Income Tax Exemption Orders for BioNexus companies gazetted
22 December 2023
The following income tax exemption orders were gazetted on 19 December 2023:
- Income Tax (Exemption) (No. 4) Order 2023 [P.U.(A) 382/2023] (“E.O. 4/23”);
- Income Tax (Exemption) (No. 5) Order 2023 [P.U.(A) 383/2023] (“E.O. 5/23”); and
- Income Tax (Exemption) (No. 6) Order 2023 [P.U.(A) 384/2023] (“E.O. 6/23”).
All the above-referred exemption orders are deemed to have come into effect retrospectively from
1 January 2019.
E.O. 4/23 and E.O. 5/23
E.O. 4/23,
inter alia, allows the Minister of Finance (“
Minister”) to exempt a qualifying company from payment of income tax in respect of its statutory income derived from a qualifying activity for (a) in the case of a new business, ten consecutive years of assessment; and (b) in the case of an expansion project, five consecutive years of assessment.
E.O. 5/23,
inter alia, allows the Minister to exempt a qualifying company from payment of income tax for five consecutive years in respect of its statutory income derived from a new business or an expansion project, as the case may be, which is equivalent to the amount of qualifying capital expenditure incurred by the qualifying company in the basis period for that year of assessment.
For the purposes of E.O. 4/23 and E.O. 5/23:
- a “qualifying activity” is an activity relating to agricultural biotechnology, industrial biotechnology and healthcare biotechnology as approved by the Minister; and
- a “qualifying company” is a BioNexus status company1 which carries on a qualifying activity in relation to a new business or an expansion project and which has been granted exemption under E.O. 4/23 or E.O. 5/23, as applicable, and has complied with the conditions imposed by the Minister relating to the exemption.
As the deadline for submitting an application for the tax exemptions under E.O. 4/23 and E.O. 5/23 expired on 31 December 2022, these exemption orders are to formalise the exemptions given in respect of applications submitted before the aforesaid deadline and for the purposes of E.O. 6/23 as discussed below.
E.O. 6/23
E.O. 6/23, inter alia, allows the Minister to exempt a qualifying company in the basis period for a year of assessment from payment of income tax in respect of its statutory income derived from a qualifying activity for ten consecutive years of assessment commencing immediately after the exempt years of assessment under E.O. 4/23 or E.O. 5/23, as the case may be.
For the purposes of E.O. 6/23:
- a “qualifying activity” is:
- a new business which involves the first biotechnology activity undertaken by a BioNexus status company; and
- an expansion project undertaken by a BioNexus status company in expanding its existing biotechnology activity which involves new investment in a qualifying activity and which has never been granted an exemption under E.O. 4/23 and E.O. 5/23.
- a “qualifying company” is a BioNexus status company that carries out a qualifying activity that has been granted an exemption from the payment of income tax under E.O. 4/23 or E.O. 5/23; and
- a “biotechnology activity” is an activity relating to agricultural biotechnology, industrial biotechnology and healthcare biotechnology as approved by the Minister.
An application for exemption under E.O. 6/23 must be made in writing by a BioNexus status company and received by the Minister through the Malaysian Bioeconomy Development Corporation Sdn. Bhd. not less than six months before the expiry of the exempt years of assessment under E.O. 4/23 or E.O. 5/23, as the case may be.
An application for exemption may be approved subject to conditions imposed by the Minister, including
inter alia, local workforce requirements and annual operating expenditure or adequate investment in fixed assets in Malaysia, as specified in the approval letter.
It is to be noted that certain intellectual property income derived from a qualifying activity is to be excluded in determining the statutory income of a qualifying company.
Alert by Kok Chee Kheong (Partner) of the Corporate Practice and Victoria Low (Associate) of the Tax Practice of Skrine.
1 A “BioNexus status company” is a company which is incorporated under the Companies Act 2016 and is engaged in a business of life sciences such as biology, medicine, anthropology, ecology or any other branches of science, which deal with living organisms and their organisation, life processes and relationships to each other and their environment.
This article/alert contains general information only. It does not constitute legal advice nor an expression of legal opinion and should not be relied upon as such. For further information, kindly contact skrine@skrine.com.