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Malaysia Digital Tax Incentive

Malaysia Digital Tax Incentive-cover

Malaysia Digital (MD) Status Incentive (formerly known as MSC Malaysia Status)

MALAYSIA DIGITAL (“MD”) STATUS SERVICE INCENTIVE (formerly known as MSC Malaysia Status)

On 4th July 2022, The Government of Malaysia through the Malaysia Digital Economy Corporation (“MDEC”) launched Malaysia Digital (“MD”) as the new national strategic initiative to accelerate and further develop digital economy replaces the Multimedia Super Corridor (“MSC”) Malaysia.

1. ELIGIBILITY CRITERIA

To be eligible to apply for the MD Status Company, companies are required to meet the following criteria:-
a) The company incorporated under the Companies Act 2016 and resident in Malaysia; AND
b) Proposing to carry out one or more of the MD activities (please refer Appendix A).
c) Other general conditions:-
  • To comply with all applicable permit/licensing requirements and to ensure that the required permit/license has been obtained from the relevant authority for the implementation of MD Approved Activities.
With effective from 25th March 2022, MD Status Company are not subjected to minimum office space requirements and are allowed to operate and undertake MD Approved Activities in any location within Malaysia.

2. BENEFITS OF MD STATUS COMPANIES

i. MD BILL OF GUARANTEES (BoGs)

  • A set of incentives, rights and privileges available for MD status companies;
  • MD status companies eligible to access or apply for, amongst others:-
    1. Tax incentives (income tax exemption or investment tax allowance);
    2. Foreign knowledge worker quota and passes;
    3. Multimedia / ICT equipment import duty and sales tax exemptions;
    4. Freedom of ownership by exempting local ownership requirements;
    5. Flexibility to source capital and funds globally

ii. OTHER BENEFITS

MD Status companies are also eligible to access facilitation of other benefits as below, subject to certain criteria and conditions:-
  • Access to the local and international market and ecosystem;
  • Business matching and partnership;
  • Grant and funding facilitation; and/or
  • Participation in MD catalytic programs.

3. COMPANIES WITH MD STATUS COMPANY WILL HAVE TO COMPLY WITH THE FOLLOWING CONDITIONS WITHIN 12 MONTHS FROM THE DATE OF AWARD OF SUCH STATUS:

Activity

Commencement of operation and undertaking of the Malaysia Digital Approved Activities in Malaysia.

Knowledge Workers

Minimum of 2 full-time employees (comprising knowledge workers) with minimum average monthly base salary of RM5,000 employed for the MD Approved Activities.

Operating Expenditure

Minimum annual operating expenditure of RM50,000 incurred for the MD Approved Activities.

Paid-up Capital

Minimum of RM1,000.00.
As per MDEC’s announcement, the guidelines for the above tax incentives will be released by soon. Please be guide accordingly.

THE MALAYSIA DIGITAL ACTIVITIES Research, development and commercialization of solution and/or provision of services in relation to any of the following technologies or areas:

  1. Big data analytics (BDA);
  2. Artificial intelligence (AI);
  3. Financial technology (FinTech);
  4. Internet of things (IOT);
  5. Cybersecurity (technology/software/design and support);
  6. Data centre and cloud (technology/software/design and support);
  7. Blockchain;
  8. Creative media technology;
  9. Sharing economy platform;
  10. User interface and user experience (UI/UX);
  11. Integrated circuit (IC) design and embedded software;
  12. 3D printing (technology/software/design and support);
  13. Robotics (technology/software/design) Autonomous (technology/software/design and support);
  14. Systems/network architecture design and support;
  15. Global business services or knowledge process outsourcing;
  16. Virtual, augmented and/or extended reality – new/additional activity ;
  17. Drone technology – new/additional activity ;
  18. xix. Advance telecommunication technology – new/additional activity ; OR
  19. Other emerging technologies deemed significant for the digital ecosystem subject to approved by the Approval Committee – new/additional activity.

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Featured Ideas & Insights

Why Listing on 1Exchange (1X)?

Listing on 1Exhange-cover

Why Listing on 1Exchange (1X)?

Why Listing on 1Exchange (1X)?

1X’s strategic shareholder is SGX. 1X is widely regarded as 3rd Board and 1st MAS-regulated and cost-effective Private Securities Exchange in Singapore to design for private companies to enable them to trade on private share and provide ESOS and liquidity for their investors and employees, respectively.

 

Yes, you may be eligible! if your company has revenue of at least SGD 2 million with at least 2 years operating history, and the listing process only takes about 2-3 months. 

您公司有考虑在 1Exchange (1X) 上市？

如果您的公司符合以下条件：

  • 营业额：至少新加坡2百万新币。
  • 经营历史：至少2年，需提供审计过的财务报表。
  • 最低可流通股份：至少占股份的10%，且价值至少新加坡2百万新币。

时间范围：2至3个月。

谁是1 Exchange (1X)?

新加坡交易所（SGX）是1Exchange（1X）的战略股东和合作伙伴之一，1X是新加坡首家受金融管理局监管的私人证券交易所，被广泛视为全球金融中心的第三板块。

 

1X是一个“轻触式”和成本效益高的私人上市场所，专门为家族企业、成长中的公司和准备上市公司而设计。

 

此交易所提供市场导向的解决方案，例如直接私人上市和员工股票期权交易。通过1X上市，创始人、所有者和在成长阶段的公司依然可以在保留灵活性和控制权的同时，实现部分退出和可交易性的私人股份。

 

在1X上的私人投资者可以自由、安全地买入和卖出股份，随时随地可以达到实现流动性。

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Why Singapore?

Why Singapore

Why Singapore?

1) One of the LOWEST TAX RATES in the world

With effect from 2010, Singapore corporate income tax rate has further reduced from 18% to 17%, being one of the lowest tax rates in the world. Singapore Government has declared a new start-up tax exemption and partial tax exemption for newly incorporated and existing companies:

Tax Exemptions for Newly Start-up Companies in Singapore vs Malaysia
Tax Exemptions for Newly Start-up Companies in Singapore vs Malaysia
  1. (RM 300K x 17%) – (SGD 100k x 4.25% x3)
  2. [(RM 500k – RM 300k) x 17% + (RM 100k x 24%)] – [(SGD 200k – SGD 100k) x 8.5% x 3]]
  3. RM 300k to RM 500k @ 17% ; > RM 500k @ 24%

4.3% tax on first S$100K chargeable income

For a newly incorporated company, the corporate income tax rate is 4.3% on the first S$100k (˜RM300k) of chargeable income for the first 3 years of assessment consecutively.

8.5% tax on chargeable income of above S$100K up to S$200K

The newly incorporated companies are continued to enjoy for the partial tax exemption which effectively translates to about 8.5% tax rate on chargeable income of above S$100,000 up to S$200,000 per annum. The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of 17%.

