TAX INCENTIVE FOR SME 马来西亚中小企业税务奖励

SELECTED TAX INCENTIVE FOR SMALL AND MEDIUM ENTERPRISES (SME)

The following are some of the selected tax incentives available to small and medium enterprises involved in general manufacturing activities.  

1.  Corporate Tax Rate

Effective from the Year Assessment 2009, for the purpose of imposition of income tax and tax incentives, the definition of SME is reviewed as a company resident in Malaysia with a paid up capital of ordinary shares of RM2.5 million or less at the beginning of the basis period of a year of assessment whereby such company cannot be controlled by another company with a paid up capital exceeding RM2.5 million.

SME is eligible for a reduced corporate tax of 20% (w.e.f. YA 2016: 19%) on chargeable incomes of up to RM500,000. The tax rate on the remaining chargeable income is maintained at 25% (w.e.f. YA 2016: 24%).

 
2.  Reinvestment Allowance

Reinvestment Allowance (RA) is given to existing companies engaged in manufacturing, and selected agricultural activities that reinvest for the purposes of expansion, automation. modernisation or diversification of its existing business into any related products within the same industry on condition that such companies have been in operation for at least 36 months effective from the Year of Assessment 2009.

The RA is given at the rate of 60% on the qualifying capital expenditure incurred by the company, and can be offset against 70% of its statutory income for the year of assessment. Any unutilised allowance can be carried forward to subsequent years until fully utilised.

A company can offset the RA against 100% of its statutory income for the year of assessment if the company attains a productivity level exceeding the level determined by the Ministry of Finance. For further details on the prescribed productivity level for each sub-sector, please contact the Inland Revenue Board.

The RA will be given for a period of 15 consecutive years beginning from the year the first reinvestment is made. Companies can only claim the RA upon the completion of the qualifying project, i.e. after the building is completed or when the plant/machinery is put to operational use. With effect from the Year of Assessment 2009, company purchasing an asset from a related company within the same group where RA has been claimed on that asset is not allowed to claim RA on the same asset. 

Assets acquired for the reinvestment cannot be disposed off within a period of five years from the time of the reinvestment and effective from the Year of Assessment 2009.
 

Companies that intend to reinvest before the expiry of its tax relief period, can surrender their Pioneer Status or Pioneer Certificate for the purpose of cancellation and be eligible for RA.

Applications for RA should be submitted to the Inland Revenue Board (IRB), while applications for the surrender of Pioneer Status or Pioneer Certificate for RA should be submitted to MIDA.
 

3.  Tax Exemption on the Value of Increased Exports

To promote exports, manufacturing companies in Malaysia qualify for:

Under the National Automotive Policy (NAP), manufacturing in the automotive industry qualifies for:

A tax exemption on statutory income equivalent to 30% of the value of increased exports, provided that the goods exported attain at least 30% value-added; or

A tax exemption on statutory income equivalent to 50% of the value of increased exports provided that the goods exported attain at least 50% value-added.

This enhanced incentive is effective from the Year of Assessment 2010 until the Year of Assessment 2014.

To further encourage the export of Malaysian goods, a locally-owned manufacturing company with Malaysian equity of at least 60% is eligible for:

Claims should be submitted to the IRB. 
 

4.  Industrial Building Allowance

An Industrial Building Allowance (IBA) is granted to companies incurring capital expenditure on the construction or purchase of a building that is used for specific purposes, including manufacturing, agriculture, mining, infrastructure facilities, research, Approved Service Projects and hotels that are registered with the Ministry of Tourism. Such companies are eligible for an initial allowance of 10% and an annual allowance of 3%. As such, the expenditure can be written off in 30 years.

Claims should be submitted to IRB.

 
5.  Tax Incentive on Costs of Dismantling and Removing Assets

Costs of dismantling and removing assets including plant and machinery as well as restoring the site where the asset was located do not qualify for allowance under the Schedule 3, Income Tax Act 1967 since this expenditure is not deemed as cost of the asset. However, Financial Reporting Standards 116 stipulates that the cost of an asset includes the estimated cost required to be incurred relating to the obligation to dismantle and remove the asset and to restore the site on which the asset was located.

Therefore, to streamline the tax treatment under the Income Tax Act 1967 and FRS 116, a special provision is introduced in Schedule 3, Income Tax Act 1967 to provide for balancing allowance* on the cost of dismantling and removing asset including plant and machinery as well as restoring the site where the asset was located, subject to the following conditions:

Applications are eligible for the incentive with effect from the Year of Assessment 2009.

Claims should be submitted to IRB.

* The total balancing allowance is determined by adding the cost of dismantling and removing the plant and machinery as well as restoring the site to the balance of expenditure on plant and machinery at the time of the disposal of the asset.

(i) Single Deduction for the Promotion of Exports

Certain expenses incurred by resident companies in looking for opportunities to export Malaysian manufactured and agricultural products and services qualify for single deduction. The eligible expenses are those incurred in:

(ii) Double Deduction for the Promotion of Exports

Certain expenses incurred by resident companies in seeking opportunities to export Malaysian manufactured and agricultural products and services, qualify for double deduction.

The eligible expenses are those incurred in:

Partnerships and sole proprietorships registered with the Companies Commission of Malaysia are also eligible for the above incentive. To qualify, they must provide the following professional services:

For pioneer companies, the deduction is accumulated and allowed against the post pioneer income.
 

(iii) Double Deduction on Export Credit Insurance Premiums

Premium payments on export credit insurance qualify for double deduction.
 

(iv) Double Deduction on Freight Charges

Manufacturers who ship their goods from Sabah or Sarawak to any port in Peninsular Malaysia qualify for double deduction on freight charges.
 

(v) Double Deduction for the Promotion of Malaysian Brand Names

To promote Malaysian brand names, a company who is a registered proprietor of a Malaysian brand, or a company within the same group is eligible for double deduction on expenditure incurred in advertising the brand, subject to the following conditions:

Claims should be submitted to IRB.
 

(vi) Special Industrial Building Allowance for Warehouses

An annual allowance of 10% of qualifying capital expenditure is given for buildings used as warehouses for storing goods for export and re-export.
 

7.  Exemption from Import Duty on Raw Materials/Components

Full exemption from import duty can be considered for raw materials/components, regardless of whether the finished products are meant for the export or domestic market.

Where the finished products are for the export market, full exemption from import duty on raw materials/components is normally granted, provided the raw materials/components are not produced locally or, where they are produced locally, are not of acceptable quality and price.

Where the finished products are for the domestic market, full exemption from import duty on raw materials/components that are not produced locally can be considered. Full exemption can also be considered if the finished products made from dutiable raw materials/ components are not subject to any import duty.

Hotel and tourism projects qualify for full exemption of import duty and sales tax on identified imported materials.

Applications should be submitted to MIDA.