TECHNOPRENEURSHIP & INNOVATION SYMPOSIUM & EXHIBITION (TISE) 22 OCTOBER 2012 INCENTIVES & SUPPORT FOR LOCAL INVESTORS & TECHNOPRENEURS PRESENTATION BY : MR. NIK NASRI NIK AHMAD DOMESTIC INVESTMENT PROMOTION DIVISION

2 CONTENT  Functions of MIDA  EconomicTransformation Programme  Investment Opportunities and Policies  Incentives for Domestic Direct Investment (DDI)  Performance of the Manufacturing & Services Sector

FUNCTIONS OF MIDA

 Foreign Direct Investment  Domestic Investment  Manufacturing Services Promotion  Manufacturing licenses  Tax incentives  Expatriate posts  Duty exemption  OHQ, RDC, IPC and R&D status Evaluation Follow-up / Monitoring Planning  Planning for industrial development  Recommend policies and strategies on industrial promotion and development  Formulation of strategies, programmes and initiatives for international economic cooperation  Assist companies in the implementation and operation of their projects  Facilitate exchange & co-ordination among institutions engaged in or connected with industrial development  Advisory Services FUNCTIONS OF MIDA

EconomicTransformation Programme

EconomicTransformation Programme - 10 Years Economic Road Map

INVESTMENT OPPORTUNITIES AND POLICIES IN THE MANUFACTURING & SERVICES SECTORS

Electronics & Electrical Industries : Machinery & Equipment: High-technology based products using wireless and convergence technology Mobile application Solar wafer / cells / modules Semiconductors Automated equipment for semiconductor, solar, medical & automotive industries Process machinery for food & beverages and oil & gas Packaging machinery INVESTMENT OPPORTUNITIES IN THE MANUFACTURING SECTOR Petrochemical Industry : Alpha-olefins & fatty alcohols, propylene oxide & caprolactam Renewable & biodegradable materials Aerospace Industry : Maintenance, Repair and Overhaul (MRO) Aerospace Manufacturing

Food Processsing Industry : Processed meat & seafood Beverages, food ingredients, dairy products & confectionary Resourced-based industries : Food & Agro based Value-added products from natural resources Palm Oil Industry : Oleochemicals Palm-based nutraceuticals, constituents of palm oil/palm kernel oil & palm biomass Palm-based food products – specialty animal fat replacer, mayonnaise & salad dressing INVESTMENT OPPORTUNITIES IN THE MANUFACTURING SECTOR 9

10 MAJOR COMPANIES IN MALAYSIA

11  Logistics  Integrated Logistics Services  Cold Chain Facilities  Tourism  Hotel  Tourist project  Recreational camp  Convention centre TARGETED SERVICES SECTORS

12  Environmental Management  Energy conservation/efficiency  Energy generation, using renewable energy sources  Storage, treatment and disposal of hazardous waste  Recycling of agricultural waste and agricultural by- products  Business Services  Shared services outsourcing  Research & Development (R&D)  ICT Services  Market Support Services  Film & Video Production & Post Production TARGETED SERVICES SECTORS

13  Education  Technical, Vocational & Science Training  Healthcare Travel (Medical Tourism)  Private hospitals TARGETED SERVICES SECTORS

INCENTIVES FOR DDI

Pioneer Status Income tax exemption ranging from 70% or 100% for a period of 5 or 10 years Investment Tax Allowance 60% or 100% on qualifying capital expenditure for 5 years Reinvestment Allowance 60% on qualifying capital expenditure for 15 consecutive years Import Duty & Sales Tax Exemption For raw materials/components and Machinery and Equipment Incentives MAJOR INCENTIVES PROVIDED

16 APPROVAL ON INCENTIVES FOR R&D AND TRAINING FOR 2009 – 2012 (June) 2009 (RM mil) 2010 (RM mil) 2011 (RM mil) 2012 (RM mil) R & D Training Total Year Incentive

