• Publicity and advertisement in any media outside Malaysia
• Supply of samples to prospective customers outside Malaysia
• Export market research overseas
• Preparation of tenders for the supply of new manufactured goods or agricultural produce overseas
• Supply of technical information abroad relating to goods of the company
• Public relations work connected with exports
• Participation in the international trade or industrial exhibitions approved by the MATRADE. Companies need to obtain a letter from MATRADE to certify that the fair/exhibition is an international fair/exhibition
• Travel overseas by representatives of company for negotiating or concluding contract for sales of goods
• Expenses incurred by Malaysian businessmen going overseas for business are subject to RM300 per day for accommodation and RM150 per day for sustenance
• Costs of maintaining sales office overseas for promotion of exports
• Professional fees incurred in packaging design services provided by Malaysian professional service provider which has at least 60% Malaysian equity and the products is of export quality whereby the product has already been exported or has met international quality or product standards
• Participation in virtual trade shows as verified by MATRADE
• Participation in trade portals as verified by MATRADE for the promotion of local products
• Costs of maintaining warehouse overseas for promotion of exports

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Double Deduction For Promotion Of Malaysian Brands
Expenditure incurred on advertising local brand products domestically is allowed double deduction. To be eligible, the local brand must satisfy the following criteria :-

• Brand name is owned by a company which is locally incorporated with at least 70% Malaysian owned
• The brand name is registered in Malaysia or overseas
• The brand name product must achieve export quality standards
• Expenditure incurred in advertising must be incurred in Malaysia
• Expenditure incurred on professional fees must be incurred in Malaysia

Eligible expenses are:

• Advertisements on the internet where the host websites are located in Malaysia
• Advertisements in magazines and newspapers where the magazines and newspapers are printed in Malaysia
• Advertisements on locally licensed television stations
• Advertisements approved by the relevant local authority on the billboards which are located in Malaysia
• Advertisements in trade publications printed in Malaysia
• Advertisements in any form in the course of sponsoring an approved international sporting event held in Malaysia
• Advertisements in any form in the course of sponsoring an approved international trade conference or an approved international trade exhibition held in Malaysia. An approved letter to be obtained from MATRADE
• Professional fees paid to local companies to promote Malaysian brand names

As a continuous effort to promote Malaysian brand names, in the Budget 2007 it was announced that double deduction on expenses incurred on advertising Malaysian brand names is extended to a company within the same group that has incurred the advertising expenditure, subject to the following conditions:

i) The company must be owned more than 50% by the registered proprietor of the Malaysian brand name; and
ii) The deduction can only be claimed by one company in a year of assessment.

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Double Deduction On International Quality Standard
Additional deduction on expenses incurred in obtaining international quality standards such as CE Mark, HACCP, ISO and JIS.

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Double Deduction On Export Credit Insurance Premiums
Premium payments in respect of export credit insurance paid by exporters to EXIM Bank are eligible for double deduction.

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Double Deduction On Freight Charges
Malaysian manufacturers who are exporting rattan and wood based products except sawn timber and veneer are entitled for double deduction on freight charges.

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Double Deduction For Cost Of Registration Of Patent, Trade Mark And Product Licensing Overseas
Double deduction is allowed on payments for registration of patents, trade marks and product licensing overseas.

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Single Deduction For Hotel Accommodation
Single deduction for expenses incurred by companies providing hospitality to potential importers who are invited to Malaysia as a follow up to trade and investment missions overseas organised by Government agencies or Industry and Trade Associations is allowed provided it is verified by MATRADE. The visit must be within the period of 12 months from the mission date. Eligible expenses are for maximum of three days subject to RM300 per day for hotel accommodation and RM150 per day for sustenance.

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Deduction For Acquiring A Foreign Owned Company
To expedite the participation of local investors in high technology industries and to accelerate export market penetration, a locally owned company that acquires a foreign owned company abroad is granted an annual allowance of 20% of the acquisition cost for five years if the acquisition is for the following purpose:

• To acquire high technology for production within the country; or
• To gain new export markets for local products.

