Tag: Publications – Tax

Malaysia Global Services Hub Tax Incentive

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Post date February 8, 2024
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MALAYSIA GLOBAL SERVICES HUB TAX INCENTIVE

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:

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

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

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.

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.

Dividend and Capital gain, as well as intragroup transaction and reorganisations.

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Malaysia Digital Tax Incentive

Post author By admin
Post date July 19, 2023
No Comments on Malaysia Digital Tax Incentive

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:-

Tax incentives (income tax exemption or investment tax allowance);
Foreign knowledge worker quota and passes;
Multimedia / ICT equipment import duty and sales tax exemptions;
Freedom of ownership by exempting local ownership requirements;
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:

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

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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

(RM 300K x 17%) – (SGD 100k x 4.25% x3)
[(RM 500k – RM 300k) x 17% + (RM 100k x 24%)] – [(SGD 200k – SGD 100k) x 8.5% x 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

(RM 30K x 17%) – (SGD 10k x 4.25% x3)
[(RM 500k – RM 30k) x 17% + (RM 100k x 24%)] – [(SGD 200k – SGD 10k) x 8.5% x 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;

Note:

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.
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.
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).
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

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

(RM 300K x 17%) – (SGD 100k x 4.25% x3)
[(RM600k-RM300k) x 17%] – [(SGD200k-SGD100l) x 8.5% x 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

(RM30k x 17%) – (SGD100k x 4.25% x3)
[(RM600k-RM30k) x 17%] – [(SGD200k-SGD10k) x 8.5% x 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%%.

It is incorporated in Singapore and a tax resident of Singapore for that Year of Assessment.
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.
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

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)

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

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

Note:

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).
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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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

200,000

Labuan underwriting manager or Labuan underwriting takaful manage

100,000

Labuan insurance manager or Labuan takaful manager

100,000

Labuan insurance broker or Labuan takaful broker

100,000

Labuan captive insurer or Labuan captive takaful –

Labuan first party captive insurer or Labuan first party captive takaful; or
Labuan third party captive insurer or Labuan third party captive takaful.

100,000

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

200,000

Labuan trust company

120,000

Labuan leasing company or Labuan Islamic leasing company

10 or less related Labuan leasing companies or Labuan Islamic leasing companies;
11 to 20 related Labuan leasing companies or Labuan Islamic leasing companies;
21 to 30 related leasing companies or Labuan Islamic leasing companies;
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

100,000

Labuan development finance company or Labuan Islamic development finance company

100,000

Labuan building credit company or Labuan Islamic factoring company

100,000

Labuan factoring company or Labuan Islamic factoring company

100,000

Labuan money broker or Labuan Islamic factoring company

100,000

Labuan fund manager

100,000

Labuan securities license or Labuan Islamic securities license

100,000

Labuan fund administrator

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.

100,000

Labuan International Financial Exchange

120,000

Self-regulatory organisation or Islamic self-regulation organisation

120,000

Labuan entity that carries on any one or more of the following business activity:

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.*
accounting services – services pertaining to recording, analysing, summarizing or classifying financial, commercial and business transactions and information of a person or business.*
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.
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.
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
talent management services – services relating to the provision of human resource services to attract, onboard, develop, motivate, and retain employees.*
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.*
insolvency related services – services related to administering company liquidations or winding up or personal bankruptcy.*
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.*

50,000

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

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:

meeting of the board of directors is convened in Labuan at least once a year;
the registered office of the Labuan entity shall be situated in Labuan;
the secretary of the Labuan entity appointed under the Labuan Companies Act 1990 shall be resident in Labuan;
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:-

^ Limited Agreements
# Income Tax Exemption Order
@ Synthesized text

Currently, Labuan has been specifically excluded from Double Taxation Agreement with the countries as follows:-

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.

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 3^rd Party Malaysian Co.

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.

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.

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

Islamic Financing 伊斯兰融资

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Labuan GIFT Programme for International Commodity Trading

Post author By admin
Post date January 28, 2021
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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

Labuan Entities licensed as a Labuan International Commodity Trading Company (LITC).
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

Minimum annual turnover of USD 50 million;
Substantial Activity Requirements for Labuan International Commodity Trading Company (LITC) under the GIFT Programme :-

Labuan Entities	Annual operating expenditures
Labuan International Commodity Trading Company. 5 or less related LITC companies. 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

Annual operating expenditures

Labuan International Commodity Trading Company.

