In the newly announced Budget 2025, Malaysia introduces expanded corporate tax incentives and allowances aimed at boosting business innovation, supporting export-driven sectors, and advancing the nation’s digital transformation. With new Investment Tax Allowances (ITA) for smart logistics and enhanced export incentives, along with accelerated capital allowances for e-invoicing adoption, these updates reflect a proactive approach to bolstering Malaysia’s corporate competitiveness and economic resilience.
TAX INCENTIVE FOR IMPLEMENTATION OF E-INVOICING
Current Position:
The period of the capital allowance for information and communication technology (ICT) equipment and computer software has been accelerated to 3 years from the year of assessment 2024.
| No. |
Qualifying Expenditure |
Capital Allowance Rate |
| 1. |
Purchase of ICT Equipment and computer software package |
Initial Allowance: 40%
Annual Allowance: 20%
|
| 2. |
Consultation, licensing and incidental fees related to customized computer software development |
Proposal:
The expenses for the purchase of ICT equipment, computer software packages and consulting fees be given accelerated capital allowance that can be
fully claimed within a period of 2 years as follows:
| No. |
Qualifying Expenditure |
Capital Allowance Rate |
| 1. |
Purchase of ICT Equipment and computer software package |
Initial Allowance: 20%
Annual Allowance: 40%
|
| 2. |
Consultation, licensing and incidental fees related to customized computer software development |
Effective Date:
From the year of assessment 2024 until the year of assessment 2025
TAX INCENTIVE FOR SMART LOGISTICS COMPLEX
Current Position:
The Smart Logistics Complex (SLC) is a modern warehouse that uses technologies such as the Internet of Things (IoT) and Artificial Intelligence (AI) to automate various warehouse operations, reduce costs and enhance overall supply chain performance. However, there are no specific incentives for companies in Malaysia that incorporate Fourth Industrial Revolution (IR4.0) elements in smart warehousing.
For Integrated Logistics Services (ILS) such as delivery, transportation and warehousing, tax incentives are provided as follows:
- Pioneer Status with a tax exemption of 70% of statutory income for a period of 5 years; or
- Investment Tax Allowance (ITA) of 60% on qualifying capital expenditure incurred within 5 years. This allowance can be set-off against up to 70% of statutory income for each year of assessment.
Additionally, tax incentives for automation in the form of Accelerated Capital Allowance and income tax exemptions equivalent to the ITA are available to companies in the services sector that invest in machinery and automation equipment with IR4.0 elements. The qualifying capital expenditure for the first RM10 million can be claimed under this incentive. The incentive is available for applications received by the Malaysian Investment Development Authority (MIDA) until 31 December 2027.
Proposal:
Income exemption equivalent to an ITA of 60% on qualifying capital expenditure incurred for a period of 5 years be provided to SLCs. This allowance can be set-off against up to 70% of statutory income for each year of assessment, subject to the following conditions:
A. Eligible SLC companies
- SLC investor and Operator that invest in the construction of smart warehouses and undertake eligible logistics services activities; or
- SLC Operator that leases a smart warehouse under a long-term lease of at least 10 years and undertakes eligible logistics services activities
B. Eligible logistics services
- regional distribution centres;
- integrated logistics services;
- storage of hazardous goods; or
- cold chain logistics.
C. Warehouse with a minimum build-up area of 30,000 square metres;
D. Adaptation of at least three IR4.0 elements; and
E. Other conditions as prescribed.
Effective Date:
For applications received by MIDA from 1 January 2025 until 31 December 2027.
TAX INCENTIVE FOR EMPLOYERS IMPLEMENTING FLEXIBLE WORK ARRANGEMENTS
Current Position:
Double tax deduction was given to employers who implemented or made improvements to the Flexible Working Arrangements (FWA), verified by Talent Corporation Malaysia Berhad from 1 January 2014 until 31 December 2016.
Under the National Economic Recovery Plan, employers implementing FWA were given a double tax deduction on eligible expenses capped at RM500,000 for consultancy fees, capacity building for flexible work arrangements, including employee training costs and the cost of acquiring virtual working environment software from 1 July 2020 until 31 December 2022.
