MALAYSIA PRINCIPAL HUB TAX INCENTIVE

Principal Hub is a locally incorporated company that uses Malaysia as a base for conducting its regional or global businesses and operations to manage, control, and support its key functions including management of risks, decision making, strategic business activities, trading, finance, management and human resource.

1. Overview Of The Incentive

An approved Principal Hub company is eligible to enjoy the following concessionary corporate income tax rates on income derived from qualifying activities:
Category
Concessionary Corporate Income Tax Rate
Blocks (Years)

Tier 2

Tier 3
A. New Company
Tier 1 : 0%
Tier 2 : 5%
5 (+5)
Trading and services income derived from qualifying activities
Refer to Appendix A
B. Existing Company (Approved OHQ/IPC/RDC with or without incentive)
10% on the total statutory income
5
Trading and services income derived from qualifying activities
Refer to Appendix B
C. Existing companies (Existing Manufacturing / Services Companies)
10% on the total statutory income
5
Trading and services income derived from qualifying activities
Refer to Appendix C
Royalties and other income derived from Intellectual Property Rights (IPRs) will be excluded from this incentive.

2. Minimum Requirements

  • Local incorporation under the Companies Act 2016 and resident in Malaysia.
  • No local equity/ownership condition.
  • Paid-up capital of more than RM2.5 million.
  • Minimum annual sales of RM500 million (Additional requirement for companies applying for tax exemption on trading income).
  • Serve and control a minimum number of network companies1.
1 Network companies defined as related companies or an entity within a same group including subsidiary, branches and joint venture; or non-related companies have contractual agreement with applicant or applicant’s ultimate company in regards with applicant’s business and supply chain for at least 3 years.

3. List Of Qualifying Services

Strategic Services
Business Services
Shared Services
a. Regional P&L/Business Unit Management
b. Strategic Business Planning and Corporate Development
c. Corporate Finance Advisory Services
d. Brand Management
e. IP Management
f. Senior-level Talent Acquisition and Management
a. Bid and Tender Management
b. Treasury and Fund Management
c. Research, Development & Innovation1
d. Project Management
e. Sales and Marketing
f. Business Development
g. Technical Support and Consultancy
h. Information Management and Processing
i. Economic/ Investment Research Analysis
j. Strategic Sourcing, Procurement and Distribution
k. Logistics Services
a. Corporate Training and Human Resource Management
b. Finance & Accounting (Transactions, Internal Audit)

4. Requirement

  • To hire higher and diverse set of managerial/technical/professional skills such as management, analytics, communication, problem-solving and proficiency in information technology with a minimum salary of RM5,000 and RM25,000 respectively.
  • To provide structured internship and training programs approved by Talent Corporation Malaysia for Malaysians.

5. Facilities Accorded To Principal Hub

  • Customs duty exemption when bringing raw materials, components, or finished products into free industrial zones, licensed manufacturing warehouse, free commercial zones and bonded warehouses for production or re-packing, cargo consolidation and integration before distribution to its final consumers for goods-based companies.
  • No local equity/ownership requirements.
  • Expatriate post based on requirements of business plan subject to current policy of expatriate.
  • Allowed to acquire foreign professional services when locally-owned services are not available.
  • Freedom to acquire fixed assets for the purpose of carrying out operations.
  • Foreign Exchange Administration flexibilities.

Eligibility Criteria For Principal Hub 2.0

Category - I. New Company - Manufacturing/Services Company*

2-tier Incentive
Tier 2

Tier 1

Blocks
5
+5
5

+5

Tax rate
5%
+5
5%
5%
High Value Jobs with monthly salary of at least RM5,000.00

High Value Jobs
Jobs that require higher and more diverse set of managerial/ technical/ professional skills such as management, analytics, communication, problem-solving, and proficiency in information technology
30
** PH Base Commitme nt + 20%
50
** PH Base Commitment + 20%
At least 50% of the high value jobs must be filled up by Malaysians
** PH Base Commitme nt + 20%

Including key positions
– Monthly salary of at least RM25,000.00
4
** PH Base Commitme nt + 20%
5
Annual Operating Expenditure
RM5 mil
** PH Base Commitme nt + 30%
RM10 mil
** PH Base Commitme nt + 30%
Qualifying Services
Regional P&L/Business Unit Management, Strategic Business Planning & Corporate Development + 2
Minimum Serving/Business Control of No. of Network Companies
10
(Including 3 Related Companies)
10
(Including 3 Related Companies)
15
(Including 4 Related Companies)
15
(Including 4 Related Companies)

Use of Local Ancillary Services

Local Financial Institution Services (including finance and treasury), logistics, legal and arbitration services, finance and treasury services)
Trading of Goods Annual Sales Turnover
(Additional requirement for companies applying for tax exemption on trading income)
RM500 million
  • PH company upon its approval must comply with the stipulated conditions during the exemption period.
  • Where in any year of assessment of the exempted period, the PH company fails to comply with the stipulated conditions, the PH company may not enjoy the exemption on statutory income for that year of assessment.
** PH Base Commitment: To use commitment from end of Year 5 (Block 1).

