AEC OPEN DAY FOR SMEs
10th August 2015
Malaysia Your Profit Centre in Asia
CONTENT OUTLINE
About MIDA
General Incentives
Direct
Domestic
Investment
Initiatives
Latest Incentives
Investment Performance
ABOUT
MIDA
MIDA FUNCTION
• Foreign
Direct
Investment
• Domestic
Investment
• Services
• Assist companies in
the implementation
and operation
• Facilitate exchange &
co-ordination among
institutions engaged
in or connected with
industrial
development
• Advisory Services
• Manufacturing
licenses
• Tax incentives
• Expatriate posts
• Duty exemption
• RDC, IPC and R&D
status
•Planning for
Industrial
Development
•Recommend
policies and
strategies on
industrial
promotion and
development
FACILITATION OF INVESTMENT
MIDA as a One Stop Agency :
a) Advisory & consultancy
b) Approval of projects
c) After- care services
Evaluation of applications for:
• Manufacturing license
• Tax incentives
• Import duty exemptions on raw
materials, components and machinery
• Expatriate posts/work permits
• Regional establishments such as
Operational Headquarters,
International Procurement
Centers, etc.
GENERAL
INCENTIVES
INCENTIVES
Pioneer Status
Income tax exemption ranging
from 70% or 100% for a period
of 5 or 10 years
Investment Tax Allowance
60% or 100% on qualifying
capital expenditure for 5 years
Incentives
Reinvestment Allowance
60% on qualifying capital
expenditure for 15
consecutive years
Import Duty & Sales Tax
Exemption
For raw materials/components
and Machinery and Equipment
DOMESTIC
DIRECT
INITIATIVES
Investment Targets under
Economic Transformation
Programme (ETP), by 2020
73% DDI
92%
(RM953 billion)
(RM1.3 trillion)
Private
Investments
RM1.4
trillion
27% FDI
8%
Public
Investments
Domestic Direct Investment (DDI)
Domestic Initiatives
Investment Strategic
Fund (DISF)
Incentives for Acquiring a Foreign
Company for High Technology
Incentives
for
Small
Scale
Companies
Incentives for Companies in
Production (Desirous Issue)
Incentives for Merger Among
Malaysian Services Providers
Domestic Investment Strategic
To accelerate of
thethe
shift
of Malaysian-owned
Objectives
Fund
Fund
companies in targeted industries to high valueadded, high technology, knowledge-intensive
and innovation-based industries
To enable domestic investors to develop new
sources of competitive advantage and to
become active participants in the global
ecosystems of industries.
To assist capable Malaysian companies to make
the quantum leap required in driving the national
investment agenda in transforming the economy
The fund is not a business start-up fund but it is
applicable to local companies which have
new/additional investments
Domestic Investment Strategic
Priority Sectors
FundPharmaceuticals
Aerospace
Advanced
Machinery &
Electronics
Equipment
Renewable
Medical
ServicesDevices
including Design,
R&D,
Energy
testing, quality and standard
certification, technical and skills
training, engineering services, and
logistics service providers
Other industries, on a case
by case basis
Domestic Investment Strategic
Scope
ofwillthe
Fund
Fund
The fund
provide
matching grants (1:1) on
reimbursable basis to cater for expenditures
incurred for the following activities:
Training of Malaysians
R&D activities carried out in Malaysia
Licensing or Purchase of New Technology
Obtaining International Standards/Certification
Modernisation and upgrading of facilities and
tools to undertake manufacturing or services
activities for Multinational Corporations (MNCs)
and Malaysian conglomerates (Outsourcing
activities)
Definition
of Outsourcing: A subcontracting process that involves
manufacturing, manufacturing related services, business services and
delegation of some/all operations to an external entity, usually specialised
in that operation.
Incentive for Acquiring a Foreign
Company for High Technology
Reintroduction of the incentive for acquisition
of foreign companies
Malaysian-owned company acquiring a foreignowned company abroad will be eligible for an
annual deduction of 20% of the acquisition cost
for 5 years
Purpose of acquisition:
Establishment
of
a
manufacturing
facility/company or services company within
Malaysia; and/or
Utilisation of the acquired technology in their
existing operations within Malaysia
conglomerates (Outsourcing activities)
Definition of Small Scale Company under
the Promotion of Investments Act (PIA),
Previous
1986
andDefinition:
Criteria for the Granting of Tax
Small scale companies incorporated in Malaysia with
Incentives
shareholders’ fund
not exceeding RM500,000 and
having at least 60% Malaysian equity
Redefinition:
Companies
incorporated
in
Malaysia
with
shareholders’ fund not exceeding RM2.5 million and
having at least 60% to 100% Malaysian equity
Incentives:
PS with income tax exemption of 100% of statutory
income for 5 years; or
Investment Tax Allowance (ITA) of 60% of qualifying
capital expenditure incurred within a period of 5
years. The allowance can be offset against 100% of
statutory income in that year of assessment.