Tax Exemptions for Existing Companies in Singapore vs Malaysia
Tax Exemptions for Existing Companies in Singapore vs Malaysia
  1. (RM 30K x 17%) – (SGD 10k x 4.25% x3)
  2. [(RM 500k – RM 30k) x 17% + (RM 100k x 24%)] – [(SGD 200k – SGD 10k) x 8.5% x 3]]
  3. RM 300k to RM 500k @ 17% ; > RM 500k @ 24%

 

The 4th years of assessment and onwards, the companies pay only 4.25% tax on their first S$10,000 of chargeable Income and 8.5% for the next S$190,000.

 

The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of 17%.

2) Engage in TRIANGULAR or TETRAGONAL trade

The companies engaged in international transactions among two or more countries, for instance, the companies purchase goods from e.g. China, and then sell them to e.g. America or trade domestically, Malaysia. This is when the companies need a lower tax trading company (2) to act as the intermediary to issue invoice and packing list in order to strengthen their competitive power in the international or local market.

3) Government Incentives

Overview of government incentives

Internationalisation

Incentives Available

Benefits

Regional Headquarters (RHQ) Award
Reduced corporate tax rate of 15% on incremental income from qualifying HQ activities.
International Headquarters (IHQ) Award

Reduced corporate tax rates of (0%, 5% or 10%) on qualifying income could be considered in discussion with the Singapore Economic Development Board (EDB).

Mergers & Acquisitions (M&A) Scheme

The acquiring company is granted the following benefits:

  • M&A allowance equals to 25% (capped at S$10 million) of the total acquisition value capped at S$40 million per YA.
  • Stamp duty relief capped at S$80,000 for each financial year. The relief is granted on any contract, agreement or transfer documents pertaining to the

    acquisition of the ordinary shares in the target company.

  • Double Tax Deduction (DTD) on the transaction cost capped at S$100,000 incurred during the share acquisition process.
International Growth Scheme (IGS)

Qualifying Singapore companies will enjoy a concessionary tax rate of 10% for a total of 5 years on their incremental income from approved qualifying activities.

Double Tax Deduction (DTD) for Internationalisation Scheme
Up to 200% tax deduction on qualifying expenditure incurred on qualifying market expansion and investment development activities per YA.

The qualifying expenditures include:
  • Qualifying salary expenses incurred for employees posted overseas in an overseas entity
  • Overseas business development trips and missions
  • Overseas investment study trips and missions
  • Overseas trade fairs
  • Local trade fairs approved by IE Singapore or STB
Market Readiness Assistance (MRA) grant

Funding support of 70% of eligible costs with a yearly cap of S$20,000 per company. The eligible costs for marketing activities including overseas market set-up, business matching, market promotion, and other.

Trading

Incentives Available

Benefits

Global Trader Programme

A concessionary corporate tax rate of 5% or 10% for a renewable 3 or 5-year period on qualifying transactions/trades in qualifying commodities, futures and derivatives (including structured commodity financing).

Manufacturing and Services

Incentives Available

Benefits

Pioneer Incentive

Tax exemption on income from qualifying activities.

Development & Expansion Incentive (DEI)

Reduced tax rate from 5% to 15% on incremental income from qualifying activities.

Investment Allowance (IA)

Allowance (on top of normal capital allowance) on a percentage of approved fixed capital expenditure.

Integrated Investment Allowance (IIA)

Additional allowance on fixed capital expenditure incurred on qualifying productive equipment placed with an overseas company for an approved project.

Land Intensification Allowance (LIA)

Initial allowance of 25% and annual allowance of 5% on qualifying capital expenditure incurred for the construction or renovation/extension of a qualifying building or structure. Annual allowances of 5% are granted until total allowance amounts to 100%of qualifying capital expenditure.

Automation Support Package (under SPRING)

  • Capability Development Grant (CDG)
  • Investment Allowance (IA)
  • Enhanced SME Equipment Loan
Up to S$1 million grant support for the roll-out or scaling-up of automation projects at up to 50% of the qualifying cost.

Qualifying projects may be eligible for an IA of 100% on the amount of approved capital expenditure, net of grants. The approved capital expenditure is capped at S$10 million per project.

Under SPRING’s Local Enterprise Finance Scheme (LEFS), the government’s risk-share with participating financial institutions will be increased from 50% to 70% for qualifying projects undertaken by SMEs. The LEFS will also be expanded to cover equipment loan for non-SMEs at 50% risk-share with participating financial institutions. Local SMEs can apply for equipment and factory loans of up to S$15 million.
Financial and Treasury

Incentives Available

Benefits

Finance & Treasury Centre (FTC)

Reduced corporate tax rate of 8% on income derived from qualifying services/ activities. Withholding tax exemption on interest payments on loans from banks and approved network companies for FTC activities.

Financial Sector Incentive (FSI)

Reduced tax rate of 5% for qualifying Enhanced Tier financial activities and 12% or 10% for Standard Tier financial activities.

Research and Development (R&D) and intellectual property (IP) management

Incentives Available

Benefits

Research Incentive Scheme for Companies (RISC)

Co-funding to encourage and assist businesses to set up R&D centres in Singapore and develop in-house R&D capabilities in strategic areas of technology.

 

Supportable project costs include expenditure in the following:

  • Manpower cost (30% to 50% support)
  • Equipment, materials, consumables and software (30% support)
  • Singapore-based professional services (30% to 50% support)
  • IPRs, e.g. licensing, royalties, technology acquisition (30% support)
Initiatives in New Technology (INTECH)
Co-funding to support manpower development in the application of new technologies, industrial R&D and professional know-how. 30% support for qualifying items for either trainee OR training cost, subjected to various sub-caps.
Approved Foreign Loan Incentive (AFL)

Reduced withholding tax of 0%, 5% or 10% on interest payments on loans taken to purchase productive equipment.

Approved royalties incentive (ARI)

Reduced or nil withholding tax rate on approved royalties, fees or contributions to research and development costs made to a non-tax resident.

Writing-down allowances for IP acquisition (S19B)
Automatic 5/10/15-year write-down if legal and economic ownership of IP are acquired. EDB’s approval is required if only economic ownership of IP rights is acquired.
Maritime, shipping and logistics

Incentives Available

Benefits

Maritime Sector Incentive (MSI) – Singapore Registry of Ships (MSI-SRS) and Approved International Shipping (MSI-AIS)

Tax exemption on qualifying shipping income from operating Singapore and foreign-flagged ships, provision of specified ship management services, and income from foreign exchange and risk management activities which are carried out in connection with or incidental to the operations of ships for 5 or 10 years.

