Navigating 2025 Taxes: Key Changes for Businesses

From e-invoicing and expanded SST to the 2% Dividend Tax and OECD’s Global Minimum Tax, Malaysia’s tax policies in 2025 bring both challenges and opportunities for businesses. Understanding these changes is essential for compliance and competitiveness.

In this episode of P&L, Dr. Veerinderjeet Singh, Senior Advisor on Tax Policy at KPMG Malaysia, and Thenesh Kannaa, Executive Director at Tratax, unpack the key tax changes for the year. We explore the phased rollout of e-invoicing, SST's widening scope, the impact of global tax reforms, and strategies for businesses to adapt.

Whether you're a business leader or owner, this conversation provides actionable insights to help you navigate Malaysia’s evolving tax landscape and stay updated in the face of policy shifts.

Here are some AI-generated highlights of key areas covered in the conversation:

- E-Invoicing Rollout: The phased rollout of e-invoicing highlights the need for early preparation, robust processes, and cross-departmental communication. While Phase 1 has provided valuable lessons, businesses in Phase 2 (RM25M-RM100M revenue) must proactively meet specific reporting requirements despite the six-month relaxation period. This ensures compliance and avoids penalties while easing the transition to full implementation.

- SST Expansion: Starting May 2025, the SST expansion introduces higher sales tax rates on premium goods and extends coverage to B2B services and fee-based financial services. Businesses must assess cost structures, review contracts, and ensure operational readiness to avoid cascading tax effects within supply chains. These changes require CFOs and finance teams to be on high alert for last-minute updates to the law and its implementation.

- 2% Dividend Tax: Targeting individual shareholders earning over RM100,000 annually, the 2% dividend tax primarily impacts SME owners, prompting a reassessment of dividend distribution strategies. While the tax introduces an additional layer of compliance, its exemptions limit its broader revenue potential, raising questions about its role in the evolving tax ecosystem and potential for future expansion.

- Capital Gains Tax (CGT): Recent refinements to CGT, such as pay-first-refund-later mechanisms for restructuring and IPOs exemptions, pose cash flow challenges for corporates. These changes emphasise the importance of early planning and detailed compliance strategies to optimise tax outcomes, particularly for companies undergoing internal restructuring or gearing up for IPOs.

- Global Minimum Tax: The OECD’s Pillar 2 framework introduces a global minimum tax impacting multinationals, which could shift Malaysia’s incentive landscape. While direct effects are limited to large businesses, SMEs face indirect impacts through changes in supply chain dynamics and investment behavior. Adapting Malaysia’s investment incentives to align with OECD standards will be crucial to maintain competitiveness.

- Proactive Tax Strategies: With these tax changes, businesses must elevate tax planning to a strategic, board-level priority. Leveraging frameworks like tax corporate governance and staying ahead of evolving policies, such as SST coverage and CGT exemptions, will be critical for maintaining resilience and competitiveness in 2025 and beyond.

Presenter: Roshan Kanesan

Producer: Roshan Kanesan

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