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Allowance For Increased Exports
To encourage the exports of high value added products, a locally owned company is eligible to apply for the following :

• Exemption of statutory income equivalent to 10% of the value of the increased exports is given to manufacturers provided that the goods attain at least 30% value added
• Exemption of statutory income equivalent to 15% of the value of the increased exports is given to manufacturers provided that the goods attain at least 50% value added
• Exemption of statutory income equivalent to 10% of the value of increased exports is given to companies which exports fruits, fresh and dried cut flowers, ornamental plants, ornamental fish or frozen products for prawns, squids and cuttlefish

The exemption is restricted to 70% of statutory income and unabsorbed value of increased exports can be carried forward until fully utilised.

The allowance will only be given if the company has not been granted any incentive under the Promotion of Investments Act 1986 (except Deduction for Promotion of Exports) or Reinvestment Allowance for the same period.

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Exemption For The Value Of Increased Exports
A local company resident in Malaysia and carrying on activities of manufacturing or agriculture is eligible to claim tax exemption on income derived from export sales in the basis period for the year of assessment. The amount of income exempted is as follows:-

• 30% of increased exports value provided the company has achieved a significant increase in exports.  Significant increase in export means the value of increased export of the company in the basis period of a year of assessment is at least 50%;
• 50% of increased exports value provided the company has succeeded in penetrating new markets.  New markets means export to any market except USA, Canada, EU, Japan, Hong Kong, Taiwan, ROK, Singapore, Australia and New Zealand.  (The list of countries excluded may be reviewed yearly) ; and
• 100% of increased exports value where the Malaysian company has been awarded the Export Excellence Award (Merchandise Category) by the Ministry of International Trade and Industry (MITI)

The exemption is restricted to 70% of statutory income and unabsorbed value of increased exports can be carried forward until fully utilized.

This exemption will not be granted if the company is enjoying any incentives (expect for deduction for promotion of exports) under the Promotion of Investment Act 1986, Reinvestment Allowance, Allowance for Increased Exports or Deduction for Cost on Acquisition of a Foreign Owned Company.

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Double Deduction For Promotion Of Export
This is similar to the eligible activities for the manufacturing and agro based sectors. (View Info)

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Double Deduction On Export Credit Insurance Premiums
Same as for companies engaged in manufacturing and agro based sectors. (View Info)

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Exemption For Malaysian International Trading Company (MITC)
The objective of developing Malaysian International Trading Company (MITC) is to encourage local companies to be more active in international trade as well as to enhance Malaysia’s exports. Approved MITCs will be eligible to apply for tax exemption equivalent to 20% of the increase in the value of export.

To qualify as an approved MITC, the company must fulfill the following conditions:

• must be locally incorporated
• equity holding of at least 60% Malaysian
• achieve an annual sales turnover of more than RM10 million
• export manufacturing goods, especially those from Malaysian small and medium scale manufacturing companies.(This refers to companies with full time employees not exceeding 150 or annual sales turnover not exceeding RM 25 million)

An approved MITC can apply for tax exemption to the Inland Revenue Board amounting to 20% of the increase in the value of export upon fulfilling the following conditions:

• not more than 20% of the company’s annual sales is derived from trading in commodities.
• company uses local services for export such as banking, finance, insurance, local ports and airports.

This incentive is granted for five consecutive years from date of approval. Claim for the incentive must be made in the annual tax return to the Inland Revenue Board and attached together with letter from MATRADE certifying that the company has complied with conditions of the incentive.

For further details, please contact Trade Advisory Services Unit at Tel: 03- 6207 7077, Fax : 03-6203 7253, Email : info@matrade.gov.my

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Special Deduction For Halal Certification, Quality System Or Standard Certification
In an effort to enhance competitiveness of local halal products in the global market, deduction is given to companies incurring the following expenses:

• expenses in obtaining quality system and standard certification as well as halal certification from Jabatan Kemajuan Islam Malaysia (JAKIM) / Jabatan-Jabatan Agama Islam Negeri / Majlis-Majlis Agama Islam Negeri
  
• expenses in obtaining international quality system and standard certification.

