Under the Income Tax (Exemption) (No. 5) Order 2023 [P.U. (A) 383, gazetted on 19/12/2023], the Minister exempts a qualifying company [BioNexus status company] in the basis period for a year of assessment from the payment of income tax in respect of statutory income derived from a new business or an expansion project, as the case may be, which is equivalent to the amount of the qualifying capital expenditure incurred by the qualifying company in the basis period for that year of assessment. specify the calculation of assessable income, qualifying activities and capital expenditures, the application process, employment and operating expenditure requirements, and the duration of the exemption period. The criteria and conditions outlined in P.U. (A) 383 for income tax exemption in Malaysia include the following:
- The exemption applies to a qualifying company in the basis period for a year of assessment from the payment of income tax in respect of statutory income derived from a new business or an expansion project. The amount of exemption is equivalent to the qualifying capital expenditure incurred by the qualifying company in the basis period for that year of assessment.
- To be eligible for the exemption, an application must be made in writing by a BioNexus status company and received by the Minister through the Malaysian Bioeconomy Development Corporation Sdn. Bhd. The application must be submitted on or after 1 January 2019 but not later than 31 December 2022.
- The exemption period is for five consecutive years, commencing from the date of the first qualifying capital expenditure incurred by the qualifying company, as determined by the Malaysian Bioeconomy Development Corporation Sdn. Bhd. The date of the first qualifying capital expenditure must not be earlier than three years from the date of approval by the Minister as specified in the approval letter.
- The exemption is subject to the qualifying company complying with all the conditions imposed by the Minister in relation to the exemption. These conditions include employing an adequate number of full-time employees in Malaysia and incurring 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 to carry on the qualifying activity.
- The qualifying company must not have been previously granted an exemption under this order or the Income Tax (Exemption) (No. 4) Order 2023 [P.U. (A) 382/2023].
These criteria and conditions are designed to ensure that the tax exemption is granted to companies that contribute to the economic development of Malaysia through new business ventures or expansion projects, while also ensuring compliance with the regulations set forth by the Minister of Finance.
The Income Tax (Exemption) (No. 5) Order 2023 defines a qualifying company as a BioNexus status company that carries out a qualifying activity related to agricultural biotechnology, industrial biotechnology, and healthcare biotechnology as approved by the Minister.
A BioNexus status company is further described as a company incorporated under the Companies Act 2016 [Act 777] engaged in the business of life sciences, which includes biology, medicine, anthropology, ecology, or any other branches of science dealing with living organisms and their organisation, life processes, and relationships to each other and their environment.
Qualifying activities, as referred to in the Order, are activities related to agricultural biotechnology, industrial biotechnology, and healthcare biotechnology that have been approved by the Minister.
These activities must be carried out by a BioNexus status company about a new business or an expansion project.
A new business is defined as the first qualifying activity undertaken by a BioNexus status company, while an expansion project is a project undertaken by such a company to expand its existing qualifying activity.
The expansion project must involve new investment in qualifying activity and must not have been previously granted exemption under this Order or the Income Tax (Exemption) (No. 4) Order 2023 [P.U. (A) 382/2023]
