Incentives provided by the Malaysian Industrial Development Authority (MIDA)

The Malaysian Timber Industry Board (MTIB) has forwarded to STA on 8 July 2015 the update on incentives provided by the Malaysian Industrial Development Authority (MIDA).  The incentives available are summarised below:-

(1) Major tax incentives – Pioneer Status and Investment Tax Allowance

  • Pioneer Status (PS): Income tax exemption of 70% - 100% of statutory income for 5 to 10 years. Unabsorbed capital allowances and accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer status of the company.
  • Investment Tax Allowance (ITA): An allowance of 60% - 100% on qualifying capital expenditure (factory, plant, machinery or other equipment used for the approved project) incurred within 5 to 10 years from the date the first qualifying capital expenditure is incurred.
  • Reinvestment by Existing Company (Section 4F) – Resource-Based Industry:-
    • Another round of PS – Income tax exemption ranging from 70% for a period of 5 years.
    • Another round of ITA – 60% on qualifying capital expenditure for 5 years. Can be offset against 70% of statutory income.
  • Second Round Incentive for Investment By Subsequent Company Formed by Existing Company:-
    • A second-round of PS – Income tax exemption ranging from 70% of increased statutory income for a period of 5 years.
    • A second-round of ITA – 60% on additional qualifying capital expenditure for 5 years. Can be offset against 70% of statutory income.

(2) Incentives For Acquiring A Foreign Company For High Technology

  • Annual deduction of 20% of the acquisition cost for 5 years.
  • To enable Malaysian-owned companies to acquire state-of-the-art technologies for the purpose utilizing the acquired technology in their existing operation within Malaysia.
  • Eligibility Criteria:-
  • The acquirer company must be local owned with at least 60% Malaysian equity for a period of 5 years from the date of application.
  • The acquiree must be foreign company with 100% foreign equity ownership.
  • Direct acquisition at least 51% of the equity of the foreign company abroad.
  • The acquisition must be in form of cash transaction.
  • The acquisition must be complete within 3 years.
  • The acquisition must result in increase of performance or enhancement of technology and process of company’s operation in Malaysia.

(3) New Incentives under The 2015 Budget

(I) Incentive for Less Developed Areas

  • Income Tax Exemption - 100% up to 15 years of assessment (5+5+5) OR Investment Tax Allowance - 100% of qualifying capital expenditure incurred within 10 years.
  • Stamp Duty Exemption on - Transfer or leased of land or building used for development in relation to manufacturing and services activities.
  • Witholding Tax Exemption on - Fees for technical advice, assistance or services or royalty in relation to manufacturing or services activities.
  • Import Duty Exemption on:-
    • Raw materials & components used directly in the manufacturing process.
    • Machinery & equipment in the activity for the 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 development.
    • Comply with conditions including value added, local employment and Managerial, Technical and Supervisory Index (MTS index).
  • Submission period: 1 January 2015 to 31 December 2020.
  • Application submitted to MIDA
(II) Capital Allowance to Increase Automation in Labour-Intensive Industries
  • Type of Incentive:-
    • Category 1: Labour intensive industries (rubber products, plastics, wood, furniture and textiles) – Accelerated capital allowance (ACA) of 200% on the first RM4 million expenditure incurred within Year of Assessment 2015 to 2017.
    • Category 2: Other industries - ACA of 200% on the first RM2 million expenditure incurred within Year of Assessment 2015 to 2020.
  • Target Group:-
    • Manufacturing companies (labour and non-labour intensive) operating at least 36 months in Malaysia.
  • Implementation Timeline:-
    • Category 1: Year of Assessment (YA) 2015 – YA 2017
    • Category 2: Year of Assessment (YA) 2015 – YA 2020
  • 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
(III) Incentive for Industrial Area Management
  • Type Of Incentive:-
    • 100% tax exemption on statutory income for 5 years commencing from the date a company commences its activities.
  • Target Group:-
    • Newly established companies; OR
    • Existing companies appointed by Local Authority.
  • Submission period: 1 January 2015 to 31 December 2017.
  • Application submitted to MIDA.
  • 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.
  • 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
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