Proposal:
Expenses for capacity building and software acquisition incurred by employers for implementing FWA be given a 50% further deduction. The expenses eligible for further deduction is capped at RM500,000, subject to a one-off claim and to be verified by Talent Corporation Malaysia Berhad.
Effective Date:
For application received by Talent Corporation Malaysia Berhad from 1 January 2025 until 31 December 2027
TAX INCENTIVE FOR EMPLOYERS PROVIDING CAREGIVING LEAVE BENEFIT
Current Position:
Employers who provide paid leave benefit for employees are eligible for tax deductions. However, there are no tax incentives for employers who provide additional paid leave to employees caring for children or ill or disabled family members.
Proposal:
A 50% further deduction be given to employers who provide additional paid leave of up to 12 months for employees caring for children or disabled family members.
Effective Date:
For applications received by Talent Corporation Malaysia Berhad from 1 January 2025 until 31 December 2027
TAX INCENTIVE FOR HIRING WOMEN RETURNING TO WORK
Current Position:
Women on a career break for at least 2 years and return to work are eligible for income tax exemption on remuneration received for a maximum period of 12 consecutive months. This incentive is provided for applications received by Talent Corporation Malaysia Berhad from 1 January 2018 to 31 December 2027.
Proposal:
A 50% further deduction be given to employers on employment expenses paid for a period of 12 months for hiring women returning to work.
Effective Date:
For applications received by Talent Corporation Malaysia Berhad from 1 January 2025 until 31 December 2027
TAX INCENTIVE FOR INCREASED EXPORT
Current Position:
Companies engaged in selected service activities and successfully increase exports are eligible to claim tax exemption up to 70% of the statutory income equivalent to 50% of the value of increased exports. The selected services activities are as follows:
- Legal;
- Accounting;
- Achitecture;
- Marketing;
- Business consultancy;
- Office services;
- Construction management;
- Building management;
- Plantation management;
- Private education;
- Publishing;
- Printing;
- Information technology and communication;
- Engineering; and
- Local franchise
This incentive has been in effect since the year of assessment 2002.
Proposal:
The increased export incentive for the services sector be expanded to IC Design services.
Effective Date:
From the year of assessment 2025
TAX DEDUCTION ON THE COST OF DEVELOPING NEW COURSES AT PRIVATE HIGHER EDUCATION INSTITUTIONS
Current Position:
Effective from the year of assessment 2006, Private Higher Education Institutions (PHEIs) are eligible for tax deduction on expenses incurred for:
- Development of new courses; and
- Compliance with regulatory requirements for introducing new courses
The tax deduction is allowed for the year of completion of development of new courses over a period of 3 years.
Proposal:
A tax deduction on cost of developing new courses by PHEIs be allowed to be fully claimed within the same year of assessment. This incentive is also extended to include the development of Technical and Vocational Education and Training (TVET) courses by private skills training institutions.
Effective Date:
From the year of assessment 2025 until the year of assessment 2030
EXPORT DUTY EXEMPTION ON CRUDE PALM OIL
Current Position:
The Customs Duty Order 2022 determines the export duty rate on crude palm oil (CPO) according to market price range of CPO as follows:
| No. |
CPO Market Price
(RM/metric tonne)
|
Export Duty Rate |
| 1. |
≤ 650 |
NIL |
| 2. |
> 650 - 700 |
10% |
| 3. |
> 700 - 750 |
15% |
| 4. |
>750 - 800 |
20% |
| 5. |
> 800 - 850 |
25% |
| 6. |
> 850 |
30% |
Effective 1 January 2020, the export duty for CPO was revised through a partial exemption as follows:
