Malaysia Sweetens Tax Incentives To Encourage Companies Set Up Hubs

October 11, 2019by TPA Global

Malaysia is expanding the scope of its Principal Hub (PH) program to allow more businesses to take advantage of tax incentives to base their country’s local or global operations.

The key functions of principal hub companies include management of risks, decision-making, strategic business activities, trading, finance, management, and human resources, according to MIDA.


PH incentive, was first introduced in 2015 and it turned out to help Malaysia attract local and multinational companies to establish their hubs in the country. Therefore in 2019, the government sweetens the incentive to propel more investor amidst the issue that companies trying to move some of their production out of China to escape higher U.S. tariffs. Along with Vietnam and Thailand, Malaysia has been one of the main beneficiaries of these moving companies. In this regard, the government issued the PH 2.0 program which aims to make Malaysia competitive with other countries in the region as the optimal headquarters hub in Asia Pacific.

The attractive rate offered

The Malaysian Investment Development Authority (MIDA) lower the tax rate for eligible companied. Under the new PH 2.0 program which will be effective for the 2019 tax year, eligible companies will be taxed at a rate of 10 percent on their qualifying operations instead of the general 24 percent corporate tax rate. Previously, the 10 percent rate was applicable only to income in excess of corporate profits reported by companies that already had Malaysian operations when they joined the program.

Under the new regulation, new companies that have yet to establish a presence in Malaysia will be taxed at rates as low as 0 percent for the first 10 years, based on their level of commitments. Further, the government even offered more attractive tax incentive for newly established companies which set up a shop in Malaysia.  The incentive rates for such companies under PH 2.0 will be 0 and 5 percent.

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