Revised Budget 2023: What are the highlights and benefits to us?
Themed Developing A Civil Malaysia (“Membangun Malaysia Madani”), the revised Budget 2023 proposals were formulated to reflect the principles of accountability and a noble value system that is capable to face the upcoming global economic challenges.
The revised Budget 2023 aims to build a more inclusive and sustainable economic drive, to reform institutional governance, and to moderate inequality among community.
Highlights of Budget 2023
- Luxury Goods Tax
A new tax will be introduced on luxury goods of certain type or value. For instance, luxury watches and fashionable items.
Details and effective date have yet to be announced. -
Capital Gains Tax
Government will study the introduction of Capital Gains Tax on Gains from Disposal of Unlisted Shares in 2024.
Details will be unveiled after carry out consultation with relevant parties. -
Special Voluntary Disclosure Programme
Inland Revenue Board of Malaysia and Royal Malaysian Customs Department will reintroduce Special Voluntary Disclosure Programme.
100% Penalty Waiver on Voluntary Disclosure made from 1 June 2023 to 31 May 2024.
Individual Tax and Relief
-
The income tax rates for individual taxpayers vary as follow:
a. reduced by 2% for chargeable income bands between RM35,001 to RM100,000;
b. increased by 1% for chargeable income bands between RM100,001 to RM250,000;
c. increased by 0.5% for chargeable income bands between RM250,001 to RM400,000;
d. increased by 1% for chargeable income bands between RM400,001 to RM600,000;
e. increased by 2% for chargeable income bands between RM600,001 to RM1 million.Chargeable Income
(RM)
Calculations (RM)
Rate %
YA 2022
Tax Payable(RM)YA 2023
Tax Payable(RM)0 – 5,000
On the First 2,500 0 0 0 5,001 – 20,000
On the First 5,000 1 0 0 Next 15,000
150
150
20,001 – 35,000
On the First 20,000 3 150 150 Next 15,000
450 450 35,001 – 50,000 On the First 35,000
8 (YA 2022)
6 (YA 2023)
600
600
Next 15,000 1,200 900
50,001 – 70,000
On the First 50,000
13 (YA 2022) 11 (YA 2023)
1,800
1,500
Next 20,000
2,600
2,200
70,001 – 100,000
On the First 70,000
21 (YA 2022)
19 (YA 2023)
4,400
3,700
Next 30,000
6,300
5,700
100,001 – 250,000 On the First 100,000
24 (YA 2022) 25 (YA 2023)
10,700 9,400
Next 150,000
36,000
37,500
250,001 – 400,000
On the First 250,000
24.5 (YA 2022)
25 (YA 2023)
46,700
46,900 Next 150,000
36,750 37,500
400,001 – 600,000
On the First 400,000
25 (YA 2022) 26 (YA 2023)
83,450 84,400 Next 200,000
50,000
52,000
600,001 – 1,000,000
On the First 600,000
26 (YA 2022) 28 (YA 2023)
133,450 136,400 Next 400,000 104,000 112,000
1,000,001 – 2,000,000
On the First 1,000,000 28 237,450 248,400 Next 1,000,000
280,000
280,000
2,000,001 and above – 30 – –
-
Medical Treatment Expenses
It is proposed that the Income tax exemption on medical treatment expenses increase from RM8,000 to RM10,000.
Scope of medical treatment expenditure be expanded to include the intervention expenditure for:
a) Autism
b) Attention Deficit Hyperactivity Disorder (ADHD)
c) Global Development Delay (GDD)
d) Intellectual Disability
e) Down Syndrome and Specific Learning Disabilities.This will be limited to RM4,000.
Effective YA 2023. -
Childcare Tax Relief
A tax relief of RM3,000 will be extended to the YA 2024 for fees paid to childcare centre registered with the Social Welfare Department or kindergarten registered with the Ministry of Education Malaysia. - PTPTN Discount Repayment
PTPTN Discount Repayment will be introduced from 1 March 2023 to 31 May 2023 with discount up to 20%
6 months deferment will be granted to borrowers with monthly income RM1,800 or below.
