Tax Incentive
Pioneer Status
The pioneer status is available to companies engaged in promoted activities or producing promoted products. Partial ( ie. 70%) or 100% tax exemption from payment of income tax for a period of 5 years and extended by another 5 years when the relevant conditions are fulfilled. Unabsorbed business loss and capital allowance can be carried forward to post pioneer status period.
Iskandar Development Region status company is given income tax exemption on 100% of statutory income from qualifying activities for 10 years provided the operations commence on or before 31.12. 2015 . The qualifying activities include creative industries and related services, education, financial advisory, health care and related services, logistics services and tourism.
Investment Tax Allowance
It is an allowance in addition to capital allowance on qualifying plant and equipment acquired by the Company. Generally, 60% on the qualifying capital expenditure can be set off up to 70% of the statutory income of the company. A 100% investment tax allowance can be set off against 100% of the statutory income of a company for certain promoted products or promoted activities. The relevant company is granted 5 year period which would be extended by another 5 years when the relevant conditions are fulfilled. Any unutilised investment tax allowance can be carried forward to post investment tax allowance period.
Tax Incentive In Promoted Areas:
State of Kelantan, Terrenganu, Pahang,Perlis, Sabah , Sarawak
Federal Territory of Labuan
District of Mersing
Tax Incentive For Promoted Sectors:
Manufacturing, agriculture, hotel and tourism, manufacturing related services, R&D, high technology and industrial linkage program, ICT , national strategic importance, strategic knowledge intensive, automotive component.
Paid annual leave for employees:
Paid sick leave per calendar year:
Payment for overtime work:
Reinvestment Allowance
This is available to manufacturing companies, agricultural companies that have been in operation for at least 36 months and that companies reinvest capital for either expansion of existing production capacity, modernisation or automation of the production facilities or diversification into related products. The rate of reinvestment is granted in addition to capital allowance. The rate of reinvestment allowance of 60% is used to reduced up to 70% of statutory income. A company can claim reinvestment allowance up to 100% of its statutory income if its process efficiency ratio is above the industrial average for the year.The incentive period is 15 years and any unused reinvestment allowance can be carried forward indefinitely.
Double Deductions
This is one of the tax incentives for selected business expenditures:
- Interest on approved loans to small business
- Remuneration of disable employees
- Premium on export credit , import and export of cargo insured with local conventional insurance & Takaful ( Islamic)
- Freight charges for export of rattan and wood based products, goods from Sabah & Sarawak to Peninsular Malaysia, for transportation on board a Malaysian ship
- Research expenditure, cash contribution to approved R&D institute, payment for use of services of a R&D company or contract R&D company
- Expenditure incurred for obtaining certification from recognized quality systems and standards and halal certification
- Overseas expenses incurred by hotel & tour operators for promotion of tourism
- Expenses for promotion of Malaysia as International Islamic Financial Centre
- Approved expenses for promotion of export of higher education, private schools and international schools
- Approved expenses for promotion of export of products and services, expenses on international trade fairs
- Advertising Malaysian brand name overseas
- Registration of patents, trademarks and product incensing overseas
- Training program approved by MIDA or MCAT or MOF or any agency appointed by MOF incurred by manufacturing & non –manufacturing company, hotel, tour operator and training cost for handicapped persons
- Expenses for implementing structured internship program set up by MOHE and Talent Corp Malaysia Bhd
- Approved expenses for participating in career fairs abroad
- Scholarships for diploma or Bachelor’s degree courses in local higher learning institutes registered with MOHE
- Training cost for employees incurred in YA 2009-2012 for selected courses : post graduate ICT, electronics and life sciences; post basic nursing allied health care; aircraft maintenance engineering courses
Tax incentive For International / Overseas Business/ Export Sales
Export Allowance
This is an incentive for promotion of export sales. Export allowance equivalent to 30% or 50% or 100% of the increased export value is exempted from tax provided the company achieved at least 50% increase in exports or penetrated to new markets or awarded the Export Excellence Award by MITI respectively. The exemption is restricted to 70% of statutory income and unabsorbed value of increased export can be carried forward until fully utilized.
