To attract foreign companies to relocate their business into Malaysia by addressing the risk of re-shoring, the Government will grant the following incentives:
- a) 0% tax rate for 10 years for company in manufacturing sector with new investment in fixed assets between RM300 million and RM500 million.
- b) 0% tax rate for 15 years for company in manufacturing sector with new investment in fixed assets exceeding RM500 million.
- c) 100% investment tax allowance for 5 years for existing company in Malaysia relocating its overseas manufacturing facilities into Malaysia with investment in fixed assets exceeding RM300 million.
- d) Special reinvestment allowance for manufacturing and selected agriculture activity from YA 2020 to YA 2021.
- e) Domestic investment strategic fund be granted a second round of projects for companies that have previously been eligible for the facility in order to assist companies in upgrading their technologies, penetrate the global market through outsourcing, and increase their export value.
Among others, the conditions for the incentives in items 1 and 2 above are that the company must relocate and commence its operation in Malaysia within one year from the date of approval and the investment amount must be made within three years.
The above incentive is effective for application made to MIDA (items 1-3 & 5) / IRB (item 4) from July 2020 to December 2021.
Deloitte Malaysia’s view
“These measures are crucial and timely to encourage foreign investments in the current economic climate, where tax costs can be a key consideration in selecting a location for investment.
“The condition to require the new investments to commence operations within 1 year from the approval date and putting a 3-year cap on the time frame for capital investment is a good move as this will accelerate the implementation of approved projects.”