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Last Update: 16 Oct 2018
Version 8.1.2
ATTRACTIVE INCENTIVEATTRACTIVE INCENTIVE

       The Federal Government offers Tax Incentives, both Direct and Indirect, under the Promotion of Investments Act 1986, Income Tax Act 1967, Customs Act 1967, Sales Tax Act 1972, Excise Act 1976 and Free Zones Act 1990.

       These Acts cover investments in the manufacturing, agriculture, tourism and approved services sectors as well as R&D, training and environmental protection activities.

       The direct tax incentives grant partial or total relief from income tax payment for a specified period, while indirect tax incentives come in the form of exemptions from import duty, sales tax and excise duty.

Inter-alia, the incentives given by the Federal Government are:

1.Incentives for the Manufacturing Sector

1.1 Main Incentives for Manufacturing Companies
  • Pioneer Status
  • Investment Tax Allowance
1.2 Incentives for Relocating Manufacturing Activities to Promoted Areas
1.3 Incentives for High Technology Companies
1.4 Incentives for Strategic Projects
1.5 Incentives for Small and Medium Companies
1.6 Incentives to Strengthen Industrial Linkages
1.7 Incentives for the Machinery and Equipment Industry
  • Incentives for the Production of Specialised Machinery and Equipment
  • Additional Incentives for the Production of Heavy Machinery
  • Additional Incentives for the Production of Machinery and Equipment
1.8 Incentives for Automotive Component Modules
  • Incentives for the Manufacture of Critical and High Value-added Parts and Components for the Automotive Industry
1.9 Enhanced Incentives for the Utilisation of Oil Palm Biomass
  • New Companies
  • Existing Companies That Reinvest
1.10 Additional Incentives for the Manufacturing Sector
  • Reinvestment Allowance
  • Accelerated Capital Allowance
  • Accelerated Capital Allowance on Equipment to Maintain Quality of Power Supply
  • Accelerated Capital Allowance on Security Control Equipment
  • Incentive for Industrialised Building System
  • Tax Exemption on the Value of Increased Exports
  • Group Relief

2. Incentives for the Agricultural Sector

2.1 Main Incentives for the Agricultural Sector
  • Pioneer Status
  • Investment Tax Allowance
  • Incentives for Food Production
  • Incentive for Reinvestment in Food Processing Activities
2.2 Additional Incentives for the Agricultural Sector
  • Reinvestment Allowance
  • Incentive for Reinvestment in Resource-Based Industries
  • Incentives for Modernising Chicken and Duck Rearing
  • Accelerated Capital Allowance
  • Agricultural Allowance
  • Accelerated Agriculture Allowance for the Planting of Rubberwood Trees
  • 100% Allowance on Capital Expenditure for Approved Agricultural Projects
  • Tax Exemption on the Value of Increased Exports
  • Incentives for Companies providing Cold Chain Facilities and Services for Food Products
  • Double Deduction for Expenses to Obtain “Halal” Certification and Quality Systems and Standards Certification
  • Double Deduction on Freight Charges for Export of Rattan and Wood-based Products

3. Incentives for the Aerospace Industry

4. Incentives for the Biotechnology Industry

4.1 Main Incentives for the Biotechnology Industry
4.2 Incentives for Investment in a BioNexus Status Company
  • Investment by a Company or Individual in a BioNexus Status Company
  • Tax Incentives for Mergers and Acquisitions with a Biotechnology Company
4.3 Biotechnology Funding for Bionexus Status Companies

5. Incentives for the Tourism Industry

5.1 Incentives for the Hotel and Tourism Industry
  • Pioneer Status
  • Investment Tax Allowance
  • Enhanced Incentives for Undertaking New Investments
  • Incentives for Reinvestment in Hotels and Tourism Projects
  • Incentive for Healthcare Travel
  • Additional Incentives for Healthcare Travel
  • Incentives for the Luxury Yacht Industry
5.2 Additional Incentives for the Tourism Industry
  • Double Deduction on Overseas Promotion
  • Double Deduction on Approved Trade Fairs
  • Tax Exemption for Tour Operators
  • Tax Exemption for Promoting International Conference and Trade Exhibitions
  • Deduction on Cultural Performance
  • Incentive for Car Rental Operators
  • Tax Exemption on the Value Increased Exports

