6. Foreign Investment
The Ministry Of International Trade And Industry
The Ministry of International Trade and Industry (MITI) aims to promote and safeguard
Malaysian interest in the international trade arena, to spur the development of industrial
activities and to further enhance Malaysia’s economic growth. The Malaysian Industrial
Development Authority (MIDA), as an agency under MITI, is the government’s principal
agency in charge of promotion and co-ordination of industrial development in Malaysia
including foreign investments especially in the manufacturing sectors. MIDA is the first point
of contact for investors who intend to set up projects in manufacturing and its related support
service sectors in Malaysia. Detail information about the incentives granted to investors of
various industries in Malaysia may be obtained from MIDA website at www.mida.gov.my
Foreign Investment Committee Guidelines
The Foreign Investment Committee (FIC) is a committee within the Economic Planning
Unit of the Prime Minister’s Department, which, amongst others, reviews and regulates
the acquisitions by foreign interests of assets and interests in Malaysian companies and
businesses. Foreign investment in Malaysia is generally governed by the FIC. Specific
industries may also be regulated by other government authorities. FIC approval is required
in certain transactions as set out in its guidelines (FIC Guidelines). Under the FIC Guidelines,
the general rule of thumb is that a minimum 30% of the effective shareholding in Malaysian
companies is to be held by Bumiputeras while the remaining equity can be held either by
foreign interests or by Malaysian interests or both. ‘Bumiputera’ are generally Malays and
other persons indigenous to Malaysia.
Some transactions to which the FIC Guidelines on acquisition of interests, mergers and takeovers
apply are as follows:
• Any proposed acquisition of interest in a local company or business in Malaysia which is
RM10 million or more in value, by local or foreign interests;
• Any proposed acquisition of interest in any local company or business in Malaysia
regardless of whether the value is less than RM10 million by:
- any foreign interest of the voting rights to the level of 15% or more or which will
result in an increase of the voting rights to the level of 15% or more; or
- any associated or non-associated group of foreign interests of the cumulative voting
rights to the level of 30% or more or which will result in an increase of the
cumulative voting rights to the level of 30% or more;
• Any proposed acquisition of interest by any associated or non-associated group
of foreign interests, in aggregate of 30% or more of the voting rights of any local
company/business or such interest which will result in an increase of the voting rights to
30% or more in any local company/business;
• Any proposed merger or take-over of any local company or business in Malaysia by
local or foreign interests;
• Any proposed joint venture involving two or more parties in a local company;
• Any control of a local company or business in Malaysia through any form of
management agreement, technical assistance agreement or other arrangements;
• Any charging of shares in a local company to any foreign interest where the value of
loan or the market value of the shares is RM10 million or more.
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There are some exemptions to the FIC Guidelines, including any acquisition of interest in
manufacturing companies licensed by MITI and acquisition of interest in companies that
have been granted Multimedia Super Corridor (MSC) status and certain other status.
Where the FIC Guidelines are applicable, the FIC will generally impose equity conditions, share
capital conditions and employment conditions on companies undertaking the transactions,
to be complied within a specified period.
Although the FIC Guidelines are not issued pursuant to any legislation or statute, noncompliance
with the FIC Guidelines may have adverse practical consequences especially where
the foreign investor needs to apply for other governmental licence, permit or approval.
Exchange Control Regulations
The Malaysian exchange control regime is governed by the Exchange Control Act 1953 and
the Exchange Control of Malaysia Notices (ECMs) and clarifications issued by the Malaysian
central bank, Bank Negara Malaysia (BNM). As the regulator, BNM’s approval is required
for certain dealings and transactions. Generally, there are no restrictions on repatriation
of capital, profit, dividends, interest and rental income by foreign investors, subject to the
payments being made in foreign currency (other than the currency of Israel). The ECMs set
out various approvals which BNM has granted and clarifies transactions and applications
where prior approvals are required.
The Iskandar Development Region (IDR)
The Iskandar Development Region (IDR) spans an area of 2216.34 sq km in South Johor and
is one of the key engines of growth identified under the 9th Malaysia Plan. The IDR aims to
be a first-class global hub for business, living and leisure. More than RM4 billion has been
allocated under the 9th Malaysia Plan towards infrastructure development in IDR.
