The windfall profit levy is a threshold-triggered tax under the Windfall Profit Levy Act 1998 that applies to oil palm producers only when the Malaysian Palm Oil Board's monthly average crude palm oil (CPO) price exceeds a set level. From 1 January 2025 the threshold is RM3,150 per tonne in Peninsular Malaysia and RM3,650 per tonne in Sabah and Sarawak, with a 3% levy rate. Producers with holdings under 40.46 hectares are exempt.
- The levy is only charged when the MPOB monthly average CPO price rises above the regional threshold — it is zero in months when prices stay below it.
- Thresholds differ by region: from 1 January 2025, RM3,150/tonne in Peninsular Malaysia versus RM3,650/tonne in Sabah and Sarawak (raised RM150 from RM3,000 and RM3,500).
- The rate is 3% in both regions after Sabah and Sarawak were doubled up from 1.5% under Budget 2022.
- Smallholders and producers with holdings below 40.46 hectares (100 acres) are exempt.
Who this applies to: Oil palm plantation owners, estate operators, planters in Sabah and Sarawak, palm oil investors and analysts, and tax practitioners.
On this page
When crude palm oil prices spike, the Malaysian government collects a share of the gain — but only after the price clears a set line. That line is the windfall profit levy, a tax that switches on in high-price months and stays off in ordinary ones.
What is the windfall profit levy?
The levy is a threshold-triggered tax on oil palm producers, enabled by the Windfall Profit Levy Act 1998 (Act 592), which is administered by the Ministry of Finance and went into effect on 1 January 1999. It has been collected, using broadly the same calculation formula, since then — with periodic adjustments to the rate and the price threshold along the way.
The mechanics are simple in principle: the government sets a reference price threshold. When the Malaysian Palm Oil Board (MPOB) publishes a monthly average national CPO price above that threshold, the levy applies for that month. When the average stays below it, nothing is due. This is why the levy is sometimes described locally as a tax on a “durian runtuh” — a windfall that only lands in good months.
The current operative instrument is the Windfall Profit Levy (Oil Palm Fruit) Order 2023 [P.U.(A) 31/2023], in force from 1 February 2023.
What are the thresholds and rates?
Two things vary by region: the price threshold and, historically, the rate. Peninsular Malaysia has faced a lower threshold than Sabah and Sarawak, which are given more headroom to reflect higher production and logistics costs in the east.
| Region | Threshold (until 31 Dec 2024) | Threshold (from 1 Jan 2025) | Levy rate |
|---|---|---|---|
| Peninsular Malaysia | RM3,000 / tonne | RM3,150 / tonne | 3% |
| Sabah & Sarawak | RM3,500 / tonne | RM3,650 / tonne | 3% |
Both thresholds were raised by RM150 per tonne effective 1 January 2025, a change announced in Budget 2025. The rate now sits at 3% in both regions: Sabah and Sarawak were doubled up from a previous 1.5%, a change proposed under Budget 2022.
How is the levy calculated?
The published formula multiplies the rate by the estate’s monthly FFB (fresh fruit bunch) production and the MPOB monthly average CPO price, and applies only once that price clears the regional threshold. In an earlier version of the levy — effective from 1 January 2020, before the later revisions — Focus Malaysia set it out as:
- Peninsular Malaysia: 3% × monthly FFB production × MPOB monthly average CPO price, when that price is above RM2,500/tonne
- Sabah & Sarawak: 1.5% × monthly FFB production × MPOB monthly average CPO price, when that price is above RM3,000/tonne
Those RM2,500 / RM3,000 thresholds and the 1.5% eastern rate in the Focus Malaysia example are now two revisions out of date — the current thresholds are higher and Sabah and Sarawak are now at 3% (see the table above). The structure, however, is unchanged: the CPO price is the switch, and production volume drives the amount.
Who has to pay — and who is exempt?
The levy is aimed at commercial estates, not smallholders.
- Liable: oil palm holdings of not less than 40.46 hectares (100 acres).
- Exempt: smallholders below that size, and holdings within a group settlement area under the Land (Group Settlement Areas) Act 1960.
That carve-out keeps the burden on larger plantation operators while shielding small planters and settlement-scheme households from a tax designed to capture genuine windfalls.
Why is it debated?
Planters have long argued the levy bites during periods when input costs — fertiliser, labour, transport — are also elevated, so a high headline CPO price does not always mean fat margins. Industry bodies have repeatedly pressed for the threshold to be reviewed upward and for regional cost differences to be weighed, which is part of the backdrop to the RM150 increase for 2025. In Sabah and Sarawak the debate is sharper, because state sales taxes on CPO stack on top of the federal levy — one of the reasons planters objected to the eastern rate being doubled from 1.5% to 3% under Budget 2022.
What’s next
The 2025 threshold increase is the most recent adjustment, but the levy has a long history of being re-tuned as prices and politics shift — so the figures above are a snapshot, not a permanent settlement. Anyone modelling plantation returns should track the MPOB monthly average CPO price against the current threshold, watch each federal Budget for further threshold or rate changes, and, for eastern-region estates, factor in state sales taxes separately. Always confirm the operative figures against the latest Windfall Profit Levy (Oil Palm Fruit) Order before relying on them.
When is the windfall profit levy actually charged?
Only when the Malaysian Palm Oil Board's monthly average national CPO price exceeds the regional threshold. In months where the average price stays below the threshold, no levy is due.
Why do Sabah and Sarawak have a higher threshold?
The eastern states are given a higher price threshold (RM3,650 versus RM3,150 per tonne from 2025) to reflect their higher production and logistics costs, though the levy rate itself is now 3% in both regions after Sabah and Sarawak were doubled up from 1.5% under Budget 2022.
Are smallholders liable for the levy?
No. Smallholders are exempt, and the 2023 Order applies only to oil palm holdings of not less than 40.46 hectares (100 acres); holdings in group settlement areas are also excluded.
The following are deliberately unstated or described only qualitatively until confirmed by a subject-matter expert:
- Precise gazetted commencement date of the Windfall Profit Levy Act 1998 (Act 592) — widely cited as 1 January 1999; confirm against the Federal Gazette / official Act reprint.
- The gazetted effective date of the Sabah & Sarawak rate increase from 1.5% to 3% (proposed under Budget 2022; confirm the P.U.(A) commencement date, not just the Budget announcement).
- Whether the RM3,150 / RM3,650 thresholds and 3% rate remain the operative figures as of the reader's date — proposals to cut the eastern-region rate back to 1.5% have been raised publicly and should be checked against the latest Order.
- Statutory reference for the group-settlement-area carve-out (Land (Group Settlement Areas) Act 1960) as applied by the 2023 Order.
Sources
- Windfall Profit Levy (Oil Palm Fruit) Order 2023 [P.U.(A) 31/2023] — CCS & Co (Chartered Accountants)
- CPO windfall profit levy threshold to be raised by RM150 per tonne, effective Jan 1, 2025 — The Edge Malaysia
- Decoding the windfall profit levy conundrum in the palm oil industry — The Edge Malaysia
- Sabah, Sarawak palm oil players cry foul over doubling of windfall profit levy rate — The Edge Malaysia
- Budget 2025: Government proposes higher windfall profit levy on palm oil — Malaysian Palm Oil Council (MPOC)
- Effects of windfall profit levy on the palm oil industry — Incorporated Society of Planters (reprinting The Star)
- CPO windfall tax imposed only when prices surpass threshold — Focus Malaysia
Change history
| Version | Date | Change | By |
|---|---|---|---|
| 01.00 | 7 Aug 2026 | Approved and published. | — |