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Automation Capital Allowance (Automation CA) for Manufacturing and Servicess Sectors

MY - man-hard-hat-is-working-robot

AUTOMATION CAPITAL ALLOWANCE (AUTOMATION CA) FOR MANUFACTURING AND SERVICES SECTORS

Manufacturers involved in innovative and productive activities eligible for an Automation Capital Allowance (Accelerated Capital Allowance) of 200% on the first RM10 million of qualifying capital expenditure.

Automation Capital Allowance (Automation CA) For Manufacturing And Services Sectors

1) Objective:

The Automation Capital Allowance (Automation CA) was introduced to encourage adoption of automation among manufacturing companies.

2) Tax Incentive

Categories

Tax Incentive

1.

High labour-intensive industries (rubber products, plastics, wood, furniture and textiles)

2.

Other industries including Service Sector

Automation CA of 200% on the first RM10 million in qualifying expenditure incurred within year of assessment from 2023 to 2027

3) Eligibility Criteria

  • Companies must be incorporated under the Companies Act 2016;
  • Tax residents of Malaysia;
  • Companies must have been operating in manufacturing or services activities for a minimum of 36 months;
  • The company must incur expenditures for at least one (1) machinery /equipment / software / system with an adaptation of Industry 4.0 within the eligible amount of RM10 million
  • Industry 4.0 elements:-
  • √ Big Data Analytics;
  • √ Cloud Computing;
  • √ Augmented Reality;
  • √ Cybersecurity;
  • √ Artificial Intelligence;
  • √ Additive Manufacturing;
  • √ System Integration;
  • √ Simulation;
  • √ Internet of Things (IoT);
  • √ Autonomous Robots;
  • √ Advanced Materials.

This incentive is eligible to be considered for application received by MIDA from 1st January 2023 until 31st December 2027.

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Incentive For Reinvestment Under New Industrial Master Plan (NIMP) 2030

NIMP 2030-cover

Incentive For ReinvestmentUnder New Industrial MasterPlan (NIMP) 2030

New Industrial Master Plan (NIMP) 2023 offers reinvestment incentive with two tiers. Tier 1 providing Investment Tax Allowance (“ITA”) of 100% qualifying capital expenditure (“QCE”) against 100% of statutory income and Tier 2 offering ITA of 60% QCE against 70% of statutory income. This incentive is designed to encourage existing companies to reinvest in high-growth and high-value activities.

Incentive For Reinvestment Under New Industrial Master Plan (NIMP) 2030

  1. Malaysian government has introduced a reinvestment incentive aligned with the New Industrial Master Plan (NIMP) 2030, featuring a tiered and outcome-driven framework.
  2. Objectives of the incentive are:
    • To motivate companies to invest in sectors with high growth potential and substantial value.
    • To ensure that the tax incentives provided by the Government support the achievement of the targeted outcomes under the NIMP 2030 and further stimulate national economic growth.
  3. This incentive provides an opportunity for existing companies that have exhausted their Reinvestment Allowance, to continue to increase their capacity and investment in high-growth and high-value areas in the country.

A. Type of Incentives

  • The incentive is an Investment Tax Allowance (ITA) of 100% (or 60%) on the qualifying capital expenditure (excluding land cost) incurred for 5 years.
  • The allowance can be offset against up to 100% (or 70%) of statutory income for each assessment year until fully utilized.

B. Eligible Applicant

  • The company must be a Malaysian resident and incorporated in accordance with the Companies Act 2016.
  • Undertake expansion or diversification projects in the manufacturing sector.
  • The company eligible for only one (1) round of this reinvestment incentive.

