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Incentive for Merger and Acquisition for Small Malaysian Services Providers

SME Corp. Malaysia, in its endeavor to encourage small Malaysian service providers to merge into large entities, is currently offering the Incentive for Merger and Acquisition for Small Malaysian Service Providers. The incentive was officially launched on 14 February 2014 by YB Dato’ Sri Mustapa Mohamed, Minister of International Trade and Industry (MITI).

Currently, many of the services providers are fragmented and dominated by small firms. These firms will need to build up capacity in view of the ongoing liberalization of the services sector in order to be globally competitive. Mergers and rationalization within the industry or related industries will help build the domestic capacity. As the measures taken by the Government to encourage Small Malaysian Service Providers to merge into large entities, incentive of flat tax rate of 20 percent will be given on all taxable income for a period of five (5) years effective from the date of merger. Furthermore, stamp duty on the merger document will also be exempted.

As part of the requirements, firms that intend to merge must be 100 percent Malaysian owned with annual sales turnover of less than RM20 million or full-time employees of less than 75, as per the official definition of SMEs in the services sector. Enterprise or firm is defined as sole proprietors, partnerships, limited liability partnership (LLP) and private limited companies registered with the Companies Commission of Malaysia (CCM). Applicant SMEs must merge among themselves or acquire another SME to form bigger SMEs or large firms in order to be eligible.

Professional services (accounting and taxation services, specialized medical & dental practices, architectural services and engineering services), courier services, technical and vocational secondary education services and skills training services are the sectors that are eligible for this incentive.

Application is now open and the form may be downloaded from SME Corp. Malaysia’s website at www.smecorp.gov.my. Completed form is to be submitted to SME Corp. Malaysia as a one-stop centre for verification and approval under the Exemption Order under Income Tax Act 1967 and Stamp Act 1949. The closing date for applications is 2 July 2015.

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