Where we are today
The manufacturing industry in Malaysia became a significant contributor to the
country's economy in the post independence period beginning in the 1960s. During
the colonial period, the country had been a major producer of raw materials,
namely tin and rubber. Secondary industries then were related to tin, rubber,
timber, foodstuffs, and petroleum.
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
- Pioneer Status
A company granted Pioneer Status 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 as well as accumulated losses incurred
during the pioneer period can be carried forward and deducted from the
post pioneer income of the company. Applications for Pioneer Status
should be submitted to the Malaysian Investment Development Authority
- 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.