New Incentive Framework (NIF) Malaysia: What Manufacturers Need to Know in 2026

Malaysia's investment incentive system changed fundamentally on 1 March 2026. The New Incentive Framework (NIF) replaces the Promotion of Investments Act 1986 (PIA 1986) for manufacturing, shifting from entitlement-based tax holidays to outcome-based incentives tied to measurable economic contributions.

If you're planning a new factory, expanding production capacity, or diversifying operations, the NIF changes how your incentive application will be assessed, and it directly affects how you should structure your project insurance.

This guide covers:

• What the NIF replaces and why it matters
• The two incentive options: STR vs ITA
• How the NIA Scorecard evaluates your project
• Key deadlines and transition rules
• Insurance requirements for NIF-approved projects
• What manufacturers should do now

Disclaimer: This article provides general guidance on the New Incentive Framework based on official MITI and MIDA announcements as of February 2026. The NIF guidelines may be updated. Always verify current eligibility criteria and application processes with MIDA or qualified tax professionals before making investment decisions.

What Is the New Incentive Framework (NIF)?

The New Incentive Framework (NIF) is Malaysia's replacement for the Promotion of Investments Act 1986 (PIA 1986). It represents the biggest shift in Malaysian investment incentive policy in decades, moving away from profit-based tax holidays toward outcome-based incentives assessed against national development priorities.

Under PIA 1986, companies could get Pioneer Status (tax exemptions) or Investment Tax Allowance (ITA) based largely on investment size and sector. The NIF changes this: incentives are now directly linked to what your project delivers, measured through the National Investment Aspirations (NIA) Scorecard.

Aspect	PIA 1986 (Old System)	NIF (New System)
Basis for incentive	Investment size and promoted sector	Measurable outcomes via NIA Scorecard
Incentive types	Pioneer Status or ITA	Special Tax Rate (STR) or ITA
Assessment method	Sector-based eligibility	Tiered, outcome-based scoring
Post-approval monitoring	Limited	Stronger performance monitoring
Global tax alignment	Not designed for GMT	Aligned with OECD Pillar II Global Minimum Tax
Policy alignment	General industrial promotion	NIA + New Industrial Master Plan 2030

The NIF was announced under Budget 2026 and is being led by the Ministry of Finance's Taskforce on Incentive Review (TFIR), which includes MITI, MIDA, the Inland Revenue Board, Bank Negara Malaysia, and other agencies.

Key Dates and Transition Rules

The transition from PIA 1986 to NIF has clear deadlines that manufacturers need to track.

Date	What Happens
28 February 2026, 3:00 PM	Final deadline for manufacturing incentive applications under PIA 1986 (including drafts in the InvestMalaysia portal)
1 March 2026	NIF takes effect for manufacturing sector
Q2 2026 (exact date TBA)	NIF takes effect for services sector

Existing approvals are not affected. If your company already holds Pioneer Status or ITA approval under PIA 1986, your incentive remains valid under its approved terms and conditions. The NIF only applies to new applications submitted from 1 March 2026 onward.

STR vs ITA: Your Two Options Under the NIF

Under the NIF, eligible companies choose between two mutually exclusive incentive options for each qualifying project. You can only select one; you can't combine them for the same project.

Feature	Special Tax Rate (STR)	Investment Tax Allowance (ITA)
How it works	Reduced corporate income tax rate for a specified period	Allowance on qualifying capital expenditure (QCE) offsetting statutory income
Tax rate / allowance range	5% to 10% (for new investments)	60% to 100% of QCE
Income offset	Applies to statutory income	Allowance offsets 70% to 100% of statutory income
Incentive period	Up to 5 years	Up to 5 years
Best suited for	Projects expecting early profitability	Capital-intensive projects with large upfront investment
Carry forward	No (rate applies during incentive period only)	Unutilised allowance can be carried forward

The choice between STR and ITA is a strategic decision. It depends on your project's profitability timeline, capital expenditure profile, and when you expect to start generating taxable income. This is a tax modelling exercise that should involve your finance team and tax advisors early in the project planning stage.

