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While many people label Malaysia as a tourism paradise due to its tropical weather, rich cultures, and multi-racial society, foreign investors see Malaysia as an ideal investment destination in Southeast Asia. The Malaysian government has set out effort in full swing to make Kuala Lumpur as one of the liveable and economically competent cities globally by 2020. The establishment of InvestKL is one of the government strategies to attract and facilitate multinational companies (“MNCs”) to do business in the capital city of the country, Kuala Lumpur.


What is InvestKL?

As the name suggests, InvestKL is a government-supported initiative aims to attract more MNCs to invest and do business in Kuala Lumpur. They offer a slew of initiatives / assistance, from the formulation of investment strategies to dealings with regulatory bodies, to help MNCs to tap into the Malaysian market.

Functioned as a government Investment Promotion Agency, InvestKL is poised to attract Fortune 500 and Forbes 2000 type MNCs to venture into Kuala Lumpur as well as to enhance their presence in Southeast Asia by setting up their regional hubs, regional headquarters, operations centres, and other facilities in Greater Kuala Lumpur. In light of this, InvestKL has partnerships with different government agencies to woo MNCs from across the globe, mainly USA, Europe, and Asia Pacific, to traipse the Malaysia’s market.

InvestKL is now on track to achieve its 2020’s vision to bring in 100 MNCs to set up regional establishments in Greater Kuala Lumpur (“Greater KL”) – it has now successfully brought in 64 MNCs to do business in Kuala Lumpur.


How Does InvestKL Help Investors?

You are eligible if you are an MNC with the following criteria:

  1. You are a locally-incorporated company (under the Companies Act 1965)
  2. You have a global network of companies that includes the parent company (or its head office and related companies) outside Malaysia
  3. You have a minimum of five related companies outside Malaysia
  4. You have a pool of highly qualified talents

Here is a list of what InvestKL does to help investors:

  1. It helps foreign investors to formulate business strategy and fiscal package,
  2. It connects them with a slew of specialised business hubs,
  3. It proposes talent management programmes to MNCs,
  4. It helps MNCs to scout for the ideal investment location, and
  5. It helps investors to blend in and get used to Malaysia’s culture and lifestyle with their familiarisation programmes


What You Need to Know about Greater Kuala Lumpur

Greater KL is not merely a marketing strategy, but a term than well-described Kuala Lumpur’s position as the regional business hub in Southeast Asia. Kuala Lumpur is Malaysia’s capital with an important role in the 10th Malaysia Plan, (the government’s blueprint to make Malaysia a top player in global capital investment hotspot). Kuala Lumpur makes the list in the 12 National Key Economic Areas (NKEAs) – 12 key areas/factors with the potential of producing high incomes and making Malaysia globally competitive as the regional hub.

Strategically located at the heart of trade route between China and India, Kuala Lumpur is a springboard for many companies to enter its nearby markets, an underserved yet fast-growing Southeast Asian markets. Besides, its geographical position beside one of the world’s important shipping routes, the Straits of Melaka, has added the geostrategic significance of Kuala Lumpur as the regional business hub.

While Greater KL is economically and commercially competent as an ideal business destination for MNCs (especially in these sectors: oil, gas & energy, engineering services, consumer products, technology, and Industry 4.0), the city is also culturally competitive as many people find it a friendly city to live in and do business.

In fact, the Greater KL was ranked (by the Economist Intelligence Unit) impressively at the 2nd place as the regional/global nerve centre for Management, Finance and Trading activities in Southeast Asia.

Here is the list of key takeaways of what are the perks and eligibility:

a) Management

  • The perks:
    • A 10-year full tax exemption of statutory income – business income, interest income, and royalties.
    • Customs duty exemption – raw materials, components, or finished products.
    • Foreign talents will be taxed according to their chargeable income and the number of days spent in Malaysia.
  • The eligibility:
    • The MNC must be a locally incorporated company.
    • It has at least an operating expenditure of RM1.5 million (USD500,000) every year.
    • Paid-up capital: RM500,000 (USD165,000).
    • Must have at least three related companies outside Malaysia.

b) Finance

  • The perks
    • A 5-year 70% tax exemption (effective 7.5% tax rate) on Qualifying Treasury Management Centre (“TM”) income generated outside Malaysia.
    • 100% tax exemption on Qualifying TMC income generated in Malaysia.
    • Withholding tax exemption – interest payments to overseas banks and related companies.
    • Stamp duty exemption – all loan and service agreements executed for conduct of eligible TMC activities.
    • Foreign talents will be taxed according to their chargeable income and the number of days spent in Malaysia.
  • The eligibility:
    • The MNC must be a locally incorporated company.
    • It has at least an operating expenditure of RM1.5 million (USD500,000) every year.
    • Paid-up capital: RM500,000(USD165,000 ).
    • Must provide qualifying treasury services to at least three qualified related companies outside Malaysia.

c) Trade
Trading activities here mean the Global Offshore Commodities Trading – the incentive is designed to woo global commodities traders in the following sectors/products: Oil and gas, carbon credits and minerals, agriculture, refined raw materials, base minerals and chemicals.

  • The perks:
    • Corporate tax rate at a flat rate of 3% (exception: LNG).
    • For LNG trading companies who sign up for the GIFT programme before 31 December 2014 – full tax exemption
    • For LNG trading companies who sign up for the GIFT programme from 1 January 2015 onwards – 3% tax regime.
    • Non-Malaysian’s director fees – full tax exemption
    • Non-Malaysian’s gross employment income – 50% tax exemption
    • Tax exemption of stamp duties Labuan business activities.
    • Tax exemption – dividends received by or from Labuan International Trading Commodity Company (“LITC”).
  • The eligibility:
    • It has at least a turnover of US$100 million every year.
    • It has at least an operating expenditure of RM3 million (USD1 million) every year.
    • It has a minimum of three professional traders.
    • It uses local support services.


The Optimal Principal Hub Scheme

The InvestKL is engaging MNCs with the idea of the principal hub incentive. The principal hub, as the name implies, is a centralized base for locally incorporated companies to function as the focal point in conducting its global businesses. Functions offered are as follows:

  1. risk management,
  2. decision making,
  3. strategic planning,
  4. trading,
  5. finance,
  6. management and,
  7. Human resource.

The incentive is designed as such to attract MNCs to locate their headquarters in Kuala Lumpur, Malaysia. The incentives are three-tier incentives based on criteria that include:

  1. minimum annual sales,
  2. employment, and
  3. annual business spending

The eligibility:

  1. The MNC must function as a nerve centre for network companies in a minimum of three countries outside of Malaysia
  2. The MNC must have a minimum of three qualifying services (strategic, business and shared services) as their business activities with at least one strategic services:
    • Strategic service:
      • Regional P&L/ Business Unit Management
      • Strategic Business Planning and Corporate Development
      • Corporate Finance Advisory Services
      • Brand Management
      • IP Management
      • Senior-level Talent Acquisition and Management

On top of that, MNCs will be more than happy to see reduced-cost due to:

  1. customs duty exemption for raw materials, components or finished products ( in free industrial zones, licensed manufacturing warehouses, and free commercial zones),
  2. no local equity / ownership required, and
  3. flexibility in expatriates hiring requirements.

In a nutshell, the InvestKL is a government-supported initiative to attract and help MNCs not only to venture in Malaysia’s market, but also to locate its nerve centre in Kuala Lumpur, making Kuala Lumpur as its regional/global hub for its international business.