5 or less related LITC companies.
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. 5 or less related LITC companies. 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:

Strategic management;
Banking;
Finance and treasury management;
Risk management;
Market research and product portfolio development;
Logistics management;
Global procurement;
Marketing and sales planning.

Location for consideration

Operating and/or marketing office can be based anywhere in Malaysia.

Incentives

3% on audited chargeable profits;
100% tax exemption on director fees paid to a non-Malaysian director;
50% tax exemption on gross employment income of non-Malaysian professional, managerial including traders with LITC;
Tax exemption on dividends received by or paid from the LITC;
Tax exemption on royalties received from the LITC;
Tax exemption on interest received by residents or non-residents from the LITC;
Stamp duty exemption on all instruments for Labuan business activities, M&A of Labuan entities and transfer of shares;
No sales tax and service tax;
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

Apply licence with Labuan FSA*
Approval from Labuan FSA* obtained
Incorporation of LITC
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:-

Petroleum and petroleum related products, including liquefied natural gas (LNG);
Mineral;
Agricultural products;
Refined raw materials;
Chemicals;
Base minerals; and
Coal.

Electronic and electrical products;
Consumer products;
Building and Industrial materials;
Industrials products;
Energy commodities and products;
Agricultural commodities and bulk edible products;
Minerals;
Machinery components

Physical trade that qualify under GTP:

Trans-Shipment Trade;
Offshore Trade;
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

Minimum annual turnover of USD50 million;
Annual operating expenditures of RM3 million (USD 750,000) payable to Malaysian residents in Ringgit Malaysia;
Minimum 3 professional traders who are tax residents in Malaysia.

Minimum annual turnover of USD100 million;
Minimum local expenditure of SGD $3million (USD 2.3million); and
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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Why Labuan Foundation is Best Choice in Asia as Private Wealth Management Vehicle?

Post author By admin
Post date December 11, 2020
No Comments on Why Labuan Foundation is Best Choice in Asia as Private Wealth Management Vehicle?

Why Labuan Foundation is Best Choice in Asia as Private Wealth Management Vehicle?

Labuan Foundation is probably one of the Best Choices in Asia as your wealth management vehicle. While there are 21 jurisdictions worldwide which have Foundation Acts to govern wealth management activities, Labuan which is governed by the Labuan Foundation Act 2010, remains the ONLY jurisdiction in Asia. As such, your assets are protected under its own jurisdiction from the local or foreign claims and cannot be liquidated forcefully.

Labuan Foundation has other Silent Features as private wealth management vehicle as below:

Labuan Company Carrying on a Labuan Business Activity

A corporate body with a separate legal entity
Provided by the Labuan Foundations Act 2010
Established to manage its own property for any lawful purpose, be it for charitable or non-charitable purposes

Structure (Example)

Control

Founder has extensive control.

Confidentiality

End beneficiaries is anonymous.

Capital Transfer

No capital requirements. Minimum endowment of USD1.00 as an initial asset at time of establishment.

Nationality

No requirement for founder/councillor.

Appeal Against Transfer By Creditors

Only within the first two years of registration.

Appeal Against Inheritance Provisions

No appeal possible because of foreign laws.

Foreign Claim Or Judgment

Unenforceable

Rights And Powers Of A Founder

Enshrined via the charters.

Holding Of Malaysian Assets For Non-charitable Foundations

May hold with Labuan FSA’s approval.

Involvement Of Corporate Body

Allowed to be appointed as :

Founder
Council (Can be natural person or a corporation)
Officer (Can be natural person or a corporation)
Beneficiary

Duration

Fixed or perpetual.

Dissolution

Assets returned to designated party.

Ownership Of Foundation’s Asset

Beneficiary has no legal or beneficiary ownership over the foundation’s asset.

Taxation On Income

Under Income Tax Act 1967 if include Malaysian property.

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Malaysia Halal Park Opportunities

Post author By admin
Post date December 31, 2019
No Comments on Malaysia Halal Park Opportunities

Malaysia Halal Park Opportunities

In a bid to make Malaysia a strong competitor in the Global Halal Market, all companies that operate within the scope of the market will be given a complete exemption from income tax for a duration of 10 years or 100% income tax exemption on capital expenditure for a duration of 5 years plus an exemption on import duty on plant & equipment and raw materials and double deduction on specific expenses.

