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What Businesses Need To Know About The PENJANA Tax Incentives

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What Businesses Need To Know About The PENJANA Tax Incentives?

Malaysia has introduced its fourth economic relief package to mitigate the impact of the COVID-19 pandemic on the economy, and to provide various tax incentives in Malaysia. The package is named Pelan Jana Semula Ekonomi Negara (PENJANA). Its value is around RM 35 billion.

 

The package includes a number of tax incentives for businesses affected by both the pandemic and the lockdown. It also provides both financial assistance for SMEs and measures to protect the job. Through PENJANA, most of the Malaysians will be able to enjoy tax reliefs as they will not have to pay taxes on some specific expenses.

This article discusses the tax incentives and reliefs given to various individuals and organizations under PENJANA. Here are the top five exemptions given under PENJANA:

1. Incentives for Property Owners

PENJANA provides massive tax deductions to property owners that reduce the rental amount to at least 30%. Such a measure supports not only longstanding property owners, but also the people who are looking to buy property for the first time.

 

The PENJANA plan will also reintroduce and promote the Home Ownership Campaign. It will be useful in kick-starting the property market after COVID-19, which is highly important considering the fact that real estate has suffered a lot in the last few months.

Moreover, stamp duty exemptions are offered to homeowners. Stamp duty is a fee that is typically required for legal documents like instruments of transfer, loan agreements, and other such documentation. The properties that value above RM 1 million will get stamp duty exemptions. 

 

Ultimately, the businesses involved in the real estate industry will also enjoy these benefits, because they will kick-start the property market. Hence, real estate businesses will be able to sell more properties.

Penjana tax incentives

2. Tax Exemption for Automotive Industry

The automotive industry has received a 100% tax exemption for both local and imported cars. It simply means that vehicle manufacturers will not have to pay a single-stage tax on local or international manufacturing. Moreover, the buyers in Malaysia will also benefit from these tax incentives because their costs will come down, due to fewer taxes.

3. Small and Medium-Sized Enterprises (SMEs)

Tax specialists and accounting firms in Malaysia have lauded PENJANA because it covers almost all industries and aspects of the Malaysian economy. Micro businesses and SMEs are considered to be the backbone of the Malaysian economy, as they represent around 98% of Malaysia’s business population.

 

PENJANA pays special attention to SMEs to uplift and heal the economy. Incentives like establishing new companies, income tax rebate of RM 20,000 per annum for the first three years, and stamp duty exemptions are introduced to support this important sector.

 

To facilitate the SMEs’ cash flow issues, the banking sector will be providing about RM 2 billion at a low-interest rate of 3.5%. A criterion is set, and the eligible SMEs can apply for a maximum amount of RM 500,000.

4. Tax Incentives For Enterprises in Malaysia

Large organizations and enterprises were also heavily affected by prolonged lockdown and a smaller number of customers. Hence, PENJANA is promising up to RM 400 million for enterprises with an interest rate of 3.5%.

 

The companies that are eligible for this incentive can apply for up to RM 50,000. Accounting firms in Malaysia will have to keep these incentives and new regulations in mind before managing various companies’ payroll.

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5. Tourism Industry

The tourism industry has taken a huge hit due to COVID-19 pandemic and global travel restrictions. PENJANA includes several proposals to help the tourism industry and boost the economy. Some of these measures are:
  1. Extending the tax deadlines until December 31st for the tourism and travel agencies, hotels, and airlines.
  2. Domestic travellers are given concessions as well, because they will not have to pay an income tax of up to RM 1,000 if they are travelling locally between 1st March to 31st December 2021.
  3. Moreover, 100% tourism tax exemption will be given from 1st July 2020 to 30th June 2021. It includes many different exemptions, such as exemption from paying tax for accommodation.

In a Nutshell

Other than the industries discussed above, many other businesses are also given tax exemptions and relief under the PENJANA plan. Newly established businesses and COVID-19 related products like PPEs, thermal scanners, masks, and others are given maximum tax relief.


Overall, PENJANA is a very comprehensive economic package that includes a lot of provisions to support various industries and therefore the Malaysian economy. Every business and accounting firm in Malaysia should familiarize itself with these provisions to ensure that they are able to take benefits from these tax incentives.


For more information, feel free to get in touch with us.

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Tax Credit and Incentive for Corporates in Malaysia

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Tax Credit and Incentive for Corporates in Malaysia

Malaysia offers a vast range of tax incentives that cover the majority of the industrial sectors. There are different forms of tax incentives in Malaysia as they can be granted in the form of tax exemption or allowances. Usually, tax is exempted, which means that shareholders’ income is not taxed.

