(TAX UPDATE) New Incentive Framework (NIF) to replace MIDA Tax Incentive Applications (Part 2/2)

NIF FAQ updated 19 January 2026 : key points for investors

At a glance

Phased implementation:
- Manufacturing: NIF takes effect from 1 March 2026.
- Services: targeted in Q2 2026; actual date to be announced separately.
Two incentives only (choose one): Special Tax Rate (STR) or Investment Tax Allowance (ITA) are mutually exclusive.
Assessment approach : eligibility begins with pre-qualifiers in the guideline, followed by assessment using the NIA Scorecard.
Application channel: online submission via Invest Malaysia Portal.
Evaluation fee: RM2,500 per application.

What’s changing

From “promoted list” to “outcome-based”:
NIF removes the promoted activities/products list mechanism typically associated with the current regime and shifts to a tiered, outcome-based assessment, where incentive quantum is linked to national outcomes measured via the NIA Scorecard.
NIA Scorecard focus (6 pillars):
Economic complexity, high-value jobs, domestic linkages, clusters, inclusivity, and ESG practices.
Tiering concept:
Approved companies may receive two tiers of incentives depending on compliance with conditions and delivery of outcomes (i.e. better delivery may unlock better incentive outcome).

Actions for investors (practical next steps)

Confirm which regime your project will fall under
If your manufacturing incentive application is not submitted by the cut-off date, new applications from 1 March 2026 will be assessed under NIF.
Prepare “scorecard-ready” evidence early
Start documenting commitments aligned to the Scorecard pillars (jobs, talent development, local supply chain, technology, ESG). Under NIF, these items are not “nice to have” — they directly influence incentive quantum.
Decide early: STR vs ITA (cannot take both)
Under NIF, you must select either STR or ITA for the qualifying project.
STR provides a reduced corporate income tax rate (range depends on category and assessment outcome), with the guideline indicating 5%–10% (new investment) and up to 5 years.
ITA provides an allowance of up to 60%-100% on QCE, claimable within an incentive period of up to 5 years, and the allowance may be utilised to offset 70%–100% of statutory income.
If you plan to “switch” from existing regime to NIF, check eligibility
Switching is allowed only if evaluation is not completed and the company has not commenced operations. “Commencement” is defined as the first sales / commercial invoice issued. A new evaluation fee applies.
For ITA planning: do not assume backdating
For ITA under NIF, only capital expenditure incurred after the application submission date qualifies as QCE.
Consider interaction with Reinvestment Allowance (RA)
NIF incentives are mutually exclusive with RA under Schedule 7A. Companies on RA may elect to continue RA or move to NIF (if eligible).
Plan for approval steps and ongoing compliance
Applications go through the National Committee on Investment (NCI). Companies receive a principle approval letter (tiering + conditions) followed by an approval letter (commencement date + entitlement). Claims are filed to IRBM via BNCP, and incentives are subject to IRBM audit and potential additional assessments for non-compliance.

Key dates

19 January 2026: NIF FAQ updated date.
28 February 2026, 3.00 pm: last date to submit manufacturing tax incentive applications under the existing PIA 1986 framework (including applications still in draft in the portal).
1 March 2026: new manufacturing applications submitted from this date onwards will be assessed under NIF.
Services sector: targeted in Q2 2026; actual date to be announced separately.

Reference materials

Further details, eligibility, and application processes are to be read together with the NIF Implementation Guidelines on the official MITI and MIDA portals.

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