Southeast Asian neighbours Singapore and Malaysia are in discussions to establish a special economic zone in the latter’s southern state Johor. Mirroring China’s Shenzhen area, the idea is to capitalise on each locations individual strengths to give both economies a boost. In this piece, Bloomberg News explores the opportunities and challenges facing negotiators – decisions over incentives, trade rules, talent and more. Kuala Lumpur’s Tax, Trade and Wealth Management Partner Yvonne Beh comments from a tax perspective.
On the point of tax and trade incentives, Singapore still retains the region’s lowest corporate income tax rate at 17%, compared to 24% in Malaysia. That could be a disincentive to building more businesses in Johor if the SEZ can’t provide incentives to narrow that gap.
Yvonne Beh offers her thoughts on what it would take to draw investors to the Special Economic Zone, and believes that tailored customs duties and sales tax exemptions would be the minimum needed to lure investors in.
“For companies looking to use Johor as a supply chain hub for the region, customs duties and sales tax exemptions would be the least that would be expected before they will consider setting up a hub in Johor,” she said.
Read the full article here.