Quick Decision Guide

If Your Project...	Consider	Why
Generates profit quickly (within 1-2 years)	STR	Lower tax rate benefits you from day one of profitability
Has large upfront capital expenditure	ITA	Capital expenditure allowance provides immediate offset
Has a long gestation period before profitability	ITA	Carry forward means allowance isn't wasted during loss years
Is an expansion of existing profitable operations	STR	Existing profitability means reduced rate applies immediately

The NIA Scorecard: How Your Project Will Be Assessed

The National Investment Aspirations (NIA) Scorecard is the central evaluation tool under the NIF. It replaces sector-based eligibility with outcome-based assessment across six pillars. Your project's score determines the tier of incentive you qualify for.

NIA Scorecard Pillar	What MIDA Evaluates	Example Evidence
Economic value creation	Contribution to GDP, value-added activities	Revenue projections, export plans, value-added processes
Local talent development	Quality job creation, skills development	Hiring plans, training programmes, salary levels, Malaysian workforce %
Domestic supply chain	Local sourcing depth, SME integration	Local vendor development plans, SME collaboration agreements
Technology transfer	R&D investment, knowledge spillovers	R&D budget, patent applications, technology roadmap
Industrial cluster development	Contribution to strategic clusters, economic complexity	Strategic sector alignment, cluster linkages
Sustainability	Environmental commitments, ESG practices	Carbon reduction targets, renewable energy plans, waste management

The scorecard is tiered. Higher scores qualify for better incentive terms (lower STR rates or higher ITA percentages). This means the quality of your NIA Scorecard submission directly affects your bottom line for the incentive period.

What This Means for Factory Insurance

Every NIF-approved manufacturing project creates insurance requirements. New factories, production line expansions, and diversification projects all introduce physical assets, operational risks, and liability exposures that need coverage from day one.

NIF Project Type	Insurance Needed During Construction	Insurance Needed During Operations
New factory (greenfield)	CAR/EAR, DSU, SPPI	IAR, MB, BI, CGL, WC
Production line expansion	EAR for new equipment installation	Updated IAR sum insured, MB for new machinery, MLOP
Diversification project	CAR/EAR if new facilities built	Review entire P&E programme; new processes may change risk profile
Technology upgrade (R&D facility)	EAR for equipment installation	EEI for electronic equipment, ILOP, PI for design risks

The Sustainability Connection

The NIA Scorecard's sustainability pillar creates a direct link between your environmental commitments and your insurance programme. Insurers value documented sustainability practices. Companies with current HAZOP studies, environmental management systems, and clean loss histories typically receive premium credits of 5% to 30% depending on the risk.

The documentation you prepare for your NIA Scorecard submission (environmental targets, carbon reduction plans, waste management programmes) is the same documentation that helps you negotiate better insurance terms.

What Manufacturers Should Do Now

Whether you're planning a new investment or managing existing operations, the NIF requires action across several areas.

Priority	Action	Who Should Lead
1	Understand the NIF guidelines on MIDA and MITI portals	Finance / Management
2	Model STR vs ITA for your project to determine best option	Finance / Tax Advisor
3	Build NIA Scorecard documentation: hiring, training, sourcing, sustainability	HR, Operations, Sustainability
4	Review insurance programme for new/expanded assets	Operations / Insurance Broker
5	Ensure MIDA DigiCert is valid for application submission	Admin / Compliance
6	Align internal teams: finance, HR, operations, sustainability must coordinate	Management

NIF Application Process

All NIF applications are submitted through the InvestMalaysia Portal. You'll need a valid MIDA DigiCert to submit and sign your application.

Step	Action	Key Considerations
1	Choose between STR and ITA	Mutually exclusive; model both before deciding
2	Prepare NIA Scorecard documentation	Evidence across all six pillars; higher scores = better incentive tier
3	Submit application via InvestMalaysia Portal	Submissions after 3:00 PM evaluated next working day. Incomplete submissions returned.
4	MIDA evaluates against NIA Scorecard	May request additional documentation
5	Receive approval with incentive terms	Approval includes post-approval monitoring commitments
6	Deliver on commitments during incentive period	Stronger monitoring than PIA 1986; outcomes must be evidenced

Impact by Industry

The NIF's outcome-based approach affects different manufacturing sectors differently. Higher-complexity, higher-value manufacturing tends to score better on the NIA Scorecard.

