The Malaysia Budget 2025 presented on 18 October 2024 as the Third MADANI Budget by Prime Minister YAB Dato’ Seri Anwar bin Ibrahim outlines a strategic roadmap for economic growth and reforms. Malaysia is advancing confidently towards its goal of becoming a high-income and high-tech country in 2025. The government is focused on boosting economic recovery and raising household incomes after 2024 emphasise to stabilise political and economic landscapes. To promote economic development, Malaysia introduces new business measures and regulatory changes aiming to attract foreign investments, establish financial zones and foster digital industry growth. Together, these are key success metrics to position Malaysia as a regional leader in innovation and economic transformation as well.
Malaysia’s government has introduced the New Investment Incentive Framework under the budget 2025. This is expected to be implemented in the third quarter of 2025. Foreign investors, who add value to the economic sector by benefitting local companies and providing quality job opportunities, can receive double tax deductions of up to RM2 million annually for three consecutive years. Multinational enterprises or suppliers who participate in joint venture investment with local enterprises would also be offered tax deductions based on the amount of investment.
Malaysia’s Forest City is a green development located on reclaimed land near the border with Singapore. It is accessible by a five-hour drive or a 90 minute flight to the capital city—Kuala Lumpur. Malaysia announced a 0% tax rate for family offices located in Forest City’s Special Financial Zone as an incentive to attract foreign capital and revitalise the area as a go-to destination for the high-net-worth from within the country and across the region. Skilled professionals who work in Forest City are offered a special individual income tax rate of 15%, which is lower than the statutory rate of 30%.
To help Malaysian companies foster the development of a highly skilled workforce in the digital age and spur local economic growth, the Malaysia Digital Economy Corporation (MDEC) has established new tax incentives with government support, targeting cutting-edge technologies such as blockchain, cloud, integrated circuit design with embedded software, artificial intelligence and more. Enterprises equipped in this sector are eligible to apply for a tax deduction and investment tax allowance (ITA), pursuant to which criteria they belong to. Companies under the New Investment category may be waived tax on intellectual property (IP) income and enjoy a reduced tax rate of 5% or 10% on non-IP income for ten years. Meanwhile, companies under the Expansion category may enjoy a reduced tax rate of 15% for five years. For a period of five years, New Investment companies would be able to enjoy ITA of 60% to 100% on qualifying capital expenditure set-off against 100% statutory income, whereas Expansion Companie investments could receive ITA of 30% to 60% of qualifying capital expenditure set-off against 100% statutory income.
Changes to Personal Data Protection Act
Apart from implementing tax incentives for investment, Malaysia has also passed the Personal Data Protection Act (PDPA) which will be enforced in 2025. The amendment introduces several changes aimed at strengthening the protection of personal data. Under the act, it has replaced the term ‘data users’ with ‘data controllers’, proposed recognition of biometric data as a type of sensitive personal data, increased penalties up to RM1 million and/or three years of imprisonment for breaches of the PDPA, and mandated the appointment of a data protection officer. Bound by law, organisations and businesses will have to be more conscientious in handling personal data and take practical steps to protect personal data from loss, misuse, unauthorised access, or disclosure.
Cross-border trade between Malaysia and PRC
The trade partnership between Malaysia and China has grown primarily with both continuing to strengthen their interactions in business, culture and economic development. According to a Framework Agreement signed by the Export-Import Bank of Malaysia Berhad (Eximbank Malaysia) and the Export-Import Bank of China (Eximbank China) on 15 November 2024, the Export-Import Bank of China will provide a Renminbi credit line to the Export-Import Bank of Malaysia for qualified Malaysian companies to conduct business in China. This credit line is intended to fund the purchase of Chinese machinery and electronic products and equipment, as well as high-tech products and services. It will also support collaboration in natural resource and energy development, along with joint construction projects between Malaysian and Chinese enterprises.
Additionally, the Malaysia External Trade Development Corporation (MATRADE) and China Construction Bank Malaysia Bhd (CCB Malaysia) renewed a memorandum of understanding on 5 September 2024 to enhance trade access to China, which aims to empower Malaysian exporters by providing them access to new markets and better financing options. Under this agreement, CCB Malaysia will connect Malaysian companies to its extensive network of business connections in China and offer financial solutions tailored to their needs in order to boost trade between the two countries.
References
“Budget 2024 Highlights.” Kementerian Kewangan Malaysia, 13 Oct. 2023, www.mof.gov.my/portal/en/news/press-citations/budget-2024-highlights
“Budget Speech of 2025.” Laman Khas Belanjawan 2024, 18 Oct. 2024, belanjawan.mof.gov.my/en/
“Economic Outlook.” Laman Khas Belanjawan 2024, 18 Oct. 2024, belanjawan.mof.gov.my/en/economy
“Malaysia Digital – Tax Incentive.” Malaysia Digital Economy Corporation, mdec.my/malaysiadigital/tax-incentive
“Tax Measures.” Laman Khas Belanjawan 2025, belanjawan.mof.gov.my/pdf/belanjawan2025/ucapan/tax-measure.pdf
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