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Attorney at Law (Germany)
Malaysia´s New Incentive Framework
- From News from ASEAN - Q1 2026
- New Incentive Framework (NIF)
- Outcome-based incentive model
- New Industrial Master Plan 2030 (NIMP 2030)
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Malaysia has introduced the New Incentive Framework (“NIF”) as part of a strategic transformation of its investment landscape.
The reform responds to rapid technological advancement, global tax developments, sustainability priorities, and the implementation of the OECD’s Global Minimum Tax (Pillar Two). The NIF represents a significant shift from traditional profit-based tax holidays to a modern, outcome-based incentive model.
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Incentives are now tied to measurable economic contributions aligned with:
- National Investment Aspirations (“NIA”)
- New Industrial Master Plan 2030 (“NIMP 2030”)
As announced in Budget 2026, the implementation of NIF is as follows:
- Manufacturing sector: 1 March 2026
- Services sector: Q2 2026 (exact date to be announced)
Manufacturing sector incentives under NIF
The tax incentives available for the manufacturing sector under the NIF comprise two primary incentive options, which are mutually exclusive. Applicants are required to elect and apply for only one of the following incentives in respect of the proposed qualifying project:
| Types | Description | Losses |
| Special Tax Rate (“STR”) | A reduced corporate income tax rate on a company’s taxable income for a specified period. |
Losses incurred during the STR period may be carried forward for seven (7) consecutive years.
|
| Investment Tax Allowance (“ITA”) | It allows the company to offset a percentage of its qualifying capital expenditure (“QCE”) against its statutory income. This allowance is granted on QCE incurred within a specified period. | Unutilised allowance may be carried forward until fully utilised. |
Companies may apply for incentives under the following prescribed categories, subject to meeting the applicable eligibility criteria and requirements stipulated for each incentive:
| Types | STR | ITA |
| Incentive for new investments | STR of between 0 % to 10 % for a period of up to 15 years. | ITA of up to 100 % for a period of up to 15 years. The allowance can be used to offset between 70 % to 100 % of statutory income |
| Incentives for Less Developed Areas | STR of between 0 % to 15 % for a period of up to 15 years. | |
| Incentives for Small Companies | STR of between 3 % to 12 % for a period of up to 15 years. |
The quantum of incentive granted is determined based on the company’s commitments under the NIA Scorecard assessment. In addition, the selection of the incentive is final once the application is accepted by MIDA.
Eligible applicants for manufacturing sectors
In order to qualify for the incentives under NIF, companies must:
I. Be incorporated under the Companies Act 2016 and tax resident in Malaysia;
II. New or existing companies undertaking new investments in manufacturing where:
- New companies refers to a company:
a. which is newly incorporated or has not yet commenced any commercial operations; and
b. which does not have any related entity in Malaysia prior to the submission of application being made;
or which has any related entity in Malaysia and the related entity is carrying on a different project in Malaysia
- Existing company refers to a company which is already operating in Malaysia carrying on a difference project in Malaysia.
III. Operate within one of the approved manufacturing subsectors, including:
- Electrical and Electronics (E&E);
- Chemical and Chemical Products;
- Pharmaceuticals;
- Medical Devices;
- Aerospace;
- Machinery and Equipment (M&E);
- Petroleum Products and Petrochemicals;
- Oleochemicals and their derivatives;
- Food Production and Processing;
- Wood, Paper and Furniture;
- Textile, Apparel and Footwear;
- Strategic minerals-based Products;
- Metal;
IV. Biotechnology-based and recycled product manufacturers may apply under relevant subsectors.
V. Companies must also:
- Meet sustainability and ESG-related requirements; and
- Maintain separate accounts for incentivized and non-incentivized activities
Tax incentive mechanisms
I. NIA Scorecard
The NIA Scorecard is the core evaluation tools under the NIF. It assesses a project’s potential contribution across key national priorities:
- Increasing economic complexity
- Creating high-value jobs
- Strengthening domestic supply chains
- Developing industrial clusters
- Enhancing inclusivity
- Improving ESG practices
II. Tiering Approach
The result of the NIA Scorecard determines the quality of the projects. A better scoring corresponds to a better quantum of incentive package
| Incentives | Mechanisms |
| STR |
|
| ITA |
|
Applications for manufacturing incentives under the NIF are accepted by Malaysian Investment Development Authority (“MIDA”) via Invest Malaysia portal beginning 1 March 2026. From 28 February 2026, no new applications under the Promotion of Investments Act 1986 (“PIA”) will be accepted for the manufacturing sector. Existing approvals remain unaffected.