The IDR was officially launched on 4 November 2006. The Iskandar Regional Development
Authority (IRDA) established in February 2007 is the statutory body that acts as the one-stop
centre responsible for establishing policies, directions and strategies, and co-coordinating as
well as facilitating the development of IDR.
An initial Incentive and Support Package that applies to certain designated zones within
the IDR had been announced by government in March 2007. The locations of these zones
will be announced by the IRDA in the third quarter of 2007.The incentives will be enjoyed
by qualifying companies in 6 targeted sectors within the approved zones. The 6 targeted
sectors are:
• creative industries
• educational services
• financial advisory and consulting services
• healthcare services
• logistics services
• tourism related services
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The incentives for the qualifying companies in the approved zones are:
• Exemption from the Foreign Investment Committee (FIC) Guidelines.
• Exemption from corporate income tax for a period of 10 years from the commencement
of operation on the condition that operation of the company commences before the
end of year 2015.
• Exemption from withholding tax on royalty and technical fee payments to non-residents
for a period of 10 years from the commencement of operations.
• Freedom to source capital globally.
• Unrestricted employment of foreign employees within the approved zones.
More information about IDR may be obtained from www.sjer.com.my
The Multimedia Super Corridor (MSC)
The Multimedia Super Corridor (MSC) is a government initiative to spur the information
and communication technology (ICT) industry in Malaysia. The MSC was conceptualised in
1996 and has since grown into a thriving ICT hub. To ensure the success of the MSC, the
government has, in a Bill of Guarantees, committed to:
• Provide a world-class physical and information infrastructure;
• Allow unrestricted employment of local and foreign knowledge workers;
• Ensure freedom of ownership by exempting companies with MSC Status from local
ownership requirements;
• Give the freedom to source capital globally for MSC infrastructure, and the right to
borrow funds globally;
• Provide competitive financial incentives, including no income tax for up to 10 years or
an investment tax allowance, and no duties on import of multimedia equipment;
• Become a regional leader in intellectual property protection and cyberlaws;
• Ensure no Internet censorship;
• Provide globally competitive telecommunications tariffs;
• Tender key MSC infrastructure contracts to leading companies willing to use the MSC
as their regional hub; and
• Provide an effective one-stop agency.
The Multimedia Development Corporation Sdn Bhd (MDC) is the one-stop agency to accept
and process applications by companies for MSC status. Companies with MSC status are
entitled to enjoy the government incentives provided pursuant to the Bill of Guarantees.
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A company seeking MSC Status and its benefits is required to:
• be a provider or a heavy user of multimedia products and services;
• employ a substantial number of knowledge workers;
• provide technology transfer and/or contribute towards the development of the MSC or
support Malaysia’s k-economy (knowledge-based economy) initiatives;
• establish a separate legal entity for the MSC qualifying multimedia business and
activities;
• locate in a MSC designated cybercities; and
• comply with environmental guidelines.
Labuan International Business and Financial Centre
The Federal Territory of Labuan, an island located off the coast of Sabah, East Malaysia, was
established as an International Offshore Financial Centre in October 1990 and the Labuan
Offshore Financial Services Authority (LOFSA) is the one-stop approving and regulatory
agency for offshore businesses operating in Labuan. In January 2008, Labuan IOFC was
rebranded into the Labuan International Business and Financial Centre in line with its new
focus as an international financial centre.
The offshore businesses in Labuan are virtually unaffected by the country’s exchange control
measures and the nature of offshore businesses in Labuan is basically foreign currencybased.
Offshore companies and offshore trusts undertaking offshore activities are accorded
preferential tax treatment. Offshore activities are classified into offshore trading activities
(including banking, insurance, trading, management, licensing) and offshore non-trading
activities (including holding of investments in securities, stocks, shares, loans, deposits and
immovable properties by an offshore company on its own behalf).
Offshore companies and persons employed by offshore companies enjoy several tax incentives.
For example, an offshore company carrying on an offshore trading activity can opt to pay
tax each year at the rate of 3% of its net audited profits, or a fixed sum of RM20,000 a
year. Further, an offshore company carrying on an offshore non-trading activity for the basis
period for a year of assessment is not subject to tax for that year of assessment. When a
company has no basis period for a year of assessment, it is taxed a fixed rate of RM20,000
for that year of assessment. With effect from assessment year 2009, offshore companies will
also enjoy the flexibility to elect to be taxed under the domestic corporate tax regime.
