Malaysia's New Incentive Framework takes effect on 1 March 2026 for manufacturing companies, replacing the PIA Act 1986 with an outcome-based system that offers Special Tax Rates as low as 0% or Investment Tax Allowances up to 100% for periods reaching 15 years, contingent on companies meeting national priorities, including economic value creation, talent development, and sustainability goals.
The Malaysian Investment Development Authority (MIDA) has launched the New Incentive Framework (NIF), which goes into effect on 1 March 2026 for manufacturing and later in Q2 2026 for the services sector.
The NIF adopts an outcome-based and tiered approach, whereby the granting of incentives is directly linked to the achievement of outcomes aligned with national strategic priorities. The framework is designed in line with the New Investment Policy based on the National Investment Aspirations (NIP–NIA) and the New Industrial Master Plan 2030 (NIMP 2030), with emphasis on economic value creation, local talent development, technology transfer, strengthening of domestic supply chains, and sustainability considerations.
To support the effective implementation of the NIF, the NIA Scorecard will be utilised as the primary assessment mechanism to measure and quantify investment impacts based on companies’ commitments and contributions to national priorities. Under the NIF, eligible companies may apply for one of two mutually exclusive tax incentives, namely the Special Tax Rate (STR) or the Investment Tax Allowance (ITA), subject to the prescribed criteria and assessment requirements.
In tandem with the implementation of the NIF, the Government will no longer accept new incentive applications for the manufacturing sector under the PIA Act 1986 after 28 February 2026. However, existing approvals will not be affected and shall remain valid in accordance with their approved terms and conditions.
Investment tax allowance
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:
| Categories of
Incentive |
Special Tax Rate (STR) | Investment Tax Allowance
(ITA) |
| Incentives for New
Investment |
STR of between 0% to 10%
for a period of up to 15 years. |
ITA of up to 100% for a period
of up to 15 years. The allowance can be used to offset between 70% to 100% of statutory income |
| Incentives for Less
Developed Areas |
STR of between 0% to 15%
for a period of up to 15 years. |
|
| Incentives for
Small Companies |
STR of between 3% to 12%
for a period of up to 15 years. |
