Foreign Investment Overview

Guideline on Acquisition of Property

With effect from 1 Jan 2010, foreigners can only buy residential property valued at more than RM500,000 and do not need approval from Economic Planning Unit (EPU), Prime Minister’s Department . This condition supersedes the earlier Foreign Investment Committee (FIC) guideline.

For further information and clarification on acquisition of properties please visit the relevant website www.epu.gov.my

Tax Incentives for Promoted Activities in Iskandar Malaysia

Companies which are carrying out promoted activities and/or producing promoted products may be eligible for other tax incentives provided under the Promotion of Investments Act, 1986 and/or the Income Tax Act, 1967. These incentives are under the purview of various Government Ministries/ Agencies.

Pioneer Status and Investment Tax Allowance (‘ITA’) are provided under the Promotion of Investments Act, 1986. Tax exemption and Investment Allowance which are incentives similar to Pioneer Status and ITA are provided under the Income Tax Act, 1967.

i. Incentives through the Malaysian Industrial Development Authority (‘MIDA’)

Economic Drivers

Incentives

Electrical and Electronics
Petrochemicals and oleochemicals
Food and Agro-processing
Biotechnology

	Pioneer Status	Investment Tax Allowance
General	5 years Pioneer Status and tax exemption at 70% of statutory income	60% ITA on qualifying capital expenditure incurred within 5 years and can be set off against 70% of statutory income
High Technology Projects	5 years Pioneer Status and tax exemption at 100% of statutory income	60% ITA for 5 years and can be set off against 100% of statutory income
Strategic/ Prepackaged incentive Projects	10 years Pioneer Status and tax exemption at 100% of statutory income	100% ITA for 5 – 10 years and can be set off against 100% of statutory income

Exemption on import duty and/or sales tax on plant and equipment directly used in the manufacturing process
Exemption from import duty and/or sales tax on raw materials and components used in the manufacturing process

Logistics
1. Integrated logistic services providers (‘ILS’)
2. International procurement centres (‘IPCs’)/ regional distribution centres (‘RDCs’)

5 years Pioneer Status and tax exemption at 70% of statutory income, or
60% ITA for 5 years and can be set off against 70% of statutory income
For IPCs and RDCs, full tax exemption for 10 years

Tourism
1. Establishment of hotels (up to 3 stars)
2. Expansion/modernization of existing hotels
3. Establishment and expansion of tourist projects
4. Establishment of recreational camps
5. Establishment of convention centres

5 years Pioneer Status and tax exemption at 70% of statutory income, or
60% ITA for 5 years and can be set off against 70% of statutory income
Exemption from import duty and/or sales tax on selected equipment used in the hotel/tourism industry

Education
1. Technical or vocational training
2. Private Higher Education Institutions (‘PHEIs”) providing selected courses in Science (new set up) or existing PHEIs in the selected fields of Science undertaking additional investments for upgrading or expansion capacity

100% ITA on qualifying capital expenditure incurred within 10 years to be set off against 70% of statutory income
Special building allowance of 10% per year
Exemption on import duty and/or sales tax on educational equipment including laboratory equipment
Exemption on withholding tax on royalties paid to non-resident franchisors
Incentives for Private Higher Education Institutions (‘PHEIs) providing courses relating to multimedia and which have their own multimedia faculties are also available through MDeC.

Creative Industries
1. Film and video production

5 years Pioneer Status and tax exemption at 70% of statutory income, or
60% ITA for 5 years and can be set off against 70% of statutory income
For other incentives, please refer to incentives provided through MDeC for multimedia development and applications.

Financial services, advisory services and consulting services
1. Provision of regional headquarters services under business process outsourcing/ offshoring

10 years tax exemption on the provision of regional headquarters services to related companies including certain types of business process outsourcing/ offshoring
See part IV below for incentives for selected services under Islamic Financial Services

Further information can be obtained at www.mida.gov.my.

ii. Incentives through the Multimedia Development Corporation (‘MDEC’)

Companies that develop or use multimedia technologies to produce or enhance their products and services are eligible for MSC Malaysia Status. These also include private higher educational institutions providing courses relating to IT. The applications for MSC Malaysia Status are to be submitted to MDeC.

A company seeking MSC Malaysia status must meet the following criteria:

Be a provider or heavy user of multimedia products and services;
Employ a substantial number of knowledgeable workers;
Provide technology transfer and/or contribute towards the development of MSC Malaysia or support Malaysia's k-economy initiatives;
Establish a separate legal entity for MSC Malaysia qualifying multimedia business and activities;
Locate in a MSC Malaysia designated cybercity/cybercentre*; and
Comply with environmental guidelines

(*Menara MSC Cyberport, a building located within Iskandar Malaysia, is a designated cybercentre)

Economic Drivers	Incentives
Education Private Higher Education Institutions (‘PHEIs”) providing courses related to IT and which have their own multimedia faculties	5 years Pioneer Status (extendable by another 5 years) and tax exemption at 100% of statutory income; or 100% ITA on qualifying capital expenditure incurred within 5 years to be set off against 100% of statutory income Exemption on import duty and/or sales tax on multimedia equipment used in the MSC operations Exemption on withholding tax on payments to non-residents for technical services, licensing fees and interest on loans for technology development Owners of buildings in Cyberjaya whose buildings are rented out to MSC status companies are eligible for Industrial Building Allowance of 10% to be claimed over a period of ten years
Creative Industries May include: Film and television (pre and post production, production) Games and animation (content creation, production, post-production) Online and mobile content generation Online and mobile content aggregation and enablers
Financial services, advisory services and consulting services Business process outsourcing/offshoring