In Labuan, the following types of income are exempted from tax in the hands of a Malaysian
or foreign recipient:
• dividends received by, or received from an offshore company;
• distributions received from an offshore trust by the beneficiaries;
• royalties received by a non-resident or another offshore company;
• interest received from, or by, an offshore company under certain circumstances and
amounts received from an offshore company for providing services.
In addition, documents relating to offshore business activities of an offshore company
(including memorandum and articles of association of an offshore company and transfer of
shares in an offshore company) are exempted from stamp duty.
Invest in Malaysia
Incentives for Investments
1.Incentives for the Manufacturing Sector
1.1 Main Incentives for Manufacturing Companies
- Pioneer Status
- Investment Tax Allowance
1.2 Incentives for Relocating Manufacturing Activities to Promoted Areas
1.3 Incentives for High Technology Companies
1.4 Incentives for Strategic Projects
1.5 Incentives for Small and Medium-Scale Companies
1.6 Incentives to Strengthen Industrial Linkages
1.7 Incentives for the Machinery and Equipment Industry
1.7.1 Incentives for the Production of Specialised Machinery and Equipment
1.7.2 Additional Incentives for the Production of Heavy Machinery
1.7.3 Additional Incentives for the Production of Machinery and Equipment
1.8 Incentives for Automotive Component Modules
1.9 Enhanced Incentives for the Utilisation of Oil Palm Biomass
- New Companies
- Existing Companies That Reinvest
1.10 Additional Incentives for the Manufacturing Sector
- Reinvestment Allowance
- Accelerated Capital Allowance
- Accelerated Capital Allowance on Equipment to Maintain Quality of Power Supply
- Accelerated Capital Allowance on Security Control Equipment
- Incentive for Industrialised Building System
- Tax Exemption on the Value of Increased Exports
- Group Relief
2. Incentives for the Agricultural Sector
2.1 Main Incentives for the Agricultural Sector
- Pioneer Status
- Investment Tax Allowance
- Incentives for Food Production
- Incentive for Reinvestment in Food Processing Activities
2.2 Additional Incentives for the Agricultural Sector
- Reinvestment Allowance
- Incentive for Reinvestment in Resource-Based Industries
- Incentives for Modernising Chicken and Duck Rearing
- Accelerated Capital Allowance
- Agricultural Allowance
- Accelerated Agriculture Allowance for the Planting of Rubberwood Trees
- 100% Allowance on Capital Expenditure for Approved Agricultural Projects
- Tax Exemption on the Value of Increased Exports
- Incentives for Companies providing Cold Chain Facilities and Services for Food Products
- Double Deduction for Expenses to Obtain “Halal” Certification and Quality Systems and Standards Certification
- Double Deduction on Freight Charges for Export of Rattan and Wood-based Products
3. Incentives for the Biotechnology Industry
3.1 Main Incentives for the Biotechnology Industry
3.2 Incentives for Investment in a BioNexus Status Company
- Investment by a Company or Individual in a BioNexus Status Company
- Tax Incentives for Mergers and Acquisitions with a Biotechnology Company
3.3 Biotechnology Funding for Bionexus Companies
4. Incentives for the Tourism Industry
4.1 Incentives for the Hotel and Tourism Industry
- Pioneer Status
- Investment Tax Allowance
- Enhanced Incentives for Undertaking New Investments
- Incentives for Reinvestment in Hotels and Tourism Projects
- Incentives for the Luxury Yacht Industry
4.2 Additional Incentives for the Tourism Industry
- Double Deduction on Overseas Promotion
- Double Deduction on Approved Trade Fairs
- Tax Exemption for Tour Operators
- Tax Exemption for Promoting International Conference and Trade Exhibitions
- Deduction on Cultural Performance
- Incentive for Car Rental Operators
5. Incentives for Environmental Management
5.1 Incentives for Forest Plantation Project
5.2 Incentives for the Storage, Treatment and Disposal of Toxic and Hazardous Wastes
5.3 Incentives for Waste Recycling Activities
5.4 Incentives for Energy Conservation
5.5 Incentives for Energy Generation Activities Using Renewable Energy Resources
