PETALING JAYA, October 17 – Malaysia’s national Budget 2024, presented on October 13, 2023, with a total allocation of RM393.8 billion, is seen as a precursor to future tax reforms aimed at empowering the population and fostering inclusive and sustainable economic growth. Mr. Soh Lian Seng, Head of Tax at KPMG in Malaysia, noted that the Budget 2024 includes key initiatives indicating a clear strategy to expand the tax revenue base. These initiatives have implications for various sectors of the economy and taxpayers, and some notable highlights include:
- Introduction of Capital Gains Tax: Beginning March 1, 2024, a Capital Gains Tax of 10% will be imposed on the net profit from the sale of unlisted shares by local companies. Clarity in regulations and guidelines, along with a reasonable transition plan, is expected to accompany these reforms for a smooth implementation.
- High-Value Goods Tax: This tax will apply to selected high-value goods like jewelry and watches, with rates ranging from 5% to 10% based on the threshold value of the goods.
- Global Minimum Tax (GMT): The Budget clarified that GMT will only apply to companies with a global revenue of at least 750 million Euros starting in 2025. This provides multinational enterprises (MNEs) with time to prepare for the implementation of GMT.
- Increase in Service Tax Rate: The proposal to increase the service tax rate from 6% to 8%, along with an expansion in the scope of taxable services, demonstrates the government’s intent to boost tax revenue. Notably, the increased service tax does not apply to all services, with food and beverage (F&B) and telecommunication services remaining subject to the 6% tax.
Budget 2024 also includes incentives aimed at enhancing Malaysia’s business competitiveness and promoting investment. These incentives encompass extending tax benefits to individual investors who support local startups through the equity public funding platform (ECF) until December 31, 2026, using the nominee Limited Liability Partnership. Furthermore, tax incentives for angel investors will be extended until the same date, encouraging capital funding in technology startup companies and potentially fostering the internationalization of Malaysia’s unicorns.
The tax reforms and budgetary measures introduced in 2024 are designed to stimulate economic growth and pave the way for a more sustainable and inclusive future in Malaysia. The success of these initiatives will depend on effective implementation and adaptation in the business and investment landscape.
