Business Tax Rebates for Startups in Malaysia (2025 Guide)
Starting a business can be both exciting and challenging, especially in a competitive market like Malaysia. Recognising the importance of nurturing entrepreneurship, the government has introduced a variety of tax rebates and incentives for startups and SMEs. These measures are designed to reduce the financial burden during the early years and encourage growth, innovation, and compliance.
In this article, we explore the latest business tax rebates available for startups in Malaysia (2025) and how they can benefit your enterprise.
What Are Business Tax Rebates in Malaysia?
A tax rebate is a direct reduction in the amount of tax payable by a company. Unlike tax deductions (which reduce taxable income), rebates directly lower the tax bill, making them especially valuable for startups managing tight budgets.
Latest Startup Tax Rebates and Incentives in Malaysia (2025)
1. SME Tax Rebate (Up to RM20,000)
One of the most significant tax incentives in Malaysia for new businesses is the Start-Up SME Tax Rebate. Introduced to support newly incorporated small and medium-sized enterprises (SMEs), this rebate provides:
Newly incorporated SMEs may enjoy rebates up to RM20,000 per year for the first 3 years of assessment.
Applies to companies registered under SSM that meet SME definitions.
Eligibility and Benefits
Available to SMEs incorporated on or after 1 January 2022.
Provides a rebate of up to RM20,000 per year for the first three consecutive years of assessment.
Applies to SMEs with a paid-up capital of RM2.5 million or less that are not part of a larger group exceeding this threshold.
Practical Impact
For example, if your startup records a chargeable income of RM20,000, you may save up to RM20,000 in total tax rebates over three years. These savings can be reinvested into marketing, technology adoption, or expanding your operations.
Learn more about our tax services and how we can help you maximise your rebates.
2. SME Automation & Digitalisation Incentives
Automation and digital adoption remain a key focus of Malaysia’s economic strategy. To encourage SMEs to innovate, the government continues to provide special deductions and grants.
Qualifying Expenditures
Purchase or lease of automation machinery and equipment.
Investment in software, hardware, and digital solutions that streamline business processes.
Expenses under programmes such as MDEC’s Smart Automation Grant.
Benefits
These incentives allow SMEs to claim deductions of up to 30% on qualifying expenditures, enabling businesses to improve productivity, reduce errors, and enhance competitiveness in both local and international markets.
3. Green Technology & EV Tax Incentives
Sustainability is a growing priority in Malaysia, and the government provides tax relief to businesses that invest in green initiatives.
EV Charging Facilities
SMEs that install electric vehicle (EV) charging stations can claim tax deductions up to RM2,500 on installation, rental, or purchase costs.
Valid until the Year of Assessment (YA) 2027.
Green Investment Tax Allowance (GITA)
Startups involved in renewable energy, waste management, or energy efficiency projects may qualify for investment tax allowances.
Supports businesses positioning themselves as environmentally responsible and future-ready.
4. Investment Tax Allowance (ITA)
The Investment Tax Allowance (ITA) is a major incentive for businesses planning to scale.
Eligibility Criteria
SMEs can claim up to 60% of qualifying capital expenditures for expansion.
Generally, allowances can be offset against 70% of statutory income, with up to 100% for specific approved projects.
Relocation projects with capital investment above RM300 million may enjoy a 100% ITA for five years.
Strategic Growth
This incentive encourages reinvestment in new facilities, technology, and capabilities, helping startups grow sustainably and remain competitive.
5. Reduced Corporate Income Tax Rate
SMEs with chargeable income of up to RM150,000 continue to enjoy a lower tax rate (15%–17%), compared to the standard 24%.
6. Digital & E-Commerce Incentives
Tax deductions and grants available for businesses adopting digitalisation, e-commerce, and automation.
Examples include MDEC’s Smart Automation Grant and e-commerce adoption programmes.
Who Qualifies for Startup Tax Rebates in Malaysia?
Not all businesses are eligible. Typically, tax rebates apply to:
- ✅ Startups and SMEs registered with SSM Malaysia.
- ✅ Companies with a paid-up capital not exceeding RM2.5 million.
- ✅ Businesses that do not form part of a larger group with capital above RM2.5 million.
- ✅ Companies within their first few years of assessment (conditions vary depending on scheme).
(Always refer to LHDN and MOF updates for the latest qualification rules.)
How to Apply for Startup Tax Rebates in Malaysia
Register your business with SSM – Ensure proper legal structure (Enterprise or Sdn. Bhd.).
Keep accurate financial records – Rebates require proof of compliance with tax filings.
Submit your tax returns to LHDN – Claim eligible rebates during your annual filing.
Apply for incentives via MIDA, MOF, or MDEC – If your business qualifies for industry-specific grants or allowances.
Seek professional advice – A tax consultant ensures you claim the maximum rebates without compliance risks.
Common Mistakes Startups Make in Claiming Rebates
❌ Not registering with SSM properly.
❌ Missing deadlines for tax submissions.
❌ Assuming rebates apply automatically (they must be claimed).
❌ Ignoring industry-specific approvals (MOH, NPRA, MIDA, etc.).
❌ Not keeping supporting documents for LHDN audits.
FAQs on Startup Tax Rebates in Malaysia
Eligible startups can claim up to RM20,000 annually for the first three years.
No. Conditions apply, such as paid-up capital, years of operation, and sector.
Yes. A rebate reduces the payable tax directly, while an exemption means no tax is payable on specific income.
Check the latest Malaysia Budget, LHDN, and MIDA guidelines, or consult a tax advisor.
Tax rebates mainly apply to companies (Sdn. Bhd.). Sole proprietors are subject to personal income tax reliefs instead.
The Role of Audit Firms
Audit firms play an important role in helping startups with tax rebates and incentives, offering expert guidance on tax planning and compliance.
In Malaysia, they provide specialized tax planning services, identifying applicable incentives, preparing documentation, and ensuring regulatory compliance. This results in substantial savings, allowing startups to allocate resources efficiently.
Moreover, maintaining compliance with tax regulations is a must for startups to continue benefiting from tax rebates.
Audit firms assist in preparing accurate tax returns, conducting internal audits, and advising on tax-related matters, helping startups avoid penalties and legal issues. This support also enhances credibility with investors.
In a Nutshell
Malaysia offers a wide range of business tax incentives to support startups and SMEs, including:
Start-Up SME Tax Rebate (up to RM20,000 per year).
Automation and digitalisation deductions for qualifying expenditures.
Green tax incentives such as EV charging and GITA.
Investment Tax Allowance (ITA) for business expansion.
When properly managed, these incentives reduce costs, improve competitiveness, and free up resources for growth.
At ShineWing TY TEOH, we provide advisory services to help startups maximise their tax benefits, stay compliant, and build a strong financial foundation.
Ready to explore your eligibility for Malaysia’s tax rebates? Contact us today.
