Other BriefingsMalaysia Budget 2025: Impact for Individuals
Malaysia’s government announced the country’s largest national budget on October 18 — an unprecedented 421 billion ringgit (US$96 billion) — and with it a slew of new tax incentives and economic clusters. The government aims to bolster business confidence and enhance economic competitiveness through this.
As such, elements of the budget will also impact individuals, including adjustments to personal income tax brackets, enhanced welfare programs, and incentives for skills development to foster a more resilient and adaptable workforce.
What will impact individuals?
Tax on dividends received by individual shareholders
Individual shareholders with annual dividend income exceeding 100,000 ringgit (US$22,800) will be subject to a two percent dividend tax on the chargeable income.
Certain dividend income is exempted from the tax, these include:
- Dividend received from abroad;
- Dividends distributed from profits of companies that have pioneer status;
- Dividends received by residents from Labuan entities; or
- Dividends are distributed, paid, or credited from the profits of shipping companies that is exempted from this tax.
Extension on tax exempt income from sources outside of Malaysia
The tax exemption on income from foreign sources received by individual residents in Malaysia, originally set to expire on December 31, 2026, is now proposed to be extended until December 31, 2036.
Minimum wage increase
The government is committed to increasing the minimum wage in February 2025 to 1,700 ringgit (US$388) from 1,500 ringgit (US$342), with a six-month deferred implementation for businesses with less than five employees.
Tax relief on house loan interest payments
The Malaysian government aims to offer income tax relief on the loan interest payment on the first home purchased individually or jointly.
This calculates to:
- Up to 7,000 ringgit (US$1,600) tax relief per year for a residential property valued up to 500,000 ringgit (US$114,336); or
- Up to 5,000 ringgit (US$1,443) tax relief per year for residential property valued above 500,000 ringgit (US$114,336) and up to 750,000 ringgit (US$171,500).
The residential home must not be used to generate income and the sale and purchase of the property must be executed between January 1, 2025, and December 31, 2027.
Extension of tax relief for contributions to private retirement schemes
The 3,000 ringgit (US$685) income tax relief for private retirement scheme contributions and deferred annuity premiums will be extended for five years, with the 8% withholding tax on withdrawals (except for permitted purposes) continuing from YA 2026 to YA 2030.
Expansion of childcare allowances
The additional deduction for employers on childcare allowances paid to employees will be expanded to include elderly care (parents/grandparents) from YA 2025.
Extension of tax relief for nursery and kindergarten fees
The 3,000 income ringgit (US$685) income tax relief for nursery and kindergarten fees will be extended for three years, from YA 2025 to YA 2027.
Tax relief for disabled persons
Effective YA 2025, the relief for a disabled individual taxpayer will increase from 6,000 ringgit (US$1,371) to 7,000 ringgit (US$1,600), for a disabled spouse from 5,000 ringgit (US$1,143) to 6,000 ringgit (US$1,371), and for an unmarried disabled child from 6,000 ringgit (US$1,371) to 8,000 ringgit (US$1,829).
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