SEMESTER FEBRUARY

AAT20803 TAXATION II
KEY HIGHLIGHTS IN BUDGET 2023

LECTURER NAME
DR NADZIRAH BINTI MOHD SAID

PRESENTATION LINK :
https://drive.google.com/file/d/19L802B9gbdb42maEyXX8qmFu-2x2jkUm/view?usp=shari
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PREPARED BY:

NAME MATRICS NUMBER

MOHAMAD IKMAL BIN ISHAMUDIN A20A1457

MUHAMMAD SHAHIR BIN MOHD ZAIDI A21B3330

NURUL ATHIRAH BINTI ABDUL RAZAK A21B3413

NURSUHADA BINTI ABDULLAH HADZIR A21B3405

PANIMALAR A/P VISWANATHAN A21B3428

THARISANA A/P KARUNAGARAN A21B34723

 TABLE OF CONTENT

NO CONTENT PAGE

1 INTRODUCTION 1-2

2 BODY PARAGRAPH 2-7

3 CONCLUSION 7-8
1.0 INTRODUCTION

The budget for 2023 holds significant importance as it sets the tone for the fiscal year ahead. One
of the crucial aspects of any budget is taxation, as it directly impacts individuals, businesses, and
the overall economic landscape. We will provide an overview of the budget for 2023 related to
taxation, highlighting the key areas of focus and potential implications for taxpayers. The goal of
the taxation-related measures within the 2023 budget is to ensure a fair and sustainable tax
system that promotes economic growth, reduces inequality, and fosters compliance. This year's
budget aims to strike a balance between providing relief to taxpayers, stimulating investment,
and generating revenue to support essential public services and infrastructure development.
Some of the key aspects to consider within the taxation framework of the 2023 budget include
potential changes in tax rates, the introduction of new tax policies, measures to improve tax
administration and compliance, and efforts to simplify the tax system. Furthermore, the budget
may outline specific measures targeting certain sectors or demographics, such as incentives for
small businesses, provisions for low-income earners, or strategies to address tax evasion and
avoidance. These initiatives are designed to create a favorable environment for economic growth,
job creation, and social welfare. It is essential to note that the budget is subject to debates and
negotiations within legislative bodies, and the outcome may vary from the initial proposals.
Thus, taxpayers and business entities must stay updated on the developments and comprehend
how the budget's taxation aspect might affect them. In the following sections, we will delve into
how tax measures impact businesses and individuals in Malaysia’s 2023 budget. We will also
highlight the differences and improvements compared to previous budgets to provide a better
understanding of the tax landscape in the coming fiscal year.

Thesis Statement: Malaysia's Budget 2023 introduces key highlights that aim to stimulate
economic growth, improve social welfare, and strengthen the country's fiscal position. The
budget incorporates tax measures that impact businesses and individuals, promoting investment,
innovation, and equitable wealth distribution. Compared to previous budgets, Budget 2023
introduces new taxation acts and implements enhancements that prioritize sustainable
development, digital transformation, and inclusive growth. This article provides an overview of
the key highlights in Budget 2023, analyzes the impact of tax measures on businesses and
individuals, and highlights the differences and improvements in comparison to previous budgets.
2.0 BODY PARAGRAPH

2.1 How tax measures impact business and individuals in Malaysia’s 2023 budget

Malaysia's budget for 2023 was passed by the legislature on 9 March 2023 by majority vote.
After winning the national elections in 2022, Prime Minister Anwar Ibrahim presented this
budget for the first time. Malaysia's GDP is expected to grow 4.3% in 2023. This year, inflation
is expected to be between 2.8 and 3.8%, but subject to supply chain disruptions. response and
exchange rate changes, inflation may get worse. The 388 billion ringgit ($86.8 billion) budget is
the largest in Malaysian history and the new fiscal policies it introduces are aimed at boosting
economic development and promoting a more equal society.

