The recent Tax Budget 2025 introduces several key changes to indirect taxes, directly impacting businesses in Malaysia. From expanded service tax coverage to phased excise duty hikes, these updates are designed to balance economic growth with public well-being.
If you run a business or are involved in tax planning, understanding these changes is crucial for smooth compliance. Here’s a breakdown of the major changes that will come into effect in 2024 and 2025, especially those relevant to Malaysia SMEs.
1. Sales and Service Tax (SST)
Sales Tax Updates
Exemption for Basic Food Items : The government reaffirms its commitment to ensure that essential food items remain free from sales tax, minimizing the impact on the rakyat.
Higher Sales Tax for Non-Essentials : Non-essential and luxury imported items will face increased sales tax rates to curb excessive consumption.
Service Tax Expansion
New B2B Transactions Under Service Tax : A broader range of business-to-business (B2B) services will now be taxed. This change ensures better coverage of commercial activities and encourages fairness across industries.
Effective Date: 1 May 2025
2. Sales Tax Exemption for Mastectomy Bras
Supporting breast cancer patients, the government has announced a sales tax exemption for mastectomy bras.
Applicable Tax: Current 10% sales tax waived.
Application Period: Exemption applications open from 1 November 2024 to 31 December 2027, administered through the Ministry of Finance (MoF).
3. Phased Excise Duty Increase on Sugary Beverages
New Rate: RM0.40 per liter
Purpose: To promote healthier choices and curb excessive sugar consumption.
Effective Date: 1 January 2025
4. Export Duty Changes for Crude Palm Oil (CPO)
Expanded Duty Rate: From 8% to 10%
Condition: Applies when CPO market price exceeds RM3,451 per metric tonne.
Effective Date: 1 November 2024
5. Windfall Profit Levy (WPL) Threshold Increase
The government has revised the threshold price for Crude Palm Oil (CPO), aligning it with market realities.
Peninsular Malaysia: RM3,000 → RM3,150
Sabah and Sarawak: RM3,500 → RM3,650
Effective Date: 1 November 2024
6. Carbon Tax Coming in 2026
In a move toward environmental sustainability, the government has announced the introduction of a Carbon Tax targeting high-emission industries.
Industries Impacted: Iron, steel, and energy sectors.
Implementation Timeline: By 2026
Conclusion
The changes outlined in the Tax Budget 2025 are aimed at fostering sustainable growth while addressing public health and environmental concerns. As some of these measures come into effect in early 2025, businesses must act promptly to adjust their operations and tax planning strategies.
At KTP, we are committed to keeping you informed and ready for these updates. Stay ahead of these changes by visiting our blog regularly and reaching out to us for personalized tax planning services. Let’s ensure compliance and optimize your tax strategy together!
Past Update on Budget 2025
Dividend Income : https://www.ktp.com.my/blog/2percent-tax-dividend-income-above-rm100k/17oct2024
HR : https://www.ktp.com.my/blog/malaysia-budget-2025-hr/23oct2024
Companies : https://www.ktp.com.my/blog/malaysia-budget-2025-companies/24oct2024
Individual : https://www.ktp.com.my/blog/malaysia-budget-2025-individual/25oct2024
Tax Incentives : https://www.ktp.com.my/blog/malaysia-budget-2025-new-tax-incentives/30oct2024
PS : Authored by Ms Lim Nguan Lian, our head of client relationship, on her personal LinkedIn.
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