Comprehensive Guide to Tax Incentives and Government Grants for Malaysian Companies (2025 Edition)
As Malaysia continues its push towards a high-value, innovation-driven economy, the government has expanded its support for local businesses in the form of tax incentives and government grants.
These measures aim to drive economic recovery, promote digitalisation, encourage sustainable practices, and attract foreign and domestic investments.
If you’re a business owner in Malaysia, understanding which tax incentives and grants are available — and how to apply — can lead to significant savings, improved cash flow, and long-term competitive advantages.
In this 2025 edition, we provide a comprehensive guide to the key tax incentives in Malaysia, sector-specific programs, and how working with an experienced audit firm in Malaysia can simplify the compliance and claim process.
Why Tax Incentives Matter for Businesses in Malaysia
Tax incentives are targeted relief mechanisms designed to reduce the tax burden for eligible businesses. These incentives encourage companies to reinvest in strategic areas such as research and development (R&D), green technology, manufacturing, exports, and digitalisation.
For SMEs and large enterprises alike, these incentives can result in:
- Reduced effective corporate tax rates
- Cash savings through allowances and exemptions
- Stronger balance sheets for reinvestment or scaling
- Better compliance with ESG and digital transformation goals
Explore more: Malaysia Tax Incentives – Eligibility and Benefits
1. Pioneer Status and Investment Tax Allowance (ITA)
These are among the most well-established incentives provided by the Malaysian Investment Development Authority (MIDA).
Pioneer Status
- Offers 70% or 100% tax exemption on statutory income for 5 to 10 years
- Applies to promoted activities such as advanced manufacturing, R&D, and biotechnology
Investment Tax Allowance (ITA)
- Provides allowances of up to 60%–100% on qualifying capital expenditure
- Useful for companies investing in automation, equipment, or new facilities
Reference: Corporate Tax Benefits Guide for Malaysia
2. Green Technology Tax Incentives
To support Malaysia’s transition to a low-carbon economy, the government offers several tax incentives for businesses involved in green technology, energy efficiency, and renewable energy.
Green Investment Tax Allowance (GITA)
- 100% allowance on qualifying capital expenditure for green assets and projects
- Offset against 70% of statutory income
Green Income Tax Exemption (GITE)
- Up to 100% tax exemption for 5 years for companies providing green services such as energy audits, green building certification, and system integration
Learn more:
3. PENJANA Tax Incentives (Post-Pandemic Recovery)
The PENJANA (National Economic Recovery Plan) introduced several tax reliefs to stimulate post-COVID-19 recovery. Some measures have been extended into 2025.
Key components include:
- Relocation Tax Incentives for foreign companies relocating operations to Malaysia
- Reinvestment Allowance extension for qualifying capital expenditure
- Tax exemptions for tourism and selected service sectors
Deep dive: PENJANA Tax Incentives – ShineWing Guide
4. Malaysia Digital Tax Incentive
Under Malaysia Digital (MD) — the successor to MSC Malaysia — companies undertaking digital-related activities may qualify for:
- Corporate tax exemptions of up to 10 years
- Eligibility for activities such as software development, data centres, AI, IoT, cloud computing, cybersecurity
This incentive is governed by Malaysia Digital Economy Corporation (MDEC) and targets high-impact tech adopters and enablers.
Read more: Malaysia Digital Tax Incentive
5. Global Services Hub Tax Incentive
To position Malaysia as a regional hub for shared services, the government provides tax exemptions for qualifying companies that centralise their operations in the country.
Incentives include:
- Tax exemption on statutory income for up to 10 years
- Applies to services such as finance, human resources, IT support, logistics management
Eligible applicants must meet value-added activity thresholds and comply with economic substance requirements.
Learn more: Malaysia Global Services Hub Tax Incentive
6. Tax Rebates and Support for Startups and SMEs
SMEs are a major pillar of the Malaysian economy. Budget 2025 introduces and continues support for startups through:
- Tax rebates of up to RM20,000 for the first 3 years (subject to SME eligibility criteria)
- Special tax deductions for expenses related to digitalisation and ESG compliance
- Grants for e-commerce adoption and business automation under MDEC and SME Corp
7. Strategic Grants and Government Funds (2025 Outlook)
Aside from tax incentives, companies may also tap into government grants and soft loans under various ministries and agencies. Highlights for 2025 include:
| Grant/Fund | Administered by | Purpose |
|---|---|---|
|
SME Digitalisation Grant (MDG) |
MDEC / BSN |
50% matching grant for digital adoption tools |
|
SMART Automation Grant (SAG) |
MIDA |
Funding for Industry 4.0 and automation |
|
Cradle CIP IGNITE |
Cradle Fund |
Pre-commercialisation support for startups |
|
Technology Commercialisation Platform (TCP) |
MTDC |
Supports commercialisation of IPs and technologies |
How to Apply for Tax Incentives in Malaysia
1. Assess Eligibility
Review the qualifying activities, capital expenditure, and business structure.
2. Prepare Supporting Documentation
This may include business plans, audited accounts, invoices, and contracts.
3. Submit Applications Through Relevant Agencies
MIDA, MDEC, IRB, or regional development authorities depending on the program
4. Work With an Experienced Advisory Team
A professional audit firm in Malaysia can help ensure your documentation complies with current tax legislation and incentive guidelines.
Need help? ShineWing TY Teoh’s Tax Incentive Services provide end-to-end support from planning to claim execution.
Common Mistakes to Avoid
- Missing application deadlines for time-sensitive incentives
- Overlooking qualifying expenses, especially under automation or ESG categories
- Inadequate documentation leading to rejections or clawbacks
- Not updating tax incentive status annually for multi-year claims
Final Thoughts: Don’t Leave Money on the Table
In 2025, Malaysian businesses have more access than ever to tax incentives and grants that support growth, innovation, and sustainability.
Whether you’re a tech startup, manufacturer, service provider, or regional HQ, strategic use of these tools can strengthen your bottom line and fund expansion.
However, navigating the evolving incentive landscape requires expertise. From interpreting eligibility criteria to ensuring compliance with reporting standards, working with a knowledgeable tax advisory team can make all the difference.
Ready to maximise your tax savings and government support?
Contact ShineWing TY Teoh for a customised tax incentive review.
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