6/5/2015

PRINCIPAL HUB INCENTIVE SCHEME

INVESTMENT PROMOTION
WORK PROGRAMME & STRATEGIES
INVESTMENT PROMOTION
2015
WORK PROGRAMME & STRATEGIES
2014

ROESLINA ABBAS
REGIONAL ESTABLISHMENT AND SUPPLY CHAIN MANAGEMENT DIVISION
MALAYSIAN INVESTMENT DEVELOPMENT AUTHORITY (MIDA) 1
6 MAY 2015

MAIN FOCUS
 MIDA: PROMOTION OF INVESTMENT IN
REGIONAL ESTABLISHMENT AND SUPPLY CHAIN
MANAGEMENT OPERATION.

 RATIONALE FOR PRINCIPAL HUB INCENTIVE

SCHEME.

 KEY FEATURES AND GUIDELINES ON PRINCIPAL

HUB INCENTIVE SCHEME.

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KEY MILESTONES :
REGIONAL ESTABLISHMENT AND OPERATIONS PROMOTED BY MIDA

2015 PRINCIPAL HUB

Global
Operations 2012 TREASURY MANAGEMENT CENTRE (TMC)
Hub (GOH)

2004 OPERATIONAL HEADQUARTERS (OHQ)

2003 REGIONAL DISTRIBUTION CENTRE (RDC)

INTERNATIONAL PROCUREMENT CENTRE (IPC)

2003 INTEGRATED LOGISTICS SERVICES (ILS)

INTERNATIONAL ILS STATUS (IILS)

2003 REPRESENTATIVE OFFICE (RE)

REGIONAL OFFICE (RO)

INVESTMENT APPROVED
AS AT 31 DECEMBER 2014
Regional Operations No. of Investment Employment
Companies (RM billion) Opportunities
RE / RO 2,903 2.6 3,235

OHQ 254 6.0 13,609

IPC 243 8.9 2,729

RDC 33 0.7 785

ILS 58 3.7 14,371

TMC 8 0.2 130

GLOBAL OPERATION HUB 28 24.4 18,239

GRAND TOTAL: 3,527 46.5 53,098

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REGIONAL ESTABLISHMENT APPROVED BY

MAJOR STATES: 2006 - 2014
Penang
OHQ-5
IPC-12 Kedah
RDC-3 OHQ-1
GOH- 8 IPC-3 Labuan
GOH- 1 OHQ-1
Johor
Selangor
OHQ-2
OHQ-61
IPC-13
IPC-19
RDC-6
RDC-10
GOH -2
GOH- 7
Melaka Negeri
KL
IPC-2 Sembilan
OHQ-75
RDC-1 OHQ-1 KEY SECTORS:-
IPC-10
Electrical & Electronic
RDC-4 IPC-4 Oil & Gas
GOH- 9 GOH- 1 Automotive
Medical Devices
Machinery and Equipment
ICT

APPROVAL TREND: GLOBAL OPERATION HUB

2011 - 2014

2011 2012 2013 2014

RM 9.6 RM 4.4 RM 7.9 RM 2.4
billion billion billion billion

TOTAL TOTAL TOTAL TOTAL

INVESTMENT= INVESTMENT= INVESTMENT= INVESTMENT=
RM 11.3 billion RM 6.5 billion RM 12.2 billion RM 5.4 billion

GLOBAL OPERATION HUB > 50% OF ANNUAL TOTAL INVESTMENT APPROVED

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“REGIONAL & GLOBAL OPERATION HUBS”

- MALAYSIA IS CHOSEN -

RATIONALE
Globalisation -
Increasing trend of a
more complex business
models : Centre Of
Excellence, Global Hub
Operators and Solution
Providers

Significant presence as Resource dependency –

global industry group PRINCIPAL HUB raw materials, trading
player – close proximity and manufacturing
to global MNCs INCENTIVE activities, R&D, talents,
infrastructures

Effective and efficient

trade-facilitation
measures

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NEW PRINCIPAL HUB INCENTIVE

NATIONAL BUDGET 2015

OHQ
PRINCIPAL HUB
RDC INCENTIVE
IPC

• Accommodate increasing trend of global off-shoring

activities.
• Strengthen Malaysia’s position as competitive regional and
global operation base.
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DEFINITION OF PRINCIPAL HUB COMPANY

INVESTMENT PROMOTION
A locally incorporated company that uses
WORK
Malaysia as aPROGRAMME & STRATEGIES
base for PROMOTION
conducting its regional
INVESTMENT
and WORK
global PROGRAMME 2015and operations to
businesses & STRATEGIES
manage, control, 2014 and support its key
functions including management of risks,
decision making, strategic business activities,
trading, finance, management and human
resource.

