Day: October 12, 2022

Review of Tax Incentive for Equity Crowdfunding
Update: The Ismail Sabri Government Budget is no longer applicable.

Malaysia’s national budget for 2023 was re-tabled again in February 2023; for more info, please visit – https://www.ccs-co.com/post/budget-2023-malaysia-madani.

This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
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Response from MOF: MOF is currently reviewing off-budget items.
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The phrase “MOF is currently reviewing off-budget items” typically refers to the Ministry of Finance (MOF) evaluating or examining expenses or financial matters that are not included in the official budget. Off-budget items are expenditures or revenue sources not directly accounted for in the regular budgeting process.

Governments often create budgets to allocate funds for various programs, projects, and expenses. However, certain financial activities may fall outside the scope of the official budget. These off-budget items could include emergency spending, special funds, grants, subsidies, or other financial transactions not explicitly accounted for in the regular budgeting process.

When the MOF reviews off-budget items, they are scrutinising these financial activities to assess their impact, legality, appropriateness, or potential risks. This review aims to ensure transparency, fiscal responsibility, and effective financial management within the government. It helps identify discrepancies, assess the necessity and effectiveness of off-budget items, and make informed decisions regarding their continuation or modification.

Current Position

In Budget 2021, individual investors who invest in equity crowdfunding platforms approved by the Securities Commission (SC) will be allowed a tax exemption for a specified amount of aggregate income.

The proposal has been legislative under the Income Tax (Exemption) (No 4) Order 2022.

Under the Order, 50% of the amount invested for each year of assessment will be deductible against the individual’s aggregate income, subject to the conditions as follows:
1. the eligible amount for tax exemption is limited to RM50,000 each year of assessment;
2. the deductible amount is limited to 10% of the aggregate income for that year of assessment. The excess amount will be disregarded;
3. the Securities Commission Malaysia must verify the investor, investee company and amount of investment made;
4. the investor must not have any family relationship with the investee company;
5. the investment must be made through an equity crowdfunding platform approved by the Securities Commission Malaysia; and
6. the investment is not allowed to be disposed of within 2 years from the date of investment.
The tax incentive is for investments made from January 1, 2021, until December 31, 2023.

Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]

To attract more individual investors to invest in start-up companies through equity crowdfunding, it is proposed tax incentives be reviewed as follows:
- scope of tax incentives be expanded to include investments made by individuals investor through Limited Liability Partnership Nominee Company; and
- the investment period to be extended for 3 years.
Effective Date

For investment made from 1 January 2024 until 31 December 2026.
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Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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要获得即时更新，请与我们保持联系

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16
October 12, 2022
Extension of Tax Incentive for Angel Investor
Update: The Ismail Sabri Government Budget is no longer applicable.

Malaysia’s national budget for 2023 was re-tabled again in February 2023; for more info, please visit – https://www.ccs-co.com/post/budget-2023-malaysia-madani.

This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
```
Response from MOF: MOF is currently reviewing off-budget items.
```
The phrase “MOF is currently reviewing off-budget items” typically refers to the Ministry of Finance (MOF) evaluating or examining expenses or financial matters not included in the official budget. Off-budget items are expenditures or revenue sources not directly accounted for in the regular budgeting process.

Governments often create budgets to allocate funds for various programs, projects, and expenses. However, certain financial activities may fall outside the scope of the official budget. These off-budget items could include emergency spending, special funds, grants, subsidies, or other financial transactions not explicitly accounted for in the regular budgeting process.

When the MOF reviews off-budget items, they scrutinise these financial activities to assess their impact, legality, appropriateness, or potential risks. This review aims to ensure transparency, fiscal responsibility, and effective financial management within the government. It helps identify discrepancies, assess the necessity and effectiveness of off-budget items, and make informed decisions regarding their continuation or modification.

Current Position

According to the Income Tax (Exemption) (No 3) Order 2014, an Angel Investor is exempt from income tax in the second year of assessment following the year of assessment in which the angel investor makes an investment in an investee company.

The total amount of income that will be exempt from taxation equals the amount of investment that the angel investor made in the company they funded (the investee company).

