I. Advantages of investing in Malaysia
1. Investment Environment
Malaysia, strategically located in the heart of South East Asia, offers a cost-competitive location for investors intending to set up offshore operations for the manufacture of advanced technological products for regional and international markets.
2. A Dynamic Business Environment
Malaysia offers investors a dynamic and vibrant business environment with the ideal prerequisites for growth and profits. Malaysia's key strengths include well-developed infrastructure and productive workforce. A politically stable country with a well-developed legal system, Malaysia also provides attractive incentives for investors. Supported by a market-oriented economy and pro-business Government policies.
3. Advancing with Technology
Technological advancement has become an integral part of Malaysia's growth as an industrialized nation. With the help of technology, Malaysia is steadfast in providing for the modern-day requirements of investor companies based in the country. Malaysia is one of the most technologically developed countries amongst industrializing nations in the ASEAN region. The nation's persistent drive to engage modern technologies proves to be a great advantage to manufacturers in Malaysia.
4. Well-developed Infrastructure
Infrastructure in Malaysia is designed to serve the business community; it is one of the best in Asia. Telecommunications network served by digital and fibre optic technology, five international airports (all with air-cargo facilities), well-maintained highways and seven international seaports make Malaysia an ideal springboard to the Asia-Pacific market.
Industries in Malaysia are predominantly located in over 500 industrial estates and Free Zones developed throughout the country. These zones are categorized as export processing zones, which cater to the requirements of export-oriented industries. There are also specialized parks that have been developed to cater to the needs of specific industries.
5. Human Resources
One of Malaysia's greatest assets is her human resources. The workforce here is young, educated and productive, proving to be one of the best in the region. The Government's emphasis on human resource development ensures the continuous supply of manpower to meet the needs of the expanding manufacturing and services sectors.
6. Towards the Economy of Tomorrow
As a result of perceptive foresight, strategic planning and abundant resources, Malaysia offers investors a wide spectrum of investment opportunities. The technologically-inclined economy of Malaysia is proven through the country's involvement in advanced electronics manufacturing, R&D, biotechnology, photonics, logistics, design, innovation and a highly automated manufacturing sector, to name a few. The Government's objective is also to make Malaysia a hub for other value chain activities, such as R&D, design and development (D&D), procurement, logistics, distribution and marketing, business support services and shared services.
7. A Heaven for Foreign Companies
The conducive business environment in Malaysia has made the country one of the world's top investment destinations for offshore manufacturing operations. Malaysia has to date attracted more than 5,000 foreign companies from more than 40 countries to establish their operations in the country. Many of them have also expanded and diversified their operations in the country, reflecting their confidence in Malaysia as a site for their business ventures.
II. Investment Tax Incentives
1. Corporate - Tax credits and incentives
Malaysia has a wide variety of incentives covering the major industry sectors. Tax incentives can be granted through income exemption or by way of allowances. Generally, when income is exempted, any dividends paid out of such exempt income are not taxable in the hands of the shareholders. Where incentives are given by way of allowances, any unutilized allowances generally may be carried forward indefinitely to be utilized against future statutory income.
The following are the major types of incentives available in Malaysia.
2. Pioneer status (PS) and investment tax allowance (ITA)
Companies in the manufacturing, agricultural, hotel, and tourism sectors, or any other industrial or commercial sector, that participate in a promoted activity or produce a promoted product may be eligible for either PS or ITA.
PS is given by way of exemption from CIT on 70% of the statutory income for five years and the remaining 30% is taxed at the prevailing CIT rate. ITA is granted on 60% qualifying capital expenditure incurred for a period of five years to be utilized against 70% of the statutory income, while the 30% balance is taxed at the prevailing CIT rate.
A company that intends to undertake reinvestment before expiration of its PS or ITA status may opt for reinvestment allowance, provided it surrenders its PS or ITA status.
The PS and ITA incentives are enhanced for the following types of projects:
Investment tax allowance
|Projects of national and strategic importance involving heavy capital investment and high technology.
||100% of SI (2)
||5 + 5
||100% QCE (3) against 100% SI
|High-technology companies engaged in areas of new and emerging technologies.
||100% of SI
||60% QCE against 100% SI
|Companies manufacturing specialized machinery and equipment.
||100% of SI
||100% QCE against 100% SI
|Existing locally owned companies reinvesting in production of heavy machinery, specialized machinery, and equipment.
||70% of increased SI
||60% new QCE against 70% SI
|Companies providing technical and vocational training, and private higher education institution providing qualifying science courses.
||100% QCE against 70% SI
|New companies investing and existing companies reinvesting in utilizing oil palm biomass to produce value-added products.
||100% of SI
||100% QCE against 100% SI
|Small scale companies (defined) that meet with specified conditions.
||100% of SI
||60% QCE against 100% SI
|Hotel operators undertaking new investments in 4- and 5-star hotels in Sabah/Sarawak (for applications until 31 December 2020).
||100% of SI
||100% QCE against 100% SI
|Hotel operators undertaking new investments in 4- and 5-star hotels in Peninsular Malaysia (for applications until 31 December 2020).
||70% of SI
||60% QCE against 70% SI
Tax relief period (in terms of years).
Qualifying capital expenditure.
3. Special incentive schemes
A resident company in operation for not less than 36 months that incurs capital expenditure to expand, modernize, automate, or diversify its existing manufacturing business or approved agricultural project is entitled to reinvestment allowance as follows:
The allowance is given for 15 years from the first year of claim.
An allowance of 60% of QCE incurred to be utilized against 70% of statutory income. The remaining 30% is taxed at the prevailing CIT rate.
