Malaysia’s Budget 2025 underscores a strong commitment to sustainability, paving the way for a greener, more resilient economy. As the world shifts towards sustainable practices, the budget introduces measures to reduce carbon emissions, accelerate renewable energy adoption, and support sustainable practices across various sectors. Key industries such as energy, manufacturing, and palm oil are encouraged to align with global sustainability goals through tax incentives, financing, and policy reforms.
These initiatives extend beyond large corporations to include SMEs and individuals, offering incentives such as rebates for energy-efficient appliances and tax relief for eco-friendly purchases. By promoting cleaner technologies and supporting reduced environmental impacts, Budget 2025 positions Malaysia as a leader in the region’s energy transition. This article summarises the key ESG and sustainability-related tax measures in Budget 2025 that will impact you, your business or your organisation.
Table of Contents
1. Introduction of Carbon Tax
Budget 2025 is introducing a carbon tax, set to be implemented by 2026, which will target the iron, steel, and energy sectors. This move aligns with global efforts to reduce carbon emissions and transition to greener energy sources.
Applicable to: Iron, steel, and energy sectors
2. Tax Incentives for Carbon Capture, Utilisation, and Storage (CCUS)
Budget 2025 provides tax incentives for businesses involved in Carbon Capture, Utilisation, and Storage (CCUS). These companies will benefit from investment tax allowances or income tax exemptions, promoting innovation in reducing carbon emissions.
Applicable to: CCUS solution providers and businesses
3. Extension of Net Energy Metering (NEM) Programme
The Net Energy Metering (NEM) programme, which encourages the installation of solar photovoltaic (PV) systems on rooftops, has been extended until 30 June 2025.
Applicable to: Renewable energy providers, commercial property owners
4. E-Rebate for Energy-Efficient Electrical Equipment
To promote energy efficiency, an e-rebate of up to RM70 million has been introduced to encourage the purchase of energy-efficient electrical equipment. Both consumers and businesses can benefit from this rebate, reducing energy consumption and lowering electricity bills.
Applicable to: Individuals, all businesses
5. Extension of Rebates for Electric Motorcycles
The government rebate for the purchase of locally assembled (CKD) electric motorcycles has been extended, with a rebate of up to RM2,400.
Applicable to: Individuals
6. Tax Relief for Food Waste Composting Machines
To encourage sustainable waste management, homeowners can claim up to RM2,500 in tax relief for food waste composting machines from YA 2025 to YA 2027, once every three years. This expands the current individual tax relief for EV charging equipment, with the relief limit remaining at RM2,500.
Applicable to: Individuals
7. Financing for Renewable Energy and Transition Projects
A substantial financing fund of RM6.4 billion has been allocated by Bank Pembangunan Malaysia Berhad to support renewable energy and energy transition projects. This funding will facilitate infrastructure development necessary for sustainable energy production, helping businesses involved in green energy projects grow while contributing to Malaysia’s clean energy goals.
Applicable to: Renewable energy developers, energy transition project stakeholders
8. Loan Fund for Sustainability Practices in SMEs
A loan fund of RM3.8 billion has been allocated to help SMEs transition to sustainable practices by adopting digitalisation and automation, with ongoing assistance provided to the agro-food sector and promotion of sustainable practices.
Applicable to: SMEs
9. Local Exporters Get RM750 Million Boost to Expand Overseas
To encourage local exporters to expand into international markets, RM750 million has been allocated by EXIM Bank under the Exporter Sustainability Incentive.
Applicable to: Export businesses
10. Crude Palm Oil (CPO) Windfall Profit Levy of 3%
The threshold for the CPO market price will be raised to support the palm oil sector. This will involve increasing the windfall profit levy threshold, revising export duties, allocating RM100 million for smallholder replanting, and developing sustainable aviation fuel (SAF) with PETRONAS. Additionally, tax incentives for automation and RM65 million will be allocated to address European misconceptions and promote sustainability in the palm oil industry.
Applicable to: Palm oil sector
BBC comprises a team of passionate practitioners implementing sustainability solutions. Our consultants possess deep expertise in ESG and sustainability, enabling us to guide you in mitigating ESG risks and seizing the opportunities presented in Budget 2025. Additionally, we can help you prepare for tax incentives and rebates. With our comprehensive monitoring and decarbonisation solutions, you can maximise your profits while contributing to a more sustainable future for Malaysia. Download our latest free eBook, The 101 ESG Guide and the Future of ESG, to learn what ESG is, how ESG is impacting businesses, and how to integrate ESG into your business strategy.
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Events
October 30, 2024 @ 1:15PM to 2:00PM
[Live AMA] Malaysia’s Budget 2025: Key Highlights on ESG and Sustainability
Join us for our upcoming Live Ask Me Anything (AMA) session on October 30, 2024, from 1:15 to 2:00 PM MYT. Our team of ESG and Sustainability consultant and trainer, Jia Xin Ng will provide an in-depth analysis of the significant ESG initiatives and tax incentives introduced in this year’s budget and their implications for businesses and the environment.