Kuala Lumpur, 18 October 2024 — YYC, a leading accounting and business advisory firm in Malaysia perspective on the Malaysia Madani Budget 2025 announced by Prime Minister, Datuk Seri Anwar Ibrahim.
1. 2% Tax On Dividend Income
Starting from the 2025 year of assessment, individual shareholders receiving over RM 100,000 in dividend income will face a 2% dividend tax. This will impact high-earning shareholders, reducing post-tax returns from investments in companies.
The government has taken a middle-ground in announcing this new tax ruling. With this middle ground approach those who have dividends yearly of RM 100,000 will still be required to pay more taxes.
This is believed to have a lesser impact if the inheritance tax was to be introduced, which brings a wider base and higher tax impact.
2. Increase In Minimum Wage
The increase in the minimum wage to RM 1,700 per month, effective from February 2025, comes as a surprise to many small and medium enterprises (SMEs). While small employers with fewer than five employees have a six-month extension until August 2025, the wage hike represents a significant jump that will strain the payroll budgets of many smaller enterprises.
SMEs and micro-businesses, which typically operate on tighter margins, will need to adjust their staffing and operational strategies to absorb the higher wage costs. Some may face difficult decisions regarding workforce reductions, investing in automation or increase pricing for products and services.
3. Incentives for First Home Buyers
Real estate businesses can benefit from increased demand due to the government's homeownership incentives, which offer tax reliefs on home loan interest and government-backed loan guarantees. Developers and real estate professionals may see more first-time buyers entering the market, spurred by these financial benefits. This will benefit first-time home buyers as they are entitled to a RM 7,000 tax relief on housing loan interest payment for property prices up to RM 500,000 and entitled to RM 5,000 tax relief for property prices more than RM 500,000 to RM 750,000. The other industries that will benefit from this announcement include those in construction, hardware, furniture and related industries.
4. Access to Financing and Incentives
The 2025 Budget continues to provide financial support for SMEs through programs such as the RM 40 billion in loans and guarantees for SME growth, with a focus on encouraging digital and automated solutions. SMEs will also benefit from RM 50 million in grants from the Digital Matching Grant to promote digitalization, helping them compete in a modern economy.
In addition, tax incentives for SMEs, particularly those involved in high-value sectors like technology and manufacturing, will help some businesses mitigate rising costs and take advantage of growth opportunities.
5. Opportunities in Johor-Singapore Special Economic Zones (SEZ)
The Johor-Singapore Special Economic Zone (JSSEZ) and the transformation of Forest City into a Duty-Free Island and Financial Hub may create opportunities for SMEs in areas such as real estate, tourism, and cross-border trade. Businesses located in or near these zones may benefit from increased economic activity and foreign investment, opening new markets and potential growth avenues. Though details have not been fully announced yet, we believe it will create a lot of opportunities for business owners.
