Malaysia

Johor-Singapore Special Economic Zone and Forest City Special Financial Zone Tax Incentive

On 7 January 2025, Malaysia and Singapore formally entered into an agreement to establish the Johor-Singapore Special Economic Zone, or JS-SEZ. JS-SEZ is a special economic zone aimed at capitalising on the existing synergies between Johor and Singapore to unlock greater economic potential whilst the Forest City Special Financial Zone (“Forest City SFZ”) is located within the JS-SEZ and comprises four man-made islands. The tax incentive packages available are (see the Tax incentive section for more information):

For JS-SEZ:

• Global Services Hub
• Smart Logistics Complex
• Manufacturing of downstream specialty chemicals incentive
• Manufacturing business incentive
• Integrated tourism project incentive

For Forest City SFZ:

• Global Services Hub
• Smart Logistics Complex
• Relocation of service incentive

New Investment Incentive Framework 

A New Investment Incentive Framework is expected to be implemented in the third quarter of 2025, which focuses on high-value activities as opposed to a product-based approach. Among the initiatives that can be expected under the new framework are:

• Supply chain resilience: To strengthen the local supply chains and ecosystem of key sectors, the proposals include: 

• Double deduction for multinational enterprises (MNEs) on corporate expenditure of up to 2 million Malaysian ringgit (MYR) per annum for three consecutive years. 

• Tax deduction on value of investment made by MNEs or its suppliers in joint venture with other local suppliers. 

• Outcome-based tax incentives to be given to local suppliers. 
• Establishment of economic clusters based on the industry speciality of the states in Malaysia (e.g. renewable energy in Perlis and Sabah and specialised chemicals in Pahang and Terengganu).
• Special tax incentive for investment made in 21 economic sectors in the states of Perlis, Kedah, Kelantan, Terengganu, Sabah, and Sarawak. This is to encourage economic spillover effects to reduce the economic disparity between regions.

New Industrial Master Plan 2030: Reinvestment incentives

The reinvestment incentive under the New Industrial Master Plan 2030 (NIMP 2030) was introduced with the objective to encourage existing companies that have exhausted their reinvestment allowance incentive period to continue to invest in high-growth and high-value activities under the NIMP 2030. The following reinvestment incentives are provided to existing manufacturing companies undertaking expansion or diversification projects, which adopts Industrial Revolution 4.0 (IR 4.0) technologies: 

• Tier 1 - Investment tax allowance (ITA) of 100% of qualifying capital expenditure (QCE) incurred within five years to be utilised against 100% of statutory income, or 
• Tier 2 - ITA of 60% of QCE incurred within five years to be utilised against 70% of statutory income.

Applications can be submitted from 1 January 2024 to 31 December 2028.

Dividend tax

A 2% dividend tax is imposed on individuals receiving dividend income exceeding MYR100,000. This is effective from year of assessment 2025. (see the Personal tax section for more information)

Global minimum tax (GMT)

The GMT Rules based on the OECD Pillar 2, as well as the qualified domestic minimum top-up tax (QDMTT) came into effect for financial years commencing on or after 1 January 2025. To mitigate the impact of GMT, the Government is committed to streamlining the existing incentives, creating new non-tax incentives and exploring the feasibility of investment tax credits.

Expansion of scope of Sales Tax and Service Tax

Effective from 1 July 2025, the scope of Sales Tax and Service Tax will expand. Certain goods, including imported premium fishes, specific imported fruits, and specific materials to be used in the construction industry previously exempted will be subject to sales tax at rates of 5% or 10%. Additionally, service tax will be expanded to include new taxable services such education services, and private healthcare services for non-Malaysians, with rates of 6% or 8%.

e-Invoicing

The Government has revised the timeline for implementation of e-Invoicing which will be carried out for the remaining phases and new phases as follows:

• Phase 3 – 1 July 2025 for taxpayers with annual turnover / revenue exceeding RM5 million (previously RM500,000) and up to RM25 million
•  Phase 4 – 1 January 2026 for taxpayers with annual turnover / revenue exceeding RM1 million and up to RM5 million
•  Phase 5 – 1 July 2026 for taxpayers with annual turnover / revenue up to RM1 million (previously RM500,000)
•  Exempted – Taxpayers with annual turnover / revenue up to RM500,000 (previously RM150,000)