Malaysia Budget 2023

- Tax snapshots
7 October 2022
Highlights


Budget 2023 was Key tax takeaways
announced today,
► Global minimum tax of 15%, including
7 October 2022. Qualified Domestic Minimum Top-Up Tax
(QDMTT), with implementation targeted in
2024. This is in line with Pillar Two of the
The Budget 2023 proposals were Organisation for Economic Co-operation and
formulated to focus on reforms to Development (OECD)’s Base Erosion and
Profit Shifting (BEPS) 2.0 Project.
improve the rakyat’s well-being,
increase the competitiveness of ► E-invoicing will be implemented in stages
Malaysian businesses as they move from 2023.
up the value chain and strengthen ► Carry-forward of losses for companies in
the nation’s resilience. The tax sectors with long-gestation periods (e.g.,
proposals included measures aimed forestry and hydroelectric projects) will be
extended from 10 years of assessment to 20
at increasing government tax
years of assessment.
revenues and spurring investment.
► Definition of “plant” under Schedule 3 of the
Income Tax Act 1967 will be expanded to
include “intangibles” such as software.
Further guidance is expected on this point.

► Preferential tax rate for Small and Medium

Enterprises (SME) will be reduced from 17%
to 15% for the first RM100,000 of
chargeable income, from the year of
assessment (YA) 2023.

► Application period for the Global Trading

Centre (GTC) will be extended by three years,
until 31 December 2025. The GTC incentive
provides for a 10% income tax rate for five
years, renewable for a further five years.

► Application period for the Principal Hub 3.0

(PH) incentive will be extended by three
years, until 31 December 2025. The PH
incentive provides for an income tax rate of
0%, 5% or 10%, for prescribed high-value
activities.

Read on for more tax snapshots from

the Budget 2023 speech.
 Highlights of selected tax proposals

Individual tax

► Tax rates for tax resident individuals within the chargeable income bands of RM50,001 to RM70,000
and RM70,001 to RM100,000, will be reduced by two percentage points.

► Chargeable income bands of RM250,001 to RM400,000 and RM400,001 to RM600,000 for tax
resident individuals, will be combined and subject to a tax rate of 25%.

The appendix sets out the current and proposed tax rates.

► Income tax exemption for women returning to the workforce after a career break will be extended
until YA 2028.

► The following tax reliefs will be extended until YA 2024:

► Fees paid to approved child-care centres and kindergartens of RM3,000
► Net deposits in Skim Simpanan Pendidikan Nasional of RM8,000

► The scope of the following tax reliefs will be expanded:

► Life insurance premiums or takaful contributions of RM3,000 to include voluntary Employees
Provident Fund (EPF) contributions
► Complete medical examination for self, spouse or child of RM8,000 to include dental examination
and treatment expenses of up to RM1,000

► Special tax rate of 15% for C-suite positions in electrical and electronics companies relocating their
operations to Malaysia, will be extended until YA 2024.

The above are effective from YA 2023, unless otherwise stated.

Indirect tax

► Reintroduction of 50% excise duty exemption on purchase of Completely Knocked-Down (CKD)

vehicles used for tourism (i.e., hire and drive cars, and tour buses) from 1 January 2023 until 31
December 2024.

► Excise duty and sales tax exemptions granted to individual taxi owners on the sale, transfer, private
use or disposal of budget taxis and hired cars, to be extended to executive taxis, TEKS1M and airport
taxis from 1 January 2023.

► Introduction of import duty and sales tax exemptions for Nicotine Replacement Therapy products
from 1 January 2023 until 31 December 2027.
 Highlights of selected tax proposals

► Introduction of import duty and sales tax exemptions for studio and film production equipment from
1 January 2023 until 31 December 2024.

► Import duty and excise duty exemptions on importation of Completely Built-Up (CBU) electric
vehicles (EV) will be extended until 31 December 2024.

► Introduction of import duty and sales tax exemptions on equipment for Carbon Capture and Storage
(CCS) technology from 1 January 2023 until 31 December 2027.

► Import duty exemption on raw materials or components, and machinery or equipment, for BioNexus
status companies, will be extended until 31 December 2024.

► Import duty and sales tax exemptions on materials and equipment used directly for the construction
or repairing of vessels for ship-building and ship-repairing companies with bona fide status will be
extended until 31 December 2027.

► Sales tax exemption on the purchase of locally assembled buses will be extended until 31 December
2024.

Corporate income tax incentives

► The accelerated capital allowance for automation equipment will be enhanced to include the
adaptation of Industry 4.0 elements within the automation scope and to include the agriculture
sector. The capital expenditure threshold will be aligned and increased to RM10 million. This is
applicable for applications from 1 January 2023 until 31 December 2027.

► Preferential tax rates (0% to 10% for the first 10 years and 10% for the next 10 years) for
manufacturers of pharmaceutical products will be extended until 31 December 2025.

► Tax incentives for Economic Development Corridors will be extended until 31 December 2024.

► Extension of incentive period for Green Investment Tax Allowance and Green Income Tax Exemption.
The application period will be extended until 31 December 2025.

► Tax incentives for ship-building and ship-repairing industry will be extended for a period of five years.
The application period will be extended until 31 December 2027.

► Tax incentives for the aerospace industry will be extended until 31 December 2025.
 Highlights of selected tax proposals

Stamp duty

► Stamp duty exemption for purchases of residential property valued between RM500,001 and RM1
million will be increased from 50% to 75%, up to 31 December 2023. This applies to first-time
homeowners only.

► All instruments of transfer of property on grounds of love and affection between family members
(between spouses, parent and child, and grandparent and grandchild) will be subject to RM10 stamp
duty.

► Stamp duty exemption for restructuring or rescheduling of business loan or financing agreements
executed between a borrower or customer and a financial institution will be extended until 31
December 2024.

Other tax proposals

► Tax Identification Number (TIN) will be compulsory for stamping of all instruments and documents,
from 2023.

► The Government expressed the intention to introduce a carbon tax and will study the feasibility of a
carbon pricing mechanism.
 Appendix
Personal income tax rates for tax-resident individuals

Proposed tax Proposed tax

Chargeable Current tax Current tax rate payable
income rate payable (%) (RM)
(RM) (%) (RM) YA 2023 YA 2023
onwards onwards
On the first 5,000 0 0 0 0
Next 15,000 1 150 1 150
On the first 20,000 150 150
Next 15,000 3 450 3 450
On the first 35,000 600 600
Next 15,000 8 1,200 8 1,200
On the first 50,000 1,800 1,800
Next 20,000 13 2,600 11 2,200
On the first 70,000 4,400 4,000
Next 30,000 21 6,300 19 5,700
On the first 100,000 10,700 9,700
Next 150,000 24 36,000 24 36,000
On the first 250,000 46,700 45,700
Next 150,000 24.5 36,750 25 37,500
On the first 400,000 83,450 83,200
Next 200,000 25 50,000 25 50,000
On the first 600,000 133,450 133,200
Next 400,000 26 104,000 26 104,000
On the first 1,000,000 237,450 237,200
Next 1,000,000 28 280,000 28 280,000
On the first 2,000,000 517,450 517,200
Exceeding 2,000,000 30 30

Proposed changes to tax rates

EY Tax Academy Flagship series: 2023 Budget and
Tax Conference
Monday, 17 October 2022 | 9:00 a.m. – 4:35 p.m.


Registration: For more information, contact:
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please access E-mail: [email protected]
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12 October 2022 Maisarah Samsudin I +603 2388 7238
Rina Chan I +603 7495 8304
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