Malaysia Pioneer Status for Treasury Management

Malaysian Pioneer Status-Treasury Management

Under the Promotion of Investments Act 1986, pioneer status can be accorded to industries including:-

Incentives for Treasury Management Centre (TMC)-An approved treasury management centre refers to a locally incorporated company that provides centralised treasury management services for its group of related companies within or outside the country.

Eligibility Criteria
* A company incorporated under the Companies Act 1965;
* A minimum paid-up capital of RM0.5 million;
* A minimum total operating expenditure (excluding interest expenditure related to funding activities of the TMC and depreciation) of RM1.5 million incurred domestically per year of assessment;
* Appoint at least 3 senior professionals to work under the TMC;
* Provide qualifying treasury services to at least three related companies outside Malaysia

Qualifying activities:-
Cash, Financing and Debt Management

a) Cash pooling arrangement through a centralised account with a licensed onshore bank

b) Providing financing sourced from surplus funds within the group or financial institutions in Malaysia to:
- a related company in Malaysia
- a related company overseas
* in foreign currency for any purposes; and
* in ringgit for use in Malaysia

c) Arranging for competitive financing sourced from:
- surplus funds from within the group;
- financial institutions in Malaysia; or
- the issuance of bonds/sukuk in ringgit or foreign currency

d) Providing or arranging for financial and non-financial guarantee for its group of companies.

e) Current account management
- Managing account payables and receivables;
- Maintaining inter-company offsetting arrangement.

Investment Services:-
Are companies that invest funds within the group in domestic money market and in foreign currency assets onshore and offshore

Financial Risk Management:-
Are companies that Hedge:-
- Exchange rate risk;
- Interest rate risk/benchmark rate risk;
- Market risk;
- Credit/counterparty risk ;
- Liquidity risk;
- Commodity price risk.

Incentives given to Financial Management Companies include:-
i) An approved TMC will be given a 70% exemption of the following statutory income arising from treasury services rendered by treasury centres to its related companies for a period of five years:

a) All fees/management income from providing qualifying services to related companies in Malaysia and overseas;
b) Interest income/finance income received from lending/financing to related companies in Malaysia and overseas;
c) Interest income/finance income/gains received from placement of funds with onshore banks or short term investment (onshore and offshore) as part of managing surplus funds within the group;
d) Realised foreign exchange revenue/gains/profits from managing risks for the group i.e. exchange rate risk, interest rate risk, benchmark rate risk, market risk, credit/counterparty risk, liquidity risk and commodity price risk;
e) Premium/ pursuant to subscription of bonds/sukuk issued by related companies and financial institutions; and
f) Guarantee fees

ii) Exemption from withholding tax on interest payments / profits on borrowings by the TMC from financial institutions and related companies provided the funds raised are used for the conduct of qualifying TMC activities;

iii) Full exemption from stamp duty on all loan / financing agreements and service agreements executed by treasury centres in Malaysia, used for the conduct of qualifying TMC activities;

iv) Expatriates working in a TMC are taxed only on the portion of their chargeable income attributable to the number of days that they are in Malaysia;

v) Foreign Exchange Administration (FEA) flexibilities; and

vi) No local equity conditions.

Other Facilities:-
Includes Expatriate posts will be approved based on the requirements of the approved TMC provided applications to be received by 31 December 2016 to be eligible for incentives.