Malaysia Budget 2025 Unwrapped: Business Owner’s Guide

Malaysia Budget 2025 was announced in Parliament by The Prime Minister, Datuk Seri Anwar Ibrahim, on 18 October 2024, bringing with it the largest budget in the country’s history, amounting to RM421 billion. This comprehensive budget, split between RM335 billion for operating expenditure while RM86 billion as development expenditure and RM2 billion is in contingency savings, is the third one crafted under the MADANI economic framework (Ekonomi Madani) of the federal government.

With a strong focus on revitalising the economy, driving transformative changes, and enhancing the well-being of the people, this budget could open up significant opportunities for businesses.

But what does this Budget 2025 mean for you as a business owner? How can you leverage the new incentives and policies to strengthen your operations? And more importantly, how can you align your business strategies with Malaysia’s national priorities to ensure sustained growth? Let’s break down the key highlights and see how you can make the most of the new incentives and policies.

Overview: Malaysia Budget 2025 Unwrapped – A Guide for Business Owners

The Malaysia’s Budget 2025, announced on 18 October 2024, brings the largest budget in the country’s history at RM421 billion. Designed under the MADANI economic framework, this comprehensive budget allocates RM335 billion for operating expenditure and RM86 billion for development. Its goals include revitalising the economy, enhancing infrastructure, and promoting sustainable growth. As a business owner, Malaysia’s Budget 2025 offers new tax policies, incentives, and initiatives aimed at supporting business expansion, digitalisation, and sustainable practices. From tax incentives for automation to funding opportunities for SMEs, the budget introduces significant measures to drive transformative growth across sectors.

What Are the Goals and Priorities Outlined in Malaysia Budget 2025?

The goals and priorities outlined in Malaysia’s budget for 2025 include boosting economic growth, creating job opportunities, enhancing public infrastructure, promoting sustainable development, and improving the overall well-being of Malaysian citizens through targeted investments and policy initiatives.

New Taxes and Major Rules to Observed in Malaysia Budget 2025

Dividend Tax on Individual Shareholders

Starting from the Year of Assessment (YA) 2025, individual shareholders with annual dividend income exceeding RM100,000 will face a 2% tax on their dividend earnings starting in January. Consideration will be given to exempt dividend income from government funds such as the Employees Provident Fund (EPF), Amanah Saham National Bumiputera (ASNB), mutual funds under Permodalan Nasional Bhd, and dividends from foreign countries. If you receive substantial dividends, this new tax may impact your overall income, so careful planning is important.

Expansion of Sales Tax and Service Tax (SST) that Won’t Burden the Rakyat

While the Goods and Services Tax (GST) will not be implemented, the Sales Tax and Service Tax (SST) regime will be implemented more progressively, in a manner that does not burden the rakyat. The progressive SST regime will be implemented effective 1 May 2025. The Government will conduct engagement sessions with relevant stakeholders and industries before finalising the scope of expansion and the relevant tax rates. This expansion means businesses such as yours need to prepare for changes in tax compliance, especially those in sectors affected by service taxation.

Introduction of Carbon Tax

A carbon tax will be introduced for the iron and steel industry, as well as the energy sector, by 2026 and revenue from the levy will be used to fund research and green technology programmes. If you own a business in these sectors, you need to start planning ways to reduce your carbon footprint to mitigate tax liabilities.

Tax Incentives to Support Business Growth

E-Invoicing Incentives

If your business has already started to implement e-invoicing, you can claim Capital Allowance within a period of 2 years for expenses related to information and communication technology (ICT) equipment, software, and consulting fees.

In an appendix released alongside the Budget 2025 presentation, the Ministry of Finance said the proposal aims to encourage taxpayers to fully implement e-Invoicing by July 1, 2025, according to established guidelines.

This incentive applies from YA 2024 to YA 2025, providing an opportunity to modernise operations while reducing tax burdens. The details are as follows:

No.	Qualifying Expenditure	Capital Allowance Rate
1.	Purchase of ICT equipment and computer software package	Initial Allowance: 20% Annual Allowance: 40%
2.	Consultation, licensing, and incidental fees related to customised computer software development	Initial Allowance: 20% Annual Allowance: 40%

Flexible Work Arrangements and Caregiving Leave

Tax incentives and tax relief have been introduced for businesses that implement flexible work arrangements and provide caregiving leave of up to 12 months for employees caring for children or ill or disabled family members. As a business owner, your company can claim an additional 50% tax deduction on capacity building and software expenses for flexible work arrangements, as well as on caregiving leave benefits for applications made from 2025 to 2027. This could benefit your company if you wish to promote work-life balance, improve employee satisfaction, and ultimately boost national productivity.

Tax Incentives for Automation and Smart Logistics Complexes

If you own businesses in the manufacturing, services, agriculture, and commodity sectors, you can claim an accelerated capital allowance on capital expenditure for automation within a year. Additionally, logistics companies developing Smart Logistics Complexes (SLC) will benefit from new tax incentives. Automation is a key to increasing productivity, and these incentives could significantly reduce the cost of investing in technology.

Support for Women Returning to Work

To encourage women to re-enter the workforce, if you plan to hire, women returning to work will receive a 50% tax deduction on employment expenses for up to 12 months. This incentive provides an opportunity to tap into an often-overlooked talent pool while benefiting from tax savings.

Tax Incentives for Carbon Capture, Utilisation, and Storage (CCUS)

Malaysia is well-positioned to become a promising regional hub for Carbon Capture, Utilization, and Storage (CCUS) activities. Under the Malaysia Budget 2025, businesses involved in CCUS can benefit from tax incentives, such as investment tax allowances or income tax exemptions. This initiative aligns with the broader push for environmental responsibility and further strengthens Malaysia’s role in advancing sustainable practices in the region.

