The Japan Times recently highlighted the record-breaking technology investments flowing into Southeast Asia, an increasingly attractive region for global businesses. Among ASEAN countries, Malaysia is being called a ‘rising star.’ The Financial Times recently covered Malaysia’s rapid development as an AI hub “on Singapore’s doorstep.”
In a previous blog post, we explored why more international companies than ever before are eyeing Malaysia for regional headquarters. In this post, we take a closer look at the array of grants, incentives and programs making ambitions reality.
Pioneer Status (PS) and Investment Tax Allowance (ITA)
The Pioneer Status (PS) program is one of Malaysia’s flagship tax incentives aimed at attracting new businesses. Companies granted this status enjoy an income tax exemption of up to 70% for five years on statutory income, which can significantly lower the financial burden for those establishing a presence in Malaysia.
For companies investing heavily in capital equipment, the Investment Tax Allowance (ITA) offers up to 60% of qualifying capital expenditure. This can then be offset against 70% of statutory income. The ITA is particularly attractive to tech firms requiring significant upfront investments in infrastructure.
Reinvestment Allowance (RA)
For companies already operating in Malaysia, the Reinvestment Allowance (RA) offers long-term support for growth. This incentive provides an allowance of 60% on qualifying capital expenditure for up to 15 consecutive years for companies involved in manufacturing or agriculture.
This program is ideal for businesses looking to modernize, expand or diversify their operations—helping them remain competitive while scaling in the region.
Reduced tax rate with the Global Services Hub incentive
In an effort to establish Malaysia as the go-to location for international companies to set up their regional or global headquarters, the Global Services Hub (GS-Hub) Incentive offers a significantly reduced corporate tax rate ranging from 0% to 10% for up to 10 years.
This is an attractive offer for companies that want to base their APAC operations in Malaysia. This way, they can benefit from the country’s strategic location, talent pool and competitive costs compared to neighboring countries like Singapore.
Special tax incentives for industrial areas
Malaysia has also established specialized economic zones to attract foreign direct investment. Regions like Iskandar Malaysia, the East Coast Economic Region (ECER) and the Sabah Development Corridor (SDC) are specifically designed to support industries through tax exemptions and financial incentives.
These regions are often equipped with high-quality infrastructure and offer streamlined government support. This makes them ideal locations for new manufacturing plants or large-scale corporate campuses.
MSC Malaysia Status
One of Malaysia’s most successful programs is Malaysia Digital Status (MDS), designed to attract tech and digital companies. This status provides a host of benefits, including a tax exemption of up to 10 years and duty-free imports of multimedia equipment. It also offers access to grants for research and development (R&D).
The MDS program, spearheaded by the Malaysia Digital Economy Corporation (MDEC), positions Malaysia as a haven for digital transformation. It is expected to impact companies involved in AI, software development, fintech and other cutting-edge sectors.
Matching grants and soft loans
For startups and small to medium-sized enterprises (SMEs), Malaysia offers various matching grants and soft loans through government agencies such as MDEC and SME Corp Malaysia.
These financial supports are aimed at boosting innovation, digitization and workforce development. They cover critical areas like AI, the Internet of Things (IoT) and digital economy projects. By focusing on SMEs, Malaysia’s local businesses can thrive alongside the global giants setting up shop.
Incentives for green technology
Sustainability is another area where Malaysia is taking a proactive stance. Companies investing in green technology and renewable energy projects can take advantage of the Green Investment Tax Allowance (GITA) and Green Income Tax Exemption (GITE) programs.
These schemes provide tax deductions for capital expenditure on green initiatives and tax exemptions on income derived from environmentally-friendly projects.
Cost-effective and strategic
Malaysia’s remarkable ascent as a preferred destination for regional headquarters and operational bases in APAC is no accident. The country’s combination of tax incentives, targeted grants and ever-improving infrastructure is playing a critical role in this transformation.
While tech powerhouses like Singapore remain appealing, Malaysia’s unique offerings—cheaper land, abundant energy, a growing talent pool and robust government support—make it an increasingly viable alternative for international companies.
As competition for foreign investment in Southeast Asia intensifies, Malaysia stands out for its cost-efficiency and innovation. These factors are solidifying Malaysia’s position on the global investment map. Companies aiming to establish a regional hub in the APAC market should consider Malaysia’s extensive grants, incentives and programs.
For those able to harness these offerings, Malaysia stands as not just a cost-effective choice but also a strategic one.
Learn more about regulations and hiring in Malaysia here: Hire in Malaysia | GoGlobal
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