The historic agreement between Singapore and Malaysia to establish the Johor-Singapore Special Economic Zone (JS-SEZ) promises to unlock significant economic opportunities for both countries. The article delves into the key features of the JS-SEZ, including its potential to attract investments, foster job creation, and facilitate economic collaboration.
On January 6, the prime ministers of Singapore and Malaysia signed a historical agreement creating the Johor-Singapore Special Economic Zone (JS-SEZ). This initiative aims to leverage the strengths of both economies for the mutual benefit of the two countries. \The JS-SEZ will provide Singaporean companies with opportunities to invest capital, business expertise, and technology, while Malaysian companies can offer resources such as land and infrastructure.
\The SEZ is projected to stimulate investments in 16 economic sectors, encompassing manufacturing, logistics, food security, tourism, energy, digital economy, green economy, financial services, business services, education, and health. \Specific areas like aerospace, electrical and electronics, chemical, medical devices, and pharmaceuticals have been identified as key sectors for high-value growth. \Freer movement of people involved in the SEZ is anticipated through passport-free clearance using Quick Response codes. The movement of goods between the SEZ and Singapore is expected to be streamlined. Details regarding customs and immigration procedures will be available in due course. \Effective January 1, investors in the SEZ engaged in new investments in qualifying manufacturing and services activities, including artificial intelligence and quantum computing supply chains, medical devices, aerospace manufacturing, and global services hubs, will benefit from a special tax rate of 5% for up to 15 years. \Tailor-made incentives will be available to businesses operating in specific flagship areas within the SEZ. Eligible knowledge workers employed in the SEZ will enjoy a flat 15% tax rate on their personal income for 10 years. \In addition to these measures, tax benefits such as incentives for businesses relocating to Malaysia, green technology incentives, global service hub incentives, pioneer status, investment tax allowance, and grants for capital investment, research and development, and workforce training will be accessible. \It appears that existing incentives offered to the Johor region, including Iskandar incentives, Forest City Special Financial Zone incentives, family office incentives, and Pulau 1, a customs tax-free zone, are likely to be mutually exclusive from the incentives provided to investors under the JS-SEZ. \While the proposed special corporate tax rate is 5%, if investors are subject to the Global Minimum Tax, the effective corporate tax rate will rise to 15%. This applies only to multinational enterprises with a turnover exceeding €750 million (RM3.4 billion). Companies investing in the SEZ should consider the double tax agreement when calculating the tax impact of their investment and the flow of funds. \Other standard tax issues, such as withholding tax, transfer pricing, customs duty, sales tax, and service tax, remain unchanged unless future announcements are made. We understand that guidelines will be released soon to clarify the criteria for claiming incentives and the procedures to follow. These guidelines may help existing investors operating in the SEZ determine their eligibility to opt for the new incentives offered under the JS-SEZ regime without any clawback or exclusion
SPECIAL ECONOMIC ZONE SINGAPORE MALAYSIA INVESTMENTS TAX INCENTIVES
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