MSI – Shipping Related Support Services (MSI-SSS) Award

Concessionary tax rate of 10% on the incremental income derived from the provision of the following qualifying approved shipping-related support services for a 5-year renewable period:

  • Ship broking;
  • Forward freight agreement (FFA) trading;
  • Ship management;
  • Ship agency;
  • Freight forwarding and logistics services; and
  • Corporate services rendered to qualifying approved related parties who are carrying on business of shipping – related activities.
MSI – Maritime Leasing (MSI-ML) Award
Tax concessions for up to 5 years on qualifying leasing or management income.
Maritime Innovation & Technology (MINT) Fund

To promotes and encourages upstream research, product and solution development relevant to the maritime industry in Singapore.

 

Co-funding up to 50% of total project costs consisting of manpower, equipment, material, professional services, IP and other ancillary costs.

4) TAX EXEMPTION on Dividend declared from Singapore

Dividend declared out of the profit derived from Singapore Company and received in Malaysia is exempted from tax(3).

5) AUDIT EXEMPTION of a Singapore Company

A company incorporated on or after 1 July 2015, if a private company that fulfils at least two of the following three quantitative criteria in each of the immediate past two financial years is exempted from audit (4) :

(a) Total annual revenue of not more than SGD 10 million;

(b) Total assets of not more than SGD 10 million;

(c) Number of employee of not more than 50.

Note:

  1. a) It is incorporated in Singapore and a tax resident of Singapore for that Year of Assessment. b) It has no more than 20 shareholders throughout the basis period relating to that Year of Assessment and all its shareholders are individuals throughout the basis period relating to that Year of Assessment; or there is at least one individual shareholder with a minimum of 10% shareholding. c) Its principal activity is not related to (i) investment holding, or (ii) property developer for sales, investment, or both.
  2. To consider a company as resident in Singapore, the control and management of the business must be exercised in Singapore. Though the term “control and management” is not clearly defined by authorities, a generally accepted consensus is that it refers to the policy level decision making at the level of Board of Directors and not the day-to-day decision making and operations.
  3. Section 127 (1) – Exemptions from tax. Any income specified in Part 1 of Schedule 6 shall be exempt from tax. Part 1 Schedule 6,para 28 (1), Income of any person, other than a resident company carrying on the business of banking, insurance or sea or air transport, for the basis year of assessment derived from sources outside Malaysia and received in Malaysia Part 1 schedule 6, para 28(1), exempt income of any person derive from sources outside Malaysia and received in Malaysia (See also exception).
  4. Existing safeguards will however be retained, such as requiring all companies to keep proper accounting records, and empowering shareholders with at least 5% voting rights to require a company to prepare audited accounts.

1) One of the lowest tax rates in the world

With effect from 2010, Singapore corporate income tax rate has further reduced from 18% to 17%, being one of the lowest tax rates in the world. Singapore Government has declared a new start-up tax exemption and partial tax exemption for newly incorporated and existing companies.

 

Tax Exemptions for Newly Start-up Companies in Singapore vs Malaysia

  1. (RM 300K x 17%) – (SGD 100k x 4.25% x3)
  2. [(RM600k-RM300k) x 17%] – [(SGD200k-SGD100l) x 8.5% x 3]
  3. RM 300k to RM 600k @ 17% ; > RM 600k @ 24%

4.25% tax on first S$100K chargeable income

For a newly incorporated company, the corporate income tax rate is 4.25% on the first S$100k (≈RM300k) of chargeable income for the first 3 years of assessment consecutively.

8.50% tax on chargeable income of above S$100K up to S$200K

The newly incorporated companies are continued to enjoy for the partial tax exemption which effectively translates to about 8.5% tax rate on chargeable income of above S$100,000 up to S$200,000 per annum. The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of 17%.

Tax Exemptions for Existing Companies in Singapore vs Malaysia

  1. (RM30k x 17%) – (SGD100k x 4.25% x3)
  2. [(RM600k-RM30k) x 17%] – [(SGD200k-SGD10k) x 8.5% x 3]
  3. RM 300k to RM 600k @ 17% ; > RM 600k @ 24%

The 4th years of assessment and onwards, the companies pay only 4.25% tax on their first S$10,000 of chargeable Income and 8.50% for the next S$190,000.

The chargeable income above S$200,000 will be charged at the normal headline corporate tax rate of 17%%.

  1. It is incorporated in Singapore and a tax resident of Singapore for that Year of Assessment.
  2. It has no more than 20 shareholders throughout the basis period relating to that Year of Assessment and all its shareholders are individuals throughout the basis period relating to that Year of Assessment; or there is at least one individual shareholder with a minimum of 10% shareholding.
  3. Its principal activity is not related to (i) investment holding, or (ii) property developer for sales, investment, or both.

2) Engage in TRIANGULAR or TETRAGONAL trade

The companies engaged in international transactions among two or more countries, for instance, the companies purchase goods from e.g. China, and then sell them to e.g. America or trade domestically, Malaysia. This is when the companies need a lower tax trading company (2) to act as the intermediary to issue invoice and packing list in order to strengthen their competitive power in the international or local market.

3) Government Incentives

Overview of government incentives

Depending on your company’s business plans, you may consider various tax incentives and grants as follows:

Internationalisation

Incentives Available

Benefits

International Headquarters (IHQ) Award

Concessionary corporate tax rates of 5% or 10% for companies that commit to anchor substantive HQ activities in Singapore to manage, coordinate and control regional business operations. The award is accompanied with the award of Development and Expansion Incentive governed by Singapore Economic
Development Board (EDB).

Mergers & Acquisitions (M&A) Scheme

The acquiring company is granted the following benefits:

  • 25% of M&A allowance (capped at S$10 million) of the total acquisition value capped at S$40 million per YA.
  • Double Tax Deduction (DTD) on the transaction cost capped at S$100,000 incurred during the share acquisition process.
Double Tax Deduction (DTD) for Internationalisation Scheme

Enjoy up to 200% tax deduction on qualifying expenditure incurred on marketexpansion and investment development activities.

The qualifying expenditures include:

  • Qualifying salary expenses incurred for employees posted overseas in an overseas entity
  • Overseas business development trips and missions
  • Overseas investment study trips and missions
  • Overseas trade fairs
  • Local trade fairs approved by IE Singapore or STB
Market Readiness Assistance (MRA) grant

Funding support of 50% of eligible costs, capped at S$100,000 per company per new market by Enterprise Singapore. The eligible costs for marketing activities including overseas market set-up, business development and market promotion.

Trading

Incentives Available

Benefits

Global Trader Programme

A concessionary corporate tax rate of 5% or 10% for a renewable 3 or 5-year period on qualifying trading income granted by Enterprise Singapore, which includes income from physical trading, brokering of physical trades, derivative trading income, and income from structured commodity financing activities, treasury activities and advisory services in relation to mergers and acquisitios.

