(TAX UPDATE) Why Your MIDA Tax Incentive Application May Get Rejected

Dear Valued Clients,

Securing tax incentives from the Malaysian Investment Development Authority (MIDA) can significantly reduce your project costs and improve return on investment. However, many applications face rejection due to avoidable mistakes or non-compliance with MIDA's strict requirements.

As your trusted advisor, we have summarised key reasons why MIDA tax incentive applications may be rejected, based on industry experience and practical observations. Understanding these factors is crucial to improving your chances of approval.

1. Procedural and Submission Errors

Incomplete Applications
Missing information or supporting documents remains the most common reason for rejection. MIDA may return incomplete submissions, leading to processing delays and possible rejection if not corrected promptly.

Inaccurate or Inconsistent Information
Discrepancies across forms, project details, or financial data can trigger additional queries from MIDA. Failure to address these in a timely and satisfactory manner may jeopardise your application.

Incorrect Timing of Submission
Certain incentives, such as Pioneer Status or Investment Tax Allowance, require applications to be submitted before incurring qualifying capital expenditure (CAPEX). Late submissions, even by a small margin, result in automatic disqualification.

Lack of Responsiveness
Failure to respond to MIDA's requests for clarification or additional documentation within the stipulated timeframe can significantly delay the process or lead to rejection.

2. Failure to Meet Eligibility Criteria

Preliminary Screening Failures
MIDA conducts initial checks to assess basic eligibility. Applications failing to meet minimum thresholds—such as project size, qualifying activities, or sector requirements—will be rejected early in the process.

Prior Non-Compliance

Companies that previously had incentives revoked due to non-compliance (e.g., failure to meet approved milestones or reporting requirements) are generally barred from reapplying for the same incentive.

Expired Incentive Period
Projects with an expired incentive window are no longer eligible for new applications under the same scheme.

Conflicting Incentives

Applicants cannot enjoy overlapping government incentives. For example, renewable energy projects under the Feed-in Tariff (FiT) scheme are ineligible for the Green Investment Tax Allowance (GITA).

3. Non-Compliance with Incentive-Specific Conditions

Failure to Meet Technical Certification Requirements
Specialised incentives, such as those under the green technology sector, require strict technical compliance. For example, equipment must be certified under the MyHIJAU Mark or an equivalent standard. Non-compliance leads to rejection.

Breach of Approval Conditions
MIDA's approval letters outline specific conditions, including employment targets, capital expenditure milestones, or local sourcing obligations. Breaching these conditions can result in the withdrawal of approval, even after initial acceptance.

Post-Approval Deadlines Not Met
After receiving conditional approval, companies must meet key deadlines, such as applying for the determination of effective dates within 24 months. Missing these deadlines may lead to automatic cancellation of the incentive.

Final Consideration by National Committee on Investment (NCI)

All tax incentive applications are subject to final review by the National Committee on Investment (NCI). If rejected, MIDA will formally notify the applicant, specifying reasons. In most cases, companies may re-apply after addressing the highlighted deficiencies.

Conclusion

The MIDA tax incentive application process is highly competitive and strictly governed. SMEs aiming to benefit from these incentives must ensure complete, accurate, and timely submissions, backed by compliance with both eligibility and ongoing approval conditions.

Our team at KTP stands ready to guide you through this complex process, helping you avoid common pitfalls and improving your chances of securing valuable tax benefits.

If you are planning a qualifying project or have concerns about a pending application, we encourage you to consult with us early to maximise your success potential.

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