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KEY FEATURES
“TIERED” TAX RATE REDUCTION BASED ON
LEVEL OF:-
> Business Spending
> Value added functions
> High Value Job Creation
> Number of countries served

WIDER SERVICES COVERAGE :-

NETWORKS COMPANIES

“related companies or any entity within the group including

subsidiaries, branches, joint ventures, franchises or any other
company related to applicants’ supply chain and business

with contractual agreements”.

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KEY FEATURES
SUPPORT FULL OFFSHORE TRADING AND
MANAGEMENT ACTIVITIES
> No drop shipment limit or threshold.
> No restriction on distribution of only owned-brand
products.
> No requirement to serve local manufacturing
company under own Group.

EMPHASIS ON HIGH VALUE JOB CREATION

“Jobs that require higher and more diverse set of
managerial/technical/ professional skills such as management,
analytics, communication, problem-solving and proficiency in

information technology.”

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•EMPHAEMPHASIS

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INCENTIVE FOR PRINCIPAL HUB

3-TIERED CORPORATE TAXATION RATE

3-Tier Incentive Tier 3 Tier 2 Tier 1

Blocks (years) 5 +5 5 +5 5 +5
• Tax rate 10% 5% 0%

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PRINCIPAL HUB INCENTIVE

3-Tier Incentive Tier 3 Tier 2 Tier 1
Blocks 5 +5 5 +5 5 +5
Tax rate 10% 5% 0%

 High Value job 15 Jobs: base 30 Jobs: base 50 Jobs: base

by end of year 3 commitment commitment commitment
with minimum +20% +20% +20%
monthly salary
of RM5,000.00

 At least 50% must

be Malaysians by
end of year 3

 Including key 3 4 5
positions
- Minimum
monthly salary of
RM25,000.00

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PRINCIPAL HUB INCENTIVE

3-Tier Tier-3 Tier-2 Tier-1
Incentive
Blocks 5 +5 5 +5 5 +5
 Annual RM3M Base
Commitment
RM5M Base
Commitment
RM10M Base
Commitment
Business +30% +30% +30%
Spending

 Qualifying Strategic + 2 Regional P&L + 2 Regional P&L + 2

Services

 Serves / 3 4 5
Business
Control of
no. of
countries
 Use of Examples: Local Financial Institution Services (including
local finance and treasury), logistics , legal, arbitration and
Ancillary other professional services.
Services
 Trading of RM300 M
Goods:
Annual 15
Sales
Turnover

ELIGIBILITY CRITERIA
Local incorporation under the Companies Act 1965.

Paid-up capital of more than RM2.5 Million.

Carry out at least three (3) Qualifying Services, of which one

must be from the Strategic Services Cluster.

Serves and control Network Companies in at least three (3)

countries outside Malaysia. The applicant should be the
planning, control and reporting Centre for the Qualifying
Services.

Minimum Annual Sales Turnover Of RM300 Million

(Additional requirement for goods-based Applicant
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Company).

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ELIGIBILITY CRITERIA ...cont.

Employment Requirement:
Tier 3: 15 high value jobs, including 3 key strategic/management positions
Tier 2: 30 high value jobs, including 4 key strategic/management positions
Tier 1: 50 high value jobs, including 5 key strategic/management positions

• Minimum Salary Of High Value Jobs: At Least RM5,000/-

• Minimum Salary Of Key Strategic/Management Position: At Least RM25,000/-

• At Least 50% Of High Value Jobs Must Occupied By Malaysians By End Of Year 3

Annual Business Spending

Tier 3: RM3Million
Tier 2: RM5 Million
Tier 1: RM10 Million

Significant Use Malaysia’s Ancillary Services And Facilities

Each tier (Tier 3 – Tier 1) can be considered for an extension up to 5 years
within the tiers subject to fulfilling the above criteria and:

o Jobs: 20% incremental commitment of the existing employment;

and
o Annual Business spending: 30% incremental commitment of the
existing annual business spending
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ELIGIBILITY CRITERIA ….cont.

