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TAXLETTER
Revised Budget 2023 Highlights

Themed Developing A Civil Malaysia (“Membangun

Malaysia Madani”), the revised Budget 2023
proposals were formulated to reflect the principles
of accountability and a noble value system that is
capable to face the upcoming global economic
challenges.

The revised Budget 2023 aims to build a more

inclusive and sustainable economic drive, to reform
institutional governance, and to moderate inequality
among community.
 Overview of Malaysian Economy

10.00% Year on Year GDP Growth

1. Malaysia economy has performed
better than expected in 2022,with
5.00% strong domestic demand and
higher export performance. With
the transition to the endemic
0.00% phase and reopening of
2018 2019 2020 2021 2022p 2023f international borders, the
-5.00% economy is expected to register a
growth of approximately 4.5% in
2023.
-10.00%

2. Unemployment rate in 2022 recorded at 3.6%, compared to 3.3% during the pre-pandemic
period of 2019. Government expects labour market conditions to improve significantly in 2023,
reflecting in higher job creation and lower unemployment rate.

3. Inflation in 2022 is at a rate of 3.3% with high food inflation of 5.8%. The inflation rate for 2023 is
expected to be the same as 2022 and could be higher if there is continuous uncertainties in the
global supply chain.

4. Introduced by Prime Minister Datuk Seri Ibrahim, the Budget 2023 strategies are guided by the
MADANI Policy Framework:

Source : https://budget.mof.gov.my/pdf/belanjawan2023/economy-fiscal/highlights.pdf
 Highlights of Budget 2023

1. Luxury Goods Tax

A new tax will be introduced on

luxury goods of certain type or
value. For instance, luxury watches
and fashionable items.

Details and effective date have yet

to be announced.

2. Capital Gains Tax

Government will study the introduction of Capital

Gains Tax on Gains from Disposal of Unlisted Shares
in 2024.

Details will be unveiled after carry out consultation

with relevant parties.

3. Special Voluntary Disclosure Programme

Inland Revenue Board of Malaysia and Royal

Malaysian Customs Department will reintroduce
Special Voluntary Disclosure Programme.

100% Penalty Waiver on Voluntary Disclosure made

from 1 June 2023 to 31 May 2024.

Source: www,malaymail.com
 Individual Tax

1. The income tax rates for individual taxpayers vary as follow:

a. reduced by 2% for chargeable income bands between RM35,001 to RM100,000;

b. increased by 1% for chargeable income bands between RM100,001 to RM250,000;
c. increased by 0.5% for chargeable income bands between RM250,001 to RM400,000;
d. increased by 1% for chargeable income bands between RM400,001 to RM600,000;
e. increased by 2% for chargeable income bands between RM600,001 to RM1 million.

Chargeable Income Calculations Rate YA 2022 YA 2023

(RM) (RM) % Tax Payable Tax Payable
(RM) (RM)

0 - 5,000 On the First 2,500 0 0 0

On the First 5,000 0 0

5,001 - 20,000
Next 15,000 1 150 150

On the First 20,000 150 150

20,001 - 35,000
Next 15,000 3 450 450

On the First 35,000 8 (YA 2022) 600 600

35,001 - 50,000
6 (YA 2023)
Next 15,000 1,200 900

On the First 50,000 13 (YA 2022) 1,800 1,500

50,001 - 70,000
11 (YA 2023)
Next 20,000 2,600 2,200

On the First 70,000 21 (YA 2022) 4,400 3,700

70,001 - 100,000
19 (YA 2023)
Next 30,000 6,300 5,700

On the First 100,000 24 (YA 2022) 10,700 9,400

100,001 - 250,000
25 (YA 2023)
Next 150,000 36,000 37,500

On the First 250,000 24.5 (YA 2022) 46,700 46,900

250,001 - 400,000
25 (YA 2023)
Next 150,000 36,750 37,500

On the First 400,000 25 (YA 2022) 83,450 84,400

400,001 - 600,000
26 (YA 2023)
Next 200,000 50,000 52,000

On the First 600,000 26 (YA 2022) 133,450 136,400

600,001 - 1,000,000
28 (YA 2023)
Next 400,000 104,000 112,000
On the First
1,000,001 – 1,000,000 237,450 248,400
2,000,000
Next 1,000,000 28 280,000 280,000
2,000,001 and above - 30 - -
 Individual Tax and Relief

2. Medical Treatment Expenses

It is proposed that the Income tax exemption on

medical treatment expenses increase from:

RM8,000 à RM10,000

Scope of medical treatment expenditure be expanded

to include the intervention expenditure for Autism,
Attention Deficit Hyperactivity Disorder (ADHD),
Global Development Delay (GDD), Intellectual
Disability, Down Syndrome and Specific Learning
Disabilities. This will be limited to RM4,000.