Manufacturing and Services

Incentives Available

Benefits

Pioneer Incentive

Tax exemption on income from qualifying activities for a period of not exceeding 15 years, administered by Economic and Development Board (EDB).

Development & Expansion Incentive (DEI)

Reduced tax rate of 5% or 10% on incremental income from qualifying activities, limited to 5 years. The incentive is governed by Economic and Development Board (EDB).

Investment Allowance (IA)

Allowance of up to 100% (on top of normal capital allowance) on approved fixed capital expenditure. This incentive is administered by Economic and Development Board (EDB).

Integrated Investment Allowance (IIA)

Additional allowance on fixed capital expenditure incurred on qualifying productive equipment placed with an overseas company for an approved project.

Land Intensification Allowance (LIA)

Initial allowance of 25% and annual allowance of 5% on qualifying capital expenditure incurred for the construction or renovation/extension of a qualifying building or structure. Annual allowances of 5% are granted until total allowance amounts to 100% of qualifying capital expenditure. Approvals for the incentive will be granted by the Economic Development Board (EDB)

Automation Support Package (under SPRING)

  • Enterprise Development Grant (EDG)
  • Investment Allowance (IA)
  • Enhanced SME Equipment Loan

Grant support up to 70% of qualifying project costs such as equipment, training and consultancy.

 

Qualifying projects may be eligible for an IA of 100% on the amount of approved capital expenditure, net of grants. The approved capital expenditure is capped at S$10 million per project.

 

Under Enterprise Financing Scheme (EFS), qualifying SMEs may receive up to 70% government’s risk-share with participating financial institutions for qualifying projects. SMEs can apply for fixed asset loans of up to S$30 million.

Financial and Treasury

Incentives Available

Benefits

Finance & Treasury Centre (FTC)

Enjoy concessionary corporate tax rate of 8% for five years on income derived from qualifying services/ activities as well as withholding tax exemption on interest payments on loans from banks and approved network companies for FTC activities. This incentive is administered by Economic and Development Board (EDB).

Financial Sector Incentive (FSI)

Concessionary tax rate of 10% or 13.5% for licensed financial institutions, from large universal banks, fund managers to capital market players. This incentive is governed by Monetary Authority of Singapore (MAS)

Research and Development (R&D) and intellectual property (IP) management

Incentives Available

Benefits

Research Incentive Scheme for Companies (RISC)

Co-funding to encourage and assist businesses companies in Singapore to conduct or expand their research and development (R&D) activities in science and technology. This scheme is administered by Economic and Development Board (EDB).

 

Supportable project costs include expenditure in the following:

  • Manpower cost (up to 50% support)
  • Equipment, materials, consumables and software (up to 30% support)
  • Singapore-based professional services (up to 30% support)
  • IPRs, e.g. licensing, royalties, technology acquisition (up to 30% support)

Intellectual Property Development Incentive (IDI)

Reduced tax rate of 5% or 10% on a percentage of qualifying IP income for an initial period of not exceeding 10 years, and may be further extended for a period or periods not exceeding ten years each. This incentive is administered by Economic and Development Board (EDB).

Approved Foreign Loan Incentive (AFL)

Reduced or nil withholding tax rate on interest payments on loans with minimum amount of S$20 million taken to purchase productive equipment. This incentive is administered by Economic and Development Board (EDB).

Approved royalties incentive (ARI)

Reduced or nil withholding tax rate on approved royalties, fees or contributions to research and development costs made to a non-tax resident.. This incentive is administered by Economic and Development Board (EDB).

Writing-down allowances for IP acquisition (S19B)

Automatic 5/10/15-year writing-down allowances on capital expenditure incurred for IPR acquisitions with legal and economic ownership. EDB’s approval is required if only economic ownership of IP rights is acquired.

Maritime, shipping and logistics

Incentives Available

Benefits

Maritime Sector Incentive (MSI) – Singapore Registry of Ships (MSI-SRS) and Approved International Shipping (MSI-AIS)

Tax exemption on qualifying shipping income from operating Singapore and foreignflagged ships, provision of specified ship management services, and income from foreign exchange and risk management activities which are carried out in connection with or incidental to the operations of ships for either a 10-year renewable period or a 5-year non-renewable period, with the option of graduating to the 10-year renewable award at the end of the 5-year period. This incentive is administered by Maritime and Port Authority of Singapore (MPA).

MSI – Shipping Related Support Services (MSI-SSS) Award

Concessionary tax rate of 10% on the incremental income derived from carrying out approved shipping-related support services for a 5-year renewable period. This incentive is administered by Maritime and Port Authority of Singapore (MPA).

 

  • Ship broking;
  • Forward freight agreement (FFA) trading;
  • Ship management;
  • Ship agency;
  • Freight forwarding and logistics services; and
  • Corporate services rendered to qualifying approved related parties who are carrying on business of shipping – related activities.
MSI – Maritime Leasing (MSI-ML) Award

Concessionary tax rate of 10% for up to 5 years on qualifying leasing or management income. This incentive is administered by Maritime and Port Authority of Singapore(MPA). This incentive is administered by Maritime and Port Authority of Singapore(MPA).

Maritime Innovation & Technology (MINT) Fund

To promotes and encourages upstream research, product and solution development relevant to the maritime industry in Singapore. This incentive is administered by Maritime and Port Authority of Singapore (MPA).

4) TAX EXEMPTION on Dividend declared from Singapore

Dividend declared out of the profit derived from Singapore Company and received in Malaysia is exempted from tax.

5) TAX TREATIES

Singapore has entered into Double Taxation Agreement (“DTA”) with 88 countries. Please refer to APPENDIX I.

6) AUDIT EXEMPTION of a Singapore Company

A company incorporated on or after 1 July 2015, if a private company that fulfils at least two of the following three quantitative criteria in each of the immediate past two financial years is exempted from audit.

(a) Total annual revenue of not more than SGD 10 million;

(b) Total assets of not more than SGD 10 million;

(c) Number of employee of not more than 50.

Note:

  1. Section 127 (1) – Exemptions from tax. Any income specified in Part 1 of Schedule 6 shall be exempt from tax. Part 1 Schedule 6, para 28 (1), Income of any person, other than a resident company carrying on the business of banking, insurance or sea or air transport, for the basis year of assessment derived from sources outside Malaysia and received in Malaysia Part 1 schedule 6, para 28(1), exempt income of any person derive from sources outside Malaysia and received in Malaysia (See also exception).
  2. Existing safeguards will however be retained, such as requiring all companies to keep proper accounting records, and empowering shareholders with at least 5%
    voting rights to require a company to prepare audited accounts.

