Unlocking Growth Potential: Success Stories of Companies Listed on Bursa Malaysia

Tax Breaks In The Johor-Singapore Special Economic Zone

From Strategy To Savings

The Johor-Singapore Special Economic Zone (“JS-SEZ”) is a collaborative cross-border initiative designed to deepen economic integration and improve connectivity between Malaysia and Singapore. The primary objective is to attract greater investment and create high-quality job opportunities in key sectors such as manufacturing, logistics, tourism, digital services and international business.

Prior to the introduction of this JS-SEZ tax incentive package, tax incentives in Malaysia were primarily governed under the Promotion of Investments Act (“PIA”) 1986 and administered by the Malaysian Investment Development Authority (“MIDA”) and other relevant authorities. These incentives were generally granted to companies undertaking promoted activities or promoted products, as defined by the relevant guidelines.

With the launch of the JS-SEZ, a distinct and targeted tax incentive framework has been established to accelerate the development of southern Johor into a competitive and vibrant economic hub. This new framework specifically supports businesses operating within seven (7) of the nine (9) designated flagship zones.

In this article, we explore the key features of the JS-SEZ, with a focus on the tax incentives available to businesses operating within Flagship Zones A to G.

Mapped Overview of JS-SEZ Flagships with Sector Focus

The map below presents the seven (7) designated JS-SEZ flagship zones, along with their respective sectoral focus areas and key activities.

JS-SEZ Tax incentives package

The tax incentive packages for the seven (7) designated flagship areas (A–G) are summarised as follows:

Flagship	Location	Project Focus	Qualifying Services	Incentive Type
A	Johor Bahru Waterfront	Global Services Hub	Regional Profit & Loss; Strategic Business Planning; Corporate Development; Regional or Global Treasury and Fund Management conducting cash pooling activities via onshore intermediaries; A minimum of two (2) other qualifying services of either strategic services, business services or shared services.	5% tax rate for 15 years on trading and services income or services income
B	Iskandar Puteri	Global Services Hub
C	Tanjung Pelepas	Smart Logistics Complex	Smart logistic operator who invests in development of smart logistics and carries out any of the eligible logistics activities: Regional Distribution Hub; (and/or) Integrated Logistics Services; (and/or) Dangerous Goods Storage; (and/or) Cold Chain Facilities	100% ITA for 5 years and can be offset against 100% of the statutory income (“SI”)
D	Tanjung Langsat – Kong Kong	Manufacturing – Downstream Specialty Chemicals	Base chemical – methanol, ethylene, propylene, benzene, aromatics; Organics intermediates – C1 to C6; Specialty chemical; Fertilisers; Polymers/plastics; or Oleochemical/ biochemical	Special tax rate: Tier 1: 5% tax rate for up to 10 years (5 years + 5 years) Tier 2: 10% tax rate for up to 10 years OR ITA: Tier 1: 100% ITA for up to 10 years, and can be offset against 100% of the SI Tier 2: 60% ITA for up to 10 years, and can be offset against 100% of the SI.
E	Senai – Skudai	Manufacturing Business	Aerospace Manufacturing and Maintenance, Repair & Overhaul (“MRO”) Services	New Company: 5% tax rate for 15 years; or 5% tax rate for 10 years Existing Company: 100% ITA over 5 years, and can be offset against 100% of the SI
F	Kulai – Sedenak	Manufacturing Business	AI and/or Quantum Technology Supply Chain Medical Devices Pharmaceuticals
G	Desaru – Penawar	Integrated Tourism Project	Hotel with minimum number of rooms of 80 which consists of standard, superior, deluxe and suite; and Minimum 1 tourist attraction	100% ITA for up to 5 years, and can be offset against 70% of the SI.