List of certification bodies accredited for the purpose of issuing certification as determined by the Minister of Finance is listed in Annex I

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Investment Tax Allowance For Halal Food Production
Companies producing halal food will be given Investment Tax Allowance (ITA) of 100% of qualifying capital expenditure incurred within a period of 5 years. The allowance can be set-off against 100% of statutory income in each year of assessment.

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Double Deduction For Promotion Of Export Of Services
The incentive is provided under the Income Tax Act with effect from year of assessment 1996. Eligible deductions are for cost of:

• Export market research
• Preparation of tenders for supply of services overseas
• Supply of technical information abroad
• Economy class air fares in respect of travel overseas  by representatives of  company for business purposes
• Accommodation and sustenance expenses incurred by Malaysian businessmen going overseas for promotion of services for export, subject to RM300 per day for accommodation and RM150 per day for sustenance
• Cost of maintaining sales offices overseas for purposes of promoting the export of services
• Feasibility studies for overseas projects identified for the purpose of tender
• Participation in international trade or industrial exhibition which is approved by MATRADE in the country or overseas
• Participation in exhibitions held in Malaysian Permanent Trade and Exhibition Centres overseas
• Expenses incurred pertaining to publicity and advertisement in any form of media outside Malaysia for the purpose of promoting the exports of services

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Double Deduction For Promotion Of Export Of Professional Services
Effective from year of assessment 2003, this incentive is extended to the following professional services that are provided by partnership or sole proprietors registered with the Registrar of Business:

• Legal
• Accounting (including taxation and management consultancy services)
• Architectural (including town  planning and landscaping services)
• Engineering and integrated engineering (including valuation and quantity surveying)
• Medical and dental

Eligible deductions are for the following costs :

• Feasibility studies for overseas projects identified for the purpose of tender
• Tender preparations including cost of preparing architectural and engineering models, prospective drawings and 3-D Animation  for  bidding in the international contracts/competition or  payment made to a Malaysian company for preparing the models as verified by Professional Services Development Corporation Sdn Bhd
• Market research and preparing technical information
• Participation in a  trade or industrial exhibition which is approved by MATRADE in Malaysia or overseas
• Participation in exhibitions held in a Malaysian Permanent Trade and Exhibition Centre  overseas which is approved by MATRADE
• Air fares of a representative of the company to travel for the promotion  of the export of professional services
• Accommodation and sustenance expenses incurred by representatives of the company for promotion of the export of professional services, subject to RM300 per day for accommodation and RM150 per day for sustenance
• Maintaining sales office overseas
• Publicity and advertisement in any media outside Malaysia

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Double Deduction For Promotion Of Export Of Higher Education
Private higher education institution which is registered with the Ministry of Education Malaysia is eligible to apply for this incentive with effect from year of assessment 1996. This deduction is applicable for the following costs :

• Market research, tender preparation and preparing technical information for the export of higher education
• Accommodation and sustenance expenses incurred by a representative of an institute when undertaking promotion of the export of higher education or participating in education fairs for the purpose of promoting the export of higher education which are held outside Malaysia and approved by the Ministry of Education Malaysia, subject to RM300 per day for accommodation and RM150 per day for sustenance
• Air fares to travel to a country outside Malaysia by a representative of an institute to undertake promotion  of the export of higher education
• Participating in education fairs for the purpose of promoting the export of higher  education approved by the Ministry of Education of Malaysia other than those specified in paragraph (b) and (c)
• Cost of maintaining sales office overseas
• Publicity and advertisement in any media outside Malaysia

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Exemptions On The Value Of Increased Exports Of Services
Exemption of statutory income equivalent to 50% of value of increased export is given to companies in selected services sectors as follows:

• legal
• accounting
• architecture
• marketing
• business consultancy
• construction management
• building management
• office services
• healthcare
• education
• plantation management
• publishing
• information and communication technology
• engineering
• printing
• local franchise

