Provided that applications were received by the Ministry of Agriculture and Agro-Based Industry by the end of 2015, the following food production projects are eligible for specific tax incentives:
- planting of kenaf, vegetables, fruits, herbs or spices
- aquaculture
- rearing of cows, buffaloes, goats or sheep, or
- deep-sea fishing,
The following are some of the incentives:
- For a company that invests in a subsidiary company undertaking a new food production project, a tax deduction equivalent to the amount of investment made in that subsidiary for that YA;
- For a company carrying out new food production projects, a 100% income tax exemption of the statutory income for 10 Years of Assessment; or
- For a company carrying out an expansion of an existing food production project, a 100% income tax exemption of the statutory income for five Years of Assessment.
The government, realising that it needs to continue to support the development and growth of the agro-food industry, proposed in Budget 2016 to extend the application period of the incentives for another five years, all the way up until 31 December 2020.
This would bring the total number of years that the incentives could be applied to ten. In addition, it was also proposed that the list of approved food projects that qualify for tax incentives be extended.
To enact the proposals above into law, the following Exemption Order and Rules were gazette on December 24, 2020. They are considered to have gone into effect on January 1, 2016:-
- Income Tax (Exemption) (No. 6) Order 2020 [P.U.(A) 373]
- Income Tax (Deduction of Investment in New Food Production Project or Expansion Project) Rules 2020 [P.U.(A) 374].
Exemption Order
IN exercise of the powers conferred by paragraph 127(3)(b) of the Income Tax Act 1967 [Act 53], the Minister makes the Income Tax (Exemption) (No. 6) 2020 (Amendment) Order 2022, which is deemed to have come into operation on 1 January 2016 except for Approved food production project concerning high seas fishing and planting of seeds for agro-food, which are deemed to have come into operation on 1 January 2021.
Under this Order, the Income Tax (Exemption) (No. 6) Order 2020, which is referred to as the “principal Order”, is amended accordingly.
Amendment of paragraph 3 – Application
By substituting for paragraph 3 the following paragraph:
This Order shall apply to a new food production project or an expansion project:
- which an application is received by the Minister through the Minister charged with the responsibility for that project on or after 1 January 2016 but not later than 31 December 2022;
- which has not commenced on the date, the application is received by the Minister; and
- which commences within one year from the date of approval given by the Minister.”.
Amendment of paragraph 4 – Exemption
Sub-subparagraph 4(1)(b) of the principal Order is amended:
(b) an expansion project for a period of five consecutive years of assessment (referred to in this Order as the “exempt years of assessment”) in respect of the statutory income from “the existing projects and” expansion projects, commencing from the first year of assessment in which the qualified person derived statutory income in relation to the “existing projects and” expansion projects, and the first year of assessment shall not be earlier than the year of assessment in the basis period in which the date of approval from the Minister falls.
New paragraph 5A – Approved food production project
The principal Order is amended by inserting after paragraph 5 the following paragraph:
“Approved food production project
- An approved food production project referred to in this Order is a project in relation to:
- planting of industrial crop, vegetables, fruits, herbs, spices or cash crops;
- aquaculture;
- rearing of honey or urena lobate bees;
- rearing of cows, buffaloes, goats, sheep or deer;
- deep sea fishing;
- high seas fishing;
- planting of seeds for agro-food; or
- planting of feed mill, subject to subparagraph (2) below.
- The planting of the feed mill, which is referred to in sub-subparagraph (1)(h) shall be cultivated in a project which has been identified by the Minister charged with the responsibility of that project and approved by the Minister.
- An approved food production project in this paragraph shall be regarded as a separate and distinct business in determining the statutory income of the qualified person for the purpose of exemption under this Order.”.
Amendment of paragraph 6 – New food production project
The principal Order is amended by substituting for paragraph 6 the following paragraph:
“6. A new food production project referred to in this Order is the first project carried out by a qualified person for the purpose of undertaking an approved food production project, and the new project is approved by the Minister.”.
Amendment of paragraph 7 – Expansion project
The principal Order is amended by substituting for paragraph 7 the following paragraph:
“7. An expansion project which is exempted under sub-subparagraph 4(1)(b), is a project carried out by a qualified person for the purpose of expanding its existing approved food production project where the expansion project:-
- has not been granted an exemption under this Order;
- involves a new area of land; and
- is approved by the Minister.”.
Amendment of paragraph 12 – Non-application
Subparagraph 12(c) of the principal Order is amended in the national language text by substituting for the words “123(3A)” the words “127(3A)”.
These regulations can be found here:-
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