Budget 2023 was re-tabled on 24 February 2023, it brings some noteworthy key tax changes for both corporate and individual tax in Malaysia. Let's dive into the key highlights.
Corporate and individual tax in Malaysia - Key tax changes
Corporate tax
1. Reduced tax rates for Micro, Small and Medium Enterprises (MSMEs) - Effective from YA 2023
Chargeable income | Existing rates | YA 2023 |
First RM150,000 | 17% | 15% |
RM150,000 to RM600,000 | 17% | 17% |
Exceeding RM600,000 | 24% | 24% |
MSMEs refers to:
- a resident company incorporated in Malaysia with paid-up capital in respect of ordinary shares of not more than RM2.5 million at the beginning of the basis period for a year of assessment and with annual gross business income not exceeding RM50 million and;
- the resident company must not be part of a group of companies where any of their related company has a paid-up capital in respect of ordinary shares of more than RM2.5 million at the beginning of the basis period for a year of assessment.
2. Effective from YA 2024
For MSMEs to qualify for the above preferential income tax rates of 15% and 17%, an additional condition has been imposed with effect YA 2024. The condition is:
Not more than 20% of its paid-up capital in respect of ordinary shares at the beginning of the basis period for a year of assessment is directly or indirectly owned by companies incorporated outside Malaysia or individuals who are not citizens of Malaysia.
3. Due date for remittance of withholding tax on payments made to agents, dealers or distributors
Prior to 1 July 2022, the withholding tax on payments made to agents, dealers or distributors are required to be remitted to IRB within 30 days after the payment is made. With effect from 1 July 2022, IRB administratively allowed companies to accumulate the withholding tax on a monthly basis and remit the Inland Revenue Board (IRB) of Malaysia not later than the last day of the following month. This has been legislated into the Income tax Act 1967 effective from 1 January 2023.
4. Redefinition of “plant” for capital allowance purposes
Currently, intangible assets are excluded from the definition of "plant" in paragraph 70A, schedule 3 of the Income Tax Act 1967 for the purposes of computing capital allowances. With effect from YA 2023, the exclusion has been removed and qualifying intangible assets are eligible for the capital allowances.
Individual tax
1. Income tax rates for resident individuals has been revised as follows:
Chargeable Income (RM) | Existing rates (%) | YA 2023 (%) | Increase or (Reduction) (%) |
1 - 5,000 | 0 | 0 | - |
5,001 - 20,000 | 1 | 1 | - |
20,001 - 35,000 | 3 | 3 | - |
35,001 - 50,000 | 8 | 6 | (2) |
50,001 - 70,000 | 13 | 11 | (2) |
70,001 - 100,000 | 21 | 19 | (2) |
100,001 - 250,000 | 24 | 25 | 1 |
250,001 - 400,000 | 24.5 | 25 | 0.5 |
400,001 - 600,000 | 25 | 26 | 1 |
600,001 - 1,000,000 | 26 | 28 | 2 |
1,000,001 - 2,000,000 | 28 | 28 | - |
Above 2,000,000 | 30 | 30 | - |
- For non-resident individual taxpayer, the income tax rate is at 30% for YA 2023, no change from YA 2022.
2. Income tax reliefs, exemptions and deductions
a. Medical expense
The annual tax relief for medical expenses incurred for yourself, your spouse, or your child has been increased from RM8,000 to RM10,000. This means that you can deduct up to RM10,000 from your taxable income to reduce your tax liability.
b. Expanded scope on medical expense
The scope of relief has been expanded to include specific medical conditions. You can now claim additional tax relief of up to RM4,000 for expenses related to the following medical conditions:
Autism
Attention Deficit Hyperactivity Disorder (ADHD)
Global Development Delay
Intellectual Disability
Down Syndrome
Specific Learning Disabilities
c. Childcare and kindergarten fees
Tax relief of up to RM3,000 per annum on fees paid to approved childcare centres and kindergartens is applicable for YA 2023.
This relief has also been extended to YA 2024, allowing individuals to continue claiming this benefit for an additional year.
d. Life insurance premium and takaful contributions
Previously, tax relief of up to RM3,000 per annum was given for life insurance premium or Takaful contributions.
Effective from YA 2023, this relief has been expanded to include additional voluntary Employees' Provident Fund (EPF) contributions made by individuals. This means that individuals can now claim tax relief for both life insurance premiums or Takaful contributions and additional voluntary EPF contributions.
e. Voluntary EPF contributions
Previously, tax relief of up to RM4,000 per annum was provided for voluntary contributions to EPF, but it was limited to self-employed individuals or pensionable civil servants.
Effective from YA 2023, this relief has been expanded to include voluntary contributions to EPF made by employees, not just self-employed individuals or pensionable civil servants. This expansion allows a broader group of individuals to benefit from the tax relief for their voluntary EPF contributions.
