New Investment Incentive Framework Will Focus on High-value Investments
In Malaysia’s recent Budget 2025, the Prime Minister introduced a new investment incentive framework to encourage high-value projects. He announced that the government will implement the framework in the third quarter of 2025 and offer tax breaks for exports of integrated circuit (IC) design operations as one of its recommendations.
The Prime Minister of Malaysia, who also serves as the Finance Minister, announced that the government will offer special tax exemptions to private higher education institutions that offer courses in artificial intelligence (AI), robotics, the internet of things (IoT), data science, FinTech, and sustainable technology.
The government is set to implement new tax breaks for three consecutive years for multinational enterprises (MNE), spending over RM2 million in manufacturing expenses. The finance minister also announced that the government will give MNEs or suppliers that invest in local suppliers tax breaks on their respective investments. This is a move that should encourage the growth of local businesses.
How the Incentive Works
To develop local suppliers in the E&E, specialty chemicals and medical devices sector, the government will provide them with fitting tax incentive packages and matching investment funds of over RM100 million through the public equity fund platform, as stated by the Finance Minister.
The new investment incentive framework will be supported through an inclusive investment facility to stimulate balanced economic growth across the country, establishing strategic investment funds worth RM1 billion to improve local talent and support high-value activities within the country.
Preparing for GMT Implementation
Introducing the new investment incentive framework will be instrumental as the Malaysian government prepares to apply the global minimum tax (GMT) on MNEs. While GMT will increase the country’s revenue, it may also pose adverse risks such as potential reduction in foreign investment.
Therefore, the government is fully committed to strengthening current incentives, introducing new non-tax benefits like talent development programs and green energy initiatives, and exploring the possibility of implementing strategic investment credit taxes.
