The Optimal Principal Hub for Multinational Companies in Asia

In line with changing global economic trends, Multinational companies (MNCs) today are adopting principal hub models where quicker decision making and optimized capacity/resource located at a principal hub enables the delivery of superior service experience and maximization of operating efficiencies. By centralizing strategic global/regional functions, activities, risks, and their associated revenue streams, a principal hub provides better sharing of resources, services (such as management, R&D, payroll, accounting, logistics and quality control), technology and commercialization of products.  

MNCs that are traditionally located in cities with rapidly rising costs, should now consider Greater Kuala Lumpur (Greater KL) as the optimal location for their principal hub. Strategically located in the heart of ASEAN, Greater KL offers MNCs access to a growing talent pool that is multi-lingual, sophisticated business ecosystem, world-class infrastructure and connectivity, competitive cost advantage and a principal hub tax incentive that caters to their business model.

What Is A Principal Hub?
The principal hub is a centralized base for companies operating as a nerve centre to conduct its regional and global businesses. The key functions of a principal hub include management of risks, decision making, strategic business activities, trading, finance, management and human resource.

The Principal Hub Incentive Framework
Introduced by the Malaysian government in 2015, the principal hub incentive is developed in line with an evolving regional management and global supply chain  trend. It serves to enhance Greater KL’s competitiveness as a leading regional base for MNCs to grow across the region.

The incentive further affirms the government’s commitment to attract more regional set ups by the world’s largest MNCs.  Coupled with the city’s competitiveness, talent availability, world-class infrastructure and business-friendly ecosystem, this incentive places Greater KL as a leading location for MNC’s to establish their principal hubs in Asia.

Incentives for Principal Hub
The principal hub incentive offers eligible MNCs with a 3-tiered corporate taxation rate as follows:
3-tier Incentive Tier 1 Tier 2 Tier 3
Blocks (years) 5 +5 5 +5 5 +5
Tax rate 0% 5% 10%
Functions Regional P&L + 2 Strategic Services +2
High-Value Job
(Key Positions)
50
(5)
30
(4)
15
(3)
Local Business Spend RM 10 million RM 5 million RM 3 million
Countries Served Outside Malaysia 5 4 3
Annual Sales RM300M (applicable only to goods-based applicant company)
Extension Jobs: Base + 20%
Business Spend: Base + 30%
Criteria For Principal Hub Incentives
To be eligible for the principal hub incentive, MNCs must serve and control network companies in at least three countries outside of Malaysia and carry out at least three qualifying services, one of which must be from the strategic services cluster as follow:
  • Strategic Services
    1. Regional P&L/ Business Unit Management
    2. Strategic Business Planning and Corporate Development
    3. Corporate Finance Advisory Services
    4. Brand Management
    5. IP Management
    6. Senior-level Talent Acquisition and Management
  • Business Services
    1. Bid and Tender Management
    2. Treasury and Fund Management
    3. Research, Development & Innovation
    4. Project Management
    5. Sales and Marketing
    6. Business Development
    7. Technical Support and Consultancy
    8. Information Management and Processing
    9. Economic/ Investment Research Analysis
    10. Strategic Sourcing, Procurement and Distribution
    11. Logistics Services
  • Shared Services
    1. Corporate Training and Human Resource Management
    2. Finance & Accounting (Transactions, Internal Audit)
    3. General Administration
    4. IT Services

Additional Benefits Of Principal Hub
The incentives will allow for improved operations at reduced cost through:
  • Bring in raw materials, components or finished products with customs duty exemption into free industrial zones, LMW, free commercial zones and bonded warehouses for production or repackaging, cargo consolidation and integration before distribution to its final consumers for goods-based companies

  • No local equity / ownership condition

  • Expatriate posts based on requirements of applicant’s business plan subject to current policy on expatriates

  • Foreign Exchange Administration flexibilities will be accorded in support of business efficiency and competitiveness of companies under the Principal Hub
For more information on guidelines, please click here.

P&L Management focuses on the growth of the company with direct influence on how company resources are allocated - determining the regional/ global direction, monitoring budget expenditure and net income, and ensuring every program generates a positive ROI