Malaysia to Drop Secretive Car Tax Deals.  A Clearer, Fairer System Coming by October 2025

Big news for the car world in Malaysia: by October 2025, the government plans to ditch its current “Customised Incentives” system, which, let’s be honest, has been about as transparent as a foggy windscreen and switch to a new, fairer tax (Car Tax) method that applies the same rules to everyone.

Currently, carmakers try their luck negotiating sweet tax deals with the Automotive Business Development Committee (ABDC), which is run by the Ministry of Investment, Trade, and Industry (MITI). If you promised enough production, some R&D, and maybe threw in a bit of tech transfer or exports, you might just score a juicy tax break. But let’s face it, this setup has been like a game of “Who Wants to Be a Tax Free Millionaire,” with rules that seem to change depending on who’s asking.

These Customised Incentives (CI) were originally meant to attract investment into Energy Efficient Vehicles (EEVs) and Next Gen Vehicles (NxGVs), but in practice, they’ve been criticised for being slow, confusing and let’s not sugarcoat it, a bit of a mystery box. Some car brands have waited ages for approvals, while others zipped through, raising more than a few eyebrows in the industry.

Enter the new system, a fixed, rules based approach that calculates taxes using the Open Market Value (OMV) of locally assembled cars. In plain English, everyone gets taxed the same way based on the actual value of the car, not on how charming their tax negotiation skills are.

The Royal Malaysian Customs Department and the Ministry of Finance (MOF), in cahoots with MITI  are putting the finishing touches on this new system. They promise it’ll be neutral, transparent and not favouring any particular brand, so no more backroom deals or tax break fairy tales.

The Malaysian Automotive Association (MAA), which represents the local car industry, is cautiously optimistic but waving a warning flag. MAA president Mohd Shamsor Mohd Zain says manufacturers need at least six months’ notice to adjust their production plans, logistics, and pricing. With the deadline getting close and still no clear playbook, the industry’s getting a bit jittery.

“There’s real concern prices could shoot up by 30% if this isn’t handled carefully,” said Shamsor. “We’re all for fairness, but don’t blindside us at the last minute.”

The government, meanwhile, says “Relax, we’ve got this.” MOF insists that the new system won’t cause massive price hikes, it’s designed to prevent that sort of chaos. Instead, they say it’ll bring stability to car buyers and automakers alike, and stop people from gaming the system.

More importantly, the new rules will help shut down loopholes and stop shady under the table dealings. So if you’re in the business of whispering sweet nothings to tax officials hoping for a discount, your days are numbered.

This is all part of Malaysia’s bigger plan under the National Automotive Policy (NAP) 2020, which aims to boost tech innovation and make the local industry globally competitive. In other words, Malaysia wants its auto scene to grow up, stop asking for special treatment, and play by the same rules as everyone else.

So buckle up, 2025 is shaping up to be the year Malaysia takes its foot off the Customized Incentives  pedal and puts both hands on the wheel of tax transparency.