The Income Tax Act (Exemption) (No. 4) Order 2023 [P.U. (A) 382, gazetted on 19/12/2023], is a legislative instrument issued by the Malaysian government to provide income tax exemptions to companies that have been granted BioNexus status and are engaged in specified biotechnological activities.
This order delineates the scope of qualifying activities, including agricultural, industrial, and healthcare biotechnology, and sets forth the criteria and conditions that companies must fulfill to be eligible for the tax exemption.
It also addresses the exclusion of certain intellectual property income from taxable income, the process for applying for the exemption, and the duration for which the exemption may apply.
The order emphasizes the necessity for compliance with the conditions stipulated by the Minister to maintain the exemption status. This Order is deemed to have come into operation on 1 January 2019.
The qualifying activities mentioned in the Income Tax Act (Exemption) (No. 4) Order 2023 are not explicitly detailed within the provided citations.
The term “qualifying activity” is referenced, indicating that it pertains to activities that are eligible for tax exemption under the order, but the specific activities that qualify are not listed in the excerpts provided.
For a comprehensive understanding of what constitutes a “qualifying activity,” one would need to refer to subparagraph 3(2) of the order, which is not included in the citations. To be eligible for the income tax exemption under the Income Tax Act (Exemption) (No. 4) Order 2023, companies must comply with several conditions as specified by the Minister.
These conditions include:
- The company must be a BioNexus status company and derive its statutory income from a qualifying activity.
- For an expansion project, the company must incur an adequate amount of annual operating expenditure in Malaysia or an adequate amount of investment in fixed assets in Malaysia, as approved by the Minister.
- The company must employ an adequate number of full-time employees and knowledge workers in Malaysia, as approved by the Minister, to carry on the qualifying activity.
- The company must maintain a separate account for the income derived from each qualifying activity.
- The company must comply with all the conditions imposed by the Minister in relation to the exemption as specified in the approval letter.
- A related company to the qualifying company is also entitled to be granted exemption, subject to the related company complying with all the conditions imposed by the Minister.
Failure to comply with any of these conditions may result in the withdrawal of the exemption by the Minister
