Exploring Tax Incentives for Economic Activities in Malaysia

ExRevenue Malaysia (Bekas Pegawai HASIL) Malaysian Tax Incentives Result of a Smart Partnership pursued by the Government Where to LOCATE your ECONOMIC ACTIVITY & Enjoy a Tax Holiday & Repatriate 100% of your Profit with Ease Malaysian Tax Foundation (exrevenue@gmail.com (6018 222 4000)) 5/10/2025 1

Contents Malaysia Your Profit Centre in Asia Economic Strengths of Malaysia Territorial System Tax Incentives Executive Summary Some Examples 1 Digitial Malaysia in the Borderless World 2 R&D 3 OHQ 4 IPC 5 RDC Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 2

Economic Strengths of Malaysia Stable Government & Commonwealth System Economic Resources Oil & Gas (100 yrs reserve), Hydro power, Palm Oil, Rubber, Fertile Land, and plenty of Greens with Rain & Sun & Other resources No Earthquakes, Cyclones, Tornados, Wars, Civil wars, etc Talented, Hardworking, Skilled & Multiracial Work Force Stable Weather Conditions Summer, Summer & More Summer English widely used including Malay, Chinese & Indian dialects. Overall Cost Effective place to invest & A Government prepared to LISTEN. Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 3

Territorial Scope in Malaysia Non Malaysia source income is not Tax in Malaysia. No Withholding Tax on Dividends Single Tier Tax System as Final Tax Democratic Tax System Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 4

Tax Incentives Executive Summary Tax Incentives appear in various forms, such as exemption on income, extra allowances on capital expenditure incurred, double deduction of expenses, special deduction of expenses, preferential tax treatments for promoted sectors, exemption of import duty, sales tax and excise duty, Cash grants, etc. Malaysia is neither a tax haven nor a low tax jurisdiction, for companies, which are eligible for the tax incentives, the effective tax rates may be significantly below the normal corporate tax rate of 25% & expected to be reduced in the near future. 7.5% Tax Rate - a manufacturing company with a pioneer status tax incentive pays an effective tax at the rate of 7.5% as only 30% of its profits are subject to tax. Sectors manufacturing and agricultural sectors including a Deduction for Investments Service Sector - Players in the service sectors such as those involved in Islamic financial services, ICT, education, tourism, healthcare as well as research and development, are now getting their fair share of the tax incentives. Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 5

100% & 10 years Tax Holidays in the digital Haven which is borderless & NO GST / VAT Good Place to locate Your Cloud Government Guarantee Competitive Rates & Investment 100% Foreign Ownership & Repatriation of Profit Unlimited Foreign Labour World Class Intellectual Property Rights & IP Court Arbitration & a Good Dispute Resolution System in place Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 6

2 R&D Research & Development Sector 10 Year Tax Holiday on 100% Statutory Income Double Deduction of Approved Research Expenditure Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 7

3 OHQ - Operational Headquarters 1 MyCo - Incorporated under the Malaysian Companies Act 1965 2 USD 100k plus - Minimum Paid Up Capital of RM0.5 million (USD 100k plus) & Total Business Spending of RM1.5 million per year 3 - Carry out a minimum of 3 qualifying activities 4 - Serve a minimum of 3 related companies outside Malaysia 5 - Appoint a minimum of 3 senior professional or management personnel 6 - A sizeable network of companies outside Malaysia which includes the parent company or its head office and related companies 7 - A well established network of companies with significant and substantial employment of qualified professionals, technical and supporting personnel Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 8

OHQ - continued Tax Holiday - Income tax exemption on statutory income from all income from the provision of qualifying services and a part of the income from the provision of services in Malaysia (not exceeding 20%) for 10 years commencing from a year of assessment in which the date of approval of such OHQ falls in the basis period of that year of assessment. Dividends paid out from the exempt income are tax exempt in the hands of shareholders Expatriates working in an OHQ are taxed only on that portion of their chargeable income attributable to the number of days that they are in the country Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 9

4 IPC - International Procurement Centre Make Procurement from and Sale to its Related and Unrelated Companies within or outside Malaysia at market price Minimum annual sales turnover of RM100 million with export sales of at least RM80 million (out of which direct export sales must be at least RM50 million) in respect of the qualifying activities Not sell more than 20% of its products to local market [local sales include sale to free zones (free industrial zone or free commercial zone) or licensed manufacturing warehouse (LMW)]. Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 10

IPC - continued Tax exemption on the following statutory income for 10 years: (a) all income from the qualifying activities in respect of its direct export sales; (b) a part of the income from the qualifying activities in relation to its drop shipment export sales; and (c) a part of the income from the qualifying activities in relation to its local sales Dividend paid out from the exempt income are exempt from tax in the hands of the shareholders Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 11

5 - Regional Distribution Centre (RDC) Same conditions as IPC Except that the RDC is allowed to deal with its own brand of goods only and Must be located in Free zones (free industrial zones or free commercial zones) or Licensed warehouses (public and private) or Licensed manufacturing warehouses. Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 12

Thank You Life Is A Journey Enjoy It Malaysian Tax Foundation (exrevenue@gmail.com) 5/10/2025 13