Malaysia Investment Guide
Economic Introduction
Malaysia is one of the most developed countries in the ASEAN ( Association of Southeast Asian Nations). Since 1960s, Malaysia government takes the industrialization as the strategic aim of the economic developing. Since 1970s, they adjust the industrial structure, the manufacturing and the service industry grow fast.
Malaysia is abundant in natural reserves. It¡¯s one of the world¡¯s largest exporter of palm oil, natural rubber, pepper, cocoa beans and tropical timber. Its mining industry is largely dependent on tin, petroleum and natural gas. These years, the traditional primary products machining is gradually replaced by the electronic and textiles exporting. Foreign trade is important in Malaysia¡¯s national economy. The ASEAN£¬United States£¬EU£¬Japan, and Taiwan, Hong Kong are always the trading companions of Malaysia.
Investment Environment
Malaysia government is willing to introduce more overseas investment in the area of multimedia and information technology, in order to urge the local construction project of ¡° multimedia super corridor(MSC)¡±. While the local service, industrial and construction fields are not active in absorbing foreign funds. The petroleum and natural gas industry still limit the foreign funds.
Both domestic and foreign companies need to submit the application to the MIDA (Malaysian Industrial Development Authority) to get the business permission of the manufacturing. While some applications for other fields need to be approved by FIC( MALAYSIA FOREIGNINVESTMENT COMMITTEE). And to set up an Reinsurance Company need the approval of Nagara Bank ( the centre bank of Malaysia).
Generally speaking, the overseas funds can share only 30% of the stock at most. Some exporting-orientated wholly foreign owned enterprises can be allowed to set up, as well as those foreign companies who win the certificate of the MSC. Malaysia government always encourage Malaysia natives to possess of property, so its better to hold some native workers and even shareholders in either domestic or foreign companies.
Incentives and Preferential Treatment
Malaysia offers one of the most attractive incentives packages in the ASEAN region. Tax incentives and other facilities for the manufacturing sector are provided for in the Promotion of Investment Act 1986, Income Tax Act 1967, Custom Act 1967, Sales Tax Act 1972 and Excise Act 1976.
Pioneer Status:
A company given Pioneer Status will be granted partial exemption from the payment of income tax. It will only have to pay tax on 30% of its statutory income. The period of tax exemption is 5 years, commencing from the production date as determined by the Ministry of International Trade and Industry. However, companies in Sarawak will enjoy 100% of the exemption on statutory income for 5 years. For strategic projects in hi-tech industries with heavy capital investment, high R&D content or intensive linkages a 100% exemption may be granted.
Investment Tax Allowance(ITA):
A company given Investment Tax Allowance will be granted an allowance of 60% in respect of qualifying capital expenditure incurred within 5 years from the date of approval of the project. The ITA can be offset against 70% of the statutory income in the year of assessment. Unutilised allowance can be carried forward to subsequent years until the whole amount has been used up. 30% of the statutory income will be taxed at the prevailing company tax rate. However, companies in Sarawak will be granted an allowance of 100% in respect of the qualifying capital expenditure incurred. The allowance can be utilised to set-off against 100% of the statutory income in the year of assessment.
Reinvestment Allowance (RA):
Reinvestment Allowance (RA) is granted to manufacturing companies, which have been in operation for at 12 months and incur qualifying capital expenditure for the expansion of production capacity, modernization and upgrading of production facilities, and diversification into related products and automation of production facilities. The RA is in the form of an allowance of 60% of capital expenditure incurred for the expansion, modernization and upgrading of production facilities and diversification into related products. The allowance can be utilized to offset against 70% of the statutory income in the year of assessment.
Special Additional Incentives For Manufacturing Projects In Sarawak:
1.Companies eligible for Pioneer Status in Sarawak will be granted tax exemption of 100% (normally 70%) of their statutory income.
2.For companies eligible for Investment Tax Allowance, rate of allowance will be increased to a maximum 100% (normally 75%) of the statutory income.
3.Second round of pioneer status for existing and new companies.
4.Selected industries located in Sarawak can be granted incentives (i.e. Pioneer Status or Investment Tax Allowance, which are no longer given for products manufactured in other parts of Malaysia.
5.Infrastructure allowance of 100% of qualifying expenditure.
6.Manufacturing projects in Sarawak catering for domestic market are also entitled for full import duty exemption on raw material, components and parts, which are not available in Sarawak.
7.Eligibility for double deduction on freight charges incurred for the export of rattan and wood-based products (except plywood, sawn timber and veneer).
8.Cheap industrial land. Current price from RM2.50.*
9.Low down payment for the purchase of industrial land.