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Double Deduction For Tourism Industry
The following expenditure incurred by hotels and tour operators for overseas promotion are allowed further deduction:

• Expenditure on publicity and advertisement in any mass media outside Malaysia
• Expenditure on the publication of brochures, magazines and guide books, including delivery costs which are not charged to the overseas customers
• Expenditure on market research to explore for new markets overseas, subject to the prior approval of the Ministry of Tourism
• Expenditure which includes fares to any country outside Malaysia for purposes of negotiating or securing  a contract  for advertising or participating  in trade fairs, conferences or  forums approved  by the Ministry of Tourism. Such expenses are subject to a maximum of RM300 per day for accommodation and RM150 per day for sustenance
• Expenditure on organising trade fairs, conferences or forums in foreign country approved by the Ministry of Tourism. These expenditures are subject to the maximum of RM300 per day for accommodation and RM150 per day for sustenance
• Maintenance of sales office overseas

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Exemption For Tour Operators
Tour operators who bring in at least 500 foreign tourists through group inclusive tours or 1,200 local tourists on domestic tours in the assessed year that is certified by the Ministry of Tourism will be exempted from tax on income earned from the business of operating tours. The tour operators need to be licensed under the Tourism Industry Act 1992. The budget 2007 has announced that the incentive be extended until the year of assessment 2011.

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Exemption For Fair Organisers
Organisers of International Trade Exhibitions in Malaysia are eligible for tax exemption on income earned from organising international trade exhibitions. To qualify the organiser need to apply for a letter from MATRADE to certify that the fair is approved by MATRADE and the organiser of the international exhibition must bring in at least 500 foreign trade visitors per event.

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Deduction For Acquiring Propriety Rights
Capital expenditure on acquiring proprietary rights such as patent, industrial design or trademarks is allowed deduction of 20% per year of assessment on the cost of the acquisition of the proprietary rights for five years.

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Deduction on Cost of Developing E-Commerce Enabled Websites
The cost of developing e-commerce enabled websites is allowed as an annual deduction of 20% for purpose of income tax for 5 years, effective from year of assessment 2002.

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Industrial Building Allowance (IBA)
A company is eligible for the IBA in respect of buildings used as warehouse for storing of goods for export and re-export. The IBA consists of a special allowance of 10% of the qualifying capital expenditure of building.

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Exemption From Import Duty On Raw Materials/ Components
Full exemption from import duty on raw materials/components is normally granted to products for the export market, provided the raw materials/components are not produced locally or, where they are produced locally, are not of acceptable quality and price. As for products for the domestic market, full exemption from import duty on raw materials/components that are not produced locally can be considered. Full exemption can also be considered if the finished product made from dutiable raw materials/components is not subject to any import duty.

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Exemption From Import Duty And Sales Tax For Owners Of Malaysian Brand
Owners of Malaysian brands with at least 60% Malaysian equity ownership who outsource manufacturing activities are eligible to be exempted from import duty and sales tax on raw materials and components used in the manufacturing of finished products by their contract manufacturers locally or abroad. Semi finished goods from their contract manufacturers abroad, to be used by their local contract manufacturer to manufacture the finished products will also be exempted from import duty and sales tax.

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Exemption From Import Duty And Sales On Machinery And Equipment
Import duty and sales tax are exempted for imported machinery and equipment that are not available locally. For locally purchased machinery and equipment, full exemption is given on sales tax.

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Exemption From Import Duty And Sales Tax On Spares And Consumables
Manufacturing companies’ export level should be at least 80% of its production or the spares and consumables have limited demand and do not have potential for domestic production or the import duty on such items exceeds 5% to qualify for import duty and sales tax exemption.

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Exemption From Import Duty And Sales Tax For Maintenance, Repair And Overhaul (MRO) Activities
Companies undertaking maintenance, repair and overhaul activities qualify for import duty and sales tax exemption on raw materials, components, machinery and equipment, spares and consumables subject to each importation to be accompanied by certificates of parts and components issued by original equipment manufacturers (OEM).

