Budget 2024 Malaysia: Highlights, Summary, and Analysis

Budget 2024 Malaysia has been an important financial plan with widespread implications for businesses nationwide. In this article, we'll break down the essential aspects of Budget 2024, including its theme, significance, and the influence of e-invoicing, a development stemming from Budget 2023.

We'll also explore the announced measures and analyse their effects in detail. Let's delve in.

What is Budget 2024 Malaysia?

Budget 2024 Malaysia stands as the financial blueprint meticulously crafted by the government to outline its revenue and expenditure for the upcoming fiscal year. It serves as a roadmap, guiding the nation's economic policies, taxation strategies, and allocations for various sectors, including businesses, both big and small, impacting the common person in several ways.

What is the Theme of Budget 2024 Malaysia?

The theme woven into Budget 2024 revolves around 'Madani Economy: Empowering the People'. In simple words, it fosters economic resilience and sustainability. The Malaysian government aims to fortify its economic foundations, ensuring stability amid global uncertainties. Emphasis is placed on empowering businesses, nurturing innovation, and bolstering industries crucial for the nation's growth.

Why is Malaysia’s Budget 2024 Important?

Budget 2024 holds immense importance for businesses operating in Malaysia as it provides clarity on taxation policies, incentives, and support systems, enabling businesses to plan their financial strategies effectively. Moreover, it outlines the government's commitment to economic stability, which instils confidence in investors and entrepreneurs alike. 

Impact of E-invoicing Under Budget 2023

Under Budget 2023, the implementation of e-invoicing in Malaysia was a groundbreaking move that not only facilitated smoother transactions but also paved the way for a digital transformation in the business landscape. A few benefits are listed below:

• Streamlined Processes and Reduced Errors: E-invoicing streamlined the entire invoicing process for businesses by automating the creation, delivery, and processing of invoices. This helped businesses experience a significant reduction in manual errors, ensuring accurate and efficient transactions.
• Enhanced Cash Flow and Faster Payments: It facilitated faster payment cycles for businesses as digital invoices could be delivered instantly, and recipients could make payments electronically, accelerating the cash flow for suppliers and buyers. This promptness in transactions enhanced the overall liquidity of businesses.
• Improved Supplier-Buyer Relationships: Prompt and error-free invoicing led to smoother transactions and reduced payment disputes, enhancing reliability and trust between trading partners, fostering long-term collaborations, and bringing transparency thanks to digital transactions.
• Encouraged Digital Adoption in Businesses: The Budget 2023's e-invoicing initiative acted as a catalyst for digital adoption among businesses. By embracing digital invoicing, companies were incentivised to explore other digital solutions and technologies, leading to a broader digital transformation.
• Paperwork Reduction and Environmental Benefits: One of the most tangible impacts of e-invoicing was the substantial reduction in paperwork. Businesses could transition from cumbersome physical invoices to digital formats, eliminating the need for printing, mailing, and storing paper documents.
• Preparation for Budget 2024 Initiatives: It also served as a foundational step for the initiatives outlined in Budget 2024. Businesses that had already adopted digital invoicing found it easier to integrate with the new incentives and reforms introduced in the subsequent budget, putting them at an advantage.

Key Measures Announced in Budget 2024

A few key measures announced in Budget 2024 are:

