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Malaysia Global Services Hub Tax Incentive

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

2. Qualifying Services and Additional Services

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

    AND

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

3. Outcome-based conditions

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

Why Dubai

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

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

Tax Exemptions for Companies in Dubai vs Malaysia

Why Dubai-Tax Exemption
Tax
Rate
Conditions
Value-Added Tax (VAT)
While the UAE champions business freedom, it maintains a balanced approach with a 5% VAT rate, obliging businesses with revenue exceeding AED 375,000 Yet, the UAE’s commitment to global trade is evident as exports of goods remain untaxed, fostering an environment ripe for international commerce.
5%
0%
Businesses with revenue > AED 375,000 (USD 102,000)
Export of goods
Value-Added Tax (VAT)
In the UAE, the benefits extend beyond corporate tax. Dividends, capital gains, intragroup transactions, and reorganizations all enjoy a tax rate of 0%, fostering an ecosystem where business can flourish without restraint.
0%
Dividend and Capital gain, as well as intragroup transaction and reorganisations.
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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:-
    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)
  14. Autonomous (technology/software/design and support);
  15. Systems/network architecture design and support;
  16. Global business services or knowledge process outsourcing;
  17. Virtual, augmented and/or extended reality – new/additional activity ;
  18. Drone technology – new/additional activity ;
  19. Advance telecommunication technology – new/additional activity ; OR
  20. Other emerging technologies deemed significant for the digital ecosystem subject to approved by the Approval Committee – new/additional activity.
Company Taxes In Malaysia
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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.
Company Taxes In Malaysia
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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.

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