In Budget 2012, excise duty and sales tax exemption were given on the sale/transfer/private use/disposal of budget taxis and hired cars subject to the following conditions:
limited to individually owned budget taxis and hired cars only; and
age of the vehicle must exceed 7 years from the date of registration.
Proposal
To assist individual taxi owners affected by the COVID-19 pandemic, it is proposed excise duty and sales tax exemption on the sale/transfer/private use/disposal of individually owned taxis and hired cars be reviewed as follows:
exemption granted based on these licenses and services:
taxis (budget taxis, executive taxis and TEKS1M);
airport taxis (budget and family); and
hired cars
vehicle age is relaxed to at least 5 years from the registration date.
Effective Date
For applications received by the Royal Malaysian Customs Department from 1 March 2023.
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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.
MOF response: Not to be continued/Discontinued.
Something about Tourism and Travel Related Services
Tourism and Travel Related Services are divided into four (4) sub-sectors, namely:
Hotels and restaurants (including catering);
Travel agency and tour operator services;
Tourist guide services; and
Other tourism services.
Tourism activities are part of more general services activities, most notably many transport services, certain business services, distribution services, and recreational, cultural and sporting services.
Given the foreign exchange earnings potential, Malaysia gives a lot of importance to the tourism sub-sector.
Major sub-sector tourism industry guidelines include Hotel and Restaurant, Tour Operating/Travel Agency Business, Tourism Vehicle Business, and Malaysia My Second Home Scheme (MM2H). Other tourism activities include Meetings, Incentives, Conferences, Exhibitions (MICE), Medical/Health Tourism, and SPA and Wellness Services.
Footnotes
‘Tourism Vehicle’ means an excursion bus or hire-and-drive car.
‘Tourism Vehicle Business’ means the business of operating or letting out for hire a tourist vehicle.
Section 4 of the Tourism Vehicles Licensing Act 1999 states that tourism vehicles must be licensed.
“(a) No person shall carry on or hold himself out as carrying on tourism vehicle business except a company which is licensed under the Tourism Industry Act, 1992 and which holds a valid licence granted under this section.”
Current Position
In supporting Visit Malaysia Year 2020, an excise duty exemption of 50% was given to tourism operators on purchasing new locally assembled tourism vehicles effective from 1 January 2020 to 31 December 2021.
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 support the recovery of the tourism industry that has been affected by the COVID-19 pandemic, it is proposed50% excise duty exemption be given on the purchase of new locally assembled tourism vehicles as follows:
Hire and Drive Cars for Tourists; and
Excursion Bus.
Effective Date
For applications received by the Ministry of Finance from 1 January 2023 to 31 December 2024.
Something about Tourism and Travel-Related Services:-
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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.
MOF's response: Off-budget.
Current Position
A sales tax exemption of 10% on the purchase of buses, including locally installed air conditioning, is given to eligible bus operators such as:
School Buses,
Stage Buses,
Express Buses,
Excursion Buses; and
Employee Buses.
The sales tax exemption is effective from 1 January 2021 to 31 December 2022.
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 reduce the operating costs and assist the bus operators during the transition phase to endemic, it is proposed sales tax exemption be extended for a period of 2 years.
Effective Date
For applications received by the Ministry of Finance from 1 January 2023 until 31 December 2024.
Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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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.
Current Position
“Digital Service” means:
any service that is delivered or subscribed to over the internet or other electronic network and which cannot be obtained without the use of information technology and where the service delivery is essentially automated.
Any provision of services that satisfies the definition of digital service is a provision of digital service.
These services include the provision of the following (the list is not exhaustive):
Software, applications & video games
e.g. downloading of online software, updates and add-on website filters, firewalls, provision of mobile applications, online gaming;
Music, e-books and film
e.g. provision of music, and streaming services, including subscription-based media/membership
Advertisement and online platform
e.g. offering online advertising space on intangible media platforms, offering a platform to trade products or services
Search engines and social networks
e.g. customised search-engine services
Database and hosting
e.g. website hosting, online data warehousing, file-sharing and cloud storage services
Internet Based Telecommunication
e.g. Cloud-PABX, VOIP Phone
Online training
e.g. Provision of distance learning, e-learning, online courses, and pre-recorded webinar
Others
e.g. Subscription to online newspapers and journals, provision of other digital content like images, text, information and payment processing services
Digital services related to banking/financial services provided by local financial institutions/banks licensed under Financial Services Act 2013, Islamic Financial Services Act 2013, Labuan Financial Services and Securities Act 2010, Labuan Islamic Financial Services and Securities Act 2010, Development Financial Institutions Act 2002 or any qualified service provider is exempted from service tax starting from 1 January 2020.
