Reason why Invest In Malaysia

POLICIES

Local company incorporation
Manufacturing license application
No restriction on foreign equity ownership
Liberal expatriate employment policy
Free movement of funds for foreign investments in Malaysia
Protection of intellectual property rights
Company tax rate of 26%
Individual tax rate from 0%-28%
No minimum wages legislation
Minimum conditions of employment under the Employment Act 1955
Responsible trade unions and harmonious industrial relations
Compulsory contributions:
Employees Provident Fund (EPF)
Social Security Organisation (SOCSO)
Human Resources Development Fund (HRDF)
Investment guarantee agreements
Double taxation agreements
Controlled environmental management policy

INCENTIVES

Eligible industries/sectors
Manufacturing
Agriculture
Tourism
Manufacturing related services:
Integrated logistics services
Integrated market support services
Integrated central utility facilities
Cold chain facilities

Others, including:
Research and development
Environmental management
Training
ICT
Shipping and transportation
Multimedia super corridor (MSC)
Knowledge-based economy
Operational headquarters
Regional distribution centres
International procurement centres
Representative offices and regional offices
Offshore financial service

Main incentives:
Pioneer status
Full income tax exemption
Investment tax allowance
Accelerated capital allowance
Incentive for relocating manufacturing activities
Industrial building allowance
Infrastructure allowance
Reinvestment allowance
Export incentives
Import duty exemption on raw materials, components, machinery and equipment
Group relief

FACILITIES
Comprehensive system of vocational and industrial training
Financial assistance for training of workers
Well-developed financial and banking sector providing credit to industry
Export credit refinancing
Export credit insurance
Active and efficient stock exchange for raising capital
Fully developed industrial parks for industry
high-tech parks
free zones for export industries
Multimedia Super Corridor (MSC)
Ample electricity and water supply at reasonable costs
High quality telecommunications network and services
Well-equipped seaports and airports connected to the world
Network of well-maintained highways and railways

INCENTIVE FOR INVESTMENT

In Malaysia, tax incentives, both direct and indirect, are provided for in 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 (including hotel) 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 are in the form of exemptions from import duty, sales tax and excise duty.

1. INCENTIVES FOR THE MANUFACTURING SECTOR

1.1 Main Incentives for Manufacturing Companies

The major tax incentives for companies investing in the manufacturing sector are the Pioneer Status and the Investment Tax Allowance.

Eligibility for Pioneer Status and Investment Tax Allowance is based on certain priorities, including the levels of value-added, technology used and industrial linkages. Eligible activities and products are termed as "promoted activities" or “promoted products”. (Please refer to the List of Promoted Activities and Products - General)

(i) Pioneer Status

A company granted Pioneer Status enjoys a 5-year partial exemption from the payment of income tax. It pays tax on 30% of its statutory income*, with the exemption period commencing from its Production Day (defined as the day its production level reaches 30% of its capacity).

Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company.

To encourage investments in the promoted areas i.e. the States of Perlis**, Sabah and Sarawak and the designated “Eastern Corridor”+ of Peninsular Malaysia, applications received from companies located in these areas will enjoy a 100% tax exemption on their statutory income during their 5-year exemption period. Applications received by 31 December 2010 are eligible for this incentive.

Applications for Pioneer Status should be submitted to the Malaysian Industrial Development Authority (MIDA).

(ii) Investment Tax Allowance

As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted ITA is entitled to an allowance of 60% on its qualifying capital expenditure (factory, plant, machinery or other equipment used for the approved project) incurred within five years from the date the first qualifying capital expenditure is incurred.

The company can offset this allowance against 70% of its statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised. The remaining 30% of its statutory income will be taxed at the prevailing company tax rate.

For the promoted areas i.e. the States of Perlis** , Sabah and Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia, applications received from 13 September 2003 from companies located in these areas will enjoy an allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be utilised to offset against 100% of the statutory income for each year of assessment. Applications received by 31 December 2010 are eligible for this incentive.

FOR MORE DETAILS YOU CAN LOG ON TO MALAYSIAN INDUSTRIAL DEVELOPMENT