The 70% restriction does not apply to projects that have achieved the level of productivity as prescribed by the Minister of Finance.
The allowance will be withdrawn if the asset for which the allowance is granted is disposed of within five years.
Approved service projects
A resident company undertaking a project approved by the Minister of Finance in the transportation, communications, utilities, and services subsectors may enjoy the following incentives:
Investment allowance of 60% of QCE incurred within five years to be utilized against 70% of statutory income.
Alternatively, income tax exemption of 70% of statutory income for a period of five years.
Buildings used solely for the purposes of such projects qualify for an industrial building allowance.
III. Developed Infrastructure
Malaysia's persistent drive to develop and upgrade its infrastructure has resulted in one of the most well-developed infrastructure among the newly industrializing countries of Asia.
Latest, the development of Kuala Lumpur Sentral, a futuristic self-contained city, providing the perfect live, work and play environment. A modern transportation hub integrating all major rail transport networks, including the Express Rail Link to the KLIA and Putrajaya, the government's new administrative centre. The transport facilities offered are on par with the best the world over.
1. Network of Highways
Peninsular Malaysia's network of well-maintained highways is a boon to industries. These highways link major growth centres to seaports and airports throughout the peninsula and provide an efficient means of transportation for goods. To complement these highways, a Kuala Lumpur-Bangkok-Kuala Lumpur containerised service known as the ASEAN Rail Express (ARX) has been initiated with the aim of expanding it to become the Trans-Asia Rail Link that will include Singapore, Vietnam, Cambodia, Laos and Myanmar before ending up in Kunming, China.
2. Efficient Seaports
International trade, especially seaborne trade, has traditionally been the lifeblood of Malaysia. Today, more than 90% of the country's trade is by sea via Malaysia's seven international ports namely Penang Port, Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port in Peninsular Malaysia and Bintulu Port in Sarawak. All these ports are equipped with modern facilities. Bintulu Port handles liquefied natural gas.
In tandem with the expansion of the economy and trade, ports in the country registered impressive growth in recent years. Two of the ports; Port Klang and the Port of Tanjung Pelepas (PTP), are ranked among the top 20 container ports in the world. Port Klang has been made the national load centre and the transshipment centre. Whereas the Port of Tanjung Pelepas has been recognized as a regional transshipment hub.
3. International Airports
Malaysia's central location in the Asia Pacific region makes her an ideal gateway to Asia. Air cargo facilities are well-developed in the seven international airports - the Kuala Lumpur International Airport (KLIA), Kuala Lumpur International Airport 2 (KLIA2), Penang International Airport, Langkawi International Airport and Senai International Airport in Peninsular Malaysia, Kota Kinabalu International Airport in Sabah, and Kuching International Airport in Sarawak.
Malaysia's biggest airport, the KLIA, surrounded by four main cities of Kuala Lumpur, Shah Alam, Seremban and Melaka has a capacity of handling 40 million passengers and more than 1.2 million tonnes of cargo per year. Cargo import and export procedures are fully automated at the KLIA to cut down delivery time.
4. Developed Industrial Parks
Industries in Malaysia are mainly located in over 500 industrial estates or parks and18 Free Industrial Zones (FIZs) developed throughout the country. New sites, fully equipped with infrastructure facilities such as roads, electricity and water supplies, and telecommunications, are continuously being developed by state governments as well as private developers to meet demand.
FIZs are export processing zones which have been developed to cater to the needs of export-oriented industries. Companies in FIZs are allowed duty free imports of raw materials, components, parts, machinery and equipment directly required in the manufacturing process. In areas where FIZs are not available, companies can set up Licenced Manufacturing Warehouses (LMWs) which are accorded facilities similar to those enjoyed by establishments in FIZs.
5. Specialized Parks
Specialized parks have been developed in Malaysia to cater to the needs of specific industries. Examples of these parks are the Technology Park Malaysia in Bukit Jalil, Kuala Lumpur and the Kulim Hi-Tech Park in the northern state of Kedah which cater to technology-intensive industries and R&D activities. TPM is among the world's most advanced and comprehensive centres for R&D by knowledge-based industries.
To the North is the sprawling 1,450-hectare (3,580-acre) Kulim Hi-Tech Park, the country's first, fully-integrated high technology park. Besides providing one of the best infrastructure there is for high technology manufacturing and R&D, the Park's Masterplan also emphasizes on the quality of life within a self-contained township. Amenities incorporated in the plan include a shopping centre, a hospital, educational institutions and recreational facilities.
6. Hi-Tech Telecommunications
Malaysia's telecommunications network has seen impressive expansion and upgrading during the past decade following the successful privatization of its Telecommunications Department. The latest digital and fibre optics technology is being used to provide high quality telecommunication services at competitive prices.
Under the Equal Access Regime, telephone subscribers in Malaysia can choose from five network service providers for a full range of local, domestic and international services encompassing voice and data facilities. There are also six internet service providers and five telco's and other network facilities services supporting a full range of domestic and international services.
Malaysia is linked to the rest of the world through various fibre optics and satellite consortia such as FLAG, SE-MA-WE, APCN, China-US, Japanese-US, Measat and Intelsat. To support the increasing demand for bandwidth, medium and high-end technologies such as IDSL, IP, VPN and ATM are being extensively deployed throughout the country.
Reference：1. Malaysian Investment Development Authority
2. Ministry of Finance
3. Matrade Press Release: Trade Performance for March 2019 and the period of January-March 2019
4. Price Wterhouse Coopers (PwC)