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Manufacturing
Last Updated : 17/3/2017 11:40 AM
 
 

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 "promoted products".

  • 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 (MIDA).
  • 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.

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