Effective YA 2023.

3. Childcare Tax Relief

A tax relief of RM3,000 will be:

extended to the YA 2024

for fees paid to childcare centre registered with the
Social Welfare Department or kindergarten
registered with the Ministry of Education Malaysia.

4. PTPTN Discount
Repayment

PTPTN Discount Repayment

will be introduced from 1
March 2023 to 31 May 2023
with:

Discount up to 20%

6 months deferment will be

granted to borrowers with
monthly income RM1,800 or
below.
 Employer

1. Grant from SOCSO for Women Return to Work

In order to encourage women return to work, SOCSO will amend the existing legislation to allow a
grant equivalent to :

80% of the Wages insured under the SOCSO Act 1969.

2. Further Tax Deduction for Inmate and Ex-Inmate of Henry Gurney School and
Institutions under the Social Welfare Department

will be granted to remuneration paid to inmate and ex-inmate of Henry

Further Tax Gurney School under Malaysian Prison Department, protection and
Deduction rehabilitation institution and registered care centers under the Social
Welfare Department. Effective from YA 2023 to YA 2025.

3. EPF i-Saraan

EPF i-Saraan benefits both self-employed and business owners. RM250

15% government matching contribution will be increased from : RM300
4. Hiring incentive

In order to increase the average wage of the private sector, SOCSO will provide a hiring
incentive for private sectors in hiring new graduates, especially those under Technical and
Vocational Education Training (“TVET”), disabled and ex-convicts. The incentive offered is:

RM600 per month for 3 months

 Corporate Tax

1. Income Tax Rate for Micro, Small and Medium Enterprises

Effective YA 2023, income tax rate for Micro, Small and Medium Enterprises (MSME) on
chargeable income for the first RM150,000 be reduced by 2%. The income tax rates summary
are as follow:-

Taxable Income Tax Rate YA 2022 YA 2023

First RM150,000 15% RM22,500
RM102,000
RM150,001 to RM600,000 17% RM76,500
RM600,001 and above 24% - -

Effective tax saving is RM3,000.

2. Tax Deduction for Listing Fee

To encourage MSME to expand their businesses by raising funds through listing on BURSA
Malaysia, it is proposed that the:–
(i) tax deduction up to RM1.5 million on the cost of listing
Tax Deduction on the ACE and LEAP Markets be extended for a
up to 1.5m period of 3 years; and
(ii) tax deduction is expanded to cover the cost of listing
technology-based companies on BURSA Main Market.

Effective YA 2023 to YA 2025.

3. Tax Deduction on the Cost of Issuance of Sustainable and Responsible Investment

linked Sukuk

To provide an innovative Shariah-compliant financing and place Malaysia as a regional hub of

Sustainable and Responsible Investment Sukuk (SRI) – linked Sukuk issuance, it is proposed tax
deduction on the cost of issuing SRI-linked Sukuk that is approved or permitted or deposited with
the Securities Commission Malaysia be given for a period of 5 years.

Effective from YA 2023 to YA 2027.

 Import Duties and Sales Tax Exemption

1. Import Duties and Sales Tax Exemption on Studio and Filming Production Equipment

It is proposed that import duty and sales tax exemptions on studio and filming equipment to be given
to providers of studio equipment, production and post-production services for a period of 3 years.

Applications must be submitted to Ministry of Finance from 1 April 2023 until 31 March 2026.

2. Excise Duty and Sales Tax Exemption on the Sale or Transfer of Individually Owned
Taxis and Hired Cars

To assist individual taxi owners impacted by the Covid-19 pandemic, it is proposed that the excise
duty and sales tax exemption will be reviewed:-

(i) Exemption expanded to include executive taxies, TEKS1M and airport taxis;
(ii) Vehicle age condition at least 5 years from the date of registration.

For applications received by the Royal Malaysian Customs Department from 1 March 2023.

3. Electric Vehicles

To increase demand of Electric Vehicles (EV), it is proposed as follows:-

(i) Full import duty and excise duty exemption on imported Completely Built Up (CBU) EV be
extended for another 2 years until 31 December 2025;
(ii) Full import duty exemption on components for locally assembled EV extended for another
2 years until 31 December 2027; and
(iii) Full excise duty and sales tax exemption on locally assembled Completely Knocked-Down
(CKD) EV extended for another 2 years until 31 December 2027.

