Unlocking Malaysia's Logistics Future

The Smart Logistics Complex (SLC) Incentive Explained

Introduction

In a bold stride towards Industry 4.0, the Malaysian government has introduced the Smart Logistics Complex (SLC) Incentive, as announced in the National Budget 2025. This initiative aims to transform the nation's logistics landscape by encouraging the integration of advanced technologies into warehousing and supply chain operations.

In addition, this incentive seeks to attract high-quality investments in smart logistics infrastructure. By drawing from smart factory principles, the SLC framework supports systematic, data-driven resource planning and operational management across the logistics value chain.

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Definition of SLC

A SLC is a high-tech logistics facility that deploys technologies such as Internet of Things (IoT), Artificial Intelligence (AI), Radio Frequency Identification (RFID), and automated material handling systems.

These technologies collectively optimise warehouse operations, improve cost efficiency, and enhance overall supply chain performance.

Key features of the SLC incentive

Tax Incentive

Eligible companies may be granted:

Income Tax Exemption equivalent to Investment Tax Allowance (ITA) of 60% on qualifying capital expenditures incurred within a period of five (5) years.
The allowance can be offset against up to 70% of statutory income for each year of assessment.
Unused allowances can be carried forward until fully utilised.

Business Models

There are two (2) main models that qualify for the SLC incentive:

Model 1 (Investor and Operator):
- A company that invests in and operates a smart warehouse and carry out qualifying logistics services / activities (QLA).
Model 2 (Operator only):
- A company that leases smart warehouse for at least ten (10) years and operates QLA.

Eligible Applicants

A new or existing company that invests in smart warehouse facilities to undertake QLA.
Only one (1) company within the same group may be considered for the SLC incentive.
Related companies engaged in the same (SLC activities are not eligible to apply for this incentive).
Pursuant to Section 2 of the Promotion of Investments Act, 1986, “related company” means:
- the operations of which are or can be controlled, either directly or indirectly, by the first-mentioned company;
- which controls or can control, either directly or indirectly, the operations of the first-mentioned company; or
- the operations of which are or can be controlled, either directly or indirectly, by a person who controls or can control, either directly or indirectly, the operations of the first-mentioned company:
  
  Provided that a company shall be deemed to be a related company of another company if:
1. at least twenty percent of its issued share capital is beneficially owned, either directly or indirectly, by that other company; or
2. at least twenty percent of its issued share capital of that other company is beneficially owned, either directly or indirectly, by the first mentioned company.