3. Stamp duty
a. Purchase of first (1st) residential property
100% stamp duty exemption for the purchase of first residential property valued at RM500,000 or less.
75% stamp duty exemption for the purchases of first residential property valued between RM500,001 and RM1 million. Currently, 50% exemption is in place.
The exemption applies to sale and purchase agreements executed from 1 June 1 2022 until 31 Dec 2023 and is duly stamped no later than 31 January 2024.
b. Transfer of property by way of love and affection
100% exemption is given, limited to the first RM1 million of the property's value.
Applicable to transfer of ownership between parents and children; grandparents and grandchildren.
Applicable to instrument of transfer of property executed from 1 April 2023.
4. Second revision for tax instalment scheme CP500
Curently, the application for revision of tax instalment scheme under form CP500 is allowed only once, by 30 June of that YA. Effective from YA 2023, an application for second revision be allowed, as long it is submitted by 31 October of that YA.
5. Introduction of Luxury Goods Tax
The Malaysian government unveiled its plan to implement a luxury goods tax, commencing in 2023. The proposal outlined that this tax would be levied on certain items, such as luxury watches and high-end fashion products, subject to a predefined value threshold. Further details on the tax were expected in June 2023 but, as at the date of publication of this article, no details have been forthcoming.
6. Special Voluntary Disclosure Program (SVDP) - 100% Waiver of penalty
SVDP 2.0 has been reintroduced by the IRB and the Royal Malaysian Customs Department. The implementation period of SVDP 2.0 is from 6 June 2023 until 31 May 2024. Through this program, a 100% penalty waiver would be available to taxpayers that make voluntary disclosures of their compliance gaps and under declared income.
For comprehensive information regarding SVDP 2.0, please access the following link:
7. Enhancements in tax administration, including E-Invoice adoption
a. Instalment payment expansion (Effective from YA 2023):
Currently, tax arising from an assessment, additional assessment and an advance assessment is allowed to be paid in instalment but not a deemed assessment upon submission of an ITRF or an amended ITRF.
Effective from YA 2023, the power of Director General of IRB to allow tax to be paid in instalments be expanded to include tax arising from a deemed assessment upon submission of an ITRF or an amended ITRF.
b. Mandatory e-filing for amended ITRF (Effective from YA 2024):
Starting from the YA 2024, companies will be obligated to utilise electronic filing, commonly referred to as "e-filing," when submitting an amended ITRF to the IRB. This move builds upon the existing mandate for e-filing, which is currently applicable solely to the submission of ITRFs and employer return forms.
c. Introduction of E-Invoice by IRB (Commencing June 2024):
One of the most transformative changes in Malaysia's tax landscape is the introduction of electronic invoicing, referred to as "e-invoice,". E-invoicing represents a shift towards digital tax administration, particularly concerning transactions between suppliers and buyers. E-invoice technology will replace traditional paper-based or electronically transmitted documents such as invoices, credit notes, and debit notes. This transition is designed to enhance accuracy, transparency, and efficiency in tax-related transactions. The implementation of e-invoice is scheduled to commence in June 2024 for specific targeted taxpayers, with plans to encompass all taxpayers, including certain non-business transactions, by January 1, 2027.
For comprehensive information on e-invoice adoption in Malaysia, please visit the following link:
8. Capital Gains Tax
The Ministry of Finance (MOF) has clarified by way of letter dated 17 November 2023 to Chartered Tax Institute of Malaysia (CTIM) the following in relation to the effective date of capital gains tax (CGT) imposition: a. CGT is to be imposed with effect from 1 January 2024 as indicated in the Finance Bill (No.2) 2023. b. Notwithstanding the above, the imposition of CGT on gains or profits from disposal of local companies' unlisted shares will commence from 1 March 2024.
Please note that tax laws can change, and it's essential to verify the latest updates with the Inland Revenue Board of Malaysia (Lembaga Hasil Dalam Negeri Malaysia or LHDN) or consult a tax professional to ensure that you're claiming the correct tax relief based on the most recent regulations.
The information provided here is a summary derived from the re-presentation of the 2023 Budget by our Prime Minister and Finance Minister, Dato' Seri Anwar bin Ibrahim, on February 24, 2023. The highlights above aim to offer a broad overview of significant tax changes and should not be used as the sole basis for determining specific tax liabilities or making business decisions. GSK & Associates cannot assume responsibility for any losses incurred by individuals who act or refrain from acting based on the content of this publication. It is strongly advised that readers seek professional advice before making any decisions based on this information.
For further clarification, please feel free to reach out to us at gunalan@gskassociates.net or contact the manager with whom you typically engage or who oversees your organisation's tax matters.