Malaysia has a wide range of incentives for important industries. Tax breaks can come in the form of income exemptions or allowances. If not used, incentives given through allowances can be carried over indefinitely and used for future statutory income. But some incentives, like the reinvestment allowance and the investment allowance for approved service projects, are only available for seven years.
If a company in the manufacturing, agricultural, hotel and tourism, or any other industrial or commercial sector takes part in a promoted activity or makes a promoted product, it may be eligible for either PS or ITA.
PS is given by not having to pay CIT on 70% of the statutory income for five years. The other 30% is taxed at the current CIT rate. ITA is given on 60% of qualifying capital expenditures made over a five-year period and can be used to offset 70% of statutory income. The remaining 30% is taxed at the current CIT rate.
A company that wants to reinvest before its PS or ITA status ends
A resident company that has been in business for at least 36 months and spends money on capital improvements to grow, modernize, automate, or diversify its existing manufacturing business or approved agricultural project is eligible for a reinvestment allowance as follows:
The allowance lasts for 15 years starting with the first year of the claim.
The allowance is based on 60% of the QCE that was incurred and can be used against 70% of taxable income.
The 70% limit does not apply to projects that have met the productivity level set by the Minister of Finance.
If the asset for which the allowance is given is sold within five years, the allowance will be taken away.
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