Malaysia's Budget 2024 Boost for Startups

by Khaw Veon Szu

Khaw is a trusted startup, business, and intellectual property lawyer with over 20 years of track record helping his clients succeed.
He understands that the modern business world needs practical, common sense and value-for-money solutions. That is why he initiated an innovative legal service brand —- Veon Szu® Law.
Riding on the digital revolution, he built his firm’s own App — Veon Szu® Law App, to serve his valued clients better
Make no mistake, Malaysia is positioning itself at the forefront of ASEAN’s thriving startup ecosystem with a focus on becoming a hub for high-performing businesses in the region. As part of the Malaysia Startup Ecosystem Roadmap (SUPER) 2021-2030, the country has an ambitious goal to generate 5,000 startups, including five with unicorn status, by 2025.

However, startups require funding, access to digitalization grants, and opportunities for capacity building. These are fundamental in empowering emerging ventures to thrive and expand. Fostering a sustainable ecosystem that accelerates digital adoption and cultivates the next generation of tech innovation companies is paramount. To remain competitive on a global scale, investments in technology and innovation should be prioritized.

The various government initiatives laid out as part of the Madani Framework, SUPER 2021-2030, and Budget 2024 are a testament to the government’s commitment to bolstering the development of startups through investor-friendly policies and financial incentives – including grants, tax exemptions, and low-interest loans.

In this article, I will explore some of the initiatives under the budget for 2024 that are relevant for startups in Malaysia, especially those in high-growth and high-value (HGHV) fields such as the digital economy, space technology, and electronics and electrical. Here are some of the key highlights:

Tax exemption for startups
The government will provide a tax exemption of up to RM20 million or 10 years, whichever is earlier, for startups that are incorporated between January 1, 2024, and December 31, 2026. This is an extension of the existing tax incentive for startups that was introduced in Budget 2023.

The tax exemption is subject to the following conditions:
  • The startup must be at least 51% owned by Malaysians.
  • The startup must have paid-up capital of not more than RM2.5 million.
  • The startup must have annual sales of not more than RM25 million.
  • The startup must be engaged in HGHV activities as determined by the Malaysian Investment Development Authority (MIDA).

MyCIF allocation for venture capital
The government will allocate RM500 million to the Malaysia Co-Investment Fund (MyCIF) under the Securities Commission Malaysia (SC) to co-invest with private investors in equity crowdfunding (ECF) and peer-to-peer financing (P2P) platforms.

The MyCIF will co-invest up to 50% of the total investment amount or a maximum of RM500,000 per campaign, whichever is lower. The co-investment ratio will be reduced to 30% for campaigns that have raised more than RM3 million.

The MyCIF aims to support early-stage startups and small and medium enterprises (SMEs) that have limited access to financing from traditional sources. It also aims to encourage more private investors to participate in ECF and P2P platforms.

Development of MYStartup Platform
The government will allocate RM50 million to develop a one-stop online platform called MYStartup to facilitate the registration, compliance, and reporting of startups in Malaysia.

The MYStartup platform will be developed by MIDA in collaboration with relevant agencies such as the Companies Commission of Malaysia (SSM), the Inland Revenue Board (IRB), the Employees Provident Fund (EPF), and the Social Security Organization (SOCSO).

The platform will provide various services such as:
  • Online registration of startups with SSM.
  • Online application and approval of tax incentives from MIDA.
  • Online submission and payment of taxes to IRB.
  • Online registration and contribution to EPF and SOCSO.
  • Online access to information and resources on the startup ecosystem.

The MYStartup platform aims to simplify and streamline the processes for startups to start and operate their businesses in Malaysia. It also aims to reduce the cost and time involved in complying with regulatory requirements.

National Scam Response Centre
The government will establish a National Scam Response Centre (NSRC) under the SC to combat online scams that target investors, especially those who use ECF and P2P platforms.

The NSRC will provide a centralized platform for investors to report online scams, verify the legitimacy of ECF and P2P campaigns, and seek assistance from relevant authorities.

The NSRC will also collaborate with other agencies such as the Royal Malaysia Police (PDRM), the Malaysian Communications and Multimedia Commission (MCMC), Bank Negara Malaysia (BNM), and CyberSecurity Malaysia (CSM) to investigate and take action against online scammers.

The NSRC aims to protect investors from falling victim to online scams, enhance investor confidence in ECF and P2P platforms, and promote a safe and secure online investment environment.

In conclusion, the Malaysian government has demonstrated a strong commitment and vision to support and nurture startups in the country. With these initiatives and policies in place, Malaysia has great potential to become a regional hub and global player in the digital economy. However, this can only be achieved if startups know how to leverage the opportunities and advantages that Malaysia offers, such as its strategic location, diverse market, skilled workforce, competitive costs, and supportive ecosystem.