The Malaysian government has announced to give full exemption of import duty, excise duty, as well as sales tax for electric vehicles (EVs) in a bid to support the local EV industry.

The announcement was made by Finance Minister Tengku Zafrul Abdul Aziz when he was tabling the Budget 2022 in Parliament.

A 100 percent road tax exemption will also be given to EVs, he said.

“The government sees the potential of EVs with Energy Efficient Vehicle (EEV) features as means to minimize vehicle smoke pollution in the atmosphere. To support the development of the local EV industry, the government proposes to provide import duty, excise duty, and sales tax exemptions on EVs,” he said.

Additionally, individual income tax reliefs of up to 2,500 MYR ($602.57) will be given for the purchase and installation, rental and hire purchase of EV charging facilities as well as payment of EV charging facility subscription fees, the minister said.

The move came as EVs are gaining popularity. Last week, car-rental firm Hertz announced that it had made a deal to buy 100,000 cars from EV maker Tesla. Japanese carmaker Toyota is also developing fully EV that would debut by 2025.

Malaysia has unveiled its largest-ever budget on Friday, in a bid to boost the recovery of its economy after COVID-19 pandemic hit.

The country’s economic growth is expected to be between 3 and 4 percent for 2021, Tengku Zafrul said.

“Next year, the country’s economy is projected to expand between 5.5 and 6.5 percent based on strong fundamentals and a diversified economic base. However, this performance also depends on other factors including the success of our pandemic response, the effectiveness of our vaccination programs as well as the robustness of the global economy and trade prospects,” he said.

Budget 2022 will be the largest budget to date, with an allocation of 332.1 billion MYR ($80 billion). From this allocation, the government will provide 233.5 billion MYR ($56.25 billion) for operating expenditure, 75.6 billion MYR ($18.21 billion) for development expenditure, and 23 billion MYR ($5.54 billion) under the COVID-19 Fund. A total of 2 billion MYR ($481.7 billion) was also provided as a contingency reserve advance warrant.

Even with an expansionary budget in place, the fiscal deficit is projected to reduce to 6 percent to GDP compared to a fiscal deficit of 6.5 percent to GDP in 2021, the minister said.

Read the full Budget 2022 speech here.

Here are some tech-related highlights from Budget 2022

  • Allocation of 700 million MYR ($168.62 million) to enhance digital connectivity in 47 industrial areas and 630 schools, especially those in rural areas
  • Allocation of 30 million MYR ($7.23 million) will be prepared to implement the Innovation Hub: Industrial Revolution 4.0 under Technology Park Malaysia for the developing new emerging technology clusters such as drones, robotics, autonomous vehicles
  •  Matching grant of 100 million MYR ($24.09 million) for Bumiputera SMEs to explore the aerospace industry in view of Aerodyne’s success story
  • Cradle Fund, a startup ecosystem coordinating agency, will be allocated 20 million MYR ($4.82 million) to intensify recovery efforts, build the resilience of the startup economy
  • Allocation of 20 million MYR ($4.82 million) for the development of e-Sports, including MYR5 million for drone sports center-of-excellence
  • To boost the growth of e-sports, a total of 20 million MYR is provided for the Development of National e-Sports including RM5 million to create a drone sports center-of-excellence.
  • income tax exemption on recognized e-sports tournament prize money
  • Allocation of 250 million MYR ($60.22 million) allocated for Shop Malaysia Online and Go-eCommerce Onboarding
  • SME Digitalisation Grant Scheme to be increased to 200 million MYR ($48.17 million) in 2022
  • Sales tax to be imposed on low-value items from overseas sold by online sellers and sent to Malaysia via air courier
  • Service tax to be imposed on delivery services provided by service providers including e-commerce platforms, except for food and beverage deliveries, logistics services
  • Digital First Program initiative will be introduced to encourage the usage of cloud computing in the public sector, minimizing the need for physical storage & cultivating a paperless culture

Amid range and charging anxiety, the EV ecosystem will benefit from extreme fast charging