C. Eligibility Criteria

List of product(s) or activity(ies) eligible for the reinvestment incentive as below:
  • Aerospace
  • Automotive
  • Chemical including biotechnology
  • Electrical & Electronics
  • Food Processing
  • Halal
  • Machinery & Equipment
  • Medical Devices
  • Metal
  • Mineral
  • Palm Oil-based Products
  • Pharmaceutical including biotechnology
  • Petroleum Products and Petrochemicals
  • Rail
  • Rubber-based Products
  • Ship building and Ship Repair
  • Textile, Apparel and Footwear
  • Wood, Paper and Furniture
The tiering tax incentive will be based on an outcome-based approach as follows:
Tier 1
Tier 2
Tax incentive
ITA of 100% on qualifying capital expenditure (QCE) (excluding land) and set off against 100% of statutory income.
ITA of 60% on QCE (excluding land) and set off against 100% of statutory income.
Incentive period
5 years
Minimum Conditions
  1. QCE must be incurred within the proposed 3-year period capital expenditure (excluding land) to be realised within 3 years as proposed;
  2. Implementation of Industrial Revolution 4.0 (IR4.0) technologies is required; and
  3. R&D expenditures (included related to product and technology improvement) must align with the proposed plan.
Additional Conditions
Subject to the following outcomes (but not limited to):

  1. Adequate number of newly hired Malaysian full-time employees in high-value positions (with minimum basic salary RM 10,000/month);
  2. The number of local and/or local service providers (companies incorporated in Malaysia) engaged as proposed;
  3. Adoption of green technology (generation of renewable energy or utilisation of energy efficiency equipment); and
  4. Any additional requirements for sustained economic growth, as stated in the approval letter.

Not Applicable.

D. Date of Application

Applications received by Malaysia Investment Development Authority (“MIDA”) from 1 January 2024 until 31 December 2028 are eligible to be considered for this incentive.

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Family Office Incentive Scheme in Forest City Free Trade Zone (FCFTZ)

Forest City FZ-cover

Family Office Incentive Scheme in Forest City Free Trade Zone (FCFTZ)

First location in Malaysia which provide 0% concessionary tax rate for family offices. This incentive is valid for an initial period of 10 years and an additional 10 years with further conditions.

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Johor-Singapore Special Economic Zone (JS-SEZ)

Johor-Singapore Special Economic Zone-cover

Johor-Singapore Special Economic Zone (JS-SEZ)

On 8 January 2025, Malaysia Government announced tax package incentive for The Johor-Singapore Special Economic Zone (JS-SEZ). JS-SEZ offers a special corporate tax rate 5% for up to 15 years for new investment in qualifying activities such as aerospace manufacturing, medical devices, global services hubs and artificial intelligence and also special personal income tax rate 15% for 10 years for knowledge worker.

Introduction

Johor-Singapore Special Economic Zone (JS-SEZ) is the first special economic zone spanning Southeast Asia’s borders located in the southern Malaysian state of Johor.

Effective from January 1, 2025, companies undertaking new investment in high-growth sectors within the JS-SEZ eligible to apply for special corporate tax rate of 5% for up to 15 years, 15% tax rate up to 10 years for knowledge workers employed in the JS-SEZ, stamp duty exemption etc.

Location

Source: www.irda.com.my

Why Invest in JS-SEZ

Invest-JS-SEZ-01
Competitive Cost Advantage
Invest-JS-SEZ-02
Strong Government Support
Invest-JS-SEZ-03
Designated Flahships Areas
Invest-JS-SEZ-04
Strategic Location & Strong Connectivity
Attractive Policies & Incentives

Competitive Tax Incentive

A. Special Tax Corporate Tax Rate:

Special tax rate of 5% for up to 15 years for companies undertaking new investment as below:

No.

Category
Type of Incentive
1.
Flagship F (Kulai – Sedenak)

Manufacturing Company:
  1. Artificial Intelligence (AI), Quantum Computing Supply Chain;
  2. Medical Devices; or
  3. Pharmaceuticals.

Flagship E (Senai – Kulai)
Aerospace Manufacturing; and Maintenance Repair and Overhaul (MRO) Services.

2.

Flagship A (Johor Bahru Waterfront) and

Flagship B (Iskandar Puteri)
Global Service Hub.

Qualifying Services:
  1. Regional P&L;
  2. Strategic Business Planning;
  3. Corporate Development; and
  4. Regional or Global Treasury and Fund management conducting cash pooling activities via onshore intermediaries.
Special tax rate of 5% for a period of up to 15 years;

Eligibility Criteria / Conditions
  1. Annual operating expenditure of at least RM50 million;
  2. Company must Serve / Business Control of at least 10 Network Companies;
  3. Annual sales turnover of at least RM500 million and forex in-flow into the local banking system as proposed;
  4. A minimum of 50% of high-value positions (with a minimum monthly basic salary of RM10,000) shall be filled by full-time Malaysian employees as proposed.
3.
Flagship G (Desaru-Penawar)

Integrated Tourism Development
100% Investment Tax Allowance (ITA) on eligible capital expenditure (excluding land cost) for a period of 5 years. This allowance can be deducted up to 70% of statutory income for the relevant assessment year.