Employer
- Grant from SOCSO for Women Return to Work
In order to encourage women return to work, SOCSO will amend the existing legislation to allow a grant equivalent to 80% of the Wages insured under the SOCSO Act 1969. - Further Tax Deduction for Inmate and Ex-Inmate of Henry Gurney School and Institutions under the Social Welfare Department
Further Tax Deduction will be granted to remuneration paid to inmate and ex-inmate of Henry Gurney School under Malaysian Prison Department, protection and rehabilitation institution and registered care centers under the Social Welfare Department. Effective from YA 2023 to YA 2025. - EPF i-Saraan
3.EPF i-Saraan benefits both self-employed and business owners.
15% government matching contribution will be increased from RM250 to RM300. - Hiring incentive
In order to increase the average wage of the private sector, SOCSO will provide a hiring incentive for private sectors in hiring new graduates, especially those under Technical and Vocational Education Training (“TVET”), disabled and ex-convicts. The incentive offered is RM600 per month for 3 months.
Corporate Tax
- Income Tax Rate for Micro, Small and Medium Enterprises
Effective YA 2023, income tax rate for Micro, Small and Medium Enterprises (MSME) on chargeable income for the first RM150,000 be reduced by 2%. The income tax rates summary are as follow:-Taxable Income
Tax Rate YA 2022 YA 2023 First RM150,000
15%
RM102,000
RM22,500
RM150,001 to RM600,000
17%
RM76,500
RM600,001 and above 24% – –
Effective tax saving is RM3,000.
- Tax Deduction for Listing Fee
To encourage MSME to expand their businesses by raising funds through listing on BURSA Malaysia, it is proposed that the:–(i)
Tax deduction up to RM1.5 million on the cost of listing on the ACE and LEAP Markets be extended for a period of 3 years; and (ii) Tax deduction is expanded to cover the cost of listing technology-based companies on BURSA Main Market.
Tax Deduction up to RM1.5m
- Tax Deduction on the Cost of Issuance of Sustainable and Responsible Investment linked Sukuk
To provide an innovative Shariah-compliant financing and place Malaysia as a regional hub of Sustainable and Responsible Investment Sukuk (SRI) – linked Sukuk issuance, it is proposed tax deduction on the cost of issuing SRI-linked Sukuk that is approved or permitted or deposited with the Securities Commission Malaysia be given for a period of 5 years.Effective from YA 2023 to YA 2027.
Import Duties and Sales Tax Exemption
- Import Duties and Sales Tax Exemption on Studio and Filming Production Equipment
It is proposed that import duty and sales tax exemptions on studio and filming equipment to be given to providers of studio equipment, production and post-production services for a period of 3 years.Applications must be submitted to Ministry of Finance from 1 April 2023 until 31 March 2026. -
Excise Duty and Sales Tax Exemption on the Sale or Transfer of Individually Owned Taxis and Hired Cars
To assist individual taxi owners impacted by the Covid-19 pandemic, it is proposed that the excise duty and sales tax exemption will be reviewed:-
(i)
Exemption expanded to include executive taxies, TEKS1M and airport taxis; (ii)
Vehicle age condition at least 5 years from the date of registration For applications received by the Royal Malaysian Customs Department from 1 March 2023.
- Electric Vehicles
To increase demand of Electric Vehicles (EV), it is proposed as follows:-(i)
Full import duty and excise duty exemption on imported Completely Built Up (CBU) EV be extended for another 2 years until 31 December 2025; (ii)
Full import duty exemption on components for locally assembled EV extended for another 2 years until 31 December 2027; and (iii)
Full excise duty and sales tax exemption on locally assembled Completely Knocked-Down (CKD) EV extended for another 2 years until 31 December 2027. -
Import Duty and Sales Tax Exemption on Nicotine Replacement Therapy
To encourage Malaysian to use of Nicotine Replacement Therapy (NRT) as an alternative for smoking cessation, it is proposed that import duty and sales tax exemption be given to nicotine gum and and nicotine patch for a period of 3 years. Applications for the exemption to be submitted to the Ministry of Finance from 1 April 2023 until 31 March 2026.