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Mandatory Sustainability Reporting

Mandatory Sustainability Reporting

Mandatory Sustainability Reporting

MANDATORY SUSTAINABILITY REPORTING REQUIREMENT

a. Singapore Stock Exchange Sustainability Reporting Requirement

b. Bursa Malaysia Sustainability Reporting Requirement

Bursa Malaysia Sustainability Reporting Requirement

WHAT WE DO

More and more stock exchanges recognised the important of Sustainability Reporting and require all the listed companies to disclose their ESG performance as non-financial performance reporting to satisfy the greater demand of transparency from stakeholders.

Our ESG experts at ShineWing TY TEOH can work with you on the following sustainability programs:

  1. Training and Education
    Train your Board, Management, and Employees about the ins and outs of ESG reporting globally and within your region. We provide
    education coverage on these key matters:
    1. Introduction to ESG
    2. ESG and Sustainability Reporting
      1. Existing and Upcoming Regulations
      2. Corporate Governance
      3. The Role of the Board of Directors, Management, and Operating Departments
      4. Establishing and Communicating Policies
      5. Benefits and Remuneration Disclosures
      6. ESG Preparedness
      7. Dealing with GHG emissions
      8. Your Value Chain and their impact
      9. Employee and Customer Considerations
    3. Accounting and Reporting ESG-related assets and transactions
    4. Diversity, Equity, and Inclusion
  2. ESG Risk and Opportunities Assessment
    Revisit existing process, procedures, and controls to identify risks and opportunities to help management address risks and seize opportunities aligned with emerging market trends particularly on environment, health & safety.
  3. Policy advisory and creation
    In compliance with sustainability regulations, identify needs on policies to establish and assist management in preparing and executing the relates policies and controls.
  4. Stakeholder engagement
    Identify, plan, develop and implement required engagement mechanisms with your stakeholders.
  5. Sustainability reporting and disclosure
    Prepare regulatory compliant sustainability reports that meets stakeholder needs and expectations.
  6. Accounting and reporting ESG-related assets and transactions
    Account and report ESG related transactions including Carbon Credits, Renewable Energy Credits, Carbon Offsets, Investments on ESG-linked funds/securities, etc.
  7. Report assurance
    Provide assurance on your sustainability transactions and reports.

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Japan Desk ジャパンデスク

Japan Desk-Cover

JAPAN DESK
ジャパンデスク

Japan has been consistently remained as one of top investors in the South East Asia region, and recognising the distinct needs of Japanese businesses, our Japan Desk is led by native Japanese who is fluent in Japanese-English and has stayed locally for a number of years, thus he understand both local and Japanese business environment, culture and customs well and is able to leverage our extensive industry knowledge and client services experiences and lead our local professional teams to work closely with Japanese companies to meet the local statutory compliances, resolve business issues, identify and maximum business opportunities, improve efficiency and eventually to achieve your business goals.
日本は、東南アジア地域において、常にトップインベスターの地位を占めています。そして、日本ビジネス特有のニーズには個別対応が必要な ことから、当事務所では日本語と英語に熟達し、かつマレーシアにて長期の実務経験を有する、日本人コンサルタントを配置しています。そし て、日本とマレーシア双方のビジネス環境、文化的特性、商習慣に対する十分な理解のもと、広範囲な業界知識と業務経験を活かし、当事務所 のローカルスタッフと連携し、日本企業向けにプロフェッショナルサービスを提供しています。そのスコープには、法令順守、業務課題の解決、 ビジネス機会の抽出と最大化、効率性改善、そしてその成果としての事業目標の達成に貢献いたします。

In addition, we organises Japanese seminars and publishes Japanese publications and newsletters regularly to ensure Japanese companies stay tune with the updated information which is essential to them to make any business decision promptly.
さらに当事務所では、日本語でのビジネスセミナーや書籍・ビジネスレターなどの定期的な発行を通して、日本企業に最新情報をお届けするこ とで、迅速かつ臨機応変な意思決定をサポートしています。

What We Do 当事務所のサービス

Our Japan Desk provides a diverse spectrum of business solutions and consulting services to Japanese client including:
ジャパンデスクでは、多岐に渡るビジネスソリューションとコンサルティングサービスを提供しています。

Audit and Assurance
監査・保証業務(アシュアランス)

Offshore Advisory
オフショアアドバイス

BPO & Business Advisory
アウトソーシング(BPO)・ビジネスアドバイス

Risk & Governance Advisory
リスク・ガバナンスアドバイス

Digital Transformation & Data Analytic
デジタルトランスフォーメーション・データアナリティクス

Tax & GST Advisory
税務・GST税アドバイス

Family Office & Private Client Services
ファミリーオフィス・プライベートサービス

Transfer Pricing Advisory
移転価格アドバイス

Financial and Transactions Advisory
財務、買収合併アドバイス

US Desk
アメリカデスクサービス

Market Entry Advisory
市場参入アドバイス

Valuation Advisory
事業価値評価アドバイス

Migration Advisory
移転アドバイス

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US Desk

US Desk Featured

US DESK

Thinking of going listed aboard on US Stock Exchange for either a better valuation and liquidity or gateway to international market to leverage global growth?

Our US Desk has been setup to support and facilitate those Asia-based companies interested in going listed aboard on US Stock Exchange.

Our US Desk is well connected with our member firms or strategic partners throughout the US to act as a single point of contact to manage your cross-border projects in direct coordination with your team and assist your IPO path to success in US.

What We Do

Our expertise include:
  • US GAAP Reporting including the Preparation of SEC Form, Quarterly Announcement and Annual Financial Statement in accordance with
    US GAAP Financial Reporting Framework;
  • Identifying Key Differences Between IFRS and US GAAP and Converting IFRS to US GAAP and Assisting in the Calculation of Necessary
    Adjustments;
  • Preparing Interim or Annual US GAAP and SEC Disclosure Checklist and Management Analysis and Discussions;
  • US GAAP Technical Accounting Memorandum on Complex and Unusual Accounting Transactions;
  • SOX (Sarbanes Oxley) Reporting including the setting up of COSO Framework to Address Major Elements of Internal Controls such as
    the Control Environment, Risk Assessment, Control Activities, Information/Communication, and Monitoring Activities to meet the
    requirements of 404a – Management’s Responsibility for Establishing and Maintaining Adequate Internal Control For Financial Reporting
    or 404b – Independent Auditor’s Responsibility for Attesting to and Reporting on Management’s Assessment of Internal Control.
  • Introducing and Pitching a Target Companies to Potentially Match with a Right SPACs (Special Purpose Acquisitions Companies) for
    Acquisition and Merger.
  • American National Standard Business Valuation by Certified Valuation Analyst (CVA) of National Association of Certified Valuators and
    Analysts (NACVA) for the purpose of Financial Reporting, Initial Public Offering (IPO), Mergers & Acquisitions (M&A) and SPACs.

