On October 13, 2023, Prime Minister Datuk Seri Anwar Ibrahim, who also serves as Malaysia’s Finance Minister, presented the 2024 Budget in Parliament. Themed ‘Building Malaysia Madani”, the budget aims to tackle the economic challenges faced by the rakyat as well as further nurture businesses in Malaysia.
PM Anwar outlined plans to enact the Malaysia Madani Development framework through the budget, which consists of 12 main verticals under 3 pillars, namely:
i) inclusive and sustainable economic growth
ii) institutional reforms and good governance to restore confidence, and
iii) social justice to bridge inequality
The budget also highlights several initiatives aimed at supporting businesses, particularly small and medium-sized enterprises (SMEs), which make up the backbone of Malaysia’s economy, to promote sustainable growth.
In this revised budget, a total of RM388.1 billion will be allocated according to the following breakdown: RM289.1 billion for operating expenditure, RM99 billion for developmental expenditure and RM2 billion for contingency savings.
Read on as we provide an overview of the key highlights from Budget 2024 and their potential implications for your business below.
At A Glance – Tax Highlights
E-invoicing Mandate
E-invoicing is now mandatory for taxpayers with annual sales or income exceeding RM100 million, starting from August 2024. The implementation of this e-invoicing mandate for other income categories will occur in phases by July 1, 2025.
New Taxes Introduced in Budget 2024
1. Capital Gains Tax on Non-Listed Shares: A capital gains tax of 10% on the net profit will be imposed on the disposal of non-listed shares by local companies. It has recently been announced that the imposition of this tax will be exempted until 2028.
3. High Value Goods Tax: A High-Value Goods Tax, ranging from 5% to 10%, will be implemented effective May 1, 2024 on luxury items such as jewelry and watches.
2. Global Minimum Tax: In 2025, a global minimum tax will be introduced for companies with a global income of at least EUR750 million.
Incentives and Exemptions for Economic Growth
1. Extension of Tax Incentives for Angel Investors: To promote capital funding in tech startups, tax incentives for angel investors have been extended until December 31, 2026.
2. Entertainment Tax Reduction: In the Federal Territories, the entertainment tax will be reduced from 25%. Local artists and performers will enjoy a full tax exemption, while international arts events and foreign performers will benefit from a reduced tax rate of 10%. Theme parks and family recreational centers will also see their tax rate reduced to 5%.
3. Capital Gains Tax Exemption: The government will consider exempting capital gains tax on shares related to specific activities such as approved Initial Public Offerings (IPOs), internal structuring, and venture capital companies, subject to further conditions.
4. Income Tax Exemption for Islamic Securities Selling and Buying (ISSB): Starting from the assessment year 2024, income arising from ISSB will be exempt from income tax.
5. Extended Application Period for Income Tax Exemption for Social Enterprises: The application period for income tax exemption for social enterprises has been extended until 2025.
Increases in Service Tax and Additional Taxable Services
1. Service Tax Increase: The service tax will increase from the current 6% to 8%. Notably, this increase will not apply to services such as F&B and telecommunications.
2. Expanded Scope of Taxable Services: The government will expand the scope of taxable services to include logistics, brokerage, underwriting, and karaoke services.
Malaysia Budget 2024 Initiatives for Supporting SMEs
Funds and Loans Facilities for SMEs
- RM44 billion for SME-focused loans and financing guarantees
- RM2.4 billion furnished as small loan facilities for micro-entrepreneurs and small traders through agencies like Bank Simpanan Nasional (BSN), Tabung Ekonomi Kumpulan Usaha Niaga’s (TEKUN), and Bank Negara Malaysia (BNM).
- Additional RM8 billion from BNM to reduce financial difficulties and encourage business development
Targeted Initiatives and Programmes
- RM100 million for microcredit organization Amanah Ikhtiar Malaysia (AIM)
- RM1.6 billion worth of loan facilities and guarantees for bumiputera SME entrepreneurs
- 9 financial institutions offering special financial programmes for halal SMEs
- RM50 million special financing facility for disabled microentrepreneurs
- Additional funds for the iTEKAD social finance programme
- Additional funds amounting to RM25 million in matching grants with financial institutions to benefit more entrepreneurs
Support for Automation and Digitisation
- RM100 million for digitisation grants (capped at RM5,000 per entrepreneur) that will enable over 20,000 MSMEs to upgrade their sales, inventory, and digital accounting systems.
- RM900 million in loan funds from BNM for SMEs to increase business productivity through automation and digitisation.
- RM40 million designated for incentivising small traders to adopt e-commerce via the Shop Malaysia Online programme.
- RM25 million allocation for each state’s Digital Economy Centres (PEDi) for enhancements to assist small entrepreneurs located rurally who sell their products online.
- Capital allowance for ICT equipment and computer software increased from 20% to 40%, whilst the allowance claim time frame gets reduced from 4 to 3 years for eligible companies.
Government Guarantee Schemes
RM20 billion will be provided to Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) to further provide guarantees for up to 80% of loans by entrepreneurs, with special attention to those involved in the green economy, technology, and halal sectors.
Continuing Development of Our Youth and Talent
- RM1.6 billion to be provided to the Human Resources Development Corporation (HRD Corp) to train 1.7 million workers.
- 15% of the total funds collected to be used by HRD Corp to implement the MADANI Training Programme for MSME entrepreneurs and vulnerable groups (including ex-prisoners, the disabled, as well as the elderly and retirees).
- RM20 million set aside to continue SME Corp Malaysia’s Tunas Usahawan Belia Bumiputera Programme (TUBE), which has helped produce over 7,000 youth bumiputera entrepreneurs through training workshops and a pairing system programme.
Navigate through Budget 2024 confidently
As a business owner, you don’t have to feel overwhelmed by the myriad of updates and initiatives. Instead, consider the following steps to take advantage of the various benefits offered by Budget 2024:
1. Speak to a tax consultant or professional accountant to understand how these changes specifically impact your business.
2. Review your financial and operational strategies in light of these new developments.
3. Stay informed about additional updates that may be issued by the government in response to the budget.
For comprehensive business and financial solutions for small and medium-sized enterprises in Malaysia, including company formation services, accounting services, tax compliance, and financial due diligence, Bispoint Group is here to help. Our team of highly skilled tax agents can swiftly and expertly implement solutions to meet your business needs. Currently, we have over 70 dedicated teams, including Chartered Accountants, managers, supervisors, and junior associates in our offices serving over 1,000 private companies.