 

The following schemes and incentives cover different corporates in Malaysia.

Pioneer Status (PS) And Investment Tax Allowance (ITA)

Businesses operating under the manufacturing, tourism, agricultural and any other industrial sector are eligible for PS and ITA. Such industries are responsible for the production of products.

Industries with pioneer status are exempted 70% of the tax on income for five years. Payable taxes for PS and ITA also depend on the type of business. For example, a project that involves a large amount of investment and has great importance in the development of a nation is given a huge tax incentive. Similarly, manufacturing companies, the IT industry and specialized machinery production are given special status under the PS or ITA.

Special Incentive Schemes

Any local business in Malaysia that wants to expand, introduce automation and modern machinery is eligible for the reinvestment allowance. The terms of this scheme are:

  • The allowance is specified up to 15 years from the first year of claiming the tax credit.
  • An allowance of 60% of QCE sustained must be used against 70% of legal income. The unsettled 30% is taxed at the usual CIT rate.
  • Ministry of Finance has the right to withdraw the allowance if a company fails to comply with taxation rules.

Regional operations

A principal hub is a local organization in which Malaysia is used as the base of conducting both regional and international business activities and operations. Such functions may include risk management, strategic decision making, controlling and supporting the key shares related to the company.

Some of the other incentives available for regional operations of businesses are:

  • Absence of ownership conditions
  • Flexible rules for foreign exchange
  • Customs duty exemption for certain products like raw materials, repackaging materials and other finished products.
office

International trading companies

International trading companies are excused for five years on the income of 20% of the total export revenue, up to a maximum of 70% of income.

To avail the tax incentive, an international trading company must fulfil the following three conditions:

  1. A company must have a branch in Malaysia, and 60% ownership of the businesses must be Malaysian.
  2. The minimum revenue of the organization must be MYR 10 million per annum.
  3. Business operations must make use of the local services of Malaysia, for example, hiring an accounting firm in Malaysia, banking, financing and insurance must be done locally.

Financial services sector

Since 2007, a ten years tax exemption is given to:

  • Islamic banks operating under the Islamic Financial Act of 2013. It includes Islamic banking performed in foreign currencies as well.
  • Islamic insurance services (Takaful) that are registered under the Islamic Financial Act 2013 are exempted from the tax.

Petroleum sector

The petroleum sector is given the following tax incentives:

  • Quick allowance is provided on the total amount of finance invested from the year of assessment 2010 to 2024 for the working of petroleum industries.
  • An investment allowance of 60% is given.
  • A significant portion of the income is exempted from the tax payment, which brings down the total tax rate from 38% to 25%.

Sabah Development Corridor (SDC)

SDC is also a tax scheme which can be availed by companies. Under SDC, an organization can enjoy the following benefits:

  • 100% income tax exemption for five years in the shipping sector.
  • 100% income tax exemption for ten years in the production, hotel and education sector.

The incentive for rural areas

Tax incentives are designated for less-developed regions as well. Such schemes make sure that small businesses are able to flourish in small areas and play a role in the development of backward areas. They include:

  • 100% tax exemption for up to 15 years for companies that create employment and meet a set target of revenue.
  • Tax exemption on land or building lease.
  • Accounting firms in Malaysia that are based in rural or less-developed areas are also given tax exemption.
  • Customs duty exemption on raw materials, machines and other equipment needed in small industries.
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Green Incentives

Green incentives refer to the tax exemptions provided to companies that are part of the green energy research and playing a role in the development of modern technology for clean energy.

 

Companies dealing with renewable energy, energy efficiency, waste management and green energy research are eligible to apply for Green incentives.

 

For more questions regarding tax credit and incentive for corporates in Malaysia, feel free to get in touch with us.

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Tax Incentives in Malaysia: 2024 Guide

Types of Business Tax Incentives in Malaysia

Types of Business Tax Incentives in Malaysia

There are various kinds of tax schemes present in Malaysia, which includes tax incentives and exemptions for different types of businesses. They also include allowances and tax deductions on a certain income.

What Are Tax Incentives?

Tax incentives are reductions or exemptions from taxes provided by the government to encourage economic activities. In Malaysia, these incentives aim to attract foreign investments, promote specific industries, and support startups and SMEs. They can take the form of tax holidays, allowances, or deductions.

Types of Business Tax Incentives in Malaysia

Malaysia’s tax incentives are broadly categorized into pioneer status, investment tax allowance, and special industry-specific incentives. Below, we’ll dive into each type:

Pioneer Status (PS)

This incentive provides companies with partial or full income tax exemption for up to five years, extendable in certain cases. It targets businesses in industries that the government aims to develop.

