Malaysia announced its 2025 Budget on 18 October 2024 with various tax measures.

Dividend tax

Starting from the year of assessment 2025, a 2% dividend tax will be applied to the annual chargeable dividend income of individuals exceeding MYR 100,000, after considering allowances and deductions. There are exemptions such as:

• dividend income from abroad;
• dividend income distributed from the profits of companies that received pioneer status and reinvestment allowances;
• dividend income paid, credited, or distributed from the profits of shipping companies that is exempted from tax;
• dividend income distributed by cooperatives;
• dividend income declared by closed-end funds;
• dividend income received by residents from Labuan entities; and
• any exemption given on dividend income at the shareholder level.

Tax incentives for implementation of e-invoicing

From the year of assessment 2024 until the year of assessment 2025, From the year of assessment 2024, the rates of capital allowance allowed to be claimed on capital expenditure for information and communication technology (ICT) equipment and computer software have been revised as follows:

To encourage taxpayers to fully implement e-Invoicing, it is proposed the expenses for the purchase of ICT equipment, computer software packages and consulting fees be given an accelerated capital allowance that can be fully claimed within two years as follows:

Exemption of stamp duty on loan or financing agreements through the initial exchange offering platform for micro, small and medium enterprises

To facilitate expanding MSME’s access to raising business capital through alternative financing, it is proposed a 100% stamp duty exemption be given on loan or financing agreements executed by MSMEs and investors through the IEO platforms registered with the Securities Commission Malaysia for two years. The proposal goes into effect for loans or financing agreements executed from 1 January 2025 until 31 December 2026.

Extension of the tax deduction for sponsorship of smart artificial intelligence-driven reverse vending machine

To further support plastic waste recycling practices and to increase the collected-for-recycling rate, it is proposed the current tax deductions given to contributions or sponsorships of Smart AI-driven RVM be extended for two years. This goes into effect from 1 January 2025 until 31 December 2026.

Expansion of income tax exemption for Islamic financial activities under Labuan international business and financial centre 

The expansion of the Income tax exemption is provided for five years from the year of assessment 2024 until the year of assessment 2028 to Labuan trading entities that undertake Islamic finance activities such as Islamic digital banking, Islamic digital bourses, ummah-related companies and Islamic digital token issuers.

The exemption applies to the following Labuan takaful business and takaful-related activities for the assessment years 2025 through 2028:

• The Labuan insurer, Labuan reinsurer, Labuan takaful operator, or Labuan re-takaful operator;
• Labuan captive insurer or Labuan captive takaful;
• Labuan underwriting manager or Labuan underwriting takaful manager;
• Labuan insurance manager or Labuan takaful manager; and
• Labuan insurance broker or Labuan takaful broker.

Tax incentive for smart logistics complex (SLC)

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. An investment tax allowance (ITA) of 60% has been introduced on qualifying capital expenditure incurred for five years to 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:

1. 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.

2. Eligible logistics services

• • regional distribution centres;
  • integrated logistics services;
  • storage of hazardous goods; or
  • cold chain logistics.

3. Warehouse with a minimum build-up area of 30,000 square metres.

Tax incentive for increased exports

From the year of assessment 2025, the range of services eligible for a tax exemption – up to 70% of statutory income equivalent to 50% of the value of increased exports – will be expanded to include Integrated Circuit (IC) Design services.

Review of the rates of sales tax and the expansion of service tax scope

The revision of sales and service taxes, effective from 1 May 2025, is as follows:

• a sales tax exemption will be maintained on basic food items;
• sales tax will be increased on non-essential items such as imported premium goods; and
• the scope of service tax will be expanded to include new services such as commercial service transactions between businesses (B2B).

Review of export duty exemption on crude palm oil (CPO)

Effective from 1 November 2024, the revision of the CPO export duty exemption and rates will be based on the market price per tonne.

• up to MYR 2,250 – NIL
• MYR 2,250 to 2,400 – 3.0%
• MYR 2,401 to 2,550 – 4.5%
• MYR 2,551 to 2,700 – 5.0%
• MYR 2,701 to 2,850 – 5.5%
• MYR 2,851 to 3,000 – 6.0%
• MYR 3,001 to 3,150 – 6.5%
• MYR 3,151 to 3,300 – 7.0%
• MYR 3,301 to 3,450 – 7.5%
• MYR 3,451 to 3,600 – 8.0%
• MYR 3,601 to 3,750 – 8.5%
• MYR 3,751 to 3,900 – 9.0%
• MYR 3,901 to 4,050 – 9.5%
• over MYR 4,050 – 10.0%

Excise duty of sugary drinks

Effective 1 July 2019, an excise duty of 40 cents per litre was imposed on sugar-sweetened beverages based on the threshold of sugar content. This rate was increased to 50 cents per litre from 1 January 2024. In line with the effort to improve the health and well-being of the population, particularly the prevention of diabetes and obesity, it is proposed the excise duty on sugar-sweetened beverages be increased in phases starting from 1 January 2025 at 40 cents per litre.