Taxation Updates for Malaysian Businesses in 2025: What You Need to Know

As Malaysia steps into 2025, new tax policies, digital infrastructure upgrades, and regulatory shifts are reshaping the business environment. The Lembaga Hasil Dalam Negeri Malaysia (LHDN) and the Ministry of Finance have introduced several key taxation updates aimed at enhancing revenue collection, increasing compliance, and encouraging digital and green growth initiatives.

Whether you’re a small enterprise, multinational, or foreign investor operating in Malaysia, understanding these tax changes is essential to ensure legal compliance and strategic financial planning.

1. Expansion of E-Invoicing Mandate in 2025

One of the most significant developments for Malaysian businesses in 2025 is the rollout of the e-invoicing system managed by the Inland Revenue Board (LHDN). Initially introduced in 2023, e-invoicing will be mandatory for businesses with an annual turnover above RM25 million by July 2025, and all businesses regardless of size by January 2027.

Key Features:

• Real-time validation by LHDN before invoices are issued.

• Required integration with existing ERP or accounting systems.

• Applies to B2B, B2C, and B2G transactions.

This initiative is part of Malaysia’s MyInvois initiative aimed at combating tax evasion, improving data transparency, and modernizing the tax ecosystem.

🔗 More about Malaysia’s E-Invoicing System (LHDN)

2. Corporate Tax Adjustments: Green Incentives and Compliance Enforcement

A. Corporate Tax Rate:

The general corporate income tax (CIT) remains at 24% for resident companies, and 17% on the first RM150,000 for SMEs, provided annual revenue does not exceed RM50 million and no more than 20% of income is derived from passive sources.

B. Green Technology Tax Incentives:

To support the Green Technology Master Plan 2025, the government extended and enhanced tax incentives for green investments, including:

• Green Investment Tax Allowance (GITA): Up to 100% of qualifying capital expenditure.

• Green Income Tax Exemption (GITE): For companies involved in solar, energy-efficient equipment, biomass, and recycling sectors.

🔗 Malaysia Green Technology Incentives – MIDA

C. Tax Compliance Enforcement:

The LHDN has ramped up compliance checks and audits, particularly focusing on transfer pricing, profit shifting, and non-disclosure of digital income.

3. Service Tax Changes and Digital Economy Coverage

To reflect the rapid growth of digital services, the service tax has seen several changes in 2025:

• Service Tax Rate Increased: From 6% to 8% for high-value services such as consultancy, digital advertising, brokerage, and logistics services.

• Streaming and SaaS Tax Enforcement: Non-resident foreign digital service providers must register for digital tax in Malaysia under the Service Tax on Digital Services (SToDS) framework.

Affected platforms include:

• Cloud software providers (SaaS)

• Streaming platforms (Netflix, Spotify)

• Online advertising platforms (Google Ads, Meta)

These adjustments align with global trends under the OECD’s digital tax frameworks.

🔗 Malaysia’s Digital Tax Guide (PwC)

4. Capital Gains Tax on Unlisted Shares

A Capital Gains Tax (CGT) on the disposal of unlisted shares by companies has been introduced in 2024, and fully implemented in 2025. The tax rate is 10% on net gains, applicable to:

• Malaysian-incorporated companies disposing of shares in other unlisted Malaysian companies.

• Foreign companies and investors subject to tax treaties.

Exemptions are granted for IPO preparations, internal restructuring, and venture capital investments that meet qualifying conditions.

This measure seeks to broaden Malaysia’s tax base and reduce overreliance on indirect taxes.

5. Tax Transparency and ESG Disclosure Requirements

To align with global ESG and tax transparency frameworks, public-listed and large private entities in Malaysia are now expected to disclose:

• Country-by-Country Reports (CbCR) for multinationals earning over EUR 750 million.

• Sustainability tax disclosures, including carbon credits and green incentives claimed.

• Beneficial ownership reporting, under updates from the Companies Commission of Malaysia (SSM).

This promotes transparent governance and tax accountability, particularly relevant for foreign investors seeking to ensure due diligence and ESG alignment.

🔗 Malaysia ESG Reporting Guide – Bursa Malaysia

6. Personal Income Tax Reliefs and SME Benefits

While much of the focus has been on corporate taxation, personal and SME taxation updates are worth noting:

• Personal income tax reliefs have been expanded to include:

  • Digital devices (up to RM2,500)

  • Mental health services

  • EV charging equipment

• Micro-SME tax assistance programs: Extended until 2026 under:

  • Digital onboarding grants

  • Sales tax exemptions for local manufacturers

These initiatives are designed to support inclusive growth and reduce the financial burden on lower-income businesses and individuals.

7. Tax Amnesty and Voluntary Disclosure Program (VDP)

To boost revenue collection and promote voluntary compliance, the government relaunched the VDP 2.0 in early 2025, allowing businesses to:

• Voluntarily declare previously undeclared income.

• Pay lower penalties (as low as 15%) and avoid criminal prosecution.

This is particularly relevant for companies operating with cross-border income, gig economy earnings, or digital assets.

🔗 Voluntary Disclosure Program 2025 – LHDN

Conclusion: How Malaysia-Agent.com Can Help

As Malaysia undergoes significant tax modernization and digital transformation, local and foreign businesses must stay agile and well-informed. Whether you’re managing invoicing compliance, navigating green tax incentives, or expanding into cross-border digital trade, understanding tax updates is critical for long-term success.

Malaysia-Agent.com provides end-to-end assistance for:

• Local business registration and tax filing

• E-invoicing system integration

• Export/import tax planning

• Corporate structuring and incentives

Reach out to our expert network of agents to ensure your business remains tax-compliant and future-ready in Malaysia’s dynamic 2025 landscape.