 

Benefits:

  • 70% to 100% exemption on statutory income for up to 5 years.
  • Eligible companies can extend the tax exemption period.

 

Who Qualifies? Industries such as:

  • Manufacturing
  • Agriculture
  • Biotechnology
  • Renewable energy

 

Companies must apply through the Malaysian Investment Development Authority (MIDA) to enjoy Pioneer Status.

Investment Tax Allowance (ITA)

For businesses not qualifying for Pioneer Status, ITA offers an alternative form of tax relief. This allows companies to offset their capital expenditures against taxable income.

 

Benefits:

  • 60% to 100% allowance on qualifying capital expenditure for 5 years.
  • The unused allowance can be carried forward until fully utilized.

 

Eligibility:

  • Applicable to industries like automation, modern agriculture, and environmental conservation.
  • Companies must demonstrate their commitment to innovation or productivity improvement.

Reinvestment Allowance (RA)

Businesses looking to reinvest in expansion, automation, or modernization can benefit from the RA.

 

Benefits:

  • 60% of qualifying capital expenditure is exempted from taxable income.
  • Available for a period of 15 consecutive years.

 

Industries Covered:

  • Manufacturing
  • Agricultural processing

Incentives for Small and Medium Enterprises (SMEs)

SMEs play a critical role in Malaysia’s economy, and the government provides tailored tax incentives for them.

Key Incentives:

  • Reduced corporate tax rate of 17% on the first RM600,000 of chargeable income.
  • Various grants and allowances under the SME Digitalization Initiative.

Industry-Specific Incentives

Some industries receive exclusive tax benefits to spur their growth and global competitiveness:

(a) Halal Industry Incentives

  • 100% tax exemption for halal-certified companies.
  • Focused on businesses in the food, cosmetics, and pharmaceutical sectors.

(b) Green Technology Incentives

  • Green Investment Tax Allowance (GITA) for renewable energy projects.
  • Green Income Tax Exemption (GITE) for service providers.

(c) Tourism Tax Incentives

  • Tax deductions for building or renovating tourism-related facilities.

Types of Business Tax Incentives in Malaysia Based on Industry

1. Trading Sector

Industries related to the production of goods, tourism sector, hoteling, manufacturing and other commercial businesses can avail pioneer status (PS) or investment tax allowance (ITA). Under PS, companies’ tax is exempted from 70% of the income for five years since the formation of the business.

According to ITA, 60% of the capital expenditure is excused on 70% of the legal income.

2. Special Incentive Scheme

Businesses that are based in Malaysia and generating income from approved businesses through the Ministry of Finance are qualified for this scheme.

It provides a tax exemption on 70% of the total income. Companies that involve heavy import-export businesses are also eligible for this special tax incentive scheme.

3. Food Production

Food production companies can claim significant tax concessions, especially if they are operating under a large corporate enterprise. Moreover, 100% tax exemption can also be availed under certain conditions if the subsidiary industries are approved through the Ministry of Finance under the list of food production industries.

4. Biotechnology

Biotechnology is rapidly rising in the scientific technology sector. Therefore, Malaysia offers several tax incentives to the companies related to biotechnology that are approved through Biotechnology Corporation, Malaysia.

The following incentives are provided to biotechnology organizations:

  • Start-ups and new organizations are provided with a 100% tax exemption for up to 10 years.
  • Expanding businesses are given a 100% exemption for up to 5 years.
  • Up to 20% concession is provided on the taxes after a period of 10 years.
  • An organization with a separate building for biotechnology research is provided with an industrial building allowance of 10% for 10 years.
  • Import duty charges are exempted from the biotechnology sector. Since the export of samples and modern machinery is essential in efficient biotechnology business, tax incentive on custom duty is a huge advantage.
Types of Business Tax Incentives in Malaysia-1

5. Education

Private higher education institutions are exempted from the majority of the taxes, for example, development of new curriculum, modification in a course(s), and annual training of the teachers.

Non-profit schools are also provided with tax incentives in Malaysia. However, they must be registered and approved by the Ministry of Education (MOE). There is a certain amount of tax that is exempted. It depends on the scale and strength of the school.

International schools are usually profit-oriented. No tax is collected from these schools for a period of 5 years since their establishment. After this period is over, a certain amount of tax is set, which depends on the number of students studying at the school and the fee structure. Equipment needed in such schools is usually imported, which is made tax-free.

Kindergarten schools registered with MOE are eligible for the education tax incentive scheme. For a period of 5 years, tax exemption is provided to the pre-schools based on their total income. Moreover, building allowance is given to kindergarten schools.

All private pre-schools and kindergartens registered with the MOE are eligible.