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Why Considering Outsourcing as You Have Bigger Fish to Fry

Why Considering Outsourcing as You Have Bigger Fish to Fry

Why Considering Outsourcing as You Have Bigger Fish to Fry

Why You Should Consider Staff Placement Services

Why considering staff placement services? Today the business is dynamic, you might want to fully redeploy your human resources towards a more important business task to achieve your strategic goals and objectives, by leveraging our highly skills and experienced human resources to assist your organisation’s statutory compliance, you can focus on your operation in more efficient and effective way.

We have pool of professional staff with knowledge, experience and expertise to assist your internal fuction (i.e accounting, administrations, human resources etc.). We are able to assign our professional staffs to your office for a certain period as per your business needs. Our staff placement services will help you in the following situations:-

  • You need temporary replacement after your staff has resigned;
  • You need professional and experience staff to clear accounting backlogs and get your accounts updated;
    • unidentified and unmatched trade spend and goods return
    • long outstanding and accumulated suspense, clearing, other debtors and creditors account balances,
    • bank statement reconciliation or monthly/annual accounts.
  • You are facing peak period which is temporary in nature (e.g annual budgeting, rapid expansion etc) and need extra hands to expedite the process;
  • Your existing staff participate in special projects (such as restructuring, merger, acquisition, listing exercise, system migration etc) and require temporary helping hands to focus on routine functions;
  • Your existing staff are on long leave due to illness, personal reasons or temporary re-assignment;
  • You need highly skills, experience professional and reliable staff that will always ensure your organisation are in full compliance with regulatory requirement in an accurate and timely mannerly;
  • You are at early stage companies and rarely require full-time accounting employees for accounting task as the worload is small.

What Benefits Our Staff Placement Services to Your Business

  • Redeploy your valuation human resources to a more important business task to achieve your business strategic goals and objectives;
  • Minimum re-training costs on the changes of GST/VAT, Accounting Standards and other relevant regulation and acts;
  • Lower your fixed costs on maintaining a pool of compliance teams; and
  • Lower recruitment costs on hiring your compliance team;

What We Do

  • Accounting Services and Function
  • Payroll Services and Human Resource Administration
  • Outsourcing CFO Functions
  • Compilation of Unaudited Financial Statement
  • Preparation of filing XBRL (Extensible Business Reporting Language)
  • Provision of Treasury Functions
  • Executive Recruitment and Search

Why ShineWing TY TEOH

  • Our staff strength combine Singapore, Malaysia, UK, and Australia Chartered Accountants;
  • More than 150 experienced accounting professionals who bring the different set of technical skills and expertise and with different industry experiences;
  • Strong track records, e.g. delivered more than 10,000 financial report;
  • Experienced in handling BPO in different countries’ governing law and jurisdiction.

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Why Labuan?

Why Labuan

Why Labuan?

If your business models may optimise use of offshore structure, so why might an onshore investment if it carries lesser advantages as compared to offshore investment? The Labuan company is only taxed at 3% on its audited profit.

TAX BENEFITS

1. Corporate Tax 3%

The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulation 2021 has been gazetted on 22 November 2021 and are deemed to have come into operation on 1 January 2019, a Labuan company carrying on a Labuan business activity is only subject to tax at the rate of 3% of net profit PROVIDED that it has fulfilled the requirement of the number of full time employees and an amount of annual operating expenditure as specified in the Schedule below:
Labuan Company Carrying on a Labuan Business Activity
Minimum Number of Full Time Employees in Labuan
Minimum Amount of Annual Operating Expenditure in Labuan (RM)
Labuan Insurer, Labuan reinsurer, Labuan takaful operator or Labuan retakaful operator

3

200,000

Labuan underwriting manager or Labuan underwriting takaful manage
4

100,000

Labuan insurance manager or Labuan takaful manager
4
100,000
Labuan insurance broker or Labuan takaful broker

2

100,000

Labuan captive insurer or Labuan captive takaful –
  1. Labuan first party captive insurer or Labuan first party captive takaful; or
  2. Labuan third party captive insurer or Labuan third party captive takaful.

2

2

100,000

100,000

Labuan bank, Labuan investment bank, Labuan Islamic bank or Labuan Islamic investment bank

3

200,000

Labuan trust company

3

120,000
Labuan leasing company or Labuan Islamic leasing company
  1. 10 or less related Labuan leasing companies or Labuan Islamic leasing companies;
  2. 11 to 20 related Labuan leasing companies or Labuan Islamic leasing companies;
  3. 21 to 30 related leasing companies or Labuan Islamic leasing companies;
  4. More than 30 related Labuan leasing companies or Labuan Islamic leasing companies

2 per group


3 per group

 

4 per group


Increase of 1 employee for every additional 10 related companies or Labuan Islamic leasing companies;

100,000 for each Labuan leasing company or Labuan Islamic leasing companies;
100,000 for each Labuan leasing company or Labuan Islamic leasing companies;
100,000 for each Labuan leasing company or Labuan Islamic leasing companies;
100,000 for each Labuan leasing company or Labuan Islamic leasing companies;

Labuan credit token company or Labuan Islamic credit token company

2

100,000
Labuan development finance company or Labuan Islamic development finance company

2

100,000

Labuan building credit company or Labuan Islamic factoring company

2

100,000
Labuan factoring company or Labuan Islamic factoring company

2

100,000

Labuan money broker or Labuan Islamic factoring company

2

100,000
Labuan fund manager

2

100,000

Labuan securities license or Labuan Islamic securities license

2

100,000
Labuan fund administrator

2

100,000

Labuan company management
  • provision of treasury processing services and such other services as defined in Section 129 of the Labuan Financial Services and Securities Act 2010.

