Promotion of Investments Act 1986 (Act 327).

This Act, consisting of 55 Articles, aims to achieve the following objectives: (i) offer a range of incentives and income tax relief to companies involved in specified activities or products such as manufacturing, agriculture, tourism, exports, research and development, etc.; (ii) encourage foreign investments in Malaysia across industrial, agricultural, and other commercial sectors by providing specific tax reliefs and investment allowances. Applicable to resident companies in Malaysia that have been granted pioneer status, investment tax allowance, industrial adjustment allowance, income abatement, export allowance, or infrastructure allowance by either the Minister of International Trade and Industry or the Minister of Finance.
The Act outlines specific criteria, processes, and rates for various incentives and relief, including: (i) Pioneer Status: Companies engaged in promoted activities or products are eligible for a tax relief period lasting five to ten years. During this period, income from the pioneer business is either tax-exempt or subject to a reduced rate; (ii) Investment Tax Allowance: Companies incurring capital expenditure on promoted activities or products can claim an allowance ranging from 60% to 100% of qualifying expenditure. This allowance can be set off against 70% to 100% of the statutory income for each assessment year; (iii) Industrial Adjustment Allowance: Companies investing in industrial adjustment, involving modernization, upgrading, or diversification, can claim an allowance of 60% of qualifying expenditure. This allowance is set off against 70% of statutory income for each assessment year; (iv) Abatement of Adjusted Income: Companies locating their business in a promoted industrial area or complying with government policies on capital participation or employment can claim an abatement of 10% to 15% of adjusted income for each assessment year; (v) Abatement of Statutory Income for Exports: Companies exporting manufactured products or agricultural produce can claim an abatement of 10% to 15% of statutory income derived from such exports for each assessment year; (vi) Export Allowance: Companies exporting manufactured products or agricultural produce can claim an allowance of 10% to 15% of the increase in export value over the previous year. This allowance is set off against 70% of statutory income for each assessment year; (vii) Deductions for Promotion of Exports: Companies incurring expenses to seek opportunities, create, or increase demand for the export of goods or agricultural produce can claim deductions for such expenses, in addition to any deductions allowable under the Income Tax Act 1967; (viii) Infrastructure Allowance: Companies incurring capital expenditure on infrastructure, providing basic amenities or facilities for area development, can claim an allowance of 100% of qualifying expenditure. This allowance is set off against 100% of statutory income for each assessment year. The Act also empowers public officers with the authority for entry, inspection, and sampling.