Friday 29 Mar 2024
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KUALA LUMPUR: New tax exemptions for companies in the manufacturing or services sector in underdeveloped areas will be provided to promote job creation and a more balanced and inclusive regional growth. 

Minister of International Trade and Industry Datuk Seri Mustapa Mohamad said these new tax exemptions are: 100% income tax relief for up to 15 years of assessment, stamp duty exemptions on transfer or lease of land or building, and withholding tax exemption on fees for technical advice, assistance or services or royalties up to Dec 31, 2020. 

“The objectives of this incentive are to enhance private sector involvement in the development of less developed areas and to transform these areas into major business centres by enabling local business activities,” he said. 

“The target groups for this incentive would be existing companies expanding their operations into less developed areas or newly established companies within the manufacturing and services sector,” he said. 

He noted that there is no specific definition for what constitutes a less developed area so consideration for those wishing to take advantage of the tax would be given based on consultation with the Malaysian Investment Development Authority (Mida) and the respective state development authorities. 

This incentive is one of four new tax incentives introduced under Budget 2015 in October last year, which also included incentives for industrial area management, capital allowances to increase automation in labour-intensive industries, and incentives for the establishment of principal hubs. 

The industrial management incentive is to ensure that park managers will undertake the marketing and maintenance of the industrial parks, thus reducing the dependence on government funding.

Under the one-off capital allowances incentive, industries such as rubber products, plastics, wood, furniture and textiles will be entitled to a 200% capital allowance for undertaking automation on the first RM4 million expenditure incurred from 2015 up to 2017. 

For other manufacturing industries, the 200% capital allowance will only be provided on the first RM2 million expenditure incurred within the year of assessment 2015 until 2020.          

The incentives to set up principal hubs are meant to replace the existing international procurement centres, regional distribution centres and operational headquarters incentive schemes, which will officially be terminated by April 30, this year. 

Mida chief executive officer Datuk Azman Mahmud said the incentives are effective immediately, save for the incentive for the establishment of principal hubs, which will kick in on May 1.

 

This article first appeared in The Edge Financial Daily, on April 7, 2015.

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