Stamp Duty
- Transfer of Property by way of love and affection
In order to reduce the cost of stamp duty for the transfer of property by way of love affection between parents and children, grandparents and grandchildren, it is proposed that stamp duty on the instruments of transfer of property be fully exempted, limited to the first RM1 million of the property’s value. The remaining balance of the property’s value will subject to ad valorem duty rate and is given 50% remission. This stamp duty treatment applies to the recipients who are Malaysian citizens.For instrument of transfer of property executed from 1 April 2023. - Ownership of First Home
In order to encourage more Malaysian citizen to purchase first residential home, government continue granting a:-a) Full stamp duty exemption on instrument of transfer and loan agreement for property valued not exceeding RM500,000
b) 75% stamp duty exemption for property valued more than RM500,000 to RM1 million. - Educational Loan / Scholarship Agreement
In order to streamline stamp duty treatment for all levels of education, it is proposed the imposition of a fixed duty of RM10 be expanded to include educational loan / scholarship agreement to pursue education at all levels including certificate (education / skills / professionals) in any educational and training institutions.For educational loan / scholarship agreement executed from 1 June 2023. - Restructuring or Rescheduling of Loan / Financing Agreement
It is proposed that full stamp duty exemption on restructuring or rescheduling of the loan / financing agreement be extended for a period of 2 years, until 31 December 2024.
Other Incentives
- Sponsorship of Smart Artificial Intelligence Driven Reverse Vending Machine
To support recycling of plastic waste as an economic resource, it is proposed that a tax deduction under Section 34(6)(h) of the Income Tax Act 1967 be given to companies and other than companies (self employed, partnerships, trusts and cooperatives that have business income) that make donations or sponsorships of Artificial Intelligence (AI) – Driven Reverse Vending Machine.For contribution or sponsorships and application received by Ministry of Finance from 1 April 2023 to 31 December 2024. - Tax Incentive for Rental of Non-Commercial Electric Vehicle
At present, companies renting non-commercial motor vehicles are given tax deduction similar to the Capital Allowance restriction as follows:-(i)
Cost of vehicle not exceeding RM150,000, the maximum rental amount allowed for tax deduction is limited up to RM100,000; and (ii)
Cost of vehicle exceeding RM150,000, the maximum rental amount allowed for tax deduction is limited to RM50,000. It is proposed the maximum rental amount for Electric Vehicle for tax deduction is up to RM300,000. Effective from YA 2023 until YA 2025.
- Tax Incentives for Manufacturer of Electric Vehicle Charging Equipment
It is proposed that a new tax incentive to be introduced for electric vehicle charging equipment manufacturers, :-(i)
Income tax exemption of 100% Statutory Income up to 10 years from YA 2023 to YA 2032; or (ii)
Income Tax Allowance of 100% for a period of 5 years and can be set-off against up to 100% of the Statutory Income for each year of assessment. For applications received by Malaysian Investment Development Authority (MIDA) from 25 February 2023 until 31 December 2025.
- Tax Incentives for Carbon Capture and Storage
In order to promote Carbon Capture and Storage (CCS) activities as a new source of economic growth and in achieving net zero greenhouse gas emission, it is proposed tax incentives be given as follows:-Companies undertaking CCS in-house activity (i)
Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure for a period of 10 years and can be set-off against up to 100% statutory income; (ii)
Full import duty and sales tax exemption on equipment for CCS technology commencing from 1 January 2023 until 31 December 2027; and (iii)
Tax deduction for allowable pre-commencement expenses within 5 years prior to the date of commencement of operation. Companies undertaking CCS services (i)
Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure for a period of 10 years and can be set-off against up to 100% statutory income; or (ii)
Tax exemption of 70% on statutory income for a period of 10 years; and (iii)
Full import duty and sales tax exemption on equipment for CCS technology starting 1 January 2023 until 31 December 2027. Companies engaging CCS services (i)
Shall be given tax deduction on fees incurred for use of CCS services. The incentives are applicable to application received by Ministry of Finance from 25 February 2023 to 31 December 2027.
- Tax Incentives for Chicken Rearing in Closed House System
To encourage more poultry farmers to adopt environmental-friendly closed house system, it is proposed that new tax incentives be introduced as follow:-(i)
Accelerated Capital Allowance (ACA) 100% on the qualifying capital expenditure; and (ii)
Income tax exemption of 100% equivalent to the qualifying capital expenditure. The tax incentives are given on the qualifying capital expenditure incurred from YA 2023 to YA 2025, and to be fully absorbed to 200% within a year.