HALMAS

HALMAS, it is a symbol of excellence reserved for parks that perform remarkably in terms of the standard of Halal products that they produce, their level of integrity as well as safety.

Several perks, in the form of incentives are tied to this mark of notable performance. Operators, industry players and logistics service providers will enjoy these benefits, to serve as a motivating factor for new and existing players in the Halal industry.

HALAL INCENTIVES

1. Halal Park Operators

In a bid to enhance the quality of Halal parks and make them more fascinating, certain incentives are recommended, they include:

Total exemption from income tax for a duration of 10 years, or 100% income tax exemption on capital expenditure for a duration of 5 years.
Exclusion from payments that pertain to import duties on equipment, components, and machinery that are utilized in the Cold Room Operations in compliance with existing policies.

2. Halal Industry Players (Manufacturers)

In a bid to reinforce the competitive prowess of Malaysia in the Global Halal Market, specifically in aspects of inward and outward investment into the country, it is suggested that certain incentives be provided for companies that operate within the Halal Park.

Total exemption from income tax for a duration of 10 years, or 100% income tax exemption on capital expenditure for a duration of 5 years.
Exclusion from payments that pertain to import duties on raw materials that are utilized for the development and production of halal promoted products.
Double deduction on expenses that results from obtaining international quality standards including HACCP, GMP, Codex Alimentarius (food standard guidelines of FAO & WHO), Sanitation Standard Operating Procedure and regulations for compliance for export markets such as Food Traceability from farm to fork.

3. Halal Logistic Service Providers

In a bid to improve Halal Industry and Halal supply chain in Malaysia, recommended incentives that also covers logistic operators include:

Total exemption from income tax for a duration of 5 years, or 100% income tax exemption on capital expenditure for a duration of 5 years.
Exclusion from payments that pertain to import duties on equipment, components, and machinery that are utilized in the Cold Room Operations in compliance with existing policies.

HALMAS ELIGIBILITY CRITERIA

The following qualifications are required from applicants, they must be;

Have an active part in the Halal industry
- Food & Beverages
- Cosmetics & Personal Care
- Halal Ingredients
- Pharmaceutical
- Modest Fashion
- Medical Tourism
- Medical Devices & Appliances
- Muslim Friendly Hospitality
- Logistics Services
- Islamic Finances
- Vaccine
High value knowledge workers with at least 15% of the entire workforce, with a minimum of 2 Halal Compliance Officers inclusive.
Currently taking part in recent business activities pertaining to Halal, which must comprise of a new legal entity in Malaysia.
Property within the bounds of the specified area.

LIST OF 14 HALMAS – ACCREDITED HALAL PARKS

List of halal parks with HALMAS status:-

PERDA Halal Park PERDA
Penang International Halal Park
Selangor Halal Hub
PKFZ National Halal Park PFKZ
Techpark @ Enstek
Pedas Halal Park
Melaka Halal Park
Pasir Mas Halal Park
Gambang Halal Park
Sedenak Industrial Park
ECER Pasir Mas Halal Park
ECER Gambang Halal Park
POIC Tanjung Langsat
Iskandar Business Park

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Investing In The Northern Corridor Economic Region (NCER), MALAYSIA

Post author By admin
Post date November 15, 2019
No Comments on Investing In The Northern Corridor Economic Region (NCER), MALAYSIA

Investing In The Northern Corridor Economic Region (NCER), MALAYSIA

MAJOR DEVELOPMENT IN NCER

The Northern Corridor Economic Region (NCER) is a development plan encompassing the four Northern States of Malaysia namely Perlis, Kedah, Perak and Penang. The priority sectors in NCER are manufacturing, agriculture and bio-industries and services which include the sub-sectors of tourism, global business services and logistics & connectivity.

The objectives of the NCER initiative include:

a) To stimulate economic growth to address the imbalances and increase inclusively;

b) To achieve balance growth in the manufacturing, agriculture, bio-industries and services sectors;

c) To enhance talents to meet the growing needs of the region;

d) Increase private sector investments and finance initiatives.

The advantages include:

a) Located within the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT);

b) NCER has hosted many multinational companies and local companies with approximately RM47.7 billion of investment in the year 2009 – 2016;

c) Year 2020, RM50 million for high impact strategic projects has been allocated to Chuping Valley Industrial Area in Perlis;

d) NCER plays a predominant role in agriculture in the NCER;

e) NCER is renowned for its rich natural and heritage attraction.