• Macroeconomy: The government anticipates a 4% to 5% increase in the gross domestic product in 2024. Revenue collection is projected to climb to 307.6 billion MYR in 2024, up from 303.2 billion MYR this year. The fiscal deficit is expected to decrease to 4.3% from the current year's 5% and the 2022 figure of 5.6%.
• Ministerial allocations: In the Budget 2024, the Education Ministry secures the largest allocation at 58.7 billion MYR, followed by the Health Ministry which is granted an allocation of 41.2 billion MYR for 2024. The Higher Education Ministry sees an allocation of 16.3 billion MYR for 2024, 19.7 billion MYR is allocated to the Defence Ministry, and 19 billion MYR to the Home Affairs Ministry. 10 million MYR is set aside for research and development (R&D) funds, with the Science, Technology, and Innovation Ministry (MOSTI) and Higher Education Ministry sharing this allocation.
• Revenue base: Starting March 1, 2024, the capital gains tax on net profit from the disposal of unlisted shares of local companies will be fixed at 10%, with exemptions for IPOs, internal restructuring, and venture capital companies. The new legislation will introduce a high-value goods tax (luxury goods tax) ranging from 5% to 10%, applicable to specific items like jewellery and watches, determined by the goods' threshold value. Foreign tourists, however, will be exempt from this tax.
• EPF, tax exemptions, etc.: The government will extend tax incentives until Dec 31, 2027, to encourage women to return to work. The income tax exemption limit on childcare allowances will be raised to 3,000 MYR from 2,400 MYR. The Second Chance Policy, Insolvency (Amendment) Act 2023, will be expanded to include individuals aged 40 and below with debts not exceeding 200,000 MYR. The government will raise the monthly wage ceiling for Socso contribution from 5,000 MYR to 6,000 MYR.
• Cash aid, welfare: The government plans to allocate 58.1 billion MYR for various social welfare initiatives, encompassing subsidies, incentives, and assistance. Half of this budget will be dedicated to controlling the prices of goods and services. The Rahmah Cash Aid (STR) allocation is set to increase to 10 billion MYR in 2024, up from 8 billion MYR in 2023, benefiting approximately nine million recipients.
• For businesses: The government plans to allocate up to 10% of the 95 billion MYR investment in the New Industrial Master Plan (NIMP) 2030 for the mission to bolster the nation's manufacturing sector, starting with an initial fund of 200 million MYR in 2024. In a bid to encourage investments in high-growth and high-value areas (HGHV), the government intends to provide a tiered reinvestment tax incentive, ranging from 70% to 100%. An allocation of 28 million MYR is set aside for the development of the MYStartup platform catering to start-up companies. Financial facilities totalling 2.4 billion MYR will be made available to micro, small, and medium enterprises (MSMEs) through Bank Negara Malaysia (BNM), Bank Simpanan Nasional (BSN), and the National Entrepreneurial Group Economic Fund (Tekun).
• Tourism sector: In 2026, Malaysia aims to attract 26.1 million foreign tourists and generate an estimated domestic spending of 97.6 billion MYR as part of Visit Malaysia Year. To achieve this, the government is allocating 350 million MYR to enhance tourism promotion and activities, aiming to restore Malaysia as a premier tourism destination. To encourage the influx of foreign tourists and investors, the government will relax the conditions for Malaysia My Second Home (MM2H) applications.
• Agriculture: To enhance agricommodity activities and promote socioeconomic development for smallholders, the government is allocating 2.4 billion MYR to the Federal Land Development Authority (FELDA), Federal Land Consolidation and Rehabilitation Authority (FELCRA), and Rubber Industry Smallholders Development Authority (RISDA).
• Housing: To support the redevelopment of strata schemes, the threshold for residents' agreement for en-bloc sales will be lowered from 100% to a level aligned with international practices, such as in Singapore, to foster urban renewal and the redevelopment of ageing city buildings. The Housing Credit Guarantee Scheme will be expanded by up to 10 billion MYR, benefiting 40,000 borrowers.
• Health: The Drug Dependants (Treatment and Rehabilitation) Act of 1983 is set to undergo amendments, allowing drug addicts to undergo treatment and rehabilitation outside of prison. The nationwide expansion of Skim Perubatan Madani is planned with an allocation of 100 million MYR, benefiting 700,000 people.
• Infrastructure/public projects: A new Global Services Hub tax incentive will be introduced, offering an income tax rate incentive of 5% or 10%, determined based on performance, valid for up to 10 years. The North-South Highway (PLUS) from Sedenak to Simpang Renggam will be widened to six lanes, costing 931 million MYR. A total of 1.1 billion MYR is allocated to address water supply issues, especially in Kelantan, Sabah, and Labuan. The implementation of 33 high-priority flood mitigation projects, costing 11.8 billion MYR, will begin next year.
• Green agenda - The government has decided to extend tax exemptions for fund management companies overseeing sustainable and responsible investment funds (SRI) and maintain tax deductions on SRI sukuk issuance costs until the assessment year 2027. A new proposal suggests an additional tax deduction of up to 300,000 MYR for companies investing in measurement reporting and verification (MRV) related to carbon projects.
• Online fraud - The collaboration between BNM and the financial sector aims to create a National Fraud Portal (NFP) by mid-2024. This portal is designed to automate fund tracking, enhancing the efficiency of detecting, freezing, and returning funds. The National Scam Response Centre (NSRC) is set to receive an increased allocation of 20 million MYR, up from 10 million MYR. This boost in funding is intended to enhance the center's capabilities in combating scams effectively.

Conclusion

Budget 2024 Malaysia significantly strives towards a digitally empowered and economically resilient nation. It not only charts the financial course for the nation but also paves the way for a transformative journey for businesses.