Tax Incentives for Automation

If you own a business in the manufacturing, services, agriculture, and commodity sectors that incur capital expenditure for automation, you will receive tax incentives, including an accelerated capital allowance that can be claimed in full within one year and an income tax exemption equivalent to the capital expenditure incurred.

Tax Incentive for Increased Exports

The tax incentive for increased exports in the services sector will be expanded to include advanced integrated circuit design services, aligning with the mission of the New Industrial Master Plan (NIMP) 2030, which aims to establish Malaysia as a hub for advanced integrated circuit design technology and solutions.

Tax Deduction on New Equipment and Machinery Donations

Companies that acquire new equipment and machinery and donate them to registered public skills training institutions, polytechnics, or vocational colleges will receive a tax deduction for these donations from YA 2025 to YA 2027.

Review of Export Duty Exemption on Crude Palm Oil (CPO)

The export duty for CPO will be revised to include new market price brackets above RM3,450 per metric tonne, with rates ranging from 8.0% to 10.0%, effective from 1 November 2024.

Financing Highlights

Local Exporters

A fund of RM750 million will be provided by EXIM Bank under the Skim Insentif Pemampanan Pengeksport to encourage local exporters to expand their operations into overseas markets.

Small Traders

Funding of RM3.2 billion is allocated as small loan facilities under BSN and TEKUN to assist small traders, including the disabled community, the Chinese community, and Bumiputeras.

Key Developments

A financing fund of RM6.4 billion will be provided by Bank Pembangunan Malaysia Berhad to support the development of infrastructure, digitalisation, tourism, logistics, transportation, renewable energy, and transition projects.

Sustainability Practices and Agro-Food Sector

A loan fund of RM3.8 billion will be provided by BNM to SMEs to transition towards digitalisation and automation, in addition to continuing assistance for the agro-food sector and sustainable practices.

Women and Youth Entrepreneurs

Funding of RM650 billion is allocated to support women and youth in entering the field of entrepreneurship. This funding aims to empower more women and young people to start their own businesses and contribute to economic growth.

Equity Crowdfunding (ECF) Platform

A matching investment fund of RM100 million will be made available through an ECF platform, particularly for local suppliers in Electrical and Electronics, speciality chemicals, and medical devices. If you are in these industries, this is an excellent opportunity to secure additional funding for growth and innovation.

Financing for SMEs and Mid-Sized Companies

Under Malaysia Budget 2025, funding of RM200 million has been allocated for allocation to drive innovation and foster growth in SMEs and mid-sized companies. Additionally, Khazanah will launch a RM1 billion fund to support the capacity building of local companies. If you are an SME, these funds provide access to capital that could drive your business to the next level.

Food Security and Halal Certification for SMEs

To boost food security, Agrobank will provide RM200 million to agro-food entrepreneurs, while RM600 million will be available through Bank Pembangunan Malaysia Berhad and SME Bank to support halal certification for SMEs. This funding aims to enhance Malaysia’s food supply chain and support the growing halal market, offering substantial opportunities for SMEs in these sectors. If you’re an agro-food entrepreneur, you should take advantage of this funding opportunity,

Guarantee Financing for SME Loans

Syarikat Jaminan Pembiayaan Perniagaan Berhad (SJPP) will continue to guarantee financing up to RM20 billion for SME loans, including a special guarantee of RM5 billion for Bumiputera SMEs. This guarantee financing aims to ease access to credit for SMEs, enabling businesses to sustain operations and invest in expansion.

Government Grants and Key Initiatives

Digital Grants for SMEs and Traders

To support digitalisation, RM50 million is allocated for Digital Matching Grants under BSN based on Malaysia Budget 2025. These grants are designed to help SMEs remain competitive in an increasingly digital economy. If your business has been considering digital transformation, now is an ideal time to explore this opportunity.

Minimum Wage Increase

The minimum wage will increase from RM1,500 to RM1,700 effective 1 February 2025, which is under the MADANI economic framework (Ekonomi Madani). However, businesses with fewer than five employees will have a six-month deferment. As an employer, you should prepare for this wage adjustment, as it will impact payroll and overall operating costs.

Simplified Employer Registration Processes

Based on the Malaysia Budget 2025, the government plans to simplify employer registration processes for EPF, SOCSO, and HRD Corp by consolidating these processes. This initiative is expected to reduce administrative burdens and make compliance easier for businesses.

Moving Forward

Malaysia Budget 2025 introduces various initiatives aimed at promoting sustainable growth and enhancing the well-being of Malaysians. However, it also brings new challenges, such as increased compliance requirements and new taxes. If you’re unsure which accounting firm to hire to navigate these changes, you can explore this guide on Local vs Big 4 Accounting Firms in Malaysia – Which One to Hire for insights on choosing the right partner for your business.

Business owners must stay informed, plan strategically, and adapt to the changes to remain competitive and resilient. If you are uncertain about how these new measures might affect your business, our tax specialists are here to help. Reach out to Grof Malaysia today for tailored advice on navigating the evolving tax landscape and ensuring you’re prepared for what lies ahead.

Reach Out to Grof Malaysia for Tax Compliance Support

As you move forward into 2025, navigating Malaysia’s tax regulations can become increasingly complex. Whether you’re an SME or a large enterprise, ensuring compliance with the latest tax laws is important for avoiding penalties and optimising your financial planning. Grof Malaysia offers expert guidance on tax compliance, helping you stay up-to-date with the latest changes while focusing on growing your business. Reach out to our team in Kuala Lumpur for tailored support and make tax compliance a seamless part of your 2025 strategy.