Update: The Ismail Sabri Government Budget is no longer applicable.
Malaysia’s national budget for 2023 was re-tabled again in February 2023; for more info, please visit – https://www.ccs-co.com/post/budget-2023-malaysia-madani.
This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
Response from MOF: MOF is currently reviewing off-budget items.
The phrase “MOF is currently reviewing off-budget items” typically refers to the Ministry of Finance (MOF) evaluating or examining expenses or financial matters that are not included in the official budget. Off-budget items are expenditures or revenue sources not directly accounted for in the regular budgeting process.
Governments often create budgets to allocate funds for various programs, projects, and expenses. However, certain financial activities may fall outside the scope of the official budget. These off-budget items could include emergency spending, special funds, grants, subsidies, or other financial transactions not explicitly accounted for in the regular budgeting process.
When the MOF reviews off-budget items, they are scrutinising these financial activities to assess their impact, legality, appropriateness, or potential risks. This review aims to ensure transparency, fiscal responsibility, and effective financial management within the government. It helps identify discrepancies, assess the necessity and effectiveness of off-budget items, and make informed decisions regarding their continuation or modification.
Current Position
In Budget 2021, individual investors who invest in equity crowdfunding platforms approved by the Securities Commission (SC) will be allowed a tax exemption for a specified amount of aggregate income.
The proposal has been legislative under the Income Tax (Exemption) (No 4) Order 2022.
Under the Order, 50% of the amount invested for each year of assessment will be deductible against the individual’s aggregate income, subject to the conditions as follows:
- the eligible amount for tax exemption is limited to RM50,000 each year of assessment;
- the deductible amount is limited to 10% of the aggregate income for that year of assessment. The excess amount will be disregarded;
- the Securities Commission Malaysia must verify the investor, investee company and amount of investment made;
- the investor must not have any family relationship with the investee company;
- the investment must be made through an equity crowdfunding platform approved by the Securities Commission Malaysia; and
- the investment is not allowed to be disposed of within 2 years from the date of investment.
The tax incentive is for investments made from January 1, 2021, until December 31, 2023.
Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]
To attract more individual investors to invest in start-up companies through equity crowdfunding, it is proposed tax incentives be reviewed as follows:
- scope of tax incentives be expanded to include investments made by individuals investor through Limited Liability Partnership Nominee Company; and
- the investment period to be extended for 3 years.
Effective Date
For investment made from 1 January 2024 until 31 December 2026.
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