How much tax an individual can save from Budget 2023? - YYC Business School | YYC商学院

How much tax an individual can save from Budget 2023?

30 Aug
How much tax an individual can save from Budget 2023?

With the recent announcement of the revised Budget 2023 by the Government of Malaysia (the Government), the adjustment of personal income tax brackets has gained lots of attention from the public. After all, everyone has to pay taxes, so this announcement would undoubtedly bring about a widespread effect. In view of the bearish economic outlook, we should try to be as thrifty as possible. By paying the correct amount of taxes, the extra cash surplus can remain in your wallets or bank accounts. Let’s take a look at the personal tax benefits as follows:

Individual Income Tax Rate Adjustment

From the perspective of an ordinary Malaysian citizen, the notable change in this year is the 2% reduction in the personal income tax rate for the annual chargeable income bracket between RM35,000 and RM100,000. In addition, the income tax rate for annual chargeable income between RM100,000 and RM1 million will be increased by 0.5% to 2%. For the ease of understanding, please refer to the table below for the changes made:

Let’s illustrate the above with an example:

Dave’s monthly income is RM5,000, which is equivalent to his annual income of RM60,000. Without claiming any tax relief, he will be required to pay a personal income tax of RM3,100 (RM1,800 for the first RM50,000 and RM1,300 (RM10,000 x 13%) for the remaining RM10,000 (10,000 x 13%)) in 2022. After the tax rate reduction in 2023, his personal income tax will be reduced to RM2,600 (RM1,500 for the first 50,000 and RM1,100 for the remaining 10,000 (100,000x 11%)). This results in RM500 savings in taxes.

In view of the change, individuals with chargeable income above RM100,000 will have to pay a higher tax amount in this year compared with last year (Year 2022). Low and middle-income taxpayers rejoice at the availability of higher tax relief amount and reduced tax rates, others are distressed that the tax relief are not enough to offset the pressure of rising living costs, or they will need to pay higher taxes due to their high earning incomes. Therefore, this adjustment can be said to be one man’s meat is another man’s poison.

Personal Income Tax Relief
There are some changes to the 2023 tax reliefs in comparison to existing tax reliefs which outlined as follows:

✔️Child care fees for registered nurseries or kindergarten
The maximum tax relief is maintained at RM3,000. Its validity period is extended for another year to Year of Assessment (YA) 2024.
✔️Medical expenses for individuals, spouses, or children suffering from serious illnesses
The tax relief is increased from RM8,000 to RM10,000 and the scope of this tax relief is expanded to include early intervention expenditure for Autism, Down Syndrome, and Specific Learning Disabilities. It is subject to a maximum tax relief amount of RM4,000.
Such tax relief is effective from YA 2023.
In addition to changes made to existing tax reliefs, the Government has announced that donations to the following institutions are tax deductible:
i. Non-profit organizations related to sports development programs;
ii. Charitable hospitals operated by a private limited company (limited to 10% of gross income); and
iii. Tabung Komuniti Filem and Pembangunan Filem Kenegaraan under the National Film Development Corporation Malaysia (FINAS)
Introduction of Luxury Good Tax
The Government’s proposal to impose a luxury goods tax caused an uproar.
The details of this newly introduced tax system are yet to be released, as such the scope and extent of its implication for the public remain unknown. However, it is certain that once this tax is implemented, the price of luxury goods in Malaysia will be higher than in neighbouring countries. Experts point out that this is likely to affect the tourism industry in our country, as tourists who want to buy luxury goods will be inclined to spend their money in other countries instead.
Stamp Duty Exemptions
🔴Stamp duty exemption for transfers of property between family members

Budget 2023 has made a very humane adjustment to the transfer of property between family members. Before this, transfers between parents and children had only been entitled to a remission of 50%, while grandparents who transferred properties to their grandchildren were subject to stamp duty at ad valorem duty rate. Please refer to the table below for the specific adjustments:
🔴Stamp duty exemption for the purchase of first residential property

75% stamp duty exemption is available for the purchase of first individual residential properties valued at RM500,000 to RM1 million. The exemption is valid until 31 December 2023. Currently, stamp duty is fully exempt for the purchase of first individual residential property valued at less than RM500,000.

🔴Stamp duty on educational loans and scholarship agreements
From 1 June 2023, stamp duty on education loans and scholarship agreements for all levels including certificates (education/skills/professionals) for studying at any education and training institution is fixed at RM10.
🔴 Stamp duty exemption for personal loans or financing agreements
The stamp duty exemption involved in restructuring and rescheduling of loan or financing agreements between borrowers and financial institutions will be extended to loan/financing agreements signed before 31 December 2024.

🔴 Tax Exemption for the Purchase of Electric Vehicles
The tax exemption period for electric vehicles imported from overseas has been extended to 31 December 2025 and includes import duties as well as excise duties. 
The exemption for locally assembled electric vehicles, which originally expired on 31 December 2025, has also been extended to 31 December 2027, and it includes import tax on assembled electric vehicle parts. However, the Government has not announced any extension regarding the road tax exemption for electric vehicles.