Eligibility Criteria / Conditions
  1. Company which does not have an existing entity or related entity undertaking same hotel or tourism project in Malaysia;
  2. Paid-up capital of at least RM2.5 million;
  3. Investment in capital expenditure (excluding land) of at least RM500 million;
  4. Company undertaking integrated tourism project which consists of the following:
    1. Hotel with minimum number of rooms of 80 which consists of standard, superior, deluxe and suite; and
    2. Minimum 1 tourist attractions (i.e. water park, outdoor park consists of rides and/or games, convention centre with capacity minimum of 3,000 participants, or outdoor sport excluding golf course and driving range).

4.

Flagship C (Tanjung Pelepas)

Smart Logistics Complex
Smart logistic operator who invests in development of smart logistics and carry out any of the eligible logistic activities:

a. Regional Distribution Hub;
b. Integrated Logistics Services;
c. Dangerous Goods Storage;
d. Cold Chain Facilities
100% Investment Tax Allowance (ITA) on eligible capital expenditure (excluding land cost) for a period of 5 years. This allowance is deducted up to 100% of the statutory income for the relevant assessment year.

Eligibility Criteria / Conditions
  1. Investment in capital expenditure (excluding land) of at least RM500 million;
  2. The built-up area of the smart warehouse complex must be at least 50,000m2 and equipped with at least three (3) enabling elements technologies under the IR4.0;
  3. Use the application of modern construction techniques i.e. achieving a score for the Industrial Building System (IBS) that has been set by the Construction Industry Development Board (CIDB)
  4. Total full-time workforce must consist of at least 80% Malaysian citizens;
  5. A minimum of 30% of total high-value positions (with a minimum basic salary of RM10,000) shall be filled by full-time Malaysian employees.
5.
Flagship D (Tanjung Langsat – Kong-Kong)

Manufacturing – Downstream Specialty Chemicals
Eligible product(s) / activity(ies):
a. Base Chemicals;
b. Organic intermediates C1 to C6
c. Specialty chemicals;
d. Fertilizers;
e. Polymers / Plastics;
f. Oleo chemical / Biochemical.
Special tax rate of 5% or 10% for a period of up to 10 years, for A company with capital investment (excluding land) of RM500 million and above in the manufacturing sector; OR
60% or 100% Investment Tax Allowance (“ITA”) on eligible capital expenditure (excluding land cost) for a period of 10 years.

Eligibility Criteria / Conditions
  1. A new company or an existing company undertaking diversification activities in relation to the eligible activities / products under this cluster;
  2. The company is required to have a minimum paid-up capital of RM2.5 million at the point of submission of application to MIDA;
6.
Additional Incentives
  1. 40% stamp duty exemption on the instrument of transfer/ financing agreement for the purchase of a commercial property in Flagship A and B that remains unsold as at 31st December 2024. The stamp duty exemption to be provided under Section 80(1) under the Stamp Act 1949;
  2. A deduction equivalent to amount not exceeding RM1 million for each year assessment in respect of cash contribution or contribution in-kind by qualifying person who sponsors a hallmark event.
  3. The hallmark event referred to is an event of regional or international significance which is carried on in Flagship G and supported/ verified by MOTAC. For contribution made between 1 January 2025 to 31 December 2034.
  4. ACA in respect of renovation costs incurred on a building or part of a commercial building located in Flagship A-G for the purpose of qualifying company’s business. Qualifying companies are companies that have been approved any tax incentives under PIA 1986 or ITA 1967 between 1 Jan 202 – 31 December 2034 and operating in Flagship A-G. This incentive to be utilized only once throughout their business operation in JS-SEZ.

