Malaysia: Tax-Efficient Sectors
Double Deduction Tax Incentives
Expenses incurred on certain activities can be set off twice against taxable profits. Among those activities are included:
Promotion of Exports - Expenses which are aimed at promoting exports and the supply of goods overseas can be deducted twice from taxable profits. The list of allowable expenses are set out in the income tax legislation and include overseas advertising, export market research, preparation of tenders for the supply of goods overseas, overseas travel and accommodation, cost of maintaining overseas offices & approved industrial exhibitions. This incentive is available to manufacturing & agricultural companies producing "promoted products" or engaged in "promoted activities". The allowance is also available to the tourist industry in respect of costs incurred in the overseas promotion of Malaysia as a tourist destination.
Employee Training Programs - Expenditure incurred by manufacturing companies on government approved training programs designed to develop and upgrade skills to modernize manufacturing processes can be deducted twice from taxable profits. This incentive is available to manufacturing companies & companies engaged in the hotel and tourist industry.
Disabled Persons - All remuneration payable to physically or mentally disabled employees can be deducted twice from taxable profits. This incentive is available to manufacturing companies.
Research & Development - All expenditure incurred on government approved research, payments made for the use of services of approved research institutes and voluntary cash contributions made to approved research institutes can be deducted twice from taxable profits.
Freight Charges - Certain manufacturing industries located in certain regions of the country (e.g. timber companies in Sabah) can deduct double the amount of freight charges incurred.
Brand Promotion Advertising - Expenditure incurred promoting an export quality standard Malaysian owned product is subject to double tax deduction. Promotion of a brand name means making a name internationally known and therefore would include such expenditure as bill-boards in international airports or highways. The company must be 70% Malaysian owned and the product must achieve export quality standards. This incentive is available to manufacturing companies.