The angel investor is required to satisfy the following conditions to be eligible for the income tax exemption:
- a resident in Malaysia whose sources of income are not solely derived from business;
- an application is made to the Minister of Finance in the period from 1 January 2013 until 31 December 2023 (extended from 31 December 2020 under the Income Tax (Exemption) (No 3) 2014 (Amendment) Order 2019) to invest in an investee company.
  - The time frame for the application period of this incentive was initially up to 31 December 2017 and given the first extension to 31 December 2020 under the Income Tax (Exemption) (No 3) 2014 (Amendment) Order 2017;
- the angel investor does not have a parent, a parent-in-law, a child including a stepchild or adopted child, a brother or sister, a grandparent or grandchild or a spouse who makes any investment in the investee company;
- the investment is in the form of holding ordinary shares in the investee company and is paid in cash;
- the investment is for the sole purpose of financing the activities of the investee company as approved by the Minister, and
- the investment shall not be more than 30% of the invested company’s total paid-up share capital.
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Investee Company
An investee company refers to a company resident in Malaysia where at least 51% of its shares are owned directly by Malaysian shareholders. It engages in activities approved by the Malaysian government.
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Footnotes

An angel investor who has made a claim for a deduction under the Income Tax (Deduction for Investment in a Venture Company) Rules 2005 will not be eligible for the exemption under the Income Tax (Exemption) (No 3) Order 2014.

Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]

To attract more angel investors to contribute to economic activities through capital funding in investee companies, tax incentives are proposed to be extended for 3 years.

Effective Date

For applications received by the Ministry of Finance from 1 January 2024 until 31 December 2026
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Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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Keep in touch with us so that you can receive timely updates |

要获得即时更新，请与我们保持联系

1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍
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4. Blog ✍ https://lnkd.in/e-Pu8_G 5. Google ✍ https://lnkd.in/ehZE6mxy

6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/
19
October 12, 2022
Extension of Tax Incentive for Principal Hub 3.0
Update: The Ismail Sabri Government Budget is no longer applicable.

Malaysia’s national budget for 2023 was re-tabled again in February 2023; for more info, please visit – https://www.ccs-co.com/post/budget-2023-malaysia-madani.

This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
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MOF's response: Off-budget.
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Background to the Principal Hub Incentive

A locally incorporated company that uses Malaysia as a base for conducting its regional and global businesses and operations is considered to be a Principal Hub.

This type of company uses Malaysia as its base to manage, control, and support its key functions, which can include the management of risks, decision-making, strategic business activities, trading, finance, management, and human resources.

This new incentive, which went into effect on May 1, 2015, has replaced the International Procurement Centres (IPC), Regional Distribution Centres (RDC), and Operational Headquarters (OHQ) incentive schemes.

To be eligible to apply for this incentive, a locally incorporated company must have a paid-up capital of more than RM2.5 million, in addition to providing at least three Qualified Services.

The provision for the incentive can be found in the Income Tax Act of 1967 and approved through the National Committee on Investment.

Principal Hub Incentive 3.0

A review of the Principal Hub incentive scheme was one of the initiatives announced in the Budget 2021. This study is now mandated by legislation in the form of the Income Tax (The Principal Hub Incentive Scheme) Rules 2022.

In the meantime, trading operations are now included under the umbrella of the Global Trading Center incentive.

The Malaysian Investment Development Authority (MIDA) has issued guidelines that explain the tax incentive for the establishment of a Principal Hub. These guidelines can be found here:-

174.1-Guidelines-for-Principal-Hub-Incentive-3.0 Download

174.1 Guidelines for Principal Hub Incentive 3.0

.pdf

Download PDF • 267KB

The guidelines have regularly been updated to take into account any new legislative initiatives that have been taken.

Current Position

New and existing companies using Malaysia as a global regional hub for high-value activities that manage, control and support main business functions such as risk management, decision-making, strategic business, finance and human resource management are eligible for principal hub tax incentives with 0%, 5% or 10% income tax rate.

The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA) until 31 December 2022.

Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]

In attracting more companies to establish their principal hub in Malaysia, the proposed tax incentive will be extended for 3 years.

Effective Date

For applications received by MIDA from 1 January 2023 until 31 December 2025.
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Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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Keep in touch with us so that you can receive timely updates |

要获得即时更新，请与我们保持联系

1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍
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4. Blog ✍ https://lnkd.in/e-Pu8_G 5. Google ✍ https://lnkd.in/ehZE6mxy

6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/

17
October 12, 2022
Extension of Tax Incentive for Global Trading Centre
Update: The Ismail Sabri Government Budget is no longer applicable. Malaysia’s national budget for 2023 was re-tabled again in February 2023.

To Download Revised Budget 2023 Speech and some other related publications – https://www.ccs-co.com/post/budget-2023-malaysia-madani

This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023.
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MOF's response: Off-budget.
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Background to the Global Trading Centre

A Global Trading Centre (GTC) is a locally incorporated company that uses Malaysia as its international trading base for strategic sourcing, procurement and distribution of raw materials, components and finished products to its related and unrelated companies in Malaysia and abroad.

