Budget 2025: New tax incentives to attract foreign investment

Budget 2025: New tax incentives to attract foreign investment

18 Oct 2024

A new Investment Incentive Framework has been introduced in Budget 2025 to focus on attracting high-value investments.

Prime Minister Datuk Seri Anwar Ibrahim said this framework is expected to be implemented in the third quarter of 2025.

Among its proposals are to provide tax incentives for the exports of integrated circuit (IC) design activities.

Anwar, who is also Finance Minister, also said the government will provide special tax deductions to private higher-education institutions providing courses in Artificial Intelligence (AI), robotics, internet of things (IoT), data science, FinTech and sustainable technology.

At the same time, to strengthen the local supply chain, Budget 2025 will introduce new tax breaks for multinational enterprises (MNE) that spend over RM2mil in manufacturing expenses.

“They will be given two tax breaks for three years consecutively,” added Anwar.

Anwar also said MNEs or suppliers that invest in local suppliers will be given tax breaks on their respective investments.

“Local suppliers involved in this scheme will also be given suitable tax incentive packages and matching investment funds of over RM100mil will be provided through the public equity fund platform to develop local suppliers in the E&E, specialty chemicals and the medical devices sector,” said Anwar

“The new Investment Incentive Framework will be supported through an inclusive investment facility to stimulate balanced economic growth across the country.

“This includes introducing strategic investment funds worth RM1bil as efforts to improve the local talent and to encourage high-value activities within the country,” added Anwar.

At the same time, Anwar also said the government is ready to implement a global minimum tax (GMT) on MNEs.

“GMT’s will give us additional revenue, but there are still negative risks in the investment climate

“To reduce the effects of GMT, the government is committed to improving existing incentives, and to create new non-tax incentives, as well as studying the feasibility of strategic investment credit taxes,” added Anwar.

Budget 2025, worth RM421bil, covers RM335bil on operational expenses, RM86bil on development expenses and RM2bil for miscellaneous spending, RM9bil for private-public joint venture projects, and direct domestic investments by GLICs worth RM25bil.

Source: The Star