-
Tax Incentives for Food Production Project
At present, tax incentives for food production projects are given as follow:-(i)
A Company investing in a subsidiary company engaging in new food production project is given tax deduction equivalent to the amount of investment made in the specified period the investment is made; and (ii)
Company engaging in Food Production Project a)New project is given 100% income tax exemption on statutory income for 10 YAs; orb)Expansion project for existing company is given 100% income tax exemption on statutory income for 5 YAs.To further promote participation of industry players in agriculture sector and to ensure the security of domestic food supply, it is proposed that tax incentive is expanded to include agricultural based projects on Controlled Environment Agriculture (CEA) and extend for a period of 3 years.
For applications received by Ministry of Agriculture and Food Security (MAFS) from 1 January 2023 until 31 December 2025.
-
Tax Incentives for BioNexus Status Company
At present, income tax exemption of 70% on Statutory Income is given to company undertaking biotechnology activity and approved with BioNexus status.It is proposed that income tax exemption on statutory income be increased from 70% to 100%; and application period for tax incentive be extended for 2 years. The incentive is applicable to applications received by Malaysian Bioeconomy Development Corporation from 1 January 2023 until 31 December 2024. -
Tax Incentive for Automation in Manufacturing and Services Sector
At present, manufacturing and services companies which incur qualifying capital expenditure on automation equipment is given tax incentive as follows:-
(i)
Category 1 : Labour-Intensive Industry Accelerated Capital Allowance (ACA) of 100% for automation equipment on the first RM4 million for qualifying capital expenditure incurred and can be utilized within 1 year.
(ii)
Category 2 : Industries other than Category 1 including the Services Sector ACA of 100% for automation equipment on the first RM2 million for qualifying capital expenditure incurred and can be utilized within 1 year.
It is proposed that the ACA for automation equipment be enhanced as follows:-
(i)
Scope of automation to include the adaptation of Industry 4.0 elements; (ii)
Scope of tax incentive is expanded to include agriculture sector; and (iii)
Capital expenditure threshold for categories 1, 2 and agriculture be aligned and increased up to RM10 million For applications received by Malaysian Investment Development Authority (MIDA) and Ministry of Agriculture and Food Security (MAFS) from 1 January 2023 until 31 December 2027.
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Tax Incentive for Ship Building and Ship Repairing Industry
Companies undertaking ship building and ship repairing activities in Malaysia are eligible for tax incentives as follows:New Company (i)
Pioneer Status with income tax exemption of 70% statutory income for a period of 5 years; or (ii)
Investment Tax Allowance of 60% on qualifying capital expenditure incurred within 5 years and can be set-off against 70% of the Statutory Income for each year of assessment. Existing Company (i) Investment Tax Allowance of 60% on qualifying capital expenditure incurred within 5 years and can be set-off against 70% of the Statutory Income for each year of assessment. It is proposed that the tax incentive be extended for a period of 5 years, for applications received by Malaysian Investment Development Authority (MIDA) from 1 January 2023 until 31 December 2027.
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Tax Incentive for Aerospace Industry
At present, new and existing aerospace companies in Malaysia undertaking high-value activities are given tax incentive as follows:-New Company (i)
Income tax exemption of 70% to 100% for a period between 5 to 10 years; or (ii)
Investment Tax Allowance of 60% to 100% for a period of 5 years and can be set-off against 70% to 100% of Statutory Income for each year of assessment. Existing Company (i)
Investment Tax Allowance of 60% for a period of 5 years and can be set-off against 70% of Statutory Income for each year of assessment. It is proposed that the tax incentive be extended for a period of 3 years, for applications received by Malaysian Investment Development Authority (MIDA) from 1 January 2023 until 31 December 2025.
- Special Tax Deduction for Malaysia-Made Handicraft
Special tax deduction up to RM150,000 be given to hoteliers, for expenditure incurred on qualified Malaysia-made handicraft purchased from handicraft entrepreneur registered with Perbadanan Kemajuan Kraftangan Malaysia.The qualifying handicraft products expenditure incurred from 1 January 2023 until 31 December 2025.
Watch Full Budget Speech 2023:
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