NEW DOMESTIC DIRECT INVESTMENT (DDI) INITIATIVES Incentives Announced: Domestic Investment Strategic Fund Incentives for Acquiring a Foreign Company for High Technology Incentives for Small Scale Companies

Domestic Investment Strategic Fund 1

Domestic Investment Strategic Fund of RM1 billion Domestic Investment Strategic Fund To accelerate the shift of Malaysian-owned companies in targeted industries to high value-added, high technology, knowledge-intensive and innovation-based industries Objectives 19 Domestic Investment Strategic Fund The fund aims to: Harness and leverage on outsourcing opportunities created by MNCs operating in Malaysia Intensify technology acquisition by Malaysian-owned companies Enable Malaysian-owned companies to obtain international standards/ certifications in strategic industries

20 Domestic Investment Strategic Fund The fund does not offer an outright grant and is contingent on the investments of the applicants Mechanism To be granted on a negotiable basis based on the request of the companies and the merits of each case Provided under the Customised Incentive Scheme, Section 127, Income Tax Act 1967 Matching grants (1:1) on reimbursable basis

Domestic Investment Strategic Fund The fund will provide matching grants to cater for expenditures incurred for the following activities: Training of Malaysians R&D activities carried out in Malaysia Obtaining international standards/certification Licensing or purchase of new/high technology Modernisation and upgrading of facilities and tools to undertake manufacturing or services activities for Multinational Corporations (MNCs) and Malaysian conglomerates (outsourcing activities) Scope of the Fund 21 Domestic Investment Strategic Fund

New and existing companies in the manufacturing and services sectors with Malaysian equity ownership of at least 60% Eligibility Criteria 22 Domestic Investment Strategic Fund Incorporated under the Companies Act, 1965 Companies producing promoted products/engaged in promoted activities in the following priority sectors: Aerospace Medical Devices Pharmaceuticals Advanced Electronics Machinery and Equipment Renewable Energy Services including design, R&D, testing, quality and standard certification, engineering services, technical and skills training and logistics service providers (3PL) Other industries, on a case by case basis

Domestic Investment Strategic Fund Effective Date of Application Applications received on or after 3 July 2012 are eligible to be considered for this incentive 23 Domestic Investment Strategic Fund

2 Incentive for Acquiring a Foreign Company for High Technology

Malaysian-owned company acquiring a foreign-owned company abroad will be eligible for an annual deduction of 20% of the acquisition cost for 5 years Malaysian-owned company acquiring a foreign-owned company abroad will be eligible for an annual deduction of 20% of the acquisition cost for 5 years Purpose of acquisition: Establishment of a manufacturing facility/company or services company within Malaysia Utilisation of the acquired technology in their existing operations within Malaysia Incentive for Acquiring a Foreign Company for High Technology Reintroduction of the incentive for acquisition of foreign companies 25 Incentive for Acquiring a Foreign Company for High Technology

26 Acquirer must be a locally owned company with at least 60% Malaysian equity ownership involved in manufacturing and services activities Incentive for Acquiring a Foreign Company for High Technology Eligibility Criteria For a public listed company: Malaysian equity ownership of at least 60% must be held for a period of 5 years from date of application Acquisition by a holding company having interests in manufacturing or services activities will be considered on a case by case basis Incentive for Acquiring a Foreign Company for High Technology At least 60% of its equity is directly owned by Malaysians on the first day of listing on the stock exchange; and At least 50% of its equity is directly owned by Malaysians

27 Acquiree must be a foreign company with 100% foreign equity ownership that is located abroad and uses the high technology in the activity of manufacturing or services Incentive for Acquiring a Foreign Company for High Technology Eligibility Criteria Acquisition should be a direct acquisition of at least 51% of the equity of the foreign company abroad Acquisition must be in the form of a cash transaction Acquisition must be completed within three years Incentive for Acquiring a Foreign Company for High Technology

