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.

Some of the types of business tax incentives in Malaysia are:

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.

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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.