Tax Incentive Program for Electric Vehicles in Malaysia

Abed Saleh, Technology Director, Sime Darby Motors

Following the new tax advantages that went into effect at the beginning of the year, purchasing electric cars (EVs) has become more feasible in Malaysia. EV manufacturers are now eligible for several tax breaks, including ones on sales, excise, and imports. As part of the government's efforts to reduce the cost of adopting zero-emission vehicles, consumers can claim tax assistance for owning an EV. The government's efforts to reduce carbon emissions while maintaining the competitiveness of the nation's automotive industry are reflected in Malaysia's push to promote EVs. A robust automotive sector is in place in Malaysia to take advantage of development potential as the industry changes, but the country's EV ecosystem is still in its infancy.

Three groups are eligible for Malaysia's EV tax incentives: imports, local assembly, and private owners. They do not apply to hybrid vehicles; only fully electric vehicles are covered.

The incentives include:

• Imports: Until the end of 2023, imported (CBU) EVs are exempt from all import and excise taxes.

• Local assembly: CKDs that are locally built are exempt from all import and excise taxes as well as from paying sales and service taxes (SST) through the end of 2025.

• Owners: From now until the end of 2023, EV owners are exempt from paying road taxes and are eligible for a personal tax exemption of up to 2,500 ringgit (USD 571) for expenses related to EV charging hardware and services, such as the cost of buying, installing, renting, and subscribing to EV charging facilities.

"As an additional incentive to support the automotive industry, all imported passenger automobiles in Malaysia presently benefit from a 50 per cent decrease in SST"

Local assemblies qualify for the most favourable tax breaks because they are exempt from any SST. However, as an additional incentive to support the automotive industry, all imported passenger automobiles in Malaysia presently benefit from a 50 per cent decrease in SST. This SST rate cut is likely to last until June 30, 2022. Since there is no local assembly and no domestic production of EVs, Malaysia currently does not qualify for the local assembly incentives. 

The stronger incentives for local assembly are intended to change this and encourage the growth of a domestic EV assembly industry, according to policymakers.

The manufacturing sector of Malaysia has a sizable portion devoted to the automobile industry. According to the Malaysian Investment Development Authority, Malaysia is the third-largest automotive market in ASEAN and its automotive industry contributes four per cent to GDP. Malaysia currently has 28 facilities for the production and assembly of various auto parts and cars. In terms of both production and usage, Malaysia's EV ecosystem is far less developed than that of the larger automotive sector. However, the government is making EV promotion a higher priority, particularly in light of its commitment to becoming carbon neutral by 2050 at the earliest in the 12th Malaysia Plan for 2021–2025. Malaysia's EV infrastructure is also underdeveloped, as indicated by the scarcity of EV charging stations there. There are currently just 600 EV charging stations in Malaysia. According to the Low Carbon Mobility Blueprint 2021–2030, Malaysia's government promised to collaborate with the business sector to create 10,000 EV charging stations by 2025 after realising the necessity. Government incentives, such as tax reductions, will be given to businesses that help Malaysia create its EV infrastructure.