For the SLC Incentive

Qualifying Criteria / Conditions

Criteria	conditions
Incorporation of Company	The company must be a Malaysian resident entity incorporated under the Companies Act 2016.
Eligible services/ QLA	Companies applying for the SLC incentive must provide at least one (1) of the logistics services from the qualifying activities as follows: Regional Distribution Center (RDC): Refers to a collection and consolidation center for finished goods, components and spare parts produced by its own group of companies for its own brand to be distributed to dealers, importers or its subsidiaries or other unrelated companies within or outside the country. Among the activities involved are bulk breaking, repackaging and labeling; (and/or) Integrated Logistics Services: Refers to end-to-end logistics services, including warehousing, transportation, freight forwarding, distribution, other value-added services (i.e., product assembly/installation, consolidation, procurement, quality control, and supply chain management); (and/or) Dangerous Goods Storage: Refers to safe warehousing, handling, and storing of any goods classified as dangerous goods approved by the Government of Malaysia (and/or) Cold Chain Facility: Refers to the operation of a facility designed and equipped to store and handle perishable food products within the designated temperature
Built-up area	The built-up area of the smart warehouse complex must be at least 30,000 m².
Operating expenditure	The Company must incur an adequate amount of operating expenditure annually, as proposed, throughout the tax incentive period. This operating expenditure shall include local services for insurance, legal, banking, ICT and transportation. However, this amount shall not include the cost of goods sold, depreciation, interest on borrowings and expenses not directly involved in the company’s proposed activities.
Enabling technologies	The smart warehouse complex facilities must be equipped with at least three (3) enabling elements technologies under the Industry 4.0 as follows: - Big data analytics (and/or) Cloud computing (and/or) Augmented reality (and/or) Cybersecurity (and/or) Artificial intelligence (and/or) Additive manufacturing (and/or) System integration (and/or) Simulation (and/or) Internet of Things (and/or) Autonomous robot (and/or) Advanced materials (and/or)
Fixed asset investment	The company must incur fixed asset investment (excluding land) as proposed for the construction of the smart warehouse complex within the incentive period.
Green technologies	The smart warehouse complex must adopt at least one (1) of these following green technologies for its facility as follows:- Renewable Energy such as solar, biomass, biogas, mini hydro, geothermal and wind energy (and/or) Energy Efficiency equipment or technologies (and/or) Rainwater Harvesting System; (and/or) Green Building certified via Green Building Index (GBI) or Malaysian Carbon Reduction and Environmental Sustainability Tool (MyCREST), or GreenRE rating tools.
Full time employees	The company’s full-time employees shall comprise of at least 80% Malaysians. Employment of foreign workers (Including workers engaged through outsourcing) is subject to the current prevailing policy.
Internship programs	The company must conduct Internship programs related to the field of management and/or administration of the SLC facility.
Number of staff at the managerial, technical and supervisory level	The number of staff at the managerial, technical and supervisory level which are directly employed by the company shall consist of at least 20% of the company’s overall manpower with a minimum monthly salary of RM7,000.
Technical training programs	The company must conduct technical training programs for the Malaysian employees who are directly employed by the company.
Local contractors	The company must appoint local contractors as the main contractor for the construction of the smart warehouse complex. 'Local contractor’ means a company incorporated under the Companies Act 2016 and resident in Malaysia with at least 51% Malaysian equity.
Import and export transactions	The company must use local seaports and/or airports and/or local transportation services for import and export transactions.
Local logistics companies	The company must establish partnerships with at least three (3) local logistics companies to carry out the integrated logistics activities for the purpose of enhancing the capabilities of the respective companies. The company is encouraged to establish this partnership with small and medium-sized Bumiputera companies. Locally owned logistics company’ means a company incorporated under the Companies Act 2016 and resident in Malaysia with at least 60% Malaysian equity.
Other conditions	Other conditions related to the incentive shall be imposed by the National Committee on Investment (NCI) upon the incentive’s approval.
Effective date of Application	Applications shall be made online at https://investmalaysia.mida.gov.my from 1 January 2025 to 31 December 2027.

Mechanism

The company must submit the incentive application to the Malaysian Investment Development Authority (MIDA) before the commencement of its proposed project. Commencement of business is deemed to occur when the company has issued its first sales invoice for the proposed SLC project.
The SLC incentive is to be provided under P.U. (A) 113 Income Tax (Exemption) (No.12) Order 2006, Income Tax Act. 1967 and to be considered by the National Committee on Investments (NCI).
The eligible capital expenditure period may be backdated for up to three (3) years from the application date, but not earlier than 1 January 2023 or the end date of any previous tax incentive (if any), whichever is later.

Conclusion

The SLC incentive is a strategic initiative by the Malaysian government aimed at modernising and future-proofing the country’s logistics and supply chain ecosystem. It aligns with national plans like the Twelfth Malaysia Plan, the National Investment Aspirations and the National E-Commerce Strategic Roadmap 2.0, highlighting Malaysia’s goal to lead in advanced logistics solutions.

The incentive promotes the integration of Industry 4.0 technologies such as AI, automation, IoT and big data analytics to enhance operational efficiency, reduce costs and improve service reliability and responsiveness. It emphasises sustainability and inclusivity by requiring green technologies and engaging local contractors and SMEs, including Bumiputera enterprises, to distribute technological benefits widely and create high-skilled jobs.

The program offers tax exemptions, clear eligibility criteria and workforce development programs to support investors in building smart logistics facilities. This helps companies compete globally while supporting Malaysia’s sustainability and digital transformation goals.

The SLC incentive provides a strategic pathway for companies to transform logistics capabilities, contribute to national development, and strengthen Malaysia’s position as a logistics hub in Southeast Asia.

If you are interested in applying for the SLC incentive, please feel free to reach out to us and we will be glad to assist you.