Attracting High-Value Investments: Malaysia’s Revamped Incentives Regime
A Closer Look at the 2025 Budget Proposal
Malaysia must revamp its incentives regime to attract high-value investments that propel the country to become a high-income nation.
Unique Tax Idea to Target Top Income-Earners
KPMG Malaysia’s head of tax, Soh Lian Seng, has hailed the 2025 budget proposal of a 2% tax on share dividends as a "unique idea" to hit top income-earners without burdening 85% of taxpayers. The move targets the top 15% of taxpayers without further burdening the other 85%, he said.
Calling for Clarity on Exemptions and Incentives
Sim Kwang Gek of Deloitte Malaysia has called for more clarification on the exemption for dividends from firms enjoying pioneer status and reinvestment allowance incentive. Another tax consultant emphasized that the 2025 budget offers businesses a much-needed respite by not implementing any new major taxes.
Forward-Thinking Budget with a Focus on Progressive Tax Measures
Steve Chia of PricewaterhouseCoopers Malaysia described the budget as forward-thinking, riding on the back of positive economic sentiments with its focus on progressive tax measures. The budget provides a much-needed respite for businesses and individuals, which were expected to be relieved by the lack of new major taxes.
Micro and Macro Implications of the Global Minimum Tax
Chia also stressed the importance of the global minimum tax, which is expected to level the playing field as far as tax incentives are concerned, ensuring that multinational companies pay the right amount of taxes, at 15%. This move is expected to have a positive impact on the country’s economy, by ensuring that multinational companies contribute their fair share of taxes.
Rethinking the Incentives Regime for High-Growth, High-Value Investments
Chia emphasized that Malaysia must revamp its incentive regime to ensure it attracts high-growth, high-value investments that propel the country to become a high-income nation. The proposed carbon tax on the steel, iron, and energy industries addresses environmental concerns, collectively creating a more robust and equitable tax system and supporting long-term economic and environmental goals.
Conclusion
The 2025 budget proposal has sparked a mix of reactions from tax experts, with some hailing it as a unique approach to target top income-earners and others calling for more clarity on certain measures. As the country moves forward, it is crucial to reevaluate its incentives regime to attract high-growth, high-value investments that can propel Malaysia towards becoming a high-income nation.
Frequently Asked Questions
Q: What is the 2% tax on share dividends?
A: The 2% tax is a proposed tax on dividend income of over RM100,000 earned by individual shareholders, targeting the top 15% of taxpayers.
Q: What is the global minimum tax?
A: The global minimum tax is a new international tax standard at 15% to ensure that multinational companies pay the right amount of taxes.
Q: What is the proposed carbon tax on the steel, iron, and energy industries?
A: The proposed carbon tax is designed to address environmental concerns and create a more robust and equitable tax system, supporting long-term economic and environmental goals.