Budget 2027: LIAM Calls For 8 Pct Service Tax Exemption, Review Of Reinsurers’ Tax Treatment

KUALA LUMPUR, Sept 25 (Bernama) --  The Life Insurance Association of Malaysia (LIAM) has called on the government to exempt group employee insurance schemes from the eight per cent service tax under Budget 2027.

The association said the proposed exemption would reduce the cost of providing employee insurance benefits and encourage more employers to provide and maintain coverage for their employees.

LIAM said that based on published statistics, less than half of Malaysian workers are covered under group employee insurance schemes, leaving a significant protection gap.

“This situation raises concerns, especially in ensuring that more Malaysian workers, particularly lower- and middle-income workers, benefit from affordable insurance protection,” it said in a statement. 

LIAM said the proposed exemption would help reduce the cost of employee benefits, particularly for small and medium enterprises (SMEs).

It further said the measure would strengthen household financial resilience against unexpected financial burdens arising from death, disability and medical expenses.

“LIAM also believes that wider access to appropriate private healthcare coverage could complement the public healthcare system by enabling insured workers to seek treatment at private healthcare facilities where appropriate, thereby helping to ease pressure on public healthcare resources,” it said. 

Meanwhile, the association called for a review of the tax treatment of Malaysian-domiciled reinsurers compared with foreign reinsurers providing reinsurance capacity to the Malaysian market.

It said Malaysian-domiciled reinsurers are subject to Malaysian income tax on their reinsurance profits, while offshore reinsurers without a permanent establishment (PE) in Malaysia may compete for the same Malaysian business without a corresponding Malaysian income tax liability.

“This difference in tax treatment can result in different overall tax outcomes for reinsurers competing for the same Malaysian business and may affect the competitiveness of Malaysian-domiciled reinsurers,” LIAM said.

It said a strong domestic reinsurance sector is important to Malaysia as it supports the retention of reinsurance capacity within the country, strengthens domestic risk-management capabilities and contributes to the resilience and development of the local insurance ecosystem.

“LIAM is therefore proposing that the government consider measures to promote greater tax neutrality and a more level playing field between Malaysian-domiciled and foreign reinsurers, while taking into account Malaysia’s broader tax policy objectives and international tax developments,” it said.

Budget 2027 is scheduled to be tabled on Oct 9, 2026.

-- BERNAMA