| No. |
CPO Market Price
(RM/metric tonne) |
Export Duty Rate |
| 1. |
< 2,250 |
NIL |
| 2. |
2,250 - 2,400 |
3.0% |
| 3. |
2,401 - 2,550 |
4.5% |
| 4. |
2,551 - 2,700 |
5.0% |
| 5. |
2,701 - 2,850 |
5.5% |
| 6. |
2,851 - 3,000 |
6.0% |
| 7. |
3,001 - 3,150 |
6.5% |
| 8. |
3,151 - 3,300 |
7.0% |
| 9. |
3,301 - 3,450 |
7.5% |
| 10. |
> 3,450 |
8.0% |
Proposal:
Export duty for CPO, taking into accounts the partial exemption, be revised as follows:
| No. |
CPO Market Price
(RM/metric tonne) |
Export Duty Rate |
| 1. |
< 2,250 |
NIL |
| 2. |
2,250 - 2,400 |
3.0% |
| 3. |
2,401 - 2,550 |
4.5% |
| 4. |
2,551 - 2,700 |
5.0% |
| 5. |
2,701 - 2,850 |
5.5% |
| 6. |
2,851 - 3,000 |
6.0% |
| 7. |
3,001 - 3,150 |
6.5% |
| 8. |
3,151 - 3,300 |
7.0% |
| 9. |
3,301 - 3,450 |
7.5% |
| 10. |
3,451 - 3,600 |
8.0% |
| 11. |
3,601 - 3,750 |
8.5% |
| 12. |
3,751 - 3,900 |
9.0% |
| 13. |
3,901 - 4,050 |
9.5% |
| 14. |
> 4,050 |
10.0% |
Effective Date:
From 1 November 2024
THRESHOLD VALUE FOR WINDFALL PROFIT LEVY
Current Position:
The windfall profit levy is imposed on the production of fresh fruit bunches (FFB) when the market price of crude palm oil (CPO) exceeds the threshold. As of 1 January 2022, the threshold was reviewed and the levy for Sabah and Sarawak has been streamlined with Peninsular Malaysia rates, as follows:
| No. |
Location |
Threshold of CPO Prices
(RM/metric tonne)
|
Rates of Levy |
| 1. |
Peninsular Malaysia |
3,000 |
3% |
| 2. |
Sabah and Sarawak |
3,500 |
3% |
Proposal:
The threshold of windfall profit levy for Peninsular Malaysia, Sabah and Sarawak be revised as follows:
| No. |
Location |
Threshold of CPO Prices
(RM/metric tonne) |
Rates of Levy |
| 1. |
Peninsular Malaysia |
3,150 |
3% |
| 2. |
Sabah and Sarawak |
3,650 |
3% |
Effective Date:
From 1 January 2025
SALES TAX EXEMPTION ON MASTECTOMY BRA FOR BREAST CANCER PATIENTS
Current Position:
Mastectomy bras for cancer patients are subject to following duties/taxes:
| No. |
Product |
Tariff Code |
Import Duty |
Sales Tax |
| 1. |
Mastectomy bra (made from cotton) |
6212.10.1100 |
0% |
10% |
| 2. |
Mastectomy bra (made from other textile materials) |
6212.10.9100 |
0% |
10% |
Proposal:
Sales tax exemption be given for mastectomy bras.
Effective Date:
For applications received by the Ministry of Finance from 1 November 2024 until 31 December 2027.
REVIEW OF THE RATES OF SALES TAX AND THE EXPANSION OF SERVICE TAX SCOPE
Current Position:
Sales tax is imposed on taxable goods manufactured in Malaysia as well as imported goods. There is a list of goods exempted from sales tax (0%) consisting mainly essential items, meanwhile for other goods, sales tax at 5%, 10% or specific rates are imposed depending on the type of goods.
Service tax is imposed on taxable services provided by service providers including imported taxable services and digital services. The service tax rates are 6%, 8%, or a specific rate depending on the services provided.
To provide a conducive and business-friendly environment, the following treatment have been given:
- sales tax exemption on manufacturing inputs used by registered manufacturers to produce taxable goods under the Sales Tax Act 2018;
- business-to-business (B2B) exemption for professional services, logistics, advertising and telecommunications;
- service tax exemption for maintenance, repair and overhaul (MRO) services; and
- Group Relief facility under service tax.
Proposal:
Sales tax and service tax will be reviewed as follows:
- sales tax exemption be maintained on basic food items consumed by the rakyat;
- sales tax be increased on non-essential items such as imported premium goods; and
- the scope of service tax be expanded to include new services such as commercial service transactions between businesses (B2B).
Effective Date:
From 1 May 2025
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