Incentives & Funding for SMIs / SMEs

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SMEs in Malaysia are privileged to have many financial and non-financial incentives available to them. Financial incentives come in the form of grants, conventional loans, venture capital funding, or tax incentives while non-financial incentives may be in the form of physical infrastructure, information and training provided by the Government or by trade associations. All these incentives are mainly provided for or coordinated by Government agencies. The main agencies that offer incentives to SMEs are Small and Medium Industries Development Corporation (SMIDEC), Malaysia Technology Development Corporation (MTDC) and Malaysian Industrial Development Authority (MIDA).

Malaysian Government Budget Incentives

The Government recognizes that SMEs may face cash flow constraints at the initial stages of operations and has proposed to offer SMEs the flexibility to pay taxes at the end of financial year instead of monthly instalments. This flexibility is for a period of 2 years from the date of commencement of operations.

The Government will also begin to implement a single-tier tax system to improve the efficiency and to simplify the administration of corporate tax, effective from the year of assessment 2008. Under a single-tier tax system, profits are only taxed at the company’s level and dividends received are exempted from tax. With the single-tier system, dividends can be more easily distributed. A transition period of 6 years will be provided to ensure smooth implementation of the single-tier system.