David Wormley, August 31, 2015 (via http://www.healyconsultants.com/blog/malaysias-best-5-investment-incentives/)
As with many countries trying to attract foreign investors to set up a company, Malaysia has a number of incentive schemes in place. Some of these schemes are national, while others are restricted to certain industries or geographies. To save our readers the trouble of looking through them all to see which are the best, Healy Consultants prepared this ranking of the top Malaysian investment incentives:
Rank #5: MSC Status
Technology and knowledge-driven companies can apply for MSC Malaysia Status and thereby gain access to facilities with improved connectivity infrastructure, among other incentives. MSC status grants the right to hire up to 20 foreign knowledge workers, and there are no duties on imported technology equipment. 5-year investment tax allowances (meaning 100% capital expenditure deductions) or a special version of pioneer status (see below) for 100% tax exemption for 10 years.
Rank #4: 5-year tax depreciation of intellectual property
Malaysian companies that buy patents, designs, models, trademarks, brand assets or other similar rights from abroad can accelerate the tax deductability of such purchases. While ordinarily the tax write-downs must be taken over the useful life of the assets, this allows for a 100% write-down over five years and thereby lowers the company’s tax bill.
This is most useful for Malaysian businesses that wish to exploit brands and inventions created abroad. These deductions are claimed directly from Malaysia’s tax authority, the IRB.
Rank #3: Time-limited tax exemption on R&D-related capital expenditure
Companies with in-house R&D functions can deduct 50% of this expenditure from their taxable income for the first 10 years. Specialist R&D companies (whether researching on their own behalf or on a contract basis for others) can use 100% of this expenditure for this purpose.
These deductions can only be applied to 70% of the company’s overall income, meaning that 30% is still taxed at the prevailing rate. Learn more about these incentives from the Malaysian Investment Development Authority (MIDA).
Rank #2: Duty exemptions on imports of raw materials and components
This incentive is targeted at growing Malaysia’s manufacturing sector, as imported inputs for finished products are not subject to tax. This keeps down the cost of manufacturing in Malaysia.
The incentive can be applied to certain other sectors being encouraged by the government, for example construction projects in tourism or hotels. Building materials in these cases would therefore be exempt from import duty. Learn more about these incentives, as well as similar ones covering the purchase of manufacturing equipment, spares and consumables from MIDA.
Rank #1: Pioneer Status
Malaysia grants this ten-year incentive to companies in promoted fields such as R&D, tourism, hospitality, manufacturing or technical training. This incentive reduces the amount of taxable income by 70%, reducing these companies’ effective corporate tax rate to just 30% of the usual level during this period. Like the rules on depreciation, this incentive is governed by the IRB.
Photo by pratanti, available under a Creative Commons Attribution 2.0 Generic (CC BY 2.0) license.