Manufacturing Sector	NIA Scorecard Strengths	Insurance Implications
Electronics & Electrical (E&E)	Strong on technology transfer, R&D, cluster development	EEI as primary policy; high equipment values require precise sum insured
Chemical & Petrochemical	Economic value creation, supply chain depth	BPV, environmental liability, extended BI periods
Food Manufacturing	Job creation, domestic supply chain, sustainability	Stock deterioration cover, cold room MB, products liability
Pharmaceutical	Technology transfer, talent development, economic sophistication	Cleanroom EEI, product recall, professional indemnity
Automotive & Aerospace	Cluster development, technology transfer, high-quality jobs	Complex machinery MB, supply chain interruption, product liability
Plastics & Rubber	Domestic supply chain, sustainability (recycling)	Hydraulic oil fire risk, mould valuation, bailee's liability

Common Questions from Manufacturers

Based on industry reactions from FMM, MICCI, and the SME Association of Malaysia, these are the most common concerns manufacturers have about the NIF.

Concern	Reality
"Will my existing incentive be affected?"	No. Existing approvals remain valid under their current terms.
"Are SMEs disadvantaged?"	The SME Association views the domestic linkage focus as beneficial for SMEs integrating into larger supply chains.
"Is this about the Global Minimum Tax?"	Partly. The NIF is designed to remain competitive under OECD Pillar II GMT rules.
"What if I'm mid-project?"	If you haven't applied for incentives yet, you'll need to apply under NIF from 1 March 2026.

FAQ

What is the New Incentive Framework (NIF)?

The NIF is Malaysia's new outcome-based investment incentive system that replaces the Promotion of Investments Act 1986 for manufacturing (from 1 March 2026) and services (from Q2 2026). It ties tax incentives to measurable economic outcomes assessed through the NIA Scorecard.

When did the NIF take effect?

For the manufacturing sector, the NIF took effect on 1 March 2026. The services sector will follow in Q2 2026, with the exact date to be announced by MITI.

What happened to Pioneer Status under the NIF?

Pioneer Status as a standalone incentive no longer exists for new manufacturing applications. It has been replaced by the Special Tax Rate (STR), which offers a reduced corporate income tax rate of 5% to 10% for up to 5 years, depending on your NIA Scorecard assessment.

Can I choose both STR and ITA?

No. STR and ITA are mutually exclusive. You must select one for each qualifying project. The choice should be based on tax modelling that considers your project's profitability timeline and capital expenditure profile.

What is the NIA Scorecard?

The National Investment Aspirations Scorecard is the evaluation tool MIDA uses to assess NIF applications. It scores your project across six pillars: economic value creation, talent development, domestic supply chains, technology transfer, industrial clusters, and sustainability. Higher scores qualify for better incentive terms.

Are my existing MIDA incentive approvals affected?

No. Existing approvals under PIA 1986 remain valid according to their approved terms and conditions. The NIF only applies to new applications submitted from 1 March 2026 onward.

Where can I find the NIF implementation guidelines?

The NIF Implementation Guidelines are available on the official MITI portal at miti.gov.my/NIF and MIDA's website at mida.gov.my. These may be updated periodically, so check regularly for the latest version.

Do I need a DigiCert to apply under the NIF?

Yes. All NIF applications are submitted through the InvestMalaysia Portal, which requires a valid MIDA Digital Certificate. DigiCerts cost RM1,000 for a 2-year validity period and must be purchased through the InvestMalaysia Portal.

How does the NIF affect my insurance requirements?

Every new manufacturing investment or expansion creates physical assets and operational risks that need insurance coverage. The specific insurance programme depends on your project type, but most NIF projects require a combination of property insurance (IAR), machinery breakdown, business interruption, and liability covers. The sustainability documentation you prepare for the NIA Scorecard can also help you negotiate better insurance terms.

What post-approval monitoring can I expect under the NIF?

The NIF has stronger performance monitoring than PIA 1986. Companies must evidence that they're delivering on the outcomes committed to in their NIA Scorecard submission. This includes tracking hiring, training, local sourcing, R&D spending, and sustainability commitments. Governance and internal alignment across finance, HR, and operations are critical from day one.

Foundation Conclusion

The NIF rewards manufacturers who can demonstrate real economic value, not just investment size. For most manufacturers, this means tighter alignment between your business plan, your incentive application, and your operational risk management.

New factories, expanded production lines, and diversification projects all need insurance from day one. The same documentation you prepare for your NIA Scorecard (sustainability targets, risk management systems, operational controls) helps you secure better industrial property and machinery breakdown insurance terms. If you're planning a NIF-eligible investment, talk to your insurance broker before you break ground.

Talk to our risk specialists about insurance for your next manufacturing project