Key Highlights of the Finance Bill 2023

Review of Income Tax Treatment for MSMEs and MSME Exclusion Conditions
Corporate income tax rate for MSMEs will be reduced from 17% to 15% on the first chargeable income of RM150,000 while MSME now excludes companies or LLPs that have foreign shareholding exceeding 20%.

Electronic Submission of Amended Tax Returns
Companies, Limited Liability Partnerships, trust bodies and co-operative societies are required to submit their amended tax returns electronically effective YA 2024.

Amendments to the Definition of Plant for Capital Allowance Claims 
The definition of plant will be expanded to include intangible assets such as software and also empower the Minister to prescribe any other assets as assets which are excluded from the definition of “plant”.

Expansion of Scope for Application of Relief Other Than Error or Mistake
The scope of relief under Section 97A of the MITA is expanded to include payments made to individual agents, dealers or distributors (ADD) which are subject to withholding tax under Section 107D of the MITA.

Electronic Submission of Income Tax Returns for Trust Bodies and Co-operative Societies
Trust bodies and co-operative societies are required to submit their tax returns electronically effective YA 2024.

Application for Instalment Payment Scheme for Balance of Tax Payable under a Deemed Assessment
The application of payment by instalments as allowed by the Director General is extended to include balance of tax payable under a deemed assessment and additional assessment.

Deduction of tax from payment made to agents, etc.
Starting from 1 January 2023, companies making payments to individual agents, dealers and distributors must remit withholding tax under Section 107D of the ITA to the MIRB not later than the end of the following calendar month.

Electronic Submission of Income Tax Returns for Partnerships
Partnerships are required to submit their tax returns electronically effective YA 2024.

Employer’s returns (Form E) for LLPs, trust bodies and co-operative societies
An employer who is an LLP, a trust body or a co-operative society is required to submit his employer’s returns electronically effective YA 2024.

Review of Resident Individuals' Income Tax Rates

• The tax rate of resident individuals in each chargeable income band between RM35,001 to RM100,000 will be reduced by 2%; and
• The tax rate of resident individuals in the chargeable income band over RM100,000 to RM1,000,000 will be increased by between 0.5% to 2%. 
• These changes will be effective from YA 2023 onwards.

Extension of Tax Relief for Childcare Centres and Kindergarten Fees

• Tax relief for childcare centres and kindergarten fees up to RM3,000, will be extended for another year until YA 2024. 

Expansion of Tax Relief on Medical Treatment Expenses

• The tax relief for medical treatment expenses for self, spouse and child will be increased from RM8,000 to RM10,000.
• The scope of income tax relief for medical treatment will be expanded to include the intervention expenditure for Autism, Attention Deficit Hyperactivity Disorder (ADHD), Global
• Developmental Delay (GDD), Intellectual Disability, Down Syndrome and Specific Learning Disabilities limited to RM4,000 on his child age below 18 years old. These changes will be effective from YA 2023 onwards.

Deposits in Skim Simpanan Pendidikan Nasional (SSPN) account

• The amount deposited by an individual for his child into the Skim Simpanan Pendidikan Nasional shall no longer be allowed.
• Effective from YA 2023 onwards. 

Second revision to estimate of tax payable in the Notice of Instalment Payments (Form CP500)

• A person other than a Company, an LLP, a trust body or a co-operative society will be allowed to revise his estimate of tax payable each year via Form CP500.
• The second revision can be made by 31 October of the YA.
• Effective from YA 2023 onwards.

Mandatory e-Filing for individuals

• A person other than a company, a limited liability partnership, a trust body or a co-operative society is required to furnish to the Director General a return of income in the prescribed form on an electronic medium or by way of electronic transmission.
• Effective from YA 2024 onwards. 

Expansion of Tax Relief on Life Insurance or Takaful Contributions

• Mandatory contribution to approved schemes or voluntary contribution to EPF (not including private retirement scheme) or contribution under any written law up to RM4,000.
• Tax relief on Life Insurance or Takaful Contributions will be expanded to include voluntary contributions to EPF up to RM3,000.
• The new treatment is applicable to all contributors, including self-employed persons, employees and civil servants under the pension scheme from YA 2023 onwards.

Transfer of Assets to Controlled Companies Incorporated Outside of Malaysia 
The disposal price is no longer deemed equal to acquisition price for transfer of assets to controlled companies incorporated outside of Malaysia.

Transfer of Real Property to Former Spouse in Divorce Cases due to Court Orders
The disposal price is now deemed equal to acquisition price for transfer of real property between former spouses in divorce cases due to court orders.

Stamp Duty Treatment for Education Loan and Scholarship Agreements 
The fixed duty of RM10 on educational loan and scholarship agreements will be expanded to include education at all levels including certificate (education/skills/professional) in any educational and training institutions for agreements executed from 1 June 2023. 

Stamp Duty Treatment for Factoring Agreements on the Absolute Bill of Sale of Account Receivables or Book Debts 
The fixed duty of RM10 on the absolute bill of sale of any accounts receivables or book debts will be expanded to include any statutory body, agency of the Government or of the State Government, or any company in which the Government or the State Government has interest, which provides financing to a small and medium enterprise.

Stamp Duty Treatment for Agreements for Discounting Invoices or Hire Purchase Receivables
The fixed duty of RM10 on charge, mortgage, or assignment by way of security of accounts receivables will be expanded to include any statutory body, agency of the Government or of the State Government, or any company in which the Government or the State Government has interest, which provides financing to a small and medium enterprise.