The revised Budget 2023 was driven to advance the average Malaysian income and obtain greater work opportunities. However, with one of the main determinations being an inclusive and sustainable economic drive, Budget 2023 puts the people first with sustainability in mind.
With Malaysia’s contribution to greenhouse gas emissions standing at 0.69%, the budget proposal focusing on sustainability will certainly drive its effectiveness for businesses with schemes and tax incentives, as well as advance the electric vehicle (EV) sector.
As a leading clean energy solutionist in Malaysia, the sustainability initiatives of Budget 2023 will benefit corporate organizations looking to strengthen their ESG journey and deploy clean energy quickly, as well as further the nation’s EV sector.
Effects of Climate Change to be Addressed
Six flood mitigation projects will be re-tendered by June, potentially saving RM2 billion out of RM15 billion previously allocated for such projects.
We see the funds allocated towards tackling floods as necessary with Malaysia as its frequency and extremities have increased in recent decades, looking to only worsen with global warming. As Malaysia is prone to flooding, the need for more flood mitigation will need to be prioritized to prevent the overall losses of RM6.1 billion, equivalent to 0.4% of the country’s nominal Gross Domestic Product (GDP), from the flood that affected 11 Malaysian states in late December 2022 and early January 2023.
Green Initiatives to Fuel Corporate Sustainability
Budget 2023 proposes to extend the period to apply for the Green Investment Tax Allowance (GITA) and Green Investment Tax Exemption (GITE) to 31 December 2025 for eligible green activities. It also proposes to extend the tax allowance and exemptions from three years to five years, which would give businesses the legroom to scale up their sustainability initiatives and the beginning to empowering a smart energy ecosystem.
This will certainly continue to encourage businesses to speed up their carbon-neutral journeys as we have seen how our clients across 50+ industries can adopt sustainable practices that will lower energy costs and cut corporate tax.
Allocations to Spur Low-Carbon Economy
The Budget 2023 has also included the improvement of the Green Technology Financing Scheme (GTFS), with an increased allocation of RM3 billion until 2025 to support green tech start-ups, help implement low-carbon practices and speed up the development of green technology projects in the country.
In addition, various bodies such as Khazanah and BNM’s involvement in green efforts are applauded and could inspire others to follow suit. This includes the RM150 million from Khazanah to support environmentally friendly project development, as well as support the carbon market and reforestation in addition to Bank Pembangunan Malaysia to offer RM1 billion Sustainable Development Scheme.
Whilst the implementation of Government green procurement, we are eager to see the outcome of this measure at the state government and local authorities’ level and would like to contribute by supporting and working with the public and private sectors on this agenda.
EV Incentives Continue to Drive the Sector
As the EV sector shows the potential to become one of the nation’s economic drivers, with Malaysia being one of the leading electrical and electronics (E&E) manufacturing hubs in ASEAN, incentives need to be included to encourage higher EV adoption. Budget 2023 will play a role in increasing this adoption with the proposed import duty exemption on EV components for local assembly extended to Dec 31, 2027; excise duty and sales tax waiver on locally assembled completely knocked down (CKD) EVs extended to Dec 31, 2027.
Moreover, the sector will also benefit from the 100% statutory income tax exemption for manufacturers of EV chargers from 2023 to 2032, and a 100% allowance on investment tax for five years, as well as the tax breaks for companies leasing EVs, with the lease not exceeding RM300,000.
Conclusion: Right Step Towards Building a Smart Energy Ecosystem
While sustainability has been allocated and given priority in Budget 2023, with businesses given the legroom to scale up their sustainability initiatives, we believe this is only the beginning of empowering a smart energy ecosystem. As the journey for sustainability continues, we look forward to continuing doing our part as a clean energy solutionist to ensure businesses obtain affordable clean energy solutions, as well as clean energy solutions for the average Malaysian home which is crucial to increasing the country’s renewable energy mix by 31% by 2025.
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