Income Tax (Relocation of Provision of Services Business Incentive Scheme) Rules 2022
Income Tax (Relocation of Provision of Services Business Incentive Scheme) Rules 2022city center. Concept of success and appreciation. Double exposure
Income Tax (Relocation of Provision of Services Business Incentive Scheme) Rules 2022
In order to encourage companies relocating their manufacturing operations to Malaysia and undertake new investments, effective from Year of Assessment (“YA”) 2021, a qualifying company that performs qualifying activities under this incentive scheme is eligible for the following income tax rate charged on the chargeable income for the specified YA for a period up to ten (10) consecutive YA:
Incentive Rate
b. For existing company: 10% tax rate.
Qualifying Activities
Qualifying activities refer to service activities that adopt Industrial Revolution 4.0 and digitalization technology undertaken by a qualifying company which is as follows:
- Provision of technology solutions or technology company that develops technology and provides technology solutions based on substantial scientific or engineering challenges;
- Provision of infrastructure and technology for cloud computing;
- Research and development or design and development activities;
- Medical devices testing laboratory and clinical trials; or
- Any service activity or manufacturing-related service activity as determined by the Minister.
These Rules shall apply to the qualifying company that had applied for the Relocation of Provision of Services Business Incentive Scheme to the Minister through the Malaysian Investment Development Authority (“MIDA”) from 7 November 2020 until 31 December 2022.
Conditions for the Relocation of Provision of Services Business Incentive Scheme
The qualifying company must comply with the conditions of this incentive scheme imposed by the Minister as specified in the approval letter and the Guidelines and Procedures for the Application of Special Tax Incentive for Selected Services Activities under the National Economy Recovery Plan (PENJANA) issued or as revised by the MIDA and approved by the Minister. The conditions are as follows:
a. A qualified company employs at least 80% full-time Malaysian employees on or before the third year from the date of the first invoice in respect of the qualifying activity being issued until the end of the specified YA; and
b. A qualified company has incurred an approved adequate amount of annual operating expenditure or an approved adequate investment in fixed asset in order to carry on the qualifying activity.
Surrender of the Relocation of Provision of Services Business Incentive Scheme
a. The qualifying company is allowed to surrender this incentive scheme by submitting a written notice to the Minister through the MIDA, unless the conditions imposed under this incentive scheme are not complied with.
b. The surrendering of this incentive scheme shall have effect on the first day in the basis period for the YA in which the application for surrender of this incentive scheme is received by the Minister through the MIDA.
Non-application
These Rules shall not apply to a qualifying company in the specified YA that:
a. has made a claim for reinvestment allowance under Schedule 7A of the Income Tax Act 1967 (“ITA”) or investment allowance for the service sector under Schedule 7B of the ITA;
b. has been granted any incentive under the Promotion of Investments Act 1986 (Act 327);
c. has been granted an exemption under paragraph 127(3)(b) or subsection 127(3A) of the ITA;
d.has been approved by the Minister for an incentive scheme under any rules made under section 154 of the ITA; or
e.has made a claim for deduction under any rules made under section 154 of the ITA except:
- The rules in relation to an allowance under Schedule 3 of the ITA;
- The Income Tax (Deduction for Audit Expenditure) Rules 2006; or
- The Income Tax (Deduction for Expenses in relation to Secretarial Fee and Tax Filing Fee) Rules 2020.
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