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Incentives for Small and Medium-scale Companies

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Small and medium-scale companies with a paid-up capital of RM2.5 million and below are eligible for a reduced corporate tax of 20% on chargeable incomes up to RM500,000. The tax rate on the remaining chargeable income is maintained at 26%.

Small-scale manufacturing companies incorporated in Malaysia with shareholders’ funds not exceeding RM500,000 and having at least 60% Malaysian equity are eligible for the following incentives:

1 Pioneer Status with income tax exemption of 100% of statutory income for a period of 5 years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or
2 Investment Tax Allowance of 60% (100% for promoted areas) on the qualifying capital expenditure incurred within 5 years. The allowance can be offset against 100% of the statutory income for each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

A sole proprietorship or partnership is eligible to apply for this incentive provided a new private limited/limited company is formed to take over the existing production/activities.

In order to qualify for the incentive, a small-scale company has to comply with one of the following criteria:

1 The value-added must be at least 15%; or
2 The project contributes towards the socio-economic development of the rural population

The company shall carry out the manufacture of products or participate in activities listed as promoted products and activities for small-scale companies.

Applications for this incentive should be submitted to the Malaysian Investment Development Authority (MIDA).

See: Promoted Activities  Products for Small-scale Companies (PDF: 56kb)

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