Proposal
To streamline tax treatment on digital services related to banking/financial services by local non-bank digital payment service providers, it is proposed service tax exemption be given to:
recipients of digital payment services; and
local non-bank digital payment service providers are as below:
payment instrument issuers
merchant acquirers
payment system operators
The expiry date for the existing service tax exemption to local financial institutions/banks be streamlined with the exemption period for local non-bank service providers.
Effective Date
From 1 August 2022 until 31 July 2025 for local non-bank digital payment service providers.
From 1 January 2020 until 31 July 2025 for local financial institutions/banks and qualified service providers.
Updated on 15 July 2023- Dialogue between MOF， LHDNM， and CTIM[21/6/2023]
Feedback from MOF: Tax exemption on digital services related to banking/financial services has been expanded to include non-bank local service providers that offer digital payment services between 1 August 2022 and 31 July 2025 only.
Non-bank local digital service providers include the following:
Local non-bank payment instrument issuers;
Local non-bank merchant acquirers; and
Local non-bank payment system operators.
This approval has been issued on the Royal Malaysian Customs Department (JKDM) website on 1 August 2022.
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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.
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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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 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 scrutinise 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
According to the Income Tax (Exemption) (No 3) Order 2014, an Angel Investor is exempt from income tax in the second year of assessment following the year of assessment in which the angel investor makes an investment in an investee company.
The total amount of income that will be exempt from taxation equals the amount of investment that the angel investor made in the company they funded (the investee company).
The angel investor is required to satisfy the following conditions to be eligible for the income tax exemption:
a resident in Malaysia whose sources of income are not solely derived from business;
an application is made to the Minister of Finance in the period from 1 January 2013 until 31 December 2023 (extended from 31 December 2020 under the Income Tax (Exemption) (No 3) 2014 (Amendment) Order 2019) to invest in an investee company.
The time frame for the application period of this incentive was initially up to 31 December 2017 and given the first extension to 31 December 2020 under the Income Tax (Exemption) (No 3) 2014 (Amendment) Order 2017;
the angel investor does not have a parent, a parent-in-law, a child including a stepchild or adopted child, a brother or sister, a grandparent or grandchild or a spouse who makes any investment in the investee company;
the investment is in the form of holding ordinary shares in the investee company and is paid in cash;
the investment is for the sole purpose of financing the activities of the investee company as approved by the Minister, and
the investment shall not be more than 30% of the invested company’s total paid-up share capital.
Investee CompanyAn investee company refers to a company resident in Malaysia where at least 51% of its shares are owned directly by Malaysian shareholders. It engages in activities approved by the Malaysian government.
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 angel investors to contribute to economic activities through capital funding in investee companies, tax incentives are proposed to be extended for 3 years.
Effective Date
For applications received by the Ministry of Finance from 1 January 2024 until 31 December 2026
Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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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.
MOF's response: Off-budget.
Background to the Principal Hub Incentive
A locally incorporated company that uses Malaysia as a base for conducting its regional and global businesses and operations is considered to be a Principal Hub.
This type of company uses Malaysia as its base to manage, control, and support its key functions, which can include the management of risks, decision-making, strategic business activities, trading, finance, management, and human resources.
This new incentive, which went into effect on May 1, 2015, has replaced the International Procurement Centres (IPC), Regional Distribution Centres (RDC), and Operational Headquarters (OHQ) incentive schemes.
To be eligible to apply for this incentive, a locally incorporated company must have a paid-up capital of more than RM2.5 million, in addition to providing at least three Qualified Services.
The provision for the incentive can be found in the Income Tax Act of 1967 and approved through the National Committee on Investment.
Principal Hub Incentive 3.0
A review of the Principal Hub incentive scheme was one of the initiatives announced in the Budget 2021. This study is now mandated by legislation in the form of the Income Tax (The Principal Hub Incentive Scheme) Rules 2022.
In the meantime, trading operations are now included under the umbrella of the Global Trading Center incentive.
