UPDATE: Malaysia Revised Budget 2023 – Key Highlights for Businesses
The Malaysia Budget 2023, themed ‘Strengthening Recovery, Facilitating Reforms Towards Sustainable Socio-Economic Resilience of Keluarga Malaysia’, was announced by the Finance Minister, Tengku Zafrul Aziz last Friday. The government has unveiled the Budget 2023, with a focus on reviving the economy and to benefit businesses. Among the measures announced are targeted assistance for small and medium enterprises (SMEs), businesses, and their citizens. The total allocation for the 2023 Budget is RM372.3 billion compared to RM332 billion in 2022. Based on strong economic indicators, the government revised its 2022 growth forecast of between 6.5% to 7%, and 4% to 5% in 2023. On top of that, with all the incentives given in the past year, the unemployment rate has successfully reduced from 4.8% in July 2021 to 3.7% in July 2022.
Read the Budget 2023 speech here.
With the borders reopening and the restrictions being eased, the Malaysian economy is expected to bounce back. Therefore, this increase in allocation is only expected to grow the economy further. This is good news for businesses in Malaysia, which have been struggling in recent years due to slower economic growth. The government’s assistance will help businesses to grow and expand, creating more jobs and driving economic activity.
The Malaysia Budget 2023 is focused on three main agendas:
- Responsive – to implement an expansionary fiscal policy
- Responsible – to implement fiscal reform measures to ensure financial sustainability
- Reformist – to undertake reforms for the short and long term.
How does the Budget 2023 help businesses?
- A reduction in the tax rate on chargeable income for the first RM100,000 from 17% to 15% which is expected to provide savings of up to RM2,000.00 per Micro SME taxpayer.
- An allocation of RM10 billion to provide loans to SMEs through the National Bank of Malaysia to encourage automation and digitalisation as well as to support the food security agenda and recover the tourism sector.
- An extension of the 100% stamp duty exemption on restructuring or rescheduling loans or financing agreements until 2024.
- Financial guarantee of up to RM9 billion through Syarikat Jaminan Pembiayaan Perniagaan (SJPP) especially for strategic sectors such as agro-food, sustainable technology, tourism, and oil and gas.
- An allocation of RM30 million to the ECF fund to support start-up companies in the sustainability and social enterprise agenda.
- SemarakNiaga 2023 will be enhanced with a total value of RM45 billion compared to the RM40 billion announced in 2022 to boost business activities. This value includes direct loans, alternative financing and financing guarantees.
How does the Budget 2023 help the tourism sector?
The Malaysian government expects more than 15 million tourists for the year 2023 with a forecasted receipt of RM47.6 billion. Following this, the government has allocated a total of RM200 million to strengthen the tourism sector in Malaysia with efforts to promote and market some specific niche segments such as ecotourism, golf, scuba sports, and international exhibitions and conventions.
- An allocation of RM90 million as matching grants for initiatives organising tourism programs, including international sporting events.
- The government also seeks to work with Malaysia Airport Holdings Berhad and international airlines, to work on new direct flight routes to further promote the Malaysian airports.
- A RM10 million allocation to the ecotourism industry.
- Funding for tourism operators:
- RM500 million allocation for BNM Tourism Financing (PTF)
- Tour operators that guide at least 200 foreign tourists or 400 local tourists a year, will be given a 100% tax exemption on statutory income.
- Selected hotels and tourism projects under the Income Tax Act 1967 will be provided reinvestment allowance.
- Excise duty exemption of 50% will be given to tour operators on the purchase of new CKD tourism vehicles such as hire and drive cars and excursion buses
- To promote Malaysia as a health tourism destination, the existing tax incentives (export of private healthcare services) will be extended until 2025. An allocation of RM20 million will also be provided to the Malaysia Healthcare Travel Council to strengthen this goal.
How does the Budget 2023 help promote investments?
The Malaysian economy relies heavily on investments, both foreign and local. Companies such as Intel, Infineon, and Osram have long been in Malaysia which has in turn attracted investment commitments of up to RM40 billion. Following this, the government has pledged to strategically create an investment fund of over RM1 billion to attract these kinds of high-value investments which in turn will generate high income employment opportunities.
- An allocation of RM10 million to the Collaborative Research in Engineering, Science and Technology Centre (CREST) to develop applications for the automotive industry in the form of radio frequency and bluetooth technology.
- Extension of tax incentives and a 15% flat tax rate for C-Suite personnel until 2024 – In understanding that there are geopolitical uncertainties and global chain supply disruptions, the Malaysian Government seeks to provide a relocation incentive to attract affected E&E sector investors to relocate to Malaysia.
- Tax incentives for pharmaceutical companies extended until 2025.
Related read: Biopharmaceutical Industry Investment in Malaysia »
- An allocation of RM100 million under the Domestic Investment Strategic Fund (DISF) to promote the development of successful local technology-based companies.
- An allocation of RM364 million for Research & Development activities across different ministries, led by the Ministry of Higher Education (MOHE) and the Ministry of Science, Technology, and Innovation (MOSTI), which includes efforts to finance equity injections to companies in the E&E industry via a Venture Capital Fund.
The Malaysian government is seen to be taking their efforts to boost the economy of the country very seriously through this budget. This Budget 2023 seems to be a very bold effort in terms of areas covered – sustainability, rural development, as well as aims to promote foreign direct investments. With all these undertakings to grow the economy, now is the best time to start a business in Malaysia if you haven’t already.
Niresh Kaur is a content development manager who writes for WeCorporate. She mainly writes legal articles, as well as analytical content that serves entrepreneurs with insights on the business scene in the APAC region.
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