At a glance
By Aidan Ormond
With a theme of “Madani Economy: Empowering the People”, the 2024 budget is the largest in Malaysian history at 393.8 billion ringgit. A total of 303.8 billion ringgit has been allocated to operating expenditure and 90 billion ringgit to development expenditure.
CPA Australia’s key takeaways from Malaysian budget 2024 are:
- government forecasts the economy will expand by 4 to 5 per cent in 2024
- The government also expects its deficit to narrow from 5 per cent of GDP this year to 4.3 per cent next year
- The Sales and Services Tax (SST) is to increase from 6 to 8 per cent on most items
- Luxury goods tax rate is to be 5 to 10 per cent, with foreign tourists exempted
- Capital gains on the disposal of unlisted shares will be taxed at 10 per cent
- Global minimum tax for companies with global revenue of at least €750 million (3.74 billion ringgit) to start in 2025
- The government will distribute 28 million ringgit to develop the MYStartup platform for start-up companies
While Malaysia’s fiscal deficit for this financial year is expected to decrease from 5.0 per cent to 4.3 per cent of gross domestic product (GDP) next year, the government’s debt service payments are expected to be 46.1 billion ringgit, or 15.2 per cent of the 2024 revenue.
The Prime Minister says economic policy should be directed towards economic growth and equality: “It is hoped that by improving and plugging the leakages in the subsidy system, that the proceeds could be passed on to the public, including wage increments for the working class,” he says.
Surin Segar FCPA, President of CPA Australia Malaysia Division adds: “The Malaysian 2024 Budget is an extension of the 2023 Madani budget.
“It’s aimed at improving the wellbeing of the nation and the rakyat (the people). The planned introduction of targeted subsidies should help deliver support to those most in need and assist the government to narrow the deficit.”
Support for carbon reduction
To encourage more companies to be involved in the Bursa Carbon Exchange (BCX), participating companies will be eligible to claim a further tax deduction of up to 300,000 ringgit.
This will be for spending on measurement, reporting and verification of carbon projects. Itwill be deductible against carbon credit income generated from trading on the BCX.
Additionally, financial institutions will provide 200 billion ringgit in loans to encourage industries to reduce carbon emissions.
Finance Ministry, Inland Revenue Board (IRB) and Petronas are also studying tax incentives for carbon capture utilisation and storage and hydrogen sulphide projects.
Social welfare boost
Anwar states that the targeting of subsidies has enabled the government to increase direct cash assistance to those most in need.
In 2024, the maximum Rahmah Cash Assistance payment will increase from 3100 ringgit to 3700 ringgit. This is expected to benefit 60 per cent of Malaysian adults.
Eligibility for welfare aid from the Department of Social Welfare has been revised in line with the new poverty line of 1198 ringgit per month.
Other budget measures
- The start date for the mandatory use of e-invoicing by taxpayers with annual income or sales over 100 million ringgit has been pushed back from 1 June 2024 to 1 August 2024
- Individual income tax relief for spending on upskilling or self-enhancement course fees will be extended until 2026
- Companies will be eligible for a tax deduction of up to 50,000 ringgit on expenditure related to complying with ESG standards and improving their tax governance
- The initial capital allowance on the purchase of technology equipment and software will be increased to 40 per cent from 20 per cent
- The introduction of a Global Services Hub tax incentive will include a preferential income tax rate if certain conditions are met
- Eligible manufacturers will be exempted from import duty and sales tax on manufacturing aids
- The diesel subsidy will be rationalised in phases
- The eligibility for bankrupts to be discharged without going through the creditor’s objection procedure will be expanded to people 40 and under with debts of 200,000 ringgit or less.
Reactions to Budget 2024
Surin Segar FCPA, President of CPA Australia Malaysia Division
“It's good to see the government continue with many SME support measures. Today's small businesses could be Malaysia's next global giant.
“While improving the availability of affordable finance to the sector is important, our annual Asia-Pacific Small Business Survey shows Malaysian small business should focus more on adopting digital technology and enhancing innovation if they want to develop into high growth, high value businesses.
“The continuation of digitalisation support grants should help more SMEs to succeed and push forward.
“Efforts to provide tax incentives on carbon capture and storage are encouraging. Investments in this area can support economic growth through new, lower-carbon industries and innovation.
“This potentially enables infrastructure reuse while meeting the nation's carbon emission reduction targets. These have become a must do as we experience more extreme weather events.”
Alan Chung FCPA, Chair of the Malaysia Division Tax Committee
“The government has announced details of several new taxes and increased the SST on many items. With the debt service payments making up over 15 per cent of revenue, these measures, while limited in scope compared to other options, are understandable given global economic risks.
“Additionally, the announcement of a start date for the global minimum tax for MNCs provides more certainty to such taxpayers. They now have a date on which to work towards.
“The proposed exemption of import duty and sales tax for manufacturing aids should reduce the cost of manufacturing and increase the competitiveness of goods manufactured in Malaysia.
“This will resolve many instances of double taxation, especially for sales tax, on manufacturing aids used in the manufacture of goods.”