Definition of Desirous for the Granting of
Tax Incentives under the Income Tax Act,
1967
fora Malaysian-owned
Previously,
company must be ‘desirous’Companies
in establishing or
participating in a promoted activity or producing a promoted
product and has not started production to enjoy tax incentives
Definition of production:
Manufacturing company - Company has started to produce
products (including trial production)
Services company - Company has issued first invoice for the
services rendered
Malaysian-owned manufacturing and services companies that are
already in production which do not comply with the ‘desirous’
clause under the PIA, 1986 are now eligible to be considered for tax
incentives
Incentives:
Tax exemptions equivalent to Pioneer Status or Investment Tax
Allowance based on the prevailing rates under the PIA, 1986
Applications received by MIDA from 3 July 2012 are eligible to be
considered for this incentive
Encourage Small Malaysian Service
Providers to Merge into Larger Entities
Incentives:
Flat tax rate of 20% on all taxable
income for a period of 5 years (effective
from the date of the merger)
Stamp duty exemption on the merger
document
Eligibility
Enterprises that intend to merge must be:
Criteria
100% Malaysian owned; and
Have annual sales turnover of less than
RM5 million or full-time employees of
less than 50
LATEST
INCENTIVES
NEW INCENTIVES
ANNOUNCED
Incentive for Less Developed
Areas
Incentive for Industrial Area
Management
Capital Allowance to Increase
Automation in Labour-Intensive
Industries
Incentive for the Establishment
of Principal Hub
INVESTMENT
PERFORMANCE
APPROVED INVESTMENTS
RM235.9
billion
A new record for approved
investments
72.6 : 27.4
Domestic-Foreign
investment ratio
5,942
Projects
Approved
178,360
Employment
opportunities
AL INVESTMENTS APPROVED IN 2014
Investments in Malaysia
reached
a new record level
235.9
250.0
219.4
RM Billion
200.0
150.0
148.8
154.6
167.8
137.0
104.9
105.6
2009
2010
100.0
50.0
2007
2008
2011
2012
2013
2014
TOTAL APPROVED MANUFACTURING
PROJECTS
(2010 –2014), FDI vs. DI
45.0
40.0
RM
Billion
35.0
34.1
30.5
29.1
30.0
25.0
20.0
39.6
DI
21.9
18.1
20.2 20.9
32.3
21.6
15.0
10.0
5.0
-
2010
2011
2012
2013
2014
TOTAL APPROVED MANUFACTURING
PROJECTS
2014, BY MAJOR
INDUSTRIES
18
16
RM
Billion
FDI
15.98
14
12
10
DI
11.15
10.75
9.94
8
6
4
2
5.62
3.45
2.85
2.48
MALAYSIAN COMPANIES
Malaysia Your Profit Centre in Asia
Thank You
MIDA Sentral
No. 5 Jalan Stesen Sentral 5
K L Sentral
50470 Kuala Lumpur
Tel. 03 – 2267 3633, Fax. 03 – 2274 7970
[email protected]
26
INCENTIVE FOR LESS
DEVELOPED AREAS
Regional Economic Corridors (ECs) created to
achieve balanced regional development and
accelerate growth in designated geographic areas
Only ECER, ISKANDAR and SDC have their own
special incentive packages
INCENTIVE FOR LESS
To encourage more AREAS
equitable regional
DEVELOPED
development and inclusiveness, the special
incentive packages provided under ECs are
enhanced to include more areas that are less
developed
Objectives:
 Ensure continued promotion of investments
in less developed areas
 Enhance private sector involvement in
development of less developed areas
 Transform less developed areas into major
TYPE OF INCENTIVES
Income Tax Exemption:
 100% up to 15 years of
assessment (5+5+5) OR
Stamp duty exemption on
Investment Tax Allowance (ITA)
 100% of qualifying capital
expenditure incurred within 10
years
 Transfer or lease of land or
building used for development in
relation to manufacturing and
services activities
Incentiv
es
Withholding tax exemption on
Import duty exemption on:
 Fees for technical advice, assistance
or services or royalty in relation to
manufacturing or services activities
 Raw materials and components used
directly in the manufacture of finished
products
 Machinery and equipment used in the
activity for selected services sector
TARGET
GROUPS
 Existing
companies
expanding
their operation
into the less
developed
areas; OR
 Newly
established
companies
ELIGIBILITY
CRITERIA
 Undertake
manufacturing or
services
activities in less
developed areas
with substantial
employment
creation and rural
 Comply with
development
conditions
including value
added, local
employment and
Managerial,
Technical and
Supervisory
Index (MTS
EFFECTIVE
DATE OF
APPLICATIO
N
 Submission
period: 1
January 2015
31
 to
Application
December
submitted to
2020
MIDA
What are LESS DEVELOPED
areas ?
