KUALA LUMPUR (June 5): KPMG Malaysia has hailed the investment tax exemptions announced for manufacturers in the National Economic Recovery Plan (Penjana), but feels they should be extended to the services sector.

Tai Lai Kok, head of tax at KPMG Malaysia, said the tax exemption on foreign direct investments (FDI) in the manufacturing sector would allow Malaysia to differentiate itself and encourage investors to choose Malaysia as the preferred investment destination in the region.

The incentive comprises a 10 to 15-year tax exemption for new FDI in the manufacturing sector with capital investment of RM300 million or more, and a 100% investment tax allowance for five years for existing companies which relocate their overseas facilities.

The location transfer and operation ramp-up must be done within a year from the approval date, while the amount must be invested within three years.

“These incentives, however, are targeted only at the manufacturing sector and it is hoped that consideration is also similarly given to the services sector that can play an equivalent role in boosting the domestic economy,” said Tai in a statement.

He also hoped that the necessary guidelines and conditions accompanying the incentives can be released quickly as multi-national companies require much time to make such significant investment decisions.

“Hence, the sooner clear and unambiguous guidelines and conditions are formalised, the more likely favourable decisions can be arrived at,” he said.

Meanwhile, Tai said the various digitalisation and financing initiatives for small and medium enterprises (SMEs) and micro businesses, such as the training and support under the e-commerce campaign, grants and loans for the adoption of digitalisation services, as well as the Penjana SME Financing and Microfinancing programmes, would assist SMEs and micro businesses to recover faster and quickly adapt to the new normal.

“As SMEs and micro businesses are the backbone of the Malaysian economy representing some 98.5% of Malaysia’s business population, it is certainly a step in the right direction for the Penjana to continue placing emphasis on accelerating their recovery,” he said.