To include expenses on:
  • General electrical installation
  • Lighting
  • Gas system
  • Water system; Kitchen fittings
  • Sanitary fittings
  • Door, gate, window, grill and roller shutter
  • Fixed partitions
  • Flooring (including carpets)
  • Wall covering (including paint work)
  • Incentives & Eligibility Criteria
  • False ceiling and cornices
  • Ornamental features or decorations excluding fine art
  • Canopy or awning
  • Recreation room for employee
  • Air-conditioning system
  • Day care centre for employees’ children
  • Surau
  • Reception area
  • Green elements, smart solutions systems

Initial Allowance: 20%, Annual Allowance: 40%

B. Special Tax Rate for Knowledge Workers:

A special tax rate of 15% for a period of 10 years is provided for eligible knowledge workers in all Flagships.

Eligibility Criteria / Conditions:

  1. Malaysian/Non-Malaysian citizen;
  2. Not generating employment income in Malaysia 24-months prior;
  3. Salary abroad/in Malaysia >RM20,000 per month.
  4. Subject to academic qualifications / years of professional work experience
  5. Subject to MyCOL profession and JS-SEZ qualifying sectors
Source: MIDA guideline

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Family Office Incentive Scheme in Forest City Free Trade Zone (FCFTZ)

Forest-City

Family Office Incentive Scheme in Forest City Free Trade Zone (FCFTZ)

First location in Malaysia which provide 0% concessionary tax rate for family offices. This incentive is valid for an initial period of 10 years and an additional 10 years with further conditions.

Forest City Special Financial Zone (FCSFZ)

Following amendment bills were tabled and passed by House of Parliament in July 2024 and gazetted in Sept 2024, FCSFZ is first onshore duty-free zone and special financial zone in Forest City, Johor, Malaysia.

Pulau Satu, Forest City is the first location in Malaysia to offer a zero (0%) percent tax rate for Family Office established under the Single Family Office Scheme.
FCSFZ-map
Source: https://forestcitycgpv.com

Single Family Office (SFO) & Single Family Office Vehicle (SFOV)

What is Single Family Office (SFO)?

What is Single Family Office (SFO)?

  1. SFO is a corporate vehicle;
  2. Wholly owned or controlled by members of a single wealthy family;
  3. Created to exclusively manage the assets, investments and long-term interests of that family;
  4. SFO may also represent multiple generations and branches of the family.

What is Single Family Office Vehicle (SFOV) ?

  1. SFOV is a corporate vehicle;
  2. Wholly owned or controlled by members of a single wealthy family;
  3. Established solely for the purposes of holding the assets, investments and long-term interest of members of the single family.

SFO vs SFOV

SFO-SFOV

Key Conditions on SFOVs Tax Incentives

SFOV must be incorporated in Malaysia, preregistered with the Securities Commission (SC), and operating in Pulau Satu, FCSFZ to be eligible for zero (0%) Concessionary Tax Rate for first initial 10 years + additional 10 years. The below conditions are also required to be fulfilled during the incentive periods.

Conditions

First 10 Years
Additional 10 Years
1. Minimum AUM

RM30Mil (*USD7Mil)

RM50Mil (*USD11.5Mil)

2. Minimum Domestic Investment in Promoted Activities
At least 10% of AUM or RM10Mil (*USD2.3Mil), whichever is lower
At least 10% of AUM or RM10Mil (*USD2.3Mil), whichever is higher
3. Minimum local operating expenditure per annum
RM500,000 (*USD115,000)
RM650,000 (*USD150,000)
4. Minimum full time employees
Two (2) and each with a minimum monthly salary of RM10,000 and of whom at least one (1) is an investment professional.
Four (4)
*1 USD = 4.32740 MYR

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Green Investment Tax Allowance (GITA) For Own Comsumption

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MALAYSIA GREEN INVESTMENT TAX ALLOWANCE (GITA) FOR OWN COMSUMPTION

Companies undertake in green technology project for own consumption may enjoy up to 100% Green Investment Tax Allowance (“GITA”) to be offset against 70% of statutory income. Promoted activities such as green building, renewable energy system, energy efficiency, battery energy storage system, electric vehicles etc.
In 2024 Budget, the green technology tax incentives have been revised to the following categories:
  • Green Investment Tax Allowance (GITA) Project for Business Purposes;
  • Green Investment Tax Allowance (GITA) Asset for Own Consumption; and
  • Green Income Tax Exemption (GITE) Solar Leasing
The Malaysian Green Technology and Climate Change Corporation (MGTC) has issued a new guideline for GITA for own consumption project as below:

