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Tax Incentives
The
Malaysian Government provides a host of tax incentive to encourage direct
foreign investment in Malaysia. Applications for tax incentive should be made to
the Malaysian Industries Development Authorizing (MIDA), a division of the
ministry of International Trade & Industry. These tax incentives are designed to
grant total or partial relief from taxes in various forms. To assure foreign
investment, the government of Malaysia has guaranteed the investor against
expropriation or nationalization and allows the free remittance and repatriation
of capital by generating an investment guarantee agreement (IGA).
(i)
Pioneer Status
Companies
which intent to participate in promoted activities or engage in the manufacture
of promoted products by the government of Malaysia, are eligible to apply for
pioneer status. An up to 100% tax exemption from income tax is given to
strategic project of national importance. For example, projects involve heavy
capital investment and high technology. Manufacturing of promoted products in
areas of new and emerging bio-technology and information technology for 100% tax
exemption on the statutory income for a period of 5 years.
(ii)
Tax Relief / Exemption
1)
Companies are generally subjected to Malaysian Tax on income accruing and
derived from Malaysia. Offshore income remitted by companies resident in
Malaysia, are generally exempt from Malaysian Income Tax.
2)
A company is considered to be resident for tax purpose of control and
management of is business is exercised in Malaysia. Business losses incurred in
the current basic period for a tax year can be off set against any other income
generated in the same year. Examples relief and exemptions (not exhaustive)
i.
Investment Tax Allowance (ITA)
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permits a company to off set an amount equal to a percentage of the
capital expenditure incurred in a factory and the provision of plant and
necessary against its taxable profits.
ii.
Incentive of companies located in Multimedia Super Corridor (MSC)
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Companies with MSC status can enjoy spent incentives back by Malaysian
Court.
iii.
Industrial Adjustment Allowance (IAA)
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Companies in wood-based, textile, machinery and engineering industries
are eligible to apply to the Minister of International Trade & Industry for
approvals.
iv.
Reinvestment Allowance
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This allowance is to encourage existing industries to reinvest their
profits for the purpose of expanding, modernizing a diversity existing
operation.
v.
Infrastructure Allowance
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A company which has incurred capital expenditure in infrastructural
facilities such as construction, reconstruction, extension a improvement of any
permanent structure for a business.
(iii)
Grants
Spend funds
are set up by the Government primarily to provide financial assistance to
government approved Schemes. Examples are:
i.
Malaysia Export Credit Insurance Berhad (MECIB)
ii.
Credit Guarantee Corporation.
iii.
Export Credit Refinancing Share
iv.
Non Entrepreneurs Fund
v.
Abandoned Housing Profit Fund
vi.
Industrial Technical Assistance Fund.
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