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Enhancement made to Principal Hub incentive
Published on: Wednesday, October 09, 2019

KUALA LUMPUR: The government has announced enhancements to the Principal Hub incentive, which was introduced in 2015, whereby companies with existing operations in Malaysia can now further leverage the country as a base for conducting their regional or global businesses.

The Malaysian Investment Development Authority (Mida) in a statement said effective 2019, principal hub companies, with key functions including management of risks, decision-making, strategic business activities, trading, finance, management and human resource, approved with the enhanced Principal Hub incentive, also known as PH 2.0, would be able to enjoy a concessionary 10 per cent tax rate for their operations in Malaysia.

“This is to replace the previous tax treatment whereby companies with existing Malaysian operations could only enjoy tax exemption on incremental income,” it said.

It said new companies that had yet to establish a presence in Malaysia can enjoy up to zero per cent tax rate for 10 years based on their level of commitments.

“This enhancement is timely as Malaysia continues to innovate its policies and strategies to attract investments so that the country will be strongly integrated into the region as well as other markets,” it said, adding the review aimed to make Malaysia regionally competitive as the optimal headquarters hub in Asia Pacific.

Mida said the relaxation of certain conditions under this revised incentive would potentially appeal to more homegrown companies exploring expansion opportunities by venturing into new, high value-added services and expanding their supply chain in the region.

“PH 2.0 excludes the need for companies to serve a minimum number of countries outside Malaysia. Nevertheless, they are required to serve a minimum number of network companies,” it said.

It said the PH incentive had been invaluable in attracting companies to establish their hubs in the country.

“Multinational corporations are able to tap into Malaysia’s strategic location within the Asia Pacific region, world-class infrastructure, as well as multilingual talent pool to optimise their operational efficiency,” it added.

It said this had created positive spillover effects on the Malaysian economy such as high-value jobs, increase in research and development activities, as well as transfer of technology and knowledge to the local industry ecosystems.

Since the introduction of the PH incentive in 2015, Mida has approved 35 principal hub projects, with total approved investments of RM35.5 billion and potential creation of over 2,700 high-value jobs.

Mida said these projects cut across various key sectors from electrical and electronics, aerospace, oil and gas, chemicals and information technology.

Additionally, it said the inclusion of new conditions such as internships, training and collaborations with local institutions would further accelerate the creation of more high-value jobs and talent pool in Malaysia.

“Eligible companies are encouraged to submit their applications to Mida as soon as possible, as only applications received before Dec 31, 2020 are eligible to be considered for the PH 2.0 incentive,” it added. – Bernama



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