6. Incentives for Environmental Management

6.1 Incentives for Forest Plantation Project
6.2 Incentives for the Storage, Treatment and Disposal of Toxic and     Hazardous Wastes
6.3 Incentives for Waste Recycling Activities
6.4 Incentives for Energy Conservation
  • Companies Providing Energy Conservation Services
  • Companies Undertaking Conservation of Energy for Own Consumption
6.5 Incentives for Energy Generation Activities Using Renewable Energy Resources
6.7 Accelerated Capital Allowance for Environmental Management
6.7 Tax Incentives for Buildings Obtaining Green Building Index Certificate
6.8 Accelerated Capital Allowance for Environmental Management

7. Incentives for Research and Developmen

7.1 Main Incentives for Research and Development
  • Contract R&D Company
  • R&D Company
  • In-house Research
  • Second Round Incentives
  • Incentives for Commercialisation of Public Sector R&D
7.2 Additional Incentives for Research and Development
  • Double Deduction for Research and Development
  • Incentives for Researchers to Commercialise Research Findings

8. Incentives for the Medical Devices Industry

8.1 Incentives for Medical Devices Testing Labaratories
  • Companies Investing in New Testing Laboratories for Medical Device
  • Companies Upgrading Existing Testing Laboratories for Testing Medical Devices

9. Incentives for Training

9.1 Main Incentives for Training
9.2 Additional Incentives for Training
  • Deduction for Cost of Recruitment of Workers
  • Deduction for Pre-employment Training
  • Deduction for Cash Contribution
  • Special Industrial Buiding Allowance
  • Tax Exemption on Educational Equipment
  • Tax Exempetion on Roayalty Payments
  • Double Deduction for Approved Training
  • Human Resource Development Fund

10. Incentives for Approved Service Projects

10.1 Main Incentives for ASPs
  • Exemption under Section 127 of the Income Tax 1967
  • Investment Allowance (1A) under Schedule 7B of the Income Tax Act 1967
10.2 Additional Incentives for ASPs

11. Incentives for the Shipping and the Transportation Industry

11.1 Tax Exemption for Shipping Operation
11.2 Exemption from Import Duty and Sales Tax on Prime Movers and Trailers

12. Incentives for MSC Malaysia

12.1 Main Incentives for MSC Malaysia Status Company

13. Incentives for Information and Communication Technology (ICT)

13.1 Incentives for the use of ICT

14. Incentives for A Knowledge-Based Economy

15. Incentives for Manufacturing Related Services

16. Incentives for Operational Headquarters

16.1 Approvals for OHQ Status, Incentives and Other Facilities
16.2 Equity Requirements
16.3 Incentives
16.4 Foreign Exchange Administration (FEA) Flexibilities Accorded to Resident Comapnies with Approved Opertaional Headquarters Status(OHQ)
16.5 Others FEA Flexibities
16.6 Other Facilities
16.7 Expatriate Employment

17. Incentives for International Procurement Centres/Regional Distribution Centres

17.1 Approvals for IPC/RDC Status
17.2 Equity Requirements
17.3 Incentives
17.4 Foreign Exchange Administration (FEA) Flexibilities Accorded to Resident Comapnies with International Procurement Centre (IPC) and Regional Distribution Centres (RDC) Status
17.5 Others FEA Flexibilities
17.6 Others Facilities
17.7 Expatriate Employment

18. Representative Offices and Regional Offices

18.1 Activities Allowed
18.2 Activities Not Allowed
18.3 Equity Requirements
18.4 Incentives
18.5 Expatriate Employment

19. Other Incentives

19.1 Industrial Building Allowance
19.2 Industrial Building Allowance for Buildings in MSC Malaysia
19.3 Infrastructure Allowance
19.4 Deduction of Audit Fees
19.5 Tax Incentives for Venture Capital Industry
19.6 Tax Incentive on Costs of Dismantling and Removing Assets
19.7 Incentive for Acquiring Proprietary Rights
19.8 tax Incentives for Small Scale and Medium Enterprises to Register Patents ad Trademarks
19.9 Tariff Related Incentives
  • Exemption from Import Duty on Raw Materials/Components
  • Exemption from Import Duty on Imported Medical Devices for Purpose of Kitting
  • Exemption from Import Duty and Sales Tax on Machinery and Equipment
  • Exemption from Import Duty and Sales Tax on Spares and Consumables
  • Exemption from Import Duty and Sales Tax for Outsourcing Manufacturing Activities
  • Exemption from Import Duty and Sales Tax for Maintenance, Repair and Overhaul (MRO) Activities
  • Exemption from Import Duty and Sales Tax on Solar Photovoltaic System Equipment
  • Exemption from Import Duty and Sales Tax on Energy Efficiency Equipment
  • Exemption from Import Duty and Excise Duty on Hybrid Cars
  • Sales Tax Exemption
  • Drawback on Import Duty, Sales Tax and Excise Duty
19.10 Incentives for Export
  • Single Deduction for the Promotion of Exports
  • Double Deduction for the Promotion of Exports
  • Double Deduction on Export Credit Insurance Premiums
  • Double Deduction on Freight Charges
  • Double Deduction for the Promotion of Malaysian Brand Names
  • Special Industrial Building Allowance for Warehouses
  • Incentive for the Implementation of RosettaNet
19.11 Incentive for the Use of Enviornmental Protection Equipment
19.12 Donations for Environmental Protection
19.13 Incentives for Employees' Accommodation
19.14 Incentives for Employees' Child Care Facilities


