Tax incentive policies

Emerging Industry Status (PS) and Investment Tax Allowance (ITA)

Companies in manufacturing, food processing, agriculture, hotels, tourism, or other industrial or commercial sectors, which have been in production for less than a year and are involved in promoted activities or promoted products, are eligible for Investment Tax Allowance (ITA) or Emerging Industry Status (PS) benefits

Emerging Industry Status (PS):  70% of the income is exempt from tax within 5 years from the start of production
Investment Tax Allowance (ITA)： From the date of approval and for a period of 5 years, 60% of the Qualified Capital Expenditure (QCE) can offset up to 70% of statutory income each year until fully utilized within the tax year.

The company can also opt for a reinvestment allowance by waiving its PS / ITA status, but this should be completed before the expiration of its PS / ITA.

Special Incentive Program

Companies incorporated in Malaysia and receiving “Approved Business” income from the Ministry of Finance are eligible to participate in this program

Rewards:
In the approved business, 70% of the company’s statutory income can be exempt from tax (unless a specific rate is set by the authorities), or the statutory income of the approved business can be exempted from income tax at a rate determined by the authorities.

Increase in export allowances

Companies headquartered in Malaysia and operating in the manufacturing or agriculture industry, and exporting products from their respective industries, are eligible for this allowance

Approved Service Projects (ASP)

Qualified capital expenditure (QCE) incurred in the communication, utilities, and transportation services or its sub-sectors, or in sub-sectors approved by the Ministry of Finance, falls under this category.

Food Production

If a company invests in a subsidiary with a food production license, it can apply for a tax reduction equivalent to the amount invested by the parent company in its subsidiary. New projects in subsidiaries approved by the authorities for entry into the food production sector can receive 100% tax exemption for up to 10 years, while ongoing projects can receive a 5-year tax exemption.

Reinvestment Allowance (RA)

Companies headquartered in Malaysia that have been operational for 36 months or more and have incurred qualified capital expenditure (QCE) in Malaysia on their factories and machinery to expand, modernize, and automate their units, or in the agriculture sector, are eligible for this allowance.

Companies engaged in biotechnology-related activities and approved by Malaysia Biotechnology Corporation Sdn Bhd as Bionexus Status Companies are eligible.

Incentives:

• New companies receive a 100% tax exemption for up to 10 years from the year they begin to have statutory income, while extended project income receives a 5-year tax exemption. 100% Investment Tax Allowance (ITA) for Qualified Capital Expenditures (QCEs), in addition to 100% ITA for QCEs that must be offset against the statutory income they earn within 5 years
• After the expiration of the tax exemption period, the tax exemption rate is discounted to 20% of the income of the approved business for up to 10 years
• BioNexus buildings used solely as approved operations or expansions will receive a 10% industrial building allowance for up to 10 years
• BioNexus is exempt from stamp duty and real estate profit tax on mergers or acquisitions with other biotechnology companies
• The company is able to import raw materials and parts exempt from import duties

In addition, the total amount of seed capital invested in BioNexus at the initial stage is exempt from all personal and corporate taxes

i) Private Higher Education Institutions (PHEI)

Costs incurred in developing new courses that meet regulatory requirements are tax-free

Incentives
Deductions can be claimed for expenses incurred over 3 years

ii) Non-profit oriented schools

To meet these criteria, the school must be approved and accredited by the Ministry of Education (MOE) as a non-profit oriented school.

Incentives
The school’s income is tax-exempt

iii) Profit-oriented private or international schools

Profit-oriented schools or international schools registered with the Ministry of Education fall into this category.

Incentives

• 100% tax exemption for Qualified Capital Expenditures (QCE) over a 5-year period, which will be used to offset statutory income 70% or 70% tax exemption for a 5-year period
• All educational equipment imported into these schools is exempt from import duties
• Double deduction for overseas promotional expenses

iv) Pre-school/kindergarten

All private preschools and kindergartens registered with the Ministry of Education are eligible

Incentives

• Statutory income from pre-schools or kindergartens will be exempt from tax for five years
• For buildings used as pre-schools or kindergartens, a 10% annual IBA will be granted

• Investment tax credits can be claimed if any green technology equipment must be purchased.
• Tax exemption for income generated from the use of green technologies and services.

Travel medicine

Exemptions are provided if any new or existing company plans to expand, modernize, or renovate to provide private health care facilities that benefit at least 5% of all patients who are health care travelers.

Incentives
It is possible to claim a 100% tax exemption on statutory income for compliant capital expenditure for a maximum period of five years.

Cost of developing a website

In the case of e-commerce websites, the costs incurred in developing the website can be waived for a period of five years at a rate of 20% per year

Offshore trading via website in Malaysia

Approved offshore trading companies, which are operated by non-Malaysian residents but use Malaysian websites to sell overseas products offshore, are exempted from tax

Incentives
The income tax incentive lasts for five years and is based on a formula

Multimedia Super Corridor

MSC status companies investing in highly capital intensive transactions can claim 100% tax exemption on statutory income for 5 + 5 years or ITA on statutory income with 100% QCE for 5 years

If ICT companies relocate to cybercities or cybercenters they are eligible for a statutory income tax exemption for 10 years or a 100% QCE offsetting statutory income tax exemption for up to 5 years

If the company has MSC status but is located outside of a designated area, the statutory income tax exemption period is 5 years, with an additional 5 years of 100% tax exemption granted if they migrate to a designated Multimedia Super Corridor area

International trading company

A company incorporated in Malaysia needs to meet the following criteria:

• 60% owned by Malaysians and should be registered with the Malaysian External Trade Development Authority (MATRADE)
• Annual sales should exceed RM10 million
• Merchandising should not account for more than 20% of the company’s annual sales
• They should take advantage of local financial, insurance and transportation services

Incentives
A tax allowance equal to 20% of the increased value of exports is provided to offset 70% of the statutory income for a period of five years

Global Incentives for Trade (GIFT) Program

Companies located in Labuan can apply to Labuan FSA for them to be recognized as Labuan International Commodity Trading Companies (LICTCs) under the Global Incentives for Trade (GIFT) category, allowing them to physically trade in foreign currencies and derivatives in the following areas:

• Petroleum and products related to the petroleum industry
• Agricultural products
• Refined raw materials
• Chemicals
• Minerals

Incentives

• Audited accounts under the Labuan Taxation of Business Activities Act 1990 reflecting corporation tax of 3% on taxable profits, or
• If a company is purely engaged in trading in liquefied natural gas (LNG), they can be exempted from tax for the first three years, after which they will have to pay the said tax

Major Center

Companies formed and incorporated in Malaysia and engaged in regional and international business in Malaysia fall under this category of business

Incentives
Eligible companies fall into one of three corporate tax brackets of 0%, 5% or 10%

Shipment

Malaysian individuals engaged in the business of transporting passengers or goods by sea using Malaysian ships owned or chartered by them fall under this category

Incentives
Tax exemption is granted for 70% of the statutory income

Integrated Logistics Services (ILS)

Individuals or companies that are 60% owned and engaged in activities such as freight forwarding, transportation and warehousing fall into this category

Incentives

• Emerging Industry Status (PS) and 70% tax exemption for 5 years
• QCE has a 60% Investment Tax Allowance (ITA) that can be offset against 70% of statutory income for 5 years

If you have any questions about tax incentives in Malaysia, Feel free to contact officer@rising.com.my, we will be happy to assist you.

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Incentives for new investments