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Exemption From Import Duty On Imported Medical Devices For Purpose Of Kitting
Full import duty exemption is given on medical devices that are imported for the purpose of kitting or producing complete procedural sets, provided these medical devices are not manufactured locally.

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Drawback On Import Duty, Sales Tax And Excise Duty
Under Section 99 of the Customs Act 1976, Section 29 of the Sales Tax Act 1972 and Section 19 Excise Act 1976, a drawback on import duty, sales tax and excise duty that have been paid may be claimed by a manufacturer if the parts, raw materials or packaging materials are used in the manufacture of goods for export within a year based on conditions stipulated in the Acts.

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Exemption From Sales Tax
Manufacturers licensed under the Sales Tax Act 1972 qualify for sales tax exemption on the inputs for their manufacturing operations. Manufacturers with an annual sales turnover of less than RM100,000 are exempted from licensing and are thus exempted from paying sales tax on their output. However, these manufacturers can opt to be licensed and obtain sales tax exemption on their inputs instead.

Certain categories of goods are exempted from sales tax at both the input and output stages. These include all goods (inclusive of packaging materials) used in the manufacture of controlled articles, pharmaceutical products, milk products, batik fabrics, perfumes, beauty or make up preparations, photographic cameras, wrist watches, pens, computers and computer peripherals, parts and accessories, carton boxes/cases, products in the printing industry, agricultural or horticultural sprayers, plywood, retreaded tyres, uninterruptible power systems, machinery and manufactured goods for export.

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Export- Import Bank Of Malaysia Berhad (Exim Bank)
The Export-Import Bank of Malaysia Berhad (EXIM Bank) merged with Malaysia Export Credit Insurance Berhad (MECIB) on the 30th of December 2005 retaining the name EXIM Bank. EXIM Bank’s objective is to drive the development of Malaysian exports and foreign investments abroad by providing a range of export financing, guarantees and export credit insurance facility.

Export credit insurance, financing guarantees and facilities offered by EXIM Bank are as follows:

Further details on the export financing facilities can be obtained from Exim Bank’s website www.exim.com.my

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Bilateral Payments Arrangement (BPA)
The main objectives of the BPA are to promote trade in the context of diversifying Malaysia’s trade to include non-traditional markets and also to foster closer economic and banking relationships between Malaysia and the participating countries. The two types of BPA signed by Bank Negara Malaysia are:

1. Iranian Model
Central banks are not involved in the settlement of financial claims arising from trade. The central banks guarantee to pay the respective foreign exporter for the export value in the event of default by the importer in their country. Five participating countries:

• Bosnia Herzegovina
• Botswana
• Iran
• Fiji
• Mozambique

2. ALADI Model  
For exports, central banks pay their exporters for the export value in domestic currency through designated banks. For imports, central banks receive the import value in domestic currency from their importers through designated banks. The central banks will settle the net amount due in an agreed currency on a periodic basis. Eighteen participating countries:

• Albania
• Algeria
• Argentina
• Chile
• Indonesia
• Kyrgyz Republic
• Laos
• Mexico
• Peru
• Philippines
• Romania
• Seychelles
• Thailand
• Tunisia
• Turkmenistan
• Venezuela
• Vietnam
• Zimbabwe

Exporters can apply for this facility from all Malaysian domestic banks. Further details on BPA can be obtained from the International Department, Bank Negara Malaysia or email :  bpa@bnm.gov.my

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Double Taxation Agreements
Double taxation agreements are signed to avoid double taxation on international income, such as business profits, dividends, interests and royalties that are derived in one country and remitted to another country. It removes the "tax barrier" to international trade and investment. Under double taxation agreements, business profits are taxed only in the country in which the enterprise is situated. Where the enterprise carries on business through a permanent establishment situated in the other contracting country, tax is levied in the other country on the profits as is attributable to or derived by the permanent establishment in the country where the permanent establishment is situated.

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ANNEX 1

List of Certification Bodies

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