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Integrated Logistics Services (ILS) in Malaysia: Your Strategic Pathway to Tax Incentives & Operational Scale

January 4, 2026

Malaysia’s logistics sector is evolving into a strategic hub for regional distribution, supply chain integration, and value-added services. For companies offering warehousing, freight forwarding, and transportation (alongside services like product assembly, packaging, and procurement), Integrated Logistics Services (ILS) status offers more than operational legitimacy. It opens the door to tax incentives, regulatory facilitation, and scalable infrastructure development.

This article outlines the core activities that define ILS, the licensing and equity requirements, and the infrastructure thresholds companies must meet to qualify—giving foreign investors a clear starting point for compliant, incentive-linked market entry.

Definition of Integrated Logistics Services (ILS) in Malaysia

Integrated Logistics Services (ILS) in Malaysia encompass a broad range of activities including freight forwarding, warehousing, transportation, and value-added services such as distribution, procurement, and supply chain management. These services must be offered in an integrated manner (not as standalone functions) to qualify under the ILS framework.

Companies intending to undertake ILS activities must obtain relevant licenses and approvals from various authorities, including:

  • Fire Department (BOMBA)
  • Department of Environment (DOE)
  • Department of Occupational Safety and Health (DOSH)
  • Planning Department of the Local Municipality

These approvals are tied to your physical infrastructure, operational scope, and compliance with safety and environmental standards.

Company Eligibility Criteria

To qualify as an ILS provider in Malaysia, a company must:
  • Be incorporated under the Companies Act 2016
  • Have at least 60% Malaysian equity ownership
  • Undertake all three core logistics activities:
    • Warehousing
    • Transportation
    • Freight forwarding
In addition, the company must offer at least one of the following value-added services:
  • Distribution
  • Supply chain management
  • Other logistics-related services such as palletising, product assembly, packaging, labeling, testing, or quality control
Minimum Infrastructure Requirements
  • To demonstrate operational capacity, ILS providers must maintain:
  • At least 20 commercial vehicles
  • Warehousing facilities of at least 5,000 square meters

Tax Incentives

New and existing companies providing the above value-added services are eligible to apply for incentives under the Promotion of Investments Act, 1986. However, approval is on a case-to-case basis and is not automatically granted. The tax incentives are as follows:

Pioneer Status
A tax exemption of 70% of the statutory income for a period of five (5) years.

Investment Tax Allowance (ITA)
An allowance of 60% on the qualifying capital expenditure incurred within a period of five (5) years. The allowance can be offset against 70% of the statutory income for each year of assessment. Unutilised allowances can be carried forward to subsequent years until fully utilised.

Read more about Pioneer Status and Investment Tax Allowance.

Conclusion

Integrated Logistics Services (ILS) is a strategic designation that unlocks tax incentives, regulatory facilitation, and operational scale in Malaysia. For foreign companies, meeting the licensing, equity, and infrastructure requirements is essential to qualify and compete. From warehousing and freight forwarding to value-added services like packaging and supply chain management, ILS status positions your business to serve regional markets with efficiency and compliance.

How XpatMobi Team Can Help

We guide you through incorporation, licensing, and infrastructure setup, ensuring your operations meet ILS criteria and are eligible for incentive-linked approvals. Whether you’re launching a distribution hub or scaling a supply chain network, we align your structure, documentation, and strategy to help you build with confidence.

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