4. Import Duty and Sales Tax Exemption on

Nicotine Replacement Therapy

To encourage Malaysian to use of Nicotine

Replacement Therapy (NRT) as an alternative
for smoking cessation, it is proposed that import
duty and sales tax exemption be given to
nicotine gum and and nicotine patch for a period
of 3 years. Applications for the exemption to be
submitted to the Ministry of Finance from 1 April
2023 until 31 March 2026.
 Stamp Duty

1. Transfer of Property by way of love and affection

In order to reduce the cost of stamp duty for the transfer of property by way of love affection
between parents and children, grandparents and grandchildren, it is proposed that stamp duty on
the instruments of transfer of property be fully exempted, limited to the first RM1 million of the
property’s value. The remaining balance of the property’s value will subject to ad valorem duty
rate and is given 50% remission. This stamp duty treatment applies to the recipients who are
Malaysian citizens.

For instrument of transfer of property executed from 1 April 2023.

2. Ownership of First Home

In order to encourage more Malaysian citizen to purchase first residential home, government
continue granting a full stamp duty exemption on instrument of transfer and loan
agreement for property valued not exceeding RM500,000 and 75% stamp duty exemption for
property valued more than RM500,000 to RM1 million

3. Educational Loan / Scholarship Agreement

In order to streamline stamp duty treatment for all levels of education, it is proposed the
imposition of a fixed duty of RM10 be expanded to include educational loan / scholarship
agreement to pursue education at all levels including certificate (education / skills / professionals)
in any educational and training institutions.

For educational loan / scholarship agreement executed from 1 June 2023.

4. Restructuring or Rescheduling of Loan / Financing Agreement

It is proposed that full stamp duty exemption on restructuring or rescheduling of the loan /
financing agreement be extended for a period of 2 years, until 31 December 2024.
 Other Incentives

1. Sponsorship of Smart Artificial Intelligence Driven Reverse Vending Machine

To support recycling of plastic waste as an economic resource, it is proposed that a tax

deduction under Section 34(6)(h) of the Income Tax Act 1967 be given to companies and other
than companies (self employed, partnerships, trusts and cooperatives that have business
income) that make donations or sponsorships of Artificial Intelligence (AI) – Driven Reverse
Vending Machine.

For contribution or sponsorships and application received by Ministry of Finance from 1 April
2023 to 31 December 2024.

2. Tax Incentive for Rental of Non-Commercial Electric Vehicle

At present, companies renting non-commercial motor vehicles are given tax deduction similar to
the Capital Allowance restriction as follows:-
(i) cost of vehicle not exceeding RM150,000, the maximum rental amount allowed for tax
deduction is limited up to RM100,000; and
(ii) cost of vehicle exceeding RM150,000, the maximum rental amount allowed for tax
deduction is limited to RM50,000.

It is proposed the maximum rental amount for Electric Vehicle for tax deduction is up to
RM300,000. Effective from YA 2023 until YA 2025.

3. Tax Incentives for Manufacturer of Electric Vehicle Charging Equipment

It is proposed that a new tax incentive to be introduced for electric vehicle charging equipment
manufacturers, :-

(i) Income tax exemption of 100% Statutory Income up to 10 years from YA 2023 to YA
2032; or
(ii) Income Tax Allowance of 100% for a period of 5 years and can be set-off against up to
100% of the Statutory Income for each year of assessment.
For applications received by Malaysian Investment Development Authority (MIDA) from 25
February 2023 until 31 December 2025
 Other Incentives

4. Tax Incentives for Carbon Capture and Storage

In order to promote Carbon Capture and Storage (CCS) activities as a new source of economic
growth and in achieving net zero greenhouse gas emission, it is proposed tax incentives be
given as follows:-

Companies undertaking CCS in-house activity

(i) Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure for a period of
10 years and can be set-off against up to 100% statutory income;
(ii) Full import duty and sales tax exemption on equipment for CCS technology commencing
from 1 January 2023 until 31 December 2027; and
(iii) Tax deduction for allowable pre-commencement expenses within 5 years prior to the
date of commencement of operation.

Companies undertaking CCS services

(i) Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure for a period of
10 years and can be set-off against up to 100% statutory income; or
(ii) Tax exemption of 70% on statutory income for a period of 10 years; and

(iii) Full import duty and sales tax exemption on equipment for CCS technology starting 1
January 2023 until 31 December 2027.

Companies engaging CCS services

(i) Shall be given tax deduction on fees incurred for use of CCS services.

The incentives are applicable to application received by Ministry of Finance from 25 February
2023 to 31 December 2027.

5. Tax Incentives for Chicken Rearing in Closed House System

To encourage more poultry farmers to adopt environmental-friendly closed house system, it is

proposed that new tax incentives be introduced as follow:-

(i) Accelerated Capital Allowance (ACA) 100% on the qualifying capital expenditure; and
(ii) Income tax exemption of 100% equivalent to the qualifying capital expenditure.