2

100,000

Labuan International Financial Exchange

2

120,000

Self-regulatory organisation or Islamic self-regulation organisation

2

120,000
Labuan entity that carries on any one or more of the following business activity:
  1. administrative services – services pertaining to employee management, payroll management, property management, human resource management, financial planning, contract or subcontract management, facilities management or proposal management.*
  2. accounting services – services pertaining to recording, analysing, summarizing or classifying financial, commercial and business transactions and information of a person or business.*
  3. legal services
    i. conveyancing services*
    ii. legal advisory services*
    iii. litigation or legal representation services in any proceedings before any court, tribunal or other authority
    iv. legal dispute resolution services including alternative dispute resolution.
  4. backroom processing services – services relating to settlements of receivables and payables, clearance, record maintenance, regulatory compliance or information technology (IT) related services which are usually performed by administration and support personnel who do not deal directly with client.
  5. Payroll services – services relating to
    i. processing, calculation, payment and deduction of remuneration, benefits, tax and statutory payment
    ii. issuance of payslip and tax statement
  6. talent management services – services relating to the provision of human resource services to attract, onboard, develop, motivate, and retain employees.*
  7. agency services – services relating to the provision of specific services on behalf of another group, business, or person pursuant to an agency agreement between the agent and its client.*
  8. insolvency related services – services related to administering company liquidations or winding up or personal bankruptcy.*
  9. management services other than Labuan company management under item 17
    – organization and coordination of activities of a business in order to provide services to the clients and usually consist of organizing, supervising, monitoring, planning,controlling and directing business’s resources such as human, financial and technology*
*As per Frequently-Asked Questions (FAQ) on Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulations 2021 [P.U. (A) 423/2021] issued by Labuan Financial Services Authority (LOFSA) dated 14 December 2021.*

2

50,000

Labuan entity that undertakes investment holding activities other than pure equity holding activities

1

20,000

Labuan entity that undertakes pure equity holding activities
Exempted under the Labuan Business Activity Tax (Exemption) Order 2020 [P.U (A) 177/2020]

20,000

Management And Control Requirement For Labuan Entity That Undertakes Pure Equity Holding Activities

Regulation 3, The Labuan Business Activity Tax (Requirements for Labuan Business Activity) Regulation 2021 which is deemed to have come into operation on 1 January 2021, requires the above mentioned company to comply with the following:
  1. meeting of the board of directors is convened in Labuan at least once a year;
  2. the registered office of the Labuan entity shall be situated in Labuan;
  3. the secretary of the Labuan entity appointed under the Labuan Companies Act 1990 shall be resident in Labuan;
  4. the accounting and business records including the minutes of meeting of the Labuan entity’s board of directors shall be kept in Labuan;

Income derived from intellectual property rights is subject to tax at the rate of 17% or 24% under Income Tax Acts 1967(“ITA”)

With effect from 1 Jan 2019, under Income Tax (Deductions Not Allowed for Payment Made to Labuan Company by Resident) Rules 2018 (Amendment) 2020, the following type of payments made to a Labuan Entity by a company resident in Malaysia are not entitled to a tax deduction:

Type of payment
Minimum Amount of Annual Operating Expenditure in Labuan (RM)
Interest payment
25%
Lease rental
25%
Other payments
97%

2) 0% ON SERVICE TAX AND 6 % ON IMPORTED SERVICE

No service tax shall be charged on any taxable service provided within or between Special Areas and Designated Areas unless on the taxable services prescribed in the Service Tax (Imposition of Tax for Taxable Service in Respect of Designated Areas and Special Areas) Order 2018.

3) 0% ON WITHHOLDING TAX

There is no withholding tax on dividends paid by a Labuan Company in respect of dividends distributed out of income derived from Labuan business activities or income exempt from income tax. Interest, royalties, lease rental, technical fee and management fees paid to a non- resident are not subject to withholding tax.

4) 0% ON STAMP DUTY

This may include but not limited to transfer of share, etc.

5) 100% EXEMPTION OF DIRECTOR’S FEE RECEIVED BY NON-CITIZENS INDIVIDUAL

6) DOUBLE TAXATION AGREEMENT (DTA) WITH MORE THAN 70 COUNTRIES

Labuan Company enjoys the benefits of more double taxation treaties than any other offshore company as it almost enjoys same full double taxation benefit as Malaysia company except for fourteen (14) of those 78 countries, and it can enjoy full treaty benefit even with those fourteen (14) countries by incorporating a Malaysian domestic subsidiary company.

Malaysia has entered into Double Taxation Agreements with various countries as follows:-
Double Taxation Agreements-01
^ Limited Agreements
# Income Tax Exemption Order
@ Synthesized text
Currently, Labuan has been specifically excluded from Double Taxation Agreement with the countries as follows:-
Double Taxation Agreements-02

7) LIBERAL LABUAN EXCHANGE CONTROL ENVIRONMENT – FREE FLOW OF FUNDS

8) INVESTMENT PROTECTION AGREEMENT (IGA) WITH MORE THAN 50 COUNTRIES

9) THE CONFIDENTIALITY OF COMPANY, SHAREHOLDER AND DIRECTORS’ INFORMATION IS ENSURED

10) LABUAN COMPANY VS BVI COMPANY

Labuan Company
BVI Company
Labuan is low-tax jurisdiction country.
BVI is tax-free jurisdiction country.
Comparison

Certain home country may impose the income tax law on incomes deriving from offshore, if they have not been taxed offshore, particularly, when they are remitted back, this may appy to BVI Co but not Labuan Co as it pays minimum tax.

Labuan Co enjoys more than 70 countries’ double tax treaties (DTAs).

BVI enjoys only 2 countries’ (Japan and Switzerland) double tax treaties (DTAs), and these treaties are not used in practise.

Dividend declared from Labuan Co to Malaysia is free of tax.

Dividend declared from BVI co may subject to income tax.

Note: If the company is Non-Malaysian Co, the tax exemption will depend on each home country’s law jurisdiction and its double tax treaties with Malaysia.

No withholding tax on interest payment.

BVI has applied the European Union (EU) Savings Directive since 1 July 2005. A withholding tax (initially 15%, rising to 20% from 1 July 2008) has been applied to interest payments to natural persons resident within the EU.

Labuan has its registered auditor under its jurisdiction. The income tax payable is allowed to base on the audited profit, the source of income is cleared for reinvestment or dividend purpose, once it is paid.

BVI has no registered auditor under its jurisdiction.

ILLUSTRATIONS ON LABUAN COMPANY STRUCTURE

1) Labuan Leasing Company or Labuan Islamic Leasing Company

Suitable Industries

  • Vessel, aircraft, shipping, oil & gas, high value assets co.

Tax Advantages

  • Income tax is only 3% of net profit
  • Dividend income received by Labuan Co is exempted from tax.
  • No withholding tax on dividend declared And lease rental made by Malaysian subsidiaries or 3rd Party Malaysian Co.
why labuan graph

2) Investment Holding Company

Suitable Industries :

  • Investment holding or offshore investment.

