Budget 2024 Malaysia: The Startup of Tax Reform by the Government

In a historic move for the country, the Malaysian Prime Minister, who is also Minister of Finance, unveiled the eagerly awaited 2024 budget on 13 October 2023, which sets a new spending record of MYR 393.8 billion. Its real significance lies in its distribution, with MYR 303.8 billion earmarked for operating expenditure and the remaining MYR 90 billion dedicated to development, with an additional MYR 2 billion set aside for contingency savings. The experts at ECOVIS MALAYSIA TAX SDN BHD explain the details of this comprehensive reform.

Entitled Economic Reforms, Empowering the People, the budget reflects the government’s commitment to fostering economic growth while ensuring that the benefits of this growth are felt by the citizens of Malaysia. This dual focus underscores the government’s recognition of the importance of a thriving economy and the well-being of its people, a vision that aims to set the nation on a path to a more prosperous and equitable future.

The allocation for operating expenditure is substantial and signals the intent to meet essential day-to-day needs and commitments efficiently. At the same time, the significant development expenditure reflects the government’s determination to invest in infrastructure, innovation and long-term progress, thus securing a prosperous future for Malaysia.

The inclusion of a MYR 2 billion contingency savings fund demonstrates prudence in financial management, ensuring that unexpected challenges can be met without compromising the nation’s fiscal stability.

The following aspects will massively reshape the tax landscape in Malaysia.

With the tax reform, the Malaysian government aims to promote economic growth, increase tax revenue and distribute the tax burden fairly.

Ang Heng Ann, Tax Partner, ECOVIS MALAYSIA TAX SDN BHD, Kuala Lumpur, Malaysia

1. Capital gains tax

A pivotal reform introduced in the 2024 budget is the implementation of a 10% capital gains tax, which will take effect on 1 March 2024. The tax will apply to the net profit generated from the sale of unlisted shares of local companies. However, there are certain exemptions in place to encourage specific types of investments. Notably, the tax will not apply to cases involving Initial Public Offerings (IPOs), internal restructuring, and investments by venture capital firms. These exemptions are crucial for incentivising investments in new and innovative businesses, while the tax itself will contribute to government revenue by ensuring that profits from share sales are captured in the tax net.

2. High value goods tax

Another remarkable development is the introduction of a high value goods tax, designed to target high-value items such as jewellery and luxury watches. This will range from 5% to 10%, depending on the value threshold of the item in question. Foreign tourists will be eligible for an exemption from this tax, which is a significant move to encourage tourism and attract international visitors who may wish to make high-value purchases in Malaysia. This tax will not only generate revenue for the government, but also serve to balance the impact of luxury consumption on society.

3. Global minimum tax

One of the most forward-looking changes introduced in the 2024 budget is the commitment to implement a global minimum tax in 2025. This will apply to companies with a global income of at least EUR 750 million (equivalent to MYR 3 billion). The concept of a global minimum tax is part of a broader international effort to ensure that multinational corporations pay their fair share of taxes, regardless of where they operate. With the introduction of this tax, Malaysia is aligning itself with global tax reform initiatives and aiming to ensure that multinational companies do not engage in tax avoidance practices that can erode the nation’s tax base.

4. Implementation of e-invoicing

The adoption of e-invoicing is another crucial step towards modernising tax administration in Malaysia. Starting on 1 August 2024, businesses with an annual turnover or revenue exceeding MYR 100 million will be required to implement e-invoicing. As of 1 July 2025, this requirement will gradually extend to various other categories of businesses. E-invoicing will not only streamline the process of tax collection but also reduce the potential for errors, fraud, and tax evasion. This forward-looking approach aligns with the broader global trend of embracing digital technology in tax administration.

With the introduction of the above measures, Malaysia is positioning itself as a forward-thinking nation ready to embrace the challenges and opportunities of a rapidly changing economic and tax environment.

For further information please contact:

Ang Heng Ann, Tax Partner, ECOVIS MALAYSIA TAX SDN BHD, Kuala Lumpur, Malaysia
Email: hengann.ang@ecovis.com.my