INCENTIVES FOR HIGH TECHNOLOGY COMPANIES
High technology companies are defined as companies engaged in promoted activities or in the production of promoted products in areas of new and emerging technologies. High technology companies that meet certain criteria are eligible for the following incentives:
- Pioneer Status with full tax exemption at statutory income level for a period of five years. Accumulated losses and unabsorbed capital allowances incurred during the pioneer period by companies whose pioneer status will expire on and after 1 October 2005 are allowed to be carried forward and deducted against post-pioneer income of a business relating to the same promoted activity or promoted product; or; or
- Investment Tax Allowance (ITA) of 60% (100% for promoted areas) on qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until the whole amount has been fully utilised.
Applications for these incentives should be submitted to MIDA.
INCENTIVES FOR STRATEGIC PROJECTS
Strategic projects are generally defined as projects involving products/activities of national importance. Such projects are eligible for the following incentives:
- Pioneer Status with full tax exemption at statutory income level for a period of 10 years. Accumulated losses and unabsorbed capital allowances incurred during the pioneer period by companies whose pioneer status will expire on and after 1 October 2005 are allowed to be carried forward and deducted against post-pioneer income of a business relating to the same promoted activity or promoted product; or
- Investment Tax Allowance of 100% on qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until the whole amount has been fully utilised.
Applications for these incentives should be submitted to MIDA.
INCENTIVES FOR ENVIRONMENTAL MANAGEMENT
Incentive for Forest Plantation Project
Companies which undertake forest plantation projects are eligible for incentives under the Strategic Projects.
Incentive for Energy Conservation
As a measure to reduce operating costs while promoting environmental preservation, the following incentives are available:
a) Companies providing energy conservation services are eligible for Pioneer Status or Investment Tax Allowance. The companies are required to implement their projects within one year of approval. This incentive applies for applications received by 31 December 2010.
Applications should be submitted to MIDA.
b) Companies that conserve energy for their own consumption are also eligible for Investment Tax Allowance on qualifying capital expenditure incurred within five years. Any unutilised allowance can be carried forward until the entire amount is fully utilised.
Applications should be submitted to MIDA.
Incentive for Use of Renewable Energy Resources
To encourage the utilisation of renewable energy from biomass, hydropower (not exceeding 10 megawatts) and solar power, companies which generate energy form such sources are given the following incentives:
- Pioneers status with tax exemption of 100% on statutory income for 10 years; or
- Investment Tax Allowance of 100% on qualifying capital expenditure incurred within five years, to be set off against 100% of statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until the whole amount has been fully utilised.
These incentives are for applications received from 1 October 2005 until 31 December 2010. Companies must implement their projects within one year from the date of approval.
INCENTIVES FOR APPROVED SERVICE PROJECTS (ASP)
Approved Service Projects (ASP) or projects in the transportation, communications and utilities sub-sectors approved by the Minister of Finance (ASP) are eligible for tax incentives as follows:
Exemption under Section 127 of the Income Tax Act 1967
Generally, companies undertaking ASP are eligible for Investment Allowance tax exemption on 70% of the statutory income for five years. However, companies undertaking ASP in Perlis, Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia will be eligible for tax exemption on 85% of the statutory income for five years.
Companies undertaking ASP of national and strategic importance will be eligible for full tax exemption on statutory income for 10 years.
Applications should be submitted to the Ministry of Finance.
Investment Allowance (IA) Under Schedule 7B of the Income Tax Act 1967
IA is an alternative incentive that companies undertaking ASP can opt for other than the income tax exemption under section 127. Generally, companies undertaking ASP are eligible for IA of 60% on qualifying capital expenditure incurred within five years from the date the capital expenditure is first incurred. The allowance can be used to set off against 70% of the statutory income and any unutilised allowance can be carried forward to subsequent years until fully utilised.
However, companies undertaking ASPs in Perlis, Sabah, Sarawak and the designated “Eastern Corridor” of Peninsular Malaysia are eligible for an allowance of 80% on the qualifying expenditure which can be offset against 85% of the statutory income.
Companies undertaking ASP of national and strategic importance will be granted IA of 100% on qualifying capital expenditure incurred within five years from the date the capital expenditure is first incurred. The allowance can be utilised to set off against 100% of the statutory income. Any unutilised allowance can be carried to the subsequent years until it is fully utilised.
Applications should be submitted to the Ministry of Finance.
ASPs are also eligible for Tariff-Related Incentives.
Exemption from Import Duty and Sales Tax on Raw Materials/Component and Machinery/Equipment
(i) Exemption from import duty and sales tax is given on imported raw materials/components that are used directly in the implementation of ASP and are not available locally.
(ii) Exemption is given on sales tax and excise duty on locally purchased machinery/equipment which are used in the implementation of ASP.
Exemption from Import Duty and Sales Tax on Spares and Consumables
Companies providing promoted services are eligible for import duty and sales tax exemptions on spares and consumables that are not produced locally.
Applications should be submitted to the Ministry of Finance.
INCENTIVES FOR SHIPPING AND TRANSPORTATION INDUSTRY
Tax Exemption for Shipping Operations
The income of a shipping company derived or deemed to be derived from the operations of Malaysian ships is exempted from tax. This incentive is granted to residents only. Applications should be submitted to IRB.
Exemption from Import Duty and Sales Tax on Prime Movers and Trailers
Hauliers are eligible for import duty and sales tax exemptions on prime movers and trailers, which are not produced locally. For prime movers and trailers that are produced locally, sales tax exemption can be considered.