On the other hand, resident personal income tax rates range from 0% to 30%, according to the
2023 budget, M40. For each taxable income bracket from RM50,001 to RM100,000, it is
proposed that the personal income tax rate be reduced by 2 percentage points to meet the
increasing cost of living and increasing discretionary income. of the Rakyat middle class. To
make the impact of the personal income tax system more progressive, it is proposed to increase
the income tax rate by 0.5 percentage points for residents with taxable income from RM250,001
to RM400,000. For middle-class taxpayers, the aforementioned special tax treatment can result
in tax savings of up to RM250. In other words, the additional amount the rakyat can reach is
estimated at around RM800 million. This would be a good choice as it would be the most
effective approach to reduce the financial burden on this income group.

Exemption from excise and sales taxes on the sale or transfer of taxis and rental cars by the
private economy is one of the provisions of the 2012 budget, but only if the vehicle is owned by
the public. privately owned and has been more than seven years from the date of registration. Tax
exemptions for the sale, transfer, private use and disposition of private taxis and rental cars are
proposed as follows from 1 January 2023. In addition to airport taxis, operator taxis and
TEKS1M are now exempt and the minimum vehicle age limit has been lowered to at least 5
years from the date of registration. This is done to help individual taxi drivers affected by the
COVID-19 outbreak and propose a reduction in personal income tax.
The next one will be social protection. Personal income tax does not apply to contributions paid
to accredited savings funds, such as Employee Provident Funds (EPF), takaful premiums, or life
insurance. From tax year 2022, voluntary contributors, including civil servants participating in
the pension scheme, are eligible for income tax exemption on EPF contributions up to RM4,000.
For civil employees participating in the pension scheme who do not wish to make voluntary
contributions to the EPF, income tax relief is also available on takaful contributions and life
insurance premium payments up to RM7,000. To further encourage voluntary contributions to
increase savings for old age, it is proposed to change the tax allowance for life insurance
premiums or takaful contributions from tax year 2023. Tax relief of up to RM4,000 on
mandatory contributions to registered plans or voluntary contributions to the EPF (excluding
private pension schemes) or contributions under any written law. In addtion, tax deductions of up
to RM3,000 are provided for life insurance premiums, takaful contributions, additional voluntary
contributions to the EPF, or both. Civilian employees are now subject to this new treatment under
this pension scheme. They will be able to generate money, increase retirement savings and pay
less taxes.

Other than that, an advantage due to the woman focus on them and the children. In addition to
building a harmonious family, they contribute to the prosperity of the nation. Gender focal
groups will be established in each ministry and agency to ensure that all policies are developed
taking into account gender issues. Being absent from work for at least two years from the date
Talent Corporation Malaysia Berhad received the application and exemption from tax on
employment income earned from tax year 2023 to tax year 2028 is one of the conditions that
must be assessed. to encourage women to return to the labor market and support the economy.
They will be motivated to start over and thus be able to support the family financially.
Furthermore, the protection of children's rights must be a top priority. The government will
provide RM 188 million for KEMAS preschool education projects under KEMAS. The
government has also decided to extend a tax credit of up to RM3,000 on fees paid to TASKA and
TADIKA registered with the government until tax year 2024 to ease the financial burden on
seniors. Parents send their children to school early.
In addition, the government wants to extend the personal income tax exemption until 2024 on
annual net contributions to Skim Simpanan Pendidikan Nasional (SSPN) up to RM8,000. This
Tax Reform Malaysia Budget 2023 will benefit one person as it will give more tax relief to Skim
Simpanan Pendidikan Nasional (SSPN) contributors. This action will motivate people to
contribute more money to SSPN, which will speed up the process of achieving their financial
goals. In addition, by reducing taxes and increasing disposable income, this policy allows people
to be more financially independent. Last but not least, this policy can help spur more people to
save, which will boost the economy in the long run.

Additionally, the fiscal policies in the 2023 budget will help Malaysians by rewarding TVET
degree seekers. This includes a 50% reduction in tuition fees for SPM graduates pursuing a
degree or certificate in Technical and Vocational Education and Training (TVET), as well as a
tax deduction of up to RM6,000 for those who complete the program. excel in their TVET
courses. The Technical and Vocational Education and Training Scholarships, the TVET Digital
Platform and the TVET Training and Internship Program are just some of the
government-funded efforts to modernize TVET. Through these measures, TVET will become
more attractive and accessible to Malaysians, which will help them pursue their educational
aspirations.

