Malaysia Budget 2025

Malaysia Budget 2025 Tax snapshots

Budget 2025 is Malaysia’s largest ever budget at RM421 billion, made up of RM335 billion for operating expenditure and RM86 billion for development. This is the third Budget formulated based on the Madani economic framework. The Budget is focused on revitalizing the conomy, catalyzing transformative change and improving the overall well-being of the people.

• Dividend income of individuals exceeding RM100,000 per annum will be subject to tax at the rate of 2%, effective from the year of assessment (YA) 2025. Exemptions will be available, for instance on foreign-sourced dividend income and dividends paid by companies with certain tax incentives. This tax will not apply to distributions from the Employees Provident Fund (EPF), Amanah Saham National Bumiputera (ASNB), Lembaga Tabung Angkatan Tentera (LTAT) or unit trusts.
• Resident individuals will be exempt from tax on foreign-sourced income received in Malaysia up to the year 2036, provided such income has been subjected to income tax in the country from which it was received.
• The Sales Tax and Service Tax (SST) regime will be implemented more progressively, in a manner that does not burden the rakyat. The progressive SST regime will be implemented effective 1 May 2025. The Government will conduct engagement sessions with relevant stakeholders and industries before finalizing the scope of expansion and the relevant tax rates.
• A New Investment Incentive Framework (NIIF) that focuses on high-value activities and economic spillover to the country will be introduced. The NIIF is expected to be implemented in the third quarter of 2025.
• Carbon tax will be introduced on the iron and steel, and energy industries by 2026, to encourage the adoption of low-carbon technologies. The proceeds will be used to fund green research and technology programs.
• To mitigate the impact of Global Minimum Tax (GMT), the Government is committed to streamlining existing incentives, introducing non-tax incentives and studying the feasibility of a “Strategic Investment Tax Credit”.
• A self-assessment system for stamp duty will be implemented in phases starting from 1 January 2026.