No specific definition or areas categorised as
LESS DEVELOPED
Consideration will be based on consultation
between MIDA, Economic Corridors, UPEN and
relevant authorities on a case-by-case basis
INCENTIVE FOR INDUSTRIAL
AREA MANAGEMENT
 Oversupply of Industrial Estates (IEs)
ISSUES:
but many do not meet investors’
requirements
 Limited funding by Local Authorities
to maintain infrastructure within IE
 “Build and they will come approach”
is costly
to the Government
 Multiple authorities at different levels
595 IEs
in developing,
marketing and
IN MALAYSIA
managing
IEs
Source: IE Development Study by EPU
INCENTIVE FOR INDUSTRIAL
AREA MANAGEMENT
OBJECTIVES OF INCENTIVE
To address the lack of proper
management and upkeep of IEs
To provide a more conducive investment
environment with better infrastructure
To promote growth and foster
management
development of IEs and surrounding
To
improve IEs’ management towards a
areas
park management model
INCENTIVE FOR INDUSTRIAL
AREA MANAGEMENT
EFFECTIVE
TYPE OF
INCENTIVE
TARGET
GROUP
 100% tax
exemption on
 Newly
established
statutory income
for 5 years
commencing
from the date a
company
commences its
activities
companies; OR
 Existing
companies
appointed by
Local Authority
DATE OF
APPLICATIO
N
 Submission
period: 1
January 2015
to 31
 Application
Decemberto
submitted
2017
MIDA
INCENTIVE FOR INDUSTRIAL
AREA MANAGEMENT
ELIGIBILITY CRITERIA
IE must be gazetted by the State
Authority as an Industrial Land
A company approved by Local
Authority to undertake the
management of specified IE
At least 70% of the annual income
derives from mandatory activities
INCENTIVE FOR INDUSTRIAL
AREA MANAGEMENT
MANDATORY ACTIVITIES
Must undertake all of the following
management, upgrading and maintenance
activities within the IE:
Roads, street lightings and drainage
systems
Common facilities
Landscaping
Industrial waste collection, transfer
and
disposal
Database
system maintenance
INCENTIVE FOR INDUSTRIAL
AREA MANAGEMENT
PILOT PROJECT ON PARK
MANAGEMENT
MODEL
MIDA has formed
a Taskforce
Committee for pilot projects on park
management for Selangor, Melaka,
Perak and Johor.
The selected states are required to
implement pilot projects based on the
prescribed criteria for the Industrial
Area Management incentive.
The pilot projects will help to identify
the best park management model to
be implemented.
CAPITAL ALLOWANCE TO INCREASE AUTOMATION IN
LABOUR-INTENSIVE INDUSTRIES
OBJECTIVES
To encourage manufacturing
companies to engage in innovative
and productive activities
To encourage the quick adoption of
automation especially for labour
intensive industries
To further spur automation
initiatives
CAPITAL ALLOWANCE TO INCREASE AUTOMATION IN
LABOUR-INTENSIVE INDUSTRIES
TYPE OF
ACCELER IMPLEMENT
INCENTIVE
ATION
ATED
Category 1:
TIMELINE
Labour intensive
industries (rubber
products, plastics,
wood, furniture and
textiles) – ACA of 200%
on the first RM4 million
expenditure incurred
within Year of
Category 2:
Assessment 2015 to
Other industries - ACA
2017.
of 200% on the first RM2
million expenditure
incurred within Year of
Assessment 2015 to
2020.
