Malaysia proposes shipping tax relief through 2036

Existing relief

The Income Tax (Exemption for Malaysian Ship) Order 2024, P.U.(A) 184/2024, gives qualifying Malaysian residents full exemption for statutory income from carrying passengers or cargo on Malaysian ships or chartering ships they own on a voyage or time basis. It applies for years of assessment 2024–2026 and disapplies sections 54A(1) and (2) of the Income Tax Act 1967.^[3][6]

Proposed conditions

Appendix 24 proposes full income tax exemption for shipping companies for years of assessment 2027–2036. Strategic management and effective control would have to be in Malaysia. Each Malaysian ship would require annual operating expenditure of at least RM250,000 in Malaysia and employment of at least four Malaysian citizens with an average monthly salary of RM15,000.^[2]

The proposed employment wording differs from the operative existing order. That order requires at least four specified onshore employees, a majority Malaysian, covering executive, finance, operations and health, protection, safety and environmental roles. Ship personnel must separately meet safe-manning requirements. Annual verification of each ship’s expenditure and employment conditions must come from the Ministry of Transport.^[3][5]

Financing instruments

Stamp duty on loan or financing agreements for purchasing or constructing Malaysian ships would be capped at RM2,000 for financing up to RM100 million and RM5,000 above that amount. The proposed cap would apply to agreements executed from 1 January 2027.^[1][2]

The budget would maintain the exemption for instruments executed by a Labuan entity in connection with Labuan business activity under the Stamp Duty (Exemption) (No. 3) Order 2012, P.U.(A) 268/2012. This is existing relief, distinct from the proposed ship-financing caps.^[2][4]

For shipping groups, the proposed extension combines a longer relief period with local management, expenditure and employment conditions. The budget announcement does not itself extend the existing order: the 2027–2036 exemption and financing caps require implementation.^[1][2][3]