        For further details on the above incentives given by the Federal Government for Manufacturing and its related services, please refer to the  Malaysian Industrial Development Authority (MIDA) web-site at www.mida.gov.my

        In addition, the Federal Government accommodates and provides additional tax incentives for industrialists investing in manufacturing sector under the “promoted activities” or “promoted products” in Sarawak.   Applications can be made to Malaysian Investment Authority (MIDA) for eligibility of Pioneer Status (PS) or Investment Tax Allowance (ITA) and other customised investment packages.

        The additional benefits that Sarawak enjoys from the Federal Government under the Eastern Corridor Package are summarised as follows:

Additional Incentives for Manufacturing Sector Given by Federal Government 

 

Peninsular Malaysia

Added Incentive for Sarawak

Pioneer Status (PS)

70% tax exemption on statutory income for 5 years.

100% tax  exemption on statutory income for 5 years.

Investment Tax Allowance (ITA)

60% allowance on the qualifying capital expenditure incurred within 5 years.

The allowance could be utilized to offset 70% of statutory income for each year of assessment.

100% allowance on the qualifying capital expenditure incurred within a period of 5 years.

The allowance could be utilized to offset against 100% of statutory income for each year of assessment.

Reinvestment Allowance (RA)

60% allowance on qualifying capital expenditure incurred, and could be utilized to offset against 70% of statutory income.

Free to offset RA against 100% of statutory income.

Other Incentives

Infrastructure Allowance of 85% of statutory income in the year of assessment.

Infrastructure Allowance of 100% of the qualifying expenditure.

Double deduction on freight charges incurred for exporting rattan and wood-based products (excluding sawn timber and veneer).

Double deduction on sea freight charges incurred for shipping goods from Sarawak to Peninsular Malaysia via ports in Peninsular Malaysia.

*MIDA - Malaysian Industrial Development Authority


        The State Government offers generous incentives in term of the competitive price of land, low down payment for the purchase of industrial land, cheap electricity and other facilities to ensure that start-up and operating costs for companies are competitive.

        In order to encourage investors to invest in Sarawak, the State Government gives the following additional incentives:

Additional Incentives for Manufacturing Sector Given by Sarawak State Government

 

Incentives

Industrial Land

 

30-50% rebate for industrial land if project is satisfactorily completed and started operation within 36 months from date of alienation of land.  (exclude for Samajaya Free Industrial Zone)

Log Export Quota Policy

Of total log harvested from Permanent Forest Estates, 60% for local processing and balance of 40% for export.

Electricity Tariff

For strategic and promoted industries operating at Sama Jaya Free Industrial Zone, upon approval by Syarikat SESCO, can enjoy 10% electricity tariff rebate.

 


 

 

Peninsular Malaysia

Added Incentive for Sarawak

Pioneer Status (PS)

70% tax exemption on statutory income for 5 years.

100% tax  exemption on statutory income for 5 years.

Investment Tax Allowance (ITA)

60% allowance on the qualifying capital expenditure incurred within 5 years.

The allowance could be utilized to offset 70% of statutory income for each year of assessment.

100% allowance on the qualifying capital expenditure incurred within a period of 5 years.

The allowance could be utilized to offset against 100% of statutory income for each year of assessment.

Reinvestment Allowance (RA)

60% allowance on qualifying capital expenditure incurred, and could be utilized to offset against 70% of statutory income.

Free to offset RA against 100% of statutory income.

Other Incentives

Infrastructure Allowance of 85% of statutory income in the year of assessment.

Infrastructure Allowance of 100% of the qualifying expenditure.

Double deduction on freight charges incurred for exporting rattan and wood-based products (excluding sawn timber and veneer).

Double deduction on sea freight charges incurred for shipping goods from Sarawak to Peninsular Malaysia via ports in Peninsular Malaysia.