Concessionary Tax Rate of 10%

Category - II. Existing Companies approved IPC, RDC, OHQ with or without incentive*

Criteria
Details
High Value Jobs with monthly salary of at least RM5,000.00

High Value Jobs
Jobs that require higher and more diverse set of managerial/ technical/ professional skills such as management, analytics, communication, problem- solving, and proficiency in information technology

At least 50% of the high value jobs must be filled up by Malaysians

Including 5 key positions
– Monthly salary of at least RM25,000.00
Approved without incentive:
Existing number of high value jobs + 30%

Approved with incentive:
Total 60 high value jobs or existing number of high value jobs + 20%, whichever is higher
Annual Operating Expenditure
Approved without incentive:
RM10 million or average operating expenditure for the past 3 years + 30% whichever is higher

Approved with incentive:
Annual operating expenditure of RM13 million or average operating expenditure for the past 3 years + 20% whichever is higher
Qualifying Services
Approved without incentive:
Regional P&L/ Business Unit Management, Strategic Business Planning & Corporate Development + 2

Approved with incentive:
Regional P&L/ Business Unit Management, Strategic Business Planning & Corporate Development + 3
Minimum Serving/Business Control of No. of Network Companies
Approved without incentive:
10 (Including 4 Related Companies)

Approved with incentive:
15 (Including 5 Related Companies)
Use of local Ancillary Services
Local Financial Institution Services (including finance and treasury), logistics, legal and arbitration services, finance and treasury services)
Trading of Goods Annual Sales Turnover
(Additional requirement for companies applying for tax exemption on trading income)
Average sales turnover for the past 3 years or RM500 million whichever is higher
Structured Internship Programmes/ equivalent Training Schemes introduced by the Government
Approved without incentive:
Conduct Structured Internship Programmes / equivalent Training Schemes to training at least one (1) graduate every year

Approved with incentive:
Conduct Structured Internship Programmes / equivalent Training Schemes to train at least two (2) graduates every year
Structured Training Programmes
Approved without incentive:
At least three (3) local workers to undergo structured training programs for upgrading skills in related fields during incentive period.

Approved with incentive: At least 20% of local workforce from the entire workforce to undergo structured training programs for upgrading of skills in related qualifying services during incentive period.
  • PH company upon its approval must comply with the stipulated conditions during the exemption period.
  • Where in any year of assessment of the exempted period, the PH company fails to comply with the stipulated conditions, the PH company may not enjoy the exemption on statutory income for that year of assessment.

Concessionary Tax Rate of 10%

Category - III. Existing Manufacturing/Services Company*

Blocks
5
High Value Jobs with monthly salary of at least RM5,000.00

High Value Jobs
Jobs that require higher and more diverse set of managerial/ technical/ professional skills such as management, analytics, communication, problem- solving, and proficiency in information technology

At least 50% of the high value jobs must be filled up by Malaysians

Including 5 key positions
– Monthly salary of at least RM25,000.00
Total 30 high value jobs or existing number of high value jobs + 30%, whichever is higher
Annual Operating Expenditure
Annual operating expenditure of RM10 million or average operating expenditure for the past 3 years + 30% whichever is higher
Qualifying Services
Regional P&L/Business Unit Management, Strategic Business Planning & Corporate Development + 2
Minimum Serving/Business Control of No. of Network Companies
10 (Including 5 Related Companies)
Use of local Ancillary Services
Local Financial Institution Services (including finance and treasury), logistics, legal and arbitration services, finance and treasury services)

Trading of Goods Annual Sales Turnover
(Additional requirement for companies applying for
tax exemption on trading income)

Average sales turnover for the past 3 years or
RM500 million whichever is higher.

Trading of Goods Annual Sales Turnover
(Additional requirement for companies applying for tax exemption on trading income)

Structured Internship Programmes / equivalent
Training Schemes introduced by the Government

Structured Training Programmes
Average sales turnover for the past 3 years or RM500 million whichever is higher.
Approved with incentive:
Conduct Structured Internship Programmes/ equivalent Training Schemes to train at least one (1) graduate every year.
At least 10% of local workforce from the entire workforce to undergo structured training programs for upgrading of skills in related qualifying services during incentive period
  • PH company upon its approval must comply with the stipulated conditions during the exemption period.
  • Where in any year of assessment of the exempted period, the PH company fails to comply with the conditions on annual business spending, annual high value jobs and annual value of sales, the PH company may not enjoy the exemption on statutory income for that year of assessment.