What’s in this article
- Tax Resident Status in Malaysia
- What are the Various Companies’ Tax Incentives in Malaysia?
- Tax Incentives for Manufacturing/Service/Trading Companies in Malaysia
- Tax Incentives for Financial Services Companies
- Tax Incentives for ICT Companies in Malaysia
- Tax Incentives for Biotechnological Companies in Malaysia
- Green Incentives in Malaysia
- Regional Operations and Tax Incentives
- Malaysia Income Tax Reliefs
- GET STRATEGIC TAX PLANNING FROM REGIONAL TAX EXPERTS
- FAQs
Malaysia grants tax incentives through income exemptions or allowances, and individuals can carry forward unutilized allowances indefinitely to offset future statutory income. These information and incentives are useful for both existing companies and investors who are thinking of setting up a company in Malaysia.
Tax Resident Status in Malaysia
To be eligible for incentives, you have to identify as a tax resident in Malaysia. Every citizen of Malaysia is automatically as a tax resident of the country. However, foreigners will only receive the tax resident status after they have resided in Malaysia for more than 182 days.
Here’s a quick summary of a tax resident and non-resident:
Tax Resident |
|
Non-Resident |
|
For one to be a tax resident in Malaysia, a Certificate of Residence in Malaysia is necessary, and the application for the certificate is free. To do so, you must contact the tax authorities and present your passport and documentation of travel into and out of Malaysia over the past year.
What are the Various Companies’ Tax Incentives in Malaysia?
There are various types of tax incentives provided in Malaysia to tax resident companies or tax resident individuals. They include, among others:
- Tax exemptions
- Allowance related to capital expenditures
- Enhanced tax deductions
Tax Incentives for Manufacturing/Service/Trading Companies in Malaysia
Companies in these three sectors qualify for tax incentives related to areas such as:
- Pioneer status
- Investment tax allowance
- Reinvestment allowance
- Food production
- Allowances for increased exports
- Special Incentive Scheme
- Approved Services Project
Here are the benefits of some of the incentives above:
Tax Incentives | Benefits |
---|---|
Investment Tax Allowance |
|
Pioneer Status |
|
Export Incentives |
|
Approved Services Projects |
|
Tax Incentives for Financial Services Companies
For financial services companies, here are some available tax exemptions:
- Full income tax exemption is available to Islamic banks licensed under the Islamic Financial Services Act 2013. The income that can be earned from Islamic banking activities conducted in international currencies will be exempted
- A complete income tax exemption is also applied to management fees received by resident fund management companies which have been established according to Islamic principles for the management of funds of foreign and local investors.
Some companies in Malaysia’s financial sector are eligible for tax incentives, which include:
- Special Purpose Vehicles for Islamic Financing
- Companies relayed to the operation of the Tun Razak Exchange
- Real estate and property trust funds
- Foreign Fund management companies
Tax Incentives for ICT Companies in Malaysia
In the ICT industry, tax incentives for tax residents are also available. These expenses will be tax exempted:
- Developing websites
- Offshore trading via websites based in Malaysia
- Investments and expenditures related to MSC Malaysia or international trading companies
- Any business activities related to principal hubs and transportation, warehousing and freight forwarding
- To get tax incentives as an IT company in Malaysia, the company must register with the Malaysia Digital Economy Corporation (MDEC) to obtain the Malaysia Digital (MD) status.
Tax Incentives for Biotechnological Companies in Malaysia
Biotech companies which have approval as Bionexus status are eligible for a complete offset of income through an investment tax allowance on qualifying capital expenditure for companies which can be in operation for 10 years or less.
Here are some other incentives:
- The concessional tax rate for a business which need to approve after its exempt tax period has expired for a period of up to 10 years is 0% of its statutory income
- Profits derived from stamp duty and real property gains tax are tax-exempted for Bionexus companies
- Exemptions are given to import duty for raw materials as well as components which have been imported by such companies.
- The total investment made towards the seed capital of a Bionexus company is exempted from tax
Green Incentives in Malaysia
Green technology and equipment will receive an investment tax allowance when purchased. By the Malaysian tax resident companies of any sector.
The same income tax incentive is also for the usage of green technology and services. Companies in the healthcare and wellness sector receive a 100% tax exemption on qualifying capital expenditures incurred on statutory income for a period of up to five [5] years.
Regional Operations and Tax Incentives
A principal hub is a local incorporation company that uses Malaysia as a base for its Global and Regional operations through management, control, and support of critical functions. The tax incentives which are available for Malaysian tax residents and companies who conduct their regional operations in Malaysia include:
- Equity or ownership conditions
- Foreign exchange administration
- Customs duty exemptions for raw materials, product components, or finished products brought into free zones
- Licensed and bonded warehouses for production or repackaging, cargo consolidation, and integration before products are to be distributed to their final customers; this exemption only applies to goods-based companies
Malaysia Income Tax Reliefs
Tax relief allows one to reduce their chargeable income, subject to different requirements and conditions. The following is a non-exhaustive list of tax reliefs that a person can claim:
1. Individual & dependent relatives
Claim: RM9000
Granted automatically to an individual for themselves and their dependents.
2. Medical treatment, support needs and expenses for parents
Claim: Up to RM8000
This sum is inclusive of care and treatment by nursing homes and non-cosmetic dental treatment. It must be conducted by a registered medical practitioner or written certification of a qualified carer. Parents must reside and treatment must be provided in Malaysia.
3. Husband or Wife or Alimony
Claim: Up to RM 4000
This claim can only be available if your spouse has no source of income, or they can choose to set up a joint assessment in your name. You cannot claim this relief if your spouse has a gross income of more than RM4000 derived from sources outside of Malaysia.
4. Breastfeeding equipment
Claim: Up to RM1000 per mother
This claim for an individual is a breastfeeding mother and has purchased breastfeeding equipment for her own use, on her own child ages 2 years or younger. This claim can only be once every 2 years.
5. Ordinary child relief
Claim: RM2000 per child
This claim can be for each unmarried child below the age of 18, at any time during the year of assessment.
6. Education and medical insurance
Claim: Up to RM3000
This relief can be claimable for the payment of insurance premiums for education or medical benefits. This applies to yourself, your spouse, or your child. Each of them is subjected to his/her sum of RM3000. Couples who opt for a joined assessment, however, will face a deduction limit of RM3000.
7. Child in full-time education
Claim: RM2000 or RM8000 per child
A deduction of RM2000 can be claimed for each unmarried child of age 18 years and above, who is receiving full-time education. A deduction of RM8000 can be made if an unmarried child is 18 years of age and above, is not in full-time education, is not serving under articles of indentures to qualify in a trade or profession in Malaysia, and is not pursuing a full-time degree outside Malaysia.
FAQs
You will not be taxable if
- Employed in Malaysia for less than 60 days
- Employed on board a Malaysian ship
- Age 55 years old and receiving pension from Malaysian employment
- Receiving interest from banks
- Receiving tax exempt dividends
It is absolutely free! All you have to present is your passport and any other supporting documents
Every individual who is to be taxed is required to declare income to IRB. The taxpayer is responsible for obtaining and forwarding the Income Tax Return Form (ITRF). The taxpayer must submit an ITRF that has been duly completed before April 30 every year.