INCENTIVES FOR THE
OIL PALM BIOMASS INDUSTRY
BY
SITI AISHAH GHAZALI
AGRO-BASED INDUSTRIES DIVISION
MALAYSIAN INDUSTRIAL DEVELOPMENT AUTHORITY
3 December 2008
MIDA
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MIDA
Malaysian Government's principal
agency for the promotion and coordination of industrial development
in Malaysia. It is the first point of
contact for investors who intend to
set up manufacturing and related
services projects in Malaysia.
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MIDA
PROMOTION
•Foreign Direct Investment
•Domestic Investment
RESEARCH & •Cross-Border Investment
PLANNING •Services
•Planning for Industrial
Development
•Recommend policies
and strategies on
industrial promotion and
development
EVALUATION
• Manufacturing licences
• Tax incentives
• Expatriate posts
• Duty exemption
• Other incentives for R&D,
software
development,technical &
vocational training
FOLLOW-UP/MONITORING
• 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
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• Advisory Services & Assistance
 Advisory Services Centre
Government representatives based in MIDA
 Immigration Department
 Customs Department
 Department of Occupational Health & Safety
 Department of Environment
 Ministry of Finance
 Telekom Malaysia Berhad
 Tenaga Nasional Berhad
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BUSINESS INFORMATION CENTRE
(BIC)
A user friendly centre for visitors to obtain
comprehensive information on investment, trade,
financing and productivity.
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POLICY ON THE MANUFACTURING
SECTOR
Industrial Coordination Act (ICA) 1975
 All manufacturing companies
with shareholders’ fund of RM2.5 million
and above or engaging 75 or more
full-time employees are required to apply
for a Manufacturing Licence.
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LIBERALISATION OF THE EQUITY
POLICY
All new projects in the manufacturing,
including for expansion and diversification
will be exempted from both equity and export
conditions.
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PROMOTION OF INVESTMENTS ACT,
1986
 Provides incentives for the development of
selected promoted products/activities in
the manufacturing sector.
 Also
provides
incentives
for
development of the SMIs and
agriculture sector.
the
the
Cont..
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PROMOTION OF INVESTMENTS ACT,
1986
 Two main INCENTIVES : Pioneer Status (PS)
 Investment Tax Allowance (ITA)
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INVESTMENT INCENTIVES
PIONEER STATUS (PS) : Income Tax exemption on 70%* of statutory
income for 5 years (Effective rate of tax is 7.8%)
* Full exemption (100%) in the case of approved projects in
Sabah, Sarawak, Perlis & the designated Eastern Corridor
States of Peninsular Malaysia i.e Kelantan, Terengganu,
Pahang & the District of Mersing, Johor.
 Accumulated losses and unabsorbed capital
allowance during the pioneer period can be
carried forward and deducted from post-pioneer
income
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INVESTMENT TAX ALLOWANCE (ITA)
 ITA of 60% on qualifying capital expenditure
(factory, plant, machinery/equipment excluding
land)
 ITA is to be utilised to offset against 70% of the
statutory income
 ITA of 100% to be utilised to offset against 100%
of the statutory income for approved projects in
Sabah, Sarawak, Perlis & the designated Eastern
Corridor States of Peninsular Malaysia
(Effective from 13th September 2003)
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INVESTMENT TAX ALLOWANCE (ITA)
 ITA is for 5 years from the date the first
qualifying expenditure is incurred
 Unutilised ITA can be carried forward to the
subsequent years
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PIONEER STATUS (PS) FOR SMALL
SCALE COMPANIES
 Manufacturing companies with shareholders’
funds not exceeding RM500,000 and having
at least 60% Malaysian equity undertaking
promoted products/activities for small scale
companies are eligible for PS with income tax
exemption of 100% of statutory income for 5
years.
 ITA of 60% (100% for promoted areas) on
capital expenditure incurred within 5 years to be
off set against 100% of statutory income.
Cont..
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PIONEER STATUS (PS) FOR SMALL
SCALE COMPANIES
 Fulfill one of the following criteria:1. Value added of at least 15%
2. Contribute to socio-economic development
of the rural population
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INCENTIVE FOR REINVESTMENT IN
RESOURCE-BASED INDUSTRIES
• Pioneer
Status/ITA
for
Malaysian
companies (with at least 51% Malaysian
equity) which reinvest in rubber, oil palm and
wood-based industries.
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REINVESTMENT ALLOWANCE (RA)
Expansion, Modernisation, Diversification & Automation
Projects in operation for at least 36 months
 60% RA to be utilised to offset against 70%* of the
statutory income
 RA period - 15 years
 Unabsorbed allowance can be carried forward until it is fully
utilised
* Can be offset against 100% of the statutory income in the
case of approved projects in Sabah, Sarawak, Perlis &
the designated Eastern Corridor States of Peninsular
Malaysia i.e. Kelantan, Terengganu, Pahang & the
District of Mersing, Johor.
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PALM BIOMASS SECTOR
• Industry produces 30 million tonnes of fibrous biomass
(dry weight) yearly from the plantation and the processing
activities.
