Malaysia's Budget 2024: A Glimpse into Tax Exemption Updates

Malaysia's Budget 2024: A Glimpse into Tax Exemption Updates

Budget 2024 unveils a series of tax exemption proposals designed to invigorate diverse sectors and promote economic growth, aligning with Malaysia's MADANI initiative. These proposals play a pivotal role in fostering a vibrant and inclusive economy.

Key Summaries

Let's explore the key highlights of these proposals.

1. Increase tax exemption amount for child care allowance

In Budget 2024, a notable change has been introduced to provide greater financial relief for working parents who receive child care allowances from their employers or directly to child care centers. This adjustment in tax exemption aims to support working parents by allowing them to retain a larger portion of their child care allowances, ultimately reducing their tax burden.

Key Details:

• Employment income under perquisites

• Increased from RM2,400 to RM3,000 per year

• Effective from the year of assessment (YA) 2024

2. Extended the application period for tax exemption of Social Enterprises

Social Enterprises, which are organisations in raising fund that aim to make a positive social or environmental impact, have an opportunity to benefit from an extended application period for tax exemption. This extension provides a significant opportunity to plan, develop and execute their initiatives under this extension for 2 years.

Key Details:

• Exemption on all income

• Extended the period of applications received by the Ministry of Finance from 1 January 2024 to 31 December 2025

3. Extension of the tax exemption period for Management Fees Income

This extension, lasting for 4 years, strengthens the tax exemption for management services provided by companies engaged in Sustainable and Responsible Investments (SRI) fund.

Key Details:

• Applied to companies that offer services to investors, business trusts investors or Real Estate Investment Trusts (REITs) investors in Malaysia, and are approved by the Securities Commission (SC)

• Extended from YA 2024 to YA 2027

4. Review of income exemption for Shariah-compliant fund management services

In line with the goal of bolstering the growth of Shariah-compliant companies, Budget 2024 introduces a comprehensive review of the tax exemption period and exemption rate. This initiative aims to provide a more supportive environment for Shariah-compliant businesses, encouraging their development and growth over an extended period.

Key Details:

• Approved by SC

• 60% tax exemption on statutory income

• Extended from YA 2024 to YA 2027 (4 years)

5. Introduction 100% income tax exemption for Islamic Financial Activities under Labuan International Business and Financial Centre (IBFC)

As part of its commitment to further strengthen the Islamic finance sector in Malaysia, Budget 2024 introduces a significant initiative - a full tax exemption to foster the development of the Labuan IBFC as a hub for Islamic financial activities.

Key Details:

• Eligible to Labuan entities that undertakes Islamic financial-related trading activities such as Islamic digital banking, Islamic digital bourses, ummah-related companies and Islamic digital token issuers

• Full income tax exemption for 5 years

• Effective from YA 2024 to YA 2028

6. Review of tax incentive under employment income for Women Career Comeback Programme

In a bid to bolster the participation of women in the workforce, Budget 2024 introduces a crucial review of the tax incentives offered under the Women Career Comeback Programme. This review is expected to play a significant role in expanding the female workforce and contributing to the nation's economic growth.

Key Details:

• Enhanced eligibility criteria for

i. Women returning to work after a career break at least 2 years before the date of application received by the Talent Corporation Malaysia Berhad;

and

ii. Employment income received from YA 2025 to YA 2028.

• Effective for applications received by the Talent Corporation Malaysia Berhad from 1 January 2024 until 31 December 2027

7. Extension of tax exemption for Angel Investor

In a move aimed at encouraging and facilitating capital funding for tech start-up companies, Budget 2024 extends the tax exemption period for Angel Investors. This extension spans a duration of 3 years and is expected to attract a higher number of angel investors to participate in supporting innovative tech start-ups.

Key Details:

• Exemption at the aggregate income level

• Equivalent to the amount of investment in a tech start-up company

• Extension for investment made from 1 January 2024 until 31 December 2026

8. New proposal to exempt income from Islamic Securities Selling and Buying (ISSB)

Budget 2024 introduces a fresh proposal to exempt income arising from Islamic Securities Selling and Buying (ISSB). This initiative, effective for YA 2024, seeks to enhance the overall volume of securities trading and liquidity within the Sharia-compliant stock market. By encouraging more investors to participate in ISSB transactions, the government aims to ensure equal services for Securities Borrowing and Lending (SBL) transactions.

Conclusion

In summary, Budget 2024 introduces tax exemption proposals that span various sectors, including childcare, social enterprises, management fees, Shariah-compliant businesses, Islamic finance, women's workforce participation, angel investors, and securities trading, all aimed at stimulating economic growth and encouraging investment.

Budget 2024 Highlights - Past Updates

Individual : https://www.ktp.com.my/.../malaysias-budget-2024.../17oct23

Companies : https://www.ktp.com.my/blog/malaysias-budget-2024-a-glimpse-into-companies-updates-/18oct23

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