Further information can be obtained at www.mscmalaysia.com

iii. Incentives through the Ministry of Agriculture

Projects in selected food production are eligible for a better form of tax incentives. The eligible ‘food products’ as approved by the Minister of Finance include vegetables, fruits, herbs, spices, aquaculture, rearing of cattle, goats and sheep and deep sea fishing. The incentives are for the company undertaking the approved food production activity as well as for the company investing in the approved food production company.

Economic Drivers

Incentives

1. Food and agro-processing

Approved Food Production company
1. 100% tax exemption on statutory income for 10 years
1. Company which invests in Approved Food Production company
1. The investor company is entitled to a tax deduction equivalent to the amount invested in the subsidiary (must be at least 70% owned) which undertakes the food production project; or
2. The investor company will be given group relief for the losses incurred by the subsidiary company
Exemption on import duty and/or sales tax on plant and equipment directly used in the operations

The Agro-based Industry Division of the Ministry of Agriculture is responsible for this incentive. More information can be found at http://agrolink.moa.my/moa

iv. Incentives through the Malaysia Islamic Financial Centre (‘MIFC’)

General banking and financial services providers are not eligible for any tax incentive in Malaysia. To promote Malaysia as an Islamic Financial Centre (MIFC), tax incentives are available for eligible companies carrying out Islamic banking services, takaful operations, stock broking, fund management services and etc. The incentives for Islamic financial services include the following:

tax exemption for Islamic Financial Institutions on transactions in international currencies
tax exemption for Special Purpose Vehicles issuing Islamic securities
tax deduction for expenditure on the issuance of Islamic securities
tax exemption for Islamic fund management companies
tax deduction for the establishment of an Islamic stockbroking firm
tax exemption on income received by non-resident experts in Islamic finance

Further information can be obtained at www.mifc.gov.my.

v. Incentives through the Malaysian Biotechnology Corporation

A company which is a provider of a product or services based on life sciences or substantially utilize biotechnology processes and with research capabilities in specific focus areas is eligible to apply for a BioNexus status. The application for BioNexus status is to be submitted to the Malaysian Biotechnology Corporation (Biotech Corp). The incentives are:

100% income tax exemption for ten years commencing from the first year the company derives profits; or
Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of five years.
Upon the expiry of the tax exemption period, a BioNexus status company will be given a concessionary tax rate of 20% for ten years on income from qualifying activities.
A company which invests in its subsidiary (at least 70%), which is a BioNexus Status company is granted tax deduction equivalent to the amount of investment made in that subsidiary;
A company or individual investing in a BioNexus status company is given a tax deduction equivalent to the total investment made in seed capital and early stage financing;
Exemption of import duty and sales tax on raw materials/components and machinery and equipment;
Double deduction on expenditure incurred for R&D;
Double deduction on expenditure incurred for the promotion of exports; and
Buildings used for biotechnology activities will be eligible for Industrial Building Allowance to be claimed over a period of 10 years.

Further information can be obtained at www.biotechcorp.com

vi. Incentives through the Halal Industry Development Corporation (HDC)

Halal is a way of life and promotes a healthy lifestyle by how we eat, live and conduct our business. HDC Malaysia has been tasked to develop and promote Malaysia as a ‘Global Halal Hub’ through standards development, branding enhancement as well as commercial and industry development.

The following incentives are available for the different type of activities within the supply chain to bring halal certified products to the market.

Activities	Incentives
Halal Park Operator - Development of halal parks	10 years Pioneer Status with tax exemption at 100% of statutory income; or 100% ITA on qualifying capital expenditure incurred within 5 years to be set off against 100% of statutory income Exemption from import duty on equipment directly used in the Cold Room Operations
Halal Logistic Operator Services provided must be integrated similar to services provided by an “integrated logistic services provider” which had been approved with tax incentives	5 years Pioneer Status with tax exemption at 100% of statutory income; or 100% ITA on qualifying capital expenditure incurred within 5 years to be set off against 100% of statutory income Exemption from import duty on equipment directly used in the Cold Room Operations
Halal Industry Players Activities must be in four industry sectors Specialty Processed Food Cosmetic and Personal Care / Pharmaceutical Halal Ingredients Livestock and Meat Product	Exemption on statutory income from export sales for 5 years; or 100% ITA on qualifying capital expenditure incurred within 10 years to be set off against 100% of statutory income Exemption from import duty on raw materials used for the development and production of halal promoted products Double deduction on expenses incurred in obtaining international quality standards such as HACCP, GMP, Codex Allimentarious (food standard guidelines of FAO and WHO) , Sanitation Standard Operating Procedures and regulations for compliance for export markets such as Food and Traceability from farm to fork.

Further information can be obtained from www.hdcglobal.com

Other Incentives

Projects which are strategic and/or catalytic to the development of Iskandar Malaysia and which can bring extensive economic linkages can be considered for a customized package of incentives based on the merits of each project.