Malaysia Tourism Tax Exemption 2026–2027: A Guide for Travel Agencies and Tour Operators
Introduction
To support the tourism industry in conjunction with Visit Malaysia 2026, the Malaysian Government introduced a tax incentive for qualifying tour operator companies under Budget 2026.
Under the Income Tax (Tour Operator Company) (Exemption) Order 2026 [P.U. (A) 164/2026], eligible Malaysian tour operator companies may enjoy a 100% income tax exemption on statutory income equivalent to the increase in qualifying tourism business income, subject to the prescribed conditions.
The incentive applies to Year of Assessment (YA) 2026 and YA 2027. It is intended to encourage tourism operators to attract more foreign tourists to Malaysia.
Official references:
1. What Is the Tourism Tax Exemption?
The incentive allows qualifying tour operator companies to claim a 100% income tax exemption on the statutory income attributable to the increase in qualifying tourism business income.
However, this is not a blanket exemption on all income earned by a travel agency.
The exemption is limited to qualifying tourism activities involving tour packages within Malaysia used by foreign tourists, including transportation by air, land or sea and accommodation.
Travel agencies earning income from other activities, such as outbound tour packages, general ticketing services or unrelated business activities, should assess those activities separately.
2. Who Is Eligible for the Tax Exemption?
To qualify for the exemption, a company must satisfy the conditions prescribed under the Income Tax (Tour Operator Company) (Exemption) Order 2026.
Condition 1: Malaysian-resident company
The applicant must be a company that is resident in Malaysia and incorporated under the Companies Act 2016.
Condition 2: Valid tourism licence
The company must hold a valid tour operator licence under the Tourism Industry Act 1992.
Condition 3: Qualifying inbound tourism packages
The company must operate qualifying tour packages within Malaysia that are used by foreign tourists.
The packages must include the relevant tourism arrangements, including transportation and accommodation, as prescribed by the exemption order.
For this purpose, a foreign tourist generally means an individual who is neither a Malaysian citizen nor resident in Malaysia.
Condition 4: Minimum 1,000 foreign tourists
The company must bring in at least 1,000 foreign tourists during the basis period for the relevant year of assessment for its qualifying activities.
The tourist count must be verified in writing by an authorised officer of the Ministry of Tourism, Arts and Culture Malaysia (MOTAC).
Meeting the tourist threshold alone does not automatically entitle the company to the exemption. All other conditions must also be satisfied.
3. How Is the Tax Exemption Calculated?
The exemption is based on the increase in qualifying tourism business income compared with the immediately preceding period.
For illustration, assume a qualifying tour operator company has the following figures:
| Description | Amount |
|---|---|
| Qualifying tourism business income for YA 2026 | RM1,000,000 |
| Qualifying tourism business income for the immediately preceding period | RM700,000 |
| Increase in qualifying income | RM300,000 |
In this example, the increase in qualifying tourism business income is RM300,000.
Subject to the applicable tax computation and all eligibility conditions, the company may qualify for a 100% income tax exemption on statutory income equivalent to the qualifying increase of RM300,000.
The company should not automatically treat its entire tourism business income of RM1,000,000 as tax-exempt.
The actual exemption must be determined in accordance with the exemption order and the company’s tax computation.
4. What Documents Are Required for the Application?
Companies seeking the exemption should prepare the supporting documents required by MOTAC, which may include:
- A formal application letter.
- The completed tax incentive application form.
- The company’s constitutional documents.
- A valid MOTAC tour operator licence.
- The latest SSM company information.
- A list of foreign tourists, including their names and passport numbers.
- Relevant tour itineraries.
- Supporting invoices, receipts and other records relating to the qualifying tour packages, where requested.
Companies should retain adequate records to substantiate the number of foreign tourists, the qualifying tourism activities and the income reported.
Applicants should refer to the latest MOTAC guidelines and checklist for the complete documentation requirements.
5. Application Deadline and Separate Accounts
Application deadline
Under MOTAC’s published guidelines, the application for verification of the number of foreign tourists must be submitted no later than six months after the company’s financial year-end.
Companies should plan ahead to avoid missing the deadline.
Separate accounts
Where a company conducts both qualifying and non-qualifying activities, each activity must be treated as a separate and distinct source of income for tax purposes.
The company must maintain separate accounts for the income derived from each activity.
This is particularly important for travel agencies that operate inbound tours, outbound tours, ticketing services and other travel-related businesses under the same company.
Proper accounting records will help support the tax computation and demonstrate that the exemption has been applied only to qualifying activities.
6. Does the Exemption Remove the Company’s Tax Filing Obligations?
No. The exemption does not automatically release the company from its normal tax compliance obligations.
A qualifying company must continue to comply with the relevant requirements under the Income Tax Act 1967, including filing its income tax return and providing supporting information when required.
The company should ensure that the exemption is properly reflected in its tax computation and that the supporting MOTAC verification and other records are available.
Conclusion
Malaysia’s tourism tax exemption for YA 2026 and YA 2027 provides a potential tax benefit for qualifying tour operator companies that attract foreign tourists to Malaysia.
However, eligibility depends on several conditions, including the company’s incorporation and residency status, its valid MOTAC licence, qualifying inbound tourism activities, the minimum 1,000 foreign tourist requirement and the incremental-income calculation.
Newly established companies should pay particular attention to the calculation because the exemption order does not expressly prescribe a special rule for companies without preceding-period income.
Travel agencies should review their business activities, accounting records and eligibility before claiming the exemption.
Need assistance with your company’s tax eligibility or tax computation?
CLPC Advisors provides tax compliance and advisory services to Malaysian businesses. Contact our team to discuss your company’s tax position and the appropriate documentation required for tax incentive claims.
Disclaimer: This article is prepared for general informational purposes and should not be treated as specific tax advice. The availability and amount of any exemption depend on the legislation, applicable guidelines and the facts of the individual company. Companies should obtain professional advice before making a tax claim.
Prepared & Reviewed By
Pang Cheng Leong is the Managing Director of CLPC Advisors Sdn Bhd, a professional services firm in Malaysia providing corporate tax, accounting, corporate secretarial and business advisory services.
He is a Chartered Accountant in Malaysia, Chartered Tax Practitioner, Licensed Income Tax Agent under Section 153 Income Tax Act Malaysia and Licensed Company Secretary, and has extensive experience advising Malaysian companies, startups and foreign investors on taxation, compliance and business structuring.
Professional affiliations: CA (Malaysia), CPA (Australia), CPA (Malaysia), ASEAN CPA, ACTIM
Disclaimer: This article is prepared for general informational purposes and should not be treated as specific tax advice. The availability and amount of any exemption depend on the legislation, applicable guidelines and the facts of the individual company. Companies should obtain professional advice before making a tax claim.