Malaysia

Forest City Special Financial Zone (SFZ)

The Forest City Special Financial Zone (‘Forest City SFZ‘) is a special financial zone located within the Iskandar Special Economic Zone in the southern region of Peninsular Malaysia. Its development is part and parcel of the enhancement of the business ecosystem between Malaysia and Singapore, under the Johor-Singapore Special Economic Zone.

The following are the tax incentives announced for the Forest City SFZ:

• Family offices: 0% corporate income tax (CIT) rate for family offices under the Single-Family Office Scheme coordinated by the Securities Commission. This scheme, operational by the first quarter of 2025, aims to attract wealthy families to set up a private business entity to exclusively manage the financial and personal needs of their family.

• Financial global business services: 5% CIT rate for operators of financial global business services, financial technology (fintech), and foreign payment systems.  

• Knowledge workers: 15% personal income tax (PIT) rate for individual knowledge workers (including Malaysians) working in the Forest City SFZ.
• Financial sector: Special tax deduction on relocation costs, enhanced industrial building allowance, and withholding tax (WHT) exemptions will be provided to banking, insurance, capital market intermediaries and other eligible entities in the financial sector.

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.

Global minimum tax (GMT)

Malaysia will be implementing the global minimum tax based on the Organisation for Economic Co-operation and Development (OECD) Pillar 2, as well as the qualified domestic minimum top-up tax (QDMTT), in the year 2025. The GMT Rules will come into effect from 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.

Sales and service tax 

It is proposed that from 1 May 2025: 

• The sales tax rate be increased for non-essential, basic necessities, such as imported premium goods (e.g. salmon and avocado). 

• The scope of service tax to be expanded to include new taxable services, such as commercial service transactions between businesses (B2B).

High value goods tax 

A high value goods tax is expected to be introduced at the rate of 5% to 10% on certain high-value items, such as jewellery and watches, based on the threshold of price. The implementation date was proposed to be on 1 May 2024. Its implementation has since been deferred as the government focuses on other fiscal reforms.

e-Invoicing

The government is in the process of implementing e-Invoicing. The implementation will be carried out in stages as follows:

• 1 August 2024: Mandatory implementation for taxpayers with an annual turnover or income in excess of MYR 100 million.
• 1 January 2025: Mandatory implementation for taxpayers with an annual turnover or income in excess of MYR 25 million to MYR 100 million.
• 1 July 2025: Mandatory implementation for all other categories of taxpayers.

Windfall profit levy 

With effect from 1 January 2025, the crude palm oil threshold value for windfall profit levy will be increased to MYR 3,150 per metric ton for Peninsular Malaysia and MYR 3,650 per metric ton for Sabah and Sarawak.