CAPITAL
ALLOWAN
TARGET
CE
GROUP
(ACA)
Manufacturing
companies
(labour and
non-labour
intensive)
operating at
least 36 months
in Malaysia
Category 1:
Year of
Assessment
(YA) 2015 – YA
2017
Category 2:
Year of
Assessment
(YA) 2015 – YA
2020
CAPITAL ALLOWANCE TO INCREASE AUTOMATION IN
LABOUR-INTENSIVE INDUSTRIES
ELIGIBILITY CRITERIA
Possesses a valid Business Licence
from Local Authority and
Manufacturing
Licence
from MITI
Company residing
in Malaysia
and
in operation for at least 36 months
Expenditure incurred within the
relevant years of assessment
INCENTIVE FOR THE ESTABLISHMENT
OF PRINCIPAL HUB
OBJECTIVES
Strengthen Malaysia’s position
as competitive regional and
global operation base
Accommodate increasing trend
of global off-shoring activities
* The Principal Hub incentive is to
replace the current OHQ/IPC/RDC
incentives
INCENTIVE FOR THE ESTABLISHMENT
OF PRINCIPAL HUB
OBJECTIVES
Strengthen Malaysia’s position
as competitive regional and
global operation base
Accommodate increasing trend
of global off-shoring activities
* The Principal Hub incentive is to
replace the current OHQ/IPC/RDC
incentives
INCENTIVE FOR THE ESTABLISHMENT
OF PRINCIPAL HUB
DEFINITION OF PRINCIPAL HUB
A locally incorporated company
that uses Malaysia as a base for
conducting its regional and global
businesses and operations to
manage, control and support its key
functions including management of
risks, decision making, strategic
business activities, trading, finance,
management and human resource.
INCENTIVE FOR THE ESTABLISHMENT
OF PRINCIPAL HUB
TYPE OF INCENTIVES
3-TIERED CORPORATE TAXATION RA
3-tier Incentive
Blocks
(years)
Tax rate
Tier 3
5
+5
10%
Tier 2
5
Tier 1
+5
5%
5
+5
0%
ELIGIBILITY CRITERIA
 Locally incorporated
 Paid-up capital of more than RM2.
million
 Carry out at least three qualifying
THE 3-TIERED CORPORATE TAXATION
RATE
3-tier Incentive
Blocks
Tier 3
5
Tax rate
•
•
•
High Value jobs
by end of year 3
with minimum
monthly salary of
RM5,000.00
At least 50%
must be
Malaysians by
end of year 3
Including key
positions
- Minimum
monthly salary
of RM25,000.00
+5
Tier 2
5
10%
15
Jobs:
base
commitment
5
5%
30
+20%
3
+5
Tier 1
Jobs:
base
commitment
0%
50
+20%
4
+5
Jobs:
base
commitment
+20%
5
THE 3-TIERED CORPORATE TAXATION
RATE
3-tier Incentive
Tier-3
Tier-2
Tier-1
Blocks
5
Annual Business
Spending
RM3M
+5
Business
Spending:
Base
Commitment
+30%
5
+5
5
RM5M
Business
Spending:
Base
Commitment
+30%
RM10M
+5
Business
Spending:
Base
Commitment
+30%
Qualifying
Services
Strategic + 2
Regional P&L + 2
Regional P&L + 2
Minimum Serving
/ Business
Control of no. of
countries
3
4
5
Use of local
Ancillary Services
Local Financial Institution Services (including finance and treasury),
logistics, legal and arbitration services, finance and treasury services
Trading of Goods
Annual Sales
Turnover
RM300 M
INCENTIVE FOR THE ESTABLISHMENT
OF
PRINCIPAL
HUB
KEY
FEATURES
‘Tiered’ tax rate reduction based on the level of:
 Business spending
 Value added functions and risk transferred to Principal
 High level job creation
 No. of countries served
Import duty exemption
Foreign Exchange Administration flexibilities
Support full offshoring trading (ie: no drop shipment limit)
Wider service coverage (network companies – ie: subsidiaries,
branches, joint ventures, franchises or any other company related to
applicants’ supply chain and business with contractual agreements)
FACILITIES
BENEFITS
 Facilitation
under
FZ/LMW
 High job creation
for Malaysians
 High utilisation of
local ancillary
services
 Support global
off-shoring and
trading services
by MNCs
 Strategic
decision making
and team will be
based in Malaysia
 Existing
approved
OHQ/IPC/RDC
companies will
 Foreign
Exchange
Administration
flexibilities –
accorded in
support of
business
efficiency and
competitivenes
s of companies
under the
Principal Hub
 Expatriate post
EFFECTIVE
DATE OF
APPLICATION
 New
applications
received by
MIDA from 1
2015 until
 May
Application
30
April 2018.
submitted
to
MIDA