Malaysia Budget 2025: What Employers Need to Know

1. Tax Incentives for E-Invoicing

To encourage the adoption of digital solutions, businesses can now benefit from:

• Accelerated capital allowance: For purchasing ICT equipment, software, and consulting services related to e-invoicing.
• Claim period: Capital allowances can be claimed within two years.

Takeaway: If your company hasn’t yet implemented e-invoicing, now is a great time to invest in the necessary technology and reap these tax benefits.

2. Increase in Minimum Wages

• Effective February 1, 2025, the minimum wage will rise from RM1,500 to RM1,700.
• Employers with fewer than five workers are granted a six-month deferment until August 1, 2025.

Takeaway: Ensure your payroll system is updated to comply with the new wage standards. Smaller businesses should use the deferment period to plan for the increase.

3. Tax Incentives for Flexible Work Arrangements (FWA)

To promote work-life balance and flexibility:

• Employers can claim a 50% further tax deduction on expenses related to:
  • Capacity building.
  • Software acquisition for implementing FWA.
• Applications are open from January 1, 2025, to December 31, 2027, capped at RM500,000 per claim.

Takeaway: If your company is considering flexible work options, this is an excellent time to act and save on related expenses.

4. Hiring Incentives for Women Returning to Work

To encourage diversity and support women re-entering the workforce:

• Employers can claim a 50% additional tax deduction on employment expenses for a 12-month period.
• Applications must be submitted between January 1, 2025, and December 31, 2027.

Takeaway: This incentive helps reduce costs while strengthening your team with experienced professionals returning to work.

5. Childcare and Elderly Care Tax Deductions

Effective from the year of assessment (YA) 2025:

• Employers can claim further tax deductions for childcare allowances.
• The allowance coverage now extends to elderly care for parents or grandparents.

Takeaway: This measure supports employees with caregiving responsibilities, boosting morale and loyalty.

6. Incentives for Hiring Disabled Individuals (OKU) and Ex-Convicts

To encourage inclusive hiring:

• Employers will receive an incentive of RM600 per month for three months, managed by SOCSO, for hiring:
  • Disabled individuals (OKU).
  • Ex-convicts.

Takeaway: This initiative not only promotes social responsibility but also offsets hiring costs.

7. Double Deduction for Structured Training Programs (MySIP)

To foster talent development:

• Employers implementing MySIP programs through TalentCorp can claim a double deduction on related expenses.
• The program is extended to students undergoing structured training by industry regulatory bodies until YA 2030.

Takeaway: Structured training enhances employee skills while reducing your taxable income.

8. Tax Incentive for Caregiving Leave

To support employees who are caregivers:

• Employers providing up to 12 months of additional paid leave for caregiving purposes can claim a 50% tax deduction on related expenses.
• Applications are open from January 1, 2025, to December 31, 2027.

Takeaway: This initiative encourages businesses to prioritize employee well-being while enjoying tax relief.

9. Enhancing TVET Education and Training via MADINI Program

To boost workforce skills through HRD Corp initiatives:

• Employers can use the HRDC levy to pay allowances of up to RM1,000 annually for graduates participating in skills training programs.

Takeaway: Utilize this program to upskill your team and attract young talent.

10. EPF Mandatory Coverage for Non-Malaysian Workers

To expand social protection:

• The Employee Provident Fund (EPF) will include non-Malaysian workers in mandatory contributions.
• Further details on contribution rates and implementation here.

Takeaway: Prepare for this policy change to ensure compliance and support your international workforce.

What Should Employers Do Next?

• Stay Updated: Monitor guidelines from relevant authorities for detailed implementation procedures.
• Review Budgets: Adjust financial planning to accommodate new wage requirements and incentives.
• Leverage Tax Benefits: Take full advantage of the deductions and incentives to optimize costs.