Budget 2024: Key Highlights and Comments

By the Corporate, Commercial and M&A Practice Group of LAW Partnership

FOREWORD

Tabled in Parliament today, the national Budget 2024 is the second budget announced by the new Unity Government since its inauguration.

With the allocation of RM 393.8 billion, Budget 2024 is the largest one tabled in the Parliament thus far, exceeding the Budget 2023 of RM388.1 billion. Of this sum, approximately RM 303.8 billion was earmarked for operating expenditure while RM 90 billion was designated for development expenditure including RM 2 billion as contingency savings.

The Budget 2024, as presented by Prime Minister Datuk Seri Anwar Ibrahim, is centred around increasing the country’s revenue base, boosting governance, restructuring of the economy for growth and on improving the living standards of the nation’s citizens.

With numerous initiatives announced by the government, the Corporate, Commercial and M&A Practice Group of LAW Partnership present several key corporate and commercial highlights from the Budget 2024.

Capital Gains Tax on Disposal of Unlisted Shares 

• From 1st March 2024, a 10% capital gains tax (calculated on net profits) will be applicable to the disposal of unlisted shares in local companies.
• Exceptions will apply to disposal of shares for approved IPOs, internal restructuring and venture capital companies on certain conditions.

 

Mandatory E-Invoicing for Taxpayers 

• Mandatory E-invoicing has been introduced for taxpayers with income or annual sales exceeding RM100 million from 1^st August 2024.
• Implementation for taxpayers in other categories will follow suit in phases with implementation for all taxpayer categories by 1^st July 2025.

 

Broadening Tax Base 

• Service tax will see an increase to 8% from the current 6% rate. This will not apply to services such as telecommunications, food and beverage, parking and logistics. There will also be an expansion of taxable services to include logistics, brokerage, underwriting and karaoke services.
• High-value items will be taxed between 5 – 10% with the proposed enactment of the new High Value Goods Tax legislationg., jewellery and watches based on item price threshold value.
• Global minimum taxation is expected to be implemented affecting multinational companies with a global income of at least EUR750 million.
• Tax exemption for employers increased from RM2,400 to RM3,000 – for employers offering allowances for childcare for staff.
• 4% flat rate stamp duty imposed on instruments of transfer for disposal of property by foreign-owned companies and non-citizens (excluding Malaysian permanent residents).

 

Environmental, Sustainability and Energy 

• Allocation of RM2 billion ringgit to the National Energy Transition Fund to realize the National Energy Transition Roadmap (NETR).
• Financial Institutions to provide financing up to RM200 billion to encourage industries to shift towards a low carbon economy.
• Encourage further implementation of Corporate Green Power Programme to achieve 70% of renewable energy capacity as a means of implementing a Third-Party Access (TPA) model.
• Extensions of tax exemptions to fund management companies managing Socially Responsible Investments (SRI).
• Additional tax exemption up to RM300,000 for companies investing in Measurement, Reporting and Verification (MRV) relating to development of carbon off-setting projects to encourage voluntary participation in carbon-offsetting. These expenses can be deducted from the income from the sale of carbon credits traded on the Carbon Exchange (BCX).
• Encouragement of use of solar panel through extension of Net Energy Metering (NEM) program up to 31^st December 2024.
• Development of government initiatives to repurchase solar panels on building rooftops with minimal system cost implications.

 

Electric Vehicle (EV) Incentives

• Government aims to rapidly increase development of local EV industry and encourage use of EV of its citizens.
• Government welcomes investment exceeding RM170 billion by renowned companies including TNB, Gentari and Tesla Malaysia for installation of 180 EV charging stations nationwide.
• Encouragement of use of electric motorcycles through introduction of Skim Galakan Pengunaan Motorsikal Elektrik to citizens with annual income less than RM120,000 offering rebates of up to RM2,400 to the buyer.
• Extension of individual tax exemption up to RM2,500 on EV charging equipment for a further four years and tax exemption for rental of an EV for a further 2 years. 

 

Investment, Trade, Logistics 

• Building of a high-tech industrial area for a wider electrical and electronic (E&E) cluster for the north region at Kerian in Perak North.
• Proposed development of the Port Carey Island through a Request for Proposal (RFP) to further develop the city of Klang.

 

Foreign Talent Incentives 

• Facilitation of Employment pass approvals for strategic investors in key sectors.
• Introducing Long-Term Social Visit Pass for international students who have graduated to cater to specialised workforce needs.
• Relaxing Visa-On-Arrival and Multiple Entry Visa and social visit passes to encourage influx of tourists and investors.
• Conditions for Malaysia My Second Home (MM2H) applications will be relaxed to increase foreign tourists and investors in Malaysia, to increase investment activity in the Malaysian financial market and real estate industry.

 

Creative Industry

• Full tax exemption from entertainment tax for local artistes and performers.
• Entertainment tax to be reduced from 25% in the Federal Territories.
• Entertainment tax to be reduced to 10% for international arts events and foreign performers.
• Allocation of RM60million ringgit under Digital Content Fund to promote local works and support value-based content statehood.
• Allocation of RM90million to encourage production of local films.
• Allocation of RM10million for the setting up of MyCreative Matching Fund Scheme to support creative projects.

 

Enhancing Malaysia’s Startup Ecosystem 

• Tax incentives offered to angel investors will be extended until 31^st December 2026 to encourage capital funding in technology startups.
• Government aims for Kuala Lumpur to be made a hub for startup and digital industry development domestically and in the SEA region.
• RM28 million allocated to develop “MYStartup” platform as a sole platform for startups and aims to simplify business activities throughout the startup lifecycle. This initiative will optimise collective funding of RM200 million from various funding agencies and venture capitalists under a single platform.
• Funds of up to RM1.5 billion allocated by government-linked companies (GLCs) and government-linked investment companies (GLICs) to incentivise startups and SMEs to venture into high growth high value (HGHV) industriese., digital economy, aerospace and electronics and electrical.
• Tax incentives for individual investors in startups, for investments made through equity crowdfunding platforms and now expanded to Limited Liability Partnership nominee companies – to be extended until 31^st December 2026.

 

Digital Connectivity, 5G, Cybersecurity 

• 5G network coverage to reach 80% of inhabited areas by the end of 2023.
• CyberSecurity Malaysia to develop a testing framework for 5G cybersecurity and to enhance domestic expertise in terms of protections against threats to national cybersecurity. RM 60 million has been allocated for this purpose.
• Bank Negara Malaysia to develop a National Fraud Portal with automated fund tracking capabilities, to speed up tracking, freezing and return of funds. This is expected to be completed in mid-2024.

 

 

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