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Opportunities, Facilities and Government Assistance
By: Dato’ Azman Mahmud Deputy CEO I, MIDA
1
Malaysia
Land Area 320,252km²
Capital Kuala Lumpur
Population 29.7million
GDP US$278.67billion
GDP Per capita US$10,526
2
6% GDP growth p.a.
> 60% services
contribution to GDP by
2015 (7.2%
growth p.a)
12.8% private
investment growth
p.a
37% highly skilled
workers by 2015
10th Malaysia Plan
Malaysia: Key Economic Data
Malaysia: Your Profit Centre in Asia
The Journey Continues
2010 and beyond High Impact, Strategic Cluster–Based Industries in Manufacturing and Services
High impact projects - Economic Transformation Programme Economic growth through NKEAs , non-NKEAs sectors and services sectors Target US$15,000 per capita by 2020
3 Malaysia: Your Profit Centre in Asia
The Malaysia’s Economic Development Journey
Foreign Direct Investment Domestic Investment Business matching through E-Connect Manufacturing and Services
Manufacturing licenses Tax incentives Expatriate posts Duty exemption OHQ, RDC, IPC and R&D status
Planning for industrial development Recommend policies and strategies on
industrial promotion and development Formulation of strategies, programmes and
initiatives for international economic cooperation
Assist companies in the implementation and
operation of their projects Facilitate exchange & co-ordination among
institutions engaged in or connected with industrial development
Advisory Services
Promotion
Evaluation
Planning
Follow-up &
Monitoring
4
Functions of MIDA
Malaysia: Your Profit Centre in Asia
5
Clean Tech. & Environment
Mgmt.
IT & Comm. Services
Healthcare, Education & Hospitality
R&D
and Design
Regional Establishment
Logistics & Supply Chain
Oil & Gas
Others
(i.e. Skills)
Services Divisions in MIDA
Business & Professional
Services
6
Potential market of 2.7 billion
Tariff reduction and elimination mostly by 2016
Potential market of 600 million
Combined GDP of USD1.8 trillion, as of 2010
Already zero tariffs for 99% of products
ASEAN Economic Community and Single market by 2015
ASEAN
ON-GOING FTA NEGOTIATIONS
Leverage on Malaysia’s regional market to grow exports
Gateway to ASEAN and Asian Economies
Foreign companies based in Malaysia can enjoy preferential
market access via Free Trade Agreements concluded by
Malaysia:
TPP EU Turkey
Potential market of 1.08 billion
REGIONAL / BILATERAL FTAS
Chile Korea India Australia New Zealand China Japan
Opportunities
Malaysia: Your Profit Centre in Asia
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Opportunities Malaysia’s Free Trade Agreements- Create Market Access in Sectors of Interests
Japan NZ Pakistan India
Business Services Y Y Y Y
Communication Services Y Y Y Y
Construction Services y Y Y Y
Distribution Services N N Y Y
Education Services Y Y Y Y
Environmental Services N Y N Y
Financial Services Y Y Y N
Health Services Y Y Y Y
Tourism Services Y Y Y Y
Recreational & Cultural and Sporting Services
Y Y Y Y
Transport Services Y Y Y Y
Other Services Y Y Y Y Malaysia: Your Profit Centre in Asia
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Healthcare travel 1. Private hospital 2. Ambulatory care
centers
Education 1. Technical, Vocational &
Science Training Institution
2. International / Private School
Environmental Management 1. Renewable energy 2. Energy
conservation/efficiency 3. Storage, treatment and
disposal of hazardous waste
4. Recycling of agricultural waste and agricultural by products
Tourism 1. Hotel 2. Tourist project 3. Recreational
camp 4. Convention
centre
Business & Other Support Services 1. R&D 2. Irradiation & Gas
Sterilisation 3. Testing for Industrial
Devices 4. Central Utility Facilities
5. Industrial Design
Regional Establishment 1. Operational Headquarters (OHQ) 2. International Procurement Centre (IPC) 3. Regional Distribution Centre (RDC) 4. Treasury Management Centre (TMC)
Logistic 1. Integrated
Logistic Services 2. Cold Chain
Facilities
Promoted Services Activities
Malaysia: Your Profit Centre in Asia
Government Assistance
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Domestic Direct Investment (DDI) Initiatives
Malaysia: Your Profit Centre in Asia
General Fiscal & Non Fiscal Incentives
Investment Tax Allowance (ITA) of 60% or 100% on qualifying capital expenditure for a period of 5 or 10 years
Pioneer Status with income tax exemption of 70% or 100% of the Statutory Income for 5 years
Expatriate Posts
10
Incentives for Local and Foreign Companies
Malaysia: Your Profit Centre in Asia
Exemption from import duty and sales tax on imported machinery, equipment, materials, components, spare parts/replacement parts and
consumables
Double deduction for promotion of export of services
• An office of foreign company/organization established in Malaysia to perform permissible activities for its head office/principle.
