Johor-Singapore Special Economic Zone (“JS-SEZ”) Tax Incentive Package
Introduction
On 7 January 2025, Malaysia and Singapore exchanged an agreement on the Johor-Singapore Special Economic Zone (“JS-SEZ”) signed by Malaysia’s Minister of Economy, Rafizi Ramli, and Singapore’s Deputy Prime Minister and Minister for Trade and Industry, Gan Kim Yong. This strategic initiative underscores both nations’ commitment to fully developing the economic zone by facilitating investments in ten (10) targeted economic sectors.
Strategically located at the southern tip of the Malay Peninsula, Johor serves as a key commercial and industrial hub. Its close proximity to Singapore, a leading global financial center, provides a distinct advantage in driving economic growth and cross-border collaboration. Beyond strengthening bilateral ties, the JS-SEZ aims to accelerate Johor’s transformation into a developed state within Malaysia. The Johor government has set an ambitious target to increase its GDP by 7.8% annually, reaching RM260 billion by 2030, thereby positioning Johor as a thriving economic powerhouse.[1]
Initiatives
Key Initiatives of JS-SEZ were outlined in the Memorandum of Understanding signed on 11 January 2024. These initiatives aim to enhance cross-border collaboration, streamline business operations, and drive economic growth in the region:-
- One-stop Business/Investment Service Centre in Johor
To facilitate the application processes for various approvals and licences required for foreign business to be set up in Johor.
- Passport-free QR code Clearance System
To enable seamless travel between Johor and Singapore by expediting the clearance process at land checkpoints.
- Digitised Cargo Clearance
To reduce processing time and expedite the movement of people and goods across the border.
- Investors Forum
To gather insights and feedback from businesses in Singapore and Malaysia on the JS-SEZ.
- Renewable Energy Cooperation
To facilitate cross-border electricity trading, where Singapore plans to meet their electricity demands by purchasing electricity from Sarawak.
- Training and Work-Based Programs
To offer learning programs that develop a skilled workforce and bridge talent and skill gaps in key industries within the JS-SEZ.
- Joint Promotion Events
To organize joint promotional events showcasing business opportunities between Johor and Singapore to promote trade and investments into JS-SEZ.
The incentives further complement, among others the 0% tax rate for single family offices (“SFOs”) offered in Forest City. Following the signing of the JS-SEZ agreement between Malaysia and Singapore, the Government of Malaysia announced a tax incentive package for the JS-SEZ on 8 January 2025.
JS-SEZ Tax Incentives Package Under Malaysian Investment Development Authority[2]
- Manufacturing Business Incentive Scheme Project (for AI and Quantum Computing Supply Chain, Medical Devices, Pharmaceutical or Aerospace Manufacturing and Maintenance, Repair, and Overhaul (“MRO”) Services)
Type of Company | Tax Incentive | Period (years) | Flagship
|
|
New Company | New investment in the manufacturing sector with capital investment (excluding land) above RM1 billion | 5% | 15 | i. Flagship F – Kulai – Sedenak (AI and Quantum Computing Supply Chain, Medical Devices, and Pharmaceutical)
ii. Flagship E – Senai – Skudai (Aerospace Manufacturing and MRO Services) |
New investment in the manufacturing sector with capital investment (excluding land) between RM500 million to RM1 billion | 5% | 10 | ||
Existing Company | New investment in the manufacturing sector with capital investment (excluding land) between RM500 million to RM1 billion | Investment Tax Allowance of 100% on the qualifying capital investment (excluding land) incurred within 5 years, against 100% statutory income | 5 |
- Global Services Hub Project (for Regional Profit & Loss (“P&L”), Strategic Business Planning, Corporate Development; and Regional or Global Treasury and Fund Management conducting cash pooling activities via onshore intermediaries)
Tax Incentives | Period (years) | Eligibility Criteria / Conditions | Flagship |
5% | 15 | i. Annual operating expenditure of at least RM50 million;
ii. Company must serve / business control of at least 10 network companies; iii. Annual sales turnover of at least RM500 million and forex in-flow into the local banking system as proposed; iv. A minimum of 50% of high-value positions (with a minimum monthly basic salary of RM10,000) shall be filled by full-time Malaysian employees as proposed. |
Flagship A (Johor Bahru Waterfront) and B (Iskandar Puteri) |
- Integrated Tourism Project
Tax Incentives | Period (years) | Eligibility Criteria / Conditions | Flagship |
Investment Tax Allowance (“ITA”) of 100% qualifying capital expenditure incurred
(The allowance can be offset against 70% of the statutory income for each year of assessment)
|
5 | i. Company which does not have an existing entity or related entity undertaking same hotel or tourism project in Malaysia;
ii. Paid-up capital of at least RM2.5 million; iii. Investment in capital expenditure (excluding land) of at least RM500 million; iv. Company undertaking integrated tourism project which consists of the following: a) Hotel with minimum number of rooms of 80 which consists of standard, superior, deluxe and suite; and b) Minimum 1 tourist attractions (i.e. water park, outdoor park consists of rides and/or games, convention centre with capacity minimum of 3,000 participants, or outdoor sport excluding golf course and driving range).
|
Flagship G (Desaru – Penawar) |
- Smart Logistics Complex Project (Smart logistic operator who invests in development of smart logistics and carry out any of the eligible logistic activities of Regional Distribution Hub, Integrated Logistic Services, Dangerous Goods Storage, and Cold Chain Facilities)
Tax Incentives | Period (years) | Eligibility Criteria / Conditions | Flagship |
Investment Tax Allowance (ITA) of 100% qualifying capital expenditure incurred.
