Introduction

Malaysia export incentives are designed to encourage the growth of manufactured goods and agricultural exports. These incentives, granted under the Income Tax Act 1967, provide tax exemptions, double deductions, and allowances for qualifying exporters. Businesses that qualify can reduce their tax burden significantly while expanding into new markets.

Key Export Incentives in Malaysia

Allowance for Increased Exports (AIE)

The AIE rewards companies that record higher export volumes of manufactured goods or agricultural produce.

• Normal AIE: Income tax exemption on statutory income based on increased exports.
• Enhanced AIE: Additional benefits for new market penetration and outstanding performance.

Malaysian International Trading Companies (MITC)

Approved MITCs enjoy tax exemptions on certain exports, provided they meet qualifying conditions.

Double Deductions

Special single and double deductions are available for export promotion expenses, including trade fairs, advertising, and overseas marketing.

Allowance for Increased Exports: Qualifying Criteria

To qualify, a company must:

• Be incorporated in Malaysia under the Companies Act 2016.
• Be a Malaysian tax resident.
• Have ≥60% Malaysian citizen ownership.
• Manufacture products or agricultural produce.
• Export those products directly.
• Record an increase in export sales (excluding sales to free zones, licensed warehouses, Langkawi, Labuan, or Tioman).

There is no fixed qualifying period — incentives are available in any year of assessment (YA) if conditions are met.

Mechanism of the Incentive

• Exemption Rate: 10% or 15% of the value of increased exports.
• Value of Increased Exports: Difference between the current year’s export FOB value vs. the preceding year or average of 12 months.
• Restriction: Exempt amount limited to 70% of statutory income (SI).
• Carry Forward: Any excess exempt amount can be carried forward.

‘Value of increased exports’ refers to the ‘DIFFERENCES’ between in either:

a)’Free-on board’ (FOB) value of export sales
Current Period’s FOB VS immediate Preceding Basis Period’s FOB-> Provided both basis periods are twelve (12) months and end on the same date

OR

b) Average FOB value of export sales
Current Period’s average FOB VS immediate Preceding Basis Period’s average FOB-> Provided both basis periods are not twelve (12) months period ending on the same date

Note

In both cases above, the FOB value of export sales in the preceding or current basis period should not be zero

‘Value added’ -> Sales price of goods at ex-factory – Total cost of raw materials
‘Small Company’ -> Paid-Up ordinary share capital ≤ RM2.5 million as at the beginning of its basis period

Exclusions & Non-Application

• AIE does not apply if the company already enjoys:
  • Pioneer Status (PIA 1986)
  • Reinvestment Allowance
  • Exemption under Para 127(3)(b) or s.127(3A)
  • Deduction under s.154 (other than Schedule 3 allowances & statutory expenses).
• Excluded manufactured products:
  

  No.	Item Description
  1	Tin ingot or slab, tin ore and concentrate
  2	Natural rubber sheet and slab, standard Malaysian rubber, crepe natural rubber, natural
  3	Rubber latex and natural gum
  4	Crude palm kernel oil, palm kernel cake and crude palm oil
  5	Log, sawn timber (upgraded and non-kiln dry) and wood chips (except briquette)
  6	Petroleum oil (crude and other than crude) and petroleum gas and other gaseous hydrocarbons (liquefied or in gaseous state), hydrogen, nitrogen and oxygen

Key Takeaways

• Malaysia export incentives reduce tax costs for exporters.
• AIE provides tax exemptions based on increased exports.
• MITCs enjoy tax exemptions under approved conditions.
• Export promotion expenses may qualify for double deductions.
• Incentives exclude certain commodities like tin, crude oil, and timber.
  

For more details, you may refer to the link below:

• Lembaga Hasil Dalam Negeri (LHDN) – Export Incentives
• Royal Malaysian Customs Department – Export Procedures 

ANC Group – Your Personal Tax Advisor

Tax consulting is the core service of ANC Group. Our tax professionals provide clients with comprehensive tax support and guidance. We offer tax consulting and compliance services for expatriates, entrepreneurs, and listed and non-listed companies.

Our tax consulting services include business tax, transaction tax, personal tax, and corporate income tax. We don’t just guide you in interpreting and applying complicated taxation rules, but to explore new opportunities and business trends.

ANC Group keep you abreast with Malaysia tax updates and any changes in the local regulations.

We work closely with industry specialists, authorities, and associated professionals within ANC Group to provide the best-in-class integrated tax planning solutions. ANC specialists coordinate the accounting and taxation services to bring your business to success.

If you need professional tax advisory services regarding the Malaysia Income Tax Act 1967, our team is ready to assist you. Contact us here to discuss how we can support your business.