28 Incentive for Acquiring a Foreign Company for High Technology Eligibility Criteria Acquisition of the foreign technology company must result in increase of performance or enhancement of technology and processes of the company’s operation in Malaysia Acquisition costs eligible for the deduction comprise: Value of shares purchased by the Malaysian company (acquirer) Incidental costs, including professional fees paid to bankers, valuers, auditors, accountants, tax agents, consultants, or legal advisers; cost of transfers including stamp duties; related travelling and accommodation expenses incurred for the purpose of the acquisition Incentive for Acquiring a Foreign Company for High Technology

29 Mechanism Incentives to be provided under the Income Tax Act, 1967 and approved through the NCI Incentive for Acquiring a Foreign Company for High Technology Incentive for Acquiring a Foreign Company for High Technology Definition of High Technology means new and emerging technologies acquired by a locally owned company in Malaysia with the object of using the high technology for: The production or improvement of material, devices, products, produce or processes; or The improvement of processes or quality of the selected services Eligibility Criteria

30 Incentive for Acquiring a Foreign Company for High Technology Effective Date of Application Applications received by MIDA from 3 July 2012 until 31 December 2016 are eligible to be considered for this incentive Incentive for Acquiring a Foreign Company for High Technology

Definition of Small Scale Company under the Promotion of Investments Act (PIA), 1986 and Criteria for the Granting of Tax Incentives 3

Definition of Small Scale Company under the PIA, 1986 and Criteria for the Granting of Tax Incentives 32 Redefinition: Companies incorporated in Malaysia with shareholders’ fund not exceeding RM2.5 million and having 60% to 100% Malaysian equity Previous Definition: Small scale companies incorporated in Malaysia with shareholders’ fund not exceeding RM500,000 and having at least 60% Malaysian equity Incentives: PS with income tax exemption of 100% of statutory income for 5 years; or Investment Tax Allowance (ITA) of 60% of qualifying capital expenditure incurred within a period of 5 years. The allowance can be offset against 100% of statutory income in that year of assessment. Definition of Small Scale Company under the PIA, 1986 and Criteria for the Granting of Tax Incentives

33 Definition of Small Scale Company under the PIA, 1986 and Criteria for the Granting of Tax Incentives Shareholders’ funds not exceeding RM2.5 million Incorporated under Companies Act, 1965 Malaysian equity ownership: Companies with shareholders’ fund of up to RM500,000 with at least 60% Malaysian equity Companies with shareholders’ fund of above RM500,000 and less than RM2.5 million with 100% Malaysian equity Eligibility Criteria

34 Eligibility Criteria Applicant must fulfill the following conditions: Value Added (VA) – 25% Managerial, Technical and Supervisory Staff (MTS) index - 20% Not more than 20% of the equity of the applicant company is owned, whether directly or indirectly controlled, by a holding company having shareholders’ funds of more than RM2.5 million Producing products/engaged in activities listed in the list of promoted products/activities for small companies or general promoted list For companies with shareholders’ fund of above RM500,000 and less than RM2.5 million and producing products/engaged in activities listed in the general promoted list, the prevailing rates on VA and MTS index under the general promoted list will be applicable Definition of Small Scale Company under the PIA, 1986 and Criteria for the Granting of Tax Incentives

35 Incentive to be provided under the PIA, 1986 and to be considered by the NCI Incentive to be provided under the PIA, 1986 and to be considered by the NCI Mechanism Effective Date of Application Applications received by MIDA from 3 July 2012 are eligible to be considered for this incentive Definition of Small Scale Company under the PIA, 1986 and Criteria for the Granting of Tax Incentives

36 Incentives to be provided under Section 127 (3)(b) of the Income Tax Act, 1967 and to be considered by the NCI Mechanism Effective Date of Application Applications received by MIDA from 3 July 2012 are eligible to be considered for this incentive Definition of Small Scale Company under the PIA, 1986 and Criteria for the Granting of Tax Incentives