adminKUALA LUMPUR: The Life Insurance Association of Malaysia (LIAM) has asked the government to exempt group employee insurance schemes from the eight percent service tax under Budget 2027.
In a statement on Friday, the association said the proposed exemption could reduce the cost of providing insurance benefits to employees as well as encourage more employers to provide and maintain insurance coverage for their employees.
According to LIAM, published statistical information shows that less than half of workers in Malaysia are covered under group insurance schemes, thus creating a significant coverage gap.
“This situation raises concerns, especially in ensuring that more Malaysian workers, especially lower and middle-class workers, benefit from insurance coverage,” the association noted.
LIAM also described the proposal as being able to help reduce related costs, especially for small and medium enterprises (SMEs).
This measure can also strengthen household financial resilience against any unexpected financial burdens due to death, disability and medical expenses.
“LIAM believes that wider access to private healthcare coverage will also complement public healthcare. This will allow covered workers to receive treatment at private healthcare facilities, thus helping to reduce pressure on public healthcare resources,” the association noted.
At the same time, LIAM also urged that the tax treatment for insurance (reinsurance) companies domiciled in Malaysia be reviewed compared to foreign companies that provide the facility capacity to the Malaysian market.
This is because reinsurance companies domiciled in Malaysia are subject to Malaysian income tax on the profits involved, whereas offshore equivalent companies without permanent establishments (PEs) in Malaysia can compete for the same business in this country without the corresponding Malaysian income tax liability.
“The difference in tax treatment could result in unequal overall tax revenues for reinsurers competing for the same business in this country, and may even affect the competitiveness of companies domiciled in Malaysia,” LIAM noted.
LIAM also described a strong domestic reinsurance sector as important for Malaysia as it can help maintain the segment’s capacity in the country, strengthen domestic risk management capabilities and contribute to the resilience and development of the local insurance ecosystem.
“In this regard, LIAM asks the government to consider measures to promote greater tax equality and create a more level playing field between reinsurance companies domiciled in Malaysia and foreign reinsurance companies.”
“This is in line with Malaysia’s broader tax policy objectives as well as international taxation developments,” the association noted.
The 2027 Budget is scheduled to be presented on October 9, 2026.
— BERNAMA