Tax Exemption On International/ Overseas Business
A full 100% tax exemption on statutory income for 10 years is available to Operational Headquarters (OHQ), International Procurement Centre (IPC) and Regional Distribution Centre (RDC) and KL International Financial District status companies. Employment income of the non Malaysian citizen in OHQ, IPC, RDC and regional office which is related to employment exercise outside of Malaysia, is exempted from tax.
A 70% tax exemption on statutory income of Treasury Management Centre (TMC) for 5 years provided the relevant conditions are fulfilled.
A 70% tax exemption on statutory income of Treasury Management Centre (TMC) for 5 years provided the relevant conditions are fulfilled.
Generally, income of banking and insurance business is taxed on world scope basis. A 100% tax exemption for 5 years, is given to profits of newly established overseas branches or overseas subsidiaries of banks, insurance and Takaful companies provided application is submitted to BNM by 31 Dec 2015 with relevant conditions fulfilled.
A 100% tax exemption for 10 years from YA 2007-YA 2016, is given to income transacted in international currencies, which is derived by banks and Takaful companies.
Management fees received for managing foreign Islamic funds from YA 2008-YA 2016 is given a full tax exemption. Fee on advising, underwriting and distributing non RM susuk ( Islamic bonds) and statutory income for dealing in non RM susuk are exempted from tax from YA 2012 - YA 2014.
Fees of corporate advisors for listing a foreign corporation of a foreign investment product on KLSE, is fully tax exempted from YA 2009-YA 2013
Special Deduction
Generally expense that is capital in nature is not tax deductible. Special tax deduction is available for certain expenses such as:
- Acquisition of proprietary rights ie. patents, industrial design or trade marks incurred by manufacturing companies, is allowed for an annual deduction of 20% for a period of 5 years. SME is allowed a full deduction of registration cost of patents and trademark against the business income from YA 2010-YA 2014.
- Franchise fee for local franchise brand is given tax deduction wef YA 2012.
- Investment cost in a company that undertakes a forest plantation project or approved consolidation of management of smallholdings and idle land projects with application submitted to Minister of Primary Industries by 31 Dec 2011, is entitled to a full tax deduction.
- Investment cost in a company in an approved food production projects ( such as kenaf, vegetables, fruits, herbs, spices, aquaculture, cattle, goats, sheep and deep sea fish ) with application submitted to Ministry of Agriculture and Agro-based Industry by 31 Dec 2015, is entitled to a full tax deduction.
- Investment cost in a company that undertakes the commercialisation of R&D findings, is given a full tax deduction against the business income.
- Investment cost in a Bionexus status company is given a full tax deduction provided the investor does not dispose of the investment within 5 years.
- Establishment costs ( ie. legal, valuation, consultancy fees) incurred by REIT or PTF for establishing the unit trust prior to approval by SC, are allowed as deduction against business income.
- Establishment cost of Islamic stock broking company prior to commencement of business is allowed for a deduction provided application is submitted to SC by 31 Dec 2015.
- Issuance cost of Islamic securities approved by SC and LOFSA is given a deduction until YA 2015
- Incorporation cost of SME company with paid up capital not more than RM 2.5 million is given a tax deduction.
Human Resources Updates
Minimum Conditions of Employment
The Employment Act, 1955 is the main legislation on labour matters in Malaysia.
Paid maternity leave | : | 60 day |
Normal work hours | : | Not exceeding eight hours in one day or 48 hours in one week |
Paid holiday | : | At least 10 gazetted public holidays (inclusive of four compulsory public holidays;National Day, Birthday of the Yang Dipertuan Agong, Birthday of Ruler, Federal Territory Day and Labour day) in one calendar year and on any day declared as a public holiday under section 8 of the Holiday Act 1951 |
Paid annual leave for employees:
minimum paid annual leave to be provided for employees
Less than two years of service | : | 8 days |
Two or more but less than 5 years of service | : | 12 days |
Over five years of service | : | 16 days |
Paid sick leave per calendar year:
minimum paid sick leave to be provided for employees
Less than two years of service | : | 14 days |
Two or more but less than five years of service | : | 18 days |
Over five years of service | : | 22 days |
Where hospitalisation is necessary | : | up to 60 days |
Payment for overtime work:
Normal working days | : | one-and-a-half times the hourly rate of pay |
Rest days | : | two times the hourly rate of pay |
Public holidays | : | three times the hourly rate of pay |
Source: Ministry of Human Resources
Management Updates
What is risk management?
