Income Tax (Deduction for Investment in Approved New Food Production Project) Rules 2022

Income Tax (Deduction for Investment in Approved New Food Production Project) Rules 2022

Deemed effective from 1 January 2021, this order shall apply to a resident company incorporated in Malaysia that has made an investment in its related company undertaking an approved new food production project under the Income Tax (Exemption) (No. 6) Order 2020 [P.U. (A) 373/2020] ; and has made an application to the Minister through the Minister charged with the responsibility of an approved new food production project. Such application was received from 1 January 2021 to 31 December 2022.

The deduction allowable in the basis period for a year of assessment is an amount equivalent to the value of an investment for the sole purpose of financing an approved new food production project undertaken by the related company.

The value of the investment is eligible for a tax deduction as the following:

• Shall be equivalent to the expenditure incurred by the related company in the basis period for the same year of assessment;
• Shall be made for a period and up to an amount as approved by the Minister through the Minister charged with the responsibility for the approved new food production project; and
• Shall not be disposed of within five years from the date of the last investment made if such investment is in the form of holding of paid-up share capital in respect of ordinary shares.

The deduction can only be claimed by a company for a period of three (3) consecutive years of assessment commencing from the year of assessment the application is approved by the Minister.

Where a company that has made an investment in the form of holding of paid-up share capital in respect of ordinary shares and claimed a deduction in respect of that investment receives an amount as consideration for the disposal of such shares, the amount so received by that company shall be added in ascertaining its adjusted income in the basis period for the year of assessment in which that amount was received.

The amount shall not exceed the total deductions allowed in relation to that investment.

The deduction cannot be claimed by the company if the disposal of the shares takes place after five years from the date of the last investment in the form of paid-up share capital in respect of ordinary shares made in the related company.

Cessation of deduction

Where an investment is made by a company for the purposes of the project, that deduction to the company shall be ceased in the basis period for a year of assessment in which the period of exemption of the related company commences upon the related company deriving its first statutory income from that project.

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