• Industry estimated that from 100,000 hectares replanted
yearly, 13.6 million logs of oil palm trunk available.
• They will be used to produce value added products such as
panel products, moulded packaging, composites
products and pulp & paper.
• To date, 73 projects were approved with total
investments of RM 816.8 million for processing of palm
biomass into value added products.
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PALM BIOMASS SECTOR
2007
No. of projects approved : 12 projects
Total Investments
: RM 158.7 million
2006
No. of projects approved : 13 projects
Total Investments
Products
: RM 211.7 million
: Moulded products, plywood, veneer, flooring boards,
laminated block boards, pellets and briquette
charcoal & fibres
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INCENTIVES FOR THE UTILISATION OF
OIL PALM BIOMASS
 Promoted products such as particleboard,
fibreboard, plywood, pulp and paper from oil palm
biomass .
Incentives :a) PS with 100% tax exemption of
income for a period of 10 years; or
the statutory
b) ITA of 100% to be offset against 100% of the
qualifying capital expenditure incurred within a
period of 5 years
Cont..
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INCENTIVES FOR THE UTILISATION
OF OIL PALM BIOMASS
Existing Companies that Reinvest
a) PS with tax exemption of 100% on the increased
statutory income arising from the reinvestment
for a period of 10 years; or
b) ITA of 100% on the additional qualifying capital
expenditure be utilised to offset against 100% of
the statutory income incurred within a period of
5 years.
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INCENTIVES FOR
COMMERCIALISATION OF PUBLIC
R&D
A company that invests in its subsidiary
company engaged in the commercialisation
of resource-based R&D findings will be given
tax deduction equivalent to the amount of
investment made in the subsidiary.
Cont..
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INCENTIVES FOR COMMERCIALISATION
OF PUBLIC R&D
 The subsidiary company that undertakes the
commercialisation
of resource-based R&D
findings will be given Pioneer Status with 100%
tax exemption on statutory income for 10
years.
Criteria :
 At least 70% Malaysian
 Company which invests should own at least 70%
equity of the company that commercialised the R&D
findings
 Commercialisation of R&D should be implemented
within one year from the date of approval of the
incentive
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EXEMPTION FROM IMPORT DUTY AND
SALES TAX ON
MACHINERY/ EQUIPMENT/SPARE PARTS
 Used directly in the manufacturing process or
agricultural activity
 Not produced locally
(For machinery/equipment produced locally sales
tax exemption is applicable)
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EXEMPTION FROM IMPORT DUTY ON
RAW MATERIALS / COMPONENTS
For Export Market
 Not produced locally or
 Produced locally but specifications / quality / price
are not acceptable
For Domestic Market
 Not produced locally or
 Finished product is non-dutiable (e.g. furniture)
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EXEMPTION PERIOD
 1 year for new application
 2 years for extension
 For Finished Product which is non-dutiable
(e.g. Furniture), 2 years for new
application & 3 years for extension
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EMPLOYMENT OF EXPATRIATE
PERSONNEL
• To promote technology transfer and inflow of
foreign skills, manufacturing and related services
companies operating in Malaysia are allowed to
employ expatriate
• To take care of their investment interest in
Malaysia foreign companies are also allowed key
posts.
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EMPLOYMENT OF EXPATRIATE
PERSONNEL
 All types of application for expatriate
personnel in manufacturing and related services will
be considered by MIDA. These include application by
NEW or EXISTING Companies for : New Expatriate posts
 Additional Expatriate Posts; and
 Other application, e.g.: extension of time, upgrading of
term post to key post, change of title, amendments of
approval conditions, etc.
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MANUFACTURING SECTOR - Employment
Guidelines:
Companies
Foreign paid-up : US$ 2 million
- Automatic approval for up to 10 expatriate posts,
including 5 key posts
Foreign paid-up : US$ 200,000 but
less than US$ 2 million
- Automatic approval for up to 5 expatriate posts,
including 1 key posts
Companies
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MANUFACTURING
MANUFACTURINGSECTOR
SECTOR--Employment
Employment
Companies
Foreign paid-up : Less than US$ 200,000
- A key post can be considered when foreign paid-up
capital at least RM 500,000.
- Number of expatriate (time post) allowed depends on merits of
each case.
More than 50% Malaysian
equity
- Allowed to employ expatriate personnel for technical post
including R&D post regardless of the level of paid-up capital.
- Consideration is based on merits of each case.
Malaysian owned companies
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MANUFACTURING SECTOR - Employment
• Additional key posts and time posts for an existing
company which undertakes Expansion/Diversification
will depend on the additional value of the foreign paidup capital
• An existing company which is exempted from
Manufacturing license is required to submit appropriate
Business License issued by Local Authorities.
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DURATION OF POSTS
Key Post :
Can be permanently held by foreigner as long as the project is in
operation
Time Post :
- Executive
Require professional Qualification
and Experience
Up to 10 years
- Non-Executive Require Technical Skills and
Experience
Up to 5 years
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Thank You
For more information please
visit:-
www.mida.gov.my
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