Malaysia: Malaysia National Budget 2025

Malaysia’s tax base is gradually expanded by introducing a 2% tax on dividend income exceeding RM100,000 for individual shareholders, with effect from year of assessment 2025. The scope of Sales Tax will be broadened to apply to non-essential goods, especially premium imported products; while the Services Tax will be expanded to cover commercial services, particularly businesses that operate on a fee-based model. In addition, “sugar tax” will be increased starting 1 January 2025. Other proposed tax measures take effect in 2026 include carbon taxes on the iron and steel industry and energy sector.

Foreign-sourced income received in Malaysia by a resident individual is exempted from tax from 1 January 2022 to 31 December 2026, subject to conditions. The exemption is extended for another 10 years until 31 December 2036.

Malaysia is committed to implement the Global Minimum Tax (GMT) as part of the Base Erosion and Profit Shifting 2.0 initiative, which introduces a global minimum tax rate of 15%. GMT may result in potential negative impacts to investment in Malaysia. To mitigate this, existing incentives may be streamlined, new non-tax incentives may be introduced, and the feasibility of Strategic Investment Tax Credits may be explored.

A New Investment Incentive Framework focusing on high-value activities will be introduced to replace the existing “products based” approach. The proposed New Investment Incentive Framework is expected to be implemented by the third quarter of 2025. Key proposals are:

• Supply chain resilience initiative
• Key economic cluster by states
• Special income tax incentive for investments in 21 economic sectors
• Carbon capture, utilisation and storage (CCUS)

Further to earlier announcement of the Forest City Special Financial Zone (SFZ) on 30 September 2024, the Budget 2025 has announced the Johor-Singapore Special Economic Zone (JSSEZ). Forest City SFZ is approved as a Duty-Free Island to support tourism and local economic activities. The Invest Malaysia Facilitation Centre – Johor (IMFC-J) is established to facilitate investment, reduce bureaucracy and expedite approval processes. Additional special incentives may be announced towards the end of 2025.

Self-assessment stamp duty system will be implemented in 3 phases, with commencement dates set for 1 January 2026, 1 January 2027 and 1 January 2028, based on the types of instruments involved. 

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Reference/ Citation

Official Portal of Ministry of Finance Malaysia www.mof.gov.my

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