Risk management is a process that involves assessing the risks that arise in your workplace, putting measures in place to control them and then making sure they work in practice. It also involves the decision on which risks to exploit, to pass over to investor, to hedge or avoid. To exploit the risks, you need to have timely and reliable information to map out a plan of action when confront with a crisis. It also depends on the speed to respond to the crisis , past experience of handling the crisis and resources to manage the crisis.
What is risk assessment?
A risk assessment is an examination of what could cause harm , so that you can weigh up whether you have taken enough precautions or should do more to prevent harm.
Type of Risk
Market Risk is caused by the change in value of the market risk factors, such as stock prices, interest rates, foreign exchange rates, and commodity prices.
Business Risk is caused by fluctuations of earnings before interest and taxes (operating income). Business risk depends on variability in demand, sales price, input prices, and amount of Operating Leverage. Operating Leverage ,is a measurement of the degree to which a firm or project incurs a combination of fixed and variable costs.
A business that makes few sales, with each sale providing a very high gross margin, is said to be highly leveraged. A business that makes many sales, with each sale contributing a very slight margin, is said to be less leveraged. As the volume of sales in a business increases, each new sale contributes less to fixed costs and more to profitability.
A business that has a higher proportion of fixed costs and a lower proportion of variable costs is said to have used more operating leverage. Those businesses with lower fixed costs and higher variable costs are said to employ less operating leverage.
A business that has a higher proportion of fixed costs and a lower proportion of variable costs is said to have used more operating leverage. Those businesses with lower fixed costs and higher variable costs are said to employ less operating leverage.
Financial Risk is corporate risk that results from using debt. It includes credit risk. Credit Risk is the risk of loss of principal or loss of a financial reward stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation. The greater the firm's Financial Leverage, the higher is its financial risk. Financial Leverage ( Gearing) is a fundamental analysis ratio of a company's level of long-term debt to its equity capital and is expressed in percentage form.A company with a high gearing - more long-term liabilities than shareholder equity - are considered speculative.
What is Internal Control ?
Internal control is defined as a process effected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives. It plays an important role in preventing and detecting fraud and protecting the organization's resources, both physical (e.g., machinery and property) and intangible (e.g., reputation or intellectual property such as trademarks). At the organizational level, internal control objectives relate to the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals, and compliance with laws and regulations.
What is Balanced Scorecard ?
The balanced scorecard is a strategic planning and management system that is used to align business activities to the vision and strategy of the organization, improve internal and external communications, and monitor organization performance against strategic goals. It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton as a performance measurement framework that added strategic non-financial performance measures to traditional financial metrics to give managers and executives a more 'balanced' view of organizational performance.
It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results.The balanced scorecard suggests that we view the organization from four perspectives, and to develop metrics, collect data and analyze it relative to each of these perspectives:
Financial , Customers, Internal Business Processes and Learning & Growth.
What is Key Performance Indicator (KPI) ?
Key Performance Indicators( KPI ) help an organization define and measure progress toward organizational goals. Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization.
The key environments for identifying KPIs are:
- Having a pre-defined business process (BP).
- Requirements for the business processes.
- Having a quantitative/qualitative measurement of the results and comparison with set goals.
- Investigating variances and tweaking processes or resources to achieve short-term goals.
KPI measure has a Specific purpose for the business, it is Measurable to really get a value of the KPI, the defined norms have to be Achievable, the KPI has to be Relevant to measure (and thereby to manage) and it must be Time phased, which means the value or outcomes are shown for a predefined and relevant period.
Business IT Updates
What is Enterprise Resource Planning (ERP) software ?
ERP software is multi module application that integrates cross functional department centrally including planning, manufacturing, sales, inventory, HRIS (Human Resource Information Systems), finance and marketing.
There are three levels of business processes - Strategic Planning, Management Control and Operational Control. The software has been designed to support or streamline business processes at all three levels.
It improve and streamline the internal business process effectively, which typically requires re-engineering of current business process. Customer Relationship Management ( CRM ) and Supply Chain Management ( SCM ) attempts to enhance the relationship with customers and suppliers respectively while the balanced scorecard is a strategic planning and management system that is used to develop metrics, collect data and analyze data in relation to four perspectives namely Financial, Customers, Internal Business Processes and Learning & Growth.
