehouses that utilise Industry 4.0 (“IR4.0”) elements and undertake eligible logistics services activities
SLC Operator	Leases smart warehouse under a long-term lease of at least 10 years and undertakes logistics services

The incentive is applicable for applications received by the Malaysian Investment Development Authority (“MIDA”) from 1 January 2025 until 31 December 2027.

Johor-Singapore Special Economic Zone (“JS-SEZ”)

Special incentives are expected to be announced towards the end of 2024 with the aim of attracting quality investments and creating high-value jobs.

Indirect Tax

Review of Sales Tax scope

It is proposed that Sales Tax exemptions will continue to be maintained on essential food items. Consequently, Sales Tax will be levied on non-essential goods, such as imported premium items.

Expansion of Service Tax scope

Effective from 1 May 2025, the Service Tax scope will be expanded progressively to include new services such as commercial service transactions between businesses (“B2B”).

Excise duty on sugar-sweetened beverages (“SSB”)

The Government has proposed that the excise duty rate on sugar sweetened beverages will be increased in phases at RM0.40 per litre based on a prescribed sugar content threshold under the following tariff codes, effective from 1 January 2025.

Tariff Code	Type of Beverages	Sugar Content Threshold
22.02	Beverages including carbonated drinks containing added sugar or other sweetening matter or flavoured and other non-alcoholic beverages	> 5 g/100 ml
22.02	Flavored milk-based beverages containing lactose	> 7 g/100 ml
20.09	Fruit juices and vegetable juices whether or not containing added sugar or other sweeteners	> 12 g/100 ml

Export duty on crude palm oil

Effective from 1 November 2024, the export duty rates on crude palm oil, considering the partial exemption, will be revised as follows:

CPO Market Price (RM/metric tonne)	Current Rate	Proposed Rate
≤ 3,600	No changes
> 3,600	8.0 %	8.5 % to 10.0 %

Windfall profit levy on crude palm oil

Effective from 1 January 2025, the threshold for the windfall profit levy on crude palm oil will be increased to RM3,150 per metric tonne for Peninsular Malaysia and to RM3,500 per metric tonne for Sabah and Sarawak. The levy rate will remain at 3 %.

Sales Tax exemption on mastectomy bras for breast cancer patients

Sales Tax exemptions will be granted on mastectomy bras for breast cancer patients, currently subject to a rate of 10 %. This exemption will apply to applications received by the Ministry of Finance (“MoF”) from 1 November 2024 to 31 December 2027.

Stamp Duty

Implementation of self-assessment system for Stamp Duty

It is proposed by the Government that the self-assessment stamp duty system shall be implemented in phases based on types of instruments or agreements, as follows:

Phase	Effective Date	Types of Instruments
Phase 1	From 1 January 2026	Instruments or agreements realted to rental or lease, general stamping and securities
Phase 2	From 1 January 2027	Instruments of transfer of property ownership
Phase 3	From 1 January 2028	Instruments or agreements other than stated in Phase 1 and Phase 2

Stamp Duty on loan or financing agreements based on Shariah principles

Stamp duty of RM10 (instead of an ad-valorem rate of 0.5 %) will be imposed on loan or financing agreements executed from 1 January 2025 that are based on Shariah principles, such as Murabahah and Tawarruq, for the purchase of goods. This applies to goods not specified under the First Schedule of the Hire Purchase Act 1967.

Stamp Duty on the assignment of a life insurance policy and family takaful certificate

A fixed rate stamp duty ranging from RM10 to RM1,000 will be applied to deeds of assignment of life insurance policies and family takaful certificates given by way of love and affection or through a trustee, based on the ownership transfer value. This applies to instruments executed from 1 January 2025.

Stamp Duty exemption on loan or financing agreements through the initial exchange offering (“IEO”) platform

The Government has proposed a 100 % Stamp Duty exemption for a period of two years on loan or financing agreements executed by Micro, Small, and Medium Enterprises (“MSMEs”) and investors through Initial Exchange Offering (“IEO”) platforms registered with the Securities Commission Malaysia. This exemption will apply to loan or financing agreements executed from 1 January 2025 until 31 December 2026.

Carbon Tax

Introduction of Carbon Tax

To encourage the adoption of low-carbon technologies, the Government has announced the introduction of a Carbon Tax targeting the iron and steel industry, as well as the energy sector, effective from YA 2026.

Others

Employees Provident Fund (“EPF”)

EPF contributions will be made mandatory for non-Malaysian employees, which will be introduced in phases.

Subsidy for RON95

The Government has plans to implement a subsidy rationalisation for the RON95 petrol in mid-2025, with the aim of ensuring that 85 % of the rakyat will not be adversely affected.

Increment of minimum wages

In addition to the rationalization of the RON95 subsidy, the Government has proposed an increase in the minimum wage for employees from RM1,500 to RM1,700, effective 1 February 2025.

For employers with less than five workers, a six-month deferment will be granted, and the new minimum wage rate will take effect on August 1, 2025.