Key Tax-Aways for the Year 2024
Tax Highlights & Takeaways
The year 2024 saw the MADANI Economy framework being instrumental in shaping a new economic landscape for Malaysia. The growth in Gross Domestic Product (GDP) coupled with the influx of foreign investment has supported a positive appreciation of the Ringgit against the US Dollar. This is a commendable performance by the Unity Government amid uncertainties around the world which is still engulfed by war and trading challenges.
Moving ahead to the year 2025, Malaysia’s economic outlook appears optimistic with a mix of opportunities and challenges ahead. Global economic uncertainties will surely affect the economic growth. Although the outlook for Budget 2025 is positive, its success will hinge on effective policy implementation, especially in areas such as fiscal discipline, economic inclusivity, and the integration of technological innovations to drive sustained growth.
As such, this write up focuses on the key “Tax Aways” for the year 2024, which will highlight some of the important takeaways from a tax perspective that taxpayers need to be aware of before we go forward into the new year. Some of these items may be new, as they have only been implemented or announced in recent months, making this publication a timely resource for taxpayers who are in the midst of preparing for the new year.
Therefore, we encourage taxpayers to take stock of these takeaways for the year 2024 so that you may better position yourselves for the challenges ahead. As always, we hope that taxpayers will remain vigilant to the changes that are taking place amidst an uncertain environment, and we remain at your side to address any of these challenges. From all of us at Crowe Malaysia, we would also like to take this opportunity to wish all our clients a very Happy New Year ahead and greater success in the year 2025.
| Download Article |
Corporate Tax
The exemption orders for the extension and revision of the green technology tax incentives which were announced in the 2024 Budget were gazetted on 17 September 2024. Subsequently, the Malaysian Investment Development Authority (MIDA) issued the Guideline on Application for Green Technology Incentive covering:
- Green Investment Tax Allowance (GITA) Project for Business Purposes;
- Green Income Tax Exemption (GITE) Solar Leasing; and
- Green Investment Tax Allowance (GITA) Asset for Own Consumption.
MD tax Incentive was unveiled on 31 May 2024 as a new outcome-based tax incentive scheme offered to eligible MD companies proposing to undertake qualifying activities by leveraging in any of the promoted tech enablers such as Artificial Intelligence, Big Data Analytics, Internet of Things, Cybersecurity, Cloud, Blockchain, Drone Technology, Creative Media Technology including Extended Reality (XR) and/or Mixed Reality(MR), Integrated Circuit Design with Embedded Software, Robotics, Automation and Advanced Network Connectivity Technology.
This incentive scheme was designed to align with the international standards set by the Organisation for Economic Co-operation and Development (OECD).
A new guideline that provided clarity on the tax treatment of various financial instruments was issued on 19 June 2024. The Guideline outlined the general characteristics of equity and debt instruments, emphasising the importance of considering these features before determining the appropriate tax treatment. The clarifications in the Guideline have substantial implications for businesses involved with or issuing hybrid financial instruments.
Malaysia will implement GMT under Pillar 2 of BEPS 2.0 starting from 1 January 2025, with the following mechanisms:
- Who are impacted?
- Constituent Entity : member of Multinational Enterprise Group with annual consolidated group revenue exceeding EUR 750 million in two of the four immediately preceding fiscal years
- What are the mechanisms?
- Domestic Top-Up Tax (DTT)
- Multinational Top-Up Tax (MTT)
- GMT rate: a minimum top-up tax of 15%
A list of tax incentives that will be available in the SFZ was announced on 20 September 2024. Among the incentives that were announced are as follows:
- 0% tax rate for the Single-Family Office Scheme, coordinated by the Securities Commission of Malaysia (SC);
- Special individual income tax rate of 15% for knowledge workers, including Malaysians that work in the SFZ;
- Concessionary tax rate of 5% for financial global business services, financial technology or fintech, and foreign payment system operators; and
- Special deductions on relocation costs, enhanced industrial building allowances and withholding tax exemptions for banking institutions, insurance, capital market intermediaries and other eligible financial sector entities.
Individual Tax
The income tax exemption on childcare allowances received by employees or paid directly by employers to childcare centres has been increased from RM2,400 to RM3,000 per year from YA 2024.
The income tax exemption on childcare allowances received by employees or paid directly by employers to childcare centres has been increased from RM2,400 to RM3,000 per year from YA 2024.
Individual taxpayers must remember to retain all receipts and supporting records for seven (7) years as evidence for making tax relief claims.
The scope of lifestyle income tax relief has been expanded to include fees for self-improvement courses. However, expenditure on the purchase of sports equipment and gymnasium membership fees was removed from the scope of lifestyle income tax relief. A specific tax relief has been introduced, i.e. “Sports Equipment and Activities”, which includes expenditure on sports equipment and fees for the use of sports facilities, registration for sports tournaments and gym memberships. Deduction is limited to RM1,000 from YA 2024.
Payroll and Immigration
EPF Flexible Account has been introduced as a new account to allow accessibility to members at any time to strengthen their retirement savings.
The ESC has been fully operational 24 hours a day, 7 days a week to facilitate the issuance of new Employment Passes, Professional Visit Passes, Dependant Passes, and the Residence Pass-Talent for expatriates from 23 July 2024.
Indirect Tax
Effective 1 March 2024, the Service Tax rate has increased from 6% to 8%, except for food and beverage, telecommunications services, vehicle parking services and logistic services, which remain at 6%.
In addition, the Service Tax rate on digital services provided by foreign registered persons also increased from 6% to 8%.
This initiative is to strengthen tax compliance based on awareness, education, and facilitation. The programme is to encourage taxpayers to voluntarily disclose any non-compliance through self-assessment. The key points of AViP are:
- The AViP covers all areas of indirect taxes, duties and levies under the purview of Royal Malaysian Customs Department (RMCD) such as Sales Tax, Service Tax, Customs Duties, Excise Duties and Tourism Tax.
- Taxpayers selected/ subject to audit by RMCD can request to participate in the AViP.
- Taxpayers not under audit but have underpayment of taxes, duties and/ or levies can approach RMCD to request to participate in the AViP.
