Malaysia proposes new global services hub and treasury incentives

New and existing hubs

Appendix 23 proposes a 5% rate for a new company’s qualifying hub income. For an existing company previously approved under the Global Services Hub or Principal Hub incentive, income up to a base amount would be taxed at 15%, while qualifying income above that amount would be taxed at 5%. The base would be the company’s average income for the preceding three years. An extension application would also require additional new services.^[1]

Activities and incentive period

The revised incentive would operate in five-year periods, potentially for up to 30 years, subject to performance and commitments before and after each period. A hub would need to undertake regional profit-and-loss or business management, strategic business planning and corporate development, plus at least two activities from the strategic, business or shared-services categories. Exempt income could include service income, service and trading income, and treasury fund management income prescribed by the Minister of Finance. The proposal would apply to applications received by MIDA from 1 January 2027.^[1]

Treasury and cross-border financing

A qualifying hub conducting treasury fund management through cash pooling via onshore intermediaries would receive withholding-tax exemption for interest paid to non-residents and full stamp-duty exemption for foreign-currency intercompany loan agreements. Those additional incentives would also extend to the Johor–Singapore Special Economic Zone incentive package. Under the published Income Tax Act text, section 109 ordinarily requires tax to be deducted from Malaysian-source interest paid to a person not known to be resident. The published Stamp Act text defines a foreign-currency loan and charges foreign-currency secured lending under First Schedule item 27, subject to exemptions under written law.^[1][2][3]

Implementation still required

The Income Tax Act provides the enabling architecture rather than the announced replacement terms. Section 6(1A) allows the Minister to prescribe qualifying incentive activities; section 65B treats the activity as a separate business source and requires separate accounts; and section 154 authorises implementing rules. Budget 2027 is a proposal, not an operative exemption. Groups considering a Malaysian services or treasury hub should model the three-year baseline and incremental-income split, but wait for the implementing legislation and final conditions before treating the 5% rate or financing exemptions as available.^[1][2][4]