MAJOR PROJECTS DEVELOPMENT IN NCER

Perlis Inland Port

An inland port to capitalize on the border trade from southern Thailand.

RM0.94bil GNI per year by 2025
4,056 job creation

Chuping Valley Industrial Area (CVIA)

An on-going industrial park development to transform Perlis into an industrialised state.

RM4.5 bil investment by 2025
12,674 job creation

Kota Perdana SBEZ(KPSBEZ)

A mixed development comprising industrial park, logistics hub & commercial zones.

RM50bil total GDVby 2030
21,050 job creation

Kedah Science & Technology Park (KSTP)

A new industrial park that focuses on science and technology clusters located at the border region.

RM12.9bil total GDV by 2030
23,244 job creation

Kedah Rubber City (KRC)

Project that will focus on downstream rubber activities by creating a complete rubber.

RM9.7bil investment by 2030
14,471 job creation

MAIN ELIGIBILITY CRITERIA FOR NCER TAX INCENTIVE PACKAGES

a) A company incorporated in Malaysia under the Companies Act 1965 or Company Act 2016;

b) The company must be undertaking a qualifying project or activity in NCER;

c) For Foreign Direct Investment (FDI), the company must submit its application to Northern Corridor Implementation Authority (NCIA) before commencing operation/production (including trial production);

d) For Domestic Direct Investment (DDI), the incentive application submitted to NCER must not more than twelve (12) months from production services of the proposed project. The company must be owned by 60% Malaysian Resident and must hold equity in 5 years within the incentive period;

e) Company is required to source minimum 50% of raw material/ components/ services produced in Malaysia. Employment of full time employee in compliance with current national policy;

f) Applicable to application received by NCIA from 17 August 2017 until 31 December 2025.

TAX INCENTIVES IN NCER

Sector

Promoted Activities

NCER Incentives

A. Manufacturing

1. Electrical & Electronic
2. Machinery & Equipment

a. Green Technology (product)

b. Medical Devices (products)

c. Automotive (products)

d. Additive Manufacturing (products)

e. Aerospace (products)

Kedah & Perlis

1. Income tax exemption of 100% of statutory income for 10 years (5 + 5); OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 10 years. This allowance will be set-off against up to 70% of the statutory income.

3. A 50% reduction of stamp duty on instruments of transfer or lease of land.

Perak & Penang

4. Income tax exemption of 70% of statutory income for 10 years (5 + 5); OR

5. An allowance of 70% on the qualifying capital expenditure incurred within 10 years. This allowance will be set-off against up to 70% of the statutory income.

B. Agriculture & Bio-Industries

a. Sustainable Agriculture

b. Processing of Agriculture Produce

c. Superfruit/ Superfood (Upstream)

d. Superfruit/ Superfood (Downstream)

e. Green Technology Services

f. Halal Industry Seed Research & Development

Kedah, Perlis, Perak & Penang

1. Unutilised allowances are allowed to be carried forward to the following years until fully utilised.

2. Import duty exemption on plant and machinery, equipment, spare parts, raw materials and components not produced locally and used directly in production activities.

C. Service

1. Tourism
2. Logistic

1. Tourism:
a. Medical Tourism
b. Hotel Business
c. Tourism Projects
d. Business Tourism

2. Logistics:
a. Warehousing
b. Freight Forwarding
c. Transportation

Kedah and Perlis only

1. Income tax exemption of 100% of statutory income for 10 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 10 years; AND

3. A 50% reduction of stamp duty on instruments of transfer or lease of land.

Perak and Penang Only

1. Income tax exemption of 70% of statutory income for 10 years (5+5); OR

2. An allowance of 70% on the qualifying capital expenditure incurred within 10 years.

3. Import duty exemption on plant and machinery, equipment, spare parts, raw materials and components not produced locally and used directly in production activities for Kedah, Perak, Perlis and Penang.

D. Medical Science and Science & Technology

Contract R&D
Research, development and inspection works for customers.

Kedah and Perlis only

1. Income tax exemption of 100% of statutory income for 10 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years.

Perak and Penang only

1. Income tax exemption of 70% of statutory income for 10 years (5 + 5); OR

2. An allowance of 70% on the qualifying capital expenditure incurred within 10 years.

In-House R&D
Research & development undertaken by Malaysian company for their own business.

Kedah, Perak, Perlis and Penang

1. An allowance of 100% on the qualifying capital expenditure incurred within 10 years. This allowance will be set-off against up to 70% of the statutory income.