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Feasibility Studies
Planning of Business Activities
Research & Development
Coordination Centre
Representative Office (RE) / Regional Office (RO)
Malaysia: Your Profit Centre in Asia
12
Representative Office (RE) / Regional Office (RO)
12
Benefit Expatriates are taxed
based on the number of days they are in Malaysia
Duration (Renewable) Companies & NGOs (including NGOs not relating to trade)
minimum 2 years Government and Trade Association
based on the requirement
Eligibility Criteria OPEX:RM150,000 per
annum
Malaysia: Your Profit Centre in Asia
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A locally incorporated company that carries on a business in
Malaysia to provide at least 3 QUALIFYING SERVICES to its
offices or related companies in and outside Malaysia:
R&D
Corporate Financial Advisory
Business Planning & Coordination
Treasury Fund Management
General Management & Administration
Operational Headquarters (OHQ)
Marketing Control & Sales Promotion
Planning
Technical Support & Maintenance
Data/Information Management &
Processing
Training for its offices & related companies
Malaysia: Your Profit Centre in Asia
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Eligibility Criteria Locally incorporated OPEX : RM 1.5
million annual Paid up capital RM
0.5 million Employ at least 3
senior professional Serve at least 3
related companies outside Malaysia
Provide at least 3 qualifying services
Incentives Tax exemption for 10 years on:
• Business income • Interest • Royalties
Expatriates are taxed based on the number of days they are in Malaysia
Facilities 100% foreign equity holding Approval of expatriate posts based
on requirement
Operational Headquarters (OHQ)
Malaysia: Your Profit Centre in Asia
As at July 2013, number of OHQ approved is 235
• Local 11 • Foreign 224
International Procurement Center (IPC)
• Undertakes procurement and sale of raw materials, components and finished products to its group of related companies and to unrelated companies in Malaysia and abroad.
Regional Distribution Center (RDC)
• Acts as a collection and consolidation centre for finished goods, components and spare parts produced by its own group of companies for its own brand to be distributed to dealers, importers or its subsidiaries or other unrelated companies within or outside the country
15
International Procurement Center (IPC) & Regional Distribution Center (RDC)
Malaysia: Your Profit Centre in Asia
16 16
Eligibility Criteria Locally incorporated OPEX: RM 1.5 million
annually Paid up capital RM 0.5
million Minimum annual sales
turnover of RM 50 million
20% maximum domestic sales
80% Export Sales 30% maximum sales via
Drop shipment Located in either
FZ,LMW or Bonded Warehouse
Incentives Full tax exemption on its statutory
income for 10 years Dividends paid from the exempt
income are exempted from tax in the hands of its shareholder.
Facilities 100% foreign equity holding Approval of expatriate posts based on
requirement Custom duty exemption for raw
materials, components or finished products
International Procurement Center (IPC) & Regional Distribution Center (RDC)
Malaysia: Your Profit Centre in Asia
17
Tax incentive is given to companies that
provide centralized treasury management
services for its group of related companies
within or outside Malaysia.
Gazetted in June 2012 under Section 127 (3)(b), Income Tax Act 1967
Treasury Management Center (TMC)
Malaysia: Your Profit Centre in Asia
18
Eligibility Criteria Locally incorporated OPEX: RM 1.5 million
annually Paid up capital RM 0.5 million Employ at least 3
senior professional Serve at least 3
related companies outside Malaysia
Incentives 70% exemption on
statutory income for 5 years
Exemption on witholding tax
Exemption from stamp duty
Expatriates are taxed based on the number of days they are in Malaysia
Customised Foreign Exchange Administration (FEA) flexibilities
Treasury Management Center (TMC)
Qualifying Services Financial Services – cash pooling arrangement,
financing from surplus within the group, current account management
Investment Advisory Services Hedging – exchange rate, interest rate, liquidity
risk, commodity price risk Malaysia: Your Profit Centre in Asia
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Integrated Logistics Services (ILS)
• A locally incorporated services provider that undertakes integrated logistics services (i.e. freight forwarding, warehousing & transportation.)
