(TAX UPDATE) New Incentive Framework (NIF) to replace MIDA Tax Incentive Applications (Part 1/2)

Introduction

Before we talk about the new NIF, it is important to know today’s “normal” baseline: under the Promotion of Investments Act 1986 (PIA 1986), a company can generally apply for Pioneer Status (PS) or Investment Tax Allowance (ITA) only if the project is a gazetted “promoted activity” or “promoted product” (as published by MIDA).

MIDA will assess the application based on key priorities such as the level of value-added, technology used, and industrial linkages (local supply chain impact). Also, the application must be submitted to MIDA before the company starts operation/production, and typically you choose either PS or ITA as your main incentive route

At a glance (what you need to know)

Manufacturing sector: NIF effective 1 March 2026.
Services sector: targeted in Q2 2026; exact date to be announced.
NIF shifts incentives to an outcome-based, tiered approach, assessed using the NIA Scorecard.
Under NIF, eligible companies apply for one of two mutually exclusive incentives: Special Tax Rate (STR) or ITA.
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.
Transition cut-off (Manufacturing): Government will stop accepting new manufacturing incentive applications under PIA 1986 after 28 February 2026, with a stated submission deadline of 28 February 2026, 3.00 pm. Existing approvals remain valid based on approved terms.

What is changing under NIF (and why it matters)

NIF represents a structural shift in Malaysia’s incentive design.

Incentives are no longer primarily assessed based on “promoted list” eligibility alone. Instead, incentives will be linked to measurable outcomes aligned with national priorities such as economic value creation, local talent development, technology transfer, domestic supply chain strengthening, and sustainability.

For investors and tax teams, this means the incentive process becomes more like an investment impact case : companies must be ready to evidence commitments, deliverables, and follow-through.

How NIF is assessed: NIA Scorecard

NIF will use the NIA Scorecard as the primary mechanism to assess and quantify investment impact based on company commitments and contributions.

Practically, applicants should expect greater focus on:

quality of jobs and local capability building
depth of local supply chain participation
technology adoption / transfer and R&D elements
ESG outcomes and sustainability roadmap

Incentives under NIF: STR vs ITA (choose one)

Under NIF, eligible companies may apply for either:

Special Tax Rate (STR), or
Investment Tax Allowance (ITA)
and these are mutually exclusive.

MIDA’s manufacturing guideline further explains ITA as a capital expenditure-based allowance on qualifying capital expenditure, with carry-forward of unutilised allowance (subject to the prescribed rules in the guideline).

Transition rule: last window for manufacturing applications under PIA 1986

For manufacturing projects still planning to apply under the existing PIA 1986 route:

Last submission deadline: 28 February 2026, 3.00 pm, including applications still in draft stage in the Invest Malaysia portal.

This is a critical planning point for projects with board approvals, feasibility sign-off, and documentation still in progress.

Implications and recommended actions for businesses

1) Re-check your project timeline immediately
If your project is manufacturing and you intended to apply under PIA 1986, confirm whether submission by 28 February 2026 (3.00 pm) is still achievable.

2) Start building “scorecard-ready” documentation
Even before formal submission, prepare internal documentation on hiring, training, technology roadmap, local sourcing plan, and sustainability commitments.

3) STR vs ITA decision becomes an early tax modelling exercise
Under NIF, the incentive route is a strategic choice. Investors should model expected profitability, capital expenditure profile, and timing of utilisation/benefit before deciding.

4) Governance and delivery matter more
Outcome-based incentives typically come with stronger monitoring expectations. Businesses should ensure internal ownership (finance, HR, operations, sustainability) is aligned from day one.

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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