(The allowance can be offset against 100% of the statutory income for each year of assessment.)
|
5 | i. Investment in capital expenditure (excluding land) of at least RM500 million;
ii. The built-up area of the smart warehouse complex must be at least 50,000 m2 and equipped with at least three (3) enabling elements technologies under the IR4.0; iii. Use the application of modern construction techniques i.e. achieving a score for the Industrial Building System (IBS) that has been set by the Construction Industry Development Board (CIDB); iv. Total full-time workforce must consist of at least 80% Malaysian citizens; v. A minimum of 30% of total high-value positions (with a minimum basic salary of RM10,000) shall be filled by full-time Malaysian employees. |
Flagship C (Tanjung Pelepas)
|
- Manufacturing – Downstream Specialty Chemicals Project (such as base chemical – methanol, ethylene, propylene, benzene, aromatics; Organics intermediates – C1 to C6, Specialty chemical, Fertilisers, Polymers/plastics; or Oleochemical/ biochemical)
Tax Incentives | Tier | Period (years) | Eligibility Criteria / Conditions | Flagship |
5% for a company with capital investment (excluding land) of RM500 million and above in the manufacturing sector | Tier 1 | Up to 10 (5 + 5) | i. A new company or an existing company undertaking diversification activities in relation to the eligible activities/products under this cluster;
ii. A new company or an existing company undertaking diversification activities in relation to the eligible activities/products under this cluster; |
Flagship D (Tanjung Langsat – Kong-kong)
|
10% for a company with capital investment (excluding land) of RM500 million and above in the manufacturing sector | Tier 2 | |||
Income tax exemption equivalent to Investment Tax Allowance (ITA) of 100% for a company with capital investment (excluding land) of RM 500 million and above in the manufacturing sector | Tier 1 | Up to 10 (5 + 5) | Same as above | |
Income tax exemption equivalent to Investment Tax Allowance (ITA) of 60% for a company with capital investment (excluding land) of RM 500 million and above in the manufacturing sector
|
Tier 2 |
- Additional Incentives
No. | Tax Incentive | Flagship |
1. | 40% stamp duty exemption on the instrument of transfer/financing agreement for the purchase of a commercial property in Flagship A and B that remains unsold as at 31st December 2024. The stamp duty exemption to be provided under Section 80(1) under the Stamp Act
1949.
|
Flagship A (Johor Bahru Waterfront) and B (Iskandar Puteri) |
2. | A deduction equivalent to amount not exceeding RM1 million for each year assessment in respect of cash contribution or contribution in-kind by qualifying person who sponsors a hallmark event.
The hallmark event referred to is an event of regional or international significance which is carried on in Flagship G and supported/verified by MOTAC. For contribution made between 1 January 2025 to 31 December 2034.
|
Flagship G (Desaru – Penawar) |
3. | ACA in respect of renovation costs incurred on a building or part of a commercial building located in Flagship A-G for the purpose of qualifying company’s business. Qualifying companies are companies that have been approved any tax incentives under PIA 1986 or ITA 1967 between 1 Jan 2025-31 December 2034 and operating in Flagship A-G. This incentive to be utilised only once throughout their business operation in JSSEZ.
To include expenses on: • General electrical installation • Lighting • Gas system • Water system • Kitchen fittings • Sanitary fittings • Door, gate, window, grill and roller shutter • Fixed partitions • Flooring (including carpets) • Wall covering (including paint work) • Incentives & Eligibility Criteria • False ceiling and cornices • Ornamental features or decorations excluding fine art • Canopy or awning • Recreation room for employee • Air-conditioning system • Day care centre for employees’ children • Surau • Reception area • Green elements, smart solutions systems
Initial allowance:20% Annual Allowance: 40%
|
All Flagships |
- Knowledge Worker Incentive
Tax Incentives | Period (years) | Eligibility Criteria / Conditions | Flagship |
15% flat tax rate on chargeable employment income | 10 | i. Malaysian/Non-Malaysian citizen;
ii. Not generating employment income in Malaysia 24-months prior iii. Salary abroad/in Malaysia >RM20,000 per month iv. Subject to academic qualifications / years of professional work experience v. Subject to MyCOL profession and JS-SEZ qualifying sectors
|
All flagships |
Conclusion
By leveraging Johor’s strategic location and Singapore’s financial and technological expertise, the JS-SEZ is poised to drive long-term economic growth, job creation, and regional competitiveness. With applications for incentives open from 1 January 2025 to 31 December 2034, investors and businesses have a unique opportunity to participate in shaping the future of this dynamic economic zone.
If you have any questions or queries, please contact our Managing Partner, Nazmi Zaini nazmi@nzchambers.com or our Associate, Husna Shariff husna@nzchambers.com.
References
[1] https://theedgemalaysia.com/node/740663
[2] https://www.mida.gov.my/wp-content/uploads/2025/02/03.02.25_Snapshot-JSSEZ-for-Publication_MIDA_IRDA_.pdf