Principal Hub Incentive 2.0: Malaysia’s Headquarters Hub Incentive Enhanced
The Government has announced enhancements to the Principal Hub (PH) incentive, which was previously introduced in 2015. Companies with existing operations in Malaysia can now further leverage Malaysia as a base for conducting their regional or global businesses. The key functions of principal hub companies include management of risks, decision making, strategic business activities, trading, finance, management and human resource
8 October 2019, Kuala Lumpur –The Government has announced enhancements to the Principal Hub (PH) incentive, which was previously introduced in 2015. Companies with existing operations in Malaysia can now further leverage Malaysia as a base for conducting their regional or global businesses. The key functions of principal hub companies include management of risks, decision making, strategic business activities, trading, finance, management and human resource.
Effective 2019, companies approved with the enhanced Principal Hub incentive, also known as PH 2.0, will be able to enjoy a concessionary 10% tax rate for their operations in Malaysia. This is to replace the previous tax treatment whereby companies with existing Malaysian operations could only enjoy tax exemption on incremental income. New companies that have yet to establish a presence in Malaysia can enjoy up to 0% tax rate for 10 years based on their level of commitments.
This enhancement of the PH tax incentive is timely as Malaysia continues to innovate its policies and strategies to attract investments so that the country will be strongly integrated into the region as well as other markets. The review aims to make Malaysia competitive with other countries in the region as the optimal headquarters hub in Asia Pacific.
The relaxation of certain conditions under this revised incentive will potentially appeal to more homegrown companies exploring expansion opportunities by venturing into new, high value–added services and expanding their supply chain in the region.PH 2.0 excludes the need for companies to serve a minimum number of countries outside Malaysia.Nevertheless, they are required to serve a minimum number of network companies.
The PH incentive has been invaluable in attracting companies to establish their hubs in the country. Multinational corporations are able to tap on Malaysia’s strategic location within the Asia Pacific region, world-class infrastructure as well as multi-lingual talent pool to optimise their operational efficiency. This has created positive spillover effects for the Malaysian economy such as high value jobs, increase in R&D activities as well as transfer of technology and knowledge to the local industry ecosystems.
Since the introduction of the PH incentive in 2015, the Malaysian Investment Development Authority (MIDA) has approved 35 principal hub projects, with total approved investments of RM35.5 billion and potential creation of over 2,700 high value jobs. These projects cut across various key sectors from electrical and electronics (E&E), aerospace, oil and gas, chemicals and information technology.
Additionally, the inclusion of new conditions such as internships, training and collaborations with local institutions will further accelerate the creation of more high-value jobs and talent pool in Malaysia.
Eligible companies are encouraged to submit their applications to MIDA as soon as possible, as only applications received before 31 December 2020 are eligible to be considered for the PH 2.0 incentive. Companies can obtain more information at www.mida.gov.my.
MIDA is the government’s principal promotion agency under the Ministry of International Trade and Industry (MITI) to oversee and drive investments into the manufacturing and services sectors in Malaysia. Starting operations in 1967 with a relatively small set up of 37 staff, MIDA has grown to become an active and dynamic organisation of over 700 employees. Headquartered in Kuala Lumpur Sentral, MIDA today has 12 regional and 20 overseas offices. MIDA continues to be the strategic partner to businesses in seizing the opportunities arising from the technology revolution of this era. For more information, please visit www.mida.gov.my and follow us on Twitter, Instagram and Facebook.
For more Information:
Ms. Wahida Abdul Rahman
Director, Business Services & Supply Chain Innovation Division, MIDA
Tel: 03-2267 6622 | Email: [email protected]