Furthermore, dental examination and treatment expenses will also be income tax deductible for
the medical treatment expenses of individuals, spouses and children, up to a maximum of
RM1,000, starting from the 2023 assessment year. To support the national oral health policy, it's
welcome. Individuals will benefit from this tax change in Malaysia's 2023 budget. Individuals
will be allowed to deduct the cost of dental exams and treatment from their taxable income,
reducing their overall tax liability, by expanding the scope of tax breaks to cover these costs.
This action will help improve the oral health of Malaysians by making dental care more
accessible and cheaper.

2.2 Differences and improvements of budget 2023 compared to previous budgets

The budget for Malaysia in 2022 introduces several significant proposals aimed at enhancing
corporate tax policies and providing tax incentives to various industries. One of the primary
proposals is the introduction of a special one-off tax called Cukai Makmur, targeted at companies
that have generated substantial income during the COVID-19 pandemic period. The objective
behind Cukai Makmur is to ensure that businesses contribute their fair share towards economic
recovery efforts.

The budget extends the special tax deduction for the reduction of rental costs for business
premises. This measure aims to support companies that have been significantly affected by the
pandemic and enable them to continue their operations. Additionally, the budget proposes an
extension of the special tax deduction for expenses related to the renovation and refurbishment of
business premises. This move encourages companies to invest in upgrading their facilities, thus
enhancing their competitiveness and contributing to economic growth. To provide businesses
with additional flexibility, the budget extends the expiry date for accumulated business losses.
This extension allows companies to carry forward their losses for a longer period, thereby
reducing their tax liabilities and aiding their financial recovery. In terms of tax incentives, the
budget introduces the Digital Ecosystem Acceleration Scheme (DESAC), which provides tax
incentives for digital technology providers and digital infrastructure providers. These incentives
are designed to encourage the growth of Malaysia's digital economy, attracting investment and
fostering innovation in the digital sector. The budget also updates tax incentives for green
technology to promote sustainable practices and environmental stewardship. These incentives
include investment tax allowances and tax exemptions, providing financial support for
companies engaged in green technology initiatives. The Special Voluntary Disclosure
Programme (SVDP) is introduced by the Royal Malaysian Customs Department, allowing
taxpayers to voluntarily disclose any previous non-compliance with tax regulations. This
program aims to encourage taxpayers to rectify their past errors while benefiting from reduced
penalties or legal actions. Recognizing the importance of the electric vehicles (EV) industry, the
budget proposes tax incentives to support its development. These incentives include import duty
exemptions, partial excise duty exemptions, and sales tax exemptions for EV-related products.
These measures aim to encourage the adoption of EVs and stimulate growth in the sector. In
conclusion, the corporate tax and tax incentive proposals outlined in Malaysia's Budget 2022
reflect the government's commitment to economic recovery and sectoral growth.
The Restabled Budget 2023 in Malaysia, inspired by Prime Minister Datuk Seri Anwar Ibrahim's
"Malaysia MADANI" vision, focuses on sustainability, prosperity, innovation, respect, trust, and
compassion. To broaden the tax base and increase revenue collection, the budget proposes
measures such as a Voluntary Disclosure Program (VDP) to encourage taxpayers to rectify errors
without penalties. Additionally, a study will be conducted on the introduction of a low-rate
capital gains tax on the disposal of unlisted shares. However, the government aims to balance the
potential benefits with the impact on investment attractiveness and plans to consult with
stakeholders before making any implementation decisions. Furthermore, an excise duty on
e-cigarettes and vapes is proposed, with a portion of the collection allocated to improving
healthcare services. To spur economic growth, the budget emphasizes reforming public sector
institutions, streamlining agencies, and enhancing the regulatory framework. Efforts will be
made to accelerate the approval process for high-potential investment projects, improve the
business environment, and promote the adoption of digital and technology services in the public
sector. The budget also supports micro, small, and medium-sized enterprises (MSMEs) through
measures such as reducing income tax rates, providing financial assistance, and promoting
automation and digitalization. In terms of income redistribution and reducing inequality, the
budget introduces lower income tax rates for individuals in the RM35,000 to RM100,000 tax
bracket, along with increased rates for higher brackets. The budget also addresses the needs of
vulnerable groups, including youth, women, gig workers, and the unemployed. The budget aims
to generate additional revenue while addressing the needs of the people. Overall, the Restabled
Budget 2023 presents a cohesive and inclusive approach to accelerating economic recovery,
promoting sustainable growth, and fostering an inclusive society. However, certain measures,
such as the potential capital gains tax on unlisted shares, require further study to avoid
unintended adverse consequences.

