To attract foreign direct investments, countries are offering tax-related benefits and incentives for businesses and entrepreneurs to expand into their jurisdiction. This is a good way for businesses to assess the tax efficiency.
The Malaysia government has set out 3 tax incentives under the categories of:
- Tax exemptions
- Allowance related to capital expenditures
- Enhanced tax deductions
For manufacturing, service, and trading companies, here are the tax incentives:
Financial services companies can enjoy the following:
- Full income tax exemption is available on to Islamic banks licensed under the Islamic Financial Services Act 2013. All income earned from Islamic banking activities conducted in international currencies will be exempted
- A complete income tax exemption is also applied to management fees received by resident fund management companies which have been established according to Islamic principles for the management of funds of foreign and local investors.
As the government are accelerating digitalisation in the country, tech companies under the MSC Malaysia Status are entitled to many benefits, including 5-year tax exemption.
You can find more information on Malaysia’s tax incentives & tax reliefs here.
2. Hong Kong
Specific industries like financial services and shipping are eligible for Hong Kong tax incentives. Qualifying debt instruments that are issued after 1 April 2018 will be exempted from tax.
Another area where companies can tap on tax incentives is for R&D expenses. There 2 types of deductible expenses:
- Type A – 100% standard tax deduction
- Type B – two-tierd tax reduction at 300% for 1st HKD 2 million and 200% for remaining amount
In Indonesia, some companies are eligible for a tax reduction, called the tax holiday, which exempts companies from the corporate income tax due for 5 to 20 years from the start of operations for investment plans at IDR 500 billion.
50% corporate tax reduction will also be granted for the next 2 years after tax holidays.
Depending on the sectors, locations, and size of the investments, the Vietnam government has outlined a preferential tax rate initiative of 10% and 17% for 15 years and 10 years respectively.
Some of the industries that fall into this preferential tax initiative are:
- Health care
- Environmental protection
- Infrastructure development
- Software production
Another tax incentive is the tax holidays. Eligible companies can enjoy 100% tax exemption for a set period of time and another period where they will be charged at 50% of the corporate tax rate.
Similarly, Thailand has tax incentives that are very attractive to exports and imports companies in these industries:
- Agriculture, bio & medical
- Advanced manufacturing
- Basic & supporting industries
- Digital, creative & high value services
- R&D & core technology development
The tax incentive system in Thailand can be complicated with different categories of exemption under 6 groups – A1 to A4, and B1 to B2. Eligible companies can enjoy up to 13 years of corporate tax exemption.
R&D activities are also eligible for Thailand tax incentives for up to 13 years with no cap.