As Malaysia anticipates the announcement of the National Budget 2025, businesses and individuals are looking for key tax reforms that could support economic growth and alleviate financial pressures. We spoke to YYC’s leading tax experts to gather their insights on what they hope to see in the upcoming budget. From business incentives to personal tax relief, here’s the wishlist from YYC’s Tax Directors, reflecting the evolving needs of Malaysians in today’s economic landscape.
1. Jeremy Tan, YYC Tax Advisory Director – Renovation, Digitalization, and Trading Incentives
Jeremy Tan, YYC Tax Advisory Director, highlights the need for targeted tax incentives to support digitalization and Malaysia’s goal of becoming a global trading hub. His suggestions include:
Special Deduction for Renovation & Refurbishment
Jeremy proposes reintroducing a tax deduction for landlords who renovate or refurbish old office buildings in key economic zones like Bukit Bintang and Jalan Sultan Ismail. This incentive would encourage modernization through digitalization and automation, aligning with the NIMP 2030 initiative.
(Reference: NIMP 2030)
Global Trading Centre Incentive (GTC) 2.0
He also suggests reintroducing and expanding the Global Trading Centre Incentive, particularly for local trading companies. By relaxing conditions and broadening the scope to include local trading activities, Jeremy believes Malaysia can strengthen its position as a global trading hub, offering local businesses the same tax benefits as manufacturers.
(Reference: MIDA – Global Trading Centre Guidelines)
2. Zen Chow, YYC Executive Director cum Tax Practice Leader – Personal and Business Tax Reliefs
Zen Chow, YYC Executive Director cum Tax Practice Leader, focuses on easing the tax burden for both individuals and businesses. His wishlist includes:
Increase in Individual Tax Reliefs
Zen calls for an increase in personal income tax relief from RM9,000, which has remained stagnant for over 14 years, and suggests raising the RM3,000 relief for medical and education insurance, which has been unchanged for 24 years. These adjustments are crucial given the rising costs of living and insurance.
Permanent Tax Relief for Digital Devices
He also advocates for the permanent implementation of the RM2,500 tax relief for purchasing computers, tablets, and smartphones, a relief that was temporarily available from YA 2020 to YA 2022. This would help foster digital transformation in Malaysia.
Business Tax Reforms
Zen suggests increasing capital allowance limits for motor vehicles and allowing businesses to claim capital allowances on renovation expenses. Additionally, he proposes offering further deductions to companies that hire women employees on maternity leave, encouraging greater workforce participation.
3. Jinhson Kwong, YYC Tax Director – Tax-Free Bonuses and GST
Tax-Free Bonuses for the B40 Group
Jinhson proposes making annual bonuses of up to RM10,000 tax-free, especially for lower-income earners in the B40 group. This would provide immediate financial relief and boost disposable income.
GST 2.0
Jinhson also hints at revisiting the Goods and Services Tax (GST), suggesting a reintroduction that could provide a fairer tax system, while potentially boosting government revenue.
Latest Update: On October 13, 2024, Prime Minister Datuk Seri Anwar Ibrahim clarified that the reintroduction of GST would only occur once Malaysians’ income levels reach a more comfortable threshold. He emphasized that a minimum income threshold of RM3,000 to RM4,000 is necessary for GST implementation, in line with what other nations that successfully implemented GST have done. This indicates that GST 2.0 may not be introduced until these income benchmarks are met, ensuring Malaysians are better positioned to manage the consumption tax’s impact.
(Reference: The Star, October 13, 2024)
4. Tommy Chan, YYC Tax Director – Green Initiatives and Electric Vehicle (EV) Deductions
Tommy Chan, YYC Tax Director, places a strong emphasis on sustainability and environmental, social, and governance (ESG) initiatives. His recommendations are:
Special Deductions for Electric Vehicles (EVs)
Tommy advocates for reinstating the special deduction for leasing electric vehicles and allowing capital allowance claims on EVs without the current RM50,000 cap. This could incentivize businesses to adopt more sustainable transportation options.
ESG Grant for SMEs
He also suggests the introduction of an ESG grant to help small and medium enterprises (SMEs) improve their ESG practices. This would align with the broader push towards sustainability and ensure SMEs can meet the requirements of larger, listed companies that are mandated to comply with ESG standards.
Green Tax Incentives for Individuals
In addition to corporate tax incentives, Tommy proposes extending green tax incentives to individual taxpayers. He also calls for new tax relief measures to ease the burden on the M40 group, who often face financial pressure but receive limited tax breaks.
5. Wai Hoor Chew, Head of Tax in YYC – R&D and ESG Tax Deductions
Wai Hoor Chew, Head of Tax at YYC, advocates for stronger tax incentives in innovation and sustainability. His wishlist includes:
R&D and ESG Tax Deductions
Wai proposes increasing tax deductions or even offering double tax deductions for SMEs engaged in research and development (R&D) and ESG initiatives. This would help startups and small businesses innovate and stay competitive in a rapidly evolving market.
Simplified Access to Incentives
Wai also calls for simplifying the application process for SMEs to access tax incentives. By streamlining the criteria and reducing paperwork, more SMEs, especially those in emerging industries, could benefit from these tax breaks, leading to broader economic participation and growth.
6. Fong Ying Chai, YYC Tax Expert – Personal Tax Relief and MSME Support
Fong Ying Chai, YYC Tax Expert, focuses on reforms that support individual taxpayers and small businesses. Her recommendations include:
Tax-Free Bonuses for Private Sector Employees
Fong Ying advocates for extending the tax-free bonus benefit, currently provided to civil servants since 2023, to private sector employees. This would boost disposable income, stimulate spending, and ensure a more equitable tax system.
MSME Recovery Assistance
She emphasizes the need to expand grants, soft loans, and tax incentives across more industries to support Micro, Small and Medium Enterprises (MSMEs). These initiatives are critical for businesses to thrive and contribute to Malaysia’s post-pandemic economic recovery.
Recalibration of Income Classification and Tax Brackets
She recommends updating the classifications for B40, M40, and T20 to better reflect Malaysia’s current economic realities. Additionally, recalibrating personal income tax brackets would help reduce the tax burden on lower and middle-income earners, ensuring a fairer tax system.
What These Proposals Mean for Malaysians
If the government considers the proposals from YYC’s tax directors, Malaysia’s 2025 budget could bring significant changes, benefiting both businesses and individuals. These targeted tax deductions, reliefs, and incentives would encourage economic growth, support digitalization, and foster sustainability, ensuring a prosperous future for all Malaysians.
Stay tuned to see how the Malaysia National Budget 2025 unfolds, and the potential tax changes that could affect your financial planning and business strategies.
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