Must have HR training and development plan for Malaysians.

Malaysian-owned and incorporated businesses are

encouraged to provide Headquarters-related Services and
Expertise to their Overseas Companies.

Income Tax Exemption Threshold Received From

Services/Good-based Company Inside and Outside of Malaysia
is based on the ratio of 30:70 (Inside: Outside).

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FACILITIES
Foreign Exchange Administration flexibilities will be accorded in support of
business efficiency and competitiveness of companies under the Principal
Hub.

Bring in raw materials, components or finished products with customs duty

exemption into free industrial zones, LMW, free commercial zones and
bonded warehouses for production or re-packaging, cargo consolidation and
integration before distribution to its final consumers for good-based
companies.

No local equity / ownership condition.

Expatriate posts based on requirements of applicant’s business plan

subject to current policy on expatriates.

Use foreign professional services only when locally-owned services

are not available.

A foreign-owned company is allowed to acquire fixed assets for the purpose

of carrying out the operations of its business plan.

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MECHANISM
Incentive to be provided under section 127 (3) (b) the Income
Tax Act, 1967 and approved through the National Committee
on Investment (NCI).

Commitments on business spending and high value job

creation will be given flexibility to comply by end of year 3 of
each Tier. Failing to do so claw back on tax will be taken
from Year 1. This relaxation is not applicable for existing
company who already enjoyed IPC/RDC/OHQ incentive.

Company must submit yearly report to MIDA for evaluation of

performance. Failing to do so, the incentive will be
withdrawn.
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MECHANISM …cont.

For existing companies that have completed IPC, OHQ

or RDC incentive can be considered the Principal Hub
incentive by complying the criteria of Tier 1 for a
maximum incentive period of 5 years with corporate tax
rate of 10%. Consideration is subject to the following
additional commitment under Tier 1:

a. 20% incremental commitment of the existing

employment; and

b. 30% incremental commitment of the existing

business spending.

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EFFECTIVE DATE

 New applications received by Malaysian Investment

Development Authority (MIDA) from 1 May 2015 until
30 April 2018 are eligible to be considered for this
incentive.

 Application for the extension of the incentive period

must be submitted to MIDA six (6) months before the
expiry of the initial incentive period.

 The extended incentive period shall begin from the date

following the end of the initial incentive period and
continue for a period of five (5) years.
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QUALIFYING SERVICES
Strategic Services Business Services
1. Regional P&L/Business Unit 1. Bid and Tender Management
Management 2. Treasury and Fund Management
2. Strategic Business Planning and 3. Research, Development &
Corporate Development Innovation
3. Corporate Finance Advisory Services 4. Project Management
4. Brand Management 5. Sales and Marketing
5. IP Management 6. Business Development
6. Senior-level Talent Acquisition and 7. Technical Support and
Management Consultancy
8. Information Management and
Shared Services
Processing
1. Corporate Training and Human
9. Economic/Investment Research
Resource Management
Analysis
2. Finance and Accounting
10. Strategic Sourcing, Procurement
(Transactions, Internal Audit)
and Distribution
3. General Administration
11. Logistics Services
4. IT Services
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POTENTIAL MARKET
 MNCs and large local companies (manufacturing and services
companies) having regional or global presence and networking.

 MNCs intend to undertake significant level of headquarter-related

business services in Malaysia servicing network companies in the
ASEAN / Asia region and beyond.

 MNCs which have manufacturing base in Malaysia / ASEAN and

intend to move-up the value chain into services activities.

 MNCs involved in offshore trading and merchandising activities

(off-shore transaction i.e. sourcing, marketing, etc).

 MNCs with supply chain connectivity within the region.

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CONTACT US
Regional Establishment & Supply Chain Management Division
Malaysian Investment Development Authority (MIDA)
MIDA Sentral, No. 5, Jalan Stesen Sentral 5
Kuala Lumpur Sentral, 50470 Kuala Lumpur.
Tel. : +603 2267 6676
Fax : +603 2274 5483
E-mail: investmalaysia@mida.gov.my 25

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