Are You Missing Out on Tax Benefits? A Guide to Malaysia’s Corporate Incentives
For Malaysian companies, tax season doesn’t just mean obligations—it also offers opportunities.
With the right planning and awareness, your business can leverage various tax incentives in Malaysia to reduce your overall tax burden, improve cash flow, and reinvest savings into strategic growth.
Unfortunately, many eligible businesses are either unaware of these incentives or lack the structure to claim them effectively.
In this guide, we’ll explore key corporate tax incentives available in Malaysia, how they work, and how a trusted audit firm in Malaysia can help you benefit from them.
Understanding Tax Incentives in Malaysia
Tax incentives are benefits provided by the government to encourage business activities that support national economic development goals. These incentives are generally offered in the form of:
- Income tax exemptions or reductions
- Investment tax allowances (ITA)
- Reinvestment allowances (RA)
- Double deductions on approved expenses
- Pioneer status and accelerated capital allowances
They are often targeted at specific sectors such as manufacturing, biotechnology, IT, green technology, and regional operations hubs.
1. Pioneer Status (PS)
What it is: A partial exemption on statutory income for companies involved in promoted activities or producing promoted products.
Incentive: 70% exemption on statutory income for 5 years.
Who qualifies:
- Companies in manufacturing, high-tech, or strategic service sectors
- Activities listed as “promoted” under the Promotion of Investments Act 1986
Administered by: Malaysian Investment Development Authority (MIDA)
Example: A Malaysian company manufacturing energy-efficient devices could qualify for Pioneer Status and enjoy significant tax savings on its profits.
2. Investment Tax Allowance (ITA)
What it is: An alternative to Pioneer Status, allowing capital-intensive businesses to offset qualifying capital expenditures against their taxable income.
Incentive: 60% allowance on qualifying capital expenditure for 5 years, offset against 70% of statutory income.
Who qualifies:
- Manufacturing companies investing in plant, factory, or automation
- Companies engaged in R&D, biotechnology, or renewable energy
Suitable for: Companies that may not be profitable in the early years but are investing heavily in infrastructure.
3. Reinvestment Allowance (RA)
What it is: Tax incentive for manufacturing or agricultural companies that reinvest in upgrading or expanding their operations.
Incentive: 60% allowance on qualifying capital expenditure for 15 consecutive years.
Requirements:
- Must be in operation for at least 36 months
- Reinvestment must be for expansion, modernization, or automation
Pro tip: This is one of the most underutilized incentives despite its long eligibility period. Companies expanding production lines often qualify without realizing it.
4. Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE)
GITA:
- For investment in green technologies (e.g., solar, energy-efficient systems)
- 100% of qualifying capital expenditure, offset against 70% of statutory income for up to 5 years
GITE:
- For companies providing green services (e.g., consultancy, system design)
- 100% tax exemption on statutory income for up to 5 years
Administered by: Malaysian Green Technology and Climate Change Corporation (MGTC)
These are part of the government’s long-term commitment to sustainable economic development.
5. Principal Hub Incentive
What it is: For companies establishing a regional base in Malaysia to manage, control, and support regional operations.
Incentive:
- Tiered income tax rate of 0% to 10% on statutory income for up to 10 years
- Applicable for companies conducting centralized procurement, logistics, finance, HR, etc.
Eligibility: Requires minimum business spending, employment creation, and strategic planning across ASEAN or APAC.
Suitable for: Multinational corporations or regional SMEs planning to scale into Southeast Asia.
6. Double Deductions
Malaysia also offers a wide range of double tax deductions—expenses that can be claimed at twice their actual value to reduce taxable income. These include:
| Expense Type | Deduction |
|---|---|
| R&D expenses | Double |
| Export market development (e.g., trade shows) | Double |
| Approved training programs (HRDF-registered) | Double |
| Hiring disabled employees | Double |
| Environmental protection activities | Double |
Note: These deductions are subject to conditions and require documentation and sometimes prior approval from relevant agencies.
7. Automation Capital Allowance (ACA)
What it is: Designed to encourage the adoption of automation and IR4.0 technologies in labor-intensive industries.
Incentive:
- 100% capital allowance on qualifying capital expenditure
- Applicable for manufacturing and selected services sectors
Limit: RM10 million per year for eligible capital expenditures
This scheme helps companies reduce their dependence on manual labor and improve production efficiency.
How to Apply for Tax Incentives in Malaysia
Most tax incentives require pre-approval from regulatory agencies such as:
- MIDA – For Pioneer Status, ITA, Principal Hub
- IRB (LHDN) – For Reinvestment Allowance and Double Deductions
- MITI, HRDC, MGTC – For specialized incentives (training, green technology, etc.)
Application processes typically involve:
- Submitting a business plan
- Financial forecasts and projections
- Investment breakdown
- Documentation of expenses and project milestones
- Periodic reporting and compliance checks
Working with a professional audit firm in Malaysia ensures proper submission and ongoing compliance.
Are You Leaving Money on the Table?
Here are some common scenarios where companies miss out:
- Not claiming reinvestment allowance despite expanding facilities
- Failing to document R&D expenses for double deduction
- Not applying for green tax exemptions after installing energy-efficient systems
- Choosing the wrong incentive (e.g., Pioneer Status instead of ITA)
Each missed opportunity can result in thousands—or even millions—of ringgit in forgone savings.
Why Work with ShineWing TY Teoh?
At ShineWing TY Teoh, we help Malaysian companies identify, apply, and optimize their use of available tax incentives. Our integrated team of tax professionals, corporate advisors, and auditors ensure:
- Strategic tax planning aligned with business goals
- Full regulatory compliance
- Maximum incentive claims with minimal risk
- Seamless communication with government agencies
Whether you’re expanding, automating, or going regional, our expertise ensures you’re not missing out on what you deserve.
Final Thoughts: Incentives Are Not Just for Large Corporations
Contrary to common belief, SMEs are also eligible for many of these incentives—especially in areas like automation, reinvestment, and green technology. But to benefit, you must act early, document diligently, and align with professional guidance.
If you’re unsure where to start, talk to a qualified audit firm in Malaysia that understands your industry and growth potential.
