Guideline & Procedures for the Application of Special Tax Incentive (Relocation) for manufacturer

Malaysia’s Special Tax Incentive (Relocation) benefits companies that want to relocate their operations to the country.

It provides a special tax rate for new companies based on their capital investment and income tax exemption for existing companies that relocate their overseas facilities to Malaysia.

Non-citizen individuals holding key positions in these companies also receive special income tax treatment.

Eligible applicants can apply online through the MIDA website, but certain activities and products are not eligible for the incentive.

What benefits are offered by the Special Tax Incentive (Relocation) in Malaysia?

The Special Tax Incentive (Relocation) in Malaysia offers several benefits to both new and existing companies in the manufacturing sector.

For new companies

A 0% special tax rate is offered for 10 years for investments in the manufacturing sector with capital investment (excluding land) between RM300 million and RM500 million.

If the capital investment exceeds RM500 million, the 0% special tax rate is extended to 15 years.

For existing companies

An income tax exemption equivalent to the Investment Tax Allowance (ITA) of 100% on the qualifying capital investment (excluding land) above RM300 million incurred within 5 years is offered.

This allowance can be offset against 100% of statutory income for each assessment year.

In addition, non-citizen individuals holding key positions (C-Suite) in companies that have been granted the Special Tax Incentive (Relocation) are eligible for a flat tax rate of 15% for 5 consecutive years.

However, this is limited to a maximum of five individuals per company, and they must be residents of Malaysia, hold a key position, receive a basic monthly salary of not less than RM25,000, and be a Malaysian tax resident for each year of assessment throughout the five consecutive years of assessment.

Who is eligible to apply for this tax incentive?

The Special Tax Incentive (Relocation) in Malaysia is available to companies that meet the following criteria:

1. The company must be incorporated under the Companies Act 2016 and resident in Malaysia.
2. Under the incentive, the company fulfils the definition of a ‘new company’ or ‘existing company’.
3. The company is to undertake manufacturing activities other than the manufacturing activities listed in Appendix A.
4. New companies must incur the first qualifying capital expenditure within one year from the date of the approval letter, and the minimum qualifying capital expenditure (excluding land) is to be completed within three years from the date of the first capital expenditure.
5. Existing companies must incur the first qualifying capital expenditure, which can be backdated up to three years but shall not be earlier than 1 July 2020 and the minimum qualifying capital expenditure of RM300 million to be completed within three years from the date of the first capital expenditure.
6. The company is required to have a paid-up capital of RM 2.5 million and above.
7. New companies can be companies relocating manufacturing facilities for eligible activities from any country to Malaysia or establishing a new operation in Malaysia and not having an existing manufacturing operation in Malaysia.
8. Existing companies can be foreign or locally owned companies with an existing manufacturing operation in Malaysia and relocate their manufacturing operations outside Malaysia for a new business segment. The products from the new business segment are not expansion projects for existing products.

How can companies apply for the incentive, and what are the restrictions on eligible activities and products?

Companies can apply for the Special Tax Incentive (Relocation) in Malaysia online through the Invest Malaysia portal at https://investmalaysia.mida.gov.my.

Applications received by MIDA from 1 July 2020 until 31 December 2024 are eligible to be considered for this incentive.

However, applications with incomplete information will not be accepted and will be returned to the applicant company.

The company must undertake manufacturing activities other than the manufacturing activities listed in Appendix A.

An existing company approved this incentive has to keep separate accounts for the product(s) /activity(ies) approved with the tax incentive and product(s)/activity(ies) without tax incentive or to set up new entities to carry out the project.

For new companies, the capital expenditures incurred before the approval letter date will not be included as the qualifying minimum capital investment. In this event, the subsequent capital expenditures incurred within one year from the approval letter’s date will be considered the first qualifying capital expenditures.

For existing companies, the first qualifying capital expenditure can be backdated up to three years but shall not be earlier than 1 July 2020.

The application to determine the effective date shall be submitted within 24 months from the date of the approval letter.

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