(Tax Update) Johor-Singapore Special Economic Zone (JS-SEZ): A Strategic Incentive Framework for Regional Investors

The Johor-Singapore Special Economic Zone (JS-SEZ) represents a landmark initiative by the Malaysian Government in collaboration with Singapore to position Johor as a regional investment hub. This initiative offers an unprecedented suite of fiscal incentives across nine flagship zones in Johor, designed to attract high-value investments in strategic sectors.

With preferential tax rates as low as 5% for up to 15 years, a 15% flat tax rate for knowledge workers, generous investment allowances, and various sector-specific benefits, the JS-SEZ is expected to drive significant economic activity and cross-border integration.

Key Highlights of the JS-SEZ Incentive Framework

1. Manufacturing Sector Incentives

New Companies
- Investment exceeding RM1 billion: 5% income tax rate for 15 years
- Investment between RM500 million and RM1 billion: 5% income tax rate for 10 years
Existing Companies
- New business segments (non-expansion): 100% Investment Tax Allowance (ITA) for five years, offsettable against 100% of statutory income

Flagship Zones:
Kulai-Sedenak (AI & Quantum Computing, Medical Devices, Pharmaceuticals)
Senai-Skudai (Aerospace Manufacturing & MRO Services)

2. Global Services Hub
A reduced tax rate of 5% for up to 15 years is offered to companies establishing regional management activities such as strategic business planning, global treasury, and corporate development.

Eligibility Requirements:

Annual operating expenditure of RM50 million or more
Control over at least 10 related entities
Minimum annual turnover of RM500 million
At least 50% of high-value positions (≥ RM10,000/month) filled by Malaysians

Flagship Zones:
Johor Bahru Waterfront and Iskandar Puteri

3. Integrated Tourism Projects
Companies investing in large-scale tourism-related developments are eligible for a 100% ITA on qualifying capital expenditure for five years, deductible against 70% of statutory income. Tax deductions of up to RM1 million per year are also available for contributions to hallmark events.

Key Conditions:

No existing tourism entity in Malaysia
Minimum RM2.5 million paid-up capital
Minimum RM500 million investment (excluding land)
Development must include a hotel (≥80 rooms) and a major attraction

Flagship Zone:
Desaru-Penawar

4. Smart Logistics
100% ITA on capital investment for five years, deductible against 100% of statutory income, is offered for logistics facilities including regional distribution hubs and cold chain storage.

Key Conditions:

Minimum RM500 million investment
Minimum warehouse size of 50,000 sqm
80% Malaysian workforce
At least 30% of high-value positions (≥ RM10,000/month) to be held by Malaysians

Flagship Zone:
Tanjung Pelepas

5. Downstream Specialty Chemicals
Companies in sectors such as oleochemicals, polymers, and fertilizers may choose between:

5% or 10% income tax rate for up to 10 years
Or 100% ITA for five years, offsettable against 100% of statutory income

Key Conditions:

Minimum RM500 million investment (excluding land)
RM2.5 million minimum paid-up capital
New or diversified business activity

Flagship Zone:
Tanjung Langsat–Kong Kong

Additional Incentives and Considerations

Accelerated Capital Allowance (ACA)
Qualifying businesses may claim ACA on renovation costs related to utilities, fittings, flooring, air-conditioning, employee facilities, and green technology. This incentive is available once per JS-SEZ business operation.

Stamp Duty, Sales Tax, and Import Duty Exemptions
Applicable on a case-by-case basis, subject to Customs and MOF approval for qualifying companies.

Environmental, Social and Governance (ESG) Compliance
Companies are encouraged to integrate ESG principles, which may influence incentive renewals or additional support in future policy updates.

Application Process and Key Dates

Application Period: 1 January 2025 to 31 December 2034
Submission Platform: MIDA’s InvestMalaysia portal
Approval: Subject to evaluation by MIDA, the Johor State Government, and final approval by the Ministry of Finance

Companies must ensure continued compliance with Malaysia’s tax framework, including obligations under the e-Invoice regime (effective July 2025 for Tier 2 taxpayers), Transfer Pricing Rules, and other IRB reporting requirements. Non-compliance may result in clawback of incentives.

Looking Ahead

A comprehensive JS-SEZ blueprint and technical guidelines are expected to be released by the end of 2025. These documents are anticipated to provide further clarification on approved activities, incentive renewal mechanisms, and cross-border facilitation arrangements with Singapore.

Next Steps

Investors are advised to:

Conduct feasibility assessments for qualifying investments
Begin early engagement with MIDA and IMFC-J
Align business operations with the incentive requirements, particularly around high-value job creation and ESG compliance

For advisory support, please contact:

KTP & Company PLT
Website: www.ktp.com.my
Email: tax@ktp.com.my

Visit Us

Wisma KTP, 53 Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru
Wisma THK, 41, Jalan Molek 1/8, Taman Molek, 81100 Johor Bahru

KTP (Audit, Tax, Advisory)

An approved audit firm and licensed tax firm operating under the KTP group based in Johor Bahru providing audit, tax planning, advisory and compliance services to clients

THK (Secretarial, Bookkeeping, Payroll, Advisory)

A licensed secretarial firm in Johor Bahru providing fast reliable incorporation, secretarial services, corporate compliance services, outsourcing bookkeeping, and payroll services to clients