Updated on 15 July 2023- Dialogue between MOF，LHDNM， and CTIM [21/6/2023]
Update: The Ismail Sabri Government Budget is no longer applicable.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
Background to the Shipbuilding and Ship Repairing Industry
Malaysia’s strategic location on a crucial sea lane has made the country well-positioned to access global trade routes.
The Greek geographer Ptolemy described us as the “Golden Khersonene,” meaning Golden Peninsula, in his atlas Geographica in AD 150.
In modern times, the Malaysian shipbuilding and ship repair (SBSR) sub-sector encompass companies that manufacture seagoing vessels and marine equipment, as well as providers of related services, including ship repair, design, upgrade/ conversion of vessels and maintenance, repair and overhaul (MRO).
Introduced in 2016, the SBSR industry incentives are available for both new and existing companies until the end of 2022.
Current Position
Companies undertaking SBSR activities in Malaysia are eligible for tax incentives as follows:
New Company
- Pioneer Status with an income tax exemption of 70% of statutory income for 5 years; or
- An Investment Tax Allowance of 60% on Qualifying Capital Expenditure incurred within 5 years and can be set off against 70% of the statutory income for each assessment year.
Existing Company
Investment Tax Allowance of 60% on qualifying capital expenditure incurred within 5 years and can be set off against 70% of the statutory income for each assessment year.
The tax incentive is for applications received by the Malaysian Investment Development Authority (MIDA)from 1 January 2020 until 31 December 2022.
In addition, SBSR companies with bona fide status are also eligible for import duty and sales tax exemption under Item 53, Customs Duties (Exemption) Order 2017 and Item 44, Schedule A, Sales Tax (Persons Exempted from Payment of Tax) Order 2018.
These exemptions are given for bona fide status applications received by the Ministry of Finance until 31 December 2022.
Proposal
To position Malaysia as a regional hub for SBSR, it is proposed that existing tax incentives and bona fide status be extended for 5 years.
Effective Date
- For SBSR applications received by MIDA from 1 January 2023 until 31 December 2027.
- For bona fide status applications received by the Ministry of Finance from 1 January 2023 until 31 December 2027.
Updated on 15 July 2023- Dialogue between MOF，LHDNM， and CTIM [21/6/2023]
LHDNM confirms that for Ship Building and Ship Repairing activities, the mechanism for implementing tax incentives is through PU(A)112/2006 or PU(A)113/2006.
CTIM sought confirmation that the qualifying company could follow the tax treatment (e.g. losses or capital allowance) mentioned under PU(A) 112/2006 and PU(A) 113/2006, regardless of whether the approval letter made reference to the said PU orders.
LHDNM’s Feedback:
For Ship Building and Ship Repairing activities, the approval letter will specify the specific provisions of the law in granting tax incentive approval and the prescribed approval conditions to ensure that the approved company carries out proper tax compliance services and adheres to the established approval conditions.
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