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New Malaysian Investment Tax Breaks Announced

by Mary Swire,, Hong Kong

08 April 2015

The Malaysian Investment Development Authority (MIDA) has announced detailed guidelines for the new tax measures to incentivize capital investments in selected sectors that were introduced in the 2015 Budget.

It was said that the objectives of the new tax incentives are to promote balanced regional growth; to accelerate the shift of manufacturing and services sectors from labor-intensive to high value-added, knowledge-intensive and innovation-based industries; and to boost the development of regional headquarters for various corporate services in Malaysia.

For example, investors in less developed areas of Malaysia will be granted either an income tax exemption of 100 percent for up to 15 fiscal years, commencing from the first year of assessment in which the company derives statutory income; or an income tax exemption equivalent to 100 percent of qualifying capital expenditure incurred within a period of 10 years. This latter allowance can be offset against 100 percent of statutory income for each assessment year, and allowances not used can be carried forward until fully absorbed.

With applications to be received by MIDA by December 31, 2020, investors will also be given a stamp duty exemption on the transfer or lease of land or buildings, a withholding tax exemption on fees for technical advice or royalties, and import duty exemptions on raw materials, components, machinery, and equipment that are not produced locally.

In addition, tax incentives to increase automation in manufacturing will be divided between highly labor-intensive industries (rubber products, plastics, wood, furniture, and textiles) for which an investment allowance of 200 percent will be provided on the first MYRM4m (USD1m) of expenditure in each of the 2015-17 fiscal years, and other industries that will receive a similar allowance based on the first MYR2m of investment in each of the 2015-20 fiscal years.

To obtain this tax allowance, companies will need to be resident in Malaysia; operate for at least 36 months; and purchase equipment that is more advanced than the technology currently used by the company and that will enhance manufacturing productivity.

Finally, to promote the establishment of regional corporate hubs in Malaysia, locally incorporated companies with paid-up capital of more than MYR2.5m and an annual business spend of at least MYR3m, and that serve and control network companies in at least three countries outside Malaysia, will be eligible from May 1, 2015, for a tiered corporate tax rate of up to 10 percent for a maximum of 10 years, dependent on factors including the number of high-value jobs (with a minimum monthly salary of at least MYR5,000) the company generates.

This incentive will replace the existing International Procurement Centers, Regional Distribution Centers, and Operational Headquarters Incentive Schemes, which will all be terminated by April 30, 2015.

TAGS: tax | investment | business | tax incentives | royalties | corporation tax | manufacturing | corporate headquarters | multinationals | transfer pricing | withholding tax | stamp duty | Malaysia | tax breaks | import duty | services | Investment | business investment | Invest | Investment

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