International Integrated Logistics Services (IILS)
• A locally incorporated company that provides integrated and seamless logistics services (door-to-door) along the logistics supply chain as a single entity on a regional or global scale.
Integrated Logistics Services (ILS) & International Integrated Logistics Services (IILS)
Malaysia: Your Profit Centre in Asia
20 20
Eligibility Criteria Locally incorporated Undertakes the following 3
principle activities: a) Freight forwarding b) Warehousing c) Transportation And at least one of the following: a) Distribution b) Supply chain management
Must Own at least a) 20 commercial vehicles b) 5,000 sqm of warehousing
facilities
Incentives
Pioneer status or Investment tax allowance
Equity Condition
At least 60% Malaysian
Integrated Logistics Services (ILS)
Malaysia: Your Profit Centre in Asia
21
Incentives
Status Only
Equity Condition
100% foreign equity is allowed
International Integrated Logistics Services (IILS) Eligibility Criteria
Locally incorporated Undertakes the following 3 principle
activities: a) Freight forwarding b) Warehousing c) Transportation And at least one of the following: a) Distribution b) Supply chain management
Must own at least a) 20 commercial vehicles b) 5,000 sq.m of warehousing
facilities Employ majority Malaysians Use Malaysia as a logistics hub for
the region Substantial usage of ICT throughout
the logistics supply chain
Malaysia: Your Profit Centre in Asia
Domestic Direct Investment (DDI) Initiatives
22
• Encourage small Malaysian service providers to merge into larger entities
• Incentive under the purview of SME Corp
• Incentives:
• Flat tax rate of 20% on all taxable income for a period of 5 years
(effective from the date of the merger)
• Stamp duty exemption on the merger document
Eligibility Criteria
Enterprises that intend to merge must be:
• 100% Malaysian owned; and
• Have annual sales turnover of less than RM5 million or full-time employees of
less than 50
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Incentives For Merger Among Malaysian Service Providers
Malaysia: Your Profit Centre in Asia
Sectors eligible for the incentive:
• Professional services (accounting and taxation services, specialised medical & dental
practices, architectural services and engineering services)
• Courier services
• Technical and vocational secondary education services (generic & special needs)
• Skills training services
24
Incentives For Merger Among Malaysian Service Providers
Applications received within 3 years from 3 July 2012 are eligible to be considered for this incentive
Application submitted to Inland Revenue Board (IRB) and incentives to be provided through Exemption Order under Income Tax Act 1967 and Stamp Act 1949
Malaysia: Your Profit Centre in Asia
Harness & Leverage on Outsourcing opportunities
Intensify Technology Acquisition by Malaysian-owned companies
Accelerate the shift of Malaysian-owned companies in targeted industries
High value-added
High technology
Knowledge-Intensive
Innovation-based
Training of Malaysians
Modernisation of facilities for
Outsourcing activities
Licensing & Purchase of New Technology
R&D
International Standards
& Certification
SCOPE OF FUND
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Domestic Investment Strategic Fund (DISF)
Malaysia: Your Profit Centre in Asia
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Assistance in the form of matching grants (1:1) on reimbursable basis
To be granted on a negotiable basis based on the request of the companies and the merits of each case
MECHANISM
Domestic Investment Strategic Fund (DISF)
Malaysia: Your Profit Centre in Asia
New and existing companies with Malaysian equity ownership of at least 60%.
Priority sectors:
• Aerospace
• Medical Devices
• Pharmaceuticals
• Advanced Electronics
• Machinery and Equipment
• Renewable Energy
• Services including design, R&D, testing,
quality and standard certification,
engineering services and logistics service
providers (3PL)
• Other industries, on a case by case basis
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Domestic Investment Strategic Fund (DISF)
Approval Status As at 19 July 2013, a total of 36 projects with investments valued at RM2.1 billion have been approved grants amounting to RM220.5 million
Malaysia: Your Profit Centre in Asia
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Soft Loan
Malaysian Industrial Development Finance Bhd. Soft Loan Scheme For Services Capacity Development (SLSCD) Financial assistance to local services providers to build up their capacities to withstand competition due to liberalisation and the opening up of the domestic market as well as to strengthen their international competitiveness.
Malaysia: Your Profit Centre in Asia
Thank you
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