Malaysia will roll out a new, outcome-based incentive framework from March 2026, starting with the manufacturing sector, offering targeted tax incentives tied to measurable economic contributions under the country’s broader investment and industrial strategies.
Malaysia’s Ministry of Investment, Trade and Industry (MITI) announced on 29 January 2026 that the government will implement the new incentive framework (NIF), effective 1 March 2026, commencing with the manufacturing sector, followed by the services sector in the second quarter of 2026.
The New Incentive Framework (NIF) aligns with the announcement made under Budget 2026. The NIF is designed to strengthen Malaysia’s economic resilience by linking the incentives to the achievement of specific measurable outcomes aligned with the nation’s strategic priorities.
The NIF framework adopts a tiered and outcome-based approach that is consistent with the country’s broader economic and industrial policy aspirations. Its implementation is guided by two key national strategies, namely the New Investment Policy based on National Investment Aspirations (NIA) and the New Industrial Master Plan 2030 (NIMP 2030).
Types of tax incentives under the NIF
Under the NIF, the Government offers two (2) primary tax incentives, which are mutually exclusive, whereby applicants are required to select one incentive for each qualifying project:
1. Special tax rate (STR):A special corporate income tax rate for a speciϐied period.
2. Investment tax allowance (ITA): A capital expenditure-based incentive based on the percentage of Qualifying Capital Expenditure (QCE) that can be used to offset against statutory income.
The granting of incentives under the NIF will be determined based on the company’s commitments and an assessment using the NIA Scorecard, which takes into account the investment’s contribution towards economic value creation, local talent development, strengthening of domestic supply chains, technology transfer, and sustainability.
Companies may apply for incentives based on the prescribed categories, subject to compliance with the relevant requirements as detailed in the NIF Implementation Guidelines for the Manufacturing Sector.
The NIF Implementation Guidelines outline the eligibility criteria, NIA Scorecard assessment parameters, category of incentive, as well as the application and evaluation processes. Further information on the NIF Implementation Guidelines is available on the ofϐicial portals of the Ministry of Investment, Trade and Industry (MITI) and the Malaysian Investment Development Authority (MIDA).
MIDA has released an FAQ and NIF Implementation Guidelines for the manufacturing sector, detailing eligibility requirements, assessment criteria, available incentives, and the application and evaluation process.
Categories of incentive
The Investment Tax Allowance (ITA) is a capital expenditure-based incentive that allows a company to offset a percentage of its qualifying capital expenditure (QCE) against its statutory income. This allowance is granted on QCE incurred within a specified period. Any unutilised allowance can be carried forward to subsequent years until fully utilised.
Companies are eligible to apply for incentives based on the following categories, subject to fulfilling the requirements specified for the incentives:
| Category of incentive | Special tax rate (STR) | Investment tax allowance (ITA) |
| Incentives for New Investment | 0% to 10% for up to 15 years | Up to 100% for up to 15 years (Offsets 70% to 100% of statutory income)
N/A N/A |
| Incentives for Less Developed Areas | 0% to 15% for up to 15 years | |
| Incentives for Small Companies | 3% to 12% for up to 15 years |
