Malaysia has introduced a performance-based tax exemption for tour operator companies under the Income Tax (Tour Operator Company) (Exemption) Order 2026, effective from YA 2026 to YA 2027, rewarding qualifying businesses that grow foreign tourist arrivals while meeting strict eligibility, reporting, and accounting requirements.
The Malaysian government has issued the Income Tax (Tour Operator Company) (Exemption) Order 2026 on 7 April 2026. The order applies for the year of assessment (YA) 2026 to YA 2027, setting out a targeted tax incentive for qualifying tourism businesses that serve foreign visitors.
Who qualifies for the exemption?
A company must meet all of the following conditions to be treated as a “qualifying person”:
- Be a resident in Malaysia and incorporated under the Companies Act 2016
- Hold a valid licence as a tour operator under the Tourism Industry Act 1992
- Actively carry out a defined qualifying tourism activity
A “foreign tourist” is defined as any non-Malaysian citizen and non-resident individual. Only tour packages within Malaysia that serve foreign tourists qualify. The eligible activity specifically covers tour operating services that package travel within Malaysia, including transport by air, land, or sea, together with accommodation.
Scope of tax exemption and key conditions
The exemption applies to statutory income derived from qualifying tourism activities, but only up to the “value of increase in income”. This means the exemption is calculated based on growth in tourism income compared to the immediately preceding period.
The formula is essentially: Current basis period tourism income minus previous period tourism income.
However, the incentive is conditional. A company must attract at least 1,000 foreign tourists per basis period to qualify. This figure must be formally verified in writing by an authorised officer from the Ministry of Tourism, Arts and Culture Malaysia.
Importantly, businesses are still required to:
- File tax returns and financial statements
- Comply fully with all reporting obligations under the Income Tax Act 1967
Separate accounting and compliance requirements
Where a company operates both qualifying and non-qualifying businesses, each must be treated as a separate income source. Firms benefiting from the exemption are also required to maintain distinct accounting records for each activity throughout every basis period.
