Budget 2025: Key Corporate and Commercial Highlights

By the Corporate Commercial Practice Group of LAW Partnership

Foreword

The Budget 2025 was announced on 18 October 2024 with the theme “Revitalising the Economy, Facilitating Change, Prospering the Rakyat”.

With the allocation of RM 421 billion, Budget 2025 is the largest one tabled in the Parliament thus far, exceeding the Budget 2024 of RM 407.5 billion. Of this sum, approximately RM 335 billion is earmarked for operating expenditure, while RM 86 billion was designated for development expenditure. Proportionally, the Government has set a revenue collection target of RM 340 billion.

Budget 2025, as presented by Prime Minister Datuk Seri Anwar Ibrahim, will avoid major new taxes and introduce measures to expand Malaysia’s revenue base. The Prime Minister shared a positive outlook on Malaysia’s economic performance, including Malaysia’s historic milestone of achieving RM 329.5 billion in improved investments, the highest ever recorded.

With numerous initiatives announced by the government, the Corporate, Commercial Practice Group of LAW Partnership present several key corporate and commercial highlights from the Budget 2025.

 

Legislative Reforms

• Consumer Credit Bill will be tabled at the next Parliament sitting (Oct-Dec ’24) and a Consumer Credit Monitoring Board will be established to regulate non-bank credit providers and credit service providers.
• Contracts Act, among 3,000 archaic laws to be reviewed.

 

Broadening Tax Base

• A dividend Tax of 2% will apply on annual dividend income exceeding RM 100,000 received by individual shareholders (residents, non-residents and individuals who hold shares through nominees) effective Year of Assessment (“YA”) 2025. Exemptions may include income from government savings, including EPF, unit trusts under Permodalan Nasional Berhad (PNB), and foreign dividend income.
• Expansion of Sales and Service Tax (SST) will see the scope of SST being expanded to cover imported premium goods (e.g. salmon and avocado) and fee-based financial services.
• Global Minimum Tax (GMT) on large multinational companies may be implemented to generate additional revenue, with a need to balance mitigating risk to FDI to be addressed by the potential implementation of a Strategic Investment Tax Credit.

 

Enhancing the Economy

• To enhance the Johor-Singapore Special Economic Zone (JS-SEZ), further incentives will be introduced by the end of 2024 to attract high-quality investments and offer high-paying jobs, in addition to the incentives announced previously (Forest City as a duty-free island, tax incentive package for Forest City Special Financial Zone, launching of Single-Family Office Scheme).
• A New Investment Incentive Framework (NIIF) that focuses on high-value activities, including in the electrical & electronics (E&E) sector, AI, robotics, FinTech, data centres, and sustainable technology, is expected to launch in Q3 2025. NIIF shifts the emphasis of incentives to activities creating greater economic multipliers.
• GLICs collectively pledge to invest RM 120 billion in domestic direct investments over the next five years, with RM 25 billion to be mobilised next year to be invested, including:
  • KWAP to invest RM 500 million in key sectors, including data centres and advanced manufacturing;
  • Khazanah will invest RM 1 billion in investments supporting the semiconductor industry.
• Support for the development of the domestic local rare earth element (REE) industry through collaboration with China and Australia, which have technological capabilities, including amending the Mineral Development Act 1994 and mapping out potential REE sources in the country.

 

Environmental, Social and Energy Incentives

• Carbon Tax on the iron and steel and energy industries will apply by 2026, with proceeds utilised to fund research programmes and green technology initiatives.
• The Green Technology Financing Scheme programme will be extended to 2026, with RM 1 billion in funding.
• Investment tax allowances or income tax exemptions for Carbon Capture, Utilisation and Storage (CCUS) activities will be offered under the NIIF.
• Carbon Capture, Utilisation and Storage Progressive Regulatory Framework Bill to be tabled imminently.
• Locally assembled (CKD) electric motorcycle purchasers with an annual income of less than RM 120,000 may be eligible for rebates up to RM 2,400.
• Electric Vehicles (EV) are among the priority areas for the Skills Development Fund Corporation, which has been provided RM 100 million.
• Scope of tax relief for the purchase of electric vehicle chargers to include the purchase of food waste composting machines for household use.
• Following the enactment of the Energy Efficiency and Conservation Act, an Energy Performance Contract will be introduced by all Government agencies to achieve savings on electricity bills by up to 10%.
• National Energy Transition Roadmap (NETR) targets to achieve net-zero emissions by 2050.

 

Incentives for Implementation of E-Invoicing

To encourage full implementation of e-invoicing by 1 July 2025, accelerated capital allowance revised to the initial allowance of 20% and an annual allowance of 40% (previously initial allowance of 40% and annual allowance of 20%) is given for the purchase of ICT equipment, computer software, consultancy fees, licensing, and incidental fees to be fully claimed within 2 years.

 

Stamp Duty

• Self-assessment stamp duty system to be implemented in phases based on types of instruments or agreements:
  • Instruments or agreements related to rental or lease, general stamping and securities, from 1 January 2026.
  • Instruments of transfer of property ownership, from 1 January 2027.
  • Other instruments or agreements, from 1 January 2028.
• Currently, assessment of stamp duty remains the responsibility of the Inland Revenue Board via STAMPS following the issuance of a notice of assessment.
• Stamp duty for loan/financing agreements based on Shariah principles for purchase of goods other than hire purchase will be charged RM 10 fixed stamp duty for agreements executed from 1 January 2025. Currently, an ad valorem stamp duty of 0.5% is charged.
• Fixed rate stamp duty ranging from RM 10 to RM 1000 for deeds of assignment of life insurance policy and family takaful certificate given by way of love and affection or through trustee based on ownership transfer value, effective 1 January 2025. Currently, ad valorem rates per the Stamp Act 1949 apply.
• Full stamp duty exemption for loan or financing agreements executed by Micro, Small and Medium Enterprises (MSMEs) and investors through the IEO platforms for 2 years.

 

Employers

• • Increase of monthly minimum wage raised to RM 1,700 from RM 1,500, effective from 1 February 2025. Employers with less than five workers will have a grace period of six months, effective 1 August 2025.
  • Mandatory contribution to EPF for non-citizen workers introduced in phases.
  • Full implementation of the Progressive Wage Policy (PWP) following the pilot in June 2024 to boost wage growth, enhance talent development and enhance productivity.
  • Guidelines on starting salaries for various job sectors to be issued by the Ministry of Human Resources.
  • Tax deductions up to 50% offered to employers for applications received by TalentCorp from 1 January 2025 to 31 December 2027 for:
    • Wages paid over a period of 12 months for hiring women returning to work after at least 2 years of career break;
    • Providing up to 12 months of caregiver leave;
    • Expenses incurred for capacity development and software acquisition in implementing flexible work arrangements.
    • Tax deductions for employers paying childcare allowances to be extended to include care for the elderly (i.e., parents and grandparents).