10.Flexible terms of payment for the purchase of industrial land.*
Incentives For High Tech Industries:
High technology companies are defined as companies engaged in promoted activities or in the production of promoted products in areas of new and emerging technologies. High technology companies are eligible for the following incentives:
1.Pioneer Status with full tax exemption at statutory income level for a period of five years; or
2.Investment Tax Allowance of 60% on qualifying capital expenditure incurred within a period of five years. The allowance can be offset against the statutory income for each assessment year without 100% of The high technology company must fulfill the following criteria:
1.Local research and development (R&D) expenditure to gross sales should be at least 1% on an annual basis. However, companies are allowed a period of three years from the date of operation / commencement of business to comply with this requirement
2.The percentage of science and technical graduates to total workforce should be at least 7%
Incentives For Research And Development£º
The definition of R & D in the Promotion of Investment Act 1986 is as follows:
"Research and development means any systematic or intensive study carried out in the field of science or technology with the object of using the results of the study for the production or improvement of materials, devices, products, produce or processes but does not include:
Quality control of product or routine testing of materials, devices products or produce;
Research in the social science or humanities;
Routine data collection;
Efficiency surveys or management studies;
Market research or sales promotion."
To further strengthen the foundation for a more integrated R & D in the future, companies which carry out designing or prototyping as an independent activity are eligible for incentives.
Incentives For Small Scale Industries£º
Small-scale manufacturing companies incorporated in Malaysia with shareholders' funds not exceeding RM500,000 and having Malaysian equity of at least 60% are eligible for pioneer status incentive with an income tax exemption of 100% of the statuting income for a period of 5 years; or investment tax Allowance of 60% on the qualifying capital expenditure incurred within five years and can be offset against 100% of the statuting income for each year of assesment
Other Special Benefits
There are also special incentives for Tourism Industry, Multimedia Super Corridor (MSC) as well as:
Agriculture Sector
Software Development
Computers and Information Technology Assets
Acquiring Proprietary Rights
Training
Operational Headquarters (OHQs)
International Procurement Centres
Approved Service Projects
Shipping Industry
Tariff Related Incentives
Protection of Foreign Investment
Equity Policy In The Manufacturing Sector£º
The Malaysian Government welcomes foreign investment in the manufacturing sector. In keeping with the objective of increasing Malaysian participation in manufacturing activities, it is the policy of the Government to encourage projects to be undertaken on a joint venture basis between Malaysia and foreign entrepreneurs.
Equity Policy Application To New Investment Expansion & Diversification£º
1.Foreign equity participation in manufacturing projects has been governed by the level of exports. Effective from 31 July 1998, the Malaysia government has liberalized the equity policy for the manufacturing sector in respect of new investment, expansion or diversification as follows:
2.Foreign investors can now hold 100% equity irrespective of the level of exports. Equity holdings in all manufacturing projects were fully liberalized effective from 17 June 2003 Foreign investors can now hold 100% of the equity in all investments in new project, as well as investments in expansion/ diversification project by existing companies, irrespective of the level of exports and without any product/activity being excluded.
Equity Policy Application To Existing Companies:
Equity and export conditions imposed on companies prior to 17 June 2003 will be maintained. However, companies can request for these condition to be removed. The government will be flexible in considering such requests and approval will be given based on the merits of each case. Companies with export conditions can apply for approval from MIDA to sell in the domestic market based on the following guidelines:
1.Up to 100% of their output for those products with nil duty or those not produced locally.
2.Up to 80% of their output if the domestic supply is inadequate or there has been an increase in imports from ASEAN for products with Common Effective Preferential Tariff (CEPT) duties of 5% and below.
Protecting of Intellectual Properties
Intellectual property means the property in intellectual creations, particularly technology inventions and literary and artistic works. Inventions and works protected under the copyright protection can be used only with the consent of the inventor, author or other owner of the rights. Intellectual rights exist are also embodied in the protected trademarks.
Malaysia's Intellectual property system is made up of the following :
ndustrial Property consisting of:
* Trade marks as governed by Trade Marks Act 1976 and the Regulations made thereunder.
* Patents as governed by Patents (Amendment) Act 1995 and the Regulations made thereunder.
* Industrial designs as governed by the United Kingdom Designs (Protection) Act 1949 for Peninsular Malaysia, United Kingdom Designs (Protection) Chapter 152 for Sabah and Designs (United Kingdom) Ordinance Chapter 59 for Sarawak.
Copyright
Copyright as governed by the Copyright Act 1987, Copyright (Amendment) Act 1990 and the regulations made thereunder.
Enforcement of the above intellectual property rights is provided for by the various intellectual property legislation and the Trade Description act 1972.
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