2. Unutilised allowances are allowed to be carried forward to the following year until fully utilised.

R&D Company
Research on science or technology including Industry 4.0 for the production/ improvement of materials, equipment, products or processes.

E. Agriculture

Seed R&D Centre
Investor

Kedah and Perlis only

1. Income tax exemption of 100% of statutory income for 10 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years.

Perak and Penang only

1. Income tax exemption of 70% of statutory income for 10 years (5 + 5); OR

2. An allowance of 70% on the qualifying capital expenditure incurred within 10 years.

Seed R&D Centre
Operator

Kedah and Perlis only

1. Income tax exemption of 100% of statutory income for 10 years (5 + 5); OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 10 years. This allowance will be set-off against up to 70% of the statutory income.

3. Unutilised allowances are allowed to be carried forward to the following years until fully utilised.

4. Industrial Building Allowance for 10 years on building used for Seeds R&D Centre operating in Kedah Science & Technology Park (KSTP).

5. Tax deduction for 5 years on cost incurred to acquire property rights with condition that the Seed R&D Centre is at least 51% Malaysian owned.

Approved Agriculture Project

Kedah, Perlis, Perak and Penang

1. Income tax exemption of 100% of statutory income for 10 years on new project undertaken; OR

2. Income tax exemption of 100% of statutory income for 5 years on expansion project approved by Jawatankuasa Penilaian Insentif Sektor Pertanian (JPISP).

3. Tax deduction for investor company carrying on an Approved Agriculture Project by JPISP.

F. Support Industry

Education

a. Private Institution of Higher Learning

b. Technical & Vocational Education and Training (TVET)

c. International/ Private Schools

Kedah and Perlis only

1. Income tax exemption of 70% of statutory income for a period of limited 5 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years. This allowance will be set-off against up to 70% of the statutory income.

3. Unutilised allowances are allowed to be carried forward to the following years until fully utilised.

G. Special Incentive

1. Selama
2. Perak Tengah
3. Kuala Kangsar
4. Badan Datuk
5. Seberang Prai Utara
6. Seberang Prai Selatan
7. Seberang Prai Tengah
8. Barat Daya Pulau Pinang

Perak and Penang only

1. Income tax exemption of 100% of statutory income for a period of 15 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within certain period, will be set-off against up to 70% of the statutory income.

H. Kedah Science & Technology Park (KSTP)

1. KSTP Park Manager

Income tax exemption of 100% of statutory income for 5 years. This approval applies only to the first industrial park manager at KSTP.

2. R&D & Manufacturing activities (Operators)

a. Manufacturing activities in agro-science;
b. Advanced material
c. Information & Communication Technology;
d. Biotechnology;
e. Component R & D;
f. Halal science;
g. Green Technology

1. Income tax exemption of 100% of statutory income for 15 years (5+5+5); OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 10 years (5+5). This allowance will be set-off against up to 70% of the statutory income.

3. Unutilised allowances are allowed to be carried forward to the following years until fully utilised.

4. A 50% stamp duty reduction on transfer or lease of land/building.

5. Import duty exemption on plant and machinery, equipment, spare parts, raw materials and components which are not produced locally and used directly in production activities.

6. This approval is subject to product/service provision from qualifying activity. This approval does not apply to income derived from intellectual property services.

3. Developer
Commercial property development only

Income tax exemption of 70% of statutory income for 5 years.

4. KSTP Global Research Centre (GRC)

Income tax exemption of 100% of statutory income for 15 years (5+5+5).

5. Education
a. IHL and TVET

1. Income tax exemption of 100% of statutory income for 5 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years.

I. Chuping Valley Industrial Area (CVIA)

1. Developer
Commercial property development only

1. Income tax exemption of 70% of statutory income for 5 years for the following income:

a. Disposal of all or part of right or land/building located at CVIA; OR

b. Rental of all or part or the land/buildings located at CVIA.

2. Stamp duty exemption on transfer or lease of land only.

2. CVIA Park Manager

Income tax exemption of 100% of statutory income for 5 years.

3. Waste-To-Resources Facilities Provider

1. Income tax exemption of 100% of statutory income for 15 years; OR

2. An allowance of 100% allowance on the qualifying capital expenditure incurred within 10 years. This allowance will be set-off against up to 70% of the statutory income. Unutilised allowances are allowed to be carried forward to the following years until fully utilized.

