Having navigated through the economic challenges of the past few years, Minister YAB Dato’ Seri Anwar Ibrahim shared his roadmap for the government’s priorities in 2025 in the Malaysia Budget 2025 on October 18, 2024.
This budget outlines the nation’s expected revenue and planned expenditures for the upcoming fiscal year. With an unprecedented RM421 billion allocated for 2025, the Malaysian government is well-positioned to craft sustainable strategies to further fuel the economy and is on track to narrow the deficit to 3.8% of GDP from 4.3% in 2024.
Empowering the People Framework
Budget 2025 builds on the focus of the Madani Economy Framework, or Empowering the People Framework, highlighting steps towards enhancing economic growth, promoting investment, and strengthening local industries to become more innovative, competitive, and capable of expanding into the global market while empowering individuals.
Economic Recovery through Innovation and Infrastructure
To stimulate sustainable growth through high-value industries, digitalization, and clean energy, the government has introduced several initiatives to encourage collaboration and investment in cutting-edge technologies:
- New Investment Incentive Framework (NIIF): RM1 billion allocated to attract foreign investment in high-value activities, to be implemented in the third quarter of 2025.
- National Funds of Funds (NFOF): RM1 billion invested over four years into venture capitals and start-ups to drive innovation in sectors such as AI, semiconductors, and green technology.
- Government Grants for MSMEs: Available to adopt digital technologies, promoting innovation and operational efficiency.
- Tax Incentives: For adopting e-invoicing, automation, and smart logistics technologies.
- Export Incentives: Extended for businesses exporting integrated circuits.
- Special Economic Zones: Increased incentives in the Johor-Singapore Special Economic Zone and Forest City Special Economic Zone, including zero percent tax rates for specific establishments.
Reinvigorating the Economy
A significant allocation of funds in Budget 2025 aligns with Malaysia’s commitment to economic reforms and fiscal responsibility, aiming to balance immediate fiscal needs with long-term financial sustainability.
The government introduced measures to expand the nation’s fiscal base, aiming to reduce the fiscal deficit to 3% by 2026, with projected growth of 5.5% to RM339.7 billion in 2025.
- Expansion of Sales and Service Taxes (SST): To cover B2B transactions and non-essential goods starting May 2025, generating RM1.5 billion in additional revenue annually.
- Dividend Tax: A 2% tax on individual shareholders with dividend income exceeding RM100,000, starting in 2025.
- Carbon Tax: On steel and energy sectors starting in 2026, with proceeds invested in green research and technology programs.
Prospering the Rakyat
The budget emphasizes empowering marginalized communities, improving healthcare, and expanding social welfare programs.
Significant investments in education, healthcare, and infrastructure aim to improve the overall well-being and quality of life for Malaysians.
- Tax Reliefs: Increased for medical expenses, sports, education, and elderly care.
- Support for Disabled Persons: Tax relief for disabled individuals and their caregivers.
- Minimum Wage Increase: From RM1,500 to RM1,700 by February 2025.
Business Taxation and Incentives
The budget introduces several business taxation changes and incentives aimed at driving growth, promoting investments, and supporting local industries.
- Digital Transformation and Innovation: Incentives for companies investing in AI, IoT, automation, and e-invoicing.
- Green Technology: Benefits for companies involved in Carbon Capture, Utilization, and Storage (CCUS) activities.
- Support for SMEs: Access to RM1.4 billion in microfinancing and additional financing.
- Flexible Work Arrangements: Employers implementing flexible work arrangements and fair hiring practices for women returning to the workforce will be eligible for tax deductions.
Conclusion
Malaysia's Budget 2025 presents a comprehensive strategy aimed at stabilizing the economy while demonstrating a strong commitment to empowering individuals and businesses.
By diversifying its sources of income, this forward-thinking plan seeks to bridge the gaps between the current economic landscape and the government’s aspirational goals.
Through targeted initiatives, Budget 2025 aims to foster resilience and growth, ensuring a brighter future for all Malaysians.
Should you have any inquiries regarding how the Malaysia Budget 2025 may impact your business operations or your personal financial situation, please contact us via info@fidinamgw.com or the form below.