5.6 Incentives for Generation of Renewable Energy for Own Consumption
5.7 Accelerated Capital Allowance for Environmental Management
6. Incentives for Research and Development
6.1 Main Incentives for Research and Development
- Contract R&D Company
- R&D Company
- In-house Research
- Second Round Incentives
- Incentives for Commercialisation of Public Sector R&D
6.2 Additional Incentives for Research and Development
- Double Deduction for Research and Development
- Incentives for Researchers to Commercialise Research Findings
7. Incentives for Medical Device Industry
7.1 Incentives for Medical Devices Testing Labaratories
- Companies Investing in New Testing Laboratories for Medical Device
- Companies Upgrading Existing Testing Laboratories for Testing Medical Devices
8.1 Main Incentives for Training
8.2 Additional Incentives for Training
- Incentives for Unemployed Graduate Training Scheme
- Deduction for Cost of Recruitment of Workers
- Deduction for Pre-employment Training
- Deduction for Cash Contribution
- Special Industrial Buiding Allowance
- Tax Exemption on Educational Equipment
- Tax Exempetion on Roayalty Payments
- Double Deduction for Approved Training
- Human Resource Development Fund
9. Incentives for Approved Service Projects
9.1 Main Incentives for ASPs
- Exemption under Section 127 of the Income Tax 1967
- Investment Allowance (1A) under Schedule 7B of the Income Tax Act 1967
9.2 Additional Incentives for ASPs
10. Incentives for the Shipping and the Transportation Industry
10.1 Tax Exemption for Shipping Operation
10.2 Exemption from Import Duty and Sales Tax on Prime Movers and Trailers
11. Incentives for the Multimedia Super Corridor
11.1 Main Incentives for MSC Status Company
12. Incentives for Information and Communication Technology (ICT)
12.1 Incentives for the use of ICT
13. Incentives for A Knowledge-Based Economy
14. Incentives for Manufacturing Related Services
15. Incentives for Operational Headquarters
15.1 Approvals for OHQ Status, Incentives and Other Facilities
15.2 Equity Requirements
15.3 Incentives
15.4 Others Facilities
15.5 Expatriate Employment
16. Incentives for International Procurement Centres/Regional Distribution Centres
16.1 Approvals for IPC/RDC Status
16.2 Equity Requirements
16.3 Incentives
16.4 Others Facilities
16.5 Expatriate Employment
17. Representative Offices and Regional Offices
17.1 Activities Allowed
17.2 Activities Not Allowed
17.3 Equity Requirements
17.4 Incentives
17.5 Expatriate Employment
18.1 Industrial Building Allowance
18.2 Industrial Building Allowance for Buildings in MSC
18.3 Infrastructure Allowance
18.4 Deduction of Audit Fees
18.5 Tax Incentives for Venture Capital Industry
18.6 Tax Incentive on Costs of Dismantling and Removing Assets
18.7 Incentive for Acquiring Proprietary Rights
18.8 Tariff Related Incentives
- Exemption from Import Duty on Raw Materials/Components
- Exemption from Import Duty on Imported Medical Device for Purpose of Kitting
- Exemption from Import Duty and Sales Tax on Machinery and Equipment
- Exemption from Import Duty and Sales Tax on Spares and Consumables
- Exemption from Import Duty and Sales Tax for Outsourcing Manufacturing Activities
- Exemption from Import Duty and Sales Tax for Maintenance, Repair and Overhaul (MRO) Activities
- Exemption from Import Duty and Sales Tax on Solar Photovoltaic System Equipment
- Exemption from Import Duty and Sales Tax on Energy Efficiency Equipment
- Exemption from Import Duty and Excise Duty on Hybrid Cars
- Sales Tax Exemption
- Drawback on Import Duty, Sales Tax and Excise Duty
18.9 Incentives for Export
- Single Deduction for the Promotion of Exports
- Double Deduction for the Promotion of Exports
- Double Deduction on Export Credit Insurance Premiums
- Double Deduction on Freight Charges
- Double Deduction for the Promotion of Malaysian Brand Names
- Special Industrial Building Allowance for Warehouses
- Incentive for the Implementation of RosettaNet
18.10 Incentive for the Use of Enviornmental Protection Equipment
18.11 Donations for Environmental Protection
18.12 Incentives for Employees’ Accommodation
18.13 Incentives for Employees’ Child Care Facilities
