Exemption for MITC Malaysia: Tax Incentives for Trading Companies

Exemption for MITC Malaysia is a powerful tax incentive granted under the Income Tax Act 1967 to approved trading companies. With this incentive, qualified Malaysian International Trading Companies (MITC) can enjoy 20% income tax exemption on increased export sales for a period of five consecutive years.

What is MITC Exemption?

The MITC exemption is designed to encourage Malaysian trading companies to expand internationally while supporting local services and infrastructure. Companies that receive MITC status are rewarded with tax relief based on their export performance.

Qualifying Criteria

To qualify as a MITC, a trading company must obtain certification from MATRADE confirming:

1. Incorporated in Malaysia under the Companies Act
2. At least 60% Malaysian ownership of paid-up capital
3. Annual sales exceeding RM10 million
4. Not more than 20% of annual sales from commodities trading
5. Use of local services for banking, finance, insurance, ports, and airports

👉 MITC status can also be awarded to companies incorporated within a group to export goods manufactured by related companies.

Incentive Period

• The exemption applies for five (5) consecutive Years of Assessment (YAs).
• The period starts from the YA in which the company first qualifies.

Mechanism of the Incentive

Tax Exemption Rate

• 20% exemption on the value of increased export sales.

Export Sales Definition

• Export of local and imported goods and commodities.
• Excludes:
  • Trading commissions
  • Profits from commodity exchange trading
  • Sales to Free Industrial Zones & Licensed Manufacturing Warehouses

Value of Increased Exports

• Based on FOB (Free on Board) value difference between:
  • Current basis period
  • Immediate preceding basis period

Computation Overview

1. Apply 20% exemption rate to the value of increased exports.
2. Add any unutilized exempt amount carried forward from previous YAs.
3. Deduct exempt amount from statutory income (SI) from trading activities.
   • Restricted to 70% of SI.
   • Excess can be carried forward until fully utilized against the same source.
4. For tax resident companies → Exempt income credited → Allows distribution of two-tier exempt dividends.

Non-Application of the Exemption

• This is the only tax incentive available for trading companies.
• Not mutually exclusive with other incentives (e.g., Pioneer Status, Reinvestment Allowance do not apply).

Key Takeaways

• Exemption for MITC Malaysia grants 20% tax exemption on export sales growth.
• Incentive period: 5 consecutive YAs.
• Limited to 70% of statutory income each YA.
• Excess exempt amount can be carried forward.
• Only applies to approved MITC trading companies certified by MATRADE.

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

• MATRADE – Malaysia External Trade Development Corporation
• LHDN Malaysia – Official Income Tax Guidelines

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.