Tax Advantages

  • Dividend income received by Malaysian Parent Co(1)  or Labuan Co is exempted from tax.
  • No withholding tax on dividend declared by Labuan Co to either Malaysian or Foreign Parent Co.
  • No withholding tax on interest charged by Malaysian or Foreign Parent Co to Labuan Co.
  • No Capital Gain Tax and stamp duty for the transfer of shares in Labuan Co, e.g. dispose the investment in Foreign Manufacturing Co by selling Labuan Co.
  • Enjoys double tax treaties with more than 70 countries via a Labuan Co.
why labuan graph-2

3) Captive Insurance

Suitable Industries :

  • Captive Insurance

Tax Advantages

Income tax is only 3% of net profit

  • Dividend income received by Malaysian Parent Co(1) is exempted from tax.
  • No withholding tax on dividend declared by Labuan Captive Insurance Co.
  • Enjoys double tax treaties with more than 70 countries via a Labuan Co.
why labuan graph

4) Offshore Financing

Suitable Industries :

  • Fund managers

Tax Advantages

  • Income from investment is exempted from tax for Labuan Co.
  • Dividend from Labuan Co is exempted from tax.
  • No withholding tax either on dividend declared by or interest charged from Labuan Co to Labuan Funds.
  • Distribution from Labuan Funds to investors is not subject to withholding tax.
  • Enjoys double tax treaties with more than 70 countries via a Labuan Co.

Other Advantages

  • Lower cost of funds.
  • Liberal Labuan exchange control environment.
  • Debt instruments of Labuan Co may be listed.
Investment Funds 投资基金
why labuan graph-4
Islamic Financing 伊斯兰融资
why labuan graph-5

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Malaysia Principal Hub Tax Incentive

MSC Malaysia-Status-Service-Incentive

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.

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Labuan GIFT Programme for International Commodity Trading

Labuan GIFT Programme

Labuan GIFT Programme for International Commodity Trading

Background

The Global Incentives for Trading (GIFT) Programme is tax incentives to encourage the traders to use Malaysia as an international base for specified types of commodities to be conducted on in, from or through Labuan, Malaysia.
Global Incentives For Trading (GIFT) Programme
Eligibility Entities
  1. Labuan Entities licensed as a Labuan International Commodity Trading Company (LITC).
  2. Traditional commodities such as petroleum and petroleum-related products. The specified trading of physical products and related derivative are as follows:-
    • Petroleum and petroleum-related products (including liquefied natural gas (LNG);
    • Mineral;
    • Agricultural products;
    • Refined raw materials;
    • Chemicals;
    • Base minerals; and
    • Coal.

Incentive Commitment

  1. Minimum annual turnover of USD 50 million;
  2. Substantial Activity Requirements for Labuan International Commodity Trading Company (LITC) under the GIFT Programme :-
Labuan Entities Annual operating expenditures
Labuan International Commodity Trading Company.

  1. 5 or less related LITC companies.
  2. Every incremental of 5 related LITC companies.
 RM3,000,000 (USD 750,000) per entity in Malaysia (including minimum of RM100,000 (USD 25,000) in Labuan).

RM3,000,000 (USD 750,000) per entity in Malaysia (including minimum of RM100,000 (USD 25,000) in Labuan).

Local business spending including:
  • Freight charges
  • Bank charges
  • Commissions
  • Depreciations
  • Entertainment
  • Insurance costs
  • Professional fees
  • Rental of office space
  • Skills development fund
  • Telecommunications
  • Transport and travel
  • Utilities
  • Warehousing and storage fees
  • Manpower costs
  • Office maintenance
Labuan Entities Minimum number of full time employees in Labuan
Labuan International Commodity Trading Company.

  1. 5 or less related LITC companies.
  2. Every incremental of 5 related LITC companies.


2 staff per group.

Increase of 1 employee for every additional 5 LITC companies.

c. To employ at least three (3) professional traders who are tax residents of Malaysia.

Operational Requirements

LITC to have the following functions (but not limited to) in Malaysia:
  1. Strategic management;
  2. Banking;
  3. Finance and treasury management;
  4. Risk management;
  5. Market research and product portfolio development;
  6. Logistics management;
  7. Global procurement;
  8. Marketing and sales planning.
Location for consideration
Operating and/or marketing office can be based anywhere in Malaysia.
Incentives
  1. 3% on audited chargeable profits;
  2. 100% tax exemption on director fees paid to a non-Malaysian director;
  3. 50% tax exemption on gross employment income of non-Malaysian professional, managerial including traders with LITC;
  4. Tax exemption on dividends received by or paid from the LITC;
  5. Tax exemption on royalties received from the LITC;
  6. Tax exemption on interest received by residents or non-residents from the LITC;
  7. Stamp duty exemption on all instruments for Labuan business activities, M&A of Labuan entities and transfer of shares;
  8. No sales tax and service tax;
  9. The non-deductability rules under P.U (A) 375/2018 dated 31st December 2018 is not applicable to transactions between LITC and Malaysian resident (subject to fulfillment of the tax substantial activity requirements).

Setting up LITC Company

  1. Apply licence with Labuan FSA*
  2. Approval from Labuan FSA* obtained
  3. Incorporation of LITC
  4. Commence business

Comparision Between Labuan Gift Programme Vs Singapore Global Trader (GTP) Programme

GIFT (MALAYSIA)
GTP (SINGAPORE)
Incentives
3% on audited net profit. No renewal is required, provided that the Substances Regulations for LITC are met.
Reduced corporate rate of 5% – 10% on qualifying trading income for renewable period three (3) to five (5) years.
Qualifying commodities and products:-
  1. Petroleum and petroleum related products, including liquefied natural gas (LNG);
  2. Mineral;
  3. Agricultural products;
  4. Refined raw materials;
  5. Chemicals;
  6. Base minerals; and
  7. Coal.
  1. Electronic and electrical products;
  2. Consumer products;
  3. Building and Industrial materials;
  4. Industrials products;
  5. Energy commodities and products;
  6. Agricultural commodities and bulk edible products;
  7. Minerals;
  8. Machinery components

Physical trade that qualify under GTP:
  1. Trans-Shipment Trade;
  2. Offshore Trade;
  3. Re-Export Trade (only the non- value added portion of the trades qualify).
Business transactions
Allowed to have transactions with Malaysians for petroleum and petroleum-related products.
Transactions are only those with offshore parties or other GTP companies.
Operation cost
Lower cost of operation, wages and rental.
High cost of operation, wages and rental.
Location
All States in Malaysia, including Iskandar Malaysia
Singapore

Requirements

  1. Minimum annual turnover of USD50 million;
  2. Annual operating expenditures of RM3 million (USD 750,000) payable to Malaysian residents in Ringgit Malaysia;
  3. Minimum 3 professional traders who are tax residents in Malaysia.
  1. Minimum annual turnover of USD100 million;
  2. Minimum local expenditure of SGD $3million (USD 2.3million); and
  3. Minimum 3 trading professional employed which involved in one of the following sectors: risk management, procurement/sourcing or sales and marketing.
Who can apply
Any person who intend to establish a Labuan entity to undertake international commodity trading business.
Well-established players engaged in international physical trading on principal basis and have substantial operations in Singapore and meet stringent quantitative criteria, including employment and local expenditure.

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