(i) Investment Tax Allowance :

Tier 1
Tier 2
Qualifying Activities
Qualifying asset as approved by Minister of Finance, Battery Energy Storage System (BESS) and Green Building.
Qualifying asset as approved by Minister of Finance (Appendix 11), Renewable Energy System and Energy Efficiency (Appendix 2).
Percentage of GITA
100%
60%
Percentage (%) of Statutory Income to be Set-Off
70%
70%
Qualifying CAPEX
  • The qualifying capital expenditure must be an approved asset by MOF that have been verified by MGTC and is listed under the MyHIJAU Directory;
  • For Green Building, the qualifying CAPEX must be verified by the locally Green Building Rating Tools/ Certification Body approved by Government;
  • The asset must be new and owned by the Company;
  • The asset must be used in the business carried out by the company in Malaysia for own consumption and not for income generation.
Qualifying Asset
  • Electric vehicles (for commercial / industrial used only);
  • EV Infrastructure;
  • Green Building;
  • Energy Storage
  • Energy Efficiency;
  • Renewable Energy System;
  • Waste Composter or waste recycling;
  • Wastewater recycling or rainwater harvesting
Incentive Period
Qualifying Capital Expenditure incurred starting from 1 January 2024 until 31 December 2026.
Application Period
The application made under the GITA Asset Guidelines must be received by the Malaysian Green Technology and Climate Change Corporation [“MGTC”] from 1st January 2024 until 31st December 2026.

(ii) Eligibility Criteria:

a) New or existing Company:
  • A newly established company that incurred qualifying capital expenditure under GITA Asset; OR
  • Existing Company operating in Malaysia but has not incurred qualifying capital under GITA Asset and has not been approved for Green Technology Incentive.
b) Companies within the same group incurring the qualifying capital expenditure:
  • The project carried out in building/location separately from activities carried out by holding company or related companies;
  • The plant, machinery and equipment used shall be separately used and shall not be transferred from holding company or related companies;
  • Not shares the same employees as per holding company or related companies except for the management staff and directors of the Company;
  • This project must not result in a reduction in the investment of holding company or related companies.
c) To comply all the following criteria:
  • Minimize the degradation of the environment or reduce greenhouse emission;
  • Promotes health and improvement of environment; and
  • Conserves the use of energy, water and/or other forms of natural resources or promote the use of renewable energy or able to recycle waste material resources.

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Why Singapore?

Why Singapore

WHY SINGAPORE

Singapore is a strategic base to implement your growth strategies and to manage and integrate your operations for the region and beyond. Being one of the lowest income tax rate countries, Singapore has further announced a full and partial tax exemption for the newly incorporated company for the first 3 years consecutively.

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Malaysia Cold Chain Facilities

Cold Chain Facilities-cover

Malaysia Cold Chain Facilities

Investment in cold chain facilities or providing services for perishable agricultural produce such as fruits, vegetables, flowers, ferns, meat and aquatic products eligible for tax exemption up to 70% of statutory income or Investment Tax Allowance of 60% up to 5 years.

Companies providing cold chain facilities and services for perishable agricultural products i.e. fruits, vegetables, flowers, ferns,
meat and aquatic products are eligible for:

Type of Company
Incentive
New Company

  • Pioneer Status with tax exemption of 70% of statutory income for a period of
    5 years;

  • Unabsorbed pioneer losses after the end of pioneer period are allowed to be
    carried forward for 7 consecutive year of assessments;

    OR

  • Investment Tax Allowance (ITA) of 60% on the qualifying capital expenditure
    incurred for 5 years;

  • Unutilised allowances can be carried forward until fully absorbed.