The Malaysian Investment Development Authority (MIDA) has issued guidelines that explain the tax incentive for the establishment of a Principal Hub. These guidelines can be found here:-
The guidelines have regularly been updated to take into account any new legislative initiatives that have been taken.
Current Position
New and existing companies using Malaysia as a global regional hub for high-value activities that manage, control and support main business functions such as risk management, decision-making, strategic business, finance and human resource management are eligible for principal hub tax incentives with 0%, 5% or 10% income tax rate.
The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA) until 31 December 2022.
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]
In attracting more companies to establish their principal hub in Malaysia, the proposed tax incentive will be extended for 3 years.
Effective Date
For applications received by MIDA from 1 January 2023 until 31 December 2025.
Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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Imported Completely Built-Up (CBU) Electric Vehicles (EV) consisting of passenger vehicles (including SUV and MPV), motorcycles and commercial vehicles are subject to duties and taxes as follows:
In Budget 2022, full import and excise duty exemptions are given on imported CBU EVs from 1 January 2022 until 31 December 2023.
Proposal
To encourage domestic demand for EVs in line with the Low Carbon Mobility Blueprint, EV Roadmap and National Automotive Policy 2020, as well as considering the global shortage of automotive chips, it is proposed full import duty and excise duty exemption on imported CBU be extended for a period of 1 year.
Effective Date
From 1 January 2024 until 31 December 2024.
Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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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) conducting an evaluation or examination of 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
The government proposed in Budget 2020 that qualifying intellectual property (IP)-generated income derived from the development of patents and copyright software be given a 100% income tax exemption for up to 10 years.
In response to the proposal presented above, the Malaysian Investment Development Authority (MIDA) has published, with an effective date of January 1, 2020, the Guidelines on Incentives for Intellectual Property (IP) Development.
For tax exemption computation, the income that qualifies for the exemption will be calculated based on the Modified Nexus Approach (MNA).
Eligible applicants
New/existing companies own the rights of the qualifying IPs and are receiving income from the qualifying IP activities related to the promoted activities/list prescribed under the Promotion of Investments Act 1986 (PIA) and the Income Tax Act 1967 (ITA).
Qualifying IP asset types
Patent or utility innovation
Copyrighted software
Family of qualifying IPs
Qualifying IP income types
Royalty
Licensing Fees
Eligibility criteria
R&D activities must be conducted in Malaysia, where such activities lead to the development, improvement, modification or creation of the Qualifying Asset.
Adequate operating expenditure incurred annually to support the company in conducting its business operation in Malaysia.
The company must have at least 30% of science and technical staff have a degree or diploma with a minimum of five years of experience from related fields.
Qualifying R&D expenditure
Eligible R&D expenditure for MNA calculation will align with the eligible expenditure types under s 34A of the ITA.
Includes expenditure under cost-sharing agreements, provided that the cost of payable R&D is clearly stated in the agreement.
Qualifying expenditure can be backdated up to three years from the date the IP is registered/filed.
The incentive will apply to applications received by MIDA between 1 January 2020 and 31 December 2022. Three sets of the application are to be submitted to the following:
Chief Executive Officer
Malaysian Investment Development Authority (MIDA)
MIDA Sentral
No. 5, Jalan Stesen Sentral 5
Kuala Lumpur Sentral
50470 Kuala Lumpur
(Attention: Advanced Technology and Research & Development Division (ATRD) Division)
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 further encourage R&D activities and IP registration in Malaysia, the proposed tax incentive will be extended for 3 years.
Effective Date
For applications received by MIDA from 1 January 2023 until 31 December 2025.
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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.
MOF's response: Not applicable.
Current Position
To attract investment in Malaysia on the part of makers of pharmaceutical products, including vaccines, in particular, the COVID-19 vaccine, Manufacturer of pharmaceutical products is eligible for tax incentive as follows::
income tax rate of 0% up to 10%for the first 10 years; and
income tax rate of 10% for the subsequent 10 years.
The tax incentives will be effective for applications received by the Malaysian Investment and Development Authority from November 7, 2020, to December 31, 2022.
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 further encourage the development and manufacturing of pharmaceutical products, particularly vaccines, the proposed tax incentive is extended for 3 years.
Effective Date
For applications received by MIDA from January 1, 2023, until December 31. 2025.
Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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