Incentives for the Tourism Industry

Incentives for the Tourism Industry

Tourism projects, including eco-tourism and agro-tourism projects, are eligible for tax incentives. These include hotel businesses, tourist projects including in-door and out-door theme parks, construction of holiday camps, recreational projects including recreational camps and construction of convention centres with a capacity to accommodate at least 3,000 participants.

Incentives for the Hotels and Tourism Projects

Companies undertaking new investments in 1 to 5 star hotels and tourism projects are eligible for the following incentives:

(i) Pioneer Status

A company granted Pioneer Status enjoys a five year partial exemption from the payment of income tax. It will only have to pay tax on 30% of its statutory income, commencing from its Production Day which is determined by the Minister of International Trade and Industry.

Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company.

Applications should be submitted to MIDA before commencement of business.

(ii) Investment Tax Allowance

As an alternative to Pioneer Status, a company may apply for Investment Tax Allowance (ITA). A company granted the ITA gets an allowance of 60% on the qualifying capital expenditure incurred within five years from the date on which the first qualifying capital expenditure is incurred.

Companies can offset this allowance against 70% of statutory income in the year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Applications should be submitted to MIDA before commencement of business.

Applications for 4 and 5 star hotels received by 31 December 2016 are eligible for these incentives.

(iii) Enhanced Incentives for Undertaking New Investment in Hotel

Companies undertaking new investments in 4 and 5 star hotels in Sabah and Sarawak are eligible for the following incentives:

a. Pioneer Status, with income tax exemption of 100% of the statutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. Investment Tax Allowance of 100% on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 100% of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Applications received by 31 December 2016 are eligible for these incentives. Applications should be submitted to MIDA before commencement of business.

(iv) Incentives for Reinvestments in Hotels

Companies that reinvest in the expansion and modernisation in 1 to 5 star hotels are eligible for additional rounds of Investment Tax Allowance as follows:

60% (100% for 4 and 5 star in Sabah and Sarawak) on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% (100% for 4 and 5 star in Sabah and Sarawak) of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Companies are eligible to apply for ITA for the three rounds of reinvestments. For group of companies, only 3 companies in a group are eligible for tax incentives. (See List of Promoted Products and Activities – Reinvestments)

Applications should be submitted to MIDA before the first qualifying capital expenditure is incurred.

(v) Incentive for Reinvestment in Tourism Projects

Companies that reinvest in the expansion and modernisation in tourism projects are eligible for additional rounds of Pioneer Status or Investment Tax Allowance as follows:

a. Pioneer Status, with income tax exemption of 70% of the statutory income for a period of five years. Unabsorbed capital allowances as well as accumulated losses incurred during the pioneer period can be carried forward and deducted from the post pioneer income of the company; or

b. Investment Tax Allowance of 60% on the qualifying capital expenditure incurred within a period of five years. The allowance can be offset against 70% of the statutory income in each year of assessment. Any unutilised allowances can be carried forward to subsequent years until fully utilised.

Companies are eligible to apply for PS and ITA for the two rounds of reinvestments. (See List of Promoted Products and Activities – Reinvestments)

Applications should be submitted to MIDA before the first qualifying capital expenditure is incurred.

http://www.mida.gov.my

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