Budget Breakdown 2024: Demystifying Malaysia’s Fiscal Plans and Taxes

The first quarter of 2023 saw the Malaysian economy increase at a pace of 5.6% y/y, following a 7.1% y/y growth in the fourth quarter of 2022. Regarding quarter-on-quarter (q/q) growth, the Malaysian economy expanded by 0.9% in the first quarter of 2023, representing a significant improvement over the 1.7% q/q contraction that occurred in the fourth quarter of 2022. 

But what effects do these changes have on the Malaysian budget? Read further to gain insights on the breakdown of the 2024 budget.

March 1st Rollout: Directives for Implementing the 2% Service Tax Hike

The Royal Malaysian Customs Department (RMCD) has released some fundamental guidelines for applying its 2% Service Tax increase, which will take effect on March 1, 2024. Three options for taxes and rising rates are envisioned:

  • The current 6% rate applies to cases when services are completed before March 1.
  • The 6% fee may still be charged if the services are rendered before March 1 and are finished before August 31.
  • The new 8% rate will apply if the services are rendered after March 1 (and do not qualify for 2).

2024 Financial Plan for Malaysia: October 2023 Budget Release

The Service Tax will increase by 2% and rise from 6% to 8% as part of the budget submitted to the parliament on October 13, 2023. A new Luxury Tax will be in place in addition to certain necessities maintaining their 6% tax rate. It is suggested that the Service Tax scheme now encompass logistics. These adjustments will take effect on March 1, 2024.

A turnover tax on providing goods and services, including digital services, is known as service tax. Additionally, there is a 10% or 5% sales tax on turnover for the sale of products.

After Malaysia briefly imposed a Goods and Services Tax between April 2015 and July 2018, the country reinstated sales and service taxes. According to reports, Malaysia is thinking about bringing back the GST.

Car parks, telecommunications, food, and drink will not be included in the increase and will continue to be at 6%. Karaoke establishments, brokerage and underwriting services, and logistics services (6%) will all be included in the Service Tax net. The sales of watches and jewellery will be subject to a new luxury tax.

How can we help?

The Malaysian Business Reporting System (MBRS) is a new online submission platform launched by Suruhanjaya Syarikat Malaysia (SSM). This mandates that all businesses digitally submit their annual financial statements in XBRL format.

Unless otherwise exempted, all foreign firms registered under the Firms Act 2016 and all Malaysian incorporated companies would be required under the new law to digitally file a complete set of financial statements under the MBRS in XBRL file format.

As a provider of XBRL solutions, we at Data Tracks assist numerous Malaysian companies, auditing, and secretarial organisations in effectively converting their financial statements into XBRL format to comply with SSM.

For more details, feel free to reach us at +60-392126125 or email us at enquiry@datatracks.my

Malaysia Budget 2024 FAQs

What are the main goals of Budget 2024?

Budget 2024 aims to achieve both economic recovery and social progress. It focuses on boosting GDP growth, reducing the deficit, and addressing social needs like affordable housing, education, and healthcare.

How will the budget impact the average Malaysian?

The Malaysian budget 2024 ‘s  impact will vary depending on individual circumstances. Some will benefit from increased social spending and tax relief programs, while others might face challenges due to the service tax increase.

Will the service tax increase significantly affect my cost of living?

  • Service tax increase from 6% to 8%. The 2% increase translates to a slightly higher price on various goods and services. The impact will depend on your spending habits and the types of goods you purchase.

How has Malaysian Budget 2024 changed the Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE)?

Budget 2024 extends the application period for both GITA and GITE until December 2026, increasing the GITA’s tenure for projects up to 5 or 10 years and allowing up to 100% of statutory income to be offset based on tiered qualifying activities. This enhancement aims to incentivize more significant investment in green technology and sustainability projects.

What implications does Malaysian Budget 2024 have for the company?

Malaysian Budget 2024 brings several critical adjustments that your company needs to navigate carefully. Firstly, the service tax increase to 8% may necessitate either strategic price adjustments or cost absorption strategies to remain competitive in your market. Additionally, the introduction of a new capital gains tax warrants a thorough assessment of its implications on your future asset sales and investment plans. It’s also advisable to explore and maximize tax reliefs through expanded R&D deductions and automation allowances, which could help mitigate the impact of increased taxes. On the operational front, the minimum wage hike to RM1,500 will require you to adjust compensation structures accordingly, potentially affecting your operational costs.

However, Budget 2024 also unveils opportunities, especially with government investments in strategic sectors such as the digital economy, space technology, and electronics & electrical (E&E). This opens up avenues for potential partnerships or collaborations. Additionally, there’s a strong emphasis on digitalization and sustainability, encouraging companies to adopt these trends to enhance operational efficiency, attract top talent, and secure a competitive advantage in the evolving business landscape.

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