New Tax Incentive Under the Industrial Master Plan 2030

(Tax Update) New Tax Incentive Under the Industrial Master Plan 2030

Dear KTP Clients,

We hope this newsletter finds you well. At KTP, we are committed to keeping you informed about the latest developments in tax regulations that could impact your business operations.

Today, we would like to bring to your attention a significant new tax incentive under the New Industrial Master Plan 2030 (NIMP 2030), which could benefit your company.

Introducing the Reinvestment Incentive

The Malaysian government, through the Malaysian Investment Development Authority (MIDA), has introduced a reinvestment incentive aimed at encouraging companies to continue investing in high-growth and high-value activities.

This incentive comes in the form of a tiered Investment Tax Allowance (ITA) and is particularly beneficial for companies that have exhausted their Reinvestment Allowance (RA) period.

Who Is Eligible?

To qualify for this incentive, your company must meet the following criteria:

Incorporated and Operating

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.

If your company has previously received tax incentives under the Promotion of Investment Act 1986 or the Income Tax Act 1967, those incentive periods must have ended.

If your company is currently claiming Reinvestment Allowance under the Income Tax Act 1967, you can choose to claim either RA or the new reinvestment incentive under the NIMP 2030 for a particular year of assessment. However, the 15-year RA incentive period will continue, even if you opt for the new incentive.

Expansion or Diversification

Your company must be involved in an expansion or diversification project within the manufacturing sector. This means either increasing production capacity or venturing into new product lines that require different sets of skills, knowledge, or machinery.

One Round Only

Your company is eligible for only one round of the reinvestment incentive under the NIMP 2030. If a related company has already been approved for this incentive, your company can only apply for a different product or activity.

Eligible Sectors:

Aerospace, Automotive, Chemical, Electrical & Electronics, Food Processing, Halal, Machinery & Equipment, Medical Devices, and more.

How Does the Incentive Work?

The reinvestment incentive is available in two tiers, depending on the nature and scope of your investment:

Tier 1

Offers an ITA of 100% on qualifying capital expenditure (QCE), which can be set off against 100% of your statutory income. This tier is available for five years.

Tier 2

Offers an ITA of 60% on QCE, which can be set off against 70% of your statutory income, also available for five years.

The tiering is based on an outcome-based approach, where Tier 1 requires companies to meet additional conditions, such as:

  • Creating high-value jobs with a basic monthly salary of MYR 10,000 for Malaysian employees.

  • Utilizing local suppliers and service providers.

  • Adopting green technologies or contributing to sustainable economic development.

Application Process

Applications for this incentive can be submitted to MIDA between 1 January 2024 and 31 December 2028. It is important to note that your application must be submitted before issuing the first sales invoice for the proposed project.

What Should You Do Next?

If your company is planning an expansion or diversification project, we highly recommend exploring this incentive to maximize your tax benefits. This could be an excellent opportunity to reduce your tax burden while contributing to Malaysia's industrial growth.

At KTP, we are here to help you navigate the application process and ensure you meet all the necessary conditions. Please do not hesitate to contact us if you need further information or assistance.

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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