Malaysia proposes RM5 million relocation deduction for locally owned AHTV vendors

A targeted relocation proposal

The announced expenditure window runs from 1 January 2027 to 31 December 2030. The RM5 million figure is the proposed deduction cap, not a cash grant or guaranteed tax saving. The speech confines the measure to wholly Malaysian-owned automotive vendors relocating their operations to AHTV; it does not announce equivalent relief for every foreign-owned automotive subsidiary, or an automatic deduction for all expenditure incurred in Perak.^[1]

Existing expense rules still need to be distinguished

Under section 33(1) of the Income Tax Act 1967, Act 53, ordinary adjusted-income deductions depend on expenses wholly and exclusively incurred in producing gross income, subject to the Act. Paragraphs 39(1)(b)–(c) exclude non-income-producing expenses and capital sums, subject to express provisions. These are the rules in the Attorney General’s Chambers text dated 1 January 2026, which expressly is not an authentic reprint. They do not independently establish the proposed AHTV entitlement.^[2]

The industrial-policy context predates the Budget. MOF’s 11 September consultation statement described discussions with local and international automotive businesses at AHTV. Its priorities included strengthening domestic suppliers’ integration into global value chains, increasing local value added and developing manufacturing capabilities. That earlier consultation is background, not the October tax announcement or proof that participating international businesses qualify for the proposed deduction.^[3]

Keep planning assumptions conditional

For multinational automotive groups assessing supplier relocation, our practical reading is to separate the locally owned vendor’s proposed relief from the group’s own costs. Track the entity incurring expenditure, ownership, destination and expenditure date. The speech does not identify the implementing provision or detailed qualifying-cost categories. Do not assume land, new machinery or an entire relocation budget qualifies merely because the project is at AHTV.^[1][2]