Rules on Deduction of Specific Expenses for Issue of Retail Debenture and Certain Types of Sukuk Gazetted

30 April 2019

1. The Income Tax (Deduction for Expenditure on Issuance of Retail Debenture and Retail Sukuk) Rules 2019 [P.U.(A) 117/2019] (“P.U.(A) 117/2019”) and the Income Tax (Deduction for Expenditure on Issuance of Sukuk) Rules 2019 [P.U.(A) 118/2019] (“P.U.(A) 118/2019”) were gazetted on 25 April 2019.

2. P.U.(A) 117/2019 and P.U.(A) 118/2019 extend the existing incentives accorded to the issuance of the instruments stated in the respective Rules and have effect for years of assessment 2019 and 2020.

3. P.U.(A) 117/2019 provides that for the purposes of ascertaining the adjusted income of a company resident in Malaysia for the basis period for a year of assessment, deductions shall be allowed for additional expenses (“Additional Expenses”) incurred by such company on the issuance of-

1. a retail debenture¹ approved or authorised by the Securities Commission Malaysia (“SC”) under the Capital Markets and Services Act 2007 (“CMSA”);

2. a retail sukuk² structured pursuant to the principle of Murabahah or Bai’ Bithaman Ajil (based on the concept of Tawaruruq), Mudharabah, Musyarakah, Istiana’ or any other Shariah principle other than the principle mentioned in sub-paragraph (c) below, approved or authorised by the SC under the CMSA; and

3. a retail sukuk structured pursuant to the principle of Ijarah, or Wakalah comprising a mixed component of asset and debt, approved or authorised by the SC under the CMSA.

4. The Additional Expenses which may be deducted are -

1. professional fees relating to due diligence, drafting and preparation of the prospectus;

2. printing cost of the prospectus;

3. advertisement cost of the prospectus;

4. prospectus registration fee payable to the Securities Commission Malaysia;

5. processing fee and initial listing fee payable to Bursa Malaysia;

6. new issue crediting fee payable to Bursa Malaysia; and

7. primary distribution fee.

5. The total amount of deduction allowed under –

1. paragraph 3(a) or paragraph 3(b) above shall be equivalent to twice the amount of the Additional Expenses allowed under P.U.(A) 117/2019; and

2. paragraph 3(c) above shall be equivalent to the amount of the Additional Expenses allowed under P.U.(A) 117/2019.

6. P.U.(A) 118/2019 provides that for the purposes of ascertaining the adjusted income of a company³ for the basis period for a year of assessment, a deduction shall be allowed for an amount equivalent to the expenditure incurred by the company in the issuance of sukuk –

1. approved or authorised by, or lodged with, the SC under the CMSA; or

2. approved by the Labuan Financial Services Authority established under the Labuan Financial Services Authority Act 1996.

7. For the purposes of P.U.(A) 118/2019, “sukuk” means –

1. sukuk structured pursuant to the principle of Ijarah; or

2. sukuk structured pursuant to the principle of Wakalah comprising a mixed component of asset and debt.