Principal Hub Incentive Updated: What Has Changed, and What Can Your Company Enjoy?

The Principal Hub Incentive rules were amended in a gazette published on 5 November 2026, with effect from the year of assessment 2025. The tax rates and targets stay the same. The main change is that the tables now label Category 1 and 2 simply as "new company", without saying which type of new company goes into each.

So, what does the incentive offer? A lower income tax rate to companies that use Malaysia as a base to provide regional services.

Which services qualify?

The rules list three groups: strategic services such as regional business management, business services such as treasury and procurement, and shared services such as finance and accounting.

How low is the tax rate?

A new company can enjoy 0% (Category 1) or 5% (Category 2) on the income from these services. An existing company can enjoy 10% (Category 3). The rate applies for five years of assessment in a row.

A new company may also apply to extend it for another five years, if it meets higher targets by the end of the fifth year.

What does a company need?

It must be incorporated and resident in Malaysia, with paid-up capital above RM2.5 million. It also needs new full-time staff and yearly spending in Malaysia. For example, Category 1 needs 50 staff earning at least RM5,000 a month (at least half Malaysians), 5 earning at least RM25,000, and RM10 million operating spending a year.

Are there any limits?

Income from intellectual property, such as royalties, is not covered and is taxed normally. It also cannot be combined with certain other incentives, such as reinvestment allowance.

In simple terms, a company that brings regional work, well paid jobs and spending into Malaysia can pay much less tax on that income.

If your company is planning a regional hub in Malaysia, our team can help review the tax position and compliance. Feel free to WhatsApp us at 010-246 2151.