(Tax Update) MIDA Reinvestment Incentive Eligibility

Dear KTP Clients,

As a licensed tax agent with years of experience, I’ve seen how the right tax incentives can make a significant difference for businesses in Malaysia.

Recently, a client of ours, the boss of a well-established manufacturing company producing automotive spare parts, approached me with a question that I believe many of you in similar industries might be asking: “Am I eligible for the new reinvestment incentive under the New Industrial Master Plan 2030 (NIMP 2030)?”

Let’s walk through the scenario.

This particular company has been in operation for over 10 years, a solid track record in the industry. Previously, they claimed Pioneer Status, a tax incentive that many companies in the manufacturing sector have benefited from.

Now, as they consider expanding their operations to meet increasing demand, the question of eligibility for the new reinvestment incentive arises.

The Incentive: What’s on the Table?

Under the NIMP 2030, the government has introduced a tiered Investment Tax Allowance (ITA) aimed at encouraging businesses to reinvest in high-growth, high-value activities.

The incentive is split into two tiers:

✅ Tier 1: Offers an ITA of 100% of qualifying capital expenditure (QCE), which can be set off against 100% of statutory income (SI).

✅ Tier 2: Provides an ITA of 60% of QCE, set off against 70% of SI.

Both tiers come with a 5-year incentive period, a substantial benefit for companies looking to expand or diversify their operations.

Are You Eligible?

Here’s where it gets interesting. To qualify for this incentive, your company must meet several criteria:

✅ Operational History

Your company must be a resident manufacturing company incorporated under the Companies Act 2016 and must have been in operation for at least 36 months. Given that your company has been running for over 10 years, this criterion is clearly met.

✅ Previous Incentives

If your company has previously claimed a tax incentive, such as Pioneer Status under the Promotion of Investment Act 1986, the incentive period for that must have ended. With your Pioneer Status period now behind you, this opens the door to new opportunities like the NIMP 2030 incentive.

✅ Project Type

The incentive applies if your company is undertaking an expansion (increasing production capacity or market share) or diversification (introducing new products) project within the manufacturing sector.

✅ Timing

This is crucial. The company must submit the incentive application to MIDA before the commencement of the proposed project. In this context, ‘commencement’ is specifically defined as the issuance of the first sales invoice related to the proposed project.

If you’re planning an expansion or diversification project, I strongly recommend that you prepare your application as soon as possible to ensure it is submitted to MIDA before you issue the first sales invoice for the project.

Past blog

15 August 2024 New Tax Incentive Under the Industrial Master Plan 2030

https://www.ktp.com.my/blog/reinvestment-incentive-under-the-industrial-master-plan/15aug2024

PS : Authored by Mr Koh Teck Peng, the Group Principal, in his personal LinkedIn post https://bit.ly/3YT8GgA

Note: The information provided in this newsletter is for general guidance only and should not be considered as professional advice. Always consult with a tax professional before making any business decisions.

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