Existing Company
(Company intend to reinvest in cold chain facilities for perishable agricultural produce)
  • Pioneer Status with tax exemption of 70% of increased statutory income for
    a period of 5 years;
  • Unabsorbed pioneer losses after the end of pioneer period are allowed to be
    carried forward for 7 consecutive year of assessments;

    OR

  • Investment Tax Allowance (ITA) of 60% on the additional qualifying capital
    expenditure for 5 years;
  • Unutilised allowances can be carried forward until fully absorbed.
Eligible Company
Eligible Activities
  • Must be Independent Service Provider (i.e the company conducts all of the cold chain activities on its own);
  • At least 60% of the company’s revenue must be derived from the provision of cold room facilities, refrigerated transportation and other related services for local agriculture produce.
  • Provision of cold room facilities or refrigerated transportation for local agricultural produce with or without other post-harvest activities including cleaning, washing, grading, freezing/chilling and packing;
  • Provision of cold room facilities or refrigerated transportation for local processed food products.

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Malaysia Global Services Hub Tax Incentive

MSC Malaysia-Status-Service-Incentive

MALAYSIA GLOBAL SERVICES HUB TAX INCENTIVE

With Global Services Hub tax incentive, the companies will benefit from corporate income tax rates of 5% or 10% based on outcome for a period of up to ten (10) years. This incentive aims to establish Malaysia as a competitive hub in the global service sector in the region.
Global Services Hub tax incentive is an outcom-based incentives which uses a tiered rate in the provision of incentives on service income, or service and trading income achieved.

1. Overview Of The Incentive

An approved Global Services Hub company is eligible to enjoy the following concessionary corporate income tax rates:
Category
Concessionary Corporate Income Tax Rate
Period of incentive (Blocks Years)
Type of income exempted
A. New Company
Tier 1 : 0%
Tier 2 : 5%
5 (+5)
(i) Services income; or
(ii) Services and B Existing Company trading income
B. Existing Company
Tier 1 : 5% on value added income
Tier 2: 10% on value added income
5
(i) Services income; or
(ii) Services and B Existing Company trading income
Preferential income tax rate of 15% be given for a period of 3 consecutive years of assessment limited to three (3) non- citizen individuals holding key/C-Suite positions with a monthly salary of at least RM35,000 in a new company approved with Global Services Hub tax incentive.

2. Qualifying Services and Additional Services

  • Regional P&L / Business Management Unit;
  • Strategic Business Planning;
  • Corporate Development;

    AND

    Any 2 qualifying activities under the services category as follows:
  • Strategic services;
  • Business services;
  • Shared services;
  • Other services.

3. Outcome-based conditions

  • Annual operating expenditure;
  • High value full time employees;
  • C-suite with minimum salary of RM35,000;
  • Locally ancillary services;
  • Collaboration with higher education institution/TVET;
  • Training for Malaysian students/citizen;
  • Environmental. Social and Governance (ESG) elements; or
  • Other conditions as determined by the Minister of Finance.
Application received by Malaysian Investment Development Authority (MIDA) from 14 October 2023 to 31 December 2027.

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Why Dubai

Why Dubai

Why Dubai

The UAE’s 0% corporate tax policy transcends numbers; it’s an invitation to transform your business aspirations into reality. With a robust infrastructure, a strategic location, and a welcoming environment, the UAE beckons entrepreneurs and visionaries to harness its potential.

One of the LOWEST TAX RATES in the world, embracing 0% Corporate Tax in the UAE

The United Arab Emirates (UAE) stands as a global beacon of business innovation and prosperity. In the heart of this thriving economic landscape, the UAE offers an array of incentives and advantages to both local and international companies. At the core of this allure is the UAE’s corporate tax policy, a game-changer that propels businesses towards uncharted heights.

Tax Exemptions for Companies in Dubai vs Malaysia

Why Dubai-Tax Exemption
Tax
Rate
Conditions
Value-Added Tax (VAT)
While the UAE champions business freedom, it maintains a balanced approach with a 5% VAT rate, obliging businesses with revenue exceeding AED 375,000 Yet, the UAE’s commitment to global trade is evident as exports of goods remain untaxed, fostering an environment ripe for international commerce.
5%
0%
Businesses with revenue > AED 375,000 (USD 102,000)
Export of goods
Value-Added Tax (VAT)
In the UAE, the benefits extend beyond corporate tax. Dividends, capital gains, intragroup transactions, and reorganizations all enjoy a tax rate of 0%, fostering an ecosystem where business can flourish without restraint.
0%
Dividend and Capital gain, as well as intragroup transaction and reorganisations.

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