The tax incentives are given on the qualifying capital expenditure incurred from YA 2023 to YA
2025, and to be fully absorbed to 200% within a year.
 Other Incentives

6. Tax Incentives for Food Production Project

At present, tax incentives for food production projects are given as follow:-

(i) A Company investing in a subsidiary company engaging in new food production project
is given tax deduction equivalent to the amount of investment made in the specified
period the investment is made; and
(ii) Company engaging in Food Production Project

a) New project is given 100% income tax exemption on statutory income for 10 YAs; or

b) Expansion project for existing company is given 100% income tax exemption on
statutory income for 5 YAs.
To further promote participation of industry players in agriculture sector and to ensure the
security of domestic food supply, it is proposed that tax incentive is expanded to include
agricultural based projects on Controlled Environment Agriculture (CEA) and extend for a period
of 3 years.

For applications received by Ministry of Agriculture and Food Security (MAFS) from 1 January
2023 until 31 December 2025.

7. Tax Incentives for BioNexus Status Company

At present, income tax exemption of 70% on Statutory Income is given to company undertaking
biotechnology activity and approved with BioNexus status.

It is proposed that income tax exemption on statutory income be increased from 70% to 100%;
and application period for tax incentive be extended for 2 years. The incentive is applicable to
applications received by Malaysian Bioeconomy Development Corporation from 1 January 2023
until 31 December 2024.
 Other Incentives

8. Tax Incentive for Automation in Manufacturing and Services Sector

At present, manufacturing and services companies which incur qualifying capital expenditure on
automation equipment is given tax incentive as follows:-

(i) Category 1 : Labour-Intensive Industry

Accelerated Capital Allowance (ACA) of 100% for automation equipment on the first
RM4 million for qualifying capital expenditure incurred and can be utilized within 1 year.
(ii) Category 2 : Industries other than Category 1 including the Services Sector
ACA of 100% for automation equipment on the first RM2 million for qualifying capital
expenditure incurred and can be utilized within 1 year.
It is proposed that the ACA for automation equipment be enhanced as follows:-

(i) Scope of automation to include the adaptation of Industry 4.0 elements;

(ii) Scope of tax incentive is expanded to include agriculture sector; and
(iii) Capital expenditure threshold for categories 1, 2 and agriculture be aligned and
increased up to RM10 million

For applications received by Malaysian Investment Development Authority (MIDA) and Ministry
of Agriculture and Food Security (MAFS) from 1 January 2023 until 31 December 2027.

9. Tax Incentive for Ship Building and Ship Repairing Industry

Companies undertaking ship building and ship repairing activities in Malaysia are eligible for tax
incentives as follows:

New Company
(i) Pioneer Status with income tax exemption of 70% statutory income for a period of 5
years; or
(ii) Investment Tax Allowance of 60% on qualifying capital expenditure incurred within 5
years and can be set-off against 70% of the Statutory Income for each year of
assessment.

Existing Company
(i) Investment Tax Allowance of 60% on qualifying capital expenditure incurred within 5
years and can be set-off against 70% of the Statutory Income for each year of
assessment.
It is proposed that the tax incentive be extended for a period of 5 years, for applications received
by Malaysian Investment Development Authority (MIDA) from 1 January 2023 until 31 December
2027.
 Other Incentives

10. Tax Incentive for Aerospace Industry

At present, new and existing aerospace companies in Malaysia undertaking high-value activities
are given tax incentive as follows:-

New Company
(i) Income tax exemption of 70% to 100% for a period between 5 to 10 years; or

(ii) Investment Tax Allowance of 60% to 100% for a period of 5 years and can be set-off
against 70% to 100% of Statutory Income for each year of assessment.

Existing Company
(i) Investment Tax Allowance of 60% for a period of 5 years and can be set-off against 70%
of Statutory Income for each year of assessment.

It is proposed that the tax incentive be extended for a period of 3 years, for applications received
by Malaysian Investment Development Authority (MIDA) from 1 January 2023 until 31 December
2025.

11. Special Tax Deduction for Malaysia-Made Handicraft

Special tax deduction up to RM150,000 be given to hoteliers, for expenditure incurred on

qualified Malaysia-made handicraft purchased from handicraft entrepreneur registered with
Perbadanan Kemajuan Kraftangan Malaysia.

The qualifying handicraft products expenditure incurred from 1 January 2023 until 31 December
2025.

CJ Wang Song Liew CY See Annie Liong

This taxletter offers non-binding information and is intended for general information purposes only. It is not intended as legal, tax or business administration advice and cannot be relied upon
as individual advice. When compiling this taxletter and the information included herein, ANC Hub Tax Advisory Sdn Bhd (“ANC Group”) used every endeavour to observe due diligence as
best as possible, nevertheless, ANC Group cannot be held liable for the correctness, up-to-date content or completeness of the presented information.

The information included herein does not relate to any specific case of an individual or a legal entity, therefore, it is advised that professional advice on individual cases is always sought.
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