Incentives in Malaysia’s Special Economic Zones: A Guide for Businesses

Special economic zones (SEZs) in Malaysia provide fiscal incentives and tax relief, sector-specific perks, and strong infrastructure. We list the available incentives for businesses in the country’s respective SEZs.

Malaysia’s special economic zones are attractive due to incentives like tax benefits, enhanced infrastructure, a business-friendly regulatory environment, focus on specific industries, and improved market access backed by strong government support.

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Malaysia’s economic corridors offer a range of fiscal incentives, primarily in the form of tax relief, with some tailored to each specific corridor. Additionally, these corridors provide sector-specific incentives, such as those for manufacturing, tourism, and energy. These incentives, coupled with their well-integrated infrastructure, make the economic corridors key hubs for growth and development in Malaysia.

Since their establishment, the three major economic corridors—IM, ECER, and NCER—have collectively attracted investments totaling 759 billion ringgit (US$162 billion). In this chapter, we highlight examples of the available incentives available in each economic corridor

East Coast Economic Region (ECER)

Incentives for manufacturing activities

The ECER offers income tax exemption of between 70 and 100 percent for 10 or 15 years commencing from when the company derives statutory income for selected manufacturing services. There is also an investment tax allowance equivalent of 100 percent of total expenditure for five years in addition to stamp duty exemption for land or buildings acquired for the approved activity.

Incentives for oil, gas, and petrochemical activities

The ECER offers income tax exemption of between 70 and 100 percent for 10 or 15 years commencing from when the company derives statutory income for selected oil, gas, and petrochemical activities. There is also an investment tax allowance equivalent of 100 percent of total expenditure for five years in addition to stamp duty exemption for land or buildings acquired for the approved activity.

Incentives for tourism activities

The ECER offers income tax exemption of between 70 and 100 percent for 10 or 15 years commencing from when the company derives statutory income for the following tourism activities:

• Island tourism;
• Eco-tourism;
• Medical tourism;
• Theme park and amusement parks;
• Mainland coastal tourism;
• Integrated resorts; and
• Cultural, and exhibition centers.

There is also an investment tax allowance equivalent of 100 percent of total expenditure for five years in addition to stamp duty exemption for land or buildings acquired for the approved activity.

Incentives for agriculture related activities

As with the previous activities, there is income tax exemption of between 70 and 100 percent for 10 or 15 years, commencing from when the company derives statutory income for selected agriculture related activities. These are:

• Cultivation of kenaf, vegetables, fruits, herbs spices or cocoa;
• Rearing of cattle, buffalos, goats, sheep, ostriches, turkeys or quails;
• Aquaculture;
• Plantation of crops for energy generation;
• Inland fishing or deep-sea fishing; and
• Floriculture including ornamental flowers.

There is also an investment tax allowance equivalent of 100 percent of total expenditure for five years in addition to stamp duty exemption for land or buildings acquired for the approved activity.

Incentives for education and ICT activities

Investors that establish universities, ICT related services, training centers, colleges, and service centers can receive income tax exemption of between 70 and 100 percent for 10 or 15 years commencing from when the company derives statutory income. There is also an investment tax allowance equivalent of 100 percent of total expenditure for five years in addition to stamp duty exemption for land or buildings acquired for the approved activity.

Northern Corridor Economic Region (NCER)

Businesses that invest in the priority sectors of the NCER can qualify for the following incentives:

• Income tax exemption of up to 100 percent for up to 15 years;
• Income tax allowance of up to 100 percent for a period of 10 years;
• A 50 percent reduction in stamp duty on the lease of land; and
• Import duty exemptions on the import of raw materials, machinery, spare parts, and equipment.

The priority sectors in the NCER include:

1. Manufacturing;
2. Agriculture and bio-industries;
3. Tourism;
4. Logistics; and
5. Medical science.

Iskandar Malaysia

Iskandar Malaysia is anchored around nine promoted sectors. These are:

1. Healthcare services;
2. Creative industries;
3. Electrical and electronics;
4. Petrochemical and oleochemicals;
5. Logistics;
6. Financial and business services;
7. Education;
8. Tourism; and
9. Food and agro-processing.

Investors engaging in these promoted activities in Iskandar Malaysia can receive:

• A 100 percent tax exemption of up to 10 years on statutory income; or
• A 200 percent tax deduction of up to 10 years on investment activities.

Incentives for companies in Medini

Medini Iskandar Malaysia (MIM) is a mixed-used neighborhood within the Iskandar Malaysia Economic Corridor. MIM is the site of Legoland Malaysia, residential and office buildings, retail centers, and eco-parks. Approved developers in MIM can receive income tax exemption from statutory income derived from the rental or disposal of a building located in an approved area in MIM until 2025. Further, approved development managers (businesses that provide the management, supervisory, or marketing services at MIM) can receive income tax exemption until 2024.

See also

• Malaysia’s Budget 2024: Impact for Business

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