3. A 50% stamp duty reduction on transfer or lease of land/ building.

4. Import duty exemption on plant and machinery, equipment, spare parts, raw materials and components which are not produced locally and used directly in production activities.

4. Education

a. Institution of Higher Learning (IHL); and
b. Technical and Vocational Education and Training (TVET).

1. Income tax exemption of 100% of statutory income for 5 years; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years. This allowance will be set-off against up to 70% of the statutory income. Unutilised allowances are allowed to be carried forward to the following years until fully utilized.

5. Companies That Undertake Qualifying Activities (Operators)

a. Green Manufacturing;
b. Halal industry;
c. Machinery and equipment;
d. Specialised machinery and equipment;
e. Green Energy Generation

1. Income tax exemption of 100% of statutory income for 15 years (5+5+5); OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 10 years (5+5). This allowance will be set-off against up to 70% of the statutory income.Unutilisedallowances are allowed to be carried forward to the following years until fully utilized.

3. A 50% stamp duty reduction on transfer or lease of land/ building.

J. Kedah Rubber City (KRC)

1. Manufacturer

1. Income tax exemption of 100% of statutory income derived from Rubber City qualifying activities for 10 years commencing from first year the company generates statutory income; AND

2. Income tax reduction of 50% for 5 years after expiry of the first 10 years; OR

3. An allowance of 100% on the qualifying capital expenditure incurred within 5 years. This allowance will be offset against up to 100% of statutory income for each assessment year.

4. Stamp duty exemption on the instrument of transfer of land or building or lease of land or building used for the qualifying activities in Rubber City.

5. Tax deduction for pre-operating expenses incurred within 4 years before the commencement date of qualifying activity and such expenses shall be deemed to be incurred on the commencement date.

3. Main Developer and Residential and Commercial Developer

1. Income tax exemption of 100% of statutory income derived from Rubber City qualifying activities for 10 years commencing from first year the company generates statutory income; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years. This allowance will be offset against up to 100% of statutory income for each assessment year.

3. Stamp duty exemption on the instrument of transfer of land or building or lease of land or building used for the qualifying activities in Rubber City.

4. Catalytic Anchor Tenants

1. Income tax exemption of 100% of statutory income derived from Rubber City qualifying activities for 10 years of commencing from first year the company generates statutory income; OR

2. An allowance of 100% on the qualifying capital expenditure incurred within 5 years. This allowance will be set-off against up to 100% of the statutory income for each assessment year.

3. Stamp duty exemption on the instrument of transfer of land or building or lease of land or building used for the qualifying activities in Rubber City.

4. Tax deduction for pre-operating expenses incurred within 4 years before the commencement date of qualifying activity and such expenses shall be deemed to be incurred on the commencement date.

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Investing In The East Coast Economic Region (ECER), MALAYSIA

Post author By admin
Post date November 11, 2019
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Investing In The East Coast Economic Region (ECER), MALAYSIA

QUICK FACTS: ECER MALAYSIA

The East Coast Economic Region (ECER) is an economic corridor established to bring about the socio-economic transformation of the east coast of Peninsular Malaysia. The ECER is Malaysia’s gateway to the ASEAN region and the Far East.

ECER covers the states of Kelantan, Terengganu, Pahang and the district of Mersing in Johor. The advantages include:-

Strong support from Federal and State Governments with pro-business and liberal investment policies;
Advantageous geographical orientation Eastern Gateway of Malaysia to Europe, US and Asia Pacific;
Strong resources endowment – crude oil, natural gas, tin, timber, palm oil, rubber and others;
Competitive land prices;
Industrial park ready with infrastructure;
Market-oriented economy – exporter of resource based and manufacturing products;
Multilingual workforce speaking two or three languages, including English and Mandarin;
Large and established foreign business communities in all business sectors;
Special incentives and facilitation fund for human capital development for investors in ECER;
ECER Development Council is the one-stop facilitation centre to assist investors in dealing with Malaysia Government for their investment in ECER;
Competitive wage rates compared to the more developed regions of Malaysia.

MAIN ELIGIBILITY CRITERIA FOR ALL THE CLUSTERS:

Company incorporated under the Companies Act 1965 or Company Act 2016 and resident in Malaysia;
Undertaking a qualifying activity in ECER or has commence a qualifying activity not more than one (1) year from the date of application made and approval by the Minister;
Investors investing in a related company shall own at least 70% equity/paid-up ordinary shares of the company; and
Application to be made on or after 13 June 2008 but not later than 31 December 2020.

