The Malaysian Prime Minister announced Malaysia’s 2016 budget on 23 October 2015 highlighting some tax measures including corporate and personal income taxation changes.

Corporate taxation

  • A special reinvestment allowance of 60% of qualifying capital expenditure will be extended to companies engaged in factory or agricultural activities whose reinvestment allowance incentives have expired.
  • To promote R&D activities among companies with paid-up capital not exceeding MYR 2.5 million, it is proposed that these companies be allowed to claim a double deduction automatically for R&D project expenditures up to MYR 50,000 for each year of assessment.
  • The 100% tax exemption for travel companies will be extended to 31 December 2018.

Personal taxation

  • Income tax increased from 25 percent to 26 percent for people earning between MYR 600,000 and MYR 1 million; while those making more than MYR 1million will be taxed at 28%.
  • The fixed income tax rate for non-resident individuals is to be increased by 3 percentage points from 25% to 28%.
  • Child relief for each child below 18 years old is increased from MYR 1,000 to MYR 2,000; from MYR 6,000 to MYR 8,000 for each child above the age of 18 years who is studying at local or foreign institutions and from MYR 3,000 to MYR 4,000 for individual taxpayer whose spouse has no income.
  • Subject to certain conditions, children supporting and caring for their parents will be entitled to a tax deduction of MYR 1,500 for each parent.
  • Relief for parents with a disabled child will be increased from MYR 5,000 to MYR 6,000. The additional deduction for a disabled child pursuing tertiary education will also be increased from MYR 6,000 to MYR 8,000.
  • The relief for children supporting their parents is subject to the condition that each parent does not have income exceeding MYR 2,000 a month and must be 60 years and above.
  • The tax deduction for higher education fees on approved courses will be increased from MYR 5,000 to MYR 7,000.
  • To enable more employees to benefit from the Social Security Organization (Socso), the eligibility for mandatory contribution would be increased from a monthly salary of MYR 3,000 to MYR 4,000.