General Common Eligibility Criteria

Category	Common Requirement
Company status	Must be a company incorporated under the Companies Act 2016 Must be tax resident in Malaysia
Paid-up capital	Minimum RM2.5 million
Capital expenditure (CAPEX)	Typically ≥ RM500 million (excluding land) (in most cases) For some Tier 1 benefits or longer tax periods: ≥ RM1 billion
Operating expenditure (OPEX)	Annual OPEX of ≥ RM50 million
Annual sales turnover	≥ RM500 million (required especially for global services hubs and trading-related activities)
Workforce composition	At least 80% Malaysians in the total full-time workforce At least 30%–50% high-value positions (≥ RM10,000/month) held by Malaysians
Key personnel	At least 5 key personnel earning ≥ RM35,000/month
IR4.0 adoption	Must adopt IR4.0 technology elements (e.g. AI, IoT, cybersecurity, etc.) relevant to the project
ESG commitment	In Tier 1 incentives: demonstration of Environmental, Social & Governance (ESG) practices (e.g. renewable energy, ethical supply chain)
Local ecosystem engagement	Utilise local services (e.g. legal, finance, ICT, logistics, etc.) Collaborate with local vendors and educational institutions (e.g. TVET)
Internship & graduate hiring	Must participate in MySIP (TalentCorp): minimum 3 Malaysian interns per year Must hire local graduates (with <3 years’ experience) as proposed
Vendor development	Often required to undertake at least 1 local vendor development programme
Location	Must operate within one of the approved flagship zones (A–G) for the respective sector-specific activities

General Common Tax Treatment Across JS-SEZ Incentives

Aspect	Treatment / Requirement
Application timing	Must be submitted to MIDA before commencement of the proposed project. "Commencement" usually means the first sales invoice or first qualifying capital expenditure after submission.
Effective date of incentive	Determined based on: Special tax rate: year of assessment (“YA”) when operations commence. ITA: date of first qualifying capital expenditure incurred (post-application date).
Incentive confirmation	Company must apply for determination of the incentive’s effective date: Within 24 months for special tax rate incentive Within 36 months for ITA incentive
Annual compliance requirement	Company must submit Annual Compliance Report within 7 months after financial year-end during the incentive period.
Condition for claiming incentives	Incentive can only be claimed if all stipulated conditions are met in the relevant YA. Non-compliance (even for 1 YA) results in disqualification for that year, and normal corporate tax applies.
Separate accounts	Existing companies granted approval for the tax incentive must separately account for incentivised and non-incentivised activities.
Withdrawal of incentive	The company may voluntarily surrender the incentive by written notice to the Minister of Finance via MIDA.

Please note that the criteria and tax treatments outlined above are general in nature and may vary depending on the specific incentive package. Applicants are advised to refer to the official guidelines issued by the MIDA, titled "Guideline for Johor-Singapore Special Economic Zone (JS-SEZ) Tax Incentive Package"¹, to obtain the full details. This summary is provided for reference purposes only and does not constitute comprehensive or binding eligibility conditions.

¹Guideline for Johor-Singapore Special Economic Zone (JS-SEZ) Tax Incentive Package, https://www.mida.gov.my/wp-content/uploads/2025/04/Guideline-JSSEZ-V2.pdf

Effective Date of Application

Applications shall be made online at https://investmalaysia.mida.gov.my from 1 January 2025 until 31 December 2034.

Conclusion

The JS-SEZ offers broad-based tax incentives aimed at attracting investment across a diverse range of industries, including technology, healthcare, logistics, manufacturing, and tourism. These incentives are designed to directly benefit businesses that qualify under the specific criteria set out in the respective flagship zones. Eligible companies stand to gain substantial tax advantages, which in turn support sustainable development, workforce upskilling and the growth of high-value sectors.

In addition to the direct beneficiaries, certain industries, such as property development, may also enjoy indirect advantages as a result of increased economic activities and infrastructure expansion within the designated zones. This spillover effect further enhances Johor’s potential as a vibrant and competitive economic hub, positioning it as a strategic player in the Southeast Asian economic landscape.

This article is written by Marcus Pua, a Tax Advisory Director with Crowe KL Tax Sdn Bhd. If you wish to seek further clarification on any of the above issues, please contact marcus.pua@crowe.my.