The Budget 2023 for Malaysia introduces several significant changes than the previous budget
and incentives related to corporate income tax and indirect tax. Regarding corporate income tax,
one notable change is the introduction of a capital gains tax on the disposal of unlisted shares by
companies. Additionally, there is a reduction in the tax rate for micro, small, and medium-sized
enterprises (MSMEs) on the first MYR 150,000 of chargeable income. The budget also extends
tax deduction benefits for technology-based companies that choose to list. Moreover, there will
be tax deductions for companies that issue sustainable and responsible investment-linked sukuk.
To ensure better tax compliance, companies will now be required to accumulate and remit
withholding tax on a monthly basis for payments to individual resident agents, dealers, or
distributors. Furthermore, the scope of income tax return revision provisions is expanded to
include withholding tax payments. In terms of tax incentives, there will be a restructuring of
investment incentives based on achieving specific outcomes. The accelerated capital allowance
for automation equipment will be enhanced, encouraging businesses to invest in automation
technologies. The maximum tax-deductible rental expense for non-commercial electric vehicles
will also increase, promoting the adoption of electric vehicles in the country. Tax incentives will
be provided for manufacturing electric vehicle charging equipment and engaging in carbon
capture and storage (CCS) activities. The budget extends and expands tax incentives for
industries such as shipbuilding, food production, aerospace, and BioNexus, aiming to foster
growth and innovation in these sectors. Regarding indirect tax, the government has no plans to
reintroduce the goods and services tax (GST). However, there is a proposed introduction of a
luxury goods tax. The budget also includes the extension of import duty and excise duty
exemptions for electric vehicles, supporting the transition to greener transportation options.
Lastly, tax incentives will be offered for activities related to carbon capture and storage (CCS).
Overall, the Budget 2023 in Malaysia introduces various changes and incentives aimed at
stimulating economic growth, supporting sustainable practices, and encouraging investment in
key industries.

3.0 Conclusion

Malaysia's Budget 2023 aims to stimulate economic growth, improve social welfare, and
strengthen the country's fiscal position. With a budget of 388 billion ringgit ($86.8 billion), the
budget includes tax measures promoting investment, innovation, and equitable wealth
distribution. It is the largest budget in Malaysian history, with a proposed reduction of 2
percentage points for each taxable income bracket. The Rakyat middle class will receive tax
exemptions for taxis and rental cars, and the minimum vehicle age limit has been lowered to at
least 5 years from the date of registration. Social protection is also proposed, with voluntary
contributors eligible for income tax exemptions on EPF contributions up to RM4,000 and takaful
contributions and life insurance premium payments up to RM7,000.
Gender focal groups will be established to ensure policies are developed considering gender
issues. The budget also provides RM 188 million for KEMAS preschool education projects,
extends tax credits on fees paid to TASKA and TADIKA registered with the government until
2024, and extends personal income tax exemptions on annual net contributions to Skim
Simpanan Pendidikan Nasional (SSPN) up to RM8,000. The budget also rewards TVET degree
seekers with a 50% reduction in tuition fees and a tax deduction of up to RM6,000. The
Restabled Budget 2023 in Malaysia focuses on sustainability, prosperity, innovation, respect,
trust, and compassion. With an expected economic growth of 4.5% in 2023, the government
plans to increase spending by 17% to reach RM388.1 billion. Measures include a Voluntary
Disclosure Program, a low-rate capital gains tax on unlisted shares, and an excise duty on
e-cigarettes and vapes.