6. Green Incentives

Green incentives deal with companies related to renewable and green energy. Any modern technology related to green energy adoption and research in clean energy is covered in such incentives and exempted from customs duty.

Moreover, allowance can be claimed by the companies for the successful purchase of state-of-the-art equipment needed for green energy research. Revenue generated through green technology and services is also exempted to some extent.

7. Healthcare and Wellness

Medical and pharmaceutical industries wishing to expand and modernize their operation are provided allowances by the concerned authorities. Moreover, a 100% tax exemption of QCE is given for a period of 5 years.

8. Information and Communication Technology

The IT industry has become a major part of people’s daily lives. Development of the IT industry is essential for the smooth flourishing of other industries like the latest software, applications, hardware and websites are used by the majority of the other types of businesses.

E-commerce websites are given a 20% tax exemption on the initial charges of web development for a period of 5 years. Moreover, offshore trading has also become a huge business in Malaysia because it enjoys a huge tax incentive, depending on the total revenue.

9. International Trading Companies

International companies that have established branches in Malaysia, has 60% Malaysian ownership and make at least RM10 Million are provided with tax incentives under the foreign business rules. They are provided with a 20% tax exemption of the 70% legal income for a period of 5 years.

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10. Shipping

A tax exemption is given on 70% of the income to organizations and people involved in the transportation of business cargo through Malaysian ships.

 

The aforementioned highlighted the different types of business tax incentives in Malaysia. If you have any doubt left regarding business taxes, please feel free to get in touch with us. 

Eligibility Criteria for Tax Incentives in Malaysia

To qualify for these incentives, businesses must meet specific requirements, including:

1. Registration and Compliance

The company must be registered in Malaysia and comply with local tax laws.

2. Investment in Target Sectors

Tax incentives often focus on industries that align with the government’s strategic economic goals.

3. Application Process

Applications must be submitted to relevant authorities such as MIDA, IRB, or specific industry regulators.

2024 Updates on Tax Incentives in Malaysia

The Malaysian government has introduced new updates and revisions to tax incentives in 2024 to keep up with global economic shifts and enhance local industries.

Key Updates:

1. Enhanced Pioneer Status for Digital Economy

Businesses involved in cloud computing, AI, and digital content are now eligible for extended tax holidays.

2. Expansion of Green Technology Incentives

More sectors are eligible for GITA and GITE, promoting sustainable practices.

3. Tax Incentives for Startups

New measures include tax deductions for angel investors and seed funding for tech startups.

4. Targeted SME Reliefs

Increased tax reductions for SMEs, particularly those adopting digital transformation.

Why Tax Incentives Matter

Understanding and leveraging tax incentives can significantly impact a business’s financial health. By reducing tax liabilities, businesses can reinvest savings into growth opportunities, enhance their competitiveness, and contribute more effectively to Malaysia’s economy.

Benefits Include:

  • Boosting cash flow.
  • Lowering operational costs.
  • Supporting long-term growth strategies.

How to Apply for Tax Incentives in Malaysia

Applying for tax incentives requires thorough documentation and adherence to guidelines set by relevant authorities.

 

Steps:

  1. Identify the applicable incentive based on your business activity.
  2. Gather necessary documentation, including business plans, financial statements, and investment plans.
  3. Submit the application to the appropriate body, such as MIDA or the IRB.
  4. Monitor and maintain compliance throughout the incentive period.

Conclusion

Tax incentives in Malaysia are a powerful tool for businesses and investors looking to maximize their potential in a competitive market. By understanding the different types of incentives, their benefits, and the latest 2024 updates, you can strategically position your business for growth. 

 

Whether you’re an SME or a large corporation, taking advantage of these incentives can lead to significant financial benefits.

Frequently Asked Questions about Malaysia Tax Incentives in Malaysia

SMEs can enjoy reduced corporate tax rates and various allowances like the SME Digitalization Grant.

 

You’ll need to review MIDA’s guidelines and submit an application to determine your eligibility.

Yes, GITA and GITE offer tax exemptions and allowances for businesses in the green technology sector.

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Who Needs to Register for Tax File?

Who Needs to Register for Tax File

Who Needs to Register for Tax File?

1. What is e-Daftar?

e-Daftar is an application that facilitates taxpayers through online registration of tax file in Malaysia. Income tax files of companies, employers, individuals, partnership and limited liability partnership (LLP) can be registered via e-Daftar.

