Update: The Ismail Sabri Government Budget is no longer applicable. Malaysia’s national budget for 2023 was re-tabled again in February 2023.
To Download Revised Budget 2023 Speech and some other related publications – https://www.ccs-co.com/post/budget-2023-malaysia-madani
This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
MOF's response: Off-budget.
Background to the Global Trading Centre
A Global Trading Centre (GTC) is a locally incorporated company that uses Malaysia as its international trading base for strategic sourcing, procurement and distribution of raw materials, components and finished products to its related and unrelated companies in Malaysia and abroad.
It is proposed that a new incentive scheme be introduced as Global Trading Centre and be given a 10% income tax rate for a period of 5 years and renewable for another 5 years on statutory income from Qualifying Activities.
This would be done as a measure to both improve and simplify the tax incentives for trading activities that were previously covered under the Principal Hub incentives, which were subjected to higher eligibility criteria.
This incentive has been given the legislative effect under the Income Tax (Global Trading Centre Incentive Scheme) Rules 2022.
Under Rules 2022, a Qualifying Company means the following:
- incorporated under the Companies Act 2016
- resident in Malaysia
- has not carried on any activity in Malaysia
- fulfils the eligibility condition imposed by the Minister of International Trade and Industry under the Income Tax Act 1967 (ITA) and Rules 2022
- uses Malaysia as its international trading base.
The Malaysian Investment Development Authority (MIDA) has issued guidelines that explain the tax incentive for setting up a Global Trading Centre. These guidelines can be found here:-
Qualifying Activities to be undertaken are strategic sourcing, procurement and distribution of raw materials, components and finished products to other companies within or outside Malaysia.
When applying for this incentive, a Qualifying Company must demonstrate that it complies with the conditions set by the Minister, which are outlined in the approval letter and the guidelines. The following are some of the terms and conditions:
- employ at least 15 full-time Malaysian employees with a minimum salary of RM5,000 per month in the basis period throughout the specified years of assessment to carry on the qualifying activity, and at least 50% of those employees must be Malaysian;
- has a paid-up capital of at least RM1 million to carry on the qualifying activity;
- incurs an annual operating expenditure of at least RM1.5 million to carry on the qualifying activity;
- achieves an annual sales value of at least RM100 million to carry on the qualifying
Current Position
The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA) from 1 January 2021 until 31 December 2022.
Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]
To attract multinational companies undertaking trading activities while making Malaysia a regional distribution hub, it is proposed that tax incentives be extended for 3 years.
Effective Date
For applications received by MIDA from 1 January 2023 until 31 December 2025.
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