ECER INCENTIVE PACKAGE FOR MANUFACTURING CLUSTER

Promoted Activity

ECER Incentives

Selected manufactured and agro-based products.
Selected manufacturing related services.

Tax Exemption:
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years.
Stamp duty exemption on land or building acquired for development.

ECER INCENTIVE PACKAGE FOR TOURISM CLUSTER

Promoted Activity

ECER Incentives

Tourism

Culture and Heritage.
Island tourism.
Mainland coastal tourism.
Cross border tourism.
Eco-tourism.
Health tourism.

Tax exemption:
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years.
Stamp duty exemption on land or building acquired for development.
Withholding tax exemption on royalty and technical fees up to 31 December 2020 for tourism sector only.
Single deduction up to maximum of RM1million for a year of assessment for sponsors of such Hallmark Event approved by ECER Development Council.

ECER INCENTIVE PACKAGE FOR CULTURE & HERITAGE

Promoted Activity

ECER Incentives

Culture and Heritage

Making of batik, songket or royal tenun.
Making of brassware or silverware.
Making of traditional kites.
Woodcarving.
Selected art and craft projects including print-making or sculpting.

Tax exemption
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years;
- Stamp duty exemption on land or building acquired for development.
- Withholding tax exemption on royalty and technical fees up to 31 December 2020 for tourism sector only.
- Single deduction up to maximum of RM1million for a year of assessment for sponsors of such Hallmark Event approved by ECERDC.

ECER INCENTIVE PACKAGE FOR AGRICULTURE AND AGRICULTURE RELATED SERVICES CLUSTER

Promoted Activity

ECER Incentives

Agriculture

Cultivation of kenaf, vegetable, fruit, herbs, spices or cocoa.
Biomass Plantation including cassava, acacia mangium, leucana leucocephala.
Planting of Hevea brasiliensis.
Floriculture including ornamental flowers.
Aquaculture.
Inland and Deep sea fishing.
Rearing of cattle, buffalo, goat, sheep, ostrich, turkey and quail.

Tax exemption:
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years.
Stamp duty exemption on land or building acquired for development.
Deduction to the amount of investment made in the promoted project or activity.

ECER INCENTIVE PACKAGE FOR AGRICULTURE AND AGRICULTURE RELATED SERVICES CLUSTER

Promoted Activity

ECER Incentives

Agriculture – related services

Collecting, processing and packaging of agricultural produce.
Collection and marketing of agricultural produce.

Tax exemption:
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years.
Stamp duty exemption on land or building acquired for development.
Deduction to the amount of investment made in the promoted project or activity.

ECER INCENTIVE PACKAGE FOR KNOWLEDGE, EDUCATION AND ICT DEVELOPMENT CLUSTER

Promoted Activity

ECER Incentives

Education and training.
Information, communication and technology.

Tax exemption:
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years.
- Stamp duty exemption on land or building acquired for development.
- Withholding tax exemption on royalty and technical fees up to 31 December 2020.

ECER INCENTIVE PACKAGE FOR OIL, GAS AND PETROCHEMICAL CLUSTER

Promoted Activity

ECER Incentives

Selected oil, gas and petrochemical products or activities.

Tax exemption:
- Income tax exemption of 100% for 10 years commencing from the year company derives statutory income; or
- Income tax exemption equivalent to 100% of qualifying capital expenditure (Investment tax allowance) for 5 years.
Stamp duty exemption on land or building acquired for development.

ECER INCENTIVE PACKAGE FOR OIL, GAS AND PETROCHEMICAL CLUSTER

Promoted Activity

ECER Incentives

1. Approved developers undertaking development in industrial parks or fee zone.

Income tax exemption for 10 years commencing from the year company derives statutory income:-

disposal of any right over any land or disposal of a building or rights over a building or part of a building; or
rental of building or part of a building.

2. Approved development manager providing management, supervisory or marketing services in relation to the development of an industrial park or free zone.

3. Approved park managers providing park management services including maintenance, marketing and rental of common facilities and utilities services in the industrial park or free zone.

Income tax exemption for 10 years commencing from the year company derives statutory income derived from a qualifying activity.

4. Qualifying person who sponsors a hallmark event.

A deduction equivalent to the amount not exceeding RM1 million for each year of assessment in respect of cash contribution or contribution-in-kind.

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