2. Who must register Income Tax File?

The following entities and accounting firms in Malaysia must file their taxes:
  • Individual who has income which is taxable
  • A businessperson with taxable income
  • An employee who is subject to monthly tax deduction
  • Unregistered companies with IRBM
  • A business or company which has employees and fulfilling the criteria of registering employer tax file
  • The partnership which are not yet registered with IRBM
  • Limited Liability Partnership (LLP) which are not yet registered with IRBM

3. What are the documents required for tax registration?

The documentations vary from different categories as discussed below:

Individuals without Business Income

  • National Identification Card
  • Identification can also be proven through Armed Forces card, Police card, or Passport

Individuals with Business Income

  • National Identification Card
  • Identification can also be proven through Armed Forces card, Police card, or Passport
  • Business Registration Certificate

Local company (Private Limited Companies and Limited Company)

  • Notice of registration of the company under section 15 Companies Act 2016 or certificate of incorporation of a company under section 17 Companies Act 2016 (if available)
  • Notification of Change In The Register Of Directors, Managers And Secretaries under section 58 Companies Act 2016

Foreign Companies

  • Notice of registration of the foreign company under section 562 Companies Act 2016
  • Particulars Of Change Or Alteration Relating To Foreign Company under subsection 567(1) Companies Act 2016

Partnership

  • Copy of the partnership business registration certificate issued by the Companies Commission of Malaysia (SSM)
  • Complete list of partners and any required documents like their ID papers.

Limited Liability Partnership (LLP)

  • Copy of the notice of registration of the LLP or copy of the certificate of registration of the LLP (if available) under section 11 of the Limited Liability Partnership Act 2012
OR
  • Copy of the notice of registration of the conversion to LLP under section 32 of the Limited Liability Partnership Act 2012 (if relevant) issued by the Companies Commission of Malaysia (SSM)

Complete list of partners and any required documents like their ID papers.
Who Needs to Register for Tax File-1

4. How to send the documents for tax registration?

Tax registration can be done with the help of an auditing firm in Malaysia as it will guide you throughout the process of tax registration and tax filing and inform you about the tax incentives available in Malaysia. However, the tax registration can also be done individually as well because the whole process is smooth and efficient.

After you have filled the forms and attached the required documents, they can be sent via:

  • The online website of e-Daftar
  • Fax: 03-8922 1676
  • You must state the application number when faxing the documents.
  • For any queries, issues, or comments can contact the IRBM’s line at 03-8913 3800

5. When will you receive the Reference Number of Income Tax?

After you have completed the application and the submission is accepted online, you will get the reference number in 3-4 working days.

How to check the application status?

The application status can be examined online by entering your application number in e-Daftar.

Tax Rates

In Malaysia, the rates without availing any tax incentives are:
  • Individual Tax Rate (Resident): 0% to 28% for year of assessment 2019 (0% to 30% for year of assessment 2020)
  • Company Tax Rate (Resident): 17% and 24% for Small Medium Enterprise (SME) for year of assessment 2019 onward (24% for non-SME)

In terms of the income tax system, Malaysia has adopted a unique territorial system of taxation. Any person or company, local and foreign, are subject to income tax for any income accruing in or derived from Malaysia or received in Malaysia. However, certain exemption from income tax is available for certain type of income.

For example, foreign source income received in Malaysia is exempted from income tax as stated in the local tax law except for banking, insurance companies and air/sea transportation companies. Meanwhile, capital gain is not subject to income tax but certain gain may subject to Real Property Gains Tax in Malaysia.

Individual tax have to be paid by the local residents as well as non-residents of Malaysia for income generated from Malaysia. According to the law, generally, a person who has lived in Malaysia for at least 182 days is declared a tax resident in Malaysia.

Petroleum Tax

Petroleum operations business in Malaysia is subject to petroleum income tax, which is about 38% of the total revenue generated through fuel operations and income tax rate of 24% applies to petroleum functions in fields.

Local Income Tax

In Malaysia, no state, provincial, or local government has imposed taxes on income.

Who Needs to Register for Tax File-2

Small-scale Businesses

Small companies, as well as auditing firms, if fulfilled certain criterias, would be able to enjoy massive tax incentives in Malaysia. Company incorporated in Malaysia with shareholder’s funds not exceeding RM 500,000 and has at least 60% of Malaysian ownership is eligible for certain tax incentive such as Pioneer Status which company can get a 100% tax exemption for a period of five years so it can thrive in the competitive market.


Another available tax incentive is the Investment Tax Allowance where 60% of the qualifying capital expenditure incurred within five (5) years can be offset against its statutory income. A sole proprietor or partnership is eligible to apply for the incentives provided that a new private limited/limited company is formed to take over the operations/activities of the existing production/activities.


Have more questions regarding the registration of company tax file in Malaysia? Feel free to get in touch with us.

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