Expand, Diversify and Reinvest
A licenced company which desires to expand its production capacity or diversify its product range by manufacturing additional products will need to apply to MIDA.
Equity policy for New, Expansion, or Diversification Projects
Since June 2003, foreign investors could hold 100% of the equity in all investments in new projects, as well as investments in expansion/diversification projects by existing companies, irrespective of the level of exports and without excluding any product or activity.
The equity policy also applies to:
i. Companies previously exempted from obtaining a manufacturing licence but whose shareholders’ funds have now reached RM2.5 million or have now engaged 75 or more full-time employees and are thus required to be licenced.
ii. Existing licenced companies previously exempted from complying with equity conditions, but are now required to comply due to their shareholders’ funds having reached RM2.5 million.
Equity Policy Applicable for Existing Companies
Equity and export conditions imposed on companies prior to 17 June 2003 will be maintained.
However, companies can request for these conditions to be removed and approval will be given based on the merit of each case.
INCENTIVES FOR THE MANUFACTURING SECTOR
Main Incentives for Manufacturing Companies
The major tax incentives for companies investing in the manufacturing sector are the Pioneer Status and the Investment Tax Allowance. Eligibility for Pioneer Status and Investment Tax Allowance is based on certain priorities, including the level of value added, technology used and industrial linkages.
Eligible activities and products are termed as “promoted activities” or “promoted products”.
(i) Pioneer Status – A company granted Pioneer Status (PS) enjoys a five year partial exemption from the payment of income tax. It pays tax on 30% of its statutory income*, with the exemption period commencing from its Production Day (defined as the day its production level reaches 30% of its capacity). Unabsorbed capital allowances incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company. Accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company for a period of seven consecutive years. Applications for Pioneer Status should be submitted to MIDA.
(ii) Investment Tax Allowance – As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted ITA is entitled to an allowance of 60% on its qualifying capital expenditure (factory, plant, machinery or other equipment used for the approved project) incurred within five years from the date the first qualifying capital expenditure is incurred. The company can offset this allowance against 70% of its statutory income for each year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised. The remaining 30% of its statutory income will be taxed at the prevailing company tax rate. Applications should be submitted to MIDA
The Government provides an enabling environment for the growth and development of globally competitive and resilient SMEs. Initiatives and programmes by the Government are directed toward addressing constraints and enhancing capabilities of SMEs in areas such as financial accessibility, advisory services, marketing, technology and ICT. Financial assistance in the form of grants and soft loans is provided by the Ministry of International Trade and Industry (MITI) and its agencies. Apart from the Government, funds are also channelled through commercial financial institutions.
Existing companies engaged in manufacturing and selected agricultural activities that reinvest for the purposes of expansion, automation, modernisation or diversification into any related products within the same industry on condition that such companies have been in operation for at least 36 months.