Question

Malaysia and Singapore received billions of dollars of foreign direct investment (FDI). Each of these countries offer various investment incentives to invest in their countries. Search the websites of international trade and investment of both countries and find out about the various incentives offered by the governments of these countries. Explain what are the types of incentives offered?

Answer 1

Answer :

Since 2010 foreign investment in Malaysia has oscillated between USD 9 billion and USD 12 billion, making the country one of the region 's highest FDI recipients. Malaysia continues to be an attractive investment destination in the face of growing trade tensions worldwide. The authorities aim to place Malaysia as a gateway to the ASEAN market by offering foreign companies various incentives, notably pioneer company status and investment-related tax reductions. However, the government maintains a large discretionary power to authorize investment projects and uses it to obtain the maximum benefit from foreign participation and by demanding agreements that are advantageous in terms of technology transfer or the creation of joint ventures. Let's discuss various investment incentives offering by Malaysia to invest in their country.

1.MSC status:
Technology and knowledge-driven firms will apply for MSC Malaysia Status and thus benefit, among other benefits, access to facilities with enhanced communication infrastructures. MSC status grants the right to hire up to 20 foreign knowledge workers, and duties on imported technology equipment are not in place.

2. 5-Year Intellectual Property tax depreciation:
Malaysian firms buying patents, designs, models, trademarks, brand assets or other similar overseas rights can speed up the tax deductibility of such purchases. While typically the tax write-downs have to be done over the useful life of the estate, this allows for a write-down of 100 per cent over five years and thereby reduces the company's tax bill.

3. Exemption from tax on capital expenditure linked to R&D:
For the first 10 years, companies with in-house R&D functions can deduct 50 per cent of this expenditure from their taxable income. Specialist R&D companies can use 100 per cent of this expenditure for this purpose (whether researching on their behalf or a contract basis for others).

4.Customs exemptions on raw materials imports:
This opportunity is aimed at increasing the manufacturing sector in Malaysia, as imported inputs for finished goods are not taxable. It holds the cost of manufacturing in Malaysia down. The opportunity can be extended to certain other industries that the government is promoting, such as construction projects in tourism or hotels. Hence, construction materials will be excluded from import duty in such situations.

5. Place of the pioneer:
Malaysia grants this ten-year incentive to businesses in promoted fields such as R&D, tourism, hospitality, manufacturing, or technical education. This benefit decreases the amount of taxable income by 70%, lowering the effective corporate tax rate of such businesses to just 30 per cent of the normal level during this period.

The Government of Singapore has attracted FDI through grants, support, and tax incentives. Entrepreneurs in Singapore will obtain loans and tax cuts via these government programs. The Special Situation Fund for Startups (SSFS), managed by EDBI, aims to fund innovative start-ups in the early to late stages that can contribute through a convertible note to Singapore's national priorities. The Minister of Finance announced the introduction of an Intellectual Property Development Incentive ("IDI") to promote the use of intellectual property ("IP") derived from R&D.The Finance and Treasury Center (FTC) Incentive aims to encourage firms to grow treasury management capabilities and to use Singapore as the basis for strategic finance and treasury management activities. The Aircraft Leasing Scheme (ALS) aims to encourage firms to develop aircraft leasing capabilities and expand the Singapore aircraft leasing industry.Economic Development Board of Singapore (EDB) and National Environment Agency (NEA) each carry out initiatives to provide stronger support to companies in their push to become more energy efficient and reduce carbon emissions. The Research Incentive Scheme for Companies (RISC) facilitates the advancement of research and development skills and innovations through the funding of scientific and technical ventures.Grant support for REG(E) will match the amount of carbon reduction, up to a maximum limit of 50 per cent of qualifying costs. Under the PIC scheme, businesses can benefit from tax benefits to encourage the use of innovative as well as productive activities using technology. If businesses are looking to fund their business, you don't have to be disappointed because Singapore government offers several different grants.The aforementioned grants and tax incentives are eligible for both Singaporean-based entrepreneurs and partnering international investors.