It is proposed that a new incentive scheme be introduced as Global Trading Centre and be given a 10% income tax rate for a period of 5 years and renewable for another 5 years on statutory income from Qualifying Activities.

This would be done as a measure to both improve and simplify the tax incentives for trading activities that were previously covered under the Principal Hub incentives, which were subjected to higher eligibility criteria.

This incentive has been given the legislative effect under the Income Tax (Global Trading Centre Incentive Scheme) Rules 2022.

Under Rules 2022, a Qualifying Company means the following:
- incorporated under the Companies Act 2016
- resident in Malaysia
- has not carried on any activity in Malaysia
- fulfils the eligibility condition imposed by the Minister of International Trade and Industry under the Income Tax Act 1967 (ITA) and Rules 2022
- uses Malaysia as its international trading base.
The Malaysian Investment Development Authority (MIDA) has issued guidelines that explain the tax incentive for setting up a Global Trading Centre. These guidelines can be found here:-

175.1-Guidelines-on-Incentives-for-setting-up-a-Global-Trading-Centre-GTC Download

Qualifying Activities to be undertaken are strategic sourcing, procurement and distribution of raw materials, components and finished products to other companies within or outside Malaysia.

When applying for this incentive, a Qualifying Company must demonstrate that it complies with the conditions set by the Minister, which are outlined in the approval letter and the guidelines. The following are some of the terms and conditions:
- employ at least 15 full-time Malaysian employees with a minimum salary of RM5,000 per month in the basis period throughout the specified years of assessment to carry on the qualifying activity, and at least 50% of those employees must be Malaysian;
- has a paid-up capital of at least RM1 million to carry on the qualifying activity;
- incurs an annual operating expenditure of at least RM1.5 million to carry on the qualifying activity;
- achieves an annual sales value of at least RM100 million to carry on the qualifying
Current Position

The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA) from 1 January 2021 until 31 December 2022.

Proposal [This tax incentive included in Budget 2023, tabled in Parliament on 7 October 2022, was not included in Budget 2023 (Re-tabled) on 24 February 2023]

To attract multinational companies undertaking trading activities while making Malaysia a regional distribution hub, it is proposed that tax incentives be extended for 3 years.

Effective Date

For applications received by MIDA from 1 January 2023 until 31 December 2025.
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Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
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Keep in touch with us so that you can receive timely updates |

要获得即时更新，请与我们保持联系

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6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/

17
October 12, 2022
Extension of Import Duty and Excise Duty Exemption on Imported CBU Electric Vehicles
Update: The Ismail Sabri Government Budget is no longer applicable. Malaysia’s national budget for 2023 was re-tabled again in February 2023.

To Download Revised Budget 2023 Speech and some other related publications – https://www.ccs-co.com/post/budget-2023-malaysia-madani

Current Position

Imported Completely Built-Up (CBU) Electric Vehicles (EV) consisting of passenger vehicles (including SUV and MPV), motorcycles and commercial vehicles are subject to duties and taxes as follows:

In Budget 2022, full import and excise duty exemptions are given on imported CBU EVs from 1 January 2022 until 31 December 2023.

Proposal

To encourage domestic demand for EVs in line with the Low Carbon Mobility Blueprint, EV Roadmap and National Automotive Policy 2020, as well as considering the global shortage of automotive chips, it is proposed full import duty and excise duty exemption on imported CBU be extended for a period of 1 year.

Effective Date

From 1 January 2024 until 31 December 2024.
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Our website's articles, templates, and material are solely for reference. Although we make every effort to keep the information up to date and accurate, we make no representations or warranties of any kind, either express or implied, regarding the website or the information, articles, templates, or related graphics that are contained on the website in terms of its completeness, accuracy, reliability, suitability, or availability. Therefore, any reliance on such information is strictly at your own risk.
```
Keep in touch with us so that you can receive timely updates |

要获得即时更新，请与我们保持联系

1. Website ✍️ https://www.ccs-co.com/ 2. Telegram ✍️ http://bit.ly/YourAuditor 3. Facebook ✍
- https://www.facebook.com/YourHRAdvisory/?ref=pages_you_manage
- https://www.facebook.com/YourAuditor/?ref=pages_you_manage
4. Blog ✍ https://lnkd.in/e-Pu8_G 5. Google ✍ https://lnkd